Annual report pursuant to Section 13 and 15(d)

EQUITY TRANSACTIONS

v3.22.2
EQUITY TRANSACTIONS
12 Months Ended
Mar. 31, 2022
Equity [Abstract]  
EQUITY TRANSACTIONS

4. EQUITY TRANSACTIONS

 

ISSUANCES OF COMMON STOCK AND WARRANTS

 

Equity Transactions in the Fiscal Year Ended March 31, 2022.

 

2021 At The Market Offering Agreement with H.C. Wainwright & Co., LLC

 

On March 22, 2021, we entered into an At the Market Offering Agreement, or the 2021 ATM Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as sales agent, pursuant to which we could offer and sell shares of our common stock, from time to time as set forth in the 2021 ATM Agreement.

 

The offering was registered under the Securities Act of 1933, as amended, or Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-237269), as previously filed with the Securities and Exchange Commission, or SEC, and declared effective on March 30, 2020. We filed a prospectus supplement with the SEC, dated March 22, 2021, in connection with the offer and sale of the shares of common stock, pursuant to which we could offer and sell shares of common stock having an aggregate offering price of up to $5,080,000 from time to time.

 

Subject to the terms and conditions set forth in the 2021 ATM Agreement, Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares under the 2021 ATM Agreement from time to time, based upon our instructions. We provided Wainwright with customary indemnification rights under the 2021 ATM Agreement, and Wainwright was entitled to a commission at a fixed rate equal to up to three percent of the gross proceeds per share sold. In addition, we agreed to reimburse Wainwright for certain specified expenses in connection with entering into the 2021 ATM Agreement. The 2021 ATM Agreement provided that it would terminate upon the written termination by either party as permitted thereunder.

 

Sales of the shares, under the 2021 ATM Agreement are made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made by means of ordinary brokers’ transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed with Wainwright. The 2021 ATM Agreement provided that we have no obligation under the 2021 ATM Agreement to sell any of the shares, and, at any time, we could suspend offers under the 2021 ATM Agreement or terminate the agreement.

 

In the fiscal year ended March 31, 2022, we raised aggregate net proceeds under the 2021 ATM Agreement described above of $4,947,785, net of $126,922 in commissions to Wainwright and $2,154 in other offering expense, through the sale of 626,000 shares of our common stock at an average price of $7.90 per share of net proceeds. No further sales can be made under the 2021 ATM Agreement.

 

Registered Direct Financing

 

In the fiscal year ended March 31, 2022, we sold an aggregate of 1,380,555 shares of our common stock at a purchase price per share of $9.00, for aggregate net proceeds to us of $11,659,044, after deducting fees payable to Maxim Group LLC, the placement agent, and other offering expenses. These shares were sold through a securities purchase agreement with certain institutional investors. The shares were issued pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the SEC on March 19, 2020, and was declared effective on March 30, 2020 (File No. 333-237269) and a prospectus supplement thereunder.

 

Warrant Exercises

 

In the fiscal year ended March 31, 2022, pursuant to the exercise of outstanding warrants to purchase 531,167 shares of our common stock, we received proceeds in the amount of $820,938 from institutional investors.

 

Also in the fiscal year ended March 31, 2022, pursuant to the exercise of 874,664 outstanding warrants on a cashless basis, we issued 675,554 shares of our common stock. The difference of 199,110 shares of common stock issuable pursuant to the warrants were cancelled.

 

Stock Option Exercises

 

In the fiscal year ended March 31, 2022, former employees paid us an aggregate of $28,325 for the exercise of outstanding options to purchase 11,562 shares of our common stock.

 

2022 At The Market Offering Agreement with H.C. Wainwright & Co., LLC

 

On March 24, 2022, we entered into an At The Market Offering Agreement, or the 2022 ATM Agreement, with Wainwright, which established an at-the-market equity program pursuant to which we may offer and sell shares of our common stock from time to time as set forth in the 2022 ATM Agreement. The 2022 ATM Agreement provides for the sale of shares of our common stock having an aggregate offering price of up to $15,000,000, or the 2022 ATM Shares.

