In December 2014, the Company amended and restated its articles of incorporation to reduce the total number of authorized shares of preferred stock. The amended and restated articles of incorporation authorize the issuance of up to 5,000,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors.

On July 29, 2015, the Company’s registration statement on Form S-3, as filed with the SEC on July 23, 2015 (the “2015 Shelf”), was declared effective using a “shelf” registration process. On July 26, 2018, in anticipation of the expiration of the 2015 Shelf, the Company filed a new registration statement on Form S-3 with the SEC (as amended, the “2018 Shelf”). The 2018 Shelf, which was declared effective on August 7, 2018, enables the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $150 million.

On April 5, 2017, the Company closed on the sale of an aggregate of 2,222,222 shares of common stock pursuant to the Company's 2015 Shelf. The Company received gross proceeds of approximately $10,000,000, from the sale of such shares based on a public offering price of $4.50 per share. On April 11, 2017, the Company closed the sale of an additional 333,333 shares of the Company’s common stock, pursuant to the underwriters’ full exercise of an over-allotment option. The Company received gross proceeds of approximately $1,500,000 from the exercise of the option. As a result, the Company received total gross proceeds of $11,500,000 from the offering, and, after deducting the underwriting discounts and commissions and related expenses, the Company received total net proceeds of approximately $10,300,000.

As a result of this offering, the exercise price of the warrants issued in connection with the Company’s March 11, 2014 public offering was reduced to $4.50 in accordance with the pricing provisions of those warrants. There was no change in the number of warrants which were repriced. As a result of the repricing of the warrants which occurred in connection with the April 2017 equity offering, the Company recorded a dividend of $335,731 during the year ended December 31, 2017.

On November 4, 2015, the Company entered into a Controlled Equity Offering

Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., as agent (“Cantor”), pursuant to which the Company may offer to sell, from time to time through Cantor, shares of the Company’s common stock (the “Shares”). Any Shares hereafter offered and sold will be issued pursuant to the Company’s 2018 Shelf, and the related prospectus which the Company filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act.

On July 26, 2018, the Company entered into that certain Amendment No. 1 to the Sales Agreement (the “Sales Agreement Amendment”) to extend the term of the Sales Agreement until the expiration of the 2018 Shelf. The other provisions of the Sales Agreement remain unchanged. References herein to “Sales Agreement” shall refer to the Sales Agreement, as amended by the Sales Agreement Amendment.

Under the Sales Agreement, Cantor may sell Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act, including sales made directly on Nasdaq, on any existing trading market for the common stock or to or through a market maker. In addition, under the Sales Agreement, Cantor may sell the Shares by any other method permitted by law, including in privately negotiated transactions. The Company may instruct Cantor not to sell Shares if the sales cannot be effected at or above the price designated by the Company from time to time.

The Company is not obligated to make any sales of Shares under the Sales Agreement, and if it elects to make any sales, the Company can set a minimum sales price for the Shares. The offering of Shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the expiration of the 2018 Shelf or (b) the termination of the Sales Agreement by Cantor or the Company, as permitted therein. From November 4, 2015 through December 31, 2015, the Company sold 28,880 shares, generating net proceeds of approximately $225,000 under the Sales Agreement. There were no sales during the year ended December 31, 2016. During the year ended December 31, 2017, the Company sold 550,000 shares at an average price of $6.31 per share, generating net proceeds of approximately $3,367,000. During the year ended December 31, 2018, the Company sold 1,515,260 shares at an average cost of $9.61 per share, generating net proceeds of approximately $14,127,000. In the aggregate, the Company has sold 2,094,140 shares at an average selling price of $8.72 per share, generating net proceeds of approximately $17,718,000 under the terms of the Sales Agreement.

The Company pays a commission rate of 3.0% of the aggregate gross proceeds from each sale of Shares and has agreed to provide Cantor with customary indemnification and contribution rights. In 2015, the Company reimbursed Cantor $50,000 for certain specified expenses in connection with the execution of the Sales Agreement.

