7. STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2019

STOCKHOLDERS' EQUITY

7. STOCKHOLDERS' EQUITY

Preferred Stock

The Company is currently authorized to issue up to 10 million shares of preferred stock, $0.0001, par value per share. There were no shares of preferred stock outstanding at March 31, 2019 and December 31, 2018.

Common Stock

As of March 31, 2019 and December 31, 2018, the Company was authorized to issue 75,000,000 shares of its common stock, $0.0001 par value per share, and 46,353,068 shares of common stock were outstanding. After giving effect to shares reserved for the issuance of warrants and stock options, as of March 31, 2019, 21,159,337 shares of common stock were available for issuance.

Warrants

On the Perceptive Closing Date, the Company issued the Perceptive Warrant, whereby Perceptive may purchase an aggregate of 1,360,000 shares of common stock at an exercise price of $3.28 per share. The Perceptive Warrant became exercisable on the Perceptive Closing Date, and were valued at $2.7 million. The Perceptive Warrant was valued using the Black-Scholes option-pricing model assuming an expected term of 10 years, a volatility of 61.2%, a dividend yield of 0% and a risk-free interest rate of 2.65%. At March 31, 2019, the Company had outstanding warrants to purchase an aggregate of 1,888,160 shares of common stock, with a weighted average exercise price of $3.69 per share and expiration dates ranging between June 2022 and February 2029.

Equity Incentive Plans

The fair value of stock options granted under the Company’s 2007 Employee Stock Option Plan (the “2007 Plan”) and the ADMA Biologics, Inc. 2014 Omnibus Incentive Compensation Plan, as amended and restated (the “2014 Plan”), was determined on the date of grant using the Black-Scholes option valuation model. The Black-Scholes model was developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of certain subjective assumptions including the expected stock price volatility. The stock options granted to employees and directors have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. The following assumptions were used to determine the fair value of options granted during the three months ended March 31, 2019 and 2018: 

	Three Months Ended March 31,
	2019			2018
Expected term		5.8 - 6.3 years			6.3 years
Volatility		61	%		57	%
Dividend yield		0.0			0.0
Risk-free interest rate		2.25-2.63%			2.59	%

During the three months ended March 31, 2019 and 2018, the Company granted options to purchase an aggregate of 1,330,850 and 848,700 shares of common stock, respectively, to its directors and employees. Also during the three months ended March 31, 2019 and 2018, the Company granted options to purchase 5,000 and 20,000 shares of common stock, respectively, to third party service providers.

The weighted average remaining contractual life of stock options outstanding and expected to vest at March 31, 2019 is 7.8 years. The weighted average remaining contractual life of stock options exercisable at March 31, 2019 is 6.3 years.

A summary of the Company’s option activity under the 2007 Plan and 2014 Plan and related information is as follows: 

	Shares			Weighted Average Exercise Price
Balance at December 31, 2018		4,342,231		$	5.16
Forfeited		(74,906	)	$	4.61
Expired		(3,740	)	$	4.75
Granted		1,335,850		$	3.42
Exercised		—		$	—
Balance at March 31, 2019		5,599,435		$	4.75
Options exercisable		2,588,091		$	5.93

Stock-based compensation expense for the three ended March 31, 2019 and 2018 is as follows: 

	2019		2018
Research and development	$	86,523	$	78,305
Plasma centers		11,540		7,086
Selling, general and administrative		498,471		394,858
Cost of product revenue		40,729		34,535
Total stock-based compensation expense	$	637,263	$	514,784

As of March 31, 2019, the Company had $6.2 million of unrecognized compensation expense related to options granted under the Company’s equity incentive plans, which is expected to be recognized over a weighted-average period of 2.8 years.