 

The offering was registered under the Securities Act pursuant to our shelf registration statement on S-3 (Registration Statement No. 333-259909), as previously filed with the SEC and declared effective on October 21, 2021. We filed a prospectus supplement, dated March 24, 2022, with the SEC in connection with the offer and sale of 2022 ATM Shares.

 

Under the 2022 ATM Agreement, Wainwright may sell the 2022 ATM Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act, including sales made directly on the Nasdaq Capital Market, or on any other existing trading market for the 2022 ATM Shares. In addition, under the 2022 ATM Agreement, Wainwright may sell the 2022 ATM Shares in privately negotiated transactions with our consent and in block transactions. Under certain circumstances, we may instruct Wainwright not to sell the 2022 ATM Shares if the sales cannot be effected at or above the price designated by us from time to time.

 

We are not obligated to make any sales of the 2022 ATM Shares under the 2022 ATM Agreement. The offering of the 2022 ATM Shares pursuant to the 2022 ATM Agreement will terminate upon the termination of the 2022 ATM Agreement by Wainwright or us, as permitted therein.

 

The 2022 ATM Agreement contains customary representations, warranties and agreements by us, and customary indemnification and contribution rights and obligations of the parties. We agreed to pay Wainwright a placement fee of up to 3.0% of the aggregate gross proceeds from each sale of the 2022 ATM Shares. We also agreed to reimburse Wainwright for certain specified expenses in connection with entering into the 2022 ATM Agreement.

 

As of March 31, 2022, we had not sold any 2022 ATM Shares under the 2022 ATM Agreement.

 

RSU Grants to Non-Employee Directors

 

The Company maintains an Amended and Restated Non-Employee Director Compensation Policy, which was most recently amended on February 10, 2022, or the Director Compensation Policy, that provides cash and equity compensation for persons serving as non-employee directors of the Company. Under this policy, each new director receives either stock options or a grant of RSUs upon appointment/election as well as either an annual grant of stock options or RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) RSUs are subject to vesting and represent the right to be issued on a future date shares of our common stock upon vesting.

 

On April 1, 2021, pursuant to the Director Compensation Policy, the Compensation Committee, or Compensation Committee, of the Company’s Board of Directors, or Board, granted RSUs under the Company’s 2020 Equity Incentive Plan, or the 2020 Plan, to each non-employee director of the Company. The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs at the beginning of each fiscal year, with the RSUs priced at the average for the closing prices for the five days preceding and including the date of grant, or $2.06 per share as of April 1, 2021. Each eligible director was granted an RSU in the amount of 24,295 shares under the 2020 Plan. The RSUs were subject to vesting in four equal quarterly installments on June 30, September 30, December 31, 2021, and March 31, 2022, subject to the recipient’s continued service with the Company on each such vesting date.

 

In June 2021, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $35,786 in aggregate cash proceeds to those independent directors.

 

In September 2021, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $28,134 in aggregate cash proceeds to those independent directors.

 

In December 2021, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $13,557 in aggregate cash proceeds to those independent directors.

 

In March 2022, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $10,641 in aggregate cash proceeds to those independent directors.

 

There were no vested RSUs outstanding as of March 31, 2022.

 

Equity Transactions in the Fiscal Year Ended March 31, 2021.

 

2016 Common Stock Sales Agreement with H.C. Wainwright & Co., LLC

 

On June 28, 2016, we entered into a Common Stock Sales Agreement, or the 2016 Agreement, with Wainwright, which established an at-the-market equity program pursuant to which we may offer and sell shares of our common stock from time to time as set forth in the 2016 Agreement. The 2016 Agreement provided for the sale of shares of our common stock having an aggregate offering price of up to $12,500,000.

