Note 7. Stockholders’ Equity and Stock-Based Compensation

At June 30, 2024, the Company had 14,591,477 common shares outstanding (including outstanding RSAs totaling 545,992 shares). Also outstanding were stock options relating to 534,341 shares of common stock (of which 521,731 stock options were vested), all totaling 15,125,818 shares of common stock and all common stock equivalents, potentially outstanding at June 30, 2024.

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 (of which 498,177 stock options were vested), all totaling 14,209,061 shares of common stock and all common stock equivalents, outstanding at December 31, 2023.

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 and May 8, 2024 (the ATM Agreement), 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. On May 8, 2024, the Company entered into an amendment to the ATM Agreement with Stifel. Under this amended agreement, the Company pays Stifel a commission equal to 3.0% 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 29, 2024, 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 19, 2024. On May 10, 2024, the Company filed a prospectus supplement, which was further supplemented on July 19, 2024, pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $12.5 million from time to time through its ATM.

The Company records its ATM sales on a settlement date basis. The Company sold 828,131 shares under the ATM for the six months ended June 30, 2024 resulting in net proceeds of $2.2 million (stock issuance costs were approximately $0.3 million). The Company sold 490,001 shares under the ATM for the six months ended June 30, 2023 resulting in net proceeds of $2.3 million (stock issuance costs were approximately $0.1 million).

Stock-based Compensation

Amendment to 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 2,500,000 shares with 1,484,047 shares available for future issuance at June 30, 2024. On February 27, 2024, the Board of Directors approved an increase of 700,000 shares to the authorized number of shares under the 2020 Equity Incentive Plan, increasing the total authorized number of shares from 1,800,000 shares to 2,500,000 shares. This increase was approved by the stockholders at the shareholders’ annual meeting on April 19, 2024.

Stock Options

During the six months ended June 30, 2024 and 2023, the number of stock options the Company granted to a consultant was 58,309 and 21,241, respectively.

Common Stock

Consultants’ Stock Issuances

For the six months ended June 30, 2024 and 2023, the Company issued 8,750 shares (with stock prices at $3.00 to $4.00 per share) and 7,408 shares (with stock prices at $3.89 to $4.01 per share) of common stock, respectively, to its investor relations firm for services provided during the period, recorded to general and administrative expenses. The expense recorded for these share issuances was $15,000 for each quarter with a weighted average grant date fair value of $3.43 per share.

Directors’ Stock Issuances

On November 20, 2023, the Board of Directors approved an equity grant valued at $240,000 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 and were issued 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 and were issued on January 3, 2023.

Restricted Stock Awards

As of June 30, 2024 and December 31, 2023, there were 545,992 and 557,688 restricted stock awards (RSAs) included in the total issued and outstanding common stock. A total of $0.8 million and $0.6 million of compensation expense was recorded for the six months ended June 30, 2024 and 2023, respectively. Compensation expense is recognized straight line over the three-year vesting period.

As of June 30, 2024, total unrecognized compensation cost related to restricted stock units was $1.8 million, which is expected to be recognized over a remaining weighted-average vesting period of 1.75 years.

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 during the six months ended June 30, 2024 and 2023:

Total non-cash stock-based compensation expense recorded related to options granted and restricted stock awards included in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 are as follows (rounded in millions):