UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________ to ________
Commission File Number:
SENESTECH, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The (NASDAQ Capital Market) |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of common stock outstanding
as of August 13, 2021:
SENESTECH, INC.
FORM 10-Q
For the Quarterly Period Ended June 30, 2021
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SENESTECH, INC.
CONDENSED BALANCE SHEETS
(In thousands, except shares and per share data)
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable trade, net | ||||||||
| Prepaid expenses | ||||||||
| Inventory | ||||||||
| Deposits | ||||||||
| Total current assets | ||||||||
| Right to use asset-operating leases | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Short-term debt | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Operating lease liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See note 12) | ||||||||
| Stockholders' equity: | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
1
SENESTECH, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except shares and per share data)
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue: | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Payroll Protection Program loan forgiveness | ||||||||||||||||
| Other income | ||||||||||||||||
| Total other income | ( | ) | ||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend-warrant price protection-revaluation adjustment | ||||||||||||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding - basic and fully diluted | ||||||||||||||||
| Net loss per common share - basic and fully diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these financial statements.
2
SENESTECH, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except shares and per share data)
(Unaudited)
For The Three Months Ended June 30, 2020 and 2021
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
| Balance, March 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance of common stock, sold for cash, net | ||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | ||||||||||||||||||||
| Issuance costs of common stock for service | ||||||||||||||||||||
| Net loss for the three months ended June 30, 2020 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | $ | ||||||||||||||||||
| Issuance of common stock upon exercise of warrants | - | |||||||||||||||||||
| Issuance costs of common stock for service | ||||||||||||||||||||
| Payments for employee withholding taxes related to share based awards | - | ( | ) | ( | ) | |||||||||||||||
| Net loss for the three months ended June 30, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| For The Six Months Ended June 30, 2020 and 2021 | ||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance of common stock, sold for cash, net | ||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | ||||||||||||||||||||
| Issuance costs of common stock for services | ||||||||||||||||||||
| Issuance of common stock for fractional shares-20-1 reverse split | ||||||||||||||||||||
| Warrant antidilution price protection adjustment | - | |||||||||||||||||||
| Net loss for the six months ended June 30, 2020 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance costs of common stock for service | ||||||||||||||||||||
| Issuance of common stock, sold for cash, net | ||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | ||||||||||||||||||||
| Payments for employee withholding taxes related to share based awards | - | ( | ) | ( | ) | |||||||||||||||
| Net loss for the six months ended June 30, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
SENESTECH, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Paycheck Protection Program loan forgiveness | ( | ) | ||||||
| Paycheck Protection Program loan accrued interest forgiveness | ( | ) | ||||||
| Gain on sale of equipment | ( | ) | ( | ) | ||||
| (Increase) decrease in current assets: | ||||||||
| Accounts receivable - trade | ( | ) | ( | ) | ||||
| Accounts receivable - other | ||||||||
| Other assets | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Increase (decrease) in current liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash received on sale of property and equipment | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from the issuance of common stock, net | ||||||||
| Proceeds from the issuance of notes payable | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Repayments of finance lease obligations | ( | ) | ( | ) | ||||
| Proceeds from the exercise of warrants | ||||||||
| Payment of employee withholding taxes related to share based awards | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH | ||||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Forgiveness of accrual in warrant exercise | $ | $ | ||||||
| Deemed dividend | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
4
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
Note 1 - Organization and Description of Business
SenesTech, Inc. (referred to in this report as “SenesTech,” the “Company,” “we” or “us”) has developed and is commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control.
Although there are myriad tools available to control rat populations, most rely on some form of lethal method to achieve effectiveness. Each of these solutions is inherently limited by rat species’ resilience and survival mechanisms as well as their extraordinary rate of reproduction. ContraPest®, our initial product, is unique in the pest control industry in attacking the reproductive systems of both male and female rats, which our field data shows results in a sustained reduction of the rat population.
Rats have plagued humanity throughout history. They pose significant threats to the environment and to the health and food security of many communities. In addition, rodents cause extensive product loss and damage through consumption and contamination. Rats also cause significant damage to critical infrastructure by burrowing beneath foundations and gnawing on electrical wiring, insulation, fire proofing systems, electronics and computer equipment.
The most prevalent solution to rat infestations is the use of increasingly powerful rodenticides. Although these solutions provide short term results, there are growing concerns about secondary exposure and bioaccumulation of rodenticides in the environment, as well as concerns about rodenticides that have no antidotes. The pest management industry and Pest Management Professionals (“PMPs”) are being asked for new solutions that are both effective and less toxic. Our goal is to provide customers with not only a solution to combat their most difficult rat problems, but also offer an effective, non-lethal option to serve customers that are looking to decrease or remove the amount of rodenticide used in their pest control programs.
ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide. ContraPest limits reproduction of male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling Norway and roof rat populations.
SenesTech began the registration process with the United States Environmental Protection Agency (the “EPA”) for ContraPest on August 23, 2015. On August 2, 2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”), due to the need for applicator expertise for deployment. On October 18, 2018, the EPA approved the removal of the RUP designation. We believe ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent populations.
In addition to the EPA registration of ContraPest in the United States, ContraPest must obtain registration from the various state regulatory agencies prior to selling in each state. We have received registration for ContraPest in all 50 states and the District of Columbia, 48 of which have approved the removal of the RUP designation.
We expect to continue to pursue regulatory approvals and amendments to the existing U.S. registration for ContraPest to broaden the marketability and use of ContraPest, and if ContraPest begins to generate sufficient revenue, regulatory approvals for additional jurisdictions beyond the United States. In certain cases, our EPA and state registrations require completion of additional testing and certifications even though we have received approval for the product or its labelling. We continue to seek to comply with these requirements.
The Company also continues to research and develop enhancements to ContraPest that align with our target verticals and other potential fertility control options for additional species.
5
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 1 - Organization and Description of Business – (continued)
We were formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. Our corporate headquarters and manufacturing site are in Phoenix, Arizona. On December 8, 2016, we went public and are currently traded on Nasdaq under the symbol SNES.
On February 4, 2020, we amended our amended and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued and outstanding shares of our common stock. The accompanying condensed financial statements and notes thereto give retrospective effect to the reverse stock split for all periods presented. All issued and outstanding common stock, options and warrants exercisable for common stock, restricted stock units, preferred stock conversions to common stock and per share amounts contained in our condensed financial statements have been retrospectively adjusted.
Going Concern
Our financial statements as of June 30, 2021, December 31, 2020 and June 30, 2020 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm included in its opinion for the years ended December 31, 2020 and 2019 an explanatory paragraph referring to our net loss from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. If we encounter continued issues or delays in the commercialization of ContraPest, our prior losses and expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.
Liquidity and Capital Resources
Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock. See Note 10 - Stockholders’ Deficit for a description of our public equity sales.
We have also raised capital through debt financing, consisting primarily of convertible notes and government loan programs, and, to a lesser extent, payments received in connection with product sales, research grants and licensing fees.
Through June 30, 2021, we received net proceeds
of $
6
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 1 - Organization and Description of Business – (continued)
Our ultimate success depends upon the outcome of a combination of factors, including: (i) successful commercialization of ContraPest and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPest and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs. Based upon our current operating plan, we expect that cash and cash equivalents at June 30, 2021, in combination with anticipated revenue and additional sales of our equity securities, will be sufficient to fund our current operations for at least the next 12 months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest in the United States. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time. If we need more financing, including within the next 12 months, and we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, we may require additional capital in order to fund our operating losses and research and development activities before we become profitable and may opportunistically raise capital. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2021, the Company’s operating results for the three and six months ended June 30, 2021 and 2020, and the Company’s cash flows for the six months ended June 30, 2021 and 2020. The accompanying financial information as of December 31, 2020 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 29, 2021. All amounts shown in these financial statements and accompanying notes are in thousands, except percentages and per share and share amounts.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of preferred stock, if issued, common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no material impact on net earnings, financial position or cash flows.
7
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
Cash and Cash Equivalents
The Company considers money market fund investments
to be cash equivalents. The Company had cash equivalents in the form of money market fund investment of $
Accounts Receivable-Trade
Accounts receivable-trade consist primarily of
receivables from customers. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts.
That estimate is based on historical collection experience, current economic and market conditions and a review of the current status
of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $
Inventories
Inventories are stated at the lower of cost or market value, using the first-in, first-out convention. Inventories consist of raw materials, work in progress and finished goods. Raw materials are stocked to reduce the risk of impact on manufacturing for potential supply interruptions due to the COVID-19 pandemic or long lead times on certain ingredients.
Components of inventory are:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total inventory | ||||||||
| Less: | ||||||||
| Reserve for obsolete | ( | ) | ( | ) | ||||
| Total net inventory | $ | $ | ||||||
Prepaid Expenses
Prepaid expenses consist primarily of payments made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar fees to be expensed in the current year.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Equipment held under finance leases are stated at the present value of minimum lease payments less accumulated amortization.
Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under finance leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs repair and maintenance costs on its major equipment, which are expensed as incurred.
8
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of third-party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.
Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Codification 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing. The Company recognizes other revenue earned from pilot studies, consulting and implementation services upon the performance of specific services under the respective service contract.
The Company derives revenue primarily from commercial sales of products, net of discounts and promotions, as well as consulting and implementation services provided in conjunction with our product deployments.
Research and Development
Research, and development costs are expensed as
incurred.
Stock-based Compensation
Stock based awards, consisting of stock options and restricted stock units expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using the Black-Scholes option pricing model for stock options and grant date market value for restricted stock units. The Company expenses the grant date fair value of its stock options on a straight-line basis over their respective vesting periods.
9
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
The stock-based compensation expense recorded for the three and six months ended June 30, 2021 and 2020, is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
See Note 11 for additional discussion on stock-based compensation.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company currently maintains a full valuation allowance against its deferred tax assets.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of June 30, 2021 or December 31, 2020 and as such, no interest or penalties were recorded in income tax expense.
Comprehensive Loss
Net loss and comprehensive loss were the same for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.
Loss Per Share Attributable to Common Stockholders
Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders, common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and six months ended June 30, 2021 and 2020. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period presented.
10
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| Common stock purchase warrants | ||||||||
| Restricted stock units | ||||||||
| Common stock options | ||||||||
| Total | ||||||||
Adoption of New Accounting Standard:
The Company has considered all recently issued accounting pronouncements and has concluded that there are no recently issued accounting pronouncements that we believe may have a material impact on our unaudited condensed interim financial statements.
Note 3 - Fair Value Measurements
The Company issued common stock warrants to purchase shares of common stock in June of 2015 (see Note 9 - Common Stock Warrants and Common Stock Warrant Liability) that expired in June of 2020. These warrants contained a cash settlement provision that resulted in a common stock warrant liability that was revalued at the end of each reporting period.
We valued these warrant derivatives at fair value. The accounting guidance for fair value, among other things, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The framework for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
11
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 3 - Fair Value Measurements – (continued)
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:
| A. | Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. | |
| B. | Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost). | |
| C. | Income approach: Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option-pricing and excess earnings models. |
The Company’s common stock warrant liabilities are classified as Level 3 because there is limited activity or less transparency around the inputs to valuation.
Financial Instruments Not Carried at Fair Value
The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. The estimated fair value of the convertible notes and other notes, not recorded at fair value, are recorded at cost or amortized cost which was deemed to estimate fair value.
Note 4 - Credit Risk
The Company is potentially subject to concentrations
of credit risk in its accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising
the Company’s customer base, however the Company did identify a potentially uncollectable account at December 31, 2019 and maintained
a reserve for this receivable balance of $
12
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 5 - Prepaid Expenses
Prepaid expenses consist of the following:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Director, officer and other insurance | $ | $ | ||||||
| NASDAQ fees | ||||||||
| Legal retainer | ||||||||
| Marketing programs and conferences | ||||||||
| Professional services retainer | ||||||||
| Rent | ||||||||
| Engineering, software licenses and other | ||||||||
| Total prepaid expenses | $ | $ | ||||||
Note 6 - Property and Equipment
Property and equipment, net consist of the following:
| Useful | June 30, | December 31, | ||||||||||
| Life | 2021 | 2020 | ||||||||||
| Research and development equipment | $ | $ | ||||||||||
| Office and computer equipment (1) | ||||||||||||
| Autos | ||||||||||||
| Furniture and fixtures | ||||||||||||
| Leasehold improvements | ||||||||||||
| Construction in progress | ||||||||||||
| Less accumulated depreciation and amortization | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ||||||||||
| * | |
| (1) |
Depreciation and amortization expense was approximately
$
13
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 7 - Accrued Expenses
Accrued expenses consist of the following:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Compensation and related benefits | $ | $ | ||||||
| Board Compensation | ||||||||
| Personal property and franchise tax | ||||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
Note 8 - Borrowings
A summary of the Company’s borrowings, including finance lease obligations, is as follows:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Short-term debt: | ||||||||
| Current portion of long-term debt | ||||||||
| Total short-term debt | $ | $ | ||||||
| Long-term debt: | ||||||||
| Finance lease obligations | $ | $ | ||||||
| Other promissory notes | ||||||||
| Total | ||||||||
| Less: current portion of long-term debt | ( | ) | ( | ) | ||||
| Total long-term debt | $ | - | $ | |||||
Finance Lease Obligations
Finance lease obligations at June 30, 2021 are
for manufacturing equipment leased through ENGS Commercial Finance Co. This finance lease expires on
Other Promissory Notes
Also included in the table above are notes payable
to Direct Capital and Fidelity Capital for the financing of manufacturing and computing fixed assets. These notes expire at various dates
through June 2022 and carry interest rates ranging from
14
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
The table summarizes the common stock warrant activity as of June 30, 2021 as follows:
| Balance | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||||||
| Issue Date | Warrant Type | Term Date | Exercise Price | December 31, 2019 | Issued | Exercised | Expired | December 31, 2020 | Issued | Exercised | Expired | June 30, 2021 | ||||||||||||||||||||||||||||||||||
| 2016 and prior | - | ( | ) | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| November 21,2017 | $ | (1) | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| November 21,2017 | $ | - | ( | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| June 20,2018 | $ | - | - | |||||||||||||||||||||||||||||||||||||||||||
| August 13,2018 | $ | - | - | |||||||||||||||||||||||||||||||||||||||||||
| August 13,2018 | $ | - | - | |||||||||||||||||||||||||||||||||||||||||||
| July 16,2019 | $ | - | - | |||||||||||||||||||||||||||||||||||||||||||
| January 28,2020 | $ | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| January 28,2020 | $ | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| March 6,2020 | $ | - | ( | ) | - | |||||||||||||||||||||||||||||||||||||||||
| March 6,2020 | $ | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| April 21,2020 | $ | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| April 24,2020 | $ | - | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| October 26, 2020 | $ | - | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| October 26, 2020 | $ | - | - | |||||||||||||||||||||||||||||||||||||||||||
| February 2, 2021 | $ | - | ||||||||||||||||||||||||||||||||||||||||||||
| February 2, 2021 | $ | - | ||||||||||||||||||||||||||||||||||||||||||||
| March 23, 2021 | $ | - | ||||||||||||||||||||||||||||||||||||||||||||
| (1) | The initial exercise price of these warrants was $ |
15
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)
Outstanding Warrants
As of June 30, 2021, we had
On November 21, 2017, the Company issued a total
of
The exercise price of the warrants was adjusted
downward to $
The exercise price of the warrants was adjusted
downward to $
On June 20, 2018, the Company entered into
an agreement with a holder of
16
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)
On August 13, 2018, in connection with a Rights
Offering of
In connection with the closing of the Rights Offering,
the Company issued a warrant to purchase
Common Stock Warrant Issued to Underwriter of Common Stock Offering
In July 2019, the Company issued to H.C. Wainwright
& Co., as placement agent, a warrant to purchase
Common Stock Warrants Issued in January and March 2020 Private Placements
In January and March 2020, in separate private
placements concurrent with registered direct offerings (collectively, the “2020 Registered Direct Offerings”) of shares of
the Company’s common stock, the Company also issued warrants to purchase an aggregate of up to
The warrants issued in January 2020 to purchase
The warrants issued in March 2020 to purchase
For so long as the 2020 Warrants remain outstanding, the exercise price and number of shares of common stock issuable upon exercise of the warrants are subject to adjustment as follows: (a) upon payment of a stock dividend or other distribution on a class or series of shares common stock, not including shares issued under this warrant; (b) upon subdivision (by stock spilt, stock dividend, recapitalization, or otherwise) or combination (by reverse stock split or otherwise) of shares of common stock; or (c) upon the issuance of any shares of capital stock by reclassification of shares of the common stock.
17
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)
In the event that the Company declares or makes any dividend or other distribution of its assets to holders of its common stock, each 2020 Warrant holder will be entitled to participate in such distribution to the same extent that such holder would have participated therein if the holder had held the number of shares of common stock acquirable upon exercise of the 2020 Warrant.
In the event of a Fundamental Transaction, as
described in the 2020 Warrants and generally including the sale, transfer or other disposition of all or substantially all of our properties
or assets; our consolidation or merger with or into another person or reorganization; a recapitalization, reorganization or reclassification
in which our common stock is converted into other securities, cash or property; or any acquisition of our outstanding common stock that
results in any person or group becoming the beneficial owner of
Any time that the Company grants, issues, or sells any securities pro rata to all of the record holders of the common stock (the “2020 Purchase Right”), each holder of 2020 Warrants will be entitled to acquire the aggregate amount of securities that the holder could have acquired if the holder had held the number of shares of common stock acquirable upon exercise of the applicable 2020 Warrant. However, to the extent that an exercise of a 2020 Purchase Right would exceed the Beneficial Ownership Limitation (defined below), then to such extent the 2020 Purchase Right will be held in abeyance until such time, if ever, that complete exercise of the 2020 Purchase Right would not exceed the Beneficial Ownership Limitation.
After the Initial Exercisability Date (as defined in the 2020 Warrants), the 2020 Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise. If, at the time a holder exercises the 2020 Warrant (but not sooner than six months following the date of such warrant), a registration statement registering the issuance of the shares of common stock underlying the 2020 Warrants under the Securities Act is not then effective or available, nor is any current prospectus thereto available, and an exemption from registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the number of shares of common stock determined according to a formula set forth in the 2020 Warrant.
Limitations on Exercise. A holder (together with its affiliates) may not exercise any portion of the 2020 Warrants to the extent that the holder would own more than 4.99% of the outstanding common stock after exercise (the “Beneficial Ownership Limitation”), except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the 2020 Warrants. No fractional shares of common stock will be issued in connection with the exercise of a 2020 Warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.
18
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)
Except as otherwise provided in the 2020 Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the 2020 Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, unless and until they exercise such warrants.
Common Stock Warrants Issued in April 2020 Public Offering
On April 24, 2020, in connection with a previously
announced public offering of
The Common Stock, Pre-Funded Warrants and Warrants sold in this Public Offering were offered and sold pursuant to a registration statement on Form S-1 (File No. 333-236302) initially filed with the SEC on February 7, 2020, as amended (“Registration Statement”), which was declared effective by the SEC on February 14, 2020. The Post-Effective Amendment No. 2 to the Registration Statement was declared effective by the SEC on April 21, 2020.
The Company estimated the fair value of the common
stock warrants, exercisable at $
Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement
In connection with the separate private placements
concurrent with registered direct offerings of shares of the Company’s common stock in January and March 2020, the Company issued
to H.C. Wainwright & Co., LLC, as placement agent, a warrant to purchase
The Company estimated the fair value of the common
stock warrants issued in January, with an exercise price of $
The Company estimated the fair value of the common
stock warrants issued in March, with an exercise price of $3.7563 per share, to be $
19
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)
In connection with the public offering of
The Company estimated the fair value of the common
stock warrants issued in April, with an exercise price of $
Common Stock Warrants Issued in October 2020 Private Warrant Inducement
In October 2020, in connection with an inducement
agreement with an existing accredited investor to exercise
In connection with the private warrant inducement
in October 2020 of
The Company estimated the fair value of these
common stock warrants, with an exercise price of $
Common Stock Warrants Issued in February 2021 Private Placement Agreement
In February 2021, in connection with a private
placement agreement with certain institutional and accredited investors, the Company issued common stock warrants to purchase up to an
aggregate of
20
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)
Common Stock Warrants Issued to Placement Agent in February 2021 Private Placement Agreement
In connection with the private placement in February
2021, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase up to
Common Stock Warrants Issued to Placement Agent in March 2021 Registered Direct Offering
On March 23, 2021, the Company consummated a registered
direct offering with certain institutional investors and issued an aggregate of
In connection with the registered direct offering
in March 2021, the Company issued to H.C. Wainwright & Co., LLC, as the placement agent, warrants to purchase up to
Deemed Dividend Adjustment-Warrant Modified Terms Revaluation
On March 3, 2020, the Company issued an aggregate
of
On October 26, 2020, in connection with the private
warrant inducement with an existing accredited investor to exercise
Per recent proposed guidance of ASC 260, the Company
determined that this was an exchange of the existing
21
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 10 - Stockholders’ Deficit
Capital Stock
The Company was organized under the laws of the
state of Nevada on July 27, 2004 and was subsequently reincorporated under the laws of the state of Delaware on November 10, 2015. In
connection with the reincorporation, as approved by the stockholders, the Company changed its authorized capital stock to consist of (i)
Prior to November 10, 2015,
Common Stock
The Company had
During the six months ended June 30, 2021, the
Company issued
| ● | an aggregate of | |
| ● | an aggregate of | |
| ● | an aggregate of | |
| ● | an aggregate of |
Public Offerings and Registered Direct Offerings
On February 2, 2021, the Company consummated a
private placement agreement with certain institutional and accredited investors and issued an aggregate of
On March 23, 2021, the Company consummated a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately $3.95 million, pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from the Company’s shelf registration statement on Form S-3 (File No. 333-225712).
