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Stockholders' Equity and Stock-based Compensation | 9 Months Ended
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Sep. 30, 2018
Equity [Abstract] |
Stockholders' Equity and Stock-based Compensation | NOTE 15. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Common Stock In January 2018, the Company issued 25,273 shares of its restricted common stock, with a fair value of $44, in lieu of a cash payment for accrued royalty expenses. RSUs granted in February 2015 to Andrew R. Boll, the Company’s Chief Financial Officer, vested, and in February 2018, 30,000 shares the Company’s common stock were issued to Mr. Boll. RSUs granted in February 2015 to John P. Saharek, the Company’s Chief Commercial Officer, vested, and in February 2018, 30,000 shares the Company’s common stock were issued to Mr. Saharek. In March 2018, the Company issued 35,427 shares of its restricted common stock, with a fair value of $64, in lieu of a cash payment for accrued royalty expenses. In November 2015, the Company entered into a Controlled Equity OfferingSM sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., as agent (“Cantor Fitzgerald”), pursuant to which the Company may offer and sell, from time to time through Cantor Fitzgerald, shares of our common stock having an aggregate offering price as set forth in the Sales Agreement and a related prospectus supplement filed with the Securities and Exchange Commission. The Company agreed to pay Cantor Fitzgerald a cash commission of 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. The Company sold 305,619 shares of common stock and received net proceeds of $642, after deducting $20 for sales commission and offering expenses, under the Sales Agreement during the nine months ended September 30, 2018, leaving an aggregate of $7,378 available for future sales of shares thereunder as of September 30, 2018. In November 2018, the Company terminated the Sales Agreement. During the nine months ended September 30, 2018, the Company issued 1,476,613 shares of its common stock related to the exercise of common stock warrants with an exercise price of $1.79, and received net proceeds of $2,643. During the nine months ended September 30, 2018, the Company issued 130,122 shares of its common stock related to the cashless exercise of 321,945 common stock warrants with an exercise price of $1.79. During the nine months ended September 30, 2018, 65,536 shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares are deferred until the director resigns. Stock Option Plan On September 17, 2007, the Company’s Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, which was subsequently amended on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27, 2013 (as amended, the “2007 Plan”). The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this plan, however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or are otherwise cancelled/forfeited. On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s 2017 Incentive Stock and Awards Plan (the “2017 Plan” together with the 2007 Plan, the “Plans”). As of September 30, 2018, the 2017 Plan provides for the issuance of a maximum of 2,000,000 shares of the Company’s common stock. The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in the Company’s development and financial success. Under the Plans, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock units and restricted stock. The Plans are administered by the Compensation Committee of the Company’s Board of Directors. Stock Options A summary of stock option activity under the Plans for the nine months ended September 30, 2018 is as follows:
|  | Number of shares |  |  | Weighted Avg. Exercise Price |  |  | Weighted Avg. Remaining Contractual Life |  |  | Aggregate Intrinsic Value |
Options outstanding - January 1, 2018 |  |  | 2,259,979 |  |  | $ | 5.51 |  |  |  |  |  |  |  |  |
Options granted |  |  | 295,000 |  |  | $ | 1.79 |  |  |  |  |  |  |  |  |
Options exercised |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |
Options cancelled/forfeit |  |  | (29,974 | ) |  | $ | 3.36 |  |  |  |  |  |  |  |  |
Options outstanding - September 30, 2018 |  |  | 2,525,005 |  |  | $ | 5.10 |  |  |  | 5.79 |  |  | $ | 631 |
Options exercisable |  |  | 1,277,557 |  |  | $ | 5.12 |  |  |  | 6.22 |  |  | $ | 258 |
