Annual report pursuant to Section 13 and 15(d)

8. STOCKHOLDERS' EQUITY

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8. STOCKHOLDERS' EQUITY
12 Months Ended
Dec. 31, 2018
STOCKHOLDERS' EQUITY  
8. 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 December 31, 2018 and 2017.

 

Common Stock

As of December 31, 2018 and 2017, the Company was authorized to issue 75 million shares of its common stock, $0.0001 par value per share, and 46,353,068 and 36,725,499 shares of common stock were outstanding as of December 31, 2018 and 2017, respectively. After giving effect to shares reserved for the issuance of warrants and stock options, 23,776,541 shares of common stock were available for issuance as of December 31, 2018.

 

As of December 31, 2018 and 2017, the Company was also authorized to issue 8,591,160 shares of its non-voting common stock, $0.0001 par value per share, and 0 and 8,591,160 shares of its non-voting common stock were outstanding as of December 31, 2018 and 2017, respectively.

 

In June 2018, the Company completed an underwritten public offering of 9,623,430 shares of common stock for gross proceeds of $46.0 million. The Company received net proceeds from this offering, after underwriters’ commissions and other offering expenses, of $42.9 million.

 

On November 13, 2017, the Company completed an underwritten public offering of 19,523,255 shares of its common stock for gross proceeds of $42.0 million. Net proceeds from this offering, after payment of underwriting discounts and offering expenses of $2.8 million, were $39.2 million.

 

On June 6, 2017, the Company issued 4,295,580 shares of common stock and the NV Biotest Shares to Biotest in connection with the Biotest Transaction (see Note 3). On May 14, 2018, pursuant to the Biotest Transfer Agreement, the NV Biotest Shares were transferred from Biotest to the Company and the shares were immediately retired and are no longer available for issuance.

 

Warrants

On October 10, 2017, the Company issued to Marathon the Tranche One Warrants (see Note 7) whereby Marathon may purchase an aggregate of 339,301 shares of common stock with an exercise price $3.0946 per share. The Tranche One Warrants became exercisable on the Marathon Closing Date, were valued at $0.6 million and were recorded as discount to the Tranche One Note. The Tranche One Warrants were valued using the Black-Scholes option-pricing model assuming an expected term of seven years, a volatility of 57%, a dividend yield of 0% and a risk-free interest rate of 2.18%. No warrants were issued during the year ended December 31, 2018.

 

At December 31, 2018 and 2017, the Company had outstanding warrants to purchase an aggregate of 528,160 shares of common stock, with a weighted average exercise price of $4.76 per share and with expiration dates ranging between June 2022 and October 2024.

 

Stock Options

From time to time the Company grants stock options or other equity-based awards under the Company’s 2007 Employee Stock Option Plan (the “2007 Plan”) and the Amended and Restated 2014 Omnibus Incentive Compensation Plan (the “2014 Plan”).  

 

The 2014 Plan, as amended, was approved by the Board on March 15, 2017 and by the Company’s stockholders on May 25, 2017. Currently, the maximum number of shares reserved for grant under the 2014 Plan is: (a) 2,334,940 shares, less any shares available as of such date for issuance under the 2007 Plan; plus (b) an annual increase as of the first day of the Company’s fiscal year, beginning in 2018 and occurring each year thereafter through 2022, equal to 4% of the outstanding shares of common stock as of the end of the Company’s immediately preceding fiscal year, or any lesser number of shares determined by the Board; provided, however, that no more than an aggregate of 10 million shares of common stock may be issued pursuant to incentive stock options intended to qualify under Section 422 of the Internal Revenue Code. As of December 31, 2018, an aggregate of 1,395,610 shares were available for issuance under the 2007 Plan and the 2014 Plan. In accordance with the foregoing, on January 1, 2019 the aggregate number of shares available for issuance increased to 3,249,732.