22
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 10 - Stockholders’ Deficit – (continued)
In connection with the offering, we issued the
placement agent warrants to purchase up to
On March 19, 2021 and June 22, 2021, the Company
issued an aggregate of
Note 11 - Stock-based Compensation
On June 24, 2021, the Company’s stockholders, at its 2021 annual
meeting of stockholders, approved an amendment to the SenesTech, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) to increase
the number of shares of common stock available for issuance under the 2018 Plan by
Stock Options
Stock options are generally issued with a per
share exercise price equal to no less than fair market value of our common stock on the date of grant.
As of June 30, 2021, the Company had
The Company measures the fair value of stock options with service-based vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period during which the options will be outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.
The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the six months ended June 30, 2021 were as follows:
| Expected volatility | % | |||
| Expected dividend yield | ||||
| Expected term (in years) | ||||
| Risk-free interest rate | % |
The weighted average grant date fair value of
options granted during the six months ended June 30, 2021 was $
23
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 11 - Stock-based Compensation – (continued)
Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities from traded options of biotech companies of comparable size and stability, whose share prices are publicly available. The expected term of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin 110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free interest rate is determined by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends.
The following table summarizes the stock option activity for the periods indicated as follows:
| Number of Options | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (1) | |||||||||||||
| Outstanding at December 31, 2020 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | $ | ||||||||||||||
| Forfeited | ( | ) | $ | $ | ||||||||||||
| Expired | $ | $ | ||||||||||||||
| Outstanding at June 30, 2021 | $ | $ | ||||||||||||||
| Exercisable at June 30, 2021 | $ | $ | ||||||||||||||
| (1) | The aggregate intrinsic value in the table was calculated based on the difference between the estimated fair market value of the Company’s stock and the exercise price of the underlying options. The estimated stock values used in the calculation were $ |
Restricted Stock Units
The following table summarizes restricted stock unit activity for the six months ended June 30, 2021:
| Number of Units | Weighted Average Grant-Date Fair Value Per Unit | |||||||
| Outstanding as of December 31, 2020 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Outstanding as of June 30, 2021 | $ | |||||||
24
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 11 - Stock-based Compensation – (continued)
The stock-based compensation expense was recorded as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and development | $ | - | $ | $ | $ | |||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
The allocation between research and development and selling, general and administrative expense was based on the department and services performed by the employee or non-employee.
At June 30, 2021, the total compensation cost
related to restricted stock units and unvested options not yet recognized was $
Note 12 - Commitments and Contingencies
Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
Lease Commitments
In February 2012, the Company entered into an
operating lease for its then corporate headquarters in Flagstaff, Arizona, which expired in December 2019. In December 2019, we extended
the lease for only the manufacturing facilities located in Flagstaff, Arizona, occupying a total of
On November 16, 2016, we leased an additional
On December 1, 2019,
On August 1, 2020,
We believe that our existing facilities are adequate and meet our current needs for business, manufacturing and research.
25
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 12 - Commitments and Contingencies – (continued)
Rent expense was $
| Years Ending December 31, | Finance Leases | Operating Lease | ||||||
| 2021 | ||||||||
| 2022 | ||||||||
| 2023 | ||||||||
| 2024 | ||||||||
| Total minimum lease payments | $ | $ | ||||||
| Finance Leases | ||||
| Less: amounts representing interest (ranging from 11.43% to 14.68%) | $ | |||
| Present value of minimum lease payments | ||||
| Less: current installments under finance lease obligations | ||||
| Total long-term portion | $ | |||
Note 13 - Subsequent Events
On July 15, 2021, the Company issued
COVID-19
The travel and other restrictions that began in March 2020 in response to the COVID-19 global pandemic resulted in a significant slowdown in our field studies and sales efforts. We were able to resume some projects by mid-year 2020, however, we still have delays on certain projects that might remain on hold until businesses and government entities return to more normal operations. These continued delays have impacted our results of operations and could impact our results in future quarters. In addition, extended stay at home orders and other social distancing initiatives severely limited our ability to communicate with current and potential commercial customers. While many restrictions were lifted during our second fiscal quarter of 2021, we have not returned to full scope pre-pandemic activities, and are uncertain as to when or if, with potential further restrictions, that may occur. The COVID-19 pandemic is also placing a significant budgetary burden on federal, state and local governments, which may impede or delay their ability to purchase our products.
The Company has evaluated subsequent events from the balance sheet date through August 13, 2021, the date at which the financial statements were issued, and determined that there were no other items that require adjustment to or disclosure in the financial statements.
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used in this Quarterly Report on Form 10-Q, “SenesTech,” the “Company,” “we,” “us,” or “our” refer to SenesTech, Inc., a Delaware corporation.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements and related notes.
Forward-Looking Statements
Some statements and information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, notes to our condensed financial statements and elsewhere in this report are not historical facts but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and within the meaning of the safe-harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by words such as: “expect,” “believe,” “estimate,” “plan,” “strategy,” “future,” “potential,” “continue,” “may,” “should,” “will,” and similar references to future periods. Examples include, among others, statements about:
| ● | The impacts and implications of the COVID-19 pandemic; |
| ● | Our commercialization and promotion strategy and plans, including key elements of our business strategy, how we commercialize, our sales approach, the tools we use, our hiring and retention strategy; our areas and markets of focus, our pricing strategy, our strategic relationships and which geographic markets we target; |
| ● | The success and effectiveness of our products; |
| ● | Our seeking, obtaining or maintaining regulatory approvals for our products and product candidates; |
| ● | Our expectations regarding the potential market size for our products and how the market may develop; |
| ● | Our estimates or expectations related to our revenue, cash flow, expenses, operating results, capital requirements and need for additional financing; |
| ● | Our ability to, and the expected benefits of, improving our cost structure and gross margins, and limiting our cash burn; |
| ● | Our plans for our business, including for research and development; |
| ● | Our ability to enter into strategic arrangements and to achieve the expected results from such arrangements; |
| ● | The adequacy of our facilities to meet our current needs; |
| ● | The initiation, timing, progress and results of field studies and other studies and trials and our research and development programs; |
| ● | Our financial performance, including our ability to fund operations; and |
| ● | Developments and projections relating to our projects, competitors and our industry, including legislative developments and impacts from those developments. |
27
These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and situations that are difficult to predict and that may cause our own, or our industry’s, actual results to be materially different from the future results that are expressed or implied by these statements. Accordingly, actual results may differ materially from those anticipated or expressed in such statements as a result of a variety of factors, including those discussed in Item 1A-“Risk Factors” of Part I of our Annual Report on Form 10-K, for the year ended December 31, 2020, filed with the SEC on March 29, 2021, and Item 1A of Part II of this Form 10-Q, in each case entitled “Risk Factors,” and those contained from time to time in our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Overview
Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former license. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock; and debt financing, consisting primarily of convertible notes.
Through June 30, 2021, we have received net proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.2 million in net product sales. As of June 30, 2021, we had an accumulated deficit of $107.8 million and cash and cash equivalents of $13.1 million.
On June 18, 2021, the Company received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that a loan to the Company under this program in the amount of $645,700 was forgiven in full under the terms of the program. This loan was originally granted and funded on April 15, 2020.
We have incurred significant operating losses every year since our inception. Our net losses were $1.7 million and $1.6 million for the three months ended June 30, 2021 and 2020, respectively, and $3.5 million and $4.4 million for the six months ended June 30, 2021 and 2020, respectively. We expect to continue to incur significant expenses and generate operating losses for at least the next 12 months.
We will need additional funding in order to continue to fund our operations and achieve profitability and become cash flow positive and will continue to seek additional financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
While it is difficult to measure the effect and impact of the COVID-19 pandemic on revenue during the six months ended June 30, 2021 and June 30, 2020, the travel and other restrictions that started in March 2020 resulted in a significant slowdown in our proof-of-concept field studies and sales efforts. While we were able to resume field studies in some important projects by mid-year 2020 and initially believed that we would re-start all our most significant field studies as we obtained limited waivers of certain travel bans, we still have delays on certain projects that might remain on hold until certain businesses and government entities return to more normal operations. Continued delays or new restrictions on travel or operations as a result of new outbreaks and variants could impact our results in future quarters. Initially, we believed that pest control would continue through the COVID-19 pandemic as a necessity and we were and have been able to maintain our manufacturing with cautionary, best practices put in place. However, we have concerns about distributor, pest control operator and individual consumer spending as restrictive measures related to the COVID-19 pandemic continue. Extended stay at home orders across the world, whether imposed by governments or individual businesses, have impeded our ability to communicate with current and prospective customers, potentially reducing sales until the orders are lifted. In addition, federal, state and municipal budgets continue to be severely strained as a result of the COVID-19 pandemic. This may delay or impede their ability to make near term purchases of our products. While we have stocked certain long lead time inventory raw material ingredients, any prolonged impact on the suppliers we rely on for the purchase of these items by the COVID-19 pandemic could impact future manufacturing operations.
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Components of our Results of Operations
Sales
Sales are comprised primarily of sales, net of discounts and promotions, of ContraPest and related components, to our distributors and customers, as well as consulting and implementation services provided in conjunction with ContraPest deployments.
Cost of Sales
Cost of sales consist primarily of cost of products sold, including scrap and reserves for obsolescence. We continue to focus on improving our cost structure, with the goals of shifting resources to commercialization, significantly reducing our year-over-year burn rate and achieving a 50% or greater gross margin. Steps have included relocating to more cost-efficient space, organizational restructuring, and improving our manufacturing and supply processes and reducing staffing. We expect to realize the benefits from these steps in the coming quarters.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the research and development of ContraPest and our other product candidates, which costs include:
| ● | Employee related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions; |
| ● | Expenses incurred in connection with the development of our product candidates; and |
| ● | Facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies. |
We expense research and development costs as incurred.
We continue to investigate other applications of our core technology to other product candidates, which includes laboratory tests and academic collaborations. We also continue to develop our supply chain, particularly identifying and improving our sourcing of triptolide, a key active ingredient for our product candidates. At this time, we cannot reasonably estimate the costs for further development of ContraPest or the cost associated with the development of any of our other product candidates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, sales, marketing and administrative functions. Selling, general and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, consulting, accounting and audit services.
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We plan to continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees. As a result, we anticipate that stock-based compensation expense will continue to represent a significant portion of our selling, general and administrative expenses for the foreseeable future.
Interest Income
Interest income consists primarily of interest income earned on cash and cash equivalents.
Interest Expense
Interest expense consists primarily of interest accrued on our finance lease and note commitments.
Other Income (Expense), Net
Other income (expense), net, consists primarily of any recognized gains or losses related to the sale of fixed assets. In 2021, other income also included the reversal of a payroll benefits accrual from 2019 that was reversed as the liability period had expired.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s effective tax rate for the six months ended June 30, 2021, as well as for the year ended December 31, 2020, has been impacted by the full valuation allowance on the Company’s deferred tax assets.
The Company has not recorded any U.S. federal or state income tax benefits for our net operating losses incurred since inception or for our research and development tax credits generated to date, due to the uncertainty regarding our ability to realize a benefit from these tax attributes in the future. Based on tax return activity through December 31, 2020, the Company has federal and state net operating loss carryforwards of approximately $69.5 million and $56.1 million, respectively, not considering any potential Internal Revenue Code of 1986 (“IRC”) Section 382 annual limitation discussed below. The Company is accruing additional net operating losses in calendar year 2021, which will be added to the carryover net operating loss balance once the current year is completed. The federal loss carryforwards begin to expire in 2029, unless previously utilized. The state loss carryforwards begin to expire in 2032, unless previously utilized. Included in the $69.5 million of federal loss carryforwards are approximately $25.1 million of net operating losses that do not expire due to the tax law changes promulgated in conjunction with the Tax Cuts and Jobs Act of 2017.
Additionally, the utilization of the net operating loss carryforwards are subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code od 1986, and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383 results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has not conducted an analysis of an ownership change under section 382. To the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses could be limited.
During the current quarter, the Company received notification that a loan to the Company under the Paycheck Protection Program (the “PPP”) in the amount of $646 thousand was forgiven in full pursuant to the PPP program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Section 1106(i) of the CARES Act specifically requires taxpayers to exclude canceled indebtedness from PPP loans from gross income, and accordingly, the debt forgiveness amount is nontaxable to the Company. Subsequent to the passage of the CARES Act, the IRS issued Notice 2020-32, which precludes a deduction for an expense that would otherwise be deductible if the payment results in the forgiveness of a loan, thereby preventing entities from claiming a double tax benefit on the qualifying expenses for PPP loans. On December 27, 2020, the Consolidated Appropriations Act (“CAA”) was signed into law, which reverses existing IRS guidance provided in Notice 2020-32 by allowing taxpayers to fully deduct any business expenses, regardless of whether the expense was paid for using forgiven PPP loan proceeds. None of the other provisions of the CARES Act or CAA had a material impact to the Company’s tax accounts.
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Comparison of the Three Months Ended June 30, 2021 and 2020
The following table summarizes our results of operations for the three and six months ended June 30, 2021 and 2020:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue: | ||||||||||||||||
| Sales | $ | 160 | $ | 71 | $ | 248 | $ | 108 | ||||||||
| Cost of sales | 119 | 43 | 169 | 65 | ||||||||||||
| Gross profit | 41 | 28 | 79 | 43 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 455 | 226 | 910 | 522 | ||||||||||||
| Selling, general and administrative | 1,935 | 1,427 | 3,357 | 3,472 | ||||||||||||
| Total operating expenses | 2,390 | 1,653 | 4,267 | 3,994 | ||||||||||||
| Net operating loss | (2,349 | ) | (1,625 | ) | (4,188 | ) | (3,951 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 1 | - | 3 | 2 | ||||||||||||
| Interest expense | (3 | ) | (7 | ) | (8 | ) | (15 | ) | ||||||||
| Payroll Protection Program loan forgiveness | 650 | - | 650 | - | ||||||||||||
| Other income | 1 | 3 | 22 | 18 | ||||||||||||
| Total other income | 649 | (4 | ) | 667 | 5 | |||||||||||
| Net loss and comprehensive loss | (1,700 | ) | (1,629 | ) | (3,521 | ) | (3,946 | ) | ||||||||
| Deemed dividend-warrant price protection-revaluation adjustment | - | - | - | 414 | ||||||||||||
| Net loss attributable to common shareholders | $ | (1,700 | ) | $ | (1,629 | ) | $ | (3,521 | ) | $ | (4,360 | ) | ||||
| Weighted average common shares outstanding - basic and fully diluted | 12,178,754 | 2,760,875 | 10,169,061 | 2,186,089 | ||||||||||||
| Net loss per common share - basic and fully diluted | $ | (0.10 | ) | $ | (0.59 | ) | $ | (0.35 | ) | $ | (1.99 | ) | ||||
Sales
Sales, shown net of sales discounts and promotions, were $160,000 for the three months ended June 30, 2021, compared to $71,000 for the same period in 2020. Sales increased by $89,000 in the three months ended June 30, 2021 due, in part, to the continued focus on of our internet sales initiatives, augmenting our existing pull through sales strategy, where demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products, as well as enhanced strategic partnerships and collaborations with key distributors and PMPs. While these initiatives continue to progress, we believe the benefits of these initiatives continue to be impacted by reduced spending by customers due to the COVID-19 pandemic.
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Cost of Sales
Cost of sales was $119,000 or 74.4% of net sales for the three months ended June 30, 2021, compared to $43,000 or 60.6% of net sales for the three months ended June, 2020. The increase in cost of goods sold of $76,000 in 2021 is primarily due to higher sales volume as well as an increase in manufacturing scrap associated with manufacturing scale up activities. The increase in cost of sales as a percentage of net sales was primarily due to the impact of increased new customer sales incentives during the quarter ended June 30, 2021.
We continue to focus on manufacturing process improvement and efficiencies. We anticipate cost of goods sold as a percentage of sales will improve in the future due to manufacturing efficiencies as a result of scale-up activities.
Gross Profit
Gross profit for the three months ended June 30, 2021 was $41,000 or 25.6% of net sales, compared to a gross profit of $28,000 or 39.4% of net sales, for the same period in 2020. The decrease in gross profit was a direct result of the impact of increased new customer sales incentives during the quarter ended June 30, 2021.
Research and Development Expenses
| Three Months Ended June 30, | Increase | |||||||||||
| 2021 | 2020 | (Decrease) | ||||||||||
| (in thousands) | ||||||||||||
| Direct research and development expenses: | ||||||||||||
| Personnel related (including stock-based compensation) | $ | 241 | $ | 82 | $ | 159 | ||||||
| Facility-related | 26 | 55 | (29 | ) | ||||||||
| Other | 188 | 89 | 99 | |||||||||
| Total research and development expenses | $ | 455 | $ | 226 | $ | 229 | ||||||
Research and development expenses were $455,000 for the three months ended June 30, 2021, compared to $226,000 for the same period in 2020. The $229,000 increase in research and development expenses was primarily due to an increase of $159,000 in personnel-related costs, including stock-based compensation expense, due to an increase in headcount.
Facility-related expenses decreased $29,000 for the three months ended June 30, 2021, compared to the three months ended June 20, 2020, due primarily to the expiration of a facility lease of 7,632 square feet of manufacturing space in Flagstaff, Arizona at December 31, 2020.
The increase in other research and development expenses of $99,000 in the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increased expenses related to field and regulatory compliance studies. We also continue to improve our manufacturing process and formulation.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were approximately $1.9 million for the three months ended June 30, 2021, as compared to approximately $1.4 million for the three months ended June 30, 2020. The increase of $500,000 in selling, general and administrative expenses was primarily due to an increase of $417,000 in net salary costs, $55,000 of travel and entertainment expenses and $53,000 in marketing programs, offset be a decrease of $37,000 in professional service expenses. The increase in net salary costs of $417,000 was due primarily to incentive bonuses to employees of $130,000 in May 2021, severance expense for the elimination of personnel related to in-house marketing programs in June 2021, the hiring of the Chief Strategy Officer in May 2021, and $40,000 of increased stock compensation due to the issuance of certain common stock option awards.
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The increase in travel expenses was a direct result of eased COVID-19 travel restrictions that were put in place at the end of March 2020. The $53,000 increase in marketing expenses is a result of costs associated with rebranding activities to highlight the commercial focus of the Company and on-line marketing program expansion in the three months ended June 30, 2021. The decrease in professional services expenses was primarily due to reduced legal expenses related to a litigation settlement incurred in the three months ended June 30, 2020 that were not incurred in the same period of 2021.
Interest Income/Expense, Net
We recorded interest expense, net of $2,000 for the three months ended June 30, 2021, as compared to interest expense, net of $7,000 for the same period in 2020. The $5,000 decrease in interest expense, net for the period was a result of decreased interest expense on certain notes payable and finance leases that expired after June 30, 2020.
Paycheck Protection Program Loan Forgiveness
PPP loan forgiveness income for the three months ended June 30, 2021 represents the forgiveness of a promissory note pursuant to the PPP under the CARES Act, that the Company secured under this program.
Other Income (Expense)
Other income, net, was $1,000 for the three months ended June 30, 2021 as compared to $3,000 for the same period in 2020. The $2,000 decrease of other income, net for the three months ended June 30, 2021 was due to recognized gains on the sale of fixed assets during the three months ended June 30, 2020.
Six Months Ended June 30, 2021 compared to Six Months Ended June 30, 2020:
Sales
Sales, shown net of sales discounts and promotions, were $248,000 for the six months ended June 30, 2021, compared to $108,000 for the same period in 2020. Sales increased by $140,000 in the six months ended June 30, 2021 due, in part, to the continued focus on of our internet sales initiatives, augmenting our existing pull through sales strategy, where demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products, as well as enhanced strategic partnerships and collaborations with key distributors and PMPs. We believe the benefits of these initiatives continue to be impacted by reduced spending by customers due to the COVID-19 pandemic.
Cost of Sales
Cost of sales was $169,000 or 68.1% of net sales for the six months ended June 30, 2021, compared to $65,000 or 60.2% of net sales for the six months ended June 30, 2020. The increase in cost of goods sold of $104,000 in the six months ended June 30, 2021 is primarily due to higher sales volume as well as an increase in manufacturing scrap associated with manufacturing scale up activities. The increase in cost of sales as a percentage of net sales was primarily due to the impact of increased new customer sales incentives during the six months ended June 30, 2021 as well as the increased manufacturing scrap noted above.
