9. Stockholders' Equity

3 Months Ended

Mar. 31, 2018

Stockholders Equity

9. Stockholders' Equity

Note 9. Stockholders' Equity 

Controlled Equity Offering

On November 7, 2014, the Company entered into a controlled equity offering sales agreement (the Sales Agreement) with Cantor Fitzgerald & Co. ("Cantor") pursuant to which the Company could issue and sell shares of its common stock having an aggregate offering price of up to one hundred million dollars, pursuant to an effective registration statement on Form S-3 (No. 333-200005), from time to time through Cantor, acting as agent. The Company will pay Cantor a commission rate of 3.0% of the gross sales price per share of the common stock sold through Cantor as agent under the Sales Agreement.

During the three months ended March 31, 2018 and 2017, the Company did not sell any shares of common stock under the Sales Agreement. As of March 31, 2018, approximately $77.5 million of common stock remained available to be sold under this facility, subject to certain limitation to the extent the Company continues to have a public float of less than $75.0 million.

Warrants

As of March 31, 2018, the Company has approximately 4,857 outstanding common stock warrants in connection with the acquisition of Somaxon Pharmaceuticals, Inc. (Somaxon) in March 2013.

In November 2017, the Company's shareholders approved the 2017 Omnibus Incentive Plan (the 2017 Plan)for future equity awards granted by the Company. Subject to the adjustments described below, the maximum number of shares of the Company's common stock that will be available for issuance under the 2017 Omnibus Incentive Plan will be equal to the sum of (i) one million (1,000,000) shares of the Company's common stock plus (ii) the number of shares of our common stock available for future awards under the 2015 Omnibus Incentive Plan and the 2009 Stock Incentive Plan as of November 15, 2017, plus (iii) the number of shares of the Company's common stock related to awards outstanding under such plans as of November 15, 2017 that terminate after such date by expiration or forfeiture, cancellation, or otherwise without the issuance of such shares of the Company's common stock.

Stock-Based Compensation

Stock-based compensation expense is recognized, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period, which is the vesting period.

The Company uses the Black-Scholes option pricing model to determine the fair value of its stock options. The weighted average fair value of stock options granted during the periods and the assumptions used to estimate those values using the Black-Scholes option pricing mode were as follows:  

		Three Months Ended
		March 31,
		2018		2017
Weighted average expected
stock price volatility		86.4%		85.0%
Estimated dividend yield		-		-
Risk-free interest rate		2.7%		2.1%
Expected life of option (in years)		6.3		6.2
Weighted average grant date
fair value per option	$	1.83	$	1.86

The Company measures the grant date fair value of restricted stock units (RSUs) using the Company's closing common stock price on the trading date immediately preceding the grant date.

The accounting policy with respect to stock options and RSUs is described in the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

Stock-based compensation expense was $400,000 and $745,000 for the three months ended March 31, 2018 and 2017, respectively. Stock-based compensation expense for the periods presented is included within the selling, general and administrative expense in the unaudited condensed consolidated statements of operations.

Stock Options

The following table shows the option activity, described above, during the three months ended March 31, 2018 (shares and intrinsic value in thousands):

				Weighted Average
			Average	Remaining		Aggregate
			Exercise	Contractual Life		Intrinsic
	Shares		Price	(years)		Value
Options Outstanding at December 31, 2017	1,042	$	13.80	8.8
Granted	336		2.46
Exercised	-		-
Cancelled	(62)		21.84
Expired	-		-
Options outstanding at March 31, 2018	1,316	$	10.53	8.9	$	3
Options vested and expected to vest as of March 31, 2018	850	$	14.51	8.6	$	2
Options vested and exercisable as of March 31, 2018	338	$	24.30	7.8	$	-

As of March 31, 2018, there was approximately $2 million of total unrecognized compensation cost related to non-vested stock options issued to employees and directors of the Company, which is expected to be recognized ratably over a weighted-average period of 2.0 years.

The total intrinsic value of options exercised during each of the three months ended March 31, 2018 and 2017 was $0.

Options issued subsequent to January 2014 have a graded vesting schedule over either three or four years. The Company's stock option grants expire ten years from the date of grant.

Restricted Stock

The following table shows the Company's non-vested restricted stock activity during the three months ended March 31, 2018 (shares in thousands):

			Weighted Average
			Grant Date Fair
	Shares		Value
Non-vested restricted stock outstanding at December 31, 2017	135	$	3.17
Granted	62		2.46
Vested	(1)		2.19
Forfeited	-		-
Non-vested restricted stock outstanding at March 31, 2018	196	$	2.95

The total fair value of RSUs vested in the three months ended 2018 and 2017, were $3,000 and $0, respectively. As of March 31, 2018, there was $244,000 total unrecognized compensation cost related to non-vested restricted stock issued to employees and directors of the Company which is expected to be recognized ratably over a weighted-average period of 2.3 years.