Note 7 - Equity

In April 2019, the Company sold 42.9 million shares of common stock at an offering price of $0.385 per share and warrants to purchase up to 42.9 million shares of common stock at an exercise price of $0.50 per share and with a term of 5 years, resulting in gross proceeds of $16.5 million and net proceeds of $15.1 million after deducting underwriting and other offering expenses.

For the year ended December 31, 2019, the Company sold 2.8 million common shares through its at-the-market program with an investment bank, resulting in net proceeds of $0.8 million.

On October 18, 2018, the Company and Lincoln Park Capital Fund, LLC ("Lincoln Park") entered into a purchase agreement and a registration rights agreement, pursuant to which the Company has the right to sell to Lincoln Park shares of the Company's common stock having an aggregate value of up to $32.5 million, subject to certain limitations and conditions set forth in the agreement. As consideration for entering into the purchase agreement, the Company issued to Lincoln Park 0.9 million shares of common stock, determined to be offering costs as part of the financing. These shares had a fair value of $0.6 million based on the market price on the issuance date.

Pursuant to the purchase agreement, Lincoln Park initially purchased 3.4 million shares of common stock, at a price of $0.74 per share, for a total gross purchase price of $2.5 million. As often as every business day from and after one business day following the date of the initial purchase and over the 30-month term of the agreement, and up to an aggregate amount of an additional $30.0 million of shares of common stock, (subject to certain limitations), the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 400 thousand shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park's obligation under any single such purchase will not exceed $1.5 million, unless the Company and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a "Regular Purchase"). If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the agreement, the Company may direct Lincoln Park in an "accelerated purchase" to purchase an additional amount of common stock that may not exceed the lesser of (i) 300% the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of the Company's common stock traded during a specified period on the applicable purchase date as set forth in the agreement. Under certain circumstances and in accordance with the agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.

The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

The agreement does not limit the Company's ability to raise capital from other sources at the Company's sole discretion, except that (subject to certain exceptions) the Company may not enter into any variable rate transaction (as defined in the agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 30 months after the date of the Purchase Agreement. The Company has the right to terminate the agreement at any time, at no cost to the Company.

During 2019, the Company elected to sell to Lincoln Park 0.4 million shares and received $0.1 million. During 2018, the Company elected to sell to Lincoln Park 1.0 million shares and received $0.7 million.

In March 2018, the Company sold an aggregate of 30.2 million units consisting of an aggregate of 30.2 million shares of common stock, 7.6 million series A warrants and 22.7 million series B warrants, with each series A warrant exercisable for one share of common stock at an exercise price of $0.60 per share and each series B warrant exercisable for one share of common stock at an exercise price of $0.70 per share, resulting in gross proceeds to the Company of $15.1 million (each unit was sold at $0.50 per unit), and net proceeds of $13.8 million after deducting expenses relating to dealer-manager fees and other offering expenses.

Authorized Shares

At the Company's Annual Meeting of Stockholders held on December 18, 2019, its stockholders approved an increase in the number of authorized shares of the Company's common stock to 1.0 billion shares.

Authorization for Reverse Stock Split

At the Company's Annual Meeting of Stockholders held on December 18, 2019, its stockholders approved an amendment to the Company's certificate of incorporation to effect a reverse stock split of its outstanding common stock by combining outstanding shares of common stock into a lesser number of outstanding shares of common stock by a ratio of not more than 1-for-75 prior to December 18, 2020, with the exact ratio to be set within this range by the Company's Board of Directors, or Board, at its sole discretion. The Board may alternatively elect to abandon such proposed amendment and not effect the reverse stock split authorized by stockholders, in its sole discretion.

2019 Stock Option Plan

At the Company's Annual Meeting of Stockholders held on December 18, 2019, its stockholders authorized the implementation of a 2019 Stock Plan, to be implemented at the discretion of the Company's Board before December 18, 2020. The 2019 Stock Plan as authorized, if implemented, would have 10.0 million shares to be issued. As of the date of this report, the 2019 Stock Plan has not been implemented.

2013 Amended and Restated Stock Plan

In September 2013, the Board of Directors of the Company approved the Company's 2013 Stock Plan. The expiration date of the plan is September 9, 2023 and at the time of approval, the total number of underlying shares of the Company's common stock available for grant to employees, directors and consultants of the Company under the plan was 2.75 million shares. In December 2015, shareholders of the Company approved the second amendment to the plan and increased the number of shares authorized under the plan to 9.25 million shares. In December 2016, shareholders of the Company approved the fifth amendment to the plan and increased the number of shares authorized under the plan to 12.75 million shares. In December 2017, shareholders of the Company approved the sixth amendment to the plan and increased the number of shares authorized under the plan to 17.75 million shares. In December 2018, shareholders of the Company approved the seventh amendment to the plan and increased the number of shares authorized under the plan to 22.75 million shares.

