Shareholder Equity

Equity Financings

On March 23, 2018, the Company raised approximately $9.0 million of net proceeds from the sale of 7,968,128 shares of common stock at a price of $1.13 per share in a registered direct public offering and the sale of common stock purchase warrants to purchase 7,968,128 shares of common stock at a price of $0.125 per warrant in a concurrent private placement (collectively, the “March 2018 Financing”). Subject to certain ownership limitations, the common stock purchase warrants issued in the March 2018 Financing were exercisable immediately upon issuance at an exercise price equal to $1.20 per share of common stock, subject to adjustments as provided under the terms of such common stock purchase warrants. The common stock purchase warrants are exercisable for five years from March 23, 2018.

On June 4, 2018, we raised approximately $41.9 million of net proceeds from the sale of 25,555,556 shares of our common stock in an underwritten public offering.

During the six months ended June 30, 2018, the Company received proceeds of $7.3 million from the exercise of outstanding warrants to purchase common stock issued in connection with (i) its underwritten public offering in November 2017 and (ii) its private placement of common stock warrants in March 2018.

On June 21, 2019, the Company completed the June 2019 Financing, which raised approximately $28 million of net proceeds, pursuant to which it issued 20,410,000 shares of common stock and accompanying warrants to acquire 20,410,000 shares of common stock. The combined purchase price for each share of common stock and accompanying warrant was $1.47. Subject to certain ownership limitations, such warrants were exercisable immediately at an exercise price equal to $1.47 per share of common stock, subject to adjustments as provided under the terms of such warrants and have a one-year term expiring on June 21, 2020.

Between April 1, 2019 and June 30, 2019, the Company received proceeds of $3.4 million from the exercise of outstanding warrants to purchase common stock issued in connection with (i) its underwritten public offering in November 2017 and (ii) its private placement of common stock warrants in March 2018.

Common stock warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging - Contracts in Entity’s Own Equity, as either derivative liabilities or as equity instruments depending upon the specific terms of the warrant agreement. All of the Company’s warrants are classified as equity because they do not contain terms requiring derivative liability classification.

Warrants outstanding and warrant activity for the six-month period ended June 30, 2019 is as follows:



Description	Classification	Issuance Date	Exercise Price	Expiration Date	Balance December 31, 2018	Warrants Issued	Warrants Exercised	Warrants Expired	Balance June 30, 2019
Non-tradeable warrants	Equity	06/21/19	$1.47	June 2020	—	20,410,000	—	—	20,410,000
Non-tradeable warrants	Equity	03/23/18	$1.20	Mar. 2023	7,210,945	—	1,861,115	—	5,349,830
Non-tradeable warrants	Equity	11/01/17	$0.80	Nov. 2022	1,991,687	—	1,500,000	—	491,687
Non-tradeable warrants	Equity	05/11/15	$11.83	May 2025	27,500	—	—	—	27,500
Non-tradeable warrants	Equity	11/25/14	$11.04	Nov. 2024	27,500	—	—	—	27,500
					9,257,632	20,410,000	3,361,115	—	26,306,517

Share-Based Payments

At the Company's 2019 Annual Meeting of Stockholders (the “Annual Meeting”) held on June 19, 2019, the Company's stockholders approved an amendment to the 2014 Plan, that (i) increased the number of shares reserved for issuance under the 2014 Plan by 7,908,972 shares and (ii) eliminated the “evergreen” or automatic replenishment provision of the 2014 Plan pursuant to which the number of shares authorized for issuance under the 2014 Plan is automatically increased on an annual basis (collectively, the "2014 Plan Amendment").

As of June 30, 2019, the total number of shares of common stock available for issuance under the 2014 Plan was 9,045,174.

In September 2016, the Company issued 650,000 inducement equity awards outside the 2014 Plan in accordance with Nasdaq Listing Qualifications Department (“Nasdaq”) Listing Rule 5635(c)(4). The inducement equity awards were approved and recommended by the Company's Compensation Committee, approved by the Board of Directors and were made as an inducement material to certain individuals’ acceptance of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). In August 2018, the Company issued 1,350,000 inducement equity awards outside the 2014 Plan in accordance with Nasdaq Listing Rule 5635(c)(4). The inducement equity awards were approved and recommended by the Company's Compensation Committee, approved by the Board of Directors and were made as an inducement material to Dr. Thomas R. Cannell’s acceptance of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). In December 2018, the Company issued 425,000 inducement equity awards outside the 2014 Plan in accordance with Nasdaq Listing Rule 5635(c)(4). The inducement equity awards were approved and recommended by the Company's Compensation Committee, approved by the Board of Directors and were made as an inducement material to Dr. Dennis Kim’s acceptance of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). As of June 30, 2019, the total amount of shares outstanding classified as inducement awards was 1,875,000.

The Company also maintains the Company's 2009 Stock Incentive Plan, as amended and restated, and the Company's 2014 Employee Stock Purchase Plan (the "2014 ESPP").

Stock-Based Compensation Expense

Stock-based compensation expense by award type was as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options	$	355	$	283	$	680	$	659
Restricted stock	—		—		$	—	22
Employee stock purchase plan	—		2		2		5
	$	355	$	285	$	682	$	686

The Company allocated stock-based compensation expense as follows in the condensed consolidated statements of operations and comprehensive loss (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development expense	$	86	$	123	$	139	$	288
General and administrative expense	269		162		$	543	$	398
	$	355	$	285	$	682	$	686

At June 30, 2019, there was $3.4 million of total unrecognized compensation expense related to unvested stock options for employee and non-employee consultants and shares issued pursuant to the 2014 ESPP. This unrecognized compensation expense is expected to be recognized over a weighted-average period of 2.98 years.

Stock Options

A summary of the stock option activity is presented below:



	Shares		Weighted-Average Exercise Price
Outstanding at December 31, 2018	3,941,947		$	2.12
Granted	2,425,115		0.93
Exercised	(30,000	)	1.50
Cancelled or forfeited	(558,018	)	2.30
Outstanding at June 30, 2019	5,779,044		$	1.60
Exercisable at June 30, 2019	1,189,418		$	2.86

In October 2017, the Company issued stock option awards to certain employees which contained performance vesting conditions. These options vested in installments based on the achievement of certain strategic and clinical milestones. In January 2018, March 2018, June 2018, and July 2019, the Compensation Committee of our Board determined that certain performance milestones were met. Stock-based compensation expense associated with these performance-based stock options is recognized over the service and performance period if any performance condition is considered probable of achievement using management’s best estimate. For these performance-based awards, the Company recorded $2,000 and ($16,000) of expense in the three and six months ended June 30, 2019, respectively. The expense in the six months ended June 30, 2019 reflects forfeitures recorded during the period. The Company recorded $63,000 and $274,000 of expense in the three and six months ended June 30, 2018, respectively. As of June 30, 2019, there was no unrecognized compensation expense remaining related to performance-based awards.

Restricted Stock

From time to time, upon approval by the Board, certain employees, directors and consultants have been granted restricted shares of common stock and restricted stock units. As of June 30, 2019, the Company does not have any outstanding restricted stock awards or restricted stock units.

Employee Stock Purchase Plan

On March 14, 2019, the Company issued and sold 8,601 shares of its common stock pursuant to the 2014 ESPP at a purchase price of $0.8356 per share and on March 14, 2018, the Company issued and sold 9,565 shares of its common stock pursuant to the 2014 ESPP at a purchase price of $0.9800 per share. No shares were issued under the 2014 ESPP for the three months ended June 30, 2019. The Company estimates the number of shares to be issued at the end of an offering period and recognizes expense over the requisite service period.