Note 8. Stockholders’ Equity and Stock-Based Compensation

At December 31, 2023, the Company had 13,698,274 common shares outstanding (including outstanding RSAs totaling 557,688 shares). Also outstanding were stock options relating to 510,787 shares of common stock, all totaling 14,209,061 shares of common stock and all common stock equivalents, potentially outstanding at December 31, 2023.

At December 31, 2022, the Company had 11,900,217 common shares outstanding (including outstanding RSAs totaling 416,316 shares). Also outstanding were stock options relating to 525,903 shares of common stock, all totaling 12,426,120 shares of common stock and all common stock equivalents, outstanding at December 31, 2022.

Common Stock Equity Offerings

At-the-Market (ATM) Offerings

On May 28, 2019, the Company entered into an at-the-market equity offering sales agreement with Stifel, Nicolaus & Company, Incorporated (Stifel), which was amended on April 9, 2021, pursuant to which the Company may issue and sell shares of its common stock from time to time through Stifel as the Company’s sales agent. Under this agreement, the Company pays Stifel a commission equal to 4.0% of the aggregate gross proceeds of any sales of common stock under the agreement. The offering of common stock pursuant to this agreement can be terminated with 10 days written notice by either party. Sales of the Company’s common stock through Stifel, if any, will be made by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933. On March 25, 2021, the Company filed a shelf registration statement on Form S-3, registering the sale of up to $75.0 million of the Company’s securities, which registration statement was declared effective on April 5, 2021 and expires on April 5, 2024. On April 4, 2023, the Company filed a prospectus supplement with the amount of the Company securities available for issuance totaling $17.9 million with $11.9 million available for future share issuances as of December 31, 2023.

The Company records its ATM sales on a settlement date basis. The Company sold 1,492,148 shares under the ATM for the year ended December 31, 2023 resulting in net proceeds of $6.4 million (stock issuance costs were $0.4 million). The Company sold 1,855,085 shares under the ATM for the year ended December 31, 2022 resulting in net proceeds of $11.0 million (stock issuance costs were $0.5 million).

Stock Option Plan

2020 Equity Incentive Plan

On March 9, 2020, the Board of Directors adopted the Company’s 2020 Omnibus Incentive Plan (the 2020 Plan). On September 3, 2020, the shareholders approved the 2020 Plan to authorize grants of the following types of awards: (a) Options, (b) Stock Appreciation Rights, (c) Restricted Stock and Restricted Stock Units, and (d) Other Stock-Based and Cash-Based Awards. The total number of shares of common stock available for issuance under the 2020 Plan is 1,800,000 shares with 803,467 shares available for future issuance at December 31, 2023.

Stock Options

Stock options issued to the Company’s employees, directors and consultants are summarized as follows for the year ended December 31, 2023:

During the year ended December 31, 2023, the Company issued 35,482 stock options to two consultants. These options were assigned a fair value of $1.77 per share. For the year ended December 31, 2022, the Company issued 18,852 stock options to two consultants. These options were assigned a weighted average fair value of $3.98 per share. The value was determined using the Black-Scholes pricing model. For expected volatility, we have concluded that our historical volatility over the option’s expected holding term provides the most reasonable basis for this estimate. For the risk-free interest rate, we use U.S. Treasury Note rates which mature at approximately the same time as the option’s expected holding term or option life determined by using the simplified method. We recognize forfeitures of equity-based awards as a reduction to compensation costs in the period in which they occur. The estimated future forfeiture rates, based on the historical forfeiture rates, which were not significant, were zero.

The intrinsic value is calculated as the difference between the fair value of the Company's common stock and the exercise price of the stock options. The fair value of the Company's common stock is $3.21 and $3.89 per share at December 31, 2023 and 2022, respectively. As of December 31, 2023, total unrecognized compensation cost related to option awards was $41,600, which is expected to be recognized over a remaining weighted-average vesting period of 2.0 years.

