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Note 6 - Stockholders' Deficit | 9 Months Ended | 12 Months Ended
--- | --- | ---
Sep. 30, 2016 | Dec. 31, 2015
Notes to Financial Statements |  |
Stockholders' Equity Note Disclosure [Text Block] | NOTE 7 - STOCKHOLDERS’ EQUITY (DEFICIT) On June 17, 2016, the Company held a Special Meeting of Stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved a third amendment and restatement (the “Third Amendment and Restatement”) to the Company’s Amended and Restated Certificate of Incorporation, effective July 27, 2016 (the “Effective Time”), to effect a one -for- 15,463.7183 reverse split of the Company’s common stock (the “Reverse Stock Split”). Pursuant to the Reverse Stock Split, at the Effective Time, each 15,463.7183 shares of common stock owned by a stockholder were combined into one new share of common stock, with any fractional shares that would otherwise be issuable as a result of the Reverse Stock Split being rounded up to the nearest whole share. The Third Amendment and Restatement also effected (i) a reduction in the Company’s authorized shares of common stock from 100 billion shares to 100 million shares, (ii) an increase in the par value of the Company’s common stock from $0.000001 per share to $0.0001 per share and (iii) a reduction in the Company’s authorized shares of preferred stock from 5 billion shares to 20 million shares. Stock-Based Compensation In connection with the Merger, all of the issued and outstanding options to purchase shares of Prior Protagenic common stock converted, on a 1 for 1 basis, into options (the “ New Options ”), to purchase shares of our Series B Preferred Stock. The New Options will be administered under Prior Protagenic’s 2006 Employee, Director and Consultant Stock Plan (the “ 2006 Plan ”), which the Company assumed and adopted. The Plan is authorized to issue up to 2,000,000 stock options. In accordance with the Plan, the Company can grant to certain employees, directors or consultants options to purchase shares of the Company’s common stock which vest automatically or ranging from a one -year period to a five -year period. The shares are exercisable over a period of ten years from the date of grant. The Plan provides that qualified options be granted at an exercise price equal to the fair market value at the date of grant. There were 2,592,229 options outstanding as of September 30, 2016. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:
Expected dividend yield |  | 0% |
Risk free interest rate | 1.01% | - | 2.43%
Expected life in years |  | 5 |
Expected volatility | 85% | - | 213%
The following is an analysis of the stock option grant activity under the Plan:
|  |  |  |  |  | Exercise |  |  | Weighted Average |
|  | Number |  |  | Price |  |  | Exercise Price |
Stock Options |  |  |  |  |  |  |  |  |  |  |  |
Outstanding January 1, 2016 |  |  | 1,707,744 |  |  |  |  |  |  | $ | 0.84 |
Granted |  |  | 1,301,084 |  |  | $ | 1.25 |  |  |  |  |
Expired |  |  | (416,599 | ) |  |  |  |  |  |  |  |
Outstanding September 30, 2016 |  |  | 2,592,229 |  |  |  |  |  |  | $ | 1.04 |
On February 12, 2016, the Company issued 100,000 options (on a post-Reverse Split basis) under the 2006 Plan to its Chief Financial Officer as a sign-on bonus. These options have an exercise price of $1.25 per share, a ten -year term and vest over a three -year period in 35 monthly installments of 0.18 shares and a final installment of 2,778 shares. The terms of the option grant also include full vesting acceleration upon a change of control. The Company recognized compensation expense related to this issuance $10,383 and $5,192 for the nine and three months ended September 30, 2016 and March 31, 2016, respectively. On April 15, 2016, our Compensation Committee of our Board determined that each board member will be compensated an option grant of 40,000 options per year, plus 5,000 options for serving as the Chair of a committee. Options shall have 10 -year expiration dates, 24 -month vesting cycles, and a strike price of $1.25 per share, or more in future time periods to match the fair market value of the Company’s common stock. The aggregate amount granted was 175,000 options. On April 15, 2016, the Board granted 1,008,299 options to employees and consultants. These options shall have 10 -year expiration dates, 12 to 48 month vesting cycles, and a strike price of $1.25 per share. During the quarter, 17,785 options were granted to former Atrinsic executives. These options have 3 -year expiration dates, and a strike price of $1.25 per share. The total number of options granted and vested during the nine month period ended September 30, 2016 was 1,974,445 and 133,229, respectively. The exercise price for theses 1,974,445 options was $1.25 per share. The Company recognized compensation expense related to options issued of $450,566 during the nine month period ended September 30, 2016. On June 17, 2016, the stockholders of the Company approved the adoption of the 2016 equity compensation plan at the Special Meeting. No further options will be granted under the 2006 equity compensation plan, which we assumed in connection with the Merger. Details of this plan can be found with the Company’s Form 8 -K filed June 20, 2016. Warrants: In connection with the Merger, all of the issued and outstanding warrants to purchase shares of Prior Protagenic common stock, converted, on a 1 for 1 basis, into new warrants (the “ New Warrants ”) to purchase shares of our Series B Preferred Stock. Simultaneous with the Merger and the Private Offering, New Warrants to purchase 3,403,367 shares of Series B Preferred Stock at an average exercise price of approximately $1.05 per share were issued to holders of Prior Protagenic warrants; additionally, holders of $665,000 of our debt and $35,000 of accrued interest exchanged such debt for five -year warrants to purchase 295,945 shares of Series B Preferred Stock at $1.25 per share. Placement Agent Warrants to purchase 127,346 shares of Series B Preferred Stock at an exercise price of $1.25 per share were issued in connection with the Private offering. These warrants to purchase 423,291 shares of Series B Preferred Stock have been recorded as derivative liabilities. See Note 6. A summary of warrant issuances are as follows:
|  |  |  |  |  | Exercise |  |  | Weighted Average |
|  | Number |  |  | Price |  |  | Exercise Price |
Warrants |  |  |  |  |  |  |  |  |  |  |  |
Outstanding January 1, 2016 |  |  | 3,403,367 |  |  |  |  |  |  | $ | 1.05 |
Granted |  |  | 423,291 |  |  | $ | 1.25 |  |  |  |  |
Outstanding September 30, 2016 |  |  | 3,826,658 |  |  |  |  |  |  | $ | 1.07 |
| NOTE 6 STOCKHOLDERS’ DEFICIT Common Stock The Company adopted a certificate of amendment to the Company’s restated certificate of incorporation to increase the number of authorized shares of its $.001 par value common stock from 10,000,000 shares to 20,000,000 shares which was recorded by the state of Delaware on October 2, 2015. No common stock was issued during the years ended December 31, 2015 and 2014. Stock-Based Compensation On March 15, 2006, the Company adopted the “Protagenic Therapeutic, Inc. 2006 Employee, Director and Consultant Stock Plan” (the “Plan”) and authorized 140,000 shares for issuance pursuant to the Plan. On April 1, 2012, the Company increased the number of authorized shares to 2,000,000 shares. In accordance with the Plan, the Company can grant to certain employees, directors or consultants options to purchase shares of the Company’s common stock which vest automatically or ranging from a one -year period to a five -year period. The shares are exercisable over a period of ten years from the date of grant. The Plan provides that qualified options be granted at an exercise price equal to the fair market value at the date of grant, as determined by the Board of Directors. During the years ended December 31, 2015 and 2014, the Company granted a total of 490,000 and 240,000 respectively, options to purchase shares of the Company’s common stