5. Stockholders’ Equity

On November 13, 2014, the Company entered into an At Market Sales Agreement (“Sales Agreement”) with MLV & Co. LLC (“MLV”), pursuant to which the Company may sell from time to time, at its option, up to an aggregate of $6.6 million worth of shares of common stock through MLV as sales agent. The sales of shares of the Company’s common stock made through this equity program are made in “at-the-market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended. During the nine months ended September 30, 2015, the Company sold 932,237 shares of common stock at a weighted average price per share of $4.93 pursuant to the Sales Agreement and received proceeds of approximately $4.5 million, net of commissions and fees. During October 2015, the Company sold an additional 62,348 shares of common stock at a weighted average price per share of $3.62 pursuant to the Sales Agreement and received proceeds of approximately $219,000, net of commissions and fees. The Company incurred approximately $138,000 of legal, accounting and filing fees related to its Registration Statement on Form S-3 filed in November 2014. Such costs were capitalized and included in other current assets at December 31, 2014, and were reclassified to additional paid-in capital during the first quarter of 2015 as a further offset to the net proceeds. The Company intends to use the net proceeds to continue to fund its ongoing Phase 3 clinical trial and for general corporate purposes.

Future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of the Company’s common stock and the Company’s capital needs. Although sales of the Company’s common stock have taken place pursuant to the Sales Agreement, there can be no assurance that MLV will be successful in consummating future sales based on prevailing market conditions or in the quantities or at the prices that the Company deems appropriate. Under current SEC regulations, at any time during which the aggregate market value of the Company’s common stock held by non-affiliates, or public float, is less than $75 million, the amount the Company can raise through primary public offerings of securities in any twelve-month period using shelf registration statements, including sales under the Sales Agreement, is limited to an aggregate of one-third of the Company’s public float. As of October 31, 2015, the Company’s public float was 4.0 million shares, the value of which was $17.6 million based upon the closing price of the Company’s common stock of $4.35 on October 9, 2015. The value of one-third of the Company’s public float calculated on the same basis was $5.8 million. As of October 31, 2015, the Company has the capacity to issue up to approximately $1.0 million worth of additional shares of common stock pursuant to the Sales Agreement.

In addition, the Company will not be able to make future sales of common stock pursuant to the Sales Agreement unless certain conditions are met, which include the accuracy of representations and warranties made to MLV under the Sales Agreement. Furthermore, MLV is permitted to terminate the Sales Agreement in its sole discretion upon ten days’ notice, or at any time in certain circumstances, including the occurrence of an event that would be reasonably likely to have a material adverse effect on the Company’s assets, business, operations, earnings, properties, condition (financial or otherwise), prospects, stockholders’ equity or results of operations. The Company has no obligation to sell the remaining shares available for sale pursuant to the Sales Agreement.

As a result of payroll withholdings from the Company’s employees of approximately $170,000, the Company also sold 41,176 shares of common stock through its ESPP during the nine months ended September 30, 2015.

Stock-Based Compensation

Stock-based compensation expense includes charges related to stock option grants and employee stock purchases under the ESPP. The Company measures stock-based compensation expense based on the grant date fair value of any awards granted to its employees. Such expense is recognized over the period of time that employees provide service and earn rights to the awards.

The estimated fair value of each stock option award granted was determined on the date of grant using the Black-Scholes option-pricing valuation model with the following weighted-average assumptions for option grants during the nine months ended September 30, 2015 and 2014 (no stock options were granted during the three months ended September 30, 2015 and 2014):

	Nine Months Ended
	September 30,
	2015		2014
Common Stock Options
Risk free interest rate	1.50% - 1.87%		1.66% - 1.77%
Expected option term	5.5 - 6.0 years		5.5 - 6.0 years
Expected volatility of common stock	71.99% - 76.74%		71.06% - 73.21%
Expected dividend yield		0.0%		0.0%

The estimated fair value of each ESPP award was determined on the date of grant using the Black-Scholes option-pricing valuation model with the following weighted-average assumptions for option grants during the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Employee Stock Purchase Plan
Risk free interest rate		0.26%		0.05%	0.08% - 0.26%		0.05 - 0.08%
Expected option term	6 months		6 months		6 months		6 months
Expected volatility of common stock		69.64%		69.32%	62.91% - 69.64%		69.32 - 73.21%
Expected dividend yield		0.0%		0.0%		0.0%		0.0%

The Company recognized non-cash stock-based compensation expense to employees and directors in its research and development and its general and administrative functions as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Research and development	$	144,719	$	105,145	$	433,252	$	302,569
General and administrative		226,956		198,816		694,561		489,912
Total stock-based compensation expense	$	371,675	$	303,961	$	1,127,813	$	792,481

As of September 30, 2015, there were approximately $2.7 million of unrecognized compensation costs related to outstanding employee and board of director options, which are expected to be recognized over a weighted average period of 1.22 years.