  

On March 30, 2020, we executed Amendment No. 2 to the 2016 Agreement with Wainwright, effective as of the same date. The amendment provides that references in the 2016 Agreement to the registration statement shall refer to the registration statement on Form S-3 (File No. 333-237269), originally filed with the SEC on March 19, 2020, declared effective by the SEC on March 30, 2020.

 

Subject to the terms and conditions set forth in the 2016 Agreement, Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares under the 2016 Agreement from time to time, based upon our instructions. We provided Wainwright with customary indemnification rights under the 2016 Agreement, and Wainwright is entitled to a commission at a fixed rate equal to three percent of the gross proceeds per share sold. In addition, we agreed to pay certain expenses incurred by Wainwright in connection with the 2016 Agreement, including up to $50,000 of the fees and disbursements of their counsel. The 2016 Agreement will terminate upon the sale of all of the shares under the 2016 Agreement, unless terminated earlier by either party as permitted under the 2016 Agreement. No further sales can be made under the 2016 Agreement.

 

2021 At the Market Offering Agreement with H.C. Wainwright & Co., LLC

 

On March 22, 2021, we entered into the 2021 ATM Agreement with Wainwright.

 

In the fiscal year ended March 31, 2021, we raised aggregate net proceeds of $7,260,869, net of $224,825 in commissions to Wainwright and $8,472 in other offering expenses under the 2021 ATM Agreement through the sale of 2,685,600 shares at an average price of $2.70 per share of net proceeds.

 

RSU Grants to Non-Employee Directors

 

The Company maintains the Director Compensation Policy which provides cash and equity compensation for persons serving as non-employee directors of the Company. Under this program, each new director receives either stock options or a grant of RSUs upon appointment/election as well as an annual grant of stock options or RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) RSUs are subject to vesting and represent the right to be issued on a future date shares of our common stock upon vesting.

 

On April 3, 2020, pursuant to the Director Compensation Policy, the Compensation Committee granted RSUs to each non-employee director of the Company. The then current Director Compensation Policy provided for a grant of RSUs with a grant date fair value of $35,000, priced at the average of the closing prices for the five trading days ending on the date of grant, which was $1.41 per share, so that the total number of RSUs to be granted to each non-employee director for fiscal year 2020 would be 24,822 shares of our common stock. On April 3, 2020, each eligible director was granted an RSU for 23,893 shares under the Company’s 2010 Stock Plan, or the 2010 Plan, as the number of shares that remained available for grant under the 2010 Plan was not sufficient for each director’s full RSU grant. The Compensation Committee also granted to each eligible director a contingent RSU grant under our 2020 Plan for the remaining portion of the annual RSU grants, or 929 RSU’s to each eligible director, contingent upon stockholder approval of the 2020 Plan at the Company’s 2020 Annual Meeting of Stockholders, or the 2020 Annual Meeting, which approval was obtained in September 2020. These grants were subject to vesting as follows: 50% of the RSUs subject to the grants vested on December 31, 2020 and 50% of the RSUs vested on March 31, 2021.

 

In June 2020, 29,866 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All five non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 11,947 of the vested RSUs being cancelled in exchange for $24,251 in aggregate cash proceeds to those independent directors.

 

In September 2020, 29,866 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All five non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 11,947 of the vested RSUs being cancelled in exchange for $16,128 in aggregate cash proceeds to those independent directors.

  

As noted above, in September 2020, our stockholders approved the 2020 Plan at the 2020 Annual Meeting, at which point the grants of 929 RSUs to each of our eligible independent directors for a total of 4,645 RSUs were considered effective and no longer contingent as of that date.

 

In December 2020, 32,189 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All five non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 12,876 of the vested RSUs being cancelled in exchange for $31,802 in aggregate cash proceeds to those independent directors.

 

In March 2021, 32,189 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All five directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 12,875 of the vested RSUs being cancelled in exchange for $26,136 in aggregate cash proceeds to those independent directors.