We continue to focus on manufacturing process improvement and efficiencies. We anticipate cost of goods sold as a percentage of sales will improve in the future due to manufacturing efficiencies as a result of scale-up activities.
Gross Profit
Gross profit for the three months ended June 30, 2021 was $79,000 or 31.9% of net sales, compared to a gross profit of $43,000 or 39.8% of net sales for the same period in 2020. The decrease in gross profit was a direct result of the impact of increased new customer sales incentives during the six months ended June 30, 2021 as well as the increased manufacturing scrap discussed above.
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Research and Development Expenses
| Six Months Ended June 30, | Increase | |||||||||||
| 2021 | 2020 | (Decrease) | ||||||||||
| (in thousands) | ||||||||||||
| Direct research and development expenses: | ||||||||||||
| Personnel related (including stock-based compensation) | $ | 475 | $ | 221 | $ | 254 | ||||||
| Facility-related | 46 | 79 | (33 | ) | ||||||||
| Other | 389 | 222 | 167 | |||||||||
| Total research and development expenses | $ | 910 | $ | 522 | $ | 388 | ||||||
Research and development expenses were $910,000 for the six months ended June 30, 2021, compared to $522,000 for the same period in 2020. The $388,000 increase in research and development expenses was primarily due to an increase of $254,000 in manufacturing personnel-related costs relative to the second quarter of 2020, which was impacted by the COVID-19 pandemic, in addition to increases in manufacturing and regulatory headcount to meet current and future demand.
Facility-related expenses decreased $33,000 for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, due primarily to the expiration of a facility lease of 7,632 square feet of manufacturing space in Flagstaff, Arizona at December 31, 2020.
The increase in other research and development expenses of $167,000 in the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increased expenses related to field and regulatory compliance studies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were approximately $3.4 million for the six months ended June 30, 2021, as compared to approximately $3.5 million for the six months ended June 30, 2020. The decrease of $100,000 in selling, general and administrative expenses was primarily due to a decrease of $357,000 in professional service expenses and a decrease in transfer agent fees of $62,000 offset by an increase of $267,000 in net salary costs, $31,000 in marketing programs and $27,000 of travel and entertainment expenses. The decrease in professional services expenses was primarily due to reduced legal expenses related to a litigation settlement incurred in the six months ended June 30, 2020 that were not incurred in the same period of 2021. The $62,000 decrease in transfer agent fees in the six months ended June 30, 2021 over the same period of 2020 was due to expenses related to a 20-for-1 reverse stock split effected by the Company in February 2020. The increase in net salary costs of $267,000 was due primarily to incentive bonuses to employees of $130,000 in May 2021, severance expense for the elimination of in-house marketing programs in June 2021, $40,000 of increased stock compensation due to the issuance of certain common stock option awards and the hiring of the Chief Strategy Officer in May 2021. The $31,000 increase in marketing expenses is a result of costs associated with rebranding activities to highlight the commercial focus of the Company and on-line marketing program expansion in the six months ended June 30, 2021. The $27,000 increase in travel expenses was a direct result of eased COVID-19 travel restrictions that were put in place at the end of March 2020.
Interest Income/Expense, Net
We recorded interest expense, net of $5,000 for the six months ended June 30, 2021, as compared to interest expense, net of $13,000 for the same period in 2020. The $8,000 decrease in interest expense, net for the period was a result of decreased interest expense on certain notes payable and finance leases that expired after June 30, 2020.
Paycheck Protection Program Loan Forgiveness
PPP loan forgiveness income for the six months ended June 30, 2021 represents the forgiveness of a promissory note pursuant to the PPP under the CARES Act that the Company secured under this program.
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Other Income (Expense)
Other income, net, was $22,000 for the six months ended June 30, 2021 as compared to $18,000 for the period ended June 30, 2020. Other income, net for the six months ended June 30, 2021 primarily represented a payroll benefits accrual from 2019 that was reversed as the liability period had expired. The $18,000 other income, net for the six month period ended June 30, 2020 represented recognized gains on the sale of fixed assets during the period.
Liquidity and Capital Resources
Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former license. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock; and debt financing, consisting primarily of convertible notes.
Through June 30, 2021, we have received net proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.2 million in net product sales. As of June 30, 2021, we had an accumulated deficit of $107.8 million and cash and cash equivalents of $13.1 million.
As discussed in Note 8 - Borrowings, of our Notes to Condensed Financial Statements, on April 15, 2020, the Company also received cash proceeds of $645,700 from the PPP of the Coronavirus Aid, Relief, and Economic Security Act. We used the proceeds from the PPP loan to retain employees, maintain payroll and make lease, interest and utility payments. This loan was fully forgiven, under terms of the PPP, on June 14, 2021.
Our ultimate success depends upon the outcome of a combination of factors, including: (i) successful commercialization of ContraPest and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPest and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.
Based upon our current operating plan, we expect that cash and cash equivalents at June 30, 2021, in combination with anticipated revenue and additional sales of our equity securities, will be sufficient to fund our current operations for at least the next 12 months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest in the United States. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time. If we need more financing, including within the next 12 months, and we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, we may require additional capital in order to fund our operating losses and research and development activities before we become profitable and may opportunistically raise capital. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
Additional Funding Requirements
We expect our expenses to continue or increase in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest. Further, the COVID-19 pandemic will likely continue to delay completion of field studies and achievement of sales, which will further increase our need for financing. In addition, we will continue to incur costs associated with operating as a public company.
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In particular, we expect to incur substantial and increased expenses as we:
| ● | Work to maximize market acceptance for, and generate sales of, our products; | |
| ● | Manage the infrastructure for the sales, marketing and distribution of ContraPest and any other product candidates for which we may receive regulatory approval; | |
| ● | Continue the development of ContraPest and our other product candidates, including engaging in any necessary field studies; | |
| ● | Seek additional, and to maintain, regulatory approvals for ContraPest and our other product candidates; | |
| ● | Scale up manufacturing processes and quantities to meet future demand of ContraPest and any other product candidates for which we receive regulatory approval; | |
| ● | Continue product development of ContraPest and advance our research and development activities and advance the research and development programs for other product candidates; | |
| ● | Maintain, expand and protect our intellectual property portfolio; | |
| ● | Add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts and operations as a public company; and | |
| ● | Expand regulatory approvals for ContraPest, with an effort to make the product more user friendly and available for use in an increased number of applications. |
We believe we will need additional financing to fund these continuing and additional expenses.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash used in operating activities | $ | (4,001 | ) | $ | (3,573 | ) | ||
| Cash (used in) provided by investing activities | (83 | ) | 44 | |||||
| Cash provided by financing activities | 13,570 | 6,311 | ||||||
| Net increase in cash and cash equivalents | $ | 9,486 | $ | 2,782 | ||||
Operating Activities.
During the six months ended June 30, 2021, operating activities used $4.0 million of cash, primarily resulting from our net loss of $3.5 million, changes in our operating assets and liabilities of $317,000 and by non-cash charges of $163,000, consisting primarily of stock-based compensation, depreciation and amortization, offset by the Paycheck Protection Program loan forgiveness during the period. Our net loss was primarily attributable to research and development activities and our selling, general and administrative expenses, as we generated limited product revenue during the period. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2021 of $317,000 consisted primarily of a net decrease in accrued expenses and accounts payable of $51,000, an increase in prepaid expenses of $203,000, an increase in inventory of $24,000 and an increase in accounts receivable of $49,000, offset by a decrease in other assets of $10,000.
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During the six months ended June 30, 2020, operating activities used $3.6 million of cash, primarily resulting from our net loss of $4.0 million and by changes in our operating assets and liabilities of $48,000, offset by non-cash charges of $421,000, consisting primarily of stock-based compensation, depreciation and amortization. Our net loss was primarily attributable to research and development activities and our selling, general and administrative expenses, as we generated limited product revenue during the period. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2020, consisted primarily of a net decrease in accrued expenses and accounts payable of $181,000 and an increase in prepaid expenses of $27,000 offset by a decrease in inventory of $45,000, a decrease in receivables of $104,000 and a decrease in other assets of $11,000.
Investing Activities.
For the six months ended June 30, 2021, net cash used in investing activities was $83,000 due to the purchases of property, plant and equipment and increases in construction in progress.
For the six months ended June 30, 2020, net cash provided by investing activities was $44,000 due to the sale of property and equipment.
Financing Activities.
During the six months ended June 30, 2021, net cash provided by financing activities was $13.6 million as a result of $12.4 million in net proceeds from the issuance of common stock and net proceeds of $1.2 million from the exercise of warrants, offset by $26,000 related to payments of finance lease obligations, $28,000 related to repayments of notes payable and $17,000 for the payment of employee withholding taxes related to share based awards.
During the six months ended June 30, 2020, net cash provided by financing activities was $6.3 million as a result of $5.7 million in net proceeds from the issuance of common stock and net proceeds of $646,000 from the issuance of a promissory note pursuant to the Paycheck Protection Program, offset by $29,000 of repayments related to notes payable and $49,000 in repayments of finance lease obligations.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition (“ASC 605”). Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of the fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. The performance obligations identified by the Company under ASC 606 are straightforward and similar to the unit of account and performance obligation determination under ASC Topic 605, Revenue Recognition.
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The Company recognizes revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing. The Company recognizes other revenue earned from pilot studies, consulting and implementation services upon the performance of specific services under the respective service contract.
The Company derives revenue primarily from commercial sales of products, net of discounts and promotions, as well as consulting and implementation services provided in conjunction with our product deployments.
Stock-Based Compensation
We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures, in accordance with ASC Topic 718 — Stock Compensation. We estimate the grant date fair value of the awards, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of stock-based awards is expensed on a straight-line basis over the vesting period of the respective award.
We recorded stock-based compensation expense of approximately $182,000 and $140,000 for the three months ended June 30, 2021 and June 30, 2020, respectively, and approximately $337,000 and $291,000 for the six months ended June 30, 2021 and June 30, 2020, respectively. We expect to continue to grant stock options and other equity-based awards in the future and continue to recognize stock-based compensation expense in future periods.
The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. If we had made different assumptions, our stock-based compensation expense, net loss and loss per share of common stock could have been significantly different. Our assumptions are as follows:
| ● | Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. Our historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, we estimate the expected term by using the simplified method, which calculates the expected term as the average of the time-to-vesting and the contractual life of the options. | |
| ● | Expected volatility. Expected volatility is derived from the average historical volatilities of publicly traded companies within our industry that we consider to be comparable to our business over a period approximately equal to the expected term. We intend to continue to consistently apply this process using the same or similar public companies unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. | |
| ● | Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term. | |
| ● | Expected dividend. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock. | |
| ● | Expected forfeitures. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised. |
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Significant Factors, Assumptions and Methodologies Used in Determining Fair Value of Our Common Stock
As noted above, we are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes option-pricing model. In the absence of an active market for our common stock, we utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of our common stock. In addition, we have conducted periodic assessments of the valuation of our common stock.
The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. If we had made different assumptions than those used, the amount of our stock-based compensation expense, net income and net income per share amounts could have been significantly different. The fair value per share of our common stock for purposes of determining stock-based compensation expense is the closing price of our common stock as reported on the applicable grant date. The compensation cost that has been included in the statements of operations and comprehensive loss for all stock-based compensation arrangements is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and development | $ | - | $ | 2 | $ | 2 | $ | 5 | ||||||||
| Selling, general and administrative | 182 | 138 | 335 | 286 | ||||||||||||
| Total stock-based compensation expense | $ | 182 | $ | 140 | $ | 337 | $ | 291 | ||||||||
The intrinsic value of stock options outstanding as of June 30, 2021 was $0.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we intend to comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies. We will cease to be an emerging growth company at the end of 2021.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report.
These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings in which we are involved, see Note 12 - Commitments and Contingencies under the subsection titled “Legal Proceedings” in our Notes to Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
We have not made material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our 2020 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
INDEX TO EXHIBITS
| + | Indicates a management contract or compensatory plan. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SENESTECH, INC. (Registrant) | ||
| Dated: August 13, 2021 | By: | /s/ Kenneth Siegel |
| Kenneth Siegel | ||
| Chief Executive Officer | ||
| Dated: August 13, 2021 | By: | /s/ Thomas C. Chesterman |
| Thomas C. Chesterman | ||
| Chief Financial Officer and Treasurer | ||
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Exhibit 3.2
AMENDED AND RESTATED
BYLAWS OF
SENESTECH, INC.
TABLE OF CONTENTS
| Page | ||
| ARTICLE I CORPORATE OFFICES | 1 | |
| 1.1 | REGISTERED OFFICE | 1 |
| 1.2 | OTHER OFFICES | 1 |
| ARTICLE II MEETINGS OF STOCKHOLDERS | 1 | |
| 2.1 | PLACE OF MEETINGS | 1 |
| 2.2 | ANNUAL MEETING | 1 |
| 2.3 | SPECIAL MEETING | 1 |
| 2.4 | ADVANCE NOTICE PROCEDURES | 2 |
| 2.5 | NOTICE OF STOCKHOLDERS’ MEETINGS | 5 |
| 2.6 | QUORUM | 6 |
| 2.7 | ADJOURNED MEETING; NOTICE | 6 |
| 2.8 | CONDUCT OF BUSINESS | 6 |
| 2.9 | VOTING | 6 |
| 2.10 | STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING | 7 |
| 2.11 | RECORD DATES | 7 |
| 2.12 | PROXIES | 8 |
| 2.13 | LIST OF STOCKHOLDERS ENTITLED TO VOTE | 8 |
| 2.14 | INSPECTORS OF ELECTION | 8 |
| ARTICLE III DIRECTORS | 9 | |
| 3.1 | POWERS | 9 |
| 3.2 | NUMBER OF DIRECTORS | 9 |
| 3.3 | ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS | 9 |
| 3.4 | RESIGNATION AND VACANCIES | 9 |
| 3.5 | PLACE OF MEETINGS; MEETINGS BY TELEPHONE | 10 |
| 3.6 | REGULAR MEETINGS | 10 |
| 3.7 | SPECIAL MEETINGS; NOTICE | 10 |
| 3.8 | QUORUM; VOTING | 11 |
| 3.9 | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING | 11 |
| 3.10 | FEES AND COMPENSATION OF DIRECTORS | 11 |
| 3.11 | REMOVAL OF DIRECTORS | 12 |
| ARTICLE IV COMMITTEES | 12 | |
| 4.1 | COMMITTEES OF DIRECTORS | 12 |
| 4.2 | COMMITTEE MINUTES | 12 |
| 4.3 | MEETINGS AND ACTION OF COMMITTEES | 12 |
| 4.4 | SUBCOMMITTEES | 13 |
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| ARTICLE V OFFICERS | 13 | |
| 5.1 | OFFICERS | 13 |
| 5.2 | APPOINTMENT OF OFFICERS | 13 |
| 5.3 | SUBORDINATE OFFICERS | 13 |
| 5.4 | REMOVAL AND RESIGNATION OF OFFICERS | 14 |
| 5.5 | VACANCIES IN OFFICES | 14 |
| 5.6 | REPRESENTATION OF SHARES OF OTHER CORPORATIONS | 14 |
| 5.7 | AUTHORITY AND DUTIES OF OFFICERS | 14 |
| 5.8 | THE CHAIRPERSON OF THE BOARD | 14 |
| 5.9 | THE VICE CHAIRPERSON OF THE BOARD | 14 |
| 5.10 | THE CHIEF EXECUTIVE OFFICER | 15 |
| 5.11 | THE PRESIDENT | 15 |
| 5.12 | THE VICE PRESIDENTS AND ASSISTANT VICE PRESIDENTS | 15 |
| 5.13 | THE SECRETARY AND ASSISTANT SECRETARIES | 15 |
| 5.14 | THE CHIEF FINANCIAL OFFICER AND ASSISTANT TREASURERS | 15 |
| ARTICLE VI STOCK | 16 | |
| 6.1 | STOCK CERTIFICATES; PARTLY PAID SHARES | 16 |
| 6.2 | SPECIAL DESIGNATION ON CERTIFICATES | 16 |
| 6.3 | LOST CERTIFICATES | 17 |
| 6.4 | DIVIDENDS | 17 |
| 6.5 | TRANSFER OF STOCK | 17 |
| 6.6 | STOCK TRANSFER AGREEMENTS | 17 |
| 6.7 | REGISTERED STOCKHOLDERS | 18 |
| ARTICLE VII MANNER OF GIVING NOTICE AND WAIVER | 18 | |
| 7.1 | NOTICE OF STOCKHOLDERS’ MEETINGS | 18 |
| 7.2 | NOTICE BY ELECTRONIC TRANSMISSION | 18 |
| 7.3 | NOTICE TO STOCKHOLDERS SHARING AN ADDRESS | 19 |
| 7.4 | NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL | 19 |
| 7.5 | WAIVER OF NOTICE | 19 |
| ARTICLE VIII INDEMNIFICATION | 20 | |
| 8.1 | INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS | 20 |
| 8.2 | INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION | 20 |
| 8.3 | SUCCESSFUL DEFENSE | 20 |
| 8.4 | INDEMNIFICATION OF OTHERS | 21 |
| 8.5 | ADVANCED PAYMENT OF EXPENSES | 21 |
| 8.6 | LIMITATION ON INDEMNIFICATION | 21 |
| 8.7 | DETERMINATION; CLAIM | 22 |
| 8.8 | NON-EXCLUSIVITY OF RIGHTS | 22 |
| 8.9 | INSURANCE | 23 |
| 8.10 | SURVIVAL | 23 |
| 8.11 | EFFECT OF REPEAL OR MODIFICATION | 23 |
| 8.12 | CERTAIN DEFINITIONS | 23 |
| ARTICLE IX GENERAL MATTERS | 24 | |
| 9.1 | EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS | 24 |
| 9.2 | FISCAL YEAR | 24 |
| 9.3 | SEAL | 24 |
| 9.4 | CONSTRUCTION; DEFINITIONS | 24 |
| ARTICLE X AMENDMENTS | 24 | |
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AMENDED
AND RESTATED
BYLAWS OF
SENESTECH, INC.
_____________________
ARTICLE
I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of SenesTech, Inc. shall be fixed in the corporation’s certificate of incorporation, as the same may be amended from time to time.
1.2 OTHER OFFICES
The corporation’s board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.
ARTICLE
II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. The board of directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the corporation’s principal executive office.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year. The board of directors shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
(i) Except as otherwise expressly provided by the terms of any series of preferred stock permitting the holders of such series of preferred stock to call a special meeting of the holders of such series, a special meeting of the stockholders, other than those required by statute, may be called at any time by the board of directors, chairperson of the board of directors, chief executive officer or president (in the absence of a chief executive officer), but a special meeting may not be called by any other person or persons. The board of directors may cancel, postpone or reschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to the stockholders.
(ii) The notice of a special meeting shall include the purpose for which the meeting is called. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the board of directors, chairperson of the board of directors, chief executive officer or president (in the absence of a chief executive officer). Nothing contained in this Section 2.3(ii) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held.
2.4 ADVANCE NOTICE PROCEDURES
(i) Advance Notice of Stockholder Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought: (A) pursuant to the corporation’s proxy materials with respect to such meeting, (B) by or at the direction of the board of directors, or (C) by a stockholder of the corporation who (1) is a stockholder of record at the time of the giving of the notice required by this Section 2.4(i), on the record date for the determination of stockholders entitled to notice of the annual meeting and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has timely complied in proper written form with the notice procedures set forth in this Section 2.4(i). In addition, for business to be properly brought before an annual meeting by a stockholder, such business must be a proper matter for stockholder action pursuant to these bylaws and applicable law. For the avoidance of doubt, clause (C) above shall be the exclusive means for a stockholder to bring business before an annual meeting of stockholders.
(a) To comply with clause (C) of Section 2.4(i) above, a stockholder’s notice must set forth all information required under this Section 2.4(i) and must be timely received by the secretary of the corporation. To be timely, a stockholder’s notice must be received by the secretary at the principal executive offices of the corporation not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which the corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting; provided, however, if no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice by the stockholder to be timely, it must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, and (ii) the tenth day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described in this Section 2.4(i)(a). “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor thereto (the “1934 Act”).
(b) To be in proper written form, a stockholder’s notice to the secretary must set forth as to each matter of business the stockholder intends to bring before the annual meeting: (1) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any Stockholder Associated Person (as defined below), (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, (5) any material interest of the stockholder or a Stockholder Associated Person in such business, and (6) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal (such information provided and statements made as required by clauses (1) through (6), a “Business Solicitation Statement”). In addition, to be in proper written form, a stockholder’s notice to the secretary must be supplemented not later than ten days following the record date for the determination of stockholders entitled to notice of the meeting, and five days following the record date for the determination of stockholders entitled to vote at the meeting (if that record date is different than the record date for the determination of stockholders entitled to notice of the meeting), to disclose the information contained in clauses (3) and (4) above as of the applicable record date. For purposes of this Section 2.4, a “Stockholder Associated Person” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (i) and (ii).
