Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Stock-based Compensation

Stock-Based Compensation

8. Stock-Based Compensation

Restricted Stock

The Company recognized $1,283 and $66,300 in share-based compensation expense related to issuance of shares of restricted stock to non-employees (i.e., consultants) in exchange for services during the three months ended March 31, 2016 and 2015, respectively.

Common Stock Warrants

In connection with the March 23, 2016 public offering, the Company issued 9,100,000 shares of common stock and warrants to purchase 6,825,000 shares of common stock. Each share of common stock was sold together with a warrant to purchase 0.75 of a share of common stock. The warrants have an exercise price of $1.00 per share and expire five years from the issuance date. The warrants have been accounted for as equity instruments. The fair value of the common stock warrants as of the issuance date was approximately $2,522,754.  In connection with our July 23, 2013 initial public offering, the Company issued warrants to the underwriters for 125,000 shares of common stock issuable at $12.50 per share upon exercise. The warrants expire five years from the issuance date. On March 10, 2011, the Company issued warrants to purchase shares of common stock to third parties in consideration for a private equity placement transaction. The warrants have an exercise price of $0.48 per share and expire 10 years from the issuance date. As of March 31, 2016, we have issued warrants to purchase 6,825,000 shares of common stock issuable at $1.00 per share; warrants to purchase 17,392 shares of common stock issuable at $0.48 per share and warrants to purchase 125,000 shares of common stock issuable at $12.50 per share. These warrants do not meet the criteria required to be classified as liability awards and therefore are treated as equity awards.

Stock Options

The following is a summary of the stock option activity for the three months ended March 31, 2016:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2015		1,214,686		$	4.93
Granted		370,839		$	2.47
Forfeited		(11,041	)	$	6.26
Outstanding, March 31, 2016		1,574,484		$	4.34

The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2016 was $1.62. The fair value of each stock option was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions for stock options granted during the three months ended March 31, 2016:

Dividend yield	0.0	%
Expected volatility	73.85	%
Risk-free interest rate	1.94	%
Expected lives (years)	6.0

The risk-free interest rate is based on U.S. Treasury interest rates at the time of the grant whose term is consistent with the expected life of the stock options. The Company used an average historical stock price volatility based on an analysis of reported data for a peer group of comparable companies that have issued stock options with substantially similar terms, as the Company did not have any trading history for its common stock. Expected term represents the period that the Company’s stock option grants are expected to be outstanding. The Company elected to utilize the “simplified” method to estimate the expected term. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.

Expected dividend yield was considered to be 0% in the option pricing formula since the Company had not paid any dividends and had no plans to do so in the future. The forfeiture rate was considered to be none as the options vest on a monthly basis.

The Company recognized $210,434 and $372,451 in stock-based compensation expense for the three months ended March 31, 2016 and 2015, respectively for the Company’s stock option awards.

The following table summarizes information about stock options outstanding at March 31, 2016:

Options Outstanding			Options Vested and Exercisable
Balance as of 3/31/2016	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Balance as of 3/31/2016	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price
1,574,484	7.8	$4.34	902,857	6.6	$4.69

As of March 31, 2016, the unrecognized stock-based compensation expense related to unvested stock options was $1,801,244 which is expected to be recognized over a weighted average period of approximately 18.4 months.