STOCKHOLDERS’ EQUITY

Common Stock

March 25, 2020,

the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with

three

institutional and accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors, in a registered direct offering (the “RDO”), an aggregate of

1,000,002

shares of the Company’s common stock at an offering price of

$3.50

per share, for gross proceeds of approximately

$3.5

million before the deduction of

$393,000

in placement agent fees and offering expenses. The shares were issued and sold by the Company pursuant to a registration statement on Form S-

(File

No.

333

235509

), which was initially filed with the Securities and Exchange Commission (the “Commission”) on

December 13, 2019

and was declared effective by the Commission on

January 3, 2020,

and the related prospectus supplement filed with the Commission on

March 27, 2020.

The closing of the RDO occurred on

March 27, 2020.

The Purchase Agreement also contains representations, warranties, indemnification and other provisions customary for transactions of this nature. Under the Purchase Agreement, (i) the Company and its subsidiaries are prohibited for a period of

days after the closing (subject to certain exceptions) from issuing, entering into any agreement to issue, or announcing the issuance or the proposed issuance of any shares of the Company’s common stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, shares of the Company’s common stock and (ii) the Company is prohibited for a period of

twelve

(

) months after the closing (subject to certain exceptions) from effecting or entering into an agreement to effect any issuance by the Company or any of its subsidiaries of the Company’s common stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, shares of the Company’s common stock involving a Variable Rate Transaction (as defined in the Purchase Agreement).

December 13, 2019,

the Company entered into an At The Market Offering Agreement, by and between the Company and H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”) (the “ATM Agreement”), pursuant to which the Company

may

offer and sell, from time to time through H.C. Wainwright, shares of Common Stock, having an aggregate offering price of up to

$4.4

million (the “HCW Shares”). The offer and sale of the HCW Shares is made pursuant to a shelf registration statement on Form S-

and the related prospectus (File

No.

333

235509

). Pursuant to the ATM Agreement, H.C. Wainwright

may

sell the HCW Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule

415

of the Securities Act, including sales made by means of ordinary brokers’ transactions, including on The NASDAQ Capital Market, at market prices or as otherwise agreed with H.C. Wainwright. H.C. Wainwright will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the HCW Shares from time to time, based upon instructions from the Company, including any price or size limits or other customary parameters or conditions the Company

may

impose. The Company is

not

obligated to make any sales of the HCW Shares under the ATM Agreement. The offering of HCW Shares pursuant to the ATM Agreement will terminate upon the earliest of (a) the sale of all of the HCW Shares subject to the ATM Agreement, (b) the termination of the ATM Agreement by H.C. Wainwright or the Company, as permitted therein, or (c)

August 9, 2022.

The Company will pay H.C. Wainwright a commission rate equal to

of the aggregate gross proceeds from each sale of HCW Shares and have agreed to provide H.C. Wainwright with customary indemnification and contribution rights. The Company will also reimburse H.C. Wainwright for certain specified expenses in connection with entering into the ATM Agreement. As of

March 31, 2020,

the Company sold a total of

50,746

shares of Common Stock for aggregate gross proceeds of

$280,000

at an average selling price of

$5.44

per share, resulting in net proceeds of approximately

$114,000

after deducting legal expenses, audit fees, commissions and other transaction costs of approximately

$167,000.

The Company terminated the ATM Prospectus Supplement on

March 25, 2020,

but the ATM Agreement remains in effect.

Stock Based Compensation

The Company recorded stock-based compensation of

$67,000

and

$81,000

for the

three

months ended

March 31, 2020

and

2019,

respectively, as comprised of the following:

	Three Months Ended March 31,
	2020		2019
Sales and marketing	$	13,000	$	12,000
Research and development		15,000		15,000
General and administrative		39,000		54,000
	$	67,000	$	81,000

The following is a summary of option activity for the Company’s stock option plans:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at December 31, 2019		291,807		$	13.96

Forfeited		(3,958	)	$	3.74

Outstanding at March 31, 2020		287,849		$	14.10		8.06	$	101,074

Vested and expected to vest at March 31, 2020		226,960		$	15.70		7.9	$	75,434

Exercisable at March 31, 2020		143,479		$	20.20		7.61	$	40,430

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. There were

options exercised during the

three

months ended

March 31, 2020.

Warrants

A summary of warrant activity for the

three

months ended

March 31, 2020

follows:

	Number of Shares			Weighted-Average Exercise Price Per Share
Balance at December 31, 2019		1,716,066		$	25.23
Warrants expired		--			--
Warrants exercised		(107,866	)	$	.53

Outstanding at March 31, 2020		1,608,200		$	26.89

Exercisable at March 31, 2020		1,538,347		$	24.47