Annual report pursuant to Section 13 and 15(d)

Note 4 - Stockholders' Equity

v3.19.1
Note 4 - Stockholders' Equity
12 Months Ended
Dec. 31, 2018
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. In addition, we have issued warrants to purchase common stock in conjunction with debt and equity offerings. 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
December 31, 2018,
we have approximately
10.8
million shares of common stock reserved for issuance upon the exercise of share-based 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 was as follows:
 
    Year Ended December 31,
    2018   2017
         
Research and development costs   $
133,334
    $
1,091,036
 
General and administrative expenses    
500,748
     
678,928
 
Total   $
634,082
    $
1,769,964
 
 
 
Stock Options
A summary of stock option activity and related information for the year ended
December 31, 2018
follows:
 
    Number of Options   Weighted-
Average
Exercise
Price
  Weighted-
Average
Remaining
Contractual
Life (in years)
  Aggregate
Intrinsic Value
                 
Outstanding at January 1, 2018    
1,894,077
    $
19.76
     
4.7
    $
108,000
 
Granted    
488,640
    $
1.13
     
 
    $
-
 
Exercised    
-
     
-
     
 
     
 
 
Forfeited/Expired    
(750,055
)   $
27.19
     
 
     
 
 
Outstanding at December 31, 2018    
1,632,662
    $
10.78
     
5.1
    $
-
 
                                 
Exercisable at December 31, 2018    
1,166,127
    $
14.59
     
4.4
    $
-
 
 
Range of Exercise Prices   Number of Options
Outstanding
  Weighted-
Average
Exercise
Price
  Weighted-
Average
Remaining
Contractual
Life (in years)
  Aggregate
Intrinsic Value
$1.00
-
$3.50
   
588,640
    $
1.15
     
7.3
    $
-
 
$3.51
-
$13.00
   
532,236
    $
9.76
     
4.3
     
-
 
$13.01
-
$26.00
   
343,782
    $
14.79
     
3.1
     
-
 
$26.01
-
$39.00
   
65,504
    $
30.85
     
2.5
     
-
 
$39.01
-
$56.00
   
102,500
    $
45.03
     
4.6
     
-
 
 
   
1,632,662
    $
10.78
     
5.1
    $
-
 
 
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:
 
    Year Ended December 31,  
      2018       2017  
Annual dividend    
 
-
     
 
-
 
Expected life (in years)    
2.5
-
5.3
     
0.3
-
6.5
 
Risk free interest rate    
2.5%
-
2.8%
     
0.80%
-
2.22%
 
Expected volatility    
97%
-
113%
     
62.2%
-
98.0%
 
 
Options granted in the years ended
December 31, 2018
and
2017
had weighted average grant date fair values of
$0.47
and
$1.34,
respectively. The total fair value of the options vested during the years ended
December 31, 2018
and
2017
was approximately
$205,000
and
$302,000,
respectively.
 
Unrecognized compensation cost for unvested stock option awards outstanding at
December 31, 2018
was approximately
$179,000
to be recognized over approximately
1.9
years.
 
On
December 12, 2018,
the Company granted to its incoming Executive Chairman under the Inducement Award Stock Option Plan a stock option award to purchase
800,000
shares of common stock at a price of
$0.425
per share. The award has a term of
ten
years and vests as follows: (i)
200,000
options vest on the employee start date, (ii)
200,000
vest over a
two
-year period and (iii)
400,000
vest based on the achievement of certain milestones. The Executive Chairman commenced employment on
January 1, 2019
and the Company considers this to be the accounting grant date of the award. Consequently, the award is
not
included in any of the disclosures noted above.
 
RSUs
We have granted restricted stock units (RSU’s) that entitle the holders to receive shares of our common stock upon vesting and subject to certain restrictions regarding the exercise of the RSU’s and the holders’ ability to transfer the shares received upon exercise. The fair value of RSU’s granted is based upon the market price of the underlying common stock as if they were vested and issued on the date of grant.
 
