Note 7 - Equity 

During the year ended December 31, 2017, the Company issued 2,672,973 shares of common stock for gross proceeds of approximately $4.0 million as part of its At-The-Market (“ATM”) sales agreement with an investment bank. The Company paid expenses of approximately $0.2 million resulting in net proceeds of $3.8 million.

On August 2, 2017, the Company completed an underwritten public offering of 21,500,000 shares of its common stock and warrants to purchase 18,275,000 shares of the Company’s common stock at an offering price to the public of $0.75 per share and related warrant. The warrants have an exercise price of $1.05 per share and have a term of five years. The gross proceeds from this offering were approximately $16.1 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company resulting in net proceeds of approximately $15.0 million.

On October 4, 2016, the Company sold 8,000,000 shares of its common stock at a price of $1.25 per share to the public through an underwritten public offering.

On February 11, 2015, the Company completed an underwritten offering of 4,444,444 shares of its common stock and warrants to purchase 3,333,333 shares of its common stock at a price to the public of $4.50 per share. The warrants are exercisable for a period of 4 years at an exercise price of $6.50 per share and had a relative fair value of $3,540,659 on the issuance date. The Company received net proceeds of approximately $18.5 million, after deducting underwriting discounts and commissions.

On June 9, 2015, the Company closed a financing with certain investors in which it raised approximately $5,000,000 in gross proceeds or $4,480,000 in net proceeds, after deducting placement agent’s fees and other offering expenses. Investors purchased 1,923,078 shares of the Company’s common stock, at a price per share of $2.60.

During the year ended December 31, 2017, the Company issued 67,385 common shares for consulting services. The shares have a total value of $99,056 based on the Company’s stock price on the grant date at $1.47 per share.

During the year ended December 31, 2017, the Company issued 4,234 common shares for the cashless exercise of warrants.

During the year ended December 31, 2016, the Company issued 125,862 common shares for the cashless exercise of warrants. During the year ended December 31, 2016, the Company also issued 23,212 common shares for $18,105 cash received from the exercise of options.

During the year ended December 31, 2015, the Company issued 1,532,124 common shares for the cashless exercise of warrants. During the year ended December 31, 2015, the Company also issued 224,153 common shares for $173,620 cash received from the exercise of options and warrants.

Approval of the 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 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 2,750,000 shares. In December 2015, the shareholders of the Company approved the second amendment to the plan and increased the number of shares authorized under the plan to 9,250,000 shares. In December 2016, the shareholders of the Company approved the fifth amendment to the plan and increased the number of shares authorized under the plan to 12,750,000 shares. In December 2017, the shareholders of the Company approved the sixth amendment to the plan and increased the number of shares authorized under the plan to 17,750,000 shares.

Approval of the 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 is 450,000 shares. In December 2013, the shareholders of the Company approved the plan and increased the number of shares authorized under the plan to 1,000,000 shares.

Restricted Stock

During the year ended December 31, 2017, the Company issued 26,000 common shares for restricted shares that became fully vested. During the year ended December 31, 2017, the Company also granted 59,393 common shares for consulting services. The shares have a total value of $65,813 based on the services provided and have yet to be issued.

During the year ended December 31, 2016, the Company granted 250,700 shares of restricted common stock to consultants with a fair value of $0.4 million based on the stock price on the grant dates. Of the 250,700 restricted share awards granted in 2016, 60,700 shares vested at the date of grant, 150,000 shares vest over a six-month period and 40,000 shares vest over 2 years.

During the year ended December 31, 2016, the Company issued common shares totaling 21,000 for restricted shares granted in 2015 and prior years and 60,700 for restricted shares granted in 2016.

During the year ended December 31, 2015, the Company granted 479,651 shares of restricted common stock to consultants with a fair value of $2.3 million based on the stock price on the grant dates. Of the 479,651 restricted share awards granted in 2015, 329,651 shares vested at the date of grant and 150,000 shares vest over a six-month period.

During the year ended December 31, 2015, the Company cancelled 126,265 shares of restricted stock originally granted to employees and issued a total of 152,499 options. As a result of the cancellation of the 126,265 restricted shares, the Company recorded an expense of $0.8 million for the grant-date fair value of the restricted stock for which the requisite service is expected to be rendered.

As of December 31, 2017, the Company has yet to issue 281,301 common shares for restricted shares that have vested.

During the year ended December 31, 2017, 2016 and 2015, the Company recorded approximately $0.2 million, $0.6 million and $3.4 million, respectively, in stock-based compensation for all of the restricted shares granted. 

Stock Options

Following is a summary of option activities for the years ended December 31, 2017, 2016 and 2015:

On June 6, 2017, Sergio Traversa, a director, resigned from the Company and the Company entered into an agreement with Mr. Traversa. Pursuant to the agreement, all the outstanding vested options (which originally were to expire 90 days from termination date) as well as 68,200 unvested options granted prior to December 31, 2016, shall be exercisable until the end of the term of each option grant agreement. As a result of the modification, the Company recorded an additional expense of approximately $174,000 for the incremental fair value of the options, calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate range from 0.97% to 1.39% (2) expected life of 3 months to 8.9 years, (3) expected volatility range from 45.72% to 79.81%, and (4) zero expected dividends.

