Note 6 - Convertible Preferred Stock

The Company sold Convertible Preferred Stock as follows:

Issue Date	Series		Number of Shares		Price per Share		Proceeds (in thousands)		Common Stock Conversion Price		Common shares on conversion		Offer Costs (in thousands)
2009		A		390,486	$	1.00	$	390	$	1.37		285,422	$	25
2010		A		474,014	$	1.00	$	474	$	1.37		346,476	$	43
2011		B		2,333,000	$	1.25	$	2,916	$	1.71		1,705,284	$	27
2011 ⁽¹⁾		B		82,116	$	1.25	$	103	$	1.71		60,021		---
2012		B-1		359,935	$	1.75	$	630	$	2.39		263,091	$	153
2013		C		4,631,505	$	3.85	$	17,831	$	5.27		3,385,355	$	2,747
2013 ⁽²⁾		C		65,809	$	3.85	$	253	$	5.27		48,102		---
2014		C-1		3,558,890	$	4.65	$	16,549	$	6.36		2,601,337	$	2,022
2015		C-2		12,043,006	$	4.65	$	56,000	$	6.36		8,802,723	$	3,783

(1)	Conversion of $100,000 NJEDA Note plus accrued interest of $2,645.

(2)	Conversion of $250,000 promissory note plus accrued interest of $3,365.

Offering costs associated with each issuance were recorded against such proceeds.

Preferred Stock Warrants

In connection with our preferred stock sales and debt issuances we issued warrants to the placement agent and lender, for preferred stock. The warrants are recorded as liabilities with changes in fair value being recorded in the statement of operations and are calculated utilizing the Black-Scholes option pricing model. At the IPO date of October 6, 2015 these warrants become exercisable for shares of our common stock. These warrants are now exercisable for 671,020 shares of common stock at exercise prices ranging from $5.79 to $7.00 and expire at various dates through 2020.

Voting Rights

Holders of shares of Series A, Series B, Series B-1, Series C, Series C-1 and Series C-2 Convertible Preferred Stock are entitled to vote on as if converted to Common Stock basis, except that certain defined transactions require specific Series A, Series B, Series B-1, Series C, Series C-1 and Series C-2 stockholder approval pursuant to their respective rights.

Liquidation Preferences

The holders of shares of Series C, Series C-1 and Series C-2 Convertible Preferred Stock shall be entitled to receive, in preference to all other holders of Convertible Preferred Stock, 125% of the respective original purchase price of the shares of Series C, Series C-1 or Series C-2 Convertible Preferred Stock, plus all accrued and unpaid dividends, and second, the holders of shares of Series A, Series B and Series B-1 Convertible Preferred Stock shall be entitled to receive, in preference to the holders of the shares of Common Stock, the respective original purchase prices of the shares of Series A, Series B and Series B-1 Convertible Preferred Stock in proportion to the full preferential amount that all shares of the Series A, Series B and Series B-1 Convertible Preferred Stock are entitled to receive. The Convertible Preferred Stock is not redeemable.

Dividends

The holders of the Series C, Series C-1 and Series C-2 Convertible Preferred Stock are entitled to receive, when, as and if declared by the board, cumulative dividends at the rate of 8% of the original purchase price per annum. The Series C, Series C-1 and Series C-2 dividends accrue from the date of issuance and are payable semi-annually on January 1 and July 1 in cash or common stock at the Company’s option. In accordance with accounting literature, Series C, Series C-1 and Series C-2 dividends since the date of issuance have been accrued though no dividends have been declared by the Board through September 30, 2015.

The other series of Convertible Preferred Stock have no dividend requirement. If dividends were declared then preference is given in order to the Series B-1, Series B, and Series A. Such dividends shall only be payable when, and if declared and are not cumulative. Through September 30, 2015, the Company has not declared any dividends.

Conversion Rights

The holders of shares of Series A, Series B, Series B-1, Series C, Series C-1 and Series C-2 Convertible Preferred Stock have the right to convert all or a portion of such shares at any time into shares of Common Stock. At the closing of the IPO, all of the outstanding shares of convertible preferred stock including shares for accrued dividends were automatically converted into 18,566,856 shares of common stock. See Note 9.