NOTE 5 – SALE OF COMMON STOCK

Lincoln Park transaction

On September 28, 2017, the Company entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Pursuant to the terms of the Purchase Agreement, Lincoln Park has agreed to purchase from the Company up to $15,000,000 of its common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Registration Rights Agreement, the Company filed with the SEC a registration statement to register for resale under the Securities Act the shares that have been or may be issued to Lincoln Park under the Purchase Agreement.

Pursuant to the terms of the Purchase Agreement, at the time the Company signed the Purchase Agreement and the Registration Rights Agreement, the Company issued 73,039 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of its common stock under the Purchase Agreement. The commitment shares were valued at $300,000, recorded as an addition to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital to be raised under the Purchase Agreement.

The Company does not have the right to make any sales to Lincoln Park under the Purchase Agreement unless certain conditions set forth in the Purchase Agreement, all of which are outside of Lincoln Park’s control, have been satisfied, including the registration statement being declared effective by the SEC. The registration statement was declared effective on October 12, 2017 and all conditions were satisfied on October 13, 2017.

Regular purchases

Under the Purchase Agreement, on any business day selected by the Company, it may direct Lincoln Park to purchase up to 30,000 shares of its common stock on any such business day (a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up to 40,000 shares, provided that the closing sale price is not below $5.00 on the purchase date, (ii) the Regular Purchase may be increased to up to 50,000 shares, provided that the closing sale price is not below $6.00 on the purchase date, (iii) the Regular Purchase may be increased to up to 60,000 shares, provided that the closing sale price is not below $7.50 on the purchase date, (iv) the Regular Purchase may be increased to up to 70,000 shares, provided that the closing sale price is not below $10.00 on the purchase date, and (v) the Company may direct Lincoln Park to purchase shares in a Regular Purchase only if at least one business day has passed since the most recent Regular Purchase, as applicable, was completed. In each case, the maximum amount of any single Regular Purchase may not exceed $1,000,000 per purchase.

Accelerated purchases

In addition to Regular Purchases described above, the Company may also direct Lincoln Park, on any business day on which the Company has properly submitted a Regular Purchase notice and the closing sale price of its common stock is not below $3.00 (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement), to purchase an additional amount of its common stock on the next business day (an “Accelerated Purchase”), not to exceed the lesser of:

Initial purchase

In addition to the Regular Purchases described above, the Company had the option, on the first date that it was first able to begin selling shares to Lincoln Park under the Purchase Agreement, to direct Lincoln Park to purchase up to 300,000 shares (the “Initial Purchase”), provided, however, that Lincoln Park’s committed obligation under the Initial Purchase could not exceed $1,000,000.

Additional purchases

In addition to the Regular Purchases, Accelerated Purchases and the Initial Purchase described above, from time to time the Company may also direct Lincoln Park, on any business day that the closing price of the Company’s common stock is not below $3.00, to purchase additional amounts of its common stock (an “Additional Purchase”), provided, however, that (i) the Company may direct Lincoln Park to purchase shares in an Additional Purchase only if at least 15 business days have passed since the most recent Additional Purchase, as applicable, was completed, (ii) the Company may direct Lincoln Park to purchase shares in an Additional Purchase only if at least 30 business days have passed since the Initial Purchase, if exercised, was completed, (iii) Lincoln Park’s committed obligation under any single Additional Purchase shall not exceed $500,000, and (iv) Lincoln Park’s committed obligation under all Additional Purchases shall not exceed $2,000,000 in the aggregate.

April 2017 financing

On March 30, 2017, the Company entered into an underwriting agreement with Aegis Capital Corp., as representative of the several underwriters (collectively, the “2017 Underwriters”), relating to the issuance and sale of 1,800,000 shares of the Company’s common stock, in an underwritten public offering (the “April 2017 Financing”). The public offering price for each share of common stock was $4.45. The Company granted the 2017 Underwriters an option to purchase up to an additional 270,000 shares of common stock to cover over-allotments, if any.

The April 2017 Financing closed on April 4, 2017. The 2017 Underwriters purchased the shares at a seven percent discount to the public offering price, for an aggregate discount of $0.6 million (or $0.31 per share). The Company also incurred offering expenses of approximately $0.2 million. The Company received net proceeds of approximately $7.2 million. On April 13, 2017, the 2017 Underwriters fully exercised the over-allotment option and purchased 270,000 shares of common stock for net proceeds of approximately $1.1 million, net of an aggregate discount of $0.1 million (or $0.31 per share).

At-the-market offering

On April 28, 2016, the Company entered into a sales agreement (the “2016 Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as sales agent, pursuant to which the Company could have, from time to time, issued and sold common stock with an aggregate value of up to $15.0 million in at-the-market (“ATM”) sales. On the same day, the Company filed a prospectus supplement under its existing shelf registration relating to the 2016 Sales Agreement. Cowen acted as sole sales agent for any sales made under the 2016 Sales Agreement for a 3% commission on gross proceeds. The Company’s common stock was sold at prevailing market prices at the time of the sale, and, as a result, prices varied. During the nine months ended September 30, 2017, the Company sold an aggregate of 1,486,474 shares of common stock using the ATM, resulting in net proceeds of $9.1 million, net of expenses of approximately $0.3 million of Cowen’s commission. With these sales, the Company sold all $15 million of shares under the 2016 Sales Agreement, and the 2016 Sales Agreement was terminated.

During the nine months ended September 30, 2016, the Company sold 468,050 shares of common stock using the ATM, resulting in net proceeds of $5.2 million, net of expenses, which included Cowen’s commission of $0.2 million.

On August 1, 2017, the Company entered into a new sales agreement (the “2017 Sales Agreement”) with Cowen, as sales agent, pursuant to which the Company could, from time to time, issue and sell common stock with an aggregate value of up to $9.0 million in ATM sales. No shares of common stock have been sold under the 2017 Sales Agreement. On September 15, 2017, the Company withdrew the shelf registration statement on Form S-3 filed on August 11, 2017. The Company will not make sales under the 2017 Sales Agreement until a new shelf registration statement on Form S-3 is filed and becomes effective.

June 2016 public offering

On June 15, 2016, the Company entered into an underwriting agreement with Roth Capital Partners, LLC and National Securities Corporation as underwriters (collectively, the “2016 Underwriters”), relating to the issuance and sale of 500,000 shares of the Company’s common stock, in an underwritten public offering (the “June 2016 Financing”). The public offering price for each share of common stock was $20.00. The Company granted the 2016 Underwriters a 45-day option to purchase up to an additional 75,000 shares of common stock to cover over-allotments, if any.

The June 2016 Financing closed on June 21, 2016. The 2016 Underwriters purchased the shares at a seven percent discount to the public offering price, for an aggregate discount of $0.7 million (or $1.40 per share). The Company also paid offering expenses of approximately $0.2 million. The Company received net proceeds of approximately $9.1 million. On July 12, 2016, the 2016 Underwriters fully exercised the over-allotment option and purchased 75,000 shares of common stock for net proceeds of approximately $1.4 million, net of an aggregate discount of $0.1 million (or $1.40 per share).