8.Stockholders’ Equity (Deficit)

Preferred Stock

As of September 30, 2016 and December 31, 2015, the Company’s authorized capital stock included 5,000,000 shares and 0 shares of undesignated preferred stock, par value $0.001 per share, respectively. No shares of preferred stock were outstanding as of September 30, 2016 or December 31, 2015.

Common Stock

As of September 30, 2016 and December 31, 2015, the Company’s authorized capital stock included 250,000,000 shares of common stock, par value $0.001 per share. The Company had 93,390,172 and 75,760,061 shares of common stock issued and outstanding at September 30, 2016 and December 31, 2015, respectively.

As discussed in Note 2, the Company completed the initial closing of the Offering on March 23, 2016 and completed the closing of the underwriters’ partial exercise of their option to purchase additional shares on April 5, 2016, issuing an aggregate of 17,239,143 shares of common stock. Net cash proceeds from the Offering were approximately $44.8 million, after deducting underwriting discounts and commissions and estimated Offering-related transaction costs payable by the Company.

Stock Purchase Warrants

In connection with the issuance of the Notes, the Company also issued to the Lenders 10-year stock purchase warrants to purchase an aggregate of 116,581 shares of common stock at an exercise price of $3.86 per share. The fair value of the warrants, which the Company estimated to be $304,113, was recorded as a discount to the Notes. These warrants expire on June 30, 2026 and are classified in equity. In connection with the Company’s original Loan and Security Agreement with Oxford in 2014, the Company issued to Oxford 10-year stock purchase warrants to purchase an aggregate of 167,570 shares of common stock at an exercise price of $1.79 per share. The fair value of the warrants, which the Company estimated to be $205,150, was recorded as a discount to the promissory notes issued to Oxford in connection with the original Loan and Security Agreement. These warrants expire on November 2, 2020, July 14, 2021 and August 19, 2021, and are classified in equity. The unamortized deferred financing fees and debt discount related to the notes rollover amount will be amortized along with the deferred financing costs and the discount created by the new issuance of the warrants over the term of the loan using the effective interest method. For the three months ended September 30, 2016 and 2015, the Company recorded amortization of discount of debt of $38,825 and $15,550, respectively, and for the nine months ended September 30, 2016 and 2015, the Company recorded amortization of discount of debt of $65,835 and $56,616, respectively, within interest expense in the accompanying statement of operations and comprehensive income (loss).

Restricted Stock Awards

The Company issued 398,525 shares of restricted stock to the chairman of the Company’s board of directors (the “Chairman”) in December 2015, half of which were vested upon grant and half of which vested upon the completion of the Offering, pursuant to an agreement between the Company and the Chairman, as described in greater detail in Note 9. In June 2016, the Company issued a fully vested restricted stock award for 300,000 shares of common stock to the Chairman to settle the outstanding obligations under the agreement. The Company recognized stock-based compensation expense of $0 and $1.2 million in the three and nine months ended September 30, 2016, respectively, related to the grant and vesting of this restricted stock.

Stock‑Based Compensation

In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”) under which incentive stock options and non-qualified stock options may be granted to the Company’s employees and certain other persons in accordance with the 2015 Plan provisions. In connection with the Offering, the Company’s board of directors adopted and the Company’s stockholders approved an Amended and Restated 2015 Equity Incentive Plan (the “amended and restated 2015 Plan”). The amended and restated 2015 Plan became effective as of the date of the pricing of the Offering. The Company’s board of directors may terminate the amended and restated 2015 Plan at any time. Options granted under the amended and restated 2015 Plan expire ten years after the date of grant. The Company retains the right of first offer to buy any shares issued under the amended and restated 2015 Plan.

Pursuant to the amended and restated 2015 Plan, the number of shares initially reserved for issuance pursuant to equity awards was 17,251,115 shares, representing 8,000,000 shares plus up to an additional 9,251,115 shares in the event that options that were outstanding under the Company’s equity incentive plans as of February 16, 2016 expire or otherwise terminate without having been exercised (in such case, the shares not acquired will revert to and become available for issuance under the amended and restated 2015 Plan). The number of shares of the Company’s common stock reserved for issuance under the amended and restated 2015 Plan will automatically increase on January 1 of each year, beginning on January 1, 2017 and ending on January 1, 2026, by 3.5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. As of September 30, 2016, 4,977,162 shares remained available for grant under the amended and restated 2015 Plan.

On May 8, 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), under which incentive stock options and non‑qualified stock options may be granted to the Company’s employees and certain other persons in accordance with the 1997 Plan provisions. Approximately 9,053,524 shares of the Company’s common stock underlying options have vested or are expected to vest under the 1997 Plan. Upon the effectiveness of the 2015 Plan, the Company no longer grants any awards under the 1997 Plan.

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

Capital Structure Prior to the Acquisition

Prior to the Acquisition, the Company had the following shares of preferred stock authorized:

599,997 shares of Series A Convertible Preferred Stock with a par value of $0.01 per share;

1,202,497 shares of Series B Convertible Preferred Stock with a par value of $0.01 per share;

2,073,749 shares of Series C Convertible Preferred Stock with a par value of $0.01 per share;

22,995,265 shares of Series D Convertible Preferred Stock with a par value of $0.01 per share; and

3,192,537 shares of Series E Convertible Preferred Stock with a par value of $0.01 per share (“Series E Stock”).

In August 2015, the Company completed a private offering of 2,711,926 shares of Series E Stock at a purchase price of $3.93 per share for total proceeds of $10.7 million. The Company recognized a beneficial conversion feature of $406,783 associated with the Series E Stock since the initial effective conversion price was determined to be less than the fair value of the underlying common stock into which the Series E Stock is convertible. The beneficial conversion feature was recognized as a “deemed dividend” at issuance since the Series E Stock is convertible at any time at the option of the holders.

Prior to their conversion to common stock in connection with the Acquisition, all series of preferred stock were equity classified. The holders of preferred stock were entitled to receive dividends as may be declared by the board of directors. The Company did not declare or otherwise recognize any preferred stock dividends during the three and nine months ended September 30, 2016 and 2015.

Pursuant to the terms of the Acquisition (i) all outstanding shares of common stock of Senseonics, Incorporated $0.01 par value per share, were exchanged for 1,955,929 shares of the Company's common stock, $0.001 par value per share (reflecting an exchange ratio of 2.0975), (ii) all outstanding shares of preferred stock were converted into shares of common stock of Senseonics, Incorporated and exchanged into 55,301,674 shares of the Company’s common stock, $0.001 par value per share, and (iii) all outstanding options and warrants to purchase shares of common stock or preferred stock of Senseonics, Incorporated were exchanged for or replaced with options and warrants to acquire shares of the Company’s common stock using the same exchange ratio. As a result, the Company did not have any shares of preferred stock issued or outstanding as of September 30, 2016 or December 31, 2015.