The Company intends to use the net proceeds raised through “at the market” sales to fund clinical studies in the United States and abroad, expand production capacity, support its sales and marketing efforts, further develop its products, and for general working capital purposes.

As of December 31, 2018, the Company had two Long Term Incentive Plans (the “2014 Plan” and the “2006 Plan”) to attract, retain, and provide incentives to employees, officers, directors, and consultants. The Plans generally provide for the granting of stock, stock options, stock appreciation rights, restricted shares, or any combination of the foregoing to eligible participants.

A total of 7,400,000 and 2,400,000 shares of common stock are reserved for issuance under the 2014 Plan and the 2006 Plan, respectively. As of December 31, 2018, there were outstanding options to purchase approximately 3,185,000 and 954,000 shares of common stock reserved under the 2014 Plan and the 2006 Plan, respectively.

The Compensation Committee is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom incentives are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options. The Compensation Committee is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans. Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Compensation Committee.

The 2014 Plan provides that options may or may not be Incentive Stock Options (ISOs) within the meaning of Section 422 of the Internal Revenue Code. Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options, which are not ISOs, i.e. “Non-Qualified Options.” Because the Company has not yet obtained shareholder approval of the 2006 Plan, all options granted thereunder to date are “Non-Qualified Options” and until such shareholder approval is obtained, all future options issued under the 2006 Plan will also be “Non-Qualified Options.”

In December 2014, the Company’s received shareholder approval authorizing the Board of Directors to implement the form, terms and provisions of the 2014 Plan. Accordingly, any options issued to employees under the 2014 Plan will be ISOs within the meaning of Section 422 of the Internal Revenue Code.

Total share-based employee, director, and consultant compensation for the years ended December 31, 2018, 2017 and 2016 amounted to approximately $4,437,000, $3,314,000 and $2,757,000, respectively. These amounts are included in selling, general, and administrative expenses on the consolidated statement of operations.

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
	Shares			per Share		Life (Years)
Outstanding January 1, 2016		2,477,279		$	6.56		6.2
Granted		1,044,219		$	4.68		-
Forfeited		(695,770	)	$	7.12		-
Expired		(27,351	)	$	114.33		-
Exercised		(36,200	)	$	3.26		2.5
Outstanding, December 31, 2016		2,762,177		$	4.69		6.0
Granted		1,204,950		$	5.46		9.2
Forfeited		(165,720	)	$	5.50		-
Expired		(34,020	)	$	34.61		-
Exercised		(188,849	)	$	4.40		-
Outstanding, December 31, 2017		3,578,538		$	4.64		6.3
Granted		1,481,675		$	8.01		9.2
Forfeited		(544,671	)	$	7.49		-
Expired		(800	)	$	2.88		-
Exercised		(856,280	)	$	3.65		-
Outstanding, December 31, 2018		3,658,462		$	5.82		7.0

The fair value of each stock option was estimated using the Black Scholes pricing model which takes into account as of the grant date the exercise price (ranging from $6.85 to $14.80 per share in 2018) and expected life of the stock option (

years in 2018), the current price of the underlying stock and its expected volatility (ranging from 61.6 to 66.4 percent in 2018), expected dividends (-0- percent) on the stock and the risk free interest rate (2.09 to 3.11 percent) for the term of the stock option. In addition, the Company recognizes forfeitures as they occur.

Options Outstanding

Number

Weighted

Range of

Outstanding at

Average

Aggregate

Exercise

December 31,

Exercise

Remaining

Intrinsic

Price

2018

Price

Life (Years)

Value

$2.23 - $14.80

3,658,462

5.82

7.0

8,651,547

In 2019, the Board of Directors intends to grant a pool of options to purchase shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2019 operations. Since these options relate exclusively to the achievement of 2019 milestones, no charge for these options has been recorded in the consolidated statements of operations for the year ended December 31, 2018. The Company will assess the likelihood of meeting these milestones throughout 2019 and will record stock option expense as appropriate.

