2. Summary of Significant Accounting Polices

The Company’s complete listing of significant accounting policies are described in Note 2 to the Company’s audited financial statements as of December 31, 2014 included in its annual report on Form 10-K filed with the SEC.

Use of Estimates

The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amounts of expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for common stock warrants, stock-based compensation, income taxes, and accounting for research and development costs. Actual results could differ from those estimates.

Fair Value of Financial Instruments

In accordance with ASC 825, Financial Instruments, disclosures of fair value information about financial instruments are required, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Cash and cash equivalents are carried at fair value (see Note 3).

Financial instruments, including accounts payable and accrued liabilities, are carried at cost, which approximates fair value given their short-term nature.

Warrants

The Company accounts for its warrants to purchase redeemable convertible stock in accordance with ASC 480, Distinguishing Liabilities from Equity. ASC 480 requires that a financial instrument, other than outstanding share, that, at inception, is indexed to an obligation to repurchase the issuer’s equity shares, regardless of the timing or the probability of the redemption feature, and may require the issuer to settle the obligation by transferring assets be classified as a liability. The Company measures the fair value of its warrant liability using an option pricing model with changes in fair value recognized as increases or reductions to other income (expense) in the statement of operations.

In connection with the completion of the Company’s initial public offering in May 2014, the warrants to purchase shares of Series A-1 and Series A-2 preferred stock expired unexercised and the warrants to purchase shares of Series C preferred stock automatically converted into warrants to purchase shares of common stock. Warrants with non-standard anti-dilution provisions (referred to as down round protection) are classified as liabilities and re-measured each reporting period.

The warrants issued in connection with the Company’s debt financing completed in February 2015 (see Note 6) are classified as a component of stockholders’ equity. The value of such warrants was determined using the Black-Scholes option-pricing model.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. The Company grants stock options for a fixed number of shares to employees and non-employees with an exercise price equal to the fair value of the shares at grant date. Compensation cost is recognized for all share-based payments granted and is based on the grant- date fair value estimated using the weighted-average assumption of the Black- Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The equity instrument is not considered to be issued until the instrument vests. As a result, compensation cost is recognized over the requisite service period with an offsetting credit to additional paid-in capital.

Awards for consultants are accounted for under ASC 505-50, Equity Based Payments to Non-Employees. Any compensation expense related to consultants is marked-to-market over the applicable vesting period as they vest.

Net (Loss) Income Per Share

Basic net (loss) income per share is calculated by dividing the net (loss) income attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net (loss) income per share is calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period determined using the treasury-stock and if-converted methods. Dilutive potential common shares are comprised of convertible preferred stock, convertible preferred stock warrants and options outstanding under the Company’s equity incentive plan.

Prior to their conversion in connection with the Company’s initial public offering, the Company’s Series A-1, Series A-2, Series B and Series C convertible preferred stock were entitles to participate in earnings of the Company based upon dividend rights. Accordingly, prior to the initial public offering, the Company measured net income per share based upon the two-class method. Net income attributable to common stockholders excludes $829,285 for the three months ended March 31, 2014 for net income attributable to participating securities.

Potentially dilutive securities that have been excluded from the calculation of diluted net loss per share for the three months ended March 31, 2015, because to do so would be anti-dilutive, are as follows (in common equivalent shares):

		March 31, 2015
Common stock warrants		242,779
Common stock options		2,234,191
Total		2,476,970

The following table summarizes the Company’s computation of basic and diluted net (loss) income per share for common stockholders:

	Three Months Ended March 31
	2015			2014
Numerator
Net (loss) income	(8,538,361		)	$	839,293
Less net income attributable to participating preferred stock	—			(829,180		)
Net (loss) income attributable to common stockholders	(8,538,361		)	$	10,113
Denominator
Denominator for basic and diluted net loss per share	21,282,692			106,309
Effect of dilutive securities:
Stock options	—			715,869
Denominator for diluted net (loss) income per share	21,282,692			822,178

Net (loss) income per share, basic	$	(0.40	)	$	0.10
Net (loss) income per share, diluted	$	(0.40	)	$	0.01

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB) issued an amendment to U.S. GAAP to simplify the balance sheet presentation of the costs for issuing debt. The changes were adopted in Accounting Standards Update (ASU) No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issue Costs. Public companies will have to apply the amendments for reporting periods that begin after December 15, 2015. This amendment requires adoption by revising the balance sheets for periods prior to the effective date. The Company is currently evaluating the impact of this ASU and does not believe the adoption of this ASU will have a material impact on the Company’s financial position or results of operations.