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(c) Without exception, no business shall be conducted at any annual meeting except in accordance with the provisions set forth in this Section 2.4(i) and, if applicable, Section 2.4(ii). In addition, business proposed to be brought by a stockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with the provisions of this Section 2.4(i), and, if the chairperson should so determine, he or she shall so declare at the annual meeting that any such business not properly brought before the annual meeting shall not be conducted.
(ii) Advance Notice of Director Nominations at Annual Meetings. Notwithstanding anything in these bylaws to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 2.4(ii) shall be eligible for election or re-election as directors at an annual meeting of stockholders. Nominations of persons for election to the board of directors of the corporation shall be made at an annual meeting of stockholders only (A) by or at the direction of the board of directors or (B) by a stockholder of the corporation who (1) was a stockholder of record at the time of the giving of the notice required by this Section 2.4(ii), on the record date for the determination of stockholders entitled to notice of the annual meeting and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has complied with the notice procedures set forth in this Section 2.4(ii). In addition to any other applicable requirements, for a nomination to be made by a stockholder, the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation.
(a) To comply with clause (B) of Section 2.4(ii) above, a nomination to be made by a stockholder must set forth all information required under this Section 2.4(ii) and must be received by the secretary of the corporation at the principal executive offices of the corporation at the time set forth in, and in accordance with, the final three sentences of Section 2.4(i)(a) above.
(b) To be in proper written form, such stockholder’s notice to the secretary must set forth:
(1) as to each person (a “nominee”) whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Delaware law with respect to the corporation and its stockholders, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and
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(2) as to such stockholder giving notice, (A) the information required to be provided pursuant to clauses (2) through (5) of Section 2.4(i)(b) above, and the supplement referenced in the second sentence of Section 2.4(i)(b) above (except that the references to “business” in such clauses shall instead refer to nominations of directors for purposes of this paragraph), and (B) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the corporation’s voting shares reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect such nominee(s) (such information provided and statements made as required by clauses (A) and (B) above, a “Nominee Solicitation Statement”).
(c) At the request of the board of directors, any person nominated by a stockholder for election as a director must furnish to the secretary of the corporation (1) that information required to be set forth in the stockholder’s notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person’s nomination was given and (2) such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of such information if requested, such stockholder’s nomination shall not be considered in proper form pursuant to this Section 2.4(ii).
(d) Without exception, no person shall be eligible for election or re-election as a director of the corporation at an annual meeting of stockholders unless nominated in accordance with the provisions set forth in this Section 2.4(ii). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall be disregarded.
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(iii) Advance Notice of Director Nominations for Special Meetings.
(a) For a special meeting of stockholders at which directors are to be elected pursuant to Section 2.3, nominations of persons for election to the board of directors shall be made only (1) by or at the direction of the board of directors or (2) by any stockholder of the corporation who (A) is a stockholder of record at the time of the giving of the notice required by this Section 2.4(iii), on the record date for the determination of stockholders entitled to notice of the special meeting and on the record date for the determination of stockholders entitled to vote at the special meeting and (B) delivers a timely written notice of the nomination to the secretary of the corporation that includes the information set forth in Sections 2.4(ii)(b) and (ii)(c) above. To be timely, such notice must be received by the secretary at the principal executive offices of the corporation not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. A person shall not be eligible for election or re-election as a director at a special meeting unless the person is nominated (i) by or at the direction of the board of directors or (ii) by a stockholder in accordance with the notice procedures set forth in this Section 2.4(iii). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading.
(b) The chairperson of the special meeting shall, if the facts warrant, determine and declare at the meeting that a nomination or business was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.
(iv) Other Requirements and Rights. In addition to the foregoing provisions of this Section 2.4, a stockholder must also comply with all applicable requirements of state law and of the 1934 Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.4, including, with respect to business such stockholder intends to bring before the annual meeting that involves a proposal that such stockholder requests to be included in the corporation ‘s proxy statement, the requirements of Rule 14a-8 (or any successor provision) under the 1934 Act. Nothing in this Section 2.4 shall be deemed to affect any right of the corporation to omit a proposal from the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the 1934 Act.
2.5 NOTICE OF STOCKHOLDERS’ MEETINGS
Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
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2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.
If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the board of directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and Section 2.11 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
2.8 CONDUCT OF BUSINESS
The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.
Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.
Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation or these bylaws.
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2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Subject to the rights of the holders of the shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as dividend or upon liquidation, any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of stockholders of the corporation and may not be effected by any consent in writing by such stockholders.
2.11 RECORD DATES
In order that the corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the board of directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the board of directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.
If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 2.11 at the adjourned meeting.
In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
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2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal place of business. If the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
2.14 INSPECTORS OF ELECTION
A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person.
Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(ii) receive votes, ballots or consents;
(iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;
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(iv) count and tabulate all votes or consents;
(v) determine when the polls shall close;
(vi) determine the result; and
(vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.
The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE
III
DIRECTORS
3.1 POWERS
The business and affairs of the corporation shall be managed by or under the direction of the board of directors, except as may be otherwise provided in the DGCL or the certificate of incorporation.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the board of directors. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.
If so provided in the certificate of incorporation, the directors of the corporation shall be divided into three classes.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
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Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If the directors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been duly elected and qualified.
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board of directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairperson of the board of directors, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.
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Notice of the time and place of special meetings shall be:
(i) delivered personally by hand, by courier or by telephone;
(ii) sent by United States first-class mail, postage prepaid;
(iii) sent by facsimile; or
(iv) sent by electronic mail,
directed to each director at that director ‘s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records.
If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.
3.8 QUORUM; VOTING
At all meetings of the board of directors, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.
If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.
3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board of directors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board of directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.10 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.
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3.11 REMOVAL OF DIRECTORS
Any director may be removed from office by the stockholders of the corporation only for cause.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
ARTICLE
IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the authorized number of directors, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in these bylaws, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:
(i) Section 3.5 (place of meetings and meetings by telephone);
(ii) Section 3.6 (regular meetings);
(iii) Section 3.7 (special meetings and notice);
(iv) Section 3.8 (quorum; voting);
(v) Section 7.5 (waiver of notice); and
(vi) Section 3.9 (action without a meeting)
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with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members. However:
(i) the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee; and
(ii) special meetings of committees may also be called by resolution of the board of directors;
(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.
4.4 SUBCOMMITTEES
Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the board of directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
ARTICLE
V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the board of directors, a chairperson of the board of directors, a vice chairperson of the board of directors, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The board of directors shall appoint the officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
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5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board of directors or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by the board of directors or as provided in Section 5.3.
5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairperson of the board of directors, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
5.7 AUTHORITY AND DUTIES OF OFFICERS
All officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the board of directors.
5.8 THE CHAIRPERSON OF THE BOARD
The chairperson of the board shall have the powers and duties customarily and usually associated with the office of the chairperson of the board. The chairperson of the board shall preside at meetings of the stockholders and of the board of directors.
5.9 THE VICE CHAIRPERSON OF THE BOARD
The vice chairperson of the board shall have the powers and duties customarily and usually associated with the office of the vice chairperson of the board. In the case of absence or disability of the chairperson of the board, the vice chairperson of the board shall perform the duties and exercise the powers of the chairperson of the board.
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5.10 THE CHIEF EXECUTIVE OFFICER
The chief executive officer shall have, subject to the supervision, direction and control of the board of directors, ultimate authority for decisions relating to the supervision, direction and management of the affairs and the business of the corporation customarily and usually associated with the position of chief executive officer, including, without limitation, all powers necessary to direct and control the organizational and reporting relationships within the corporation. If at any time the office of the chairperson and vice chairperson of the board shall not be filled, or in the event of the temporary absence or disability of the chairperson of the board and the vice chairperson of the board, the chief executive officer shall perform the duties and exercise the powers of the chairperson of the board unless otherwise determined by the board of directors.
5.11 THE PRESIDENT
The president shall have, subject to the supervision, direction and control of the board of directors, the general powers and duties of supervision, direction and management of the affairs and business of the corporation customarily and usually associated with the position of president. The president shall have such powers and perform such duties as may from time to time be assigned to him or her by the board of directors, the chairperson of the board or the chief executive officer. In the event of the absence or disability of the chief executive officer, the president shall perform the duties and exercise the powers of the chief executive officer unless otherwise determined by the board of directors.
5.12 THE VICE PRESIDENTS AND ASSISTANT VICE PRESIDENTS
Each vice president and assistant vice president shall have such powers and perform such duties as may from time to time be assigned to him or her by the board of directors, the chairperson of the board, the chief executive officer or the president.
5.13 THE SECRETARY AND ASSISTANT SECRETARIES
(i) The secretary shall attend meetings of the board of directors and meetings of the stockholders and record all votes and minutes of all such proceedings in a book or books kept for such purpose. The secretary shall have all such further powers and duties as are customarily and usually associated with the position of secretary or as may from time to time be assigned to him or her by the board of directors, the chairperson of the board, the chief executive officer or the president.
(ii) Each assistant secretary shall have such powers and perform such duties as may from time to time be assigned to him or her by the board of directors, the chairperson of the board, the chief executive officer, the president or the secretary. In the event of the absence, inability or refusal to act of the secretary, the assistant secretary (or if there shall be more than one, the assistant secretaries in the order determined by the board of directors) shall perform the duties and exercise the powers of the secretary.
5.14 THE CHIEF FINANCIAL OFFICER AND ASSISTANT TREASURERS
(i) The chief financial officer shall be the treasurer of the corporation. The chief financial officer shall have custody of the corporation’s funds and securities, shall be responsible for maintaining the corporation’s accounting records and statements, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit or cause to be deposited moneys or other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. The chief financial officer shall also maintain adequate records of all assets, liabilities and transactions of the corporation and shall assure that adequate audits thereof are currently and regularly made. The chief financial officer shall have all such further powers and duties as are customarily and usually associated with the position of chief financial officer, or as may from time to time be assigned to him or her by the board of directors, the chairperson, the chief executive officer or the president.
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(ii) Each assistant treasurer shall have such powers and perform such duties as may from time to time be assigned to him or her by the board of directors, the chief executive officer, the president or the chief financial officer. In the event of the absence, inability or refusal to act of the chief financial officer, the assistant treasurer (or if there shall be more than one, the assistant treasurers in the order determined by the board of directors) shall perform the duties and exercise the powers of the chief financial officer.
ARTICLE
VI
STOCK
6.1 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates, provided that the board of directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. If shares are represented by certificates, such certificates shall be in the form, other than bearer form, approved by the board of directors. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson of the board of directors or vice-chairperson of the board of directors, or the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The corporation shall not have power to issue a certificate in bearer form.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly-paid shares, or upon the books and records of the corporation in the case of uncertificated partly-paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully-paid shares, the corporation shall declare a dividend upon partly-paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
6.2 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Section 6.2 or Sections 156, 202(a) or 218(a) of the DGCL or with respect to this Section 6.2 a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
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6.3 LOST CERTIFICATES
Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
6.4 DIVIDENDS
The board of directors, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the corporation’s capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock, subject to the provisions of the certificate of incorporation.
The board of directors may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.
6.5 TRANSFER OF STOCK
Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.
6.6 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
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6.7 REGISTERED STOCKHOLDERS
The corporation:
(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;
(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and
(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE
VII
MANNER OF GIVING NOTICE AND WAIVER
7.1 NOTICE OF STOCKHOLDERS’ MEETINGS
Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the corporation’s records. An affidavit of the secretary or an assistant secretary of the corporation or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
7.2 NOTICE BY ELECTRONIC TRANSMISSION
Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if:
(i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and
(ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed given:
(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
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(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and
(iv) if by any other form of electronic transmission, when directed to the stockholder.
An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
An “electronic transmission” means any form of communication , not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.
7.3 NOTICE TO STOCKHOLDERS SHARING AN ADDRESS
Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation under the provisions of the DGCL, the certificate of incorporation or these by laws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any stockholder who fails to object in writing to the corporation, within 60 days of having been given written notice by the corporation of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.
7.4 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL
Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. If the action taken by the corporation is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.
7.5 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.
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ARTICLE
VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS
Subject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
8.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
Subject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
8.3 SUCCESSFUL DEFENSE
To the extent that a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
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8.4 INDEMNIFICATION OF OTHERS
Subject to the other provisions of this Article VIII, the corporation shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The board of directors shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.
8.5 ADVANCED PAYMENT OF EXPENSES
Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate. The right to advancement of expenses shall not apply to any claim for which indemnity is excluded pursuant to these bylaws, but shall apply to any Proceeding referenced in Section 8.6(ii) or 8.6(iii) prior to a determination that the person is not entitled to be indemnified by the corporation.
Notwithstanding the foregoing, unless otherwise determined pursuant to Section 8.8, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation, in which event this paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majority vote of the directors who are not parties to such Proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, that facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.
8.6 LIMITATION ON INDEMNIFICATION
Subject to the requirements in Section 8.3 and the DGCL, the corporation shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):
(i) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;
(ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the 1934 Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);
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(iii) for any reimbursement of the corporation by such person of any bonus or other incentive- based or equity-based compensation or of any profits realized by such person from the sale of securities of the corporation, as required in each case under the 1934 Act (including any such reimbursements that arise from an accounting restatement of the corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the corporation of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);
(iv) initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the corporation or its directors, officers, employees, agents or other indemnitees, unless (a) the board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the corporation under applicable law, (c) otherwise required to be made under Section 8.7 or (d) otherwise required by applicable law; or
(v) if prohibited by applicable law; provided, however, that if any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
8.7 DETERMINATION; CLAIM
If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 90 days after receipt by the corporation of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. The corporation shall indemnify such person against any and all expenses that are incurred by such person in connection with any action for indemnification or advancement of expenses from the corporation under this Article VIII, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.
8.8 NON-EXCLUSIVITY OF RIGHTS
The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.
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8.9 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the DGCL.
8.10 SURVIVAL
The rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
8.11 EFFECT OF REPEAL OR MODIFICATION
Any amendment, alteration or repeal of this Article VIII shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to such amendment, alteration or repeal.
8.12 CERTAIN DEFINITIONS
For purposes of this Article VIII, references to the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VIII.
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ARTICLE
IX
GENERAL MATTERS
9.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
Except as otherwise provided by law, the certificate of incorporation or these bylaws, the board of directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute any document or instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
9.2 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.
9.3 SEAL
The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors. The corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
9.4 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.
ARTICLE
X
AMENDMENTS
These bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the affirmative vote of the holders of at least 66 2/3% of the total voting power of outstanding voting securities, voting together as a single class, shall be required for the stockholders of the corporation to alter, amend or repeal, or adopt any bylaw inconsistent with, the following provisions of these bylaws: Article II, Sections 3.1, 3.2, 3.4 and 3.11 of Article III, Article VIII and this Article X (including, without limitation, any such Article or Section as renumbered as a result of any amendment, alteration, change, repeal, or adoption of any other Bylaw). The board of directors shall also have the power to adopt, amend or repeal bylaws; provided, however, that a bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the board of directors.
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SENESTECH, INC.
CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
_____________________
The undersigned hereby certifies that he or she is the duly elected, qualified, and acting Secretary or Assistant Secretary of SenesTech, Inc., a Delaware corporation, and that the foregoing bylaws, comprising 24 pages, were adopted on September 9, 2016 by the corporation’s board of directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 21st day of September, 2016.
|
/s/ Kim Wolin |
| Kim Wolin, Secretary |
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AMENDMENT
NO. 1 TO THE
AMENDED AND RESTATED
BYLAWS OF
SENESTECH, INC.
THIS AMENDMENT NO. 1 TO THE AMENDED AND RESTATED BYLAWS of SENESTECH, INC, a Delaware corporation (the “Corporation”), is made as of this 16th day of June, 2021.
ONE: Section 2.6 of the Amended and Restated Bylaws (the “Bylaws”) of the Corporation is hereby amended and restated as follows:
“2.06 QUORUM
The holders of one third (1/3) of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Where a separate vote by a class or series or classes or series is required, one third (1/3) of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.
If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.”
TWO: Except as specifically amended herein, the Bylaws shall remain unchanged and in full force and effect.
[Remainder of page intentionally left blank]
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SENESTECH, INC.
CERTIFICATE OF ADOPTION OF AMENDMENT NO. 1 TO
AMENDED AND RESTATED BYLAWS
The undersigned hereby certifies that he or she is the duly elected, qualified, and acting Secretary or Assistant Secretary of SenesTech, Inc., a Delaware corporation, and that the foregoing Amendment No. 1 to the Bylaws constitutes the entire amendment to the Bylaws as duly adopted by the Board of Directors by unanimous written consent on June 16, 2021.
Executed on June 16, 2021.
|
/s/ Kim Wolin |
| Kim Wolin, Secretary |
Exhibit 10.1
SENESTECH, INC.
2018 EQUITY INCENTIVE PLAN
| 1. | General. |
(a) Eligible Stock Award Recipients. Employees, Directors and Consultants are eligible to receive Stock Awards.
(b) Available Stock Awards. The Plan provides for the grant of the following types of Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards and (vi) Other Stock Awards.
(c) Purpose. The Plan, through the granting of Stock Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and provide a means by which the eligible recipients may benefit from increases in value of the Common Stock.
| 2. | Administration. |
(a) Administration by Board. The Board will administer the Plan. The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c).
(b) Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine (A) who will be granted Stock Awards; (B) when and how each Stock Award will be granted; (C) what type of Stock Award will be granted; (D) the provisions of each Stock Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Stock Award; (E) the number of shares of Common Stock subject to a Stock Award; and (F) the Fair Market Value applicable to a Stock Award.
(ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Stock Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it will deem necessary or expedient to make the Plan or Stock Award fully effective.
(iii) To settle all controversies regarding the Plan and Stock Awards granted under it.
(iv) To accelerate, in whole or in part, the time at which a Stock Award may be exercised or vest (or at which cash or shares of Common Stock may be issued).
(v) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or a Stock Award Agreement, suspension or termination of the Plan will not impair a Participant’s rights under his or her then-outstanding Stock Award without his or her written consent except as provided in subsection (viii) below.
(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to make the Plan or Stock Awards granted under the Plan compliant with the requirements for Incentive Stock Options or exempt from or compliant with the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. However, if required by applicable law, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Stock Awards available for issuance under the Plan. Except as provided in the Plan (including subsection (viii) below) or a Stock Award Agreement, no amendment of the Plan will impair a Participant’s rights under an outstanding Stock Award unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing.
(vii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding Incentive Stock Options.
(viii) To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that a Participant’s rights under any Stock Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent (A) to maintain the qualified status of the Stock Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (C) to clarify the manner of exemption from, or to bring the Stock Award into compliance with, Section 409A of the Code; or (D) to comply with other applicable laws.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.
(x) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Stock Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).
(xi) To effect, with the consent of any adversely affected Participant, (A) the modification of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2) Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company. In no event, however, shall the Board have the right, without stockholder approval, to (i) lower the exercise or grant price of an Option or SAR after it is granted, except in connection with Capitalization Adjustments provided in Section 9; (ii) cancel an Option or SAR at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award; (iii) take any other action that is treated as a repricing under generally accepted accounting principles, or (iv) issue an Option or SAR or amend an outstanding Option or SAR to provide for the grant or issuance of a new Option or SAR on exercise of the original Option or SAR.
(c) Delegation to Committee. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Committee may, at any time, abolish the subcommittee and/or revest in the Committee any powers delegated to the subcommittee. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
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(d) Delegation to an Officer. The Board may delegate to one (1) or more Officers the authority to do one or both of the following: (i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by applicable law, other Stock Awards) and, to the extent permitted by applicable law, the terms of such Stock Awards, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Employees; provided, however, that the Board resolutions regarding such delegation will specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Any such Stock Awards will be granted on the form of Stock Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided in the resolutions approving the delegation authority. The Board may not delegate authority to an Officer who is acting solely in the capacity of an Officer (and not also as a Director) to determine the Fair Market Value pursuant to Section 13(t) below.
(e) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
| 3. | Shares Subject to the Plan. |
(a) Share Reserve.
(i) Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards from and after the Effective Date will not exceed 3,850,000 shares, plus the following additional shares: (A) any authorized shares of Common Stock available for issuance, and not issued or subject to outstanding Stock Awards, under the Company’s 2015 Incentive Plan (the “Prior Plan”) on the Effective Date shall cease to be set aside or reserved for issuance pursuant to the Prior Plan, effective on the Effective Date, and shall instead be set aside and reserved for issuance pursuant to the Plan; and (B) any shares of Common Stock subject to outstanding Stock Awards under the Prior Plan on the Effective Date that cease to be subject to such awards following the Effective Date (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares), shall cease to be set aside or reserved for issuance pursuant to the Prior Plan, effective on the date upon which they cease to be so subject to such awards, and shall instead be set aside and reserved for issuance pursuant to the Plan, up to an aggregate maximum of 122,279 shares pursuant to clauses (A) and (B) of this paragraph (i) (taken all together, the “Share Reserve”).