A summary of our RSU activity for the year ended
December 31, 2018
follows:
 
    Number of
RSU's
  Weighted-
Average
Grant Date
Fair Value
         
Outstanding at January 1, 2018    
11,235
    $
11.77
 
Granted    
45,046
    $
1.11
 
Exercised and converted to common shares    
-
    $
-
 
Forfeited    
-
    $
-
 
Outstanding at December 31, 2018    
56,281
    $
3.24
 
                 
Exercisable at December 31, 2018    
33,759
    $
4.66
 
 
The total intrinsic value of the outstanding RSU’s at
December 31, 2018
was approximately
$17,000.
The total fair value of RSU’s vested during the years ended
December 31, 2018
and
2017,
was approximately
$50,000
and
$25,000,
respectively. The total value of all RSU’s that were converted in the year ended
December 31, 2017
was approximately
$23,000.
No
RSU’s were converted in the year ended
December 31, 2018.
 
Unrecognized compensation cost for unvested RSU’s outstanding at
December 31, 2018
was approximately
$25,000
to be recognized over approximately
0.5
years.
 
Restricted Stock
We have granted restricted stock to certain board members.
 
A summary of our restricted stock activity for the year ended
December 31, 2018
is as follows:
 
    Shares of
Restricted
Stock
  Weighted-
Average
Grant Date
Fair Value
         
Outstanding at January 1, 2018    
49,960
    $
3.00
 
Granted    
45,046
    $
1.11
 
Vested    
(72,483
)   $
2.41
 
Forfeited    
-
    $
-
 
Outstanding at December 31, 2018    
22,523
    $
1.11
 
 
The total intrinsic value of the outstanding restricted stock at
December 31, 2018
was approximately
$7,000.
The total intrinsic value of all restricted stock vested in the year ended
December 31, 2018
was approximately
$84,000.
 
Unrecognized compensation cost for unvested restricted stock outstanding at
December 31, 2018
was approximately
$25,000
to be recognized over approximately
0.5
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
1,746,173
and
2,250,000
common stock purchase warrants, respectively in conjunction with the offering of our securities. Such warrants are classified as liabilities due to the existence of certain net cash settlement provisions
contained in the warrants. At
December 31, 2018,
after giving effect to exercises,
2,982,709
of these common stock purchase warrants remain outstanding and are recorded at fair value as mark-to-market liabilities (see Note
3
). In conjunction with our
October 2018
common stock and common stock purchase warrant offerings, the exercise price on these
2,982,709
outstanding common stock purchase warrants was adjusted pursuant to existing down-round anti-dilution features. The exercise prices decreased from
$2.00
per share of common stock to
$0.57
per share of common stock.
 
In
October 2018,
we issued
3,000,000
common stock purchase warrants to investors in conjunction with the registered direct offering of our common stock. We also issued an additional
180,000
common stock purchase warrants to our placement agent. (see below under “Preferred and Common Stock’). The investor and placement agent common stock purchase warrants have an exercise price of
$0.75
and
$0.875,
respectively.
 
A summary of outstanding warrants at
December 31, 2018
follows:
 
Range of Exercise
Prices
    Number of
Warrants
Outstanding
  Range of Expiration Dates
  $0.57
-
$0.875
     
6,162,709
     
May 2021 - August 2024
 
  $1.11
-
$5.79
     
34,617
     
May 2021 - May 2023
 
  $12.80
-
$12.90
     
39,296
     
January 2022
 
  $16.20
-
$16.30
     
174,544
     
March 2020
 
  $22.10
-
$27.90
     
153,755
     
March 2019 - January 2021
 
  $34.50
-
$39.20
     
236,556
     
October 2019 - October 2021
 
  $47.30
-
$52.20
     
275,897
     
January 2019 - July 2019
 
 
 
     
7,077,374
     
 
 
 
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
October 2018,
we closed a registered direct offering and concurrent private placement with institutional investors. In connection with the offering we issued an aggregate of
3,000,000
shares of common stock in the registered direct offering and
3,000,000
common stock purchase warrants in the private placement. We issued the shares in the registered offering at a price of
$0.70
per share. We also issued each investor an accompanying warrant for each share purchased. We received gross proceeds of
$2.1
million from this offering. The warrants have an exercise price of
$0.75
per share of common stock, will be exercisable commencing with the
six
-month anniversary of the issuance date and will expire
five
and
one
-half years from issuance. The common stock issued in this offering was sold pursuant to our shelf registration statement that was declared effective by the SEC on
June 23, 2017 (
Registration
No.
333
-
218608
). In connection with the offering we also issued our placement agent
180,000
common stock purchase warrants. The placement agent warrants are substantially similar to the investor warrants except that they have an exercise price of
$0.875
per share and a term of
5
years.