Note 3 - Stock-based Compensation Plans and Warrants

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

NOTE

3

– STOCK-BASED COMPENSATION PLANS AND WARRANTS

The Company has issued options and has granted stock awards pursuant to its

2009

Equity Incentive Plan and

2014

Equity Incentive Plan, as described below.

2009

Equity Incentive Plan

The

2009

Equity Incentive Plan was approved by stockholders at the

2009

Annual Meeting. The plan provides for the grant and issuance of up to

850,000

shares and options to the Company’s employees and consultants. The plan became effective when the Company filed a registration statement on Form S-

8

on

December 18, 2009.

All options issued under the

2009

Equity Incentive Plan have a

ten

-year term with vesting periods ranging from issuance date to

24

months.

2014

Equity Incentive Plan

The

2014

Equity Incentive Plan was approved by stockholders at the

June 10, 2014

Annual Meeting. The plan provides for the grant and issuance of up to

675,000

shares and options to the Company’s employees, directors and consultants. Upon approval of the

2014

Equity Incentive Plan, all shares of common stock that remained available for award under the

2009

Equity Incentive Plan were cancelled.

201

9

Equity Incentive Plan

The

2019

Equity Incentive Plan was approved by stockholders at the

July 10, 2019

Annual Meeting. The plan provides for the grant and issuance of up to

1,200,000

shares and options to the Company’s employees, directors and consultants. Upon approval of the

2019

Equity Incentive Plan, all shares of common stock that remained available for award under the

2014

Equity Incentive Plan were cancelled.

Under the

2019

Equity Incentive Plan, each outside director receives

$50,000

of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to

$25,000

on

June 30

of each year. The award accrues on a quarterly basis, with

$12,500

of cash compensation and

$6,250

of stock earned for each fiscal quarter in which a director serves. The deferred stock award vests automatically on the

January 31

that

first

follows the award date.

All options that have been issued under the above plans have been issued to officers, employees and consultants of the Company. In total, options to purchase

492,500

shares were unexercised and outstanding on

June 30, 2019

under the equity incentive plans.

The Company recognized

no

stock option related compensation costs in each of the

six

months ended

June 30, 2019

and

2018.

Additionally,

no

options were exercised during the

six

months ended

June 30, 2019.

Stock Awards to Directors, Officers,

and

Consultants

The Company has granted stock awards pursuant to its

2009

Equity Incentive Plan and

2014

Equity Incentive Plan.

Of the total

850,000

shares reserved under the

2009

Equity Incentive Plan,

297,265

shares were issued as share grants and

507,500

were issued as options. Upon approval of the

2014

Equity Incentive Plan in

June 2014,

45,235

shares remaining available for award under the

2009

Equity Incentive Plan were cancelled.

Of the total

675,000

shares reserved under the

2014

Equity Incentive Plan,

673,466

shares have been awarded to the Company directors, consultants and employees as of

June 30, 2019.

Of the

673,466

shares awarded,

15,312

shares were awarded to the Company’s directors for services performed during the plan year ended

June 30, 2019.

These shares will vest and be issued on

January 31, 2020.

The Company recognized stock-based compensation costs of

$122,000

for each of the

three

months ended

June 30, 2019

and

2018,

and

$245,000

and

$227,000

for the

six

months ended

June 30, 2019

and

2018,

respectively.

Warrants

In conjunction with the closing of the Senior Secured Debt in

May 2017,

the Company issued to its lender a warrant to purchase an aggregate

362,500

shares of its common stock (“Warrant”). The warrant has a

five

-year term, and had an initial exercise price of

$14.94

per share, subject to adjustment.

The Company recorded a debt discount at the time of the closing of the Senior Secured Debt in the amount of

$2.9

million which was the fair value of the Warrant at the time it was issued. The debt discount is being amortized through

December 2019.

On

January 1, 2019,

the Company adopted ASU

2017

-

11.

As a result, the Company reclassified a warrant liability in the amount of

$865

thousand to additional paid-in capital, as the Company’s Warrant

no

longer met the definition of a derivative. In addition, during the years ended

December 31, 2018

and

2017,

the Company recognized annual gains of

$1.5

million and

$0.5

million, respectively, related to the historical remeasurement of the warrant derivative liability at fair value. Upon adoption of this guidance as of

January 1, 2019,

the Company recorded

$2.0

million in additional paid-in capital with a corresponding adjustment to the opening balance of accumulated deficit related to these previously recorded gains.

During the

second

quarter of

2019,

the Company sold shares of common stock under the

November 2018

ATM at a per-share price less than the Warrant’s initial exercise price, which triggered a down-round, reset provision and resulted in an adjusted exercise price of

$14.59

as of

June 30, 2019. 

In addition, the Company recorded an adjustment of

$24

thousand in additional paid-in capital related to the increase in the value of the effect of the down-round feature as of

June 30, 2019.