During the year ended December 31, 2017, the Company granted its employees and members of the Board of Directors 2,597,500 options to purchase the Company’s common stock with an exercise price ranging from $0.57 to $1.58 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 $2.4 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 1.84% to 2.28% (2) expected life of 6 years, (3) expected volatility range from 80.83% to 82.37%, and (4) zero expected dividends. The estimated option life was determined based on the “simplified method,” giving consideration to the overall vesting period and the contractual terms of the award. This method was used because the Company does not have sufficient historical option exercise data.

During the year ended December 31, 2016, the Company granted employees, consultants, and its board members 2,225,000 options to purchase the Company’s common stock with exercise prices ranging from $0.95 to $2.25 with a 10-year term vesting over a 4-year period.  The options have an aggregated fair value of $3.1 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.28% - 1.97% (2) expected life of 6 years, (3) expected volatility of 81.45% - 87.95%, and (4) zero expected dividends.

During the year ended December 31, 2015, the Company granted employees, consultants, and its board members 1,554,499 options to purchase the Company’s common stock with exercise prices ranging from $1.79 to $3.58 and a 10 year with vesting ranging from 1 to 4.17 years.  The options have an aggregated fair value of $3.2 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.56% - 1.91% (2) expected life of 6 years, (3) expected volatility of 85.01% - 94.89%, and (4) zero expected dividends.

During the year ended December 31, 2017, options to purchase 3,329,794 common shares were cancelled upon the termination of employees and a board member. 

During the years ended December 31, 2016 and 2015, the Company received gross proceeds of $18,105 and $15,680 for the exercise of options for 23,212 shares and 20,000 shares, respectively, of the Company’s common stock. There were no exercises of options during the year ended December 31, 2017.

The fair values of all options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at December 31, 2017 was approximately $3.3 million. During each of the years ended December 31, 2017, 2016 and 2015, the Company recorded total option expense of approximately $3.1 million, $3.6 million and $3.4 million, respectively.

Warrants

Following is a summary of warrant activities for the years ended December 31, 2017, 2016 and 2015:

Certain warrants were issued to the Company’s Executive Chairman (now Chairman and CEO) as part of investment banking and advisory services either prior to and outside of his role as a Board Member and subsequently Chairman and CEO. On March 14, 2017, the Company canceled a warrant to purchase 57,212 shares of Common Stock of the Company, dated December 19, 2012 and issued a new warrant to its Chairman and CEO to purchase 57,212 common shares with the term of the warrant expiring on February 11, 2022. The new warrant has the same exercise price in effect as the exercise price as the old warrant but the expiration date was modified from December 19, 2017 to February 11, 2022. The Company also amended the warrant to purchase Common Stock of the Company, dated January 31, 2012, issued to its Chairman and CEO and an entity affiliated with its Chairman and CEO to purchase 64,746 and 99,617 common shares, respectively. Pursuant to the terms of the warrant amendments, the term of the warrants was extended to February 11, 2022 from January 31, 2019. As a result of the replacement and modification, the Company recorded an additional non-cash expense of $64,091 for the incremental fair value of the new warrants. 

On August 2, 2017, the Company completed an underwritten offering of 21,500,000 shares of its common stock and warrants to purchase an aggregate of 18,275,000 shares of its common stock at a price of $0.75 per share and related warrant. The warrants are exercisable for a period of 5 years at an exercise price of $1.05 per share. The transaction date relative fair value of the warrants of $4.9 million was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option-pricing model include (1) discount rate of 1.83%, (2) expected term of 5 years, (3) expected volatility of 82%, and (4) zero expected dividends.

During the year ended December 31, 2016, the Company granted 130,000 warrants to consultants. The warrants are exercisable for periods ranging from 5 to 10 years at exercise prices ranging from $0.98 to $1.77 per share. The fair value of the warrants was approximately $116,000 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 1.13% to 1.20%, (2) expected term of 5-10 years, (3) expected volatility range of 79.79% to 84.84%, and (4) zero expected dividends.

On February 11, 2015, the Company completed an underwritten offering of 4,444,444 shares of its common stock and warrants to purchase 3,333,333 shares of its common stock at a price of $4.50 per share. The warrants are exercisable for a period of 4 years at an exercise price of $6.50 per share. The transaction date relative fair value of the warrants of $3.5 million was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option-pricing model include (1) discount rate of 1.26%, (2) expected term of 4 years, (3) expected volatility of 72%, and (4) zero expected dividends. 

During the years ended December 31, 2017, 2016 and 2015, warrants to purchase 9,364, 183,718 and 2,013,360 shares of the Company’s common stock were exercised by the warrant holders, respectively. The Company issued 4,234, 125,892 and 1,736,277 shares of common stock as a result of these exercises, respectively.

During the years ended December 31, 2017, 2016 and 2015, the Company recorded stock-based compensation expense related to the warrants of approximately $50,000 (excluding the $64,091 addition expense due to the replacement and modification), $0.1 million and $0.2 million, respectively.