Stockholders' Equity

12 Months Ended

Dec. 31, 2015

Stockholders' equity:

Stockholders' Equity

(7) Stockholders' Equity

(a) Preferred Stock

The Company is authorized to issue 5,000,000 shares of $0.01 par value preferred stock with such designations, rights and preferences as may be determined by the Board of Directors. There were no Preferred Shares issued and outstanding at December 31, 2015 and 2014.

(b) Common Stock

The Company’s stockholders approved an amendment to the Company’s corporate Charter at the Annual Shareholder Meeting held in Philadelphia, PA that concluded on December 8, 2011. This amendment increased the Company’s authorized shares from 200,000,000 to 350,000,000 with specific limitations and restrictions on the usage of 75,000,000 of the 150,000,000 newly authorized shares.

On September 16, 2015, the Company's stockholders removed the limitations and restrictions on 67,000,000 shares. The Company's stockholders approved up to an additional 60,000,000 shares for use in capital raising transactions and 7,000,000 shares for use in the Equity Plan of 2009.

As of December 31, 2015 and 2014, 247,559,487 and 204,004,818 shares were outstanding, respectively.

(c) Equity Financings

On July 23, 2012, The Company entered into a EDA with Maxim (the "EDA”) pursuant to which the Company may sell up to $75,000,000 worth of its shares of common stock from time to time through Maxim, as sales agent. Under the EDA, Maxim is entitled to a fixed commission rate of 4.0% of the gross sales price of Shares sold under the EDA, up to aggregate gross proceeds of $10,000,000, and thereafter, at a fixed commission rate of 3.0% of the gross sales price of Shares sold under the EDA. Sales of the Shares, if any, may be made in transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers' transactions, including on the NYSE MKT, at market prices or as otherwise agreed with Maxim. The Company has no obligation to sell any of the Shares and may at any time suspend offers under the EDA or terminate the EDA. Up until August 4, 2015, the shares were being sold pursuant to the Company's Universal Shelf Registration Statement on Form S-3, declared effective by the Securities and Exchange Commission on July 2, 2012. Since August 4, 2015, the shares are being sold pursuant to the Company's Universal Shelf Registration Statement on Form S-3, declared effective by the Securities and Exchange Commission on August 4, 2015 (the “2015 Universal Shelf”). 

On August 4, 2015, the Company and Maxim Group LLC amended their July 23, 2012 EDA solely for the purpose of adding the registrant’s new registration statement on Form S-3 (File No 333-205228) to the definition of “registration statement” as the old registration statement expired.

On August 5, 2015, the Company filed an updated Prospectus Supplement to reflect that sales under the EDA are now being conducted pursuant to the 2015 Universal Shelf. In addition, on September 16, 2015, the Company's stockholders approved up to an additional 60,000,000 of the remaining Restricted Shares for use in capital raising transactions

For the period ended December 14, 2015, we sold an aggregate of 40,995,890 shares that resulted in net cash proceeds of approximately $9,681,000 after commissions paid to Maxim for approximately $299,000. On December 15, 2015, the Company filed a Prospectus Supplement reducing all offerings pursuant to its existing equity distribution agreement with Maxim Group LLC to $0.

On December 15, 2015, Hemispherx Biopharma, Inc. (the “Company”) entered into an Equity Distribution Agreement with Chardan Capital Markets, LLC (the “Agreement”) to create an at-the-market equity program under which it may sell shares of its common stock (the “Shares”) from time to time through Chardan Capital Markets, LLC, as sales agent (“Chardan”). Under the Agreement, Chardan will be entitled to a commission at a fixed commission rate of 3.0% of the gross sales price of Shares sold under the Agreement.

Sales of the Shares, if any, under the Agreement may be made in transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions, including on the NYSE MKT, at market prices or as otherwise agreed with Chardan. The Company has no obligation to sell any of the Shares, and may at any time suspend offers under the Agreement or terminate the Agreement.

The Shares will be issued pursuant to the Company’s previously filed and effective Registration Statement on Form S-3 (File No. 333-205228). On December 16, 2015, the Company filed a Prospectus Supplement relating to the Chardan offering with the Securities and Exchange Commission. In 2015, no shares were sold under the Chardan Agreement.

