Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Stockholders' Equity

Note 7 - Stockholders’ Equity

Common Stock

On March 21, 2018, the Company entered into a private placement offering with an investor and issued 826,446 shares of its common stock for $1.0 million. In addition, the Company granted this investor the non-exclusive rights to distribute its product in China for a period of two years. In connection with this private placement, the Company issued 41,322 shares of common stock to an investor as a finder’s fee.

On August 23, 2018, the Company entered into a private placement offering with three investors and issued 666,665 shares of its common stock for $800,000.

Stock Options

The fair value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the expected dividend yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission’s Staff Accounting Bulletin for “plain vanilla” options. The expected term for stock options granted with performance and/or market conditions represents the period estimated by management by which the performance conditions will be met. The Company obtained the risk-free interest rate from publicly available data published by the Federal Reserve. The Company uses a methodology in estimating its volatility percentage from a computation that was based on a comparison of average volatility rates of similar companies to a computation based on the standard deviation of the Company’s own underlying stock price’s daily logarithmic returns. The grant date fair value of stock options granted to employees during years ended December 31, 2018 and 2017 was $8.2 million and $4.3 million, respectively. The fair value of options granted during the years ended December 31, 2018 and 2017 were estimated using the following weighted-average assumptions:

	For the Years Ended December 31,
	2018			2017
Exercise price	$	2.05		$	1.85
Expected stock price volatility		78	%		79	%
Risk-free rate of interest		2.68	%		1.61	%
Term (years)		4.0			3.1

A summary of option activity under the Company’s employee stock option plan for years ended December 31, 2018 and 2017 are presented below:

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2016		1,575,000		$	0.50	$	1,264,000		4.7
Employee options granted		4,150,000			1.85		4,160,000		4.5
Exercised		(6,000	)		1.08		11,000		-
Forfeited		(50,000	)		1.85		6,000		-
Outstanding as of December 31, 2017		5,669,000			1.48		7,793,000		4.3
Employee options granted		7,610,000			2.06		-		6.3
Exercised		(100,000	)		0.20		152,000		-
Expired		(250,000	)		0.10		443,000		-
Forfeited		(300,000	)		1.25		-		-
Outstanding as of December 31, 2018		12,629,000		$	1.87	$	357,000		5.2
Options vested and expected to vest as of December 31, 2018		12,629,000		$	1.87	$	357,000		5.2
Options vested and exercisable as of December 31, 2018		3,654,000		$	1.50	$	357,000		3.6

A summary of the activity of options that the Company granted to non-employees for the year ended December 31, 2018 and 2017 are presented below:

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2016		2,955,000		$	0.27	$	3,053,000		3.2
Non-employee options granted		250,000			1.95		225,000		4.6
Outstanding as of December 31, 2017		3,205,000			0.40		7,847,000		2.4
Non-employee options granted		200,000			1.64		-		3.7
Exercised		(10,000	)		0.20		22,000		-
Expired		(300,000	)		0.15		491,000		-
Outstanding as of December 31, 2018		3,095,000		$	0.51	$	1,567,000		1.7
Options vested and expected to vest as of December 31, 2018		3,095,000		$	0.51	$	1,567,000		1.7
Options vested and exercisable as of December 31, 2018		2,645,000		$	0.51	$	1,339,000		1.7

Estimated future stock-based compensation expense relating to unvested stock options are approximately $7.5 million and $2.1 million as of December 31, 2018 and 2017, respectively, and will be amortized over the remaining 3.8 years and 2.8 years. Weighted average remaining contractual life of the options is 4.5 years.

Warrants

A summary of the status of the Company’s outstanding warrants as of December 31, 2018 and 2017 and changes during the year then ended are presented below:

	Number of Warrants			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2016		3,271,875		$	1.02	$	2,000,000		3.9
Issued		1,472,417			1.72		1,666,000		5.0
Outstanding as of December 31, 2017		4,744,292		$	1.24	$	7,884,000		3.6
Issued		1,053,000			1.98		-		4.2
Exercised		(1,000,000	)		0.20		1,680,000		-
Outstanding as of December 31, 2018		4,797,292		$	1.62	$	340,000		3.1
Warrants exercisable as of December 31, 2018		4,547,292		$	1.64	$	340,000		3.0

During the year ended December 31, 2018, the Company issued 975,000 warrants to purchase the Company’s common stock, with an exercise price of $2.00, pursuant to a preferred stock purchase agreement with several accredited and institutional investors, and 78,000 warrants with an exercise price of $1.75 to a service provider. The 78,000 warrants were recorded as an advisory fee at a fair value of $40,000. There were 1,000,000 warrants exercised for total proceeds of $200,000 for the year ended December 31, 2018.

During the year ended December 31, 2017, the Company issued 910,000 warrants to purchase the Company’s common stock, with an exercise price of $2.00, pursuant to a preferred stock purchase agreement with several accredited and institutional investors, and 62,417 warrants with a weighted-average exercise price of $1.76 to two service providers in payment of outstanding invoices. The Company also granted 500,000 warrants with an exercise price of $1.20 to a service provider. 250,000 warrants were vested immediately; the other 250,000 warrants will be vested upon performance of the service.

As of December 31, 2018, weighted average remaining contractual life of the warrants is 3.0 years.

Stock-based Compensation Expense

Stock-based compensation expense for the years ended December 31, 2018 and 2017 was comprised of the following (in thousands):

	For the Year Ended December 31,
	2018			2017
Employee stock option awards	$	2,852		$	2,423
Non-employee option awards		(572	)		1,766
Non-employee warrants		40			249
Total compensation expense	$	2,320		$	4,438

For the year ended December 31, 2018, there were approximately $2.8 million stock-based compensation expense and $467,000 stock-based compensation income included in the general and administrative and research and development expense, compared to $3.0 million and $1.4 million stock-based compensation expenses included in the general and administrative and research and development expense for the year ended December 31, 2017, respectively.