Note 11 – Subsequent Events

In February 2015, the Company completed an underwritten public offering of common stock whereby 2,990,000 shares were issued at $5.85 per share. Gross proceeds from the offering totaled $17.5 million and net cash proceeds approximated $16.3 million. Expenses of the offering approximated $1.2 million, including underwriting fees of $1,050,000, underwriter legal fees and other costs of $55,000, and other costs of $110,000. The offering was underwritten by MDB Capital Group, LLC, a significant beneficial owner of the Company's common stock at December 31, 2014.

In February 2015, the Company and its Chief Executive Officer, Stephen E. Pirnat, entered into an employment agreement as described in Note 10. In accordance with the employment agreement, the Company immediately granted to Mr. Pirnat 100,000 stock options under the Equity Incentive Plan. The stock options have an exercise price of $5.97 per share, the grant date fair value, vest on February 3, 2016, and have a contractual life of 10 years. The fair value of stock options estimated on the date of grant using the Black-Scholes option valuation model was $334,000. Further, effective April 1, 2015, the Company will issue to Mr. Pirnat an option to purchase 200,000 shares of common stock with an exercise price equal to the fair value of the common stock on April 1, 2015. The option will vest 50% on April 1, 2016 and 50% on April 1, 2017, and will have a contractual life of 10 years.

In February 2015, the Company authorized 23,034 shares of common stock to be issued under the Equity Incentive Plan to its three independent directors in accordance with board agreements and which will be earned quarterly for service in 2015. The fair value of the stock at the time of grant was $5.97 per share for a total value of $138,000 which the Company will recognize in general and administrative expense on a pro-rated quarterly basis in 2015.