(ii) For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).
(b) Reversion of Shares to the Share Reserve. If a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan. If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan. Any shares reacquired by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.
(c) Incentive Stock Option Limit. Subject to the Share Reserve and Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options will be a number of shares of Common Stock equal to three (3) multiplied by the Share Reserve.
(d) Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.
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| 4. | Eligibility. |
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however, that Stock Awards may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, unless (i) the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Stock Awards are granted pursuant to a corporate transaction such as a spin off transaction), or (ii) the Company, in consultation with its legal counsel, has determined that such Stock Awards are otherwise exempt from or alternatively comply with the distribution requirements of Section 409A of the Code.
(b) Ten Percent Stockholders. A Ten Percent Stockholder will not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
(c) Consultants. A Consultant will not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or sale of the Company’s securities to such Consultant is not exempt under Rule 701 because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.
| 5. | Provisions Relating to Options and Stock Appreciation Rights. |
Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however, that each Stock Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Stock Award Agreement or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Award Agreement.
(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Stock Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Stock Award if such Stock Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents.
(c) Purchase Price for Options. The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. The permitted methods of payment are as follows:
(i) by cash, check, bank draft or money order payable to the Company;
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(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
(iv) if an Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations;
(v) according to a deferred payment or similar arrangement with the Optionholder; provided, however, that interest will compound at least annually and will be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or
(vi) in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Stock Award Agreement.
(d) Exercise and Payment of a SAR. To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Award Agreement evidencing such SAR. The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR, and with respect to which the Participant is exercising the SAR on such date, over (B) the strike price. The appreciation distribution may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Award Agreement evidencing such SAR.
(e) Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:
(i) Restrictions on Transfer. An Option or SAR will not be transferable except by will or by the laws of descent and distribution (and pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration.
(ii) Domestic Relations Orders. Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2). If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
(iii) Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, upon the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
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(f) Vesting Generally. The total number of shares of Common Stock subject to an Option or SAR may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.
(g) Termination of Continuous Service. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Stock Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Stock Award Agreement, which period will not be less than thirty (30) days if necessary to comply with applicable laws unless such termination is for Cause) and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.
(h) Extension of Termination Date. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of three (3) months (that need not be consecutive) after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement. In addition, unless otherwise provided in a Participant’s Stock Award Agreement, if the sale of any Common Stock received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of a period of time (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement.
(i) Disability of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Award Agreement, which period will not be less than six (6) months if necessary to comply with applicable laws), and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.
(j) Death of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Award Agreement for exercisability after the termination of the Participant’s Continuous Service (for a reason other than death), then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Stock Award Agreement, which period will not be less than six (6) months if necessary to comply with applicable laws), and (ii) the expiration of the term of such Option or SAR as set forth in the Stock Award Agreement. If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR (as applicable) will terminate.
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(k) Termination for Cause. Except as explicitly provided otherwise in a Participant’s Stock Award Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate immediately upon such Participant’s termination of Continuous Service, and the Participant will be prohibited from exercising his or her Option or SAR from and after the time of such termination of Continuous Service.
(l) Non-Exempt Employees. If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of the Option or SAR (although the Stock Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Stock Award Agreement, in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six (6) months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.
(m) Early Exercise of Options. An Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Subject to the “Repurchase Limitation” in Section 8(m), any unvested shares of Common Stock so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. Provided that the “Repurchase Limitation” in Section 8(m) is not violated, the Company will not be required to exercise its repurchase right until at least six (6) months (or such longer or shorter period of time required to avoid classification of the Option as a liability for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement.
(n) Right of Repurchase. Subject to the “Repurchase Limitation” in Section 8(m), the Option or SAR may include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Participant pursuant to the exercise of the Option or SAR.
(o) Right of First Refusal. The Option or SAR may include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Participant of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option or SAR. Such right of first refusal will be subject to the “Repurchase Limitation” in Section 8(m). Except as expressly provided in this Section 5(o) or in the Stock Award Agreement, such right of first refusal will otherwise comply with any applicable provisions of the bylaws of the Company.
| 6. | Provisions of Stock Awards Other than Options and SARs. |
(a) Restricted Stock Awards. Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as the Board deems appropriate. To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical. Each Restricted Stock Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
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(ii) Vesting. Subject to the “Repurchase Limitation” in Section 8(m), shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant’s Continuous Service. If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.
(v) Dividends. A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.
(b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board deems appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
(iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
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(vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
(vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined schedule.
(c) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.
| 7. | Covenants of the Company. |
(a) Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Stock Awards.
(b) Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of a Stock Award or the subsequent issuance of cash or Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities law.
(c) No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.
| 8. | Miscellaneous. |
(a) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards will constitute general funds of the Company.
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(b) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Stock Award Agreement as a result of a clerical error in the papering of the Stock Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Stock Award Agreement.
(c) Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to a Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common Stock under, the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to the Stock Award has been entered into the books and records of the Company.
(d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or any other instrument executed thereunder or in connection with any Stock Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
(e) Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Stock Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares subject to any portion of such Stock Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Stock Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Stock Award that is so reduced or extended.
(f) Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000) (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
(g) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
(h) Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from a Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Stock Award Agreement.
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(i) Electronic Delivery. Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
(j) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
(k) Compliance with Section 409A of the Code. To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code.
(l) Compliance with Exemption Provided by Rule 12h-1(f). If at the end of the Company’s most recently completed fiscal year: (i) the aggregate of the number of persons who hold outstanding compensatory employee stock options to purchase shares of Common Stock granted pursuant to the Plan or otherwise (such persons, “Holders of Options”) equals or exceeds five hundred (500), and (ii) the Company’s assets exceed $10 million, then the following restrictions will apply during any period during which the Company does not have a class of its securities registered under Section 12 of the Exchange Act and is not required to file reports under Section 15(d) of the Exchange Act: (A) the Options and, prior to exercise, the shares of Common Stock to be issued on exercise of the Options may not be transferred until the Company is no longer relying on the exemption provided by Rule 12h-1(f) promulgated under the Exchange Act (“Rule 12h-1(f)”), except: (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Holder of Options, or (3) to an executor upon the death of the Holder of Options (collectively, the “Permitted Transferees”); provided, however, the following transfers are permitted: (i) transfers by Holders of Options to the Company, and (ii) transfers in connection with a change of control or other acquisition involving the Company, if following such transaction, the Options no longer remain outstanding and the Company is no longer relying on the exemption provided by Rule 12h-1(f); provided further, that any Permitted Transferees may not further transfer the Options; (B) except as otherwise provided in (A) above, the Options and shares of Common Stock issuable on exercise of the Options are restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” as defined by Rule 16a-1(h) promulgated under the Exchange Act, or any “call equivalent position” as defined by Rule 16a-1(b) promulgated under the Exchange Act by Holders of Options prior to exercise of an Option until the Company is no longer relying on the exemption provided by Rule 12h-1(f); and (C) at any time that the Company is relying on the exemption provided by Rule 12h-1(f), the Company will deliver to Holders of Options (whether by physical or electronic delivery or written notice of the availability of the information on an internet site) the information required by Rule 701(e)(3), (4), and (5) promulgated under the Securities Act every six (6) months, including financial statements that are not more than one hundred eighty (180) days old; provided, however, that the Company may condition the delivery of such information upon the Holder of Options’ agreement to maintain its confidentiality.
(m) Repurchase Limitation. The terms of any repurchase right will be specified in the Stock Award Agreement. The repurchase price for vested shares of Common Stock will be the Fair Market Value of the shares of Common Stock on the date of repurchase. The repurchase price for unvested shares of Common Stock will be the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase or (ii) their original purchase price. However, the Company will not exercise its repurchase right until at least six (6) months (or such longer or shorter period of time necessary to avoid classification of the Stock Award as a liability for financial accounting purposes) have elapsed following delivery of shares of Common Stock subject to the Stock Award, unless otherwise specifically provided by the Board.
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| 9. | Adjustments upon Changes in Common Stock; Other Corporate Events. |
(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board will make such adjustments, and its determination will be final, binding and conclusive.
(b) Dissolution or Liquidation. Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
(c) Corporate Transaction. The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board may take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:
(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(iii) accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five (5) days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; provided, however, that the Board may require Participants to complete and deliver to the Company a notice of exercise before the effective date of a Corporate Transaction, which exercise is contingent upon the effectiveness of such Corporate Transaction;
(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;
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(v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise. For clarity, this payment may be zero ($0) if the value of the property is equal to or less than the exercise price. Payments under this provision may be delayed to the same extent that payment of consideration to the holders of the Company’s Common Stock in connection with the Corporate Transaction is delayed as a result of escrows, earn outs, holdbacks or any other contingencies.
The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award.
(d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.
| 10. | Plan Term; Earlier Termination or Suspension of the Plan. |
(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated sooner by the Board, the Plan will automatically terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan will not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant or as otherwise permitted in the Plan.
| 11. | Effective Date of Plan. |
This Plan will become effective on the Effective Date.
| 12. | Choice of Law. |
The laws of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.
| 13. | Definitions. As used in the Plan, the following definitions will apply to the capitalized terms indicated below: |
(a) “Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.
(b) “Board” means the Board of Directors of the Company.
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(c) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
(d) “Cause” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Stock Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.
(e) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company will otherwise occur, except for a liquidation into a parent corporation;
(iv) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
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(v) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.
Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.
(f) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(g) “Committee” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).
(h) “Common Stock” means the common stock of the Company.
(i) “Company” means Senestech, Inc., a Nevada corporation.
(j) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan.
(k) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director or Consultant or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however, that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
(l) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
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(m) “Director” means a member of the Board.
(n) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
(o) “Effective Date” means the effective date of this Plan, which is the earlier of (i) the date that this Plan is first approved by the Company’s stockholders, and (ii) the date this Plan is adopted by the Board.
(p) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
(q) “Entity” means a corporation, partnership, limited liability company or other entity.
(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(s) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.
(t) “Fair Market Value” means, as of any date, the value of the Common Stock determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.
(u) “Incentive Stock Option” means an option granted pursuant to Section 5 of the Plan that is intended to be, and that qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.
(v) “Nonstatutory Stock Option” means any option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option.
(w) “Officer” means any person designated by the Company as an officer.
(x) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.
(y) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.
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(z) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(aa) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(c).
(bb) “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.
(cc) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(dd) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.
(ee) “Plan” means this Senestech, Inc. 2018 Equity Incentive Plan.
(ff) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).
(gg) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.
(hh) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).
(ii) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement will be subject to the terms and conditions of the Plan.
(jj) “Rule 405” means Rule 405 promulgated under the Securities Act.
(kk) “Rule 701” means Rule 701 promulgated under the Securities Act.
(ll) “Securities Act” means the Securities Act of 1933, as amended.
(mm) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.
(nn) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan.
(oo) “Stock Award” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right or any Other Stock Award.
(pp) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement will be subject to the terms and conditions of the Plan.
(qq) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) .
(rr) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
RULE 13(a)-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Kenneth Siegel, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of SenesTech, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: August 13, 2021 | /s/ Kenneth Siegel |
| Kenneth Siegel | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
RULE 13(a)-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Thomas C. Chesterman, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of SenesTech, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: August 13, 2021 | /s/ Thomas C. Chesterman |
| Thomas C. Chesterman | |
| Chief Financial Officer and Treasurer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Kenneth Siegel, Chief Executive Officer of SenesTech, Inc., certify that:
| 1. | To my knowledge, this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of SenesTech, Inc. |
| Dated: August 13, 2021 | /s/ Kenneth Siegel |
| Kenneth Siegel | |
| Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Thomas C. Chesterman, Chief Financial Officer and Treasurer of SenesTech, Inc., certify that:
| 1. | To my knowledge, this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of SenesTech, Inc. |
| Dated: August 13, 2021 | /s/ Thomas C. Chesterman |
| Thomas C. Chesterman | |
| Chief Financial Officer and Treasurer |
Condensed Balance Sheets - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Current assets: | ||
| Cash | $ 13,129 | $ 3,643 |
| Accounts receivable trade, net | 74 | 25 |
| Prepaid expenses | 381 | 178 |
| Inventory | 969 | 945 |
| Deposits | 22 | 28 |
| Total current assets | 14,575 | 4,819 |
| Right to use asset-operating leases | 589 | 665 |
| Property and equipment, net | 471 | 538 |
| Total assets | 15,635 | 6,022 |
| Current liabilities: | ||
| Short-term debt | 67 | 98 |
| Accounts payable | 219 | 404 |
| Accrued expenses | 426 | 292 |
| Total current liabilities | 712 | 794 |
| Long-term debt, net | 673 | |
| Operating lease liability | 599 | 671 |
| Total liabilities | 1,311 | 2,138 |
| Commitments and contingencies (See note 12) | ||
| Stockholders' equity: | ||
| Common stock, $0.001 par value, 100,000,000 shares authorized, 12,185,496 and 5,099,512 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively | 12 | 5 |
| Additional paid-in capital | 122,073 | 108,119 |
| Accumulated deficit | (107,761) | (104,240) |
| Total stockholders' equity | 14,324 | 3,884 |
| Total liabilities and stockholders' equity | $ 15,635 | $ 6,022 |
Condensed Balance Sheets (Parentheticals) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, authorized | 100,000,000 | 100,000,000 |
| Common stock, issued | 12,185,496 | 5,099,512 |
| Common stock, outstanding | 12,185,496 | 5,099,512 |
Organization and Description of Business |
6 Months Ended |
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Jun. 30, 2021 | |
| Accounting Policies [Abstract] | |
| Organization and Description of Business | Note 1 - Organization and Description of Business
SenesTech, Inc. (referred to in this report as “SenesTech,” the “Company,” “we” or “us”) has developed and is commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control.
Although there are myriad tools available to control rat populations, most rely on some form of lethal method to achieve effectiveness. Each of these solutions is inherently limited by rat species’ resilience and survival mechanisms as well as their extraordinary rate of reproduction. ContraPest®, our initial product, is unique in the pest control industry in attacking the reproductive systems of both male and female rats, which our field data shows results in a sustained reduction of the rat population.
Rats have plagued humanity throughout history. They pose significant threats to the environment and to the health and food security of many communities. In addition, rodents cause extensive product loss and damage through consumption and contamination. Rats also cause significant damage to critical infrastructure by burrowing beneath foundations and gnawing on electrical wiring, insulation, fire proofing systems, electronics and computer equipment.
The most prevalent solution to rat infestations is the use of increasingly powerful rodenticides. Although these solutions provide short term results, there are growing concerns about secondary exposure and bioaccumulation of rodenticides in the environment, as well as concerns about rodenticides that have no antidotes. The pest management industry and Pest Management Professionals (“PMPs”) are being asked for new solutions that are both effective and less toxic. Our goal is to provide customers with not only a solution to combat their most difficult rat problems, but also offer an effective, non-lethal option to serve customers that are looking to decrease or remove the amount of rodenticide used in their pest control programs.
ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide. ContraPest limits reproduction of male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling Norway and roof rat populations.
SenesTech began the registration process with the United States Environmental Protection Agency (the “EPA”) for ContraPest on August 23, 2015. On August 2, 2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”), due to the need for applicator expertise for deployment. On October 18, 2018, the EPA approved the removal of the RUP designation. We believe ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent populations.
In addition to the EPA registration of ContraPest in the United States, ContraPest must obtain registration from the various state regulatory agencies prior to selling in each state. We have received registration for ContraPest in all 50 states and the District of Columbia, 48 of which have approved the removal of the RUP designation.
We expect to continue to pursue regulatory approvals and amendments to the existing U.S. registration for ContraPest to broaden the marketability and use of ContraPest, and if ContraPest begins to generate sufficient revenue, regulatory approvals for additional jurisdictions beyond the United States. In certain cases, our EPA and state registrations require completion of additional testing and certifications even though we have received approval for the product or its labelling. We continue to seek to comply with these requirements.
The Company also continues to research and develop enhancements to ContraPest that align with our target verticals and other potential fertility control options for additional species.
We were formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. Our corporate headquarters and manufacturing site are in Phoenix, Arizona. On December 8, 2016, we went public and are currently traded on Nasdaq under the symbol SNES.
On February 4, 2020, we amended our amended and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued and outstanding shares of our common stock. The accompanying condensed financial statements and notes thereto give retrospective effect to the reverse stock split for all periods presented. All issued and outstanding common stock, options and warrants exercisable for common stock, restricted stock units, preferred stock conversions to common stock and per share amounts contained in our condensed financial statements have been retrospectively adjusted.
Going Concern
Our financial statements as of June 30, 2021, December 31, 2020 and June 30, 2020 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm included in its opinion for the years ended December 31, 2020 and 2019 an explanatory paragraph referring to our net loss from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. If we encounter continued issues or delays in the commercialization of ContraPest, our prior losses and expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.
Liquidity and Capital Resources
Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock. See Note 10 - Stockholders’ Deficit for a description of our public equity sales.
We have also raised capital through debt financing, consisting primarily of convertible notes and government loan programs, and, to a lesser extent, payments received in connection with product sales, research grants and licensing fees.
Through June 30, 2021, we received net proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.2 million in net product sales. As of June 30, 2021, we had an accumulated deficit of $107.8 million and cash and cash equivalents of $13.1 million.
Our ultimate success depends upon the outcome of a combination of factors, including: (i) successful commercialization of ContraPest and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPest and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs. Based upon our current operating plan, we expect that cash and cash equivalents at June 30, 2021, in combination with anticipated revenue and additional sales of our equity securities, will be sufficient to fund our current operations for at least the next 12 months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest in the United States. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time. If we need more financing, including within the next 12 months, and we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, we may require additional capital in order to fund our operating losses and research and development activities before we become profitable and may opportunistically raise capital. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2021, the Company’s operating results for the three and six months ended June 30, 2021 and 2020, and the Company’s cash flows for the six months ended June 30, 2021 and 2020. The accompanying financial information as of December 31, 2020 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 29, 2021. All amounts shown in these financial statements and accompanying notes are in thousands, except percentages and per share and share amounts. |
Summary of Significant Accounting Policies |
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| Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of preferred stock, if issued, common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no material impact on net earnings, financial position or cash flows.
Cash and Cash Equivalents
The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents in the form of money market fund investment of $8,302 and $1,500 at June 30, 2021 and December 31, 2020, respectively, included in cash as reported.
Accounts Receivable-Trade
Accounts receivable-trade consist primarily of receivables from customers. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $0 at June 30, 2021 and December 31, 2020.
Inventories
Inventories are stated at the lower of cost or market value, using the first-in, first-out convention. Inventories consist of raw materials, work in progress and finished goods. Raw materials are stocked to reduce the risk of impact on manufacturing for potential supply interruptions due to the COVID-19 pandemic or long lead times on certain ingredients.
Components of inventory are:
Prepaid Expenses
Prepaid expenses consist primarily of payments made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar fees to be expensed in the current year.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Equipment held under finance leases are stated at the present value of minimum lease payments less accumulated amortization.
Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under finance leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs repair and maintenance costs on its major equipment, which are expensed as incurred.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of third-party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.
Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Codification 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing. The Company recognizes other revenue earned from pilot studies, consulting and implementation services upon the performance of specific services under the respective service contract.
The Company derives revenue primarily from commercial sales of products, net of discounts and promotions, as well as consulting and implementation services provided in conjunction with our product deployments.
Research and Development
Research, and development costs are expensed as incurred. Research and development expenses primarily consist of salaries and benefits for research and development employees, stock-based compensation, consulting fees, lab supplies, costs incurred related to conducting scientific trials and field studies, regulatory compliance costs, as well as manufacturing costs associated with process improvement and other research. Research and development expenses include an allocation of facilities related costs, including depreciation of equipment.
Stock-based Compensation
Stock based awards, consisting of stock options and restricted stock units expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using the Black-Scholes option pricing model for stock options and grant date market value for restricted stock units. The Company expenses the grant date fair value of its stock options on a straight-line basis over their respective vesting periods.
The stock-based compensation expense recorded for the three and six months ended June 30, 2021 and 2020, is as follows:
See Note 11 for additional discussion on stock-based compensation.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company currently maintains a full valuation allowance against its deferred tax assets.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of June 30, 2021 or December 31, 2020 and as such, no interest or penalties were recorded in income tax expense.
Comprehensive Loss
Net loss and comprehensive loss were the same for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.
Loss Per Share Attributable to Common Stockholders
Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders, common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and six months ended June 30, 2021 and 2020. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period presented.
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):
Adoption of New Accounting Standard:
The Company has considered all recently issued accounting pronouncements and has concluded that there are no recently issued accounting pronouncements that we believe may have a material impact on our unaudited condensed interim financial statements. |
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Fair Value Measurements |
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| Fair Value Measurements | Note 3 - Fair Value Measurements
The Company issued common stock warrants to purchase shares of common stock in June of 2015 (see Note 9 - Common Stock Warrants and Common Stock Warrant Liability) that expired in June of 2020. These warrants contained a cash settlement provision that resulted in a common stock warrant liability that was revalued at the end of each reporting period.
