Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Stockholders’ Equity

Shares issued

On January 22, 2019, the Company completed a public offering of 5,175,000 shares of its common stock, at the price of $1.90 per share, for gross proceeds of $9.8 million. After the payment of underwriter discounts and offering expenses, the Company received net proceeds of approximately $9.1 million.

On May 14, 2019, the Company completed a public offering of 11,000,000 shares of its common stock, at the price of $2.00 per share, for gross proceeds of $22 million. After the payment of underwriter discounts and offering expenses, the Company received net proceeds of approximately $20.3 million.

During the nine months ended September 30, 2019, the Company issued 233,646 shares of common stock upon vesting of Restricted Stock Units granted by the Company.

During the nine months ended September 30, 2019, the Company issued 142,345 shares of common stock upon vesting of Restricted Stock Units granted to Board members.

During the nine months ended September 30, 2019, the Company issued 891,235 shares of common stock valued at $2.7 million to Veolia North America Regeneration Services, LLC pursuant to the Operations, Maintenance and Management Agreement dated February 27, 2019 between Veolia and the Company.

During the nine months ended September 30, 2019, the Company issued 110,775 shares of common stock to prior Company executives to fulfill obligations related to separation agreements and other consulting services.

During the nine months ended September 30, 2019, the Company issued 807,436 shares of common stock valued at $1.3 million to Clarios (successor of Johnson Controls) pursuant to the Clarios Investor Rights Agreement dated February 7, 2017 between Clarios and the Company.

Warrant issued

In January 2019, the Company issued a warrant to purchase 103,500 shares of the Company's common stock to the underwriter of the Company's January 22, 2019 public offering, equal to 2% of the 5,175,000 shares sold. The warrant is exercisable at $1.90 per share (100% of the price of the common stock sold in the offering), commencing the later of six months after January 22, 2019 or such time as the Company amends its charter to increase its authorized shares of common stock. The warrant will expire on January 22, 2024.

Pursuant to the Operations, Maintenance and Management Agreement dated February 26, 2019, the Company has agreed to issue to Veolia, on the one-year anniversary of the Agreement, warrants to purchase 2,000,000 shares of its common stock at an exercise price of $5.00 per share and, on the second anniversary of the Agreement, warrants to purchase an additional 2,000,000 shares of its common stock at an exercise price $7.00 per share. The warrants will have a term of ten years from the date of issuance. The warrants were valued as of the agreement date using the Black-Scholes-Merton pricing model. The value of the warrants is being amortized over the applicable period until the warrants are issued.

Stock-based compensation

The stock-based compensation expense was allocated as follows:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Cost of product sales	$	32	$	35	$	124	$	132
Research and development cost	34		26		168		215
General and administrative expense	835		300		2,607		506
Total	$	901	$	361	$	2,899	$	853

The following assumptions were used in the Black-Scholes-Merton pricing model to estimate the fair value of options granted during the periods presented:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018

Expected stock volatility	86.2% - 86.5%		78.0% - 79.3%		82.3% - 87.5%		78.0% - 86.3%
Risk free interest rate	1.7% - 1.8%		2.6% - 2.9%		1.7% - 2.6%		2.1% - 2.9%
Expected years until exercise	3.5		3.5		1.0 - 4.0		2.5 - 3.5
Dividend yield	0	%	0	%	0	%	0	%

There were no stock option exercises during the nine months ended September 30, 2019 and 2018.

Stock option issuances

In January 2019, Stephen Cotton, President and CEO, was awarded options to purchase up to 232,461 shares of the Company's common stock. The options were vested immediately and are exercisable over a five-year period at an exercise price of $1.88 per share. The options were issued under the Company's Amended and Restated 2014 Stock Incentive Plan, or "2014 Plan".

In January 2019, Judd Merrill, CFO, was awarded options to purchase up to 56,698 shares of the Company's common stock. The options were vested immediately and are exercisable over a five-year period at an exercise price of $1.88 per share. The options were issued under the 2014 Plan.

In February 2019, Stephen Cotton, President and CEO, was awarded options to purchase up to 1.26 million shares of the Company’s common stock. Options to purchase 420,000 common shares are exercisable over a five-year period at an exercise price of $3.08 per share. Options to purchase 420,000 common shares are exercisable over a five-year period at an exercise price of $3.68 per share and options to purchase 420,000 common shares are exercisable over a five-year period at an exercise price of $4.18 per share. The options will vest over three years in three equal installments. The options were issued under the Company’s 2019 Stock Incentive Plan, or "2019 Plan".

In March 2019, Judd Merrill, CFO, was awarded options to purchase up to 250,000 shares of the Company’s common stock. Options to purchase 125,000 common shares are exercisable over a five-year period at an exercise price of $3.79 per share. Options to purchase 62,500 common shares are exercisable over a five-year period at an exercise price of $4.39 per share and options to purchase 62,500 common shares are exercisable over a five-year period at an exercise price of $4.89 per share. The options will vest over three years in three equal installments. The options were issued under the 2019 Plan.

In May 2019, the Company awarded options to the Directors to purchase up to 172,915 shares of the Company's common stock. The options vest equally over 12 months and are exercisable over a five-year period at an exercise price of $2.48 per share. The options were issued under the 2019 Plan.

In July 2019, the Company awarded options to purchase up to 150,000 shares of the Company's common stock. The options vest equally over three years and are exercisable over a five-year period at an exercise price of $1.65 per share. The options were issued under the 2019 Plan.

In July 2019, the Company awarded options to purchase up to 50,000 shares of the Company's common stock. The options vest equally over three years and are exercisable over a five-year period at an exercise price of $1.87 per share. The options were issued under the 2019 Plan.

Restricted stock units

In January 2019, the Company granted 261,455 restricted stock units (RSUs), all of which were subject to vesting, with a grant fair value of $490,000 to the employees under the 2014 Plan. The shares vest in six equal semi-annual installments over a three-year period.

In July 2019, the board of directors were granted 60,560 RSUs, all of which were subject to vesting, with a grant fair value of $97,500 under the 2019 Plan. The shares fully vest on September 30, 2019

In August 2019, the Company granted 134,419 RSUs, all of which were subject to vesting, with a grant fair value of $231,000 to the employees under the 2019 Plan. The shares vest in three equal installments over a twelve-month period.

In September 2019, Stephen Cotton, President and CEO, was granted 59,414 RSUs, all of which were subject to vesting, with a grant fair value of $109,000 under the 2019 Plan. The shares fully vest on March 20, 2020.