Note 8 - Equity

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.

On February 11, 2015, the Company completed an underwritten offering of 4,444,444 shares of its common stock and warrants to purchase an aggregate of 3,333,333 shares of its common stock at a price to the public of $4.50 per share. The warrants will be exercisable for a period of 4 years at an exercise price of $6.50 per share and have 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 and estimated offering expenses payable by us, and excluding the underwriters’ over-allotment option. In addition, the Company granted the underwriters a 30-day option to purchase up to an additional 666,666 shares of common stock and warrants to purchase 499,999 shares of common stock solely to cover over-allotments, if any. The underwriter did not exercise the over-allotment option.

On March 24, 2014, the Company filed a shelf registration statement on Form S-3 (the “Registration Statement”) and deemed effective on April 17, 2014. This Registration Statement contained two prospectuses: (i) a base prospectus which covers the offering, issuance and sale by the Company of up to $200,000,000 of its common stock, preferred stock, warrants and/or units; and (ii) a sales agreement prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $75,000,000 of its common stock that may be issued and sold under a sales agreement (the “Sales Agreement”). During the quarter ended September 30, 2015, the Company issued 1,044,672 shares of common stock for gross proceeds of $2,423,209 (net proceeds of $2,350,332).

During the nine months ended September 30, 2015, the Company issued 1,223,641 common shares for cashless exercise of warrants. During the nine months ended September 30, 2015, the Company also issued 153,459 common shares for $119,780 cash received from the exercise of options and warrants.

Restricted Stock

During the nine months ended September 30, 2015, the Company granted 479,650 shares of restricted common stock to consultants with a fair value of $2,277,582 based on the stock price on the grant dates. Of the 479,650 restricted share awards granted in 2015, 329,650 shares vested at the date of grant and 150,000 shares vest over a six-month vesting period.

During the nine months ended September 30, 2015, the Company cancelled 126,265 shares of restricted stock originally granted to employees and issued a total of 152,499 options (see below). As a result of the cancellation of the 126,265 restricted shares, the Company recorded an expense of $852,681 for the grant-date fair value of the restricted stock for which the requisite service is expected to be rendered.

During the three months ended September 30, 2015 and 2014, the Company recorded approximately $0.3 million and $150,000, respectively, in stock-based compensation for all of the restricted shares outstanding. During the nine months ended September 30, 2015 and 2014, the Company recorded approximately $3.5 million and $0.4 million, respectively, in stock-based compensation in relation to the outstanding restricted shares.

During the nine months ended September 30, 2015, the Company issued common shares totaling 547,269 for restricted shares granted in 2015 and prior years.

Stock Options

Following is a summary of option activities for the nine months ended September 30, 2015:

On February 18, 2015, the Company granted its employees and board members 531,000 options to purchase the Company’s common stock at an exercise price of $3.58 per share, a term of 10 years, and a vesting period of 4 years.  The options have an aggregated fair value of $1.4 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.69% (2) expected life of 6 years, (3) expected volatility of 86.29%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $208,078 in stock-based compensation in relation to these options.

On March 9, 2015, the Company granted an employee 5,000 options to purchase the Company’s common stock at an exercise price of $2.91 per share, a term of 10 years, and a vesting period of 4 years.  The options have an aggregated fair value of $11,000 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.83% (2) expected life of 6 years, (3) expected volatility of 86.29%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $1,481 in stock-based compensation in relation to these options.

On May 4, 2015, the Company granted an employee 200,000 options to purchase the Company’s common stock with an exercise price of $2.64 per share, a term of 10 years, and a vesting period of 4 years.   The options have an aggregated fair value of $378,664 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.71% (2) expected life of 6 years, (3) expected volatility of 85.01%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $38,644 in stock-based compensation in relation to these options.

On May 7, 2015, the Company granted certain employees 152,499 options to purchase the Company’s common stock at an exercise price of $2.52 per share, a term of 10 years, and vested immediately. The options have an aggregated fair value of $275,572 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.70% (2) expected life of 6 years, (3) expected volatility of 85.01%, and (4) zero expected dividends. These options were issued concurrent with the cancellation of 126,265 shares of restricted stock. The fair value of the options granted was less than the fair value of the cancelled restricted stock at May 7, 2015. Therefore, no incremental compensation cost was recorded.

On June 3, 2015, the Company granted certain employees 76,000 options to purchase the Company’s common stock at an exercise price of $2.99 per share, a term of 10 years, and a vesting period of 4 years.  The options have an aggregated fair value of $163,359 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.91% (2) expected life of 6 years, (3) expected volatility of 85.01%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $14,125 in stock-based compensation in relation to these options.

On August 17, 2015, the Company granted an employee 250,000 options to purchase the Company’s common stock with an exercise price of $2.34 per share, a term of 10 years, and a vesting period of 4 years.   The options have an aggregated fair value of $442,538 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.75% (2) expected life of 6 years, (3) expected volatility of 92.6%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $13,337 in stock-based compensation in relation to these options.

On August 24, 2015, the Company granted an employee 100,000 options to purchase the Company’s common stock with an exercise price of $1.91 per share, a term of 10 years, and a vesting period of 4 years.   The options have an aggregated fair value of $144,249 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.58% (2) expected life of 6 years, (3) expected volatility of 92.6%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $3,656 in stock-based compensation in relation to these options.

On September 1, 2015, the Company granted an employee 50,000 options to purchase the Company’s common stock with an exercise price of $2.11 per share, a term of 10 years, and a vesting period of 4 years.   The options have an aggregated fair value of $79,790 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.65% (2) expected life of 6 years, (3) expected volatility of 92.6%, and (4) zero expected dividends. During the nine months ended September 30, 2015, the Company recorded $1,585 in stock-based compensation in relation to these options.

 The fair value of all options issued and outstanding are being amortized over their respective vesting periods. During the three months ended September 30, 2015 and 2014, the Company recorded total option expense of $0.8 million and $0.7 million respectively. During the nine months ended September 30, 2015 and 2014, the Company recorded total option expense of $2.7 million and $1.6 million, respectively.

Warrants

Following is a summary of warrant activities for the nine months ended September 30, 2015:

On February 11, 2015, the Company completed an underwritten offering of 4,444,444 shares of its common stock and warrants to purchase an aggregate of 3,333,333 shares of its common stock at a price of $4.50 per share. The warrants will be 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 $3,540,659 was determined utilizing the Black-Scholes option pricing model.

During the nine months ended September 30, 2015, 1,524,893 warrants were exercised by the warrant holders. The Company issued 1,357,100 shares of common stock as a result of these exercises.

During the three months ended September 30, 2015 and 2014, the Company recorded stock-based compensation related to the warrants of $57,772 and $0, respectively. During the nine months ended September 30, 2015 and 2014, the Company recorded stock-based compensation related to the warrants of $171,432 and $98,224, respectively.