Note 3. Stockholders’ Equity and Stock-Based Compensation Expense

Stockholders’ Equity Activity during the Three Months Ended March 31, 2020 and 2019

During the three months ended March 31, 2020 and 2019, the Company’s common stock outstanding and stockholders’ equity changed as follows:



	Common Stock	Stockholders' equity (in thousands)
Balance at December 31, 2018	17,219,300	$	19,628
Non-cash stock-based compensation for:
Stock options for employees	—		342
Stock options for non-employees	—		2
Issuance costs from sale 2018 sale of common stock and warrants	—		(60)
Net loss	—		(1,359)
Balance at March 31, 2019	17,219,300	$	18,553

Balance at December 31, 2019	21,841,810	$	22,099

Non-cash stock-based compensation for:
Stock options for employees	—		261
Stock options for non-employees	—		9
Proceeds from exercise of common stock warrants	2,888,092		3,613
Net loss	—		(1,150)
Balance at March 31, 2020	24,729,902	$	24,832

At-the-Market (ATM) Common Stock Offering

On March 27, 2020, the Company established an at-the-market offering program (ATM) to sell, from time to time, shares of Company common stock having an aggregate offering price of up to $100,000,000 in transactions pursuant to a shelf registration statement that was declared effective by the SEC on May 5, 2020. The Company is obligated to pay a commission of 3.0% of the gross proceeds from the sale of shares of common stock in the offering. The Company is not obligated to sell any shares in the offering.

There were no common stock sales under the ATM during the three months ended March 31, 2020.

Common Stock Warrants

In August 2018, the Company issued warrants to purchase up to an aggregate of 9.1 million shares of its common stock in conjunction with an offering of its common stock. As of March 31, 2020, 1.6 million warrants remain outstanding, each with a strike price of $1.25 per share. Subject to certain ownership limitations described in the warrants, the warrants will remain exercisable until expiration on February 17, 2021. The warrants will be exercisable on a “cashless” basis in certain circumstances, including while there is no effective registration statement registering the shares of common stock issuable upon exercise of the warrants at any time until the expiry of the warrants. Such registration statement was declared effective by the SEC on January 30, 2019. The warrants provide that holders will have the right to participate in any rights offering or distribution of assets together with the holders of common stock on an as-exercised basis.

During the three months ended March 31, 2020, the Company received proceeds of $3.6 million from the exercise of 2.9 million warrants. There were no warrants exercised during the three months ended March 31, 2019.

Subsequent to March 31, 2020, the Company received proceeds of $62,500 from the exercise of an additional 50,000 warrants.

Stock Option and Performance Award Activity in 2020

During the three months ended March 31, 2020, stock options and unvested Performance Awards outstanding under the Company’s stock option plans changed as follows:



	Stock Options	Performance Awards
Outstanding as of December 31, 2019	3,210,965	138,055
Options granted	25,000	—
Options exercised	—	—
Options forfeited/canceled	—	—
Outstanding as of March 31, 2020	3,235,965	138,055

The weighted average exercise price of options outstanding at March 31, 2020 was $12.22. As outstanding options vest over the current remaining vesting period of 2.5 years, the Company expects to recognize non-cash expense of $2.0 million. If and when outstanding Performance Awards vest, the Company would recognize non-cash expense of $2.3 million over the implicit service period.

Stock-based Compensation Expense in 2020

During the three months ended March 31, 2020 and 2019, the Company’s non-cash stock-based compensation expenses were as follows (in thousands):



	Three months ended
	March 31,
	2020		2019
Research and development	$	115	$	137

General and administrative		155		207

Total non-cash stock-based compensation expense	$	270	$	344

2018 Equity Incentive Plan

In January 2018, the Company’s Board of Directors approved the Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”). The Company’s Board of Directors or a designated committee of the Board of Directors is responsible for administration of the 2018 Plan and determines the terms and conditions of each option granted, consistent with the terms of the 2018 Plan. The Company’s employees, directors, and consultants are eligible to receive awards under the 2018 Plan, including grants of stock options and performance awards. Share-based awards generally expire ten years from the date of grant. The 2018 Plan provides for issuance of up to 1,000,000 shares of common stock, par value $0.001 per share under the 2018 Plan, subject to adjustment as provided in the 2018 Plan.

When stock options or performance awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled. The Company then uses its cash to pay tax authorities the amount of statutory taxes owed by and on behalf of the award recipient.