Annual report pursuant to Section 13 and 15(d)

NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

v3.19.1
NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
12 Months Ended
Dec. 31, 2018
Disclosure Text Block Supplement [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]

NOTE 9 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS


Options


On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 15,186,123 (as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company or a committee thereof administers the Plan and determines the exercise price, vesting and expiration period of the grants under the Plan.


However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.


Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. The Company reserved 910,346 shares of its common stock for future issuance under the terms of the Plan.


During the year ended December 31, 2017, the Company granted an aggregate of 1,400,696 options to officers, directors and key consultants.


During the year ended December 31, 2017, the Company granted an aggregate of 803,900 stock grants to officers, employees and key consultants under the plan. See Note 8.


During the year ended December 31, 2018, the Company granted an aggregate of 559,698 options to officers, directors and key consultants.


During the year ended December 31, 2018, the Company granted an aggregate of 897,050 stock grants to officers, employees and key consultants under the plan. See Note 8.


The following table presents information related to stock options at December 31, 2018:


 

Options Outstanding

   

Options Exercisable

 
                 

Weighted

         
                 

Average

   

Exercisable

 
 

Exercise

   

Number of

   

Remaining Life

   

Number of

 
 

Price

   

Options

   

In Years

   

Options

 
  $ 2.51-5.00       1,203,218       7.7     $ 1,163,218  
    5.01-7.500       1,812,610       3.5       1,724,728  
    7.51-10.00       120,000       6.3       120,000  
            3,135,828       5.2       3,007,946  

A summary of the stock option activity and related information for the 2012 Plan for the years ended December 31, 2018 and 2017 is as follows:


                   

Weighted-Average

         
           

Weighted-Average

   

Remaining

   

Aggregate

 
   

Shares

   

Exercise Price

   

Contractual Term

   

Intrinsic Value

 

Outstanding at January 1, 2017

    3,298,079     $ 5.60       6.4     $ -  

Grants

    672,360       3.75       10.0     $ -  

Exercised

    -               -       -  

Canceled

    (566,308

)

    5.43               -  

Outstanding at December 31, 2017

    3,404,131     $ 5.28       5.7     $ -  

Grants

    559,698       4.65       10.0     $ -  

Exercised

    (140,001

)

  $ 4.40                  

Canceled

    (688,000

)

  $ 4.64                  

Outstanding at December 31, 2018

    3,135,828     $ 5.34       5.2     $ 311,545  

Exercisable at December 31, 2018

    3,007,946     $ 5.36       5.0     $ 297,745  

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $4.27 as of December 31, 2018, which would have been received by the option holders had those option holders exercised their options as of that date.


Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees.


For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.  The fair value of stock-based payment awards during the years ended December 31, 2018 and 2017 was estimated using the Black-Scholes pricing model.


On February 8, 2017, the Company granted an aggregate of 52,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.875 per share for a term of ten years with vesting immediately.


On November 8, 2017, the Company granted 80,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.925 per share for a term of ten years with 20,000 vesting immediately and 20,000 vesting each anniversary through November 8, 2020.


On November 8, 2017, the Company granted 190,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.925 per share for a term of ten years with 95,000 vesting immediately and 95,000 at one year anniversary.


On November 24, 2017, the Company granted 20,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.625 per share for a term of ten years, vesting immediately.


On November 24, 2017, the Company granted 168,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.625 per share for a term of ten years with 48,000 vesting immediately; 20,000 vesting on two year anniversary and 100,000 performance contingent.


On November 24, 2017, the Company granted 120,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.75 per share for a term of ten years with 60,000 vesting immediately and 60,000 performance contingent.


On December 22, 2017, the Company granted 42,360 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.425 per share for a term of ten years, vesting immediately.


The following assumptions were used in determining the fair value of employee and vesting non-employee options during the year ended December 31, 2017:


 

 

 

 

 

Risk-free interest rate

 

 

2.01% - 2.34

%

Dividend yield

 

 

0

%

Stock price volatility

 

 

95.72% to 107.17

%

Expected life

5 – 10 years

 

Weighted average grant date fair value

 

$

2.925

 


On February 15, 2018, the Company granted 20,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.55 per share for a term of ten years with vesting immediately.


On May 4, 2018, the Company granted 226,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $4.43 per share for a term of ten years with vesting immediately.


On May 14, 2018, the Company granted 100,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $4.43 per share for a term of ten years with vesting immediately.


On October 16, 2018, the Company granted 34,566 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.09 per share for a term of ten years with 17,283 vesting immediately and 17,283 vesting January 1, 2019.


On October 16, 2018, the Company granted 69,132 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.09 per share for a term of ten years with 17,283 vesting immediately and 17,283 vesting January 1, 2019, 17,283 vesting January 1, 2020 and 17,283 vesting January 1, 2021.


On October 16, 2018, the Company granted 110,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.09 per share for a term of ten years vesting immediately.


