Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Stockholders' Equity

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Note 5 - Stockholders' Equity
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
Note
5.
   Stockholders’ Equity
 
We have granted share-based compensation awards to employees, board members and service providers. Awards
may
consist of common stock, restricted common stock, restricted common stock units, common stock purchase warrants, or common stock options. Our stock options and stock purchase warrants have lives of up to
ten
years from the grant date. Awards vest either upon the grant date or over varying periods of time. The stock options provide for exercise prices equal to or greater than the fair value of the common stock at the date of the grant. Restricted stock units grant the holder the right to receive fully paid common shares with various restrictions on the holder’s ability to transfer the shares. As of
June 30, 2017,
we have approximately
5.1
million shares of common stock reserved for issuance upon the exercise of such awards.
 
We record share-based compensation expense on a straight-line basis over the requisite service period. Share-based compensation expense included in the statements of operations is as follows:
 
    Three Months Ended June 30,
    2017   2016
         
Research and development expenses   $
435,969
    $
264,137
 
General and administrative expenses    
215,980
     
552,930
 
Total   $
651,949
    $
817,067
 
 
    Six Months Ended June 30,
    2017   2016
         
Research and development expenses   $
808,435
    $
973,553
 
General and administrative expenses    
365,953
     
1,314,400
 
Total   $
1,174,388
    $
2,287,953
 
 
Included in the general and administrative expense for the
six
months ended
June 30, 2016
is approximately
$407,000
related to the acceleration of the vesting of options for the previous CEO whose employment was terminated during the
first
quarter of
2016.
In addition, approximately
$42,000
and
$15,000
is included in research and development and general and administrative expenses, respectively for the
three
- and
six
-month periods ended
June 30, 2016
related to the modification of certain awards in conjunction with our corporate reorganization.
 
Stock Options
A summary of stock option activity and related information for the
six
months ended
June 30, 2017
follows:
 
    Number of Options   Weighted-
Average
Exercise
Price
  Weighted-
Average
Remaining
Contractual
Life (in years)
  Aggregate
Intrinsic Value
                 
Outstanding at January 1, 2017    
1,691,987
    $
22.60
     
5.1
    $
-
 
Granted    
33,408
    $
4.96
     
 
     
 
 
Exercised    
-
     
 
     
 
    $
-
 
Forfeited    
(15,386
)   $
36.40
     
 
     
 
 
Outstanding at June 30, 2017    
1,710,009
    $
22.14
     
4.7
    $
287,704
 
                                 
Exercisable at June 30, 2017    
1,438,619
    $
24.68
     
4.0
    $
31,115
 
 
Range of Exercise Prices
  Number of Options
Outstanding
  Weighted-
Average
Exercise
Price
  Weighted-
Average
Remaining
Contractual
Life (in years)
  Aggregate
Intrinsic Value
$3.50
-
$13.00
   
751,480
    $
9.51
     
6.8
    $
287,704
 
$13.01
-
$26.00
   
379,774
    $
15.30
     
4.6
     
-
 
$26.01
-
$39.00
   
155,339
    $
32.52
     
2.2
     
-
 
$39.01
-
$65.00
   
423,416
    $
46.86
     
1.9
     
-
 
 
 
 
   
1,710,009
    $
22.14
     
4.7
    $
287,704
 
 
The Company uses the Black-Scholes option pricing model for “plain vanilla” options and other pricing models as appropriate to calculate the fair value of options. Significant assumptions used in these models include:
 
   
Six Months Ended June 30,
 
   
2017
   
2016
 
                         
Annual dividend    
 
-
 
     
 
-
 
 
Expected life (in years)    
 0.3
-
4.0 
     
6.0
-
7.0
 
Risk free interest rate    
 0.80%
-
1.72% 
     
1.35%
-
1.75%
 
Expected volatility    
 62.2%
-
82.3% 
     
69.0%
-
80.2%
 
 
Options granted in the
six
months ended
June 30, 2017
and
2016,
had a weighted average grant date fair value of
$2.99
and
$7.28
per share, respectively. Unrecognized compensation cost for unvested stock option awards outstanding at
June 30, 2017
was approximately
$1,270,000
to be recognized over approximately
1.7
years.
 
RSUs
We have granted restricted stock units (RSUs) to certain employees and board members that entitle the holders to receive shares of our common stock upon vesting and subject to certain restrictions regarding the exercise of the RSUs. The grant date fair value of RSUs is based upon the market price of the underlying common stock on the date of grant.
 