The Company’s plans to allocate the net proceeds from the offering towards research and development, operations and general and administrative purposes related to the commercialization of Ampligen® and Alferon® related products, including, but not limited to, the following: (1) Costs to maintain the Alferon N Injection® manufacturing facility and to prepare for the FDA pre-approval inspections of the Ampligen® facility, (2) Manufacture of commercial product, (3) Potential new preclinical and/or clinical studies in order to gain commercial approval for Ampligen® and broader approvals for Alferon® and Alferon LDO®, (4) Working capital to build and maintain sufficient inventory by procuring raw materials, supplies and other items for the New Brunswick manufacturing facility, as well as to remunerate outside contractors for necessary services, such as, final filling and finishing operations in order to meet any anticipated demand from normal operations as well as through the possible pursuit of other disease areas and/or geographic regions that may present themselves, (5) Pursuit of potential partnering opportunities for Ampligen®, (6) Potential establishment of sales and marketing capabilities, as well as consideration towards the expansion of our manufacturing capacity, and (7) working capital for general and administrative expenses.

(d) Common Stock Options and Warrants

(i) Stock Options

The Equity Plan of 2004, effective May 1, 2004, authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. A maximum of 8,000,000 shares of common stock was reserved for potential issuance pursuant to awards under the Equity Plan of 2004. The Equity Plan of 2004 continued in effect for a period of 10 years from its effective date. The plan terminated on May 1, 2014.

The Equity Incentive Plan of 2007, effective June 20, 2007, authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. A maximum of 9,000,000 shares of common stock is reserved for potential issuance pursuant to awards under the Equity Incentive Plan of 2007. Unless sooner terminated, the Equity Incentive Plan of 2007 will continue in effect for a period of 10 years from its effective date.

The Equity Incentive Plan of 2009, effective June 24, 2009, authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. A maximum of 15,000,000 shares of common stock is reserved for potential issuance pursuant to awards under the Equity Incentive Plan of 2009. In September 2015, the Company's shareholders approved the following amendments to the 2009 Plan: (1) increased the number of shares authorized to be issued under the Equity Incentive Plan from 15,000,000 to 22,000,000; (2) required a gradual vesting period of options issued under the Equity Incentive Plan over a three year period; (3) revised the definition of “change in control” to make it less “liberal” by amending the provision that a change in control occurs upon stockholder approval of a merger, consolidation or sale or disposition by the Company of all or substantially all of its assets (a “Business Combination”) to state that such a change in control occurs upon the consummation of the Business Combination; and (4) clarified that the definition of change in control has a double trigger – For a Participant to get the benefit resulting from a change in control, such Participant must have been terminated other than for cause within a two year period. Unless sooner terminated, the Equity Incentive Plan of 2009 will continue in effect for a period of 10 years from its effective date. 

The Equity Plan of 2004 and the Equity Incentive Plans of 2007 and 2009 are administered by the Board of Directors. The Plans provide for awards to be made to such Officers, other key employees, non-employee Directors, consultants and advisors of the Company and its subsidiaries as the Board may select.

Stock options awarded under the Plans may be exercisable at such times (not later than 10 years after the date of grant) and at such exercise prices (not less than fair market value at the date of grant) as the Board may determine. The Board may provide for options to become immediately exercisable upon a "change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control.

The fair value of each option and equity warrant award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option and equity warrant. The Company uses historical data to estimate expected dividend yield, life and forfeiture rates. The expected life of the options and equity warrants was estimated based on historical option and equity warrant holders' behavior and represents the period of time that options and equity warrants are expected to be outstanding. The fair values of the options and equity warrants granted, were estimated based on the following weighted average assumptions:

	Year Ended December 31,
	2015	2014	2013
Risk-free interest rate	1.32%-1.72%	1.66%-1.72%	0.14%-1.40%
Expected dividend yield	0	0	0
Expected life	2.5-5 years	5 years	1-5 years
Expected volatility	83.840%-85.220%	84.497%-92.631%	89.727%-118.22%
Weighted average grant date fair value for options and equity warrants issued	$0.15 per option/warrant for 825,000 options/equity warrants	$0.18 per option for 1,314,284 options	$0.14 per option/warrant for 4,120,000 options/equity warrants

For stock options or equity warrants granted to employees and non-employees, the Company measures fair value of the equity instruments utilizing the Black-Scholes-Merton pricing method. The Company amortizes such cost over the related period of service.

The exercise price of all stock options and equity warrants granted was equal to or greater than the fair market value of the underlying common stock on the date of the grant.

