Stockholders' Equity

9 Months Ended

Sep. 30, 2016

Stockholders’ Equity

Stockholders’ Equity

Note 6. Stockholders’ Equity

Capital Structure

In November 2015, the Company completed its IPO, whereby it sold 5,666,667 shares of common stock at a public offering price of $9.00 per share. The Company received gross proceeds of approximately $51.0 million and net proceeds of approximately $45.5 million, after deducting underwriting discounts and commissions and offering-related transaction costs.

Upon the close of the IPO, all of the Company’s outstanding convertible notes, including accrued and unpaid interest, converted into 2,374,606 shares of common stock.

In April 2015, the Company’s board of directors and stockholders approved an increase of the Company’s authorized shares of common stock to 22,033,500 shares. In connection with the close of the Company’s IPO on November 24, 2015, the Company’s stockholders approved an amended and restated certificate of incorporation increasing the number of authorized shares of common stock to 150,000,000 and the number of authorized shares of preferred stock to 10,000,000, par value $0.0001 per share.

The holders of shares of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings. The holders of shares of common stock are entitled to receive dividends, if and when declared by the board of directors.

Equity Incentive Plans

Shares available for the issuance of stock options or other stock-based awards under the Company’s 2015 Omnibus Incentive Compensation Plan was 2,718,919 shares at September 30, 2016.

Stock Options

The following table sets forth the stock option activity for the nine months ended September 30, 2016:

				Weighted
		Weighted		average	Aggregate
	Number	average		contractual	intrinsic
	of shares	exercise price		term	value
Outstanding at December 31, 2015	998,198	$	3.94
Granted	786,654		8.00
Exercised	(4,000)		3.67
Forfeited	(3,996)		6.47
Expired	—		—
Outstanding at September 30, 2016	1,776,856	$	5.73	8.8	$	4,001,441
Vested and expected to vest at September 30, 2016	1,770,687	$	5.75	8.8	$	3,960,849
Exercisable at September 30, 2016	747,830	$	3.31	8.0	$	3,436,797

The fair value of each stock option grant is estimated on the date of grant using the Black‑Scholes option pricing model. The Company periodically remeasures the fair value of stock‑based awards issued to non‑employees and records the expense over the requisite service period. The expected term of the Company’s stock options has been determined utilizing the “simplified” method as described in the Securities and Exchange Commission’s Staff Accounting Bulletin No. 107 relating to stock‑based compensation. The simplified method was chosen because the Company has limited historical option exercise experience due to its short operating history. The risk‑free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Expected volatility is based on historical volatilities of similar entities within the Company’s industry.

The weighted average valuation date fair value of options granted was $5.14 and $2.64 per option for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, there was $4.7 million of total unrecognized compensation cost related to non‑vested stock options which is expected to be recognized over a weighted average period of 3.1 years. These amounts do not include 6,169 options outstanding as of September 30, 2016, which are performance‑based and vest upon the achievement of certain corporate milestones. Stock‑based compensation will be measured and recorded if and when it is probable that the milestone will occur.

Stock‑based compensation expense recognized for the three and nine months ended September 30, 2016 and 2015 was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
Research and development	$	174,287	$	323,555	$	942,228	$	518,534
General and administrative		284,181		37,190		654,465		102,384
	$	458,468	$	360,745	$	1,596,693	$	620,918

Performance‑Based Awards

The Company issued no performance-based awards during the nine months ended September 30, 2016. During the nine months ended September 30, 2015, the Company issued 81,346 options with a weighted average exercise price of $6.47 to employees that vest upon the completion of certain corporate events. For awards granted to employees with performance conditions, no expense will be recognized, and no measurement date can occur, until the occurrence of the event is probable. For awards granted to non‑employees, the Company will recognize the lowest aggregate amount within the range of potential values as expense until the measurement date is established. For the nine months ended September 30, 2016 and 2015, the Company recognized $573,708 and $245,196, respectively, as expense related to performance‑based awards.

Warrants

As of September 30, 2016 and December 31, 2015, the Company had outstanding warrants to purchase 272,468 shares of common stock, consisting of 230,409 warrants with an exercise price of $1.30 per share and 42,059 warrants with an exercise price of $5.94 per share.