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3. Stockholders' Equity
 3 Months Ended
Mar. 31, 2015
STOCKHOLDERS' EQUITY  
Stockholders' Equity

Common Stock

 

During the quarter ended March 31, 2015, the Company issued the following shares of its common stock upon exercise of warrants resulting in gross proceeds of $6,702,168 to the Company:

 

·125,000 shares of common stock with an exercise price of $0.90 per share;
·125,000 shares of common stock with an exercise price of $0.40 per share;
·353,500 shares of common stock with an exercise price of $2.50 per share; and
·1,645,358 shares of common stock with an exercise price of $3.4375 per share.

 

During the quarter ended March 31, 2015, the Company issued 50,000 shares of its common stock upon exercise of an aggregate of 50,000 stock options resulting in gross proceeds of $125,500 to the Company.

 

During the quarter ended March 31, 2015, the Company issued 2,158,033 shares of its common stock upon a cashless exercise of 2,597,591 warrants.

 

During the quarter ended March 31, 2015, the Company issued an aggregate of 425,000 shares of its common stock upon conversion of an aggregate of 42,500 shares of the Series C-3non-voting preferred stock.

 

In March 2015, the Company issued 454,546 shares of its common stock upon conversion of 454,546 shares of the Series B non-voting preferred stock.

 

In March 2015, the Company issued 61,598 shares of its common stock upon conversion of 2,817 shares of the Series E non-voting preferred stock.

 

Preferred Stock and Warrants

 

Under the terms of our Amended and Restated Certificate of Incorporation, as amended, our board of directors is authorized to issue up to 2,000,000 shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Of the 2,000,000 shares of preferred stock authorized, our board of directors has designated (all with par value of $0.001 per share) the following:

 

  As of March 31, 2015   As of December 31, 2014
  Preferred Shares
Outstanding		 Liquidation Preference
(Per Share)		 Total Liquidation
Preference		   Preferred Shares
Outstanding		 Liquidation Preference
(Per Share)		 Total Liquidation
Preference
               
Series B - - $               -   454,546 $     0.001 $           455
Series C-2 150,000 10.000 1,500,000   150,000 10.000 1,500,000
Series C-3 136,500 10.000 1,365,000   179,000 10.000 1,790,000
Series D 73,962 21.000 1,553,202   73,962 21.000 1,553,202
Series E 89,623 49.200 4,409,452   92,440 49.200 4,548,048
Total 450,085   $ 8,827,654   949,948   $ 9,391,705

 

Stock Options

 

During the three months ended March 31, 2015, the Company granted to its officers, directors and consultant, ten-year non-qualifiedstock options under the 2013 Plan, covering an aggregate of 420,000 shares of the Company’s common stock. Of these options, 150,000 vested on the date of grant and had an exercise price of $5.00 per share, 250,000 will vest one year after the grant date and had an exercise price of $5.62 per share and the remaining 20,000 options had an exercise price of $3.62 per share will vest upon achievement of various performance milestones.

 

During the three months ended March 31, 2015 and 2014, totalcompensation expense for stock options issued to employees, directors, officers and consultants was $1,026,924 and $1,415,244, respectively.

 

The fair value of the grants are determined using the Black-Scholes optionpricing model with the following assumptions:

 

  Three Months Ended March 31,
  2015 2014
Expected Term 5 – 10 years 5 – 9.75 years
Volatility 94% 96% - 113%
Dividend yield 0.0% 0.0%
Risk-free interest rate 1.47% - 2.11% 1.51% - 2.88%

 

The Company estimated the expected term of the stock options granted based on anticipated exercises in future periods. The expected term of the stock options granted to consultants is based upon the full term of the respective option agreements. Prior to 2015, the expected volatility used in the valuation of the Company’s stock options was based on the historical volatility of publicly traded peer group companies due to the limited trading history of the Company’s common stock. Beginning in the first quarter of 2015, the expected stock price volatility for the Company’s stock options is calculated based on the historical volatility since the initial public offering of the Company’s common stock in March 2010. The expected dividend yield of 0.0% reflects the Company’s current and expected future policy for dividends on the Company’s common stock. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, compensation expense may need to be revised.  The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, officers and directors, including types of awards, employee class, and an analysis of the Company’s historical forfeitures. 

 

A summary of the Company’s stock option activity and related information is as follows:

 

 

Three Months Ended March 31,

 

2015

2014

 

Shares

WeightedAverage
ExercisePrice

Shares

WeightedAverage
ExercisePrice

Outstanding at beginning of period 3,664,500 $       1.25 3,453,630 $       1.06
Exercised (50,000) $       2.51 (275,000) $       0.78
Forfeited (20,000) - - -
Expired - - (274,630) $ 3.16
Granted

420,000

 $ 5.30

900,000

 $ 2.05
Outstanding at end of period

4,014,500

 $ 1.65

3,804,000

 $ 1.16
Options exercisable

3,384,000

 $ 1.34

2,765,000

 $ 1.19
Expected to vest

530,881

 $ 3.31

706,520

 $ 1.08
Weighted-average fair value of options granted during the period   $ 3.84   $ 1.49

 

The weighted average remaining contractual life of stock options outstanding at March 31, 2015 is 8.2 years. The weighted average remaining contractual life of stock options exercisable at March 31, 2015 is 8.0 years.

 

The aggregate intrinsic value is calculated as the difference between the exercise prices of the underlying options and the quoted closing price of the common stock of the Company at the end of the reporting period for those options that have an exercise price below the quoted closing price. The aggregate intrinsic value of all stock options exercised during the three months ended March 31, 2015 was $134,600. The aggregate intrinsic value of outstanding stock options at March 31, 2015was $30,542,180.

 

As of March 31, 2015, the total compensation expense related to non-vested options not yet recognized totaled $1,674,298. The weighted-average vesting period over which the total compensation expense related to non-vested options not yet recognized at March 31, 2015 was approximately 0.7 years.

 

Warrants

 

On March 2, 2015, the Company’s board of directors approved an extension to April 30, 2015 of the expiration date of the Company’s publicly traded warrants.

 

In March 2015, the Company issued two warrants exercisable into for an aggregate of up to 283,400 common shares with an exercise price of $7.00 per share and a term of five years as a result of entering into the Backstop Agreement with Manchester Securities Corp. (See Note 4). Additionally, the expiration date of March 24, 2015 of warrants to purchase 390,720 shares of common stock issued to Manchester Securities Corp. in connection with the Company’s IPO was extendedby one year to March 24, 2016.The Company recorded non-cash general and administrative expense of $1,583,252 for these warrants using the Black-Scholes option pricing model with the following assumptions:

 

Expected Term 5 years
Volatility 75.81% - 104.08%
Dividend yield 0.0%
Risk-free interest rate 0.01% - 1.61%

 

During the quarter ended March 31, 2015, the Company issued 774 warrants upon the exercise of a unit warrant related to the IPO. These warrants were subsequently exercised resulting in the issuance of 774 shares of common stock and gross proceeds of $2,661 to the Company.

 

The following table is the summary of warrant activity for the three months ended March 31, 2015:

 

  Shares   Weighted
Average
Exercise
Price

 

 

 

 

 

 Weighted Average Remaining Contractual Life
Outstanding at beginning of period 11,520,762   $       1.99   2.57
Granted 284,174   $       6.99   4.93
Expired (68,160)   $       3.44   -
Exercised

(4,846,449)

   $       1.72   -
Outstanding at end of period 6,890,327   $       2.38   2.50