Common Stock

Consultants’ Stock Issuances

For the years ended December 31, 2023 and 2022, the Company issued 13,325 shares (with stock prices ranging from $4.00 to $5.82 per share) and 10,565 shares of common stock (with stock prices ranging from $4.56 to $8.35 per share), respectively, to its investor relations firm for services provided during the years, recorded to general and administrative expenses. The total stock-based compensation expense recorded for these share issuances was $60,000 for each year with a weighted average grant date fair value of $4.50 per share.

Directors’ Stock Issuances

On November 20, 2023, the Board of Directors approved an equity grant valued at $240,000 (included in accrued liabilities and general and administrative expenses) in total to its six directors, which resulted in granting a total of 60,456 shares of common stock, valued on the grant date at $3.97 per share, which vested on January 2, 2024.

On December 15, 2022, the Board of Directors approved an equity grant valued at $200,000 in total to its five independent directors, recorded in general and administrative expenses, which resulted in granting a total of 52,085 shares of common stock to the five independent directors, valued on the grant date at $3.84 per share, which vested on January 3, 2023.

Restricted Stock Awards

The following summarizes the Company’s restricted stock award activity and the RSA outstanding:

The intrinsic value is calculated as the fair value of the Company's common stock. The fair value of the Company's common stock is $3.21 and $3.89 per share at December 31, 2023 and 2022, respectively. The fair value of the RSAs vested in 2023 was $0.6 million.

As of December 31, 2023, all the outstanding restricted stock units are unvested. As of December 31, 2023, total unrecognized compensation cost related to restricted stock units was $2.6 million, which is expected to be recognized over a remaining weighted-average vesting period of 2.1 years.

2023 Transactions

On May 3, 2023, the Board of Directors approved a RSA equity grant valued at $120,000 to one new officer of the Company, which resulted in the issuance of a total of 35,088 shares of common stock to the new officer, valued on the grant date at $3.42 per share and issued on May 3, 2023. These RSAs vest annually in equal installments over three years. These 35,088 shares were included in the total outstanding common shares at December 31, 2023 and compensation expense will be recognized straight line over the three-year vesting period.

On November 20, 2023, the Board of Directors approved a RSA equity grant of approximately $1.1 million, which equated to 266,011 RSAs granted to all of its employees and two consultants, valued at the stock price on the grant date of $3.97 per share. These RSAs awards vest annually in three equal installments on the grant date anniversary.

On November 18, 2023, 62,864 of the total 188,588 RSAs that were granted on November 18, 2021 vested. These RSAs vest annually with a three-year straight line vesting period. The Company withheld 21,854 common shares to make payments for withholding taxes of $0.1 million on these vested shares. The Company issued a total of 41,010 shares of common stock, net of this share settlement for the taxes due and paid upon the vesting of these RSAs to its employees. The common shares withheld became available for reissuance under the 2020 Plan.

On December 15, 2023, 96,863 of the total 290,590 RSAs that were granted on December 15, 2022 vested. These RSAs vest annually with a three-year straight line vesting period. The Company withheld 38,746 common shares to make payments for withholding taxes of $0.1 million on these vested shares. The Company issued a total of 58,117 shares of common stock, net of this share settlement for the taxes due and paid upon the vesting of these RSAs, to its employees. The common shares withheld became available for reissuance under the 2020 Plan.

2022 RSA Transactions

On December 15, 2022, the Board of Directors approved an equity grant of approximately $1.4 million, which equaled a total of 290,590 RSAs to all its employees and two consultants, valued at the stock price on the grant date of $4.71 per share. These RSAs awards vest annually in three equal installments on the grant date anniversary.

RSA Summary – 2023 and 2022

As of December 31, 2023 and 2022, there were 557,688 and 416,316 RSAs included in the total issued and outstanding common stock, respectively. Compensation expense is recognized in a straight line over the three-year vesting period. A total of $1.2 million and $0.7 million of compensation expense was recorded for the year ended December 31, 2023 and 2022, respectively, for the RSAs.

Stock-Based Compensation Expense

Stock Options

The following assumptions were used in the Black-Scholes pricing model to determine the fair value of stock options granted:

Total non-cash stock-based compensation expense recorded related to options granted and restricted stock awards included in the Company’s consolidated statements of operations for the years ended December 31, 2023 and 2022 are as follows (rounded in millions):