On March 15, 2018, the Board of Directors granted options to purchase 531,900 shares of common stock to the Company’s management. On April 23, 2018, the Board of Directors granted options to purchase 668,550 shares of common stock to the Company’s employees. These grants, which total 1,200,450 shares of common stock, will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2018 operations. The grant date fair value of these unvested options amounted to approximately $5,636,000. On

February 19

, 2019, Board of Directors determined that the Company has met

60%

of these milestones, and accordingly we have recorded approximately $3,381,000 of stock option expense related to these options for the year ended December 31, 2018.

On February 24, 2017, the Board of Directors granted options to purchase 953,200 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2017 operations. The grant date fair value of these unvested options amounted to approximately $3,284,000. On February 15, 2018, based upon the finalization of its review of the Company’s progress to meeting the predetermined milestones for 2017, the Board of Directors determined that 810,220 of these options would immediately vest. Accordingly, a charge of approximately $2,791,000 related to these options has been recorded in the consolidated statements of operations for the year ended December 31, 2017.

On June 7, 2016, the Board of Directors granted options to purchase 900,100 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2016 operations. The grant date fair value of these unvested options amounted to approximately $2,437,000. On January 30, 2017, based upon the finalization of its review of the Company’s progress to meeting the predetermined milestones for 2016, the Board of Directors determined that 716,480 of these options would immediately vest. Accordingly, a $1,940,000 charge related to these options has been recorded in the consolidated statements of operations for the year ended December 31, 2016.

The Board of Directors has granted restricted stock units to members of the Board of Directors, to the Company’s executive officers, and to employees of the Company. These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan.

	Board of Directors		Executive Management		Other Employees			Total			Intrinsic Value

December 31, 2016		240,000		523,000		744,500			1,507,500
Granted 2017		24,000		152,300		95,200			271,500
Forfeited 2017		-		-		(24,000	)		(24,000	)
December 31, 2017		264,000		675,300		815,700			1,755,000		$	11,407,500
Granted 2018		13,200		49,200		256,350			318,750
Forfeited 2018		-				(69,750	)		(69,750	)
December 31, 2018		277,200		724,500		1,002,300			2,004,000		$	16,192,320

Pursuant to a review of the compensation of the senior management of the Company, on June 7, 2016, the Board of Directors granted 80,000 restricted stock units to certain senior managers of the Company. These awards were valued at $375,200 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant. These awards are charged to expense over the period which they vest. For the years ended December 31, 2018 and 2017, the Company recorded a charge of approximately $240,000 and $108,000, respectively related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2016, on February 24, 2017, the Board of Directors granted 125,000 restricted stock units to certain senior managers of the Company in order to settle bonuses accrued as of December 31, 2016. These awards were valued at approximately $700,000 on the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant, one third on the first anniversary of the grant, and one third on the second anniversary of the date of the grant. For the years ended December 31, 2018 and 2017, the Company recorded a charge of approximately $329,000 and $201,000 related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2017, on February 28, 2018, the Board of Directors granted 146,200 restricted stock units to certain senior managers of the Company in order to settle bonuses accrued as of December 31, 2017. These awards were valued at approximately $1,148,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant one third on the first anniversary of the grant, and one third on the second anniversary of the date of the grant. For the years ended December 31, 2018 and 2017, the Company recorded a charge of approximately $319,000 and $383,000 related to these restricted stock unit awards.

In connection with its March 11, 2014 offering, the Company issued warrants to purchase 816,000 shares of common stock. As of December 31, 2018, 351,398 of these warrants remain outstanding. These warrants have certain pricing provisions which apply if the Company sells or issues common stock or common stock equivalents at a price that is less than the exercise price of the warrants, which is currently $4.50 over the life of the warrants, excluding certain exempt issuances.