7.	Common Stock

Authorized, Issued, and Outstanding Common Shares

The Company’s common stock has a par value of $0.001 per share and consists of 70,000,000 authorized shares at March 31, 2014 and December 31, 2013, respectively, and 334,484 and 334,068 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively. The following table summarizes common stock shares activity for the three months ended March 31, 2014:


	Shares of Common Stock
Balance, December 31, 2013		334,068
Exercise of stock options		416

Balance, March 31, 2014		334,484

Shares Reserved for Future Issuance

The Company had reserved shares of common stock for future issuance as follows:


	As of		As of
	March 31, 2014		December 31, 2013
For conversion of Series A Preferred, Series B Preferred, Series C Preferred, Series C-2 Preferred, Series D-1 Preferred, and Series D-2 Preferred and exercise of warrants to purchase Series C-1 Preferred and subsequent conversion of the shares purchased		1,705,917		1,675,812
Outstanding stock options		184,240		137,610
Outstanding common stock warrants		276,304		257,242
For possible future issuance under stock option plan		2,687		49,734

Total common shares reserved for future issuance		2,169,148		2,120,398

Warrants issued from the Note and Warrant Purchase Agreements

The Company had outstanding common stock warrants issued in connection with the Note and Warrant Purchase Agreements the Company executed in December 2011 and June 2013 (Note 4).

The 2011-2012 Notes included warrants to purchase 26,000 shares of the Company’s common stock at $0.20 per share. The warrants could be exercised for shares of common stock, in accordance with the Note and Warrant Purchase Agreements, at the earliest of:

(i)

The date the related convertible notes were converted,

(ii)

The date the related convertible notes were repaid or prepaid in full, and

(iii)

June 30, 2012.

These warrants would expire on June 30, 2017, and would terminate unless exercised prior to an IPO. The number of shares of common stock that may be purchased by exercising the warrants is calculated as follows:

•

If a related convertible note is converted pursuant to and in accordance with the terms within the Note and Warrant Purchase Agreements (Note 4), then the number of shares of common stock shall be equal to the quotient of (A) the product of (i) 20% multiplied by (ii) the principal amount of the convertible note divided by (B) the applicable per share conversion price at which the related convertible note is so converted; or

•

If a related convertible note is repaid or prepaid in full prior to the conversion thereof pursuant to and in accordance with the terms within the Note and Warrant Purchase Agreements (Note 4), then the number of shares of common stock shall be equal to the quotient of (A) the product of (i) 20% multiplied by (ii) the principal amount of the convertible note divided by (B) $87.98 (subject to proportionate adjustment upon any adjustment to the Series D-1 Preferred or Series D-2 Preferred conversion price); or

•

If a warrant is first exercised at any time after June 30, 2012, and such first exercise of the warrant occurs prior to the conversion, repayment or prepayment of the related convertible note pursuant to and in accordance with the terms within the Note and Warrant Purchase Agreements (Note 4), then the number of shares of common stock shall be equal to the quotient of (A) the product of (i) 20% multiplied by (ii) the principal amount of the convertible note divided by (B) $87.98 (subject to proportionate adjustment upon any adjustment to the Series D-1 Preferred or Series D-2 Preferred conversion price).

On December 11, 2013, holders of the June 2013 Notes, under the June 2013 Note and Warrant Agreement, exercised their rights under the June 2013 Note and Warrant Agreement to receive warrants to purchase shares of the Company’s common stock. As a result of this exercise, the Company issued warrants to purchase 88,987 shares of the Company’s common stock to the holders of the June 2013 Notes at an exercise price of $0.20 per share. These warrants were exercisable until June 28, 2018, and would terminate unless exercised prior to an IPO.

On December 11, 2013, in connection with the Series D-2 Purchase Agreement (Note 6), the Company issued warrants to purchase 87,532 shares of the Company’s common stock at an exercise price of $0.20 per share. These warrants were exercisable until December 11, 2018. In addition, as a result of the conversion of the principal and interest outstanding on the 2011-2012 Notes into Series D-1 Preferred and Series D-2 Preferred (Note 6), in accordance with the amended terms of the agreement, the number of common shares underlying the warrants issued in connection with the 2011-2012 Notes was increased by 54,120 to a total of 80,120.

There were no warrants exercised during the three month periods ended March 31, 2014 and 2013.

These warrants meet the definition of a derivative financial instrument and are accounted for as derivatives. The combined fair values of the common stock warrant derivative liabilities, including warrants issued with the sale of Series D-2 Preferred, are $9,998 and $12,200 as of March 31, 2014 and December 31, 2013, respectively, and are recorded as a long-term derivative liability in the accompanying balance sheets. The Company recorded other income of $3,108 and other income/loss of $0 for the three months ended March 31, 2014 and 2013, respectively, related to the fair value adjustment of the long-term derivative liability for common stock warrants.