Stockholders' Equity

Common Stock

During the nine months ended September 30, 2018, the Company issued 1,259,663 shares of Common Stock.

In October 2017, the Company entered into a Controlled Equity Offering^SM sales agreement (the "Sales Agreement") with Cantor Fitzgerald & Co., as agent ("Cantor Fitzgerald"), pursuant to which the Company may offer and sell, from time to time through Cantor Fitzgerald, shares of Common Stock having an aggregate offering price as set forth in the Sales Agreement and a related prospectus supplement filed with the SEC on March 19, 2018. The Company agreed to pay Cantor Fitzgerald a cash commission of 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. The Company sold 239,270 shares of Common Stock for gross proceeds of $4.31 million and received net proceeds of $4.18 million, after sales commissions, under the Sales Agreement during the nine months ended September 30, 2018. As of September 30, 2018, the Company does not have the ability to use the Controlled Equity Offering.

On September 27, 2018, the Company completed a registered public offering with Cantor Fitzgerald as underwriter and sold 811,764 shares its Common stock (including 105,882 shares purchased by Cantor Fitzgerald upon the exercise in full of its right to purchase up to an additional 105,882 shares to cover over-allotments) at a price of $17.00 per share. The Company received approximately $13.0 million of net proceeds from the offering after deducting sales commissions.

During the nine months ended September 30, 2018, the Company offset net financing proceeds received with $0.4 million of current and deferred financing costs. All deferred financing costs were offset against additional paid-in capital as of September 30, 2018. There were no additional deferred financing costs at September 30, 2018.

During the nine months ended September 30, 2018, the Company issued 3,400 shares of its Common Stock as a result of the exercise of stock purchase warrants with an exercise price of $10.00 per share for total proceeds of $34,000. During the nine months ended September 30, 2018 the Company issued 38,166 shares of its Common stock with an aggregate value of $782 thousand for services and 7,063 shares of its Common Stock for a cashless exercise of stock options. On September 5, 2018, the Company also issued 160,000 shares of Common Stock to Valour Fund, LLC, as a result of Valour's exercise of its option to exchange its interest in certain product revenues for Common Stock of the Company

Stock Options

On September 8, 2017, the Company held its Annual Meeting of Stockholders (the “Annual Meeting”), at which time the 2017 Long-Term Incentive Plan ("2017 Plan") was approved by stockholder vote. The 2017 Plan allows the Company to grant both incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”) to purchase a maximum of 400,000 shares of the Company's Common Stock. Under the terms of the 2017 Plan, ISOs may only be granted to Company employees and directors, while NSOs may be granted to employees, directors, advisors, and consultants. The Board has the authority to determine to whom options will be granted, the number of options, the term, and the exercise price. Options are to be granted at an exercise price not less than fair value for an ISO or an NSO. The vesting period is normally over a period of four years from the vesting date. The contractual term of an option is no longer than ten years.

As provided in the 2017 Plan, on January 1, 2018 the number of options available for issuance was increased by 4% of the outstanding stock as of December 31, 2017, which represents an increase of 101,431 options.

Prior to adopting the 2017 Plan, the Company did not have a formal long-term incentive stock plan. Prior to the implementation of the 2017 Plan, the Company had discretion to provide designated employees of the Company and its affiliates, certain consultants, and advisors who perform services for the Company and its affiliates, and non-employee members of the Board and its affiliates with the opportunity to receive grants of non-qualified stock options (the "Pre-2017 Non-Qualified Stock Options"). All of the Pre-2017 Non-Qualified Stock Option Grants were intended to qualify as non-qualified stock options. There were no Pre-2017 Non-Qualified Stock Option Grants that were intended to qualify as incentive stock options.

Pre-2017 Non-Qualified Stock Options

As of December 31, 2017, the Company had granted Pre-2017 Non-Qualified Stock Options to purchase, in the aggregate, 2,980,500 shares of the Company's Common Stock. During the nine months ended September 30, 2018, the Company did not grant any Pre-2017 Non-Qualified Stock Options.

Stock option activity for the Pre-2017 Non-Qualified Stock Options for the nine months ended September 30, 2018 is presented in the table below:



	Number of Shares		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at December 31, 2017	2,980,500		$	7.33	7.06	$	46,606
Exercised	(15,000	)	10.00
Forfeited	—		—
Outstanding at September 30, 2018	2,965,500		$	7.32	6.33	$	31,258
Exercisable at September 30, 2018	2,803,399		$	7.20	6.19	$	29,889

A summary of the status of the Company’s non-vested Pre-2017 Non-Qualified Stock Options as of September 30, 2018 and changes during the nine months ended September 30, 2018 is presented below:



	Number of Options		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2017	288,902		$	7.87
Vested	(126,801	)	$	7.93
Non-vested at September 30, 2018	162,101		$	7.82

During the nine months ended September 30, 2018 and 2017, the Company recognized approximately $751 thousand and $826 thousand, respectively, of non-cash expense related to Pre-2017 Non-Qualified Stock Options granted in prior periods. As of September 30, 2018, there was approximately $342.3 thousand of unrecognized compensation costs related to non-vested Pre-2017 Non-Qualified Stock Options.

The 2017 Plan

On January 4, 2018, the Company granted options to a number of employees to purchase 57,050 shares of the Company’s Common Stock at an exercise price of $24.84 per share, which represents the closing price of the Company’s Common Stock on the date of grant. These options were issued under the Company’s 2017 Plan and have ten-year terms. The options vest as follows: 25% on the one year anniversary of the grant date and then 1/48^th of the options shares vest on such date every month thereafter through the fourth anniversary of the grant date. The Company valued these options using the Black-Scholes option pricing model and estimated the fair value on the date of grant to be $1.4 million.

On February 13, 2018, the Company granted an option to an employee to purchase 100,000 shares of the Company’s Common Stock at an exercise price of $24.79 per share, which represents the closing price of the Company’s Common Stock on the date of grant. This option was issued under the Company’s 2017 Plan and has a ten-year term. The option vests as follows: 25% on the one year anniversary of the grant date and then 1/48^th of the option shares vest on such date every month thereafter through the fourth anniversary of the grant date. The Company valued this option using the Black-Scholes option pricing model and estimated the fair value on the date of grant to be $2.5 million.

During the nine month period ended September 30, 2018, the Company granted 31,500 options to employees and certain Directors of the Board at exercise prices from $14.31 to $19.83, which represents the closing price of the Company's common stock on the date of the grant. These options were issued under the Company's 2017 Plan and have ten-year terms. The options vest over a period of one to four years. The Company valued these options using the Black-Scholes option pricing model and estimated the fair value of these options granted during the nine months ended September 30, 2018 to be $476,025.

The assumptions used in the valuation of options granted under the 2017 Plan during the nine months ended September 30, 2018 are as follows:



	For the Nine Months Ended September 30, 2018
Market value of stock on measurement date	$14.31 to $24.84
Risk-free interest rate	2.47% to 2.89%
Dividend yield	—
Volatility factor	121% to 324%
Term	5.5 - 10 Years

Stock option activity for options granted under the 2017 Plan during the nine months ended September 30, 2018 is presented in the table below:



	Number of Shares Available		Number of Options Outstanding		Weighted-average Exercise Price		Weighted-average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at July 31, 2017	—		—		—
Total shares authorized	400,000		—		—
Granted	(214,000	)	214,000		$	37.62	9.71
Exercised	—		—		—
Forfeited	40,000		(40,000	)	$	49.93
Balance at December 31, 2017	226,000		174,000		$	34.78	9.71
Annual additional options authorized	101,431		—		—
Granted	(188,550	)	188,550		$	23.49
Exercised	—		—		—
Forfeited	27,000		(27,000	)	$	24.84
Balance at September 30, 2018	165,881		335,550		$	29.24	9.18	$	50

A summary of the status of the Company’s non-vested options granted under the 2017 Plan as of September 30, 2018 and changes during the nine months ended September 30, 2018 are presented in the following table:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Non-vested at December 31, 2017	174,000		$	34.78
Granted	188,550		$	23.19
Forfeited	(27,000	)	$	24.84
Balance at September 30, 2018	335,550		$	29.07
Vested	(42,500	)	35.01
Non-vested at September 30, 2018	293,050		$	28.21

During the nine months ended September 30, 2018 and 2017, the Company recognized approximately $3.9 million and $362,986 of non-cash expense related to options granted under the 2017 Plan. As of September 30, 2018, there was approximately $4.5 million of unrecognized compensation costs related to non-vested stock options that were granted under the 2017 Plan.

Warrants

During the nine months ended September 30, 2018, the Company did not issue any warrants.

Warrant activity for the nine months ended September 30, 2018 is presented in the table below:



	Number of Shares		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at December 31, 2017	357,010		$	9.78	5.57	$	4,708
Exercised	(3,400	)	$	10.00
Outstanding at September 30, 2018	353,610		$	9.78	4.85	$	2,857
Exercisable at September 30, 2018	353,610		$	9.78	4.85	$	2,857