The 1990 Stock Option Plan provided for the grant of options to purchase up to 460,798 shares of the Company's Common Stock to employees, Directors, and Officers of the Company and to consultants, advisors, and other persons whose contributions are important to the success of the Company. The recipients of options granted under the 1990 Stock Option Plan, the number of shares to be converted by each option, and the exercise price, vesting terms, if any, duration and other terms of each option shall be determined by the Company's Board of Directors or, if delegated by the Board, its Compensation Committee. no option is exercisable more than 10 years and one month from the date as of which an option agreement is executed. These shares become vested through various periods not to exceed four years from the date of grant. The option price represents the fair market value of each underlying share of Common Stock at the date of grant, based upon the public trading price. This plan is no longer in effect and no further options will be issued from this plan.

Information regarding the options approved by the Board of Directors under the 1990 Stock Option Plan is summarized below:

	2013							2014						2015
	Shares			Option Price		Weighted Average Exercise Price		Shares		Option Price		Weighted Average Exercise Price		Shares		Option Price		Weighted Average Exercise Price
Outstanding, beginning of year		200,000			2.75	$	2.75		—		—	$	—		—		—	$	—
Granted		—			—		—		—		—		—		—		—		—
Forfeited		(200,000	)		2.75		2.75		—		—		—		—		—		—
Exercised		—			—		—		—		—		—		—		—		—
Outstanding, end of year		—		$	—	$	—		—	$	—	$	—		—	$	—	$	—
Exercisable, end of year		—		$	—	$	—		—	$	—	$	—		—	$	—	$	—
Weighted average remaining contractual life (years)		0 years							0 years						0 years
Available for future grants		—							—						—

The Equity Plan is administered by the Board of Directors. The Equity Plan provides for awards to be made to such Officers, other key employees, non-employee directors, consultants and advisors of the Company and its subsidiaries as the Board may select. 

Information regarding the options approved by the Board of Directors under Equity Plan of 2004 is summarized below:

	2013							2014							2015
	Shares			Option Price		Weighted Average Exercise Price		Shares			Option Price		Weighted Average Exercise Price		Shares			Option Price		Weighted Average Exercise Price
Outstanding, beginning of year		6,630,934			1.30-6.00	$	2.66		6,480,934			1.30-6.00	$	2.68		5,864,626			1.30-6.00	$	2.69
Granted		—			—		—		—			—		—		—			—		—
Forfeited		(150,000	)		2.00	$	2.00		(616,308	)		1.90-3.44	$	2.58		(1,205,912	)		$1.63-2.87	$	1.95
Exercised		—			—		—		—			—		—		—			—		—
Outstanding, end of year		6,480,934			1.30-6.00	$	2.68		5,864,626			1.30-6.00	$	2.69		4,658,714			1.30-6.00	$	2.88
Exercisable, end of year		6,480,934			1.30-6.00	$	2.68		5,864,626			1.30-6.00	$	2.69		4,658,714			1.30-6.00	$	2.88
Weighted average remaining contractual life (years)		2-5 years							1-4 years							1-3 years
Available for future grants		170,019							—							—

Information regarding the options approved by the Board of Directors under Equity Plan of 2007 is summarized below:

	2013						2014						2015
	Shares		Option Price		Weighted Average Exercise Price		Shares		Option Price		Weighted Average Exercise Price		Shares		Option Price		Weighted Average Exercise Price
Outstanding, beginning of year		1,550,000		0.72-3.05		2.17		1,550,000		0.72-3.05		2.17		1,550,000		0.72-3.05		2.17
Granted		—		—		—		—		—		—		—		—		—
Forfeited		—		—		—		—		—		—		—		—		—
Exercised		—		—		—		—		—		—		—		—		—
Outstanding, end of year		1,550,000		0.72-3.05		2.17		1,550,000		0.72-3.05		2.17		1,550,000		0.72-3.05		2.17
Exercisable, end of year		1,550,000		0.72-3.05		2.17		1,550,000		0.72-3.05		2.17		1,550,000		0.72-3.05		2.17
Weighted average remaining contractual life (years)		5-7 years						4-6 years						3-5 years
Available for future grants		3,004						3,004						3,004

Information regarding the options approved by the Board of Directors under Equity Plan of 2009 is summarized below:

	2013						2014							2015
	Shares		Option Price		Weighted Average Exercise Price		Shares			Option Price		Weighted Average Exercise Price		Shares			Option Price		Weighted Average Exercise Price
Outstanding, beginning of year		4,688,978		0.21-4.03		0.61		6,708,978			0.21-4.03		0.61		7,673,262			0.21-4.03		0.55
Granted		2,020,000		0.22-2.00		0.40		1,314,284			0.33-2.60		0.40		800,000			0.25		0.25
Forfeited		—		—		—		(350,000	)		0.31-2.81		1.45		(653,728	)		0.25-4.03		1.74
Exercised		—		—		—		—			—		—		—			—		—
Outstanding, end of year		6,708,978		0.21-4.03		0.55		7,673,262			0.21-4.03		0.55		7,819,534			0.21-4.03		0.46
Exercisable, end of year		5,713,145		0.21-4.03		0.55		6,929,335			0.21-4.03		0.55		7,486,201			0.21-4.03		0.46
Weighted average remaining contractual life (years)		6-10 years						5-10 years							4-10 years
Available for future grants		3,090,478						1,487,543							8,341,271

Stock option activity during the years ended December 31, 2013, 2014 and 2015 is as follows:

Stock option activity for employees: 

	Number of  Options			Weighted Average Exercise Price		Weighted Average Remaining Contracted Term (Years)		Aggregate Intrinsic Value
Outstanding December 31, 2012		9,441,480		$	1.90		5.35		—
Granted		1,170,000			0.36				—
Forfeited		—			—		—		—
Outstanding December 31, 2013		10,611,480		$	1.73		4.92		—
Granted		1,264,284			0.97		—		—
Forfeited		(587,876	)		1.78		—		—
Outstanding December 31, 2014		11,287,888		$	1.64		4.61		—
Granted		800,000			0.25		—		—
Forfeited		(1,362,640	)		1.31		—		—
Outstanding December 31, 2015		10,725,248		$	1.58		4.02		—
Vested and expected to vest at December 31, 2015		10,391,915		$	1.54		3.73		—
Exercisable at December 31, 2015		10,391,915		$	1.54		3.73		—

The weighted-average grant-date fair value of employee options granted during the year 2015 was $121,000 for 800,000 options at $0.15 per option, during the year 2014 was $230,000 for 1,264,284 options at $0.18 per option, and the year 2013 was $222,000 for 1,170,000 options at $0.19 per option.

Unvested stock option activity for employees:

	Number of  Options			Weighted  Average Exercise  Price		Average  Remaining  Contracted  Term (Years)		Aggregate Intrinsic  Value
Outstanding December 31, 2012		516,373		$	0.45		9.43		—
Granted		595,000			0.24		—		—
Vested		(586,373	)		0.38		—		—
Forfeited		—			—		—		—
Outstanding December 31, 2013		525,000		$	0.29		8.38		—
Granted		1,264,284			0.97		—		—
Vested		(1,078,690	)		0.38		—		—
Forfeited		—			—		—		—
Outstanding December 31, 2014		710,594		$	1.38		8.76		—
Granted		800,000			0.25		—		—
Vested		(1,177,261	)		0.92		—		—
Forfeited		—			—		—		—
Outstanding December 31, 2015		333,333		$	0.29		7.82		—

The weighted-average grant-date fair value of employee unvested stock options granted during the year 2015 was $51,000 for 333,333 options at $0.15 per option, during the year 2014 was $230,000 for 1,264,284 options at $0.18 per option, and during the year 2013 was $100,000 for 595,000options at $0.24 per option.

Stock option activity for non-employees during the year:

	Number of  Options			Weighted  Average Exercise  Price		Weighted  Average  Remaining  Contracted  Term (Years)		Aggregate Intrinsic Value
Outstanding December 31, 2012		3,428,432		$	1.73		4.71		—
Granted		850,000			0.56		—		—
Exercised		—			—		—		—
Forfeited		(150,000	)		2.00		—		—
Outstanding December 31, 2013		4,128,432		$	1.48		5.01		—
Granted		50,000			2.60		—		—
Exercised		—			—		—		—
Forfeited		(378,432	)		2.78		—		—
Outstanding December 31, 2014		3,800,000		$	1.36		4.75		—
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited		(497,000	)		1.86		—		—
Outstanding December 31, 2015		3,303,000		$	1.29		4.31		—
Vested and expected to vest at December 31, 2015		3,303,000		$	1.29		4.31		—
Exercisable at December 31, 2015		3,303,000		$	1.29		4.31		—

The weighted-average grant-date fair value of non-employee options granted during the year 2015 was zero, as no options were granted to non-employees in 2015, during the year 2014 was $5,000 for 50,000 options at $0.10 per option, and during the year 2013 was $131,000 for 850,000 options at $0.15 per option.

