Stockholders' equity

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Deficit

Note 8 - Stockholders’ equity

As of March 31, 2016, the Company has 200,000,000 shares of authorized common shares and 12,576,306 issued and outstanding, and 10,000,000 of authorized preferred shares, none of which were issued or outstanding.

On May 8, 2015, the Company completed its IPO pursuant to which the Company offered and sold 2,850,000 units, each Unit consisting of one share of common stock and a detachable stock purchase warrant to purchase an additional share of common stock, at an initial offering price of $6.00 per unit. Of the total gross proceeds of $17.1 million, approximately $2.1 million was used to satisfy outstanding demand notes by exchanging such notes for 350,000 Units in the IPO. After considering the demand notes, and underwriting discounts, commissions and offering expenses of $2.9 million (which were charged to additional paid-in capital), the total net cash proceeds to the Company was $12.1 million. On the IPO closing date, the underwriters exercised a portion of their over-allotment option to acquire an additional 422,500 stock purchase warrants for cash of $4,225. In connection with the IPO, all of the Company’s outstanding Series A Preferred Stock, 2014 convertible notes and 2015 convertible notes were converted into 7,374,852 shares of common stock.

The stock purchase warrants issued as part of the units (including over-allotment option) are exercisable for 3,272,500 shares of common stock at $6.60 per share beginning six months after the closing of the IPO for five years, expiring on May 8, 2020. Additionally, the Company issued additional warrants to its investment bankers to purchase 185,250 shares of common stock, on the same terms as the warrants issued with the units. The warrants were valued using the Black-Scholes option pricing model and are classified as equity.

In July 2015, the Company issued 1,136,364 shares of common stock to Merck GHI for cash consideration of $5.0 million (see Note 5).

Stock options

In 2002, the Company adopted the 2002 Stock Option and Restricted Stock Plan (the “2002 Plan”), pursuant to which the Company’s Board of Directors could grant either incentive stock options or non-qualified stock options, shares of restricted stock, shares of unrestricted common stock, and other share-based awards to officers and employees. In 2008, the Company adopted the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), pursuant to which the Company’s Board of Directors may grant either incentive or non-qualified stock options or shares of restricted stock to directors, key employees, consultants and advisors.

In April 2015, the Company adopted, and the Company’s stockholders approved, the 2015 Equity Incentive Plan (the “2015 Plan”); the 2015 Plan became effective upon the execution and delivery of the underwriting agreement for the Company’s IPO. Following the effectiveness of the 2015 Plan, no further grants will be made under the 2002 Plan or 2008 Plan. The 2015 Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of non-qualified stock options to employees, non-employee directors and consultants. The 2015 Plan also provides for the grants of restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and stock payments to employees, non-employee directors and consultants.

Under the 2015 Plan, the aggregate number of shares of the common stock authorized for issuance may not exceed (1) 1,355,000 plus (2) the sum of the number of shares subject to outstanding awards under the 2008 Plan as of the 2015 Plan’s effective date, that are subsequently forfeited or terminated for any reason before being exercised or settled, plus (3) the number of shares subject to vesting restrictions under the 2008 Plan as of the 2015 Plan’s effective date that are subsequently forfeited. In addition, the number of shares that have been authorized for issuance under the 2015 Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to the lesser of (1) 4% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (2) another lesser amount determined by the Company’s Board of Directors. Shares subject to awards granted under the 2015 Plan that are forfeited or terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2015 Plan. However, shares that have actually been issued shall not again become available unless forfeited. As of March 31, 2016, 748,479 shares remain available for issuance under the 2015 Plan, w hich includes 501,907 shares automatically added to the 2015 Plan on January 1, 2016.

For the three months ended March 31, 2016 and 2015, the Company recorded $0.3 million and $0.6 million, respectively, of stock compensation expense. No income tax benefit for stock-based compensation arrangements was recognized in the condensed consolidated statements of operations due to the Company’s net loss position. The allocation of share-based compensation expense by operating expenses is as follows:

	Three months ended March 31,
	2016		2015
Costs of services	$	4,312	$	-
Research and development		62,218		36,456
General and administrative		172,103		83,299
Sales and marketing		22,864		470,848
	$	261,497	$	590,603

During the three months ended March 31, 2016, the Company granted stock options to acquire 30,000 shares of common stock at a weighted average exercise price of $1.53 per share. The 2016 awards had a weighted average grant date fair value per share of $0.73. The Company has total stock options to acquire 2,119,140 shares of common stock outstanding at March 31, 2016.

Restricted stock units

In March 2014, the Company awarded restricted stock units to acquire 130,640 shares of common stock to its Chief Executive Officer (“CEO”). The restricted stock units were compensation for his service as CEO from October 2013 through June 2014 and were subject to forfeiture if he did not continue to perform management services through October 24, 2014. The restricted stock units vested on October 24, 2014 and 130,640 shares of common stock were issued to the CEO. In the fourth quarter of 2015, the Company granted additional restricted stock units to acquire 75,000 shares of common stock, with a weighted average grant date fair value of $1.70 per share, all of which remain outstanding as of March 31, 2016.

Stock purchase warrants

At March 31, 2016, the following warrants to purchase shares of common stock were outstanding:

Issuance	Exercise Price		Expiration	Shares of Common Stock Subject to Warrants
August 2007	$	7.91	August 2017		8,921
March 2008	$	790.54	March 2018		46
November 2009	$	7.91	November 2019		6,674
January 2010	$	7.91	January 2020		6,674
March 2010	$	7.91	March 2020		1,277
November 2011	$	7.91	November 2021		5,213
December 2011	$	7.91	December 2021		664
March 2012	$	109.90	March 2019		4,125
February 2015	$	6.60	February 2025		225,011
May 2015	$	6.60	May 2020		3,457,750
					3,716,355

The warrants listed above were issued in connection with various debt, preferred stock or development contract agreements. The warrants issued in February 2015 were initially classified as a liability since the exercise price was variable. The exercise price became fixed as a result of the Company’s IPO and, as such, the warrant liability was marked to fair value at that time and reclassified to equity (see Note 6).