At
June 30, 2017,
we had
1,924
vested and outstanding restricted stock units with a weighted average grant date fair value of
$42.75
and a total intrinsic value of approximately
$11,000.
The total value of all restricted stock units that were converted in the
six
months ended
June 30, 2017
was approximately
$23,000.
 
Stock Purchase Warrants.
We have issued warrants to purchase common stock to certain officers, directors, stockholders and service providers as well as in conjunction with debt and equity offerings and at various times replacement warrants were issued as an inducement for warrant exercises.
 
In
May 2016,
we issued
1,746,173
common stock purchase warrants in conjunction with our capital raising transactions. Such warrants were classified as derivative liabilities due to the existence of non-standard anti-dilution and certain other conditions contained in the warrants. At
June 30, 2017,
after giving effect of exercises,
800,017
remain outstanding and are recorded at fair value as derivative liabilities (see Note
3
).
 
In
March 2017,
we entered into a letter agreement with an investor pursuant to which the investor agreed to exercise certain of their warrants to purchase
692,309
shares of the Company’s common stock; such warrants were originally issued on
May 6, 2016
in the Company’s registered offering and contained a current exercise price of
$3.25
per share. In exchange for and to induce the investor to exercise the warrants, we issued to the investors an inducement warrant to purchase
230,771
shares of the Company’s common stock.
 
The inducement warrants are exercisable through
March 20, 2018
at an exercise price equal to
$5.80
per share, and contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends, subsequent rights offerings, pro rata distributions, and fundamental transactions. In the event that the shares underlying the inducement warrants are
not
subject to an effective registration statement at the time of exercise, the inducement warrants
may
be exercised on a cashless basis at any time after
six
(
6
) months from the issuance date. The inducement warrants are classified in equity. The fair value of the inducement warrants of
$476,084
was expensed as inducement expense in the accompanying condensed consolidated statement of operations for the
six
months ended
June 30, 2017.
 
In
April 2017,
we executed a similar agreement with a different investor pursuant to which the investor agreed to exercise certain of their stock purchase warrants to purchase
153,847
shares of the Company’s common stock; such warrants were originally issued on
May 6, 2016
in the Company’s registered offering and contained a current exercise price of
$3.25
per share. In exchange for and to induce the investor to exercise the warrants, we issued to the investors an inducement warrant to purchase
51,283
shares of the Company common stock at
$5.80
per share (the “Inducement Warrants”). The terms of the inducement warrants issued in
April 2017
are substantially similar to the terms of the inducement warrants issued in
March 2017
and are classified in equity. The fair value of the inducement warrants of
$87,660
was expensed as inducement expense in the accompanying condensed consolidated statement of operations for the
three
and
six
months ended
June 30, 2017.
 
A summary of outstanding warrants at
June 30, 2017
follows:
 
Range of Exercise
Prices
  Number of
Warrants
Outstanding
  Range of Expiration Dates
$3.25
-
$3.90
   
811,556
   
May 2021 - July 2021
$5.80
-
$6.50
   
282,054
   
March 2018
$12.80
-
$12.90
   
39,296
   
January 2022
$13.20
-
$13.30
   
314,246
   
August 2017
$16.20
-
$16.30
   
174,544
   
March 2020
$18.60
-
$19.80
   
12,309
   
March 2018 - June 2018
$22.10
-
$27.90
   
153,755
   
March 2019 - January 2021
$34.50
-
$39.00
   
164,114
   
November 2017 - October 2019
$39.10
-
$39.20
   
230,772
   
October 2020 - October 2021
$47.30
-
$52.20
   
275,897
   
January 2019 - July 2019
 
 
 
   
2,458,543
   
 
 
Preferred and Common Stock
We have outstanding
1,000,000
shares of Series A
4.5%
Convertible Preferred Stock issued in
December 2016.
Shares of the Series A
4.5%
Convertible Preferred Stock are convertible into
3,887,387
shares of the Company’s common stock subject to certain ownership restrictions.
 
In
March
and
April 2017,
we issued
846,156
shares of our common stock upon the exercise of certain outstanding common stock purchase warrants. The warrants were exercised at
$3.25
per share and we received approximately
$2,700,000
in net proceeds. The exercises were pursuant to an inducement agreement entered into with the investors. In conjunction with the exercise we issued certain inducement warrants to the investors. (See “Stock Purchase Warrants” section of Note
5
).
 
In
June 2017,
we issued
100,000
shares of our common stock upon the exercise of certain outstanding common stock purchase warrants. The warrants were exercised at
$3.25
per share and we received approximately
$32500,000
in net proceeds.
 
During the
six
months ended
June 30, 2017,
we issued
4,939
shares of our common stock upon the conversion of
4,939
outstanding restricted stock units.