 

There were no vested RSUs outstanding as of March 31, 2021.

 

Restricted Stock Grant to Consultant

 

In February 2021, our Board approved a restricted stock grant of 7,758 shares to an investor relations consultant. Those shares were valued at $18,000 based on our closing price on the date of the approval. The shares vested quarterly over a twelve month period and were issued under our 2020 Plan. During the years ended March 31, 2022 and 2021, we recorded non-cash stock-based compensation expense of $16,500 and $1,500, respectively, related to this grant.

 

WARRANTS:

 

We did not issue any warrants during the fiscal years ended March 31, 2022 and 2021. 

 

A summary of the aggregate warrant activity for the years ended March 31, 2022 and 2021 is presented below:

                               
    Fiscal Year Ended March 31,  
    2022     2021  
    Warrants     Weighted
Average
Exercise Price
    Warrants     Weighted
Average
Exercise Price
 
Outstanding, beginning of year     1,991,973     $ 5.23       2,021,368     $ 5.21  
Granted         $ N/A           $ N/A  
Exercised     (1,206,721 )   $ 2.21           $ N/A  
Cancelled/Forfeited     (208,514 )   $ 6.11       (29,395 )   $ 91.17  
Outstanding, end of year     576,738     $ 11.21       1,991,973     $ 5.23  
Exercisable, end of year     576,738     $ 11.21       1,991,973     $ 5.23  
Weighted average estimated fair value of warrants granted           $ N/A             $ 1.22  

  

 

The detail of the warrants outstanding and exercisable as of March 31, 2022 is as follows:

                                       
      Warrants Outstanding       Warrants Exercisable  
Range of
Exercise Prices
    Number
Outstanding
      Weighted
Average
Remaining
Life (Years)
      Weighted
Average
Exercise Price
      Number
Outstanding
      Weighted
Average
Exercise Price
 
$2.75 or Below     326,753       2.78     $ 2.01       326,753     $ 2.01  
$16.50 - $59.25     249,985       0.43     $ 23.24       249,985     $ 23.24  
      576,738                       576,738          

  

STOCK-BASED COMPENSATION:

 

2020 EQUITY INCENTIVE PLAN

 

In September 2020, our stockholders approved the adoption of the 2020 Plan, to provide incentives to attract, retain and motivate employees, directors and consultants, whose present and potential contributions are important to our success, by offering them an opportunity to participate in our future performance through awards of options, the right to purchase common stock, stock bonuses and stock appreciation rights and other awards. We initially authorized a total of 1,842,556 common shares for issuance under the 2020 Plan pursuant to stock option grants, RSUs or other forms of stock-based compensation.

 

NON-EMPLOYEE DIRECTORS COMPENSATION POLICY

 

The Company maintains the Director Compensation Policy which provides cash and equity compensation for persons serving as non-employee directors of the Company. Under this policy, each new director receives either stock options or a grant of RSUs upon appointment/election, as well as either an annual grant of stock options or RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) RSUs are subject to vesting and represent the right to be issued on a future date shares of our common stock upon vesting.

 

Please see above under the heading "Equity Transactions in the Fiscal Year Ended March 31, 2022—RSU Grants to Non-Employee Directors" for disclosure regarding equity awards under the Director Compensation Policy during the fiscal year ended March 31, 2022.

 

 

STOCK OPTION ACTIVITY

 

During the fiscal year ended March 31, 2022, we issued a stock option grant to our Chief Executive Officer, or CEO, for the purchase of 266,888 shares of our common stock under our 2020 Plan. The purchase price for the shares subject to the option is $5.17 per share, the fair market value of the common stock on the date of the grant. The shares subject to the option are subject to vesting over four years, commencing on the date of grant, or Vesting Commencement Date, with twenty-five percent (25%) of the shares subject to the option vesting on the first anniversary of the Vesting Commencement Date and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, in each case subject to Dr. Fisher’s Continuous Service (as defined in the 2020 Plan) through each vesting date.

