Stockholders’ Equity

9 Months Ended

Sep. 30, 2023

Stockholders’ Equity [Abstract]

Stockholders’ Equity

7. Stockholders’ Equity 

Class A Common Stock

On April 18, 2023, the Company finalized the Separation Agreement dated March 31, 2023, for Dr. Christopher Min, the Company’s former Chief Medical Officer. In part for his agreement to a general release the Company agreed to pay Dr. Min: $112,000 as severance compensation and allowed for the immediate acceleration and vesting of 40,000 RSUs that were previously granted.

On April 19, 2023, the Company finalized the Separation Agreement effective June 9, 2023, for James Clavijo, the Company’s former Chief Financial Officer. In part for his agreement to a general release the Company agreed to pay Mr. Clavijo $275,000 as severance compensation, three months of payment for COBRA insurance coverage and the immediate acceleration and vesting of 6,690 RSUs that were previously granted. Mr. Clavijo entered into a concurrent consulting agreement with the Company to continue as interim Chief Financial Officer until a permanent successor joined the Company.

On June 27, 2023 the Company filed a registration statement with the SEC to conduct a tradeable subscription rights offering for up to $30.0 million of shares of Class A common stock to its stockholders and holders of certain warrants to purchase common stock. On July 28, 2023 the Company filed a first amendment to the registration statement. On August 16, 2023, the registration statement was declared effective by the SEC, and on August 22, 2023, the Company launched the subscription rights offering at a subscription price of $3.00 per share of Class A common stock. On September 21, 2023, the subscription period for the rights offering of the Company expired. At the end of the subscription period, the Company sold 108,497 shares of its Class A common stock at a price of $3.00 per share. There were no net proceeds to the Company after deducting the $0.3 million of expenses associated with the rights offering.

Restricted Stock Units (RSUs) are taxable upon vesting based on the market value on the date of vesting. The Company is required to make mandatory tax withholding for the payment and satisfaction of income tax, social security tax, payroll tax, or payment on account of other tax related to withholding obligations that arise by reason of vesting of an RSU. The taxable income is calculated by multiplying the number of vested RSUs for each individual by the closing share price as of the vesting date and a tax liability is calculated based on each individual’s tax bracket. During the nine months ended September 30, 2023, a total of 227,030 RSUs vested for Class A common stock shares. Of that amount, the Company withheld 43,057 Class A common stock shares to satisfy employee tax liabilities. The shares withheld are available for reissuance pursuant to the Company’s 2021 Incentive Award Plan.

During the nine months ended September 30, 2023, no stock options were exercised for Class A common stock shares.

Class B Common Stock

In connection with the Corporate Conversion, 2,000,000 outstanding Series A and B units were converted into 15,702,834 shares of our unregistered Class B common stock.

Holders of Class A common stock generally have rights identical to holders of Class B common stock, except that holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to five (5) votes per share. The holders of Class B common stock may convert each share of Class B common stock into one share of Class A common stock at any time at the holder’s option, and is otherwise subject to automatic conversion in certain circumstances. Class B common stock is not publicly tradeable.

During the nine months ended September 30, 2023, stockholders exchanged 35,546 shares of Class B common stock for 35,546 shares of Class A common stock. During the year ended December 31, 2022, stockholders exchanged 811,749 shares of Class B common stock for 811,749 shares of Class A common stock.

Warrants

As part of the Company’s initial public offering (“IPO”), the underwriter received warrants to purchase 106,400 shares of Class A common stock. The warrants are exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing August 12, 2021, at a price of $12.00 per share and the fair value of the warrants as of December 31, 2021 was approximately $0.5 million. During 2021, the underwriters assigned 95,760 of the warrants to its employees. As of December 31, 2022, 51,061 warrants have been exercised for Class A common stock shares at an exercise price of $12.00 for $612,732.

As part of the 2021 PIPE Offering, the Company issued 1,169,288 warrants to investors to purchase up to a number of shares of Class A common stock equal to the number of shares of Class A common stock purchased by such investor in the offering, at an exercise price of $17.50 per share (the “Purchaser Warrants”). The Purchaser Warrants were immediately exercisable, expire five years from the date of issuance and have certain downward pricing adjustment mechanisms, subject to a floor, as set forth in greater detail therein. In addition, the Company granted the underwriters warrants, under similar terms, to purchase 46,722 shares of Class A common stock, at an exercise price of $17.50 per share.

On August 16, 2023, the Company announced its Stock Rights Offering, which triggered the downward pricing mechanism on the Purchaser Warrants, at which time these warrants were adjusted downward to an exercise price of $5.25 for the period remaining through expiration. This resulted in a deemed dividend to common stockholders of approximately $0.8 million for the change in the fair value of the warrants using a Black-Scholes pricing model.