 

During the years ended December 31, 2018 and 2017, the Company recorded stock-based compensation expense to employees of $2.2 million and $1.6 million, respectively. The fair value of employee options granted was determined on the date of grant using the Black-Scholes model. The Black-Scholes option valuation model was developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the underlying Black-Scholes assumptions can materially affect the fair value estimate. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of the grant with a term consistent with the expected term of the Company’s awards. The expected term of the options granted is in accordance with Staff Accounting Bulletins 107 and 110, which is based on the average between vesting terms and contractual terms. The expected dividend yield reflects the Company’s current and expected future policy for dividends on the Company’s common stock. For the year ended December 31, 2018, the expected stock price volatility for the Company’s stock options was calculated by examining the historical volatility of the Company’s common stock since the stock became publicly traded in the fourth quarter of 2013. For the year ended December 31, 2017, the expected stock price volatility for the Company’s stock options was calculated by examining the pro rata historical volatilities for similar publicly traded industry peers and the trading history for the Company’s common stock.    

 

The grant date fair values of stock options awarded during the years ended December 31, 2018 and 2017 were determined using the Black-Scholes option-pricing model with the following assumptions:

 

    Year Ended   Year Ended  
    December 31, 2018   December 31, 2017  
Expected term     5.8-6.3 years       5.8-6.3 years    
Volatility     54-57 %     56-64 %  
Dividend yield     0.0       0.0    
Risk-free interest rate     2.40-3.11%       1.77-2.29%    

 

The 2007 Plan and 2014 Plan provide for the Board or a Committee of the Board (the “Committee”) to grant awards to optionees and to determine the exercise price, vesting term, expiration date and all other terms and conditions of the awards, including acceleration of the vesting of an award at any time. All options granted under the 2007 and 2014 Plans are intended to be incentive stock options (“ISOs”), unless specified by the Committee to be non-qualified options (“NQOs”) as defined by the Internal Revenue Code. ISOs and NQOs may be granted to employees, consultants or Board members at an option price not less than the fair market value of the common stock subject to the stock option agreement. The following table summarizes information about stock options outstanding as of December 31, 2018 and 2017: 

 

    Shares   Weighted Average Exercise Price
Balance at December 31, 2016     1,535,187     $ 7.90  
Forfeited     (94,024 )   $ 7.72  
Expired     (47,476 )   $ 9.02  
Granted     1,976,295     $ 3.73  
Exercised     (93,939 )   $ 2.68  
Balance at December 31, 2017     3,276,043     $ 5.52  
Forfeited     (60,854 )   $ 4.09  
Expired     (34,489 )   $ 8.38  
Granted     1,167,044     $ 4.15  
Exercised     (5,513 )   $ 3.31  
Balance at December 31, 2018     4,342,231     $ 5.16  
                 
Options exercisable     2,192,663     $ 6.30  

 

The weighted average remaining contractual term of stock options outstanding and expected to vest at December 31, 2018 is 7.5 years. The weighted average remaining contractual term of stock options exercisable at December 31, 2018 is 6.2 years. The following table summarizes additional information regarding outstanding and exercisable options under the stock option plans at December 31, 2018:

 

          Stock Options Outstanding       Stock Options Exercisable  
  Range of Exercise Prices       Options Outstanding       Weighted Average Remaining Contractual Life (Years)       Weighted Average Exercise Price       Aggregate Intrinsic Value       Options Outstanding       Weighted Average Remaining Contractual Life (Years)       Weighted Average Exercise Price       Aggregate Intrinsic Value  
  $1.34 - $2.06       35,168       7.9     $ 1.96     $ 14,966       12,928       6.2     $ 1.80     $ 7,627  
  $2.96 - $4.60       2,563,017       8.7     $ 3.66       —         789,901       8.4     $ 3.64       —    
  $4.72 - $7.21       593,893       8.4     $ 5.52       —         262,908       7.4     $ 5.66       —    
  $7.56 - $10.80       1,150,153       4.4     $ 8.39       —         1,126,926       4.3     $ 8.37       —    
          4,342,231       7.5     $ 5.16     $ 14,966       2,192,663       6.2     $ 6.30     $ 7,627  

  

Stock-based compensation expense for the years ended December 31, 2018 and 2017 was as follows:

 

    2018   2017
         
Research and development   $ 292,736     $ 380,925  
Plasma centers     34,797       47,330  
Selling, general and administrative     1,739,037       1,081,236  
Cost of product revenue     156,718       52,168  
                 
Total stock-based compensation expense   $ 2,223,288     $ 1,561,659  

 

As of December 31, 2018, the total unrecognized compensation expense related to unvested options was $4.3 million, which is expected to be recognized over a weighted-average period of 2.6 years. The Company’s outstanding and exercisable options had an intrinsic value of approximately $8,000 as of December 31, 2018.