Note 7 - Stockholders’ equity

As of March 31, 2017, the Company has 200,000,000 shares of authorized common shares and 27,377,490 issued and outstanding, and 10,000,000 of authorized preferred shares, of which none were issued or outstanding.

In September 2016, the Company entered into the Sales Agreement with Cowen pursuant to which the Company may offer and sell from time to time, up to an aggregate of $25 million of shares of its common stock through Cowen, as sales agent, with initial sales limited to an aggregate of $11.5 million. Pursuant to the Sales Agreement, Cowen may sell the shares of common stock by any method permitted by law deemed to be an "at the market” offering as defined in Rule 415 of the Securities Act, including, without limitation, sales made by means of ordinary brokers' transactions on The NASDAQ Capital Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company. The Company pays Cowen compensation equal to 3.0% of the gross proceeds from the sales of common stock pursuant to the terms of the Sales Agreement. As of March 31, 2017, the Company has sold an aggregate of approximately 5.7 million shares of its common stock under this at the market offering resulting in aggregate net proceeds to the Company of approximately $6.5 million, and gross proceeds of $6.9 million. As of March 31, 2017, remaining availability under the at the market offering is $4.6 million. For the three months ended March 31, 2017, the Company has sold approximately 2.1 million shares of its common stock under this at the market offering resulting in aggregate net proceeds to the Company of approximately $2.1 million, and gross proceeds of $2.2 million.

In May and June 2016, the Company offered and sold units in a private offering to members of management and employees and to accredited investors, including Merck GHI and jVen Capital, each unit consisting of either (i) one share of common stock and a detachable stock purchase warrant to purchase an additional 0.75 shares of common stock, or (ii) one share of non-voting convertible preferred stock and a detachable stock purchase warrant to purchase an additional 0.75 shares of common stock, at a price of $1.14 per unit. The total net proceeds to the Company, after deducting offering commissions and expenses was $9.5 million. Pursuant to the private placement the Company issued 6,744,127 shares of common stock, 2,309,428 of Series A non-voting convertible preferred stock and stock purchase warrants to acquire an additional 6,790,169 shares of common stock. Under the purchase agreement, the Company granted registration rights to the investors in the private financing.

Each share of Series A non-voting convertible preferred stock was convertible at the option of the holder in whole or in part and from time to time into one share of common stock, was entitled to dividends on an “as converted basis” when and if dividends are issued to common stockholders, and would have participated in liquidation on a pari passu basis with common stockholders. The preferred stock was classified as permanent equity. The stock purchase warrants issued as part of the units are exercisable at $1.3125 per share beginning 90 days after closing for five years, expiring on May 18, 2021. The warrants are classified as permanent equity at March 31, 2017. In connection with the issuance of Series A non-voting convertible preferred stock, the Company recognized a beneficial conversion feature of $332,550 as a deemed dividend to the preferred shareholders. Holders of the Series A non-voting convertible preferred stock subsequently converted all 2,309,428 shares of preferred stock into 2,309,428 shares of common stock.

The Company filed a registration statement on Form S-3 on June 13, 2016 to register for resale by the investors, from time to time, of the shares of common stock acquired, or underlying the warrants issued, in the private offering. On July 20, 2016, the registration statement was declared effective by the SEC.

Stock options

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 could 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 initial public offering in May 2015. Following the effectiveness of the 2015 Plan, no further grants will be made under the 2008 Plan. The 2015 Plan provides for the granting of incentive stock options within the meaning of Section 422 of the 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, 2017, 1,145,402 shares remain available for issuance under the 2015 Plan, which includes 1,012,171 shares automatically added to the 2015 Plan on January 1, 2017.

On April 28, 2016, the Board of Directors of the Company made a stock option award to Evan Jones, the Company’s Chief Executive Officer (“CEO”) and Chairman of the Board. The non-qualified stock option award to acquire 766,500 shares of common stock represented approximately 6% of outstanding shares of common stock as of the date of the award. The stock option grant has an exercise price of $1.35 per share, a ten-year term and a vesting schedule of 25% vesting of the award on the first annual anniversary of the date of grant and then 6.25% vesting each quarter thereafter over three additional years. The plan under which the award was made incorporates by reference the provisions of the Company’s 2015 Plan applicable to stock option awards. The stock option award was contingent on receipt of stockholder approval, as the award was made outside of the Company’s stockholder-approved incentive plans. The stockholders approved the stock option award at the Company’s Annual Meeting of Stockholders held on June 22, 2016.

For the three months ended March 31, 2017 and 2016, the Company recognized stock compensation expense as follows:

	Three Months Ended March 31,
	2017		2016
Cost of services	$	1,823	$	4,312
Research and development		57,778		62,218
General and administrative		152,476		172,103
Sales and marketing		33,328		22,864
	$	245,405	$	261,497

No income tax benefit for stock-based compensation arrangements was recognized in the condensed consolidated statements of operations and comprehensive loss due to the Company’s net loss position.

During the three months ended March 31, 2017, the Company granted stock options to acquire 723,600 shares of common stock at a weighted average exercise price of $1.03 per share and a weighted average grant date fair value of $0.54 per share. 4,863 options were forfeited during the three months ended March 31, 2017 at a weighted average exercise price of $1.82 per share. The Company had total stock options to acquire 3,514,071 shares of common stock outstanding at March 31, 2017.

Restricted stock units

In the fourth quarter of 2015, the Company granted restricted stock units to acquire 75,000 shares of common stock, with a weighted average grant date fair value of $1.70 per share, 18,750 shares of which remain outstanding as of March 31, 2017. No restricted stock units vested and no restricted stock units were forfeited during the three months ended March 31, 2017.

Stock purchase warrants

At March 31, 2017 and December 31, 2016, the following warrants to purchase shares of common stock were outstanding:

				Outstanding at
Issuance	Exercise Price		Expiration	March 31, 2017		December 31, 2016
August 2007	$	7.91	August 2017		8,921		8,921
March 2008	$	790.54	March 2018		46		46
November 2009	$	7.91	November 2019		6,674		6,674
January 2010	$	7.91	January 2020		6,674		6,674
March 2010	$	7.91	March 2020		1,277		1,277
November 2011	$	7.91	November 2021		5,213		5,213
December 2011	$	7.91	December 2021		664		664
March 2012	$	109.90	March 2019		4,125		4,125
February 2015	$	6.60	February 2025		225,011		225,011
May 2015	$	6.60	May 2020		3,457,750		3,457,750
May 2016	$	1.31	May 2021		4,739,348		4,739,348
June 2016	$	1.31	May 2021		2,050,821		2,050,821
					10,506,524		10,506,524

The warrants listed above were issued in connection with various debt, equity or development contract agreements.