Options vested and expected to vest |  |  | 2,396,105 |  |  | $ | 5.10 |  |  |  | 5.80 |  |  | $ | 585 |
The aggregate intrinsic value in the table above represents the total pre-tax amount of the proceeds, net of exercise price, which would have been received by option holders if all option holders had exercised and immediately sold all options with an exercise price lower than the market price on September 30, 2018, based on the closing price of the Company’s common stock of $2.78 on that date. During the nine months ended September 30, 2018, the Company granted stock options to certain employees and consultants. The stock options were granted with an exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which the common stock was then listed, at the grant date and have contractual terms of 10 years. Vesting terms for options granted to employees and consultants during the nine months ended September 30, 2018 typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; and 100% of the shares subject to the option vest on a quarterly basis in equal installments over three years. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. Beginning on April 1, 2018, the Company began calculating expected volatility based solely on the historical volatilities of the common stock of the Company. In the past, the expected volatility was based on the historical volatilities of the common stock of the Company and comparable publicly traded companies, the Company previously utilized this methodology based on its estimate that it had limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate of expected volatility. The expected term of options granted to employees and directors was determined in accordance with the “simplified approach,” as the Company has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior. The expected risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates. For option grants to employees and directors, the Company assigns a forfeiture factor of 10%. These factors could change in the future, which would affect the determination of stock-based compensation expense in future periods. Utilizing these assumptions, the fair value is determined at the date of grant. The table below illustrates the fair value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options granted to employees:
|  | 2018 |
Weighted-average fair value of options granted |  | $ | 1.42 |
Expected terms (in years) |  |  | 5.8 - 6.1 |
Expected volatility |  |  | 76% - 126 | %
Risk-free interest rate |  |  | 2.05 - 3.00 | %
Dividend yield |  |  | - |
The following table summarizes information about stock options outstanding and exercisable at September 30, 2018:
|  |  | Options Outstanding |  |  | Options Exercisable |
|  |  |  |  |  | Weighted |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Average |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  |  | Remaining |  |  | Average |  |  |  |  |  | Average |
Range of |  |  | Number |  |  | Contractual |  |  | Exercise |  |  | Number |  |  | Exercise |
Exercise Prices |  |  | Outstanding |  |  | Life in Years |  |  | Price |  |  | Exercisable |  |  | Price |
| $1.47 - $2.60 |  |  |  | 851,000 |  |  |  | 8.01 |  |  | $ | 2.04 |  |  |  | 367,921 |  |  | $ | 2.18 |
| $3.04 - $4.50 |  |  |  | 547,031 |  |  |  | 7.23 |  |  | $ | 3.96 |  |  |  | 392,138 |  |  | $ | 3.98 |
| $5.49 - $6.36 |  |  |  | 101,536 |  |  |  | 4.82 |  |  | $ | 5.98 |  |  |  | 99,658 |  |  | $ | 5.98 |
| $6.64 - $8.99 |  |  |  | 1,020,408 |  |  |  | 3.29 |  |  | $ | 7.98 |  |  |  | 412,810 |  |  | $ | 8.15 |
| $42.80 |  |  |  | 5,030 |  |  |  | 1.87 |  |  | $ | 42.80 |  |  |  | 5,030 |  |  | $ | 42.80 |
| $1.47 - $42.80 |  |  |  | 2,525,005 |  |  |  | 5.79 |  |  | $ | 5.10 |  |  |  | 1,277,557 |  |  | $ | 5.12 |
As of September 30, 2018, there was approximately $2,139 of total unrecognized compensation expense related to unvested stock options granted under the Plans. That expense is expected to be recognized over the weighted-average remaining vesting period of 2.2 years. The stock-based compensation expense for all stock options was $291 and $1,063 during the three and nine months ended September 30, 2018, respectively. Restricted Stock Units RSU awards are granted subject to certain vesting requirements and other restrictions, including performance and market-based vesting criteria. The grant date fair value of the RSUs, which has been determined based upon the market value of the Company’s common stock on the grant date, is expensed over the vesting period of the RSUs. Unvested portions of RSUs issued to consultants are remeasured on an interim basis until vesting criteria is met. During the three and nine months ended September 30, 2018, the Company’s board of directors were granted 136,360 RSUs with a fair market value $300 which vests on a quarterly basis, over one year in equal installments A summary of the Company’s RSU activity and related information for the nine months ended September 30, 2018 is as follows:
|  | Number of RSUs |  |  | Weighted Average Grant Date Fair Value |
RSUs unvested - January 1, 2018 |  |  | 1,298,946 |  |  | $ | 2.42 |
RSUs granted |  |  | 136,360 |  |  |  | 2.20 |
RSUs vested |  |  | (125,536 | ) |  |  | 3.94 |
RSUs cancelled/forfeit |  |  | - |  |  |  |  |
RSUs unvested at September 30, 2018 |  |  | 1,309,770 |  |  | $ | 2.16 |
As of September 30, 2018, the total unrecognized compensation expense related to unvested RSUs was approximately $756, which is expected to be recognized over a weighted-average period of 0.5 years, based on estimated and actual vesting schedules of the applicable RSUs. The stock-based compensation for RSUs during the three and nine months ended September 30, 2018 was $293 and $870. Warrants From time to time, the Company issues warrants to purchase shares of the Company’s common stock to investors, lenders, underwriters, settlement agreements and other non-employees for services rendered or to be rendered in the future. A summary of warrant activity for the nine months ended September 30, 2018 is as follows:
|  | Number of Shares Subject to Warrants Outstanding |  |  | Weighted Avg. Exercise Price |
Warrants outstanding - January 1, 2018 |  |  | 6,264,215 |  |  | $ | 1.91 |
Granted |  |  | - |  |  |  |  |
Exercised |  |  | (1,798,558 | ) |  |  | 1.79 |
Expired |  |  | (115,688 | ) |  |  | 6.94 |
Warrants outstanding and exercisable - September 30, 2018 |  |  | 4,349,969 |  |  | $ | 1.90 |
Weighted average remaining contractual life of the outstanding warrants in years - September 30, 2018 |  |  | 2.06 |  |  |  |  |
A list of the warrants outstanding as of September 30, 2018 is included in the following table:
|  | Warrants Outstanding |  | Warrants Exercisable
|  |  |  | Warrants |  |  | Exercise |  |  | Warrants |  |  | Expiration
Warrant Series |  | Issue Date |  |  | Outstanding |  |  |  | Price |  |  |  | Exercisable |  |  | Date
Lender warrants |  | 5/11/2015 |  |  | 125,000 |  |  | $ | 1.79 |  |  |  | 125,000 |  |  | 5/11/2025
Settlement warrants |  | 8/16/2016 |  |  | 40,000 |  |  | $ | 3.75 |  |  |  | 40,000 |  |  | 8/16/2021
Placement Agent Warrants |  | 12/27/2016 |  |  | 210,313 |  |  | $ | 1.79 |  |  |  | 210,313 |  |  | 12/27/2019
PIPE Investor Warrants |  | 12/27/2016 |  |  | 3,359,270 |  |  | $ | 1.79 |  |  |  | 3,359,270 |  |  | 12/27/2019
Lender warrants |  | 7/19/2017 |  |  | 615,386 |  |  | $ | 2.08 |  |  |  | 615,386 |  |  | 7/19/2024
|  |  |  |  | 4,349,969 |  |  | $ | 1.90 |  |  |  | 4,349,969 |  |  |
Subsidiary Stock-Based Transactions During the nine months ended September 30, 2018 the Company recognized $17 in stock-based compensation related to equity instruments granted by Surface and Melt to consultants, Imprimis employees and directors, including Mark Baum, CEO of the Company, Andrew Boll, CFO of the Company, and Richard Lindstrom, a director of the Company. The Company recorded stock-based compensation related to equity instruments granted to employees, directors and consultants as follows:
|  | For the |  |  | For the |  |  | For the |  |  | For the |
|  | Three Months Ended |  |  | Three Months Ended |  |  | Nine months Ended |  |  | Nine months Ended |
|  | September 30, 2018 |  |  | September 30, 2017 |  |  | September 30, 2018 |  |  | September 30, 2017 |
Employees - selling, general and administrative |  | $ | 527 |  |  | $ | 598 |  |  | $ | 1,790 |  |  | $ | 2,050 |
Directors - selling, general and administrative |  |  | 75 |  |  |  | 50 |  |  |  | 160 |  |  |  | 155 |
Consultants - selling, general and administrative |  |  | - |  |  |  | - |  |  |  | 108 |  |  |  | 60 |
Total |  | $ | 602 |  |  | $ | 648 |  |  | $ | 2,058 |  |  | $ | 2,265 |

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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