Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Stockholders' Equity

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Note 4 - Stockholders' Equity
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
Note
4.
   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 purchase options. Our common stock purchase 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
September 30, 2019,
we have approximately
8.5
million shares of common stock reserved for issuance upon the granting of awards under our equity incentive plans and the exercise of outstanding equity-linked instruments.
 
We typically record share-based compensation expense on a straight-line basis over the requisite service period. Share-based compensation expenses included in the statements of operations are as follows:
 
    Three Months Ended September 30,
    2019   2018
         
Research and development expenses   $
-
    $
22,917
 
General and administrative expenses    
294,600
     
111,778
 
Total   $
294,600
    $
134,695
 
 
    Nine Months Ended September 30,
    2019   2018
         
Research and development expenses   $
200,337
    $
110,417
 
General and administrative expenses    
561,007
     
459,856
 
Total   $
761,344
    $
570,273
 
 
 
Stock Options
A summary of stock option activity and related information for the
nine
months ended
September 30, 2019
follows:
 
    Number of Options  
Weighted-Average
Exercise Price
  Weighted-Average Remaining Contractual Life (in years)   Aggregate Intrinsic Value
                 
Outstanding at January 1, 2019    
81,674
    $
215.60
     
5.1
    $
-
 
Granted    
228,183
    $
7.78
     
 
     
 
 
Exercised    
-
    $
-
     
 
    $
-
 
Forfeited    
(10,127
)   $
86.07
     
 
     
 
 
Outstanding at September 30, 2019    
299,730
    $
61.78
     
7.9
    $
-
 
                                 
Exercisable at September 30, 2019    
206,347
    $
86.15
     
7.2
    $
-
 
 
Range of Exercise Prices   Number of Options Outstanding  
Weighted-Average
Exercise Price
  Weighted-Average Remaining Contractual Life (in years)   Aggregate Intrinsic Value
$5.90
-
$6.00
   
58,010
    $
5.99
     
9.3
    $
-
 
$7.20
-
$8.80
   
162,593
    $
8.51
     
9.2
     
-
 
$22.20
-
$99.20
   
36,138
    $
33.20
     
5.6
     
-
 
$107.40
-
$1,102.41
   
42,989
    $
362.61
     
2.9
     
-
 
 
   
299,730
    $
61.78
     
7.9
    $
-
 
 
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. The Company generally uses the “simplified method” to estimate expected life. Significant assumptions used in these models include:
 
      Nine Months Ended September 30,  
      2019       2018  
                 
Annual dividend    
 
-
 
     
 
-
 
 
Expected life (in years)    
4.8
-
5.5 
     
2.5
-
5.3 
 
Risk free interest rate    
1.8%
-
2.5% 
     
2.7%
-
2.8% 
 
Expected volatility    
97%
-
115% 
     
97%
-
117% 
 
 
Options granted in the
nine
months ended
September 30, 2019
and
2018,
had a weighted average grant date fair value of
$3.45
and
$15.40
per share, respectively.
 
Unrecognized compensation cost for unvested stock option awards outstanding at
September 30, 2019
was approximately
$384,000
to be recognized over approximately
0.7
years.
 
In the
three
months ended
March 31, 2019,
the Company modified certain awards in conjunction with an employee’s termination. The modification provided for the accelerated vesting of all unvested awards and the extension of the post-employment exercise period. The modifications resulted in approximately
$102,000
of additional research and development expenses in the
three
months ended
March 31, 2019.
 
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.
 
In the
nine
months ended
September 30, 2019
and
2018,
we granted
4,904
and
2,253
RSU’s, respectively. RSUs granted in the
nine
months ended
September 30, 2019
and
2018,
had a weighted average grant date fair value of
$5.90
and
$22.20,
respectively.
 
RSUs vesting in the
nine
months ended
September 30, 2019
had a total value of approximately
$6,400.
 
At
September 30, 2019,
we had
5,467
outstanding RSUs with a weighted average grant date fair value of
$29.62
and a total intrinsic value of approximately
$10,400.
Unrecognized compensation cost for unvested RSUs at
September 30, 2019
was approximately
$22,000
to be recognized over approximately
0.8
years.
 
In the
nine
months ended
September 30, 2019,
1,127
RSU’s having an intrinsic value of approximately
$10,400
were converted.
No
RSU’s were converted in the
nine
months ended
September 30, 2018.
 
Restricted Stock
We have granted restricted stock to certain board members that vest quarterly over the grant year. The grant date fair value of the restricted stock is based upon the market price of the common stock on the date of grant.
 