We valued these warrant derivatives at fair value. The accounting guidance for fair value, among other things, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The framework for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:
The Company’s common stock warrant liabilities are classified as Level 3 because there is limited activity or less transparency around the inputs to valuation.
Financial Instruments Not Carried at Fair Value
The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. The estimated fair value of the convertible notes and other notes, not recorded at fair value, are recorded at cost or amortized cost which was deemed to estimate fair value. |
Credit Risk |
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| Risks and Uncertainties [Abstract] | |
| Credit Risk | Note 4 - Credit Risk
The Company is potentially subject to concentrations of credit risk in its accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising the Company’s customer base, however the Company did identify a potentially uncollectable account at December 31, 2019 and maintained a reserve for this receivable balance of $123. At December 31, 2020, the account was deemed uncollectable and offset against the reserve. The Company did not have any potentially uncollectable account at June 30, 2021 or December 31, 2020 and therefore, did not record a reserve for uncollectable accounts at June 30, 2021 or December 31, 2020. The Company does not require collateral or other securities to support its accounts receivable. |
Prepaid Expenses |
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| Prepaid Expenses | Note 5 - Prepaid Expenses
Prepaid expenses consist of the following:
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Property and Equipment |
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| Property and Equipment | Note 6 - Property and Equipment
Property and equipment, net consist of the following:
Depreciation and amortization expense was approximately $78 and $71 for the three months ended June 30, 2021 and 2020, respectively, and $151 and $148 for the three months ended June 30, 2021 and 2020, respectively. |
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Accrued Expenses |
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| Accrued Expenses | Note 7 - Accrued Expenses
Accrued expenses consist of the following:
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Borrowings |
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| Borrowings | Note 8 - Borrowings
A summary of the Company’s borrowings, including finance lease obligations, is as follows:
Finance Lease Obligations
Finance lease obligations at June 30, 2021 are for manufacturing equipment leased through ENGS Commercial Finance Co. This finance lease expires on April 18, 2022 and carries an interest rate of 11.4%.
Other Promissory Notes
Also included in the table above are notes payable to Direct Capital and Fidelity Capital for the financing of manufacturing and computing fixed assets. These notes expire at various dates through June 2022 and carry interest rates ranging from 13.1% to 13.3%.
On June 18, 2021, the Company received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that a loan to the Company under this program in the amount of $646 was forgiven in full under the terms of the program. The forgiveness of this note and related interest was recorded as other income on the Condensed Statements of Operations and Comprehensive Loss for the quarter ended June 30, 2021. |
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Common Stock Warrants and Common Stock Warrant Liability |
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| Warrants Note Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability | Note 9 - Common Stock Warrants and Common Stock Warrant Liability
The table summarizes the common stock warrant activity as of June 30, 2021 as follows:
Outstanding Warrants
As of June 30, 2021, we had 4,553,234 shares of common stock issuable upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $3.984 per share.
On November 21, 2017, the Company issued a total of 232,875 detachable common stock warrants issued with the second public offering of 293,000 shares of its common stock at $20.00 per share. The common stock warrant is exercisable until five years from the date of grant. The common shares of the Company’s stock and detachable warrants exist independently as separate securities. As such, the Company estimated the fair value of the common stock warrants, exercisable at $30.00 per share, to be $661 using a lattice model based on the following significant inputs: common stock price of $20.00; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.87%. The initial exercise price of these warrants was $30.00 per share, which adjusted downward to $29.40 on July 24, 2018, the record date of the Right’s Offering and downward to $19.00 per share on August 13, 2018, the date of the Rights Offering, pursuant to antidilution price adjustment protection contained within these warrants. The exercise price of the warrants was adjusted downward to $7.13 on January 28, 2020 in connection with a private placement of common stock. Per guidance of Accounting Standards Codification (“ASC”) 260, the Company recorded a deemed dividend of $285 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as the difference between the fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the adjustment using a Black Scholes model based on the following significant inputs: on January 28, 2020, common stock price of $7.90; comparable company volatility of 73.8%; remaining term 2.82 years; dividend yield of 0% and risk-free interest rate of 1.45%.
The exercise price of the warrants was adjusted downward to $2.1122 on March 4, 2020 in connection with a private placement of common stock. Per guidance of ASC 260, the Company recorded a deemed dividend of $129 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as the difference between the fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the adjustment using a Black Scholes model based on the following significant inputs: on March 4, 2020, common stock price of $2.88; comparable company volatility of 74.5%; remaining term 2.71 years; dividend yield of 0% and risk-free interest rate of 0.68%.
The exercise price of the warrants was adjusted downward to $1.3659 on October 26, 2020 in connection with an inducement offering of common stock. Per guidance of ASC 260, the Company recorded a deemed dividend of $22 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as the difference between the fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the adjustment using a Black Scholes model based on the following significant inputs: On October 26, 2020, common stock price of $1.47; comparable company volatility of 96.5%; remaining term 2.08 years; dividend yield of 0% and risk-free interest rate of 0.18%.
On June 20, 2018, the Company entered into an agreement with a holder of 56,696 of the November 2017 warrants to exercise its original warrant representing 56,696 shares of common stock for cash at the $30.00 exercise price for gross proceeds of $1.7 million and the Company issued to holder a new warrant to purchase 56,696 shares of common stock at an exercise price of $36.40 per share. The new warrant did not contain the antidilution price adjustment protection that was contained within the exercised warrants. In June 2018, the Company recorded stock compensation expense of $1,700 representing the fair value of the of 56,696 inducement warrants issued. The Company estimated the fair value of the common stock warrants, exercisable at $36.40 per share, to be $1,700 using a Black Scholes model based on the following significant inputs: common stock price of $42.20; comparable company volatility of 72.6%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.8%. Also, in June 2018, an additional 17,088 of the November 8, 2017 warrants that were in the money at the time of exercise, were exercised for gross proceeds of $513.
On August 13, 2018, in connection with a Rights Offering of 267,853 shares of its common stock, the Company issued 267,853 warrants to purchase shares of its common stock at an exercise price of $23.00 per share. The Company estimated the fair value of the common stock warrants, exercisable at $23.00 per share, to be $3,600 using a Monte Carlo model based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.77%.
In connection with the closing of the Rights Offering, the Company issued a warrant to purchase 13,393 shares of common stock to Maxim Partners LLC, an affiliate of the dealer-manager of the Rights Offering. The Company estimated the fair value of the common stock warrants, exercisable at $34.50 per share, to be $169 using a using a Monte Carlo model based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.77%.
Common Stock Warrant Issued to Underwriter of Common Stock Offering
In July 2019, the Company issued to H.C. Wainwright & Co., as placement agent, a warrant to purchase 8,334 shares of common stock at an exercise price of $33.75 per share as consideration for providing services in connection with a common stock offering in July 2019. The warrant was fully vested and exercisable on the date of issuance. The common stock warrant is exercisable until five years from the date of grant. The Company estimated the fair value of the common stock warrants, exercisable at $33.75 per share, to be $127 using a lattice model based on the following significant inputs: common stock price of $26.80; comparable company volatility of 133.3%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.07%.
Common Stock Warrants Issued in January and March 2020 Private Placements
In January and March 2020, in separate private placements concurrent with registered direct offerings (collectively, the “2020 Registered Direct Offerings”) of shares of the Company’s common stock, the Company also issued warrants to purchase an aggregate of up to 353,872 shares of common stock to certain institutional and accredited investors that participated in the 2020 Registered Direct Offerings (the “2020 Warrants”). The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(b) of Regulation D promulgated thereunder. Terms used but not otherwise defined herein will have the meanings given them in the warrants, attached as Exhibit 4.1 to our Form 8-K filed on January 28, 2020, and our Form 8-K filed on March 6, 2020.
The warrants issued in January 2020 to purchase 177,500 shares of common stock have an exercise price of $9.00 per share, are exercisable after July 28, 2020 and will expire July 28, 2025. The Company estimated the fair value of the common stock warrants, exercisable at $9.00 per share, to be $813 using a Black Scholes model based on the following significant inputs: common stock price of $7.90; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.53%.
The warrants issued in March 2020 to purchase 176,372 shares of common stock have an exercise price of $2.88 per share, are immediately exercisable and will expire September 8, 2025. The Company estimated the fair value of the common stock warrants, exercisable at $2.88 per share, to be $242 using a Black Scholes model based on the following significant inputs: common stock price of $2.35; comparable company volatility of 74.8%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.39%.
For so long as the 2020 Warrants remain outstanding, the exercise price and number of shares of common stock issuable upon exercise of the warrants are subject to adjustment as follows: (a) upon payment of a stock dividend or other distribution on a class or series of shares common stock, not including shares issued under this warrant; (b) upon subdivision (by stock spilt, stock dividend, recapitalization, or otherwise) or combination (by reverse stock split or otherwise) of shares of common stock; or (c) upon the issuance of any shares of capital stock by reclassification of shares of the common stock.
In the event that the Company declares or makes any dividend or other distribution of its assets to holders of its common stock, each 2020 Warrant holder will be entitled to participate in such distribution to the same extent that such holder would have participated therein if the holder had held the number of shares of common stock acquirable upon exercise of the 2020 Warrant.
In the event of a Fundamental Transaction, as described in the 2020 Warrants and generally including the sale, transfer or other disposition of all or substantially all of our properties or assets; our consolidation or merger with or into another person or reorganization; a recapitalization, reorganization or reclassification in which our common stock is converted into other securities, cash or property; or any acquisition of our outstanding common stock that results in any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, then the holders of the 2020 Warrants will be entitled to receive upon exercise of such warrants the kind and amount of securities, cash, assets or other property that the holders would have received had they exercised the 2020 Warrants immediately prior to such Fundamental Transaction. Subject to certain limitations, in the event of a Fundamental Transaction the 2020 Warrant holder may at its option require the Company or any Successor Entity to purchase such warrant from the holder by paying to the holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of the 2020 Warrant on the date of the consummation of the Fundamental Transaction.
Any time that the Company grants, issues, or sells any securities pro rata to all of the record holders of the common stock (the “2020 Purchase Right”), each holder of 2020 Warrants will be entitled to acquire the aggregate amount of securities that the holder could have acquired if the holder had held the number of shares of common stock acquirable upon exercise of the applicable 2020 Warrant. However, to the extent that an exercise of a 2020 Purchase Right would exceed the Beneficial Ownership Limitation (defined below), then to such extent the 2020 Purchase Right will be held in abeyance until such time, if ever, that complete exercise of the 2020 Purchase Right would not exceed the Beneficial Ownership Limitation.
After the Initial Exercisability Date (as defined in the 2020 Warrants), the 2020 Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise. If, at the time a holder exercises the 2020 Warrant (but not sooner than six months following the date of such warrant), a registration statement registering the issuance of the shares of common stock underlying the 2020 Warrants under the Securities Act is not then effective or available, nor is any current prospectus thereto available, and an exemption from registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the number of shares of common stock determined according to a formula set forth in the 2020 Warrant.
Limitations on Exercise. A holder (together with its affiliates) may not exercise any portion of the 2020 Warrants to the extent that the holder would own more than 4.99% of the outstanding common stock after exercise (the “Beneficial Ownership Limitation”), except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the 2020 Warrants. No fractional shares of common stock will be issued in connection with the exercise of a 2020 Warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.
Except as otherwise provided in the 2020 Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the 2020 Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, unless and until they exercise such warrants.
Common Stock Warrants Issued in April 2020 Public Offering
On April 24, 2020, in connection with a previously announced public offering of 145,586 Class A Units and 1,428,722 Class B Units, the Company issued warrants to purchase 1,574,308 shares of common stock to the participants in the public offering and have an exercise price of $3.05 per share (the “April 2020 Warrants”). These warrants are immediately exercisable and will expire April 24, 2025.
The Common Stock, Pre-Funded Warrants and Warrants sold in this Public Offering were offered and sold pursuant to a registration statement on Form S-1 (File No. 333-236302) initially filed with the SEC on February 7, 2020, as amended (“Registration Statement”), which was declared effective by the SEC on February 14, 2020. The Post-Effective Amendment No. 2 to the Registration Statement was declared effective by the SEC on April 21, 2020.
The Company estimated the fair value of the common stock warrants, exercisable at $3.05 per share, to be $2,402 using a Black Scholes model based on the following significant inputs: common stock price of $2.40; comparable company volatility of 87.9%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement
In connection with the separate private placements concurrent with registered direct offerings of shares of the Company’s common stock in January and March 2020, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, a warrant to purchase 13,228 shares of common stock and a warrant to purchase 13,313 shares of common stock. The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. These warrants have substantially similar terms as the 2020 Warrants described above, except that the placement agent warrant issued in January 2020 has an exercise price of $10.00 per share, and the placement agent warrant issued in March 2020 has an exercise price of $3.7563 per share.
The Company estimated the fair value of the common stock warrants issued in January, with an exercise price of $10.00 per share, to be $58 using a Black Scholes model based on the following significant inputs: common stock price of $7.90; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.53%.
The Company estimated the fair value of the common stock warrants issued in March, with an exercise price of $3.7563 per share, to be $17 using a Black Scholes model based on the following significant inputs: common stock price of $2.35; comparable company volatility of 74.8%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.39%.
In connection with the public offering of 145,586 Class A Units and 1,428,722 Class B Units on April 24, 2020, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase 118,073 shares of common stock. The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. These warrants have substantially similar terms as the April 2020 Warrants described above, except that the placement agent warrant issued has an exercise price of $3.97 per share.
The Company estimated the fair value of the common stock warrants issued in April, with an exercise price of $3.97 per share, to be $167 using a Black Scholes model based on the following significant inputs: common stock price of $2.40; comparable company volatility of 87.9%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued in October 2020 Private Warrant Inducement
In October 2020, in connection with an inducement agreement with an existing accredited investor to exercise 1,700,680 outstanding warrants (the “Original Warrants”) to purchase an equal number of shares of the Company’s common stock, the Company issued new unregistered warrants to purchase up to an aggregate of 1,700,680 shares of common stock at an exercise price of $1.725 per share. The warrants issued were immediately exercisable with an exercise period of five and one-half years from the date of issuance. The Original Warrants were issued on March 6, 2020 and on April 24, 2020. Pursuant to the Letter Agreement, the per share exercise price of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725. The Company estimated the fair value of the common stock warrants, exercisable at $1.725 per share, to be $1,806 using a Black Scholes model based on the following significant inputs: common stock price of $1.47; comparable company volatility of 96.5%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
In connection with the private warrant inducement in October 2020 of 1,700,680 shares of the Company’s common warrants, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase 85,034 shares of common stock. These warrants have substantially similar terms as the 2020 Warrants described above, except that the placement agent warrant issued in October 2020 has an exercise price of $2.156 per share.
The Company estimated the fair value of these common stock warrants, with an exercise price of $2.156 per share, to be $86 using a Black Scholes model based on the following significant inputs: common stock price of $1.47; comparable company volatility of 96.5%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued in February 2021 Private Placement Agreement
In February 2021, in connection with a private placement agreement with certain institutional and accredited investors, the Company issued common stock warrants to purchase up to an aggregate of 2,194,427 shares of common stock at an exercise price of $2.216 per share. The warrants were exercisable immediately and have an exercise period of five and one-half years from the date of issuance. The warrant holder may not exercise any portion of such holder’s warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. The Company estimated the fair value of the common stock warrants, exercisable at $2.216 per share, to be $3,052 using a Black Scholes model based on the following significant inputs: common stock price of $1.93; comparable company volatility of 95.6%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued to Placement Agent in February 2021 Private Placement Agreement
In connection with the private placement in February 2021, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase up to 329,164 shares of Common Stock with an exercise price of $2.8481 per share. The warrants are exercisable immediately and have an exercise period of five and one-half years from the date of issuance. The Company estimated the fair value of these common stock warrants, with an exercise price of $2.8481 per share, to be $435 using a Black Scholes model based on the following significant inputs: common stock price of $1.93; comparable company volatility of 95.6%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued to Placement Agent in March 2021 Registered Direct Offering
On March 23, 2021, the Company consummated a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately $3.95 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The 1,975,000 shares of Common Stock sold in the Offering were offered and sold pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from the Company’s shelf registration statement on Form S-3 (File No. 333-225712).
In connection with the registered direct offering in March 2021, the Company issued to H.C. Wainwright & Co., LLC, as the placement agent, warrants to purchase up to 148,125 shares of Common Stock. The Placement Agent Warrants will be exercisable commencing six months following the date of issuance, expire five years following the date of sale and have an exercise price per share of $2.50 per share. The Placement Agent Warrants, and the shares of Common Stock issuable upon exercise thereof, will be issued in reliance on the exemption from registration provided in Section 4(a)(2) under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The Company estimated the fair value of these common stock warrants, with an exercise price of $2.50 per share, to be $181 using a Black Scholes model based on the following significant inputs: common stock price of $1.76; comparable company volatility of 100.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 0.31%.
Deemed Dividend Adjustment-Warrant Modified Terms Revaluation
On March 3, 2020, the Company issued an aggregate of 51,414 common shares in a cashless exercise of 56,625 warrants issued in December 2016 and November 2017. Consideration for the exercise of these warrants was the full settlement of an outstanding litigation reserve of $238.
On October 26, 2020, in connection with the private warrant inducement with an existing accredited investor to exercise 1,700,680 Original Warrants, the Company agreed to modify the terms of the Original Warrants that were originally issued on March 6, 2020 and on April 24, 2020. Pursuant to the agreement, the per share exercise price of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725.
Per recent proposed guidance of ASC 260, the Company determined that this was an exchange of the existing 1,700,680 warrants that were affected and the difference between the fair value of the warrants immediately prior to modification of terms and immediately after the adjustment was a cost of raising capital and was recorded as a reduction of equity. The difference between the fair value of the warrants immediately prior to modification of terms and immediately after the adjustment was calculated as $237, using a Black Scholes model based on the following significant inputs: On October 26, 2020: common stock price of $1.47; comparable company volatility of 96.5%; remaining term 4.5-4.8 years; dividend yield of 0% and risk-free interest rate of 0.18%. |
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Stockholders’ Deficit |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||
| Stockholders’ Deficit | Note 10 - Stockholders’ Deficit
Capital Stock
The Company was organized under the laws of the state of Nevada on July 27, 2004 and was subsequently reincorporated under the laws of the state of Delaware on November 10, 2015. In connection with the reincorporation, as approved by the stockholders, the Company changed its authorized capital stock to consist of (i) 100 million shares of common stock, $.001 par value, and (ii) 2 million shares of preferred stock, $0.001 par value, designated as Series A convertible preferred stock. In December 2015, the Company amended its Certificate of Incorporation to change its authorized capital stock to provide for 15 million authorized shares of preferred stock of which 7,515,000 was designated as Series B convertible preferred stock, par value $.001 per share.
Prior to November 10, 2015, the Company’s authorized capital stock consisted of 100 million shares of common stock, $.001 par value, and 10 million shares of preferred stock, $.001 par value.
Common Stock
The Company had 12,185,496 and 5,099,512 shares of common stock issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.
During the six months ended June 30, 2021, the Company issued 7,085,984 shares of common stock as follows:
Public Offerings and Registered Direct Offerings
On February 2, 2021, the Company consummated a private placement agreement with certain institutional and accredited investors and issued an aggregate of 3,968,854 shares of its common stock, par value $0.001 per share at a purchase price of $2.2785 per share, pre-funded warrants to purchase up to an aggregate of 420,000 shares of common stock at a purchase price of $2.2775 per pre-funded warrant and associated warrants to purchase up to an aggregate of 2,194,427 shares of common stock, for gross proceeds of approximately $10.0 million, prior to deducting placement agent fees and offering expenses. At March 29, 2021, all 420,000 pre-funded shares had been distributed. In connection with the offering, we issued the placement agent warrants to purchase up to 329,164 shares of Common Stock with an exercise price of $2.8481 per share.
On March 23, 2021, the Company consummated a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately $3.95 million, pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from the Company’s shelf registration statement on Form S-3 (File No. 333-225712).
In connection with the offering, we issued the placement agent warrants to purchase up to 148,125 shares of Common Stock at an exercise price per share of $2.50 per share.
On March 19, 2021 and June 22, 2021, the Company issued an aggregate of 700,680 and 499 shares of commons stock for the exercise of certain warrants, respectively. The net proceeds to the Company for these exercises was $1,220. |
Stock-based Compensation |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based Compensation | Note 11 - Stock-based Compensation
On June 24, 2021, the Company’s stockholders, at its 2021 annual meeting of stockholders, approved an amendment to the SenesTech, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) to increase the number of shares of common stock available for issuance under the 2018 Plan by 3,000,000 shares.
Stock Options
Stock options are generally issued with a per share exercise price equal to no less than fair market value of our common stock on the date of grant. Options granted under the 2018 Plan generally vest over a twelve- to 36-month period coinciding with their respective service periods. Options under the 2018 Plan generally have a term of five years. Certain stock options provide for accelerated vesting upon a change in control.
As of June 30, 2021, the Company had 2,856,259 shares of common stock available for issuance under the 2018 Plan.
The Company measures the fair value of stock options with service-based vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period during which the options will be outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.