 

On February 10, 2022, after review of data provided by the Company’s independent compensation consultant, our Compensation Committee awarded stock option grants to each of our executive officers. Each executive officer was granted an option to purchase shares of our common stock under the 2020 Plan, at an exercise price equal to the fair market value on the date of grant, or $1.41 per share. The Compensation Committee awarded the grants as follows: the Chief Executive Officer was granted an option to purchase 192,600 shares of common stock, and the Chief Medical Officer, Chief Operating Officer and Chief Financial Officer each were granted an option to purchase 100,200 shares of common stock. The options are subject to vesting over four years at the rate of 25% at the end of the first year following the grant date, then monthly vesting over the following 36 months, subject to Continuous Service with the Company, as defined in the 2020 Plan.

 

Options outstanding that were vested as of March 31, 2022 and options that are expected to vest subsequent to March 31, 2022 are as follows:

                       
    Number of
Shares
    Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
Term in
Years
 
Vested     267,221     $ 2.51       8.21  
Expected to vest     1,398,727     $ 2.27       9.17  
Total     1,665,948                  

 

 

The following is a summary of the stock options outstanding at March 31, 2022 and 2021 and the changes during the years then ended:

                           
    Fiscal Year Ended March 31,  
    2022     2021  
    Options     Weighted
Average
Exercise Price
    Options     Weighted
Average
Exercise Price
 
Outstanding, beginning of year   844,089     $ 3.07     51,124     $ 44.12  
Granted   941,188     $ 2.48     1,011,860     $ 1.71  
Exercised   (11,562 )   $ 2.45     (15,896 )   $ 1.28  
Cancelled/Forfeited   (107,767 )   $ 9.66     (202,999 )   $ 6.76  
Outstanding, end of year   1,665,948     $ 2.31     844,089     $ 3.07  
Exercisable, end of year   267,221     $ 2.51     58,954     $ 20.06  
Weighted average estimated fair value of options granted         $ 2.41           $ 1.58  

 

 

The detail of the options outstanding and exercisable as of March 31, 2022 is as follows:

                                           
          Options Outstanding       Options Exercisable  
  Exercise Prices       Number
Outstanding
      Weighted
Average
Remaining
Life (Years)
      Weighted
Average
Exercise
Price
      Number
Outstanding
      Weighted
Average
Exercise
Price
 
  $1.28 - $1.68       1,154,114       9.39 years     $ 1.38       193,526     $ 1.33  
  $2.45 - $5.17       508,654       9.09 years     $ 3.91       70,515     $ 2.52  
  $57.00 - $142.50       3,180       1.43 years     $ 84.50       3,180     $ 84.50  
          1,665,948                       267,221          

 

We recorded stock-based compensation expense related to restricted stock unit issuances and to options granted totaling $750,621 and $779,421 for the fiscal years ended March 31, 2022 and 2021, respectively. These expenses were recorded as stock compensation included in payroll and related expenses in the accompanying consolidated statement of operations for the years ended March 31, 2022 and 2021.

 

Our total stock-based compensation for fiscal years ended March 31, 2022 and 2021 included the following:

               
    Fiscal Year Ended  
    March 31, 2022     March 31, 2021  
Vesting of restricted stock units   $ 150,000     $ 175,000  
Vesting of restricted shares issued for services     16,500       1,500  
Vesting of stock options     584,121       602,921  
Total Stock-Based Compensation   $ 750,621     $ 779,421  

 

 

We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the fiscal year ended March 31, 2022 was insignificant.

 

On March 31, 2022, our outstanding stock options had no intrinsic value since the closing price on that date of $1.46 per share was below the weighted average exercise price of our outstanding stock options.

 

At March 31, 2022, there was approximately $2,724,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 3.3 years.