In the
nine
months ended
September 30, 2019
and
2018,
we granted
15,689
and
2,253
shares of restricted stock, respectively. Restricted stock granted in the
nine
months ended
September 30, 2019
and
2018,
had a weighted average grant date fair value of
$5.95
and
$22.20,
respectively.
 
Restricted stock vesting in the
nine
months ending
September 30, 2019,
had a weighted average grant date fair value of
$9.73
and a total intrinsic value of approximately
$14,500.
 
At
September 30, 2019,
we had
11,972
shares of restricted stock outstanding with an average grant date fair value of
$5.95.
Unrecognized compensation cost for unvested restricted stock awards at
September 30, 2019
was approximately
$71,300
to be recognized over approximately
0.8
years.
 
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
and
August 2017,
we issued a total of
87,309
and
112,500
common stock purchase warrants, respectively in conjunction with our offerings. Such warrants are classified as liabilities due to the existence of certain net cash settlement provisions
contained in the warrants. At
September 30, 2019,
after giving effect to exercises,
149,136
of these common stock purchase warrants remain outstanding and are recorded at fair value as mark-to-market liabilities (see Note
3
).
 
In
February 2019,
we granted
25,000
warrants to an outside
third
party as partial compensation for services. The warrants have an exercise price of
$6.00,
expire
January 2024
and have a grant date fair value of
$3.80
per warrant. The warrants vest
25%
on grant and
75%
on completion of initial services; the warrants were fully vested as of
September 30, 2019.
The warrants were valued using the Black-Scholes option pricing model with the following inputs:
no
annual dividend, expected life of
2.5
years, risk-free rate of
2.5%
and expected volatility of
110%.
 
In
July 2019,
in connection with our underwritten public offering, we issued the following equity classified common stock purchase warrants: (i)
3,194,443
short-term common stock purchase warrants with an exercise price of
$2.70
per share, exercisable immediately and expiring on
December 31, 2020; (
ii)
3,194,443
long-term common stock purchase warrants with an exercise price of
$2.70
per share, exercisable immediately and expiring
5
-years from issuance and (iii)
2,361,462
“prefunded” common stock purchase warrants with an exercise price of
$0.0001
per share, exercisable immediately with
no
expiration date. As of
September 30, 2019,
1,313,296
of the “prefunded warrants” had been exercised generating approximately
$100
in proceeds.
 
In connection with the
July
public offering we also granted the underwriters
222,223
equity classified common stock purchase warrants with an exercise price of
$3.375
per share, exercisable immediately and expiring
5
-years from issuance.
 
A summary of outstanding warrants at
September 30, 2019
follows:
 
Range of Exercise Prices   Number of Warrants Outstanding   Range of Expiration Dates
 
$0.0001
 
   
1,048,166
   
perpetual
$2.19
-
$2.70
   
6,538,035
   
December 2020
-
August 2024
$3.38
-
$17.50
   
406,223
   
October 2023
-
July 2024
$22.20
-
$782.60
   
26,479
   
October 2019
-
July 2023
 
   
8,018,903
   
 
 
Preferred and Common Stock
We have outstanding
200,000
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
38,873
shares of the Company’s common stock subject to certain ownership restrictions. In
July 2019,
334,809
Series A
4.5%
Convertible Preferred Stock shares were converted into
65,077
shares of common stock in accordance with their terms.
 
In
July 2019,
we completed
an underwritten public offering of
416,315
units (“Units”) and
2,361,462
prefunded units (“Prefunded Units”) at a price of
$2.70
per each unit resulting in gross proceeds of approximately
$7.5
million. Each Unit was comprised of
one
share of common stock,
one
short-term warrant and
one
long-term warrant. Each Prefunded Unit was comprised of
one
prefunded-warrant,
one
short-term warrant and
one
long-term warrant. The prefunded warrants have an exercise price of
$0.0001
per share and are exercisable at any time from issuance until all prefunded warrants are exercised. The short-term and long-term warrants have an exercise price of
$2.70
per share and are exercisable immediately. The short-term warrant expires
December 31, 2020
and the long-term warrant expires
five
-years from issuance. The net proceeds of the offering were approximately
$6.6
million, after deducting underwriting discounts and commissions and offering expenses. In addition to the above units, the underwriters exercised their option and purchased an additional short-term
416,666
additional short-term and
416,666
additional long-term warrant combinations at the public offering price per share and per warrant combination, before deducting underwriting discounts and commissions. The securities were sold pursuant to a registration statement on Form S-
1
(file
no.
333
-
232273
).