The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the six months ended June 30, 2021 were as follows:
The weighted average grant date fair value of options granted during the six months ended June 30, 2021 was $0.98 per share, as per the table above.
Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities from traded options of biotech companies of comparable size and stability, whose share prices are publicly available. The expected term of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin 110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free interest rate is determined by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends.
The following table summarizes the stock option activity for the periods indicated as follows:
Restricted Stock Units
The following table summarizes restricted stock unit activity for the six months ended June 30, 2021:
24 The stock-based compensation expense was recorded as follows:
The allocation between research and development and selling, general and administrative expense was based on the department and services performed by the employee or non-employee.
At June 30, 2021, the total compensation cost related to restricted stock units and unvested options not yet recognized was $999, which will be recognized over a weighted average period of 35 months, assuming the employees and non-employees complete their service period required for vesting. |
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | Note 12 - Commitments and Contingencies
Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
Lease Commitments
In February 2012, the Company entered into an operating lease for its then corporate headquarters in Flagstaff, Arizona, which expired in December 2019. In December 2019, we extended the lease for only the manufacturing facilities located in Flagstaff, Arizona, occupying a total of 7,632 square feet of space. The lease for these manufacturing facilities expired in December 2020.
On November 16, 2016, we leased an additional 1,954 square feet of manufacturing, research and development space, also in Flagstaff. This lease expired on November 15, 2018 but was extended for an additional 24 months, through November 2020. A subsequent amendment to the lease allows for the Company to cancel the lease at any time through the lease term with 30 days’ notice. The Company provided a 30-day cancellation notice effective February 2020.
On December 1, 2019, we entered into a lease for our corporate headquarters in Phoenix, Arizona where we lease and occupy approximately 5,529 square feet of office space. This lease expires in November 2024.
On August 1, 2020, we entered into a lease for our manufacturing and research facility in Phoenix, Arizona where we occupy approximately 5,105 square feet of manufacturing and warehouse space. This lease expires on November 30, 2024.
We believe that our existing facilities are adequate and meet our current needs for business, manufacturing and research.
Rent expense was $111 and $132 for the six months ended June 30, 2021 and 2020, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum finance lease payments as of June 30, 2021 are follows:
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 13 - Subsequent Events
On July 15, 2021, the Company issued 5,616 shares of common stock in connection with the exercise of common stock warrants generating net proceeds to the Company of approximately $8.
COVID-19
The travel and other restrictions that began in March 2020 in response to the COVID-19 global pandemic resulted in a significant slowdown in our field studies and sales efforts. We were able to resume some projects by mid-year 2020, however, we still have delays on certain projects that might remain on hold until businesses and government entities return to more normal operations. These continued delays have impacted our results of operations and could impact our results in future quarters. In addition, extended stay at home orders and other social distancing initiatives severely limited our ability to communicate with current and potential commercial customers. While many restrictions were lifted during our second fiscal quarter of 2021, we have not returned to full scope pre-pandemic activities, and are uncertain as to when or if, with potential further restrictions, that may occur. The COVID-19 pandemic is also placing a significant budgetary burden on federal, state and local governments, which may impede or delay their ability to purchase our products.
The Company has evaluated subsequent events from the balance sheet date through August 13, 2021, the date at which the financial statements were issued, and determined that there were no other items that require adjustment to or disclosure in the financial statements. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of preferred stock, if issued, common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.
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| Reclassifications | Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no material impact on net earnings, financial position or cash flows.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents in the form of money market fund investment of $8,302 and $1,500 at June 30, 2021 and December 31, 2020, respectively, included in cash as reported.
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| Accounts Receivable-Trade | Accounts Receivable-Trade
Accounts receivable-trade consist primarily of receivables from customers. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $0 at June 30, 2021 and December 31, 2020.
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| Inventories | Inventories
Inventories are stated at the lower of cost or market value, using the first-in, first-out convention. Inventories consist of raw materials, work in progress and finished goods. Raw materials are stocked to reduce the risk of impact on manufacturing for potential supply interruptions due to the COVID-19 pandemic or long lead times on certain ingredients.
Components of inventory are:
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| Prepaid Expenses | Prepaid Expenses
Prepaid expenses consist primarily of payments made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar fees to be expensed in the current year.
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| Property and Equipment | Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Equipment held under finance leases are stated at the present value of minimum lease payments less accumulated amortization.
Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under finance leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs repair and maintenance costs on its major equipment, which are expensed as incurred.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of third-party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.
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| Revenue Recognition | Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Codification 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing. The Company recognizes other revenue earned from pilot studies, consulting and implementation services upon the performance of specific services under the respective service contract.
The Company derives revenue primarily from commercial sales of products, net of discounts and promotions, as well as consulting and implementation services provided in conjunction with our product deployments.
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| Manufacturing, Research and Development | Research and development expenses primarily consist of salaries and benefits for research and development employees, stock-based compensation, consulting fees, lab supplies, costs incurred related to conducting scientific trials and field studies, regulatory compliance costs, as well as manufacturing costs associated with process improvement and other research. Research and development expenses include an allocation of facilities related costs, including depreciation of equipment. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based Compensation | Stock-based Compensation
Stock based awards, consisting of stock options and restricted stock units expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using the Black-Scholes option pricing model for stock options and grant date market value for restricted stock units. The Company expenses the grant date fair value of its stock options on a straight-line basis over their respective vesting periods.
The stock-based compensation expense recorded for the three and six months ended June 30, 2021 and 2020, is as follows:
See Note 11 for additional discussion on stock-based compensation.
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| Income Taxes | Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company currently maintains a full valuation allowance against its deferred tax assets.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of June 30, 2021 or December 31, 2020 and as such, no interest or penalties were recorded in income tax expense.
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| Comprehensive Loss | Comprehensive Loss
Net loss and comprehensive loss were the same for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.
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| Loss Per Share Attributable to Common Stockholders | Loss Per Share Attributable to Common Stockholders
Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders, common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and six months ended June 30, 2021 and 2020. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period presented.
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):
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| Adoption of New Accounting Standard | Adoption of New Accounting Standard:
The Company has considered all recently issued accounting pronouncements and has concluded that there are no recently issued accounting pronouncements that we believe may have a material impact on our unaudited condensed interim financial statements. |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventory |
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| Schedule of employee stock-based compensation expense |
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| Schedule of outstanding potentially dilutive securities calculation of diluted loss per share attributable to common stockholders |
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Prepaid Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of prepaid expenses |
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Property and Equipment (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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Accrued Expenses (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued expenses |
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Borrowings (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt [Table Text Block] |
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Common Stock Warrants and Common Stock Warrant Liability (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants Note Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of common stock warrant activity |
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Stock-based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value of options granted |
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| Schedule of stock option activity |
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| Schedule of summarizes restricted stock unit activity |
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| Schedule of stock-based compensation expense |
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Commitments and Contingencies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contractual Obligation, Fiscal Year Maturity [Table Text Block] |
|
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Organization and Description of Business (Details) $ in Millions |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Accounting Policies [Abstract] | |
| Net proceeds received | $ 89.3 |
| Proceeds from licensing fees | 1.7 |
| Proceeds from product sales | 1.2 |
| Accumulated deficit | 107.8 |
| Cash and cash equivalents | $ 13.1 |
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Money market fund | $ 8,302 | $ 1,500 |
| Allowance for doubtful trade receivables | $ 0 |
Summary of Significant Accounting Policies (Details) - Schedule of inventory - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of inventory [Abstract] | ||
| Raw materials | $ 936 | $ 950 |
| Work in progress | 1 | 24 |
| Finished goods | 155 | 94 |
| Total inventory | 1,092 | 1,068 |
| Less: | ||
| Reserve for obsolete | (123) | (123) |
| Total net inventory | $ 969 | $ 945 |
Summary of Significant Accounting Policies (Details) - Schedule of employee stock-based compensation expense - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
| Total stock-based compensation expense | $ 182 | $ 140 | $ 337 | $ 291 |
| Research and development [Member] | ||||
| Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
| Total stock-based compensation expense | 2 | 2 | 5 | |
| Selling, general and administrative [Member] | ||||
| Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
| Total stock-based compensation expense | $ 182 | $ 138 | $ 335 | $ 286 |
Summary of Significant Accounting Policies (Details) - Schedule of outstanding potentially dilutive securities calculation of diluted loss per share attributable to common stockholders - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 5,623,562 | 2,661,420 |
| Common Stock Purchase Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 4,553,234 | 2,504,597 |
| Restricted Stock Units [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 667 | 1,334 |
| Common Stock Options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 1,069,661 | 155,489 |
Credit Risk (Details) $ in Thousands |
Dec. 31, 2019
USD ($)
|
|---|---|
| Risks and Uncertainties [Abstract] | |
| Credit risk receivable | $ 123 |
Prepaid Expenses (Details) - Schedule of prepaid expenses - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of prepaid expenses [Abstract] | ||
| Director, officer and other insurance | $ 211 | $ 18 |
| NASDAQ fees | 22 | |
| Legal retainer | 25 | 25 |
| Marketing programs and conferences | 52 | 106 |
| Professional services retainer | 13 | 8 |
| Rent | 18 | 18 |
| Engineering, software licenses and other | 40 | 3 |
| Total prepaid expenses | $ 381 | $ 178 |
Property and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Sale of assets | $ 3 | $ 1 | $ 18 | |
| Net proceeds | $ 1 | 4 | 1 | 40 |
| Depreciation and amortization expense | $ 78 | $ 71 | $ 151 | $ 148 |
Accrued Expenses (Details) - Schedule of accrued expenses - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of accrued expenses [Abstract] | ||
| Compensation and related benefits | $ 418 | $ 218 |
| Board Compensation | 3 | |
| Personal property and franchise tax | 57 | |
| Other | 8 | 14 |
| Total accrued expenses | $ 426 | $ 292 |
Borrowings (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 18, 2021 |
Jun. 30, 2021 |
|
| Borrowings (Details) [Line Items] | ||
| Description of borrowings expiration period | On June 18, 2021, the Company received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that a loan to the Company under this program in the amount of $646 was forgiven in full under the terms of the program. | |
| Principal amount (in Dollars) | $ 646 | |
| Finance Lease Obligations [Member] | ||
| Borrowings (Details) [Line Items] | ||
| Lease expire date | Apr. 18, 2022 | |
| Minimum [Member] | Finance Lease Obligations [Member] | ||
| Borrowings (Details) [Line Items] | ||
| Interest rate | 11.40% | |
| Minimum [Member] | Other Promissory Notes [Member] | ||
| Borrowings (Details) [Line Items] | ||
| Interest rate | 13.10% | |
| Maximum [Member] | Other Promissory Notes [Member] | ||
| Borrowings (Details) [Line Items] | ||
| Interest rate | 13.30% |
Borrowings (Details) - Schedule of capital lease obligations - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Short-term debt: | ||
| Current portion of long-term debt | $ 67 | $ 98 |
| Total short-term debt | 67 | 98 |
| Long-term debt: | ||
| Finance lease obligations | 53 | 79 |
| Other promissory notes | 14 | 692 |
| Total | 67 | 771 |
| Less: current portion of long-term debt | $ (67) | (98) |
| Total long-term debt | $ 673 |
Common Stock Warrants and Common Stock Warrant Liability (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 26, 2020 |
Mar. 04, 2020 |
Mar. 03, 2020 |
Jan. 28, 2020 |
Aug. 13, 2018 |
Jul. 24, 2018 |
Nov. 21, 2017 |
Jun. 22, 2021 |
Mar. 23, 2021 |
Feb. 28, 2021 |
Oct. 31, 2020 |
Oct. 26, 2020 |
Apr. 24, 2020 |
Mar. 31, 2020 |
Jan. 31, 2020 |
Jan. 28, 2020 |
Jul. 31, 2019 |
Jun. 30, 2018 |
Jun. 20, 2018 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
Mar. 06, 2020 |
|
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 499 | ||||||||||||||||||||||||
| Deemed dividend (in Dollars) | $ 285,000 | ||||||||||||||||||||||||
| Unexercised warrants (in Shares) | 143,501 | ||||||||||||||||||||||||
| Share price | $ 1.61 | $ 1.61 | $ 1.73 | ||||||||||||||||||||||
| Stock compensation expense (in Dollars) | $ 182,000 | $ 141,000 | $ 337,000 | $ 291,000 | |||||||||||||||||||||
| Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||||||||
| Common stock sold (in Shares) | 4,388,854 | ||||||||||||||||||||||||
| Warrant activity [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 2.1122 | $ 19.00 | $ 29.40 | 30.00 | $ 30.00 | ||||||||||||||||||||
| Adjusted exercise price | $ 2.1122 | $ 19.00 | |||||||||||||||||||||||
| Downward exercise price | 1.3659 | 7.13 | |||||||||||||||||||||||
| Outstanding Warrants [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 30.00 | ||||||||||||||||||||||||
| Downward exercise price | $ 29.40 | ||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 4,553,234 | ||||||||||||||||||||||||
| Weighted-average exercise price | $ 3.984 | ||||||||||||||||||||||||
| Common Stock Offering Warrants Issued [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | 19.00 | $ 30.00 | $ 36.40 | $ 36.40 | |||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 232,875 | ||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 56,696 | 56,696 | |||||||||||||||||||||||
| Common stock per share | $ 20.00 | $ 42.20 | |||||||||||||||||||||||
| Warrant term | 5 years | ||||||||||||||||||||||||
| Fair value of common stock warrant (in Dollars) | $ 661,000 | ||||||||||||||||||||||||
| Per share price | $ 20.00 | ||||||||||||||||||||||||
| Expected volatility rate | 73.80% | 73.80% | 72.60% | ||||||||||||||||||||||
| Expected term | 5 years | 2 years 9 months 25 days | 5 years | ||||||||||||||||||||||
| Expected dividend rate | 0.00% | 0.00% | 0.00% | ||||||||||||||||||||||
| Risk free interest rate | 1.87% | 1.45% | 2.80% | ||||||||||||||||||||||
| Share price | 7.90 | $ 7.90 | |||||||||||||||||||||||
| Stock compensation expense (in Dollars) | $ 1,700,000 | ||||||||||||||||||||||||
| Fair value adjustment of warrants (in Dollars) | $ 1,700,000 | ||||||||||||||||||||||||
| Common Stock Warrant Issued to Underwriter of Common Stock Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 7.13 | $ 7.13 | |||||||||||||||||||||||
| Common stock per share | $ 2.156 | ||||||||||||||||||||||||
| Expected volatility rate | 74.50% | 96.50% | |||||||||||||||||||||||
| Expected term | 2 years 8 months 15 days | 2 years 29 days | |||||||||||||||||||||||
| Expected dividend rate | 0.00% | 0.00% | |||||||||||||||||||||||
| Risk free interest rate | 0.68% | 0.18% | |||||||||||||||||||||||
| Deemed dividend (in Dollars) | $ 129,000 | $ 22,000 | |||||||||||||||||||||||
| Share price | $ 1.47 | $ 2.88 | $ 1.47 | ||||||||||||||||||||||
| Warrants exercise price | $ 2.1122 | $ 1.3659 | |||||||||||||||||||||||
| Unexercised warrants (in Shares) | 143,501 | 143,501 | |||||||||||||||||||||||
| November 2017 warrants [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 56,696 | ||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 56,696 | ||||||||||||||||||||||||
| Common stock per share | $ 30.00 | ||||||||||||||||||||||||
| Gross proceeds (in Dollars) | $ 1,700,000 | ||||||||||||||||||||||||
| New Warrants November 8, 2017 [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 17,088 | ||||||||||||||||||||||||
| Gross proceeds (in Dollars) | $ 513,000 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 23.00 | $ 34.50 | $ 34.50 | ||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 267,853 | 13,393 | |||||||||||||||||||||||
| Common stock per share | $ 18.80 | $ 18.80 | |||||||||||||||||||||||
| Fair value of common stock warrant (in Dollars) | $ 3,600,000 | $ 169 | $ 169 | ||||||||||||||||||||||
| Expected volatility rate | 159.00% | 159.00% | |||||||||||||||||||||||
| Expected term | 5 years | 5 years | |||||||||||||||||||||||
| Expected dividend rate | 0.00% | 0.00% | |||||||||||||||||||||||
| Risk free interest rate | 2.77% | 2.77% | |||||||||||||||||||||||
| Share price | $ 23.00 | ||||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 267,853 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement [Member] | H.C. Wainwright & Co., LLC [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 33.75 | ||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 5 | ||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 8,334 | ||||||||||||||||||||||||
| Common stock per share | $ 33.75 | ||||||||||||||||||||||||
| Fair value of common stock warrant (in Dollars) | $ 127,000 | ||||||||||||||||||||||||
| Expected volatility rate | 133.30% | ||||||||||||||||||||||||
| Expected term | 5 years | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 2.07% | ||||||||||||||||||||||||
| Share price | $ 26.80 | ||||||||||||||||||||||||
| Common Stock Warrants Issued in January and March 2020 Private Placements [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 2.88 | $ 9.00 | |||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 353,872 | 353,872 | |||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 176,372 | 177,500 | |||||||||||||||||||||||
| Expected volatility rate | 74.80% | 73.80% | |||||||||||||||||||||||
| Expected term | 5 years 6 months | 5 years | |||||||||||||||||||||||
| Expected dividend rate | 0.00% | 0.00% | |||||||||||||||||||||||
| Risk free interest rate | 0.39% | 1.53% | |||||||||||||||||||||||
| Common stock warrants, exercisable | $ 2.88 | $ 9.00 | |||||||||||||||||||||||
| Common stock warrants, exercisable amount (in Dollars) | $ 242 | $ 813 | |||||||||||||||||||||||
| Common stock price | $ 2.35 | $ 7.90 | |||||||||||||||||||||||
| Ownership percentage | 50.00% | 50.00% | |||||||||||||||||||||||
| Common Stock Warrants Issued in April 2020 Public Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 3.05 | ||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 1,574,308 | ||||||||||||||||||||||||
| Expected volatility rate | 87.90% | ||||||||||||||||||||||||
| Expected term | 5 years | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.18% | ||||||||||||||||||||||||
| Common stock warrants, exercisable | $ 3,050.00 | $ 3,050.00 | |||||||||||||||||||||||
| Common stock warrants, exercisable amount (in Dollars) | $ 2,402 | ||||||||||||||||||||||||
| Common stock price | 2.40 | $ 2.40 | |||||||||||||||||||||||
| Warrant expire date | Apr. 24, 2025 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 3.97 | $ 2.35 | $ 7.90 | 2.40 | 2.40 | ||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 13,313 | 13,228 | |||||||||||||||||||||||
| Common stock per share | $ 3.7563 | $ 10.00 | $ 3.97 | ||||||||||||||||||||||
| Expected volatility rate | 74.80% | 73.80% | 87.90% | ||||||||||||||||||||||
| Expected term | 5 years 6 months | 5 years | 5 years 6 months | ||||||||||||||||||||||
| Expected dividend rate | 0.00% | 0.00% | 0.00% | ||||||||||||||||||||||
| Risk free interest rate | 0.39% | 1.53% | 0.18% | ||||||||||||||||||||||
| Common stock warrants, exercisable | $ 10.00 | ||||||||||||||||||||||||
| Common stock warrants, exercisable amount (in Dollars) | $ 17 | $ 58 | $ 167 | ||||||||||||||||||||||
| Exercise outstanding warrants (in Shares) | 1,700,680 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement [Member] | H.C. Wainwright & Co., LLC [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 118,073 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in October 2020 Inducement Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 1.725 | 1.725 | $ 1.725 | ||||||||||||||||||||||
| Adjusted exercise price | 3.05 | ||||||||||||||||||||||||
| Downward exercise price | $ 2.88 | ||||||||||||||||||||||||
| Warrant term | 5 years | ||||||||||||||||||||||||
| Expected volatility rate | 96.50% | ||||||||||||||||||||||||
| Expected term | 5 years 6 months | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.18% | ||||||||||||||||||||||||
| Share price | 1.47 | $ 1.47 | |||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 1,700,680 | ||||||||||||||||||||||||
| Common stock warrants, exercisable | 1.725 | $ 1.725 | |||||||||||||||||||||||
| Common stock warrants, exercisable amount (in Dollars) | $ 1,806,000 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in October 2020 Inducement Offering [Member] | H.C. Wainwright & Co., LLC [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 85,034 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in October 2020 Inducement Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock per share | $ 1.47 | ||||||||||||||||||||||||
| Fair value of common stock warrant (in Dollars) | $ 86,000 | ||||||||||||||||||||||||
| Expected volatility rate | 96.50% | ||||||||||||||||||||||||
| Expected term | 5 years 6 months | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.18% | ||||||||||||||||||||||||
| Fair value adjustment of warrants (in Dollars) | $ 237,000 | ||||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 1,700,680 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in October 2020 Inducement Offering [Member] | H.C. Wainwright & Co., LLC [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 2.156 | ||||||||||||||||||||||||
| Common Stock Warrants Issued in February 2021 Private Placement Agreement [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 2.216 | 2.216 | $ 2.216 | ||||||||||||||||||||||
| Common stock per share | $ 1.93 | ||||||||||||||||||||||||
| Expected volatility rate | 95.60% | ||||||||||||||||||||||||
| Expected term | 5 years 6 months | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.18% | ||||||||||||||||||||||||
| Fair value adjustment of warrants (in Dollars) | $ 3,052,000 | ||||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 2,194,427 | ||||||||||||||||||||||||
| Common Stock Warrants Issued in February 2021 Private Placement Agreement [Member] | H.C. Wainwright & Co., LLC [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 2.8481 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in February 2021 Private Placement Agreement [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | 2.8481 | $ 2.8481 | |||||||||||||||||||||||
| Common stock per share | $ 1.93 | ||||||||||||||||||||||||
| Expected volatility rate | 95.60% | ||||||||||||||||||||||||
| Expected term | 5 years 6 months | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.18% | ||||||||||||||||||||||||
| Fair value adjustment of warrants (in Dollars) | $ 435,000 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in February 2021 Private Placement Agreement [Member] | H.C. Wainwright & Co., LLC [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 329,164 | ||||||||||||||||||||||||
| Common Stock Warrants Issued to Placement Agent in March 2021 Registered Direct Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | 2.50 | $ 2.50 | |||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 1,975,000 | ||||||||||||||||||||||||
| Warrant term | 5 years | ||||||||||||||||||||||||
| Per share price | $ 2.50 | ||||||||||||||||||||||||
| Expected volatility rate | 100.80% | ||||||||||||||||||||||||
| Expected term | 5 years | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.31% | ||||||||||||||||||||||||
| Share price | $ 2.00 | $ 1.76 | $ 1.76 | ||||||||||||||||||||||
| Stock compensation expense (in Dollars) | $ 181,000 | ||||||||||||||||||||||||
| Purchase of warrants shares (in Shares) | 148,125 | ||||||||||||||||||||||||
| Common stock, par value | $ 0.001 | ||||||||||||||||||||||||
| Deducting fees payable (in Dollars) | $ 3,950,000 | ||||||||||||||||||||||||
| Common stock sold (in Shares) | 1,975,000 | ||||||||||||||||||||||||
| Deemed Dividend Adjustment-Warrant Modified Terms Revaluation [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 1.725 | ||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 56,625 | ||||||||||||||||||||||||
| Common stock per share | $ 1.47 | ||||||||||||||||||||||||
| Expected volatility rate | 96.50% | ||||||||||||||||||||||||
| Expected dividend rate | 0.00% | ||||||||||||||||||||||||
| Risk free interest rate | 0.18% | ||||||||||||||||||||||||
| Exercise outstanding warrants (in Shares) | 1,700,680 | ||||||||||||||||||||||||
| Aggregate issued common shares (in Shares) | 51,414 | ||||||||||||||||||||||||
| Outstanding litigation reserve (in Dollars) | $ 238 | ||||||||||||||||||||||||
| Deemed Dividend Adjustment-Warrant Modified Terms Revaluation [Member] | Minimum [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 2.88 | ||||||||||||||||||||||||
| Expected term | 4 years 6 months | ||||||||||||||||||||||||
| Deemed Dividend Adjustment-Warrant Modified Terms Revaluation [Member] | Maximum [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Exercise price | $ 3,050.00 | ||||||||||||||||||||||||
| Expected term | 8 years | ||||||||||||||||||||||||
| Public Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Number of warrant purchased (in Shares) | 293,000 | ||||||||||||||||||||||||
| Common Class A [Member] | Common Stock Warrants Issued in April 2020 Public Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 145,586 | ||||||||||||||||||||||||
| Common Class A [Member] | Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 145,586 | ||||||||||||||||||||||||
| Common Class B [Member] | Common Stock Warrants Issued in April 2020 Public Offering [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 1,428,722 | ||||||||||||||||||||||||
| Common Class B [Member] | Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement [Member] | |||||||||||||||||||||||||
| Common Stock Warrants and Common Stock Warrant Liability (Details) [Line Items] | |||||||||||||||||||||||||
| Common stock offering warrants issued, value (in Shares) | 1,428,722 | ||||||||||||||||||||||||
Common Stock Warrants and Common Stock Warrant Liability (Details) - Schedule of common stock warrant activity - shares |
6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|||
| Class of Warrant or Right [Line Items] | |||||
| Outstanding at beginning | 2,582,697 | 489,176 | |||
| Outstanding at ending | 4,553,234 | 2,582,697 | |||
| Various [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Various | ||||
| Term Date | Various-2020/2021 | ||||
| Exercise Price | Various | ||||
| Outstanding at beginning | 17,059 | ||||
| Exercised | (9,375) | ||||
| Expired | (7,684) | ||||
| Outstanding at ending | |||||
| Common Stock Offering Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Common Stock Offering Warrants | ||||
| Term Date | November 21, 2022 | ||||
| Exercise Price | [1] | $1.3659 | |||
| Outstanding at beginning | 143,501 | 143,501 | |||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 143,501 | 143,501 | |||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | November 21, 2022 | ||||
| Exercise Price | $30.00 | ||||
| Outstanding at beginning | 47,250 | ||||
| Exercised | (47,250) | ||||
| Warrant Reissue [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Warrant Reissue | ||||
| Term Date | December 20, 2023 | ||||
| Exercise Price | $36.40 | ||||
| Outstanding at beginning | 56,696 | 56,696 | |||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 56,696 | 56,696 | |||
| Rights Offering Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Rights Offering Warrants | ||||
| Term Date | July 25, 2023 | ||||
| Exercise Price | $23.00 | ||||
| Outstanding at beginning | 202,943 | 202,943 | |||
| Exercised | 499 | ||||
| Expired | |||||
| Outstanding at ending | 202,444 | 202,943 | |||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | August 13, 2023 | ||||
| Exercise Price | $34.50 | ||||
| Outstanding at beginning | 13,393 | 13,393 | |||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 13,393 | 13,393 | |||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | July 11, 2024 | ||||
| Exercise Price | $33.75 | ||||
| Outstanding at beginning | 8,334 | 8,334 | |||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 8,334 | 8,334 | |||
| Registered Direct Offering [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Registered Direct Offering | ||||
| Term Date | July 28,2025 | ||||
| Exercise Price | $9.00 | ||||
| Outstanding at beginning | 177,500 | ||||
| Issued | 177,500 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 177,500 | 177,500 | |||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | July 28,2025 | ||||
| Exercise Price | $10.00 | ||||
| Outstanding at beginning | 13,315 | ||||
| Issued | 13,315 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 13,315 | 13,315 | |||
| Registered Direct Offering [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Registered Direct Offering | ||||
| Term Date | September 8,2025 | ||||
| Exercise Price | $2.88 | ||||
| Outstanding at beginning | |||||
| Issued | 176,372 | ||||
| Exercised | (176,372) | ||||
| Expired | |||||
| Outstanding at ending | |||||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | March 4,2025 | ||||
| Exercise Price | $3.76 | ||||
| Outstanding at beginning | 13,228 | ||||
| Issued | 13,228 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 13,228 | 13,228 | |||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | April 21,2025 | ||||
| Exercise Price | $3.97 | ||||
| Outstanding at beginning | 118,073 | ||||
| Issued | 118,073 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 118,073 | 118,073 | |||
| Registered Direct Offering [Member[ | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Registered Direct Offering | ||||
| Term Date | April 24,2025 | ||||
| Exercise Price | $3.05 | ||||
| Outstanding at beginning | 50,000 | ||||
| Issued | 1,574,308 | ||||
| Exercised | (1,524,308) | ||||
| Expired | |||||
| Outstanding at ending | 50,000 | 50,000 | |||
| Private Warrant Inducement [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Private Warrant Inducement | ||||
| Term Date | April 27,2026 | ||||
| Exercise Price | $1.73 | ||||
| Outstanding at beginning | 1,700,680 | ||||
| Issued | 1,700,680 | ||||
| Exercised | (700,680) | ||||
| Outstanding at ending | 1,000,000 | 1,700,680 | |||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | April 27,2026 | ||||
| Exercise Price | $2.16 | ||||
| Outstanding at beginning | 85,034 | ||||
| Issued | 85,034 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 85,034 | 85,034 | |||
| Private Placement Agreement [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Private Placement Agreement | ||||
| Term Date | August 2,2026 | ||||
| Exercise Price | $2.216 | ||||
| Outstanding at beginning | |||||
| Issued | 2,194,427 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 2,194,427 | ||||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | August 2,2026 | ||||
| Exercise Price | $2.848 | ||||
| Outstanding at beginning | |||||
| Issued | 329,164 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 329,164 | ||||
| Dealer Manager Warrants [Member] | |||||
| Class of Warrant or Right [Line Items] | |||||
| Warrant Type | Dealer Manager Warrants | ||||
| Term Date | March 23, 2026 | ||||
| Exercise Price | $2.50 | ||||
| Outstanding at beginning | |||||
| Issued | 148,125 | ||||
| Exercised | |||||
| Expired | |||||
| Outstanding at ending | 148,125 | ||||
| |||||
Stockholders’ Deficit (Details) - USD ($) |
1 Months Ended | 6 Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 15, 2021 |
Feb. 02, 2021 |
Nov. 10, 2015 |
Jun. 22, 2021 |
Mar. 31, 2021 |
Mar. 29, 2021 |
Mar. 23, 2021 |
Mar. 19, 2021 |
Feb. 28, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Nov. 21, 2017 |
Dec. 31, 2015 |
|
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Common stock, authorized | 100,000,000 | 100,000,000 | |||||||||||||
| Preferred stock, authorized | 15,000,000 | ||||||||||||||
| Capital stock, description | the Company’s authorized capital stock consisted of 100 million shares of common stock, $.001 par value, and 10 million shares of preferred stock, $.001 par value. | ||||||||||||||
| Common stock, shares, issued | 12,185,496 | 5,099,512 | |||||||||||||
| Common stock share outstanding | 12,185,496 | 5,099,512 | |||||||||||||
| Shares issued in connection with registered direct offering | 4,388,854 | ||||||||||||||
| Sale of Stock, Consideration Received on Transaction (in Dollars) | $ 8,898 | ||||||||||||||
| Aggregate shares | 1,975,000 | ||||||||||||||
| Net proceeds (in Dollars) | $ 8,000 | $ 3,523 | $ 20,951 | ||||||||||||
| Exercise of common stock warrants | 701,179 | ||||||||||||||
| Restricted Stock, Shares Issued Net of Shares for Tax Withholdings | 1,220 | ||||||||||||||
| Warrant to purchase shares | 4,553,234 | 2,582,697 | 489,176 | ||||||||||||
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 | |||||||||||||
| Aggregate shares of common stock | 700,680 | ||||||||||||||
| Registered direct offering, description | On March 23, 2021, the Company consummated a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately $3.95 million, pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from the Company’s shelf registration statement on Form S-3 (File No. 333-225712). | ||||||||||||||
| Shares of commons stock for the exercise | 499 | ||||||||||||||
| Placement Agent Warrants [Member] | |||||||||||||||
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Shares issued in connection with exercise of warrants | 148,125 | ||||||||||||||
| Exercise price per share (in Dollars per share) | $ 2.50 | ||||||||||||||
| Common Stock [Member] | |||||||||||||||
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Common stock, authorized | 100,000,000 | ||||||||||||||
| Common stock, shares, issued | 7,085,984 | ||||||||||||||
| Private Placement [Member] | |||||||||||||||
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Warrant to purchase shares | 3,968,854 | ||||||||||||||
| Common stock, par value (in Dollars per share) | $ 0.001 | ||||||||||||||
| Purchase price per share (in Dollars per share) | $ 2.2785 | ||||||||||||||
| Aggregate shares of common stock | 420,000 | ||||||||||||||
| Purchase price of pre- funded warrants (in Dollars per share) | $ 2,277.5000 | ||||||||||||||
| Shares issued in connection with exercise of warrants | 2,194,427 | ||||||||||||||
| Gross proceeds (in Dollars) | $ 10,000,000.0 | ||||||||||||||
| Exercise price per share, description | all 420,000 pre-funded shares had been distributed. In connection with the offering, we issued the placement agent warrants to purchase up to 329,164 shares of Common Stock with an exercise price of $2.8481 per share. | ||||||||||||||
| Public Offering [Member] | |||||||||||||||
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Net proceeds (in Dollars) | $ 1,220,000 | ||||||||||||||
| Shares issued in connection with exercise of warrants | 293,000 | ||||||||||||||
| Series A Convertible Preferred Stock [Member] | |||||||||||||||
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Preferred stock, authorized | 2,000,000 | ||||||||||||||
| Preferred stock, par value (in Dollars per share) | $ 0.001 | ||||||||||||||
| Series B Convertible Preferred Stock [Member] | |||||||||||||||
| Stockholders’ Deficit (Details) [Line Items] | |||||||||||||||
| Preferred stock, authorized | 7,515,000 | ||||||||||||||
Stock-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2021 |
Jun. 24, 2021 |
Dec. 31, 2020 |
|
| Stock-based Compensation (Details) [Line Items] | |||
| Service period, description | Options granted under the 2018 Plan generally vest over a twelve- to 36-month period coinciding with their respective service periods. | ||
| Stock options term | 5 years | ||
| Weighted average grant date fair value of options granted | $ 0.98 | ||
| Share price | $ 1.61 | $ 1.73 | |
| Weighted average grant date | 35 months | ||
| Equity Incentive Plan 2018 [Member] | |||
| Stock-based Compensation (Details) [Line Items] | |||
| Number of shares authorized (in Shares) | 3,000,000 | ||
| Common stock available for issuance (in Shares) | 2,856,259 | ||
| Restricted Stock Units [Member] | |||
| Stock-based Compensation (Details) [Line Items] | |||
| Compensation cost not yet recognized (in Dollars) | $ 999 |
Stock-based Compensation (Details) - Schedule of fair value of options granted - Employee [Member] |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Stock-based Compensation (Details) - Schedule of fair value of options granted [Line Items] | |
| Expected volatility | 96.50% |
| Expected dividend yield | |
| Expected term (in years) | 2 years 11 months 26 days |
| Risk-free interest rate | 0.44% |
Stock-based Compensation (Details) - Schedule of stock option activity |
6 Months Ended | |||
|---|---|---|---|---|
|
Jun. 30, 2021
USD ($)
$ / shares
shares
| ||||
| Schedule of stock option activity [Abstract] | ||||
| Number of Options, Outstanding at December 31, 2020 (in Shares) | shares | 496,471 | |||
| Weighted Average Exercise Price Per Share, Outstanding at December 31, 2020 | $ 8.63 | |||
| Weighted Average Remaining Contractual Term (years), Outstanding at December 31, 2020 | 3 years 10 months 24 days | |||
| Aggregate Intrinsic Value, Outstanding at December 31, 2020 (in Dollars) | $ | [1] | |||
| Number of Options, Granted (in Shares) | shares | 575,565 | |||
| Weighted Average Exercise Price Per Share, Granted | $ 1.65 | |||
| Weighted Average Remaining Contractual Term (years), Granted | 4 years 9 months 18 days | |||
| Aggregate Intrinsic Value, Granted | [1] | |||
| Number of Options, Exercised (in Shares) | shares | ||||
| Weighted Average Exercise Price Per Share, Exercised | ||||
| Exercised (in Dollars) | $ | [1] | |||
| Aggregate Intrinsic Value, Exercised (in Dollars) | $ | [1] | |||
| Number of Options, Forfeited (in Shares) | shares | (2,375) | |||
| Weighted Average Exercise Price Per Share, Forfeited | ||||
| Weighted Average Remaining Contractual Term (years), Forfeited | [1] | |||
| Aggregate Intrinsic Value, Forfeited | [1] | |||
| Number of Options, Expired (in Shares) | shares | ||||
| Weighted Average Exercise Price Per Share, Expired | ||||
| Weighted Average Remaining Contractual Term (years), Expired | [1] | |||
| Aggregate Intrinsic Value, Exercised, Expired | [1] | |||
| Number of Options, Outstanding at June 30, 2021 (in Shares) | shares | 1,069,661 | |||
| Weighted Average Exercise Price Per Share, Outstanding at June 30, 2021 | $ 4.73 | |||
| Weighted Average Remaining Contractual Term (years), Outstanding at June 30, 2021 | 2 years 3 months 18 days | |||
| Aggregate Intrinsic Value, Outstanding at June 30, 2021 (in Dollars) | $ | [1] | |||
| Number of Options, Outstanding, Exercisable at June 30, 2021 (in Shares) | shares | 386,489 | |||
| Weighted Average Exercise Price Per Share, Exercisable at June 30, 2021 | $ 9.05 | |||
| Weighted Average Remaining Contractual Term (years), Exercisable at June 30, 2021 | 2 years 1 month 6 days | |||
| Aggregate Intrinsic Value, Outstanding, Exercisable at June 30, 2021 (in Dollars) | $ | [1] | |||
| ||||
Stock-based Compensation (Details) - Schedule of summarizes restricted stock unit activity - Restricted Stock [Member] |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
$ / shares
shares
| |
| Stock-based Compensation (Details) - Schedule of summarizes restricted stock unit activity [Line Items] | |
| Number of Units, Outstanding beginning | shares | 32,072 |
| Weighted Average Grant-Date Fair Value Per Unit, Outstanding beginning | $ / shares | $ 2.01 |
| Number of Units, Granted | shares | |
| Weighted Average Grant-Date Fair Value Per Unit, Granted | $ / shares | |
| Number of Units, Vested | shares | (31,405) |
| Weighted Average Grant-Date Fair Value Per Unit, Vested | $ / shares | $ 1.97 |
| Number of Units, Forfeited | shares | |
| Weighted Average Grant-Date Fair Value Per Unit, Forfeited | $ / shares | |
| Number of Units, Outstanding ending | shares | 667 |
| Weighted Average Grant-Date Fair Value Per Unit, Outstanding ending | $ / shares | $ 1.80 |
Stock-based Compensation (Details) - Schedule of stock-based compensation expense - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Stock-based Compensation (Details) - Schedule of stock-based compensation expense [Line Items] | ||||
| Total stock-based compensation expense | $ 182 | $ 140 | $ 337 | $ 291 |
| Research and development [Member] | ||||
| Stock-based Compensation (Details) - Schedule of stock-based compensation expense [Line Items] | ||||
| Total stock-based compensation expense | 2 | 2 | 5 | |
| Selling, general and administrative [Member] | ||||
| Stock-based Compensation (Details) - Schedule of stock-based compensation expense [Line Items] | ||||
| Total stock-based compensation expense | $ 182 | $ 138 | $ 335 | $ 286 |
Commitments and Contingencies (Details) $ in Thousands |
1 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Aug. 01, 2020 |
Dec. 02, 2019 |
Nov. 16, 2016
ft²
|
Jun. 30, 2021
USD ($)
|
Jun. 30, 2020
USD ($)
|
Dec. 31, 2019
ft²
|
|
| Commitments and Contingencies (Details) [Line Items] | ||||||
| Area square feet | 7,632 | |||||
| Lease commitments extended, description | we entered into a lease for our manufacturing and research facility in Phoenix, Arizona where we occupy approximately 5,105 square feet of manufacturing and warehouse space. This lease expires on November 30, 2024. | we entered into a lease for our corporate headquarters in Phoenix, Arizona where we lease and occupy approximately 5,529 square feet of office space. This lease expires in November 2024. | ||||
| Rent expense | $ | $ 111 | $ 132 | ||||
| Research and Development Equipment [Member] | ||||||
| Commitments and Contingencies (Details) [Line Items] | ||||||
| Area square feet | 1,954 | |||||
| Lease commitments extended, description | This lease expired on November 15, 2018 but was extended for an additional 24 months, through November 2020. | |||||
Commitments and Contingencies (Details) - Schedule of future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments $ in Thousands |
Jun. 30, 2021
USD ($)
|
|---|---|
| Schedule of future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments [Abstract] | |
| 2021 Finance leases | $ 28 |
| 2021 Operating leases | 95 |
| 2022 Finance leases | 28 |
| 2022 Operating leases | 194 |
| 2023 Finance leases | |
| 2023 Operating leases | 198 |
| 2024 Finance leases | |
| 2024 Operating leases | 186 |
| Total minimum lease payments of Finance leases | 56 |
| Total minimum lease payments of Operating leases | 673 |
| Less: amounts representing interest (ranging from 11.43% to 14.68%) | 3 |
| Present value of minimum lease payments | 53 |
| Less: current installments under finance lease obligations | 53 |
| Total long-term portion |
Subsequent Events (Details) - USD ($) |
1 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 15, 2021 |
Mar. 31, 2021 |
Feb. 28, 2021 |
Jun. 30, 2021 |
|
| Subsequent Events (Details) [Line Items] | ||||
| Number of common stock issued | 4,388,854 | |||
| Net proceeds | $ 8,000 | $ 3,523 | $ 20,951 | |
| Institutional Investors [Member] | Subsequent Event [Member] | ||||
| Subsequent Events (Details) [Line Items] | ||||
| Number of common stock issued | 5,616 | |||