Unvested stock option activity for non-employees:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contracted Term (Years)		Aggregate Intrinsic Value
Outstanding December 31, 2012		210,422		$	0.40		9.68		—
Granted		470,833			0.25		—		—
Vested		(210,422	)		0.40		—		—
Forfeited		—			—		—		—
Outstanding December 31, 2013		470,833		$	0.25		9.61		—
Granted		50,000			2.60		—		—
Vested		(487,500	)		0.33		—		—
Forfeited		—			—		—		—
Outstanding December 31, 2014		33,333		$	2.60		9.08		—
Granted		—			—		—		—
Vested		(33,333	)		2.60		—		—
Forfeited		—			—		—		—
Outstanding December 31, 2015		—		$	—		—		—

Stock-based compensation expense was approximately $181,000, $326,000 and $376,000 for the year ended December 31, 2015, 2014, and 2013, respectively resulting in an increase in general and administrative expenses with no effect on earnings per share

As of December 31, 2015 and 2014, there was $199,000 and $259,000, respectively, of unrecognized stock-based compensation cost related to options granted under the Equity Incentive Plans. Stock-based compensation related to options granted under the Equity Incentive Plans will be recorded over the vesting period which is typically one year or upon reaching agreed upon company and/or individual performance milestones being met which is indefinite.

(ii) Stock Warrants

Stock warrants are issued as needed by the Board of Directors and have no formal plan.

The fair value of each warrant award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the warrant. The Company uses historical data to estimate expected dividend yield, life and forfeiture rates. The expected life of the warrants was estimated based on historical option holder’s behavior and represents the period of time that options are expected to be outstanding. There were 25,000 warrants granted during 2015 at $0.09 per Warrant.

Information regarding warrants outstanding and exercisable into shares of common stock is summarized below:

	2013						2014							2015
	Shares		Warrant Price		Weighted Average Exercise Price		Shares			Warrant Price		Weighted Average Exercise Price		Shares			Warrant Price		Weighted Average Exercise Price
Outstanding, beginning of year		11,128,246		0.51-2.00	$	1.44		13,228,246			0.25-2.00	$	1.26		2,399,058			0.25-2.00	$	0.56
Granted		2,100,000		0.25-0.50	$	0.33		—			—	$	—		25,000			0.09	$	0.09
Forfeited		—		—		—		(10,829,188	)		0.29-1.65		1.41		(657,862	)		0.51-1.55		0.77
Exercised		—		—		—		—			—		—		—			—		—
Outstanding, end of year		13,228,246		0.25 –2.00	$	1.26		2,399,058			0.25-2.00	$	0.56		1,766,196			0.09-2.00	$	0.48
Exercisable		11,328,246		0.50-2.00	$	1.42		2,399,058			0.25-2.00	$	0.56		1,766,196			0.09-2.00		$ 0. 48
Weighted average remaining contractual life		1.5 years						4.8 years							4.4 years
Years exercisable		2014-2023						2014-2023							2017-2023

Stock warrants are issued at the discretion of the Board. In 2015, there were no warrants issued. Certain of the stock warrants outstanding are subject to adjustments for stock splits and dividends. No warrants were exercised during 2013, 2014 or 2015.

(e) Rights Offering

On November 19, 2002, the Board of Directors of the Company declared a dividend distribution of one Right for each outstanding share of Common Stock to stockholders of record at the close of business on November 29, 2002 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-hundredth of a share (a "Unit") of Series A Junior Participating Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock") at a Purchase Price of $30.00 per Unit, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and Continental Stock Transfer & Trust Company, as Rights Agent.

On November 2, 2012, the Company executed an Amended and Restated Rights Agreement amending and restating the November 19, 2002 Rights Agreement between the Company and Continental Stock Transfer & Trust Company, as Rights Agent (as amended, the “Amended Rights Agreement”). The Amended Rights Agreement extends the term of the Rights Plan to November 18, 2017 and amends certain other provisions, as described in the Company’s Amended Registration Statement on Form 8-A/A, filed on November 2, 2012 (the “Amended Form 8-A”). The Amended Rights Plan entitles holders to buy one-hundredth unit of preferred stock for $30.00 and may be redeemed prior to November 19, 2017, the expiration date, at $0.001 per Right under certain circumstances. The Rights generally are not transferable apart from the common stock and will not be exercisable unless and until a person or group acquires or commences a tender or exchange offer to acquire, beneficial ownership of 15% or more of our common stock. However, for Dr. Carter, our Chief Executive Officer, who already beneficially owns approximately 3.50% of our common stock, the Rights Plan’s threshold will be 20%, instead of 15%.