The following assumptions were used in determining the fair value of employee options for the year ended December 31, 2018:


         

Risk-free interest rate

 

 

2.65% to 3.16

%

Dividend yield

 

 

0

%

Stock price volatility

 

 

92.08% to 94.10

%

Expected life

 

 

5 to 10 years

 

Weighted average grant date fair value

 

$

3.37

 


The fair value of all options vesting during the year ended December 31, 2018 and 2017 of $2,357,242 and $1,269,591, respectively, was charged to current period operations.  Unrecognized compensation expense of $173,446 and $979,812 at December 31, 2018 and 2017, respectively, will be expensed in future periods.


Restricted Stock


The following table summarizes the restricted stock activity for the two years ended December 31, 2018:


Restricted shares issued as of January 1, 2017

    135,000  

Granted

    -  

Vested

    (135,000

)

Total restricted shares issued as of December 31, 2017

    -  

Granted

    -  

Vested

    -  

Vested restricted shares as of December 31, 2018

    -  

Unvested restricted shares as of December 31, 2018

    -  

Stock based compensation expense related to restricted stock grants was $0 and $93,261 for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, the stock-based compensation relating to restricted stock of $-0- remains unamortized. 


Warrants


The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at December 31, 2018: 


 

Exercise

   

Number

 

Expiration

 

Price

   

Outstanding

 

Date

  $ 0.0025       153,328  

January 2020

  $ 3.75       2,442,424  

April 2019 to August 2021

  $ 4.375       666,606  

May 2021

  $ 4.60       12,294  

January 2020

  $ 4.875       412,943  

February 2019 to September 2019

  $ 5.05       12,227  

January 2020

  $ 6.85       217,958  

July 2021 to August 2021

  $ 6.875       91,504  

August 2019 to September 2019

  $ 9.175       33,960  

January 2019

  $ 9.375       536,267  

April 2019 to March 2020

            4,579,511    

On February 9, 2017, the Company exchanged 15,429 warrants with an exercise price of $5.25 with 18,001 warrants with an exercise price of $3.75, all other terms and conditions the same, to 2016 investors to adjust offered terms in connection with the Company’s equity raise with other investors.


On February 10, 2017, the Company issued an aggregate of 120,253 warrants to purchase the Company’s common stock at $3.75 per share, expiring on February 10, 2020, in connection with the sale of the Company’s common stock.


On March 10, 2017, the Company issued an aggregate of 78,864 warrants to purchase the Company’s common stock at $3.75 per share, expiring on March 10, 2020, in connection with the sale of the Company’s common stock.


On March 15, 2017, the Company issued 252,000 warrants to purchase the Company’s common stock at $3.75 per share, expiring on March 15, 2020, to Mayo Foundation in connection with a know-how licensing agreement (See Note 10). The fair value of the of the issued warrants of $543,927, determined using the Black-Scholes option model with an estimated volatility of 105.22%, risk free rate of 1.599%, dividend yield of -0- and fair value of the Company’s common stock of $1.37, was charged to current period operations as acquired research and development.


On March 31, 2017, the Company issued an aggregate of 62,900 warrants to purchase the Company’s common stock at $3.75 per share, expiring on March 31, 2020, in connection with the sale of the Company’s common stock.


On April 6, 2017, the Company issued an aggregate of 115,321 warrants to purchase the Company’s common stock at $3.75 per share, expiring on April 6, 2020, in connection with the sale of the Company’s common stock.


On May 5, 2017, the Company issued an aggregate of 2,667 warrants to purchase the Company’s common stock at $3.75 per share, expiring on May 5, 2020, in connection with the sale of the Company’s common stock.


On May 17, 2017, the Company issued an aggregate of 74,785 warrants to purchase the Company’s common stock at $3.75 per share, expiring on May 17, 2020, for placement agent services in connection with the sale of the Company’s common stock.


On June 20, 2017, the Company issued 4,000 warrants to purchase the Company’s common stock at $3.75 per share, expiring on June 20, 2020, in connection with the sale of the Company’s common stock.


On June 30, 2017, the Company issued an aggregate of 43,334 warrants to purchase the Company’s common stock at $3.75 per share, expiring on June 30, 2020, in connection with the sale of the Company’s common stock.


On July 13, 2017, the Company issued an aggregate of 53,401 warrants to purchase the Company’s common stock at $3.75 per share, expiring on July 13, 2020, in connection with the sale of the Company’s common stock.


On August 18, 2017, the Company issued an aggregate of 70,200 warrants to purchase the Company’s common stock at $3.75 per share, expiring on August 18, 2020, in connection with the sale of the Company’s common stock.


On September 18, 2017, the Company issued an aggregate of 20,668 warrants to purchase the Company’s common stock at $3.75 per share, expiring on September 18, 2020, in connection with the sale of the Company’s common stock.


On October 11, 2017, the Company issued an aggregate of 77,334 warrants to purchase the Company’s common stock at $3.75 per share, expiring on October 11, 2020, in connection with the sale of the Company’s common stock.


On November 3, 2017, the Company issued an aggregate of 266,800 warrants to purchase the Company’s common stock at $3.75 per share, expiring on May 3, 2021, in connection with the sale of the Company’s Series D preferred stock.  The warrants contain certain anti-dilutive provisions (see Note 8).


On November 3, 2017, the Company issued an aggregate of 312,203 warrants to purchase the Company’s common stock at $3.75 per share, expiring on November 3, 2020 in exchange for the return and cancellation of previous issued 312,202 warrants.  The transaction was in connection with the sale of the Series D preferred stock.  Both the issued and canceled warrants contain certain anti-dilutive provisions (see Note 8).


On November 6, 2017, the Company issued an aggregate of 82,668 warrants to purchase the Company’s common stock at $3.75 per share, expiring on November 6, 2020, in connection with the sale of the Company’s common stock.


On November 6, 2017, due to certain anti-dilutive provisions embedded in the November 3, 2017 warrants issued in connection with the sale of Series D preferred stock (see above), exercise price of the previously issued 266,800 warrants were reset to $3.75 and an additional 44,467 warrants were issued with an exercise price of $3.75 per share, expiring May 3, 2021.


On December 29, 2017, the Company issued an aggregate of 92,134 warrants to purchase the Company’s common stock at $3.75 per share, expiring on December 29, 2020, in connection with the sale of the Company’s common stock.


On January 5, 2018, the Company issued 40,000 warrants to purchase the Company’s common stock at $3.75 per share, expiring on January 5, 2021, in connection with the sale of the Company’s common stock.


On February 14, 2018, the Company entered into a consent agreement with the holders of the Company’s Series D Convertible Preferred Stock.  Pursuant to the consent, the Series D Holders consented to the Series E Preferred Stock transaction and are entitled at any time on or before April 17, 2018, to elect to receive the more favorable terms of the transaction.  In consideration for their entry into the consent, the Company issued to the Series D Holders warrants to purchase up to an aggregate of 40,000 shares of common stock.  The consent warrants are exercisable immediately and expire on February 14, 2021, and have an exercise price of $3.75 per share. The warrants contain certain anti-dilutive provisions (see Note 8).


On February 16, 2018, the Company issued an aggregate of 200,000 warrants to purchase the Company’s common stock at $4.375 per share, expiring on August 16, 2021, in connection with the sale of the Company’s Series E preferred stock.  The warrants contain certain anti-dilutive provisions. On April 30, 2018, the exercise prices of the previously issued 200,000 warrants were reset to $3.75 and an additional 33,334 warrants were issued at $3.75 per share due to reset provisions (see Note 8).


On April 30, 2018, the Company issued 638,606 warrants to purchase the Company’s common stock at $4.375 per share, expiring on April 30, 2021, in connection with the sale of the Company’s common stock.


On May 11, 2018, the Company issued 28,000 warrants to purchase the Company’s common stock at $4.375 per share, expiring on May 11, 2021, in connection with the sale of the Company’s common stock.


On July 31, 2018, the Company issued 41,174 and 41,174 warrants to purchase the Company’s common stock at $3.75 and $6.85 per share, expiring on April 30, 2019 and July 30, 2021, respectively, in connection with the sale of the Company’s common stock.


On August 7, 2018, the Company issued 40,482 warrants to purchase the Company’s common stock at $6.85 per share, expiring on August 7, 2021 in connection with placement services provided for the sale of our common stock.


On August 16, 2018, the Company issued 82,266 and 82,266 warrants to purchase the Company’s common stock at $3.75 and $6.85 per share, expiring on May 16, 2019 and August 16, 2021, respectively, in connection with the sale of the Company’s common stock.


On August 17, 2018, the Company issued 54,036 and 54,036 warrants to purchase the Company’s common stock at $3.75 and $6.85 per share, expiring on May 17, 2019 and August 17, 2021, respectively, in connection with the sale of the Company’s common stock. In addition, in connection with the sale, the Company issued on August 7, 2018, 40,482 warrants to purchase the Company’s common stock at $6.85 per share, expiring on August 7, 2021 for placement agent services.


A summary of the warrant activity for the years ended December 31, 2018 and 2017 is as follows:


                   

Weighted-Average

         
           

Weighted-Average

   

Remaining

   

Aggregate

 
   

Shares

   

Exercise Price

   

Contractual Term

   

Intrinsic Value

 

Outstanding at January 1, 2017

    3,651,438     $ 4.90       2.1     $ 494,099  

Grants

    1,792,000     $ 3.75       3.0       -  

Exercised

    -               -       -  

Canceled/Expired

    (327,633

)

  $ 3.75       -       -  

Outstanding at December 31, 2017

    5,115,805     $ 4.55       1.7     $ 551,636  

Grants

    1,375,374       4.54       3.0       -  

Exercised

    (770,717

)

  $ 3.99                  

Canceled/Expired

    (1,140,951

)

  $ 4.23                  

Outstanding at December 31, 2018

    4,579,511     $ 4.73       1.5     $ 1,924,388  
                                 

Vested and expected to vest at December 31, 2018

    4,579,511     $ 4.73       1.5     $ 1,924,388  

Exercisable at December 31, 2018

    4,579,511     $ 4.73       1.5     $ 1,924,388  

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price of $4.27 as of December 31, 2018, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.