2013 Equity Incentive Plan

In September 2013, the Board approved the Company's 2013 Equity Incentive Plan. The expiration date of the plan is September 9, 2023 and the total number of shares of the Company's common stock available for grant to employees, directors and consultants of the Company under the plan was 450 thousand shares. In December 2013, the shareholders of the Company approved the plan and increased the number of shares authorized under the plan to 1 million shares.

Restricted Stock

During 2019, the Company granted 0.4 million restricted common shares for consulting services, which all vested during 2019. The shares had a total value of $0.1 million. During 2019, the Company issued 0.4 million common shares for restricted shares that became fully vested.

As of December 31, 2019, the Company has yet to issue 0.3 million common shares for restricted shares that have vested. All restricted shares granted were vested with no unamortized compensation expenses.

During 2018, the Company granted 108 thousand restricted common shares for consulting services, which all vested during 2018. The shares had a total value of $72 thousand. During 2018, the Company issued 156 thousand common shares for restricted shares that became fully vested, of which 81 thousand shares were granted prior to 2018.

During the years ended December 31, 2019 and 2018, the Company recorded stock-based compensation expense of $0.1 million for the restricted shares granted.

Stock Options

Following is a summary of option activities for the years ended December 31, 2019 and 2018:

During 2019, the Company granted its employees and members of the Board options to purchase 5.8 million shares of Company common stock with an exercise price ranging from $0.2146 to $0.58 per share, a term of 10 years, and a vesting period from 4 to 4.2 years. The options have an aggregated fair value of $1.1 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate range from 1.38% to 2.6% (2) expected life of 6 years, (3) expected volatility range from 78.5% to 81.8%, and (4) zero expected dividends.

During 2018, the Company granted its employees and members of the Board options to purchase 3.6 million shares of Company common stock with an exercise price ranging from $0.344 to $0.7829 per share, a term of 10 years, and a vesting period from 4 to 4.2 years. The options have an aggregated fair value of $1.7 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate range from 2.34% to 2.99% (2) expected life of 6 years, (3) expected volatility range from 78.8% to 80.4%, and (4) zero expected dividends.

During the years ended December 31, 2019 and 2018, options to purchase 1.7 million and 1.5 million common shares were cancelled, respectively, upon the termination of employment. There were no exercises of options during 2019 and 2018.

The fair values of all options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at December 31, 2019 was $2.1 million related to unvested options, which is expected to be expensed over a weighted average of 3.2 years. During 2019 and 2018, the Company recorded total option expense of $1.2 million and $1.7 million, respectively.

Warrants

Following is a summary of warrant activities for the years ended December 31, 2019 and 2018:

In April 2019, the Company sold 42.9 million shares of common stock at an offering price of $0.385 per share and warrants to purchase up to 42.9 million shares of common stock at an exercise price of $0.50 per share and with a term of 5 years. The transaction date relative fair value of the April 2019 warrants of $5.3 million was determined utilizing the Black-Scholes option pricing model and variables of (1) a discount rate of 2.35%, (2) expected term of 5 years, (3) expected volatility of 78% and (4) zero expected dividends.

The Company has outstanding warrants to purchase 57 thousand shares that include down-round protection. For warrants with down-round protection, a deemed dividend is recorded for the change in fair value of the warrants when the down-round provision is triggered. As result of the April 2019 offering, the exercise price of the warrant was reset from $1.25 per share to $0.88 per share. The down-round protection provision in the above warrants created a deemed dividend to common stockholders of $1,269, which is reflected in the accompanying consolidated statement of operations and consolidated statement of changes in stockholders' equity.

On November 8, 2018, the Company amended certain warrants, originally dated December 17, 2012, that had been issued to three entities affiliated with the family of the Mr. Sandesh Seth, Chairman and CEO, Amrosan LLC, Carnegie Hill Partners, and Bioche Asset Management, LCC, in the amount of 375,556, 353,023 and 721,068 shares, respectively and extended their date of expiration from December 17, 2019 to February 21, 2022. The warrants had originally been issued in 2012 as part of investment banking and advisory services provided by Mr. Seth. The incremental fair value for the warrants due to the amendment was immaterial.

In March 2018, the Company sold an aggregate of 30.2 million units consisting of an aggregate of 30.2 million shares of common stock, 7.6 million series A warrants and 22.7 million series B warrants, with each series A warrant exercisable for one share of common stock at an exercise price of $0.60 per share and each series B warrant exercisable for one share of common stock at an exercise price of $0.70 per share. During 2019, holders of 2.5 million series A warrants exercised their warrants and received 2.5 million common shares. The remaining 5.1 million series A warrants expired in March 2019.

During 2018, the Company granted 123 thousand warrants to consultants. The warrants are exercisable for periods ranging from 4 to 5 years at exercise prices ranging from $0.36 to $0.80 per share. The fair value of the warrants was $27 thousand at the grant date and was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option-pricing model include (1) discount rate range of 2.34% to 2.99%, (2) expected term of 4-5 years, (3) expected volatility range of 77.01% to 79.00%, and (4) zero expected dividends.

During the years ended December 31, 2019 and 2018, the Company recorded stock-based compensation expense related to warrants of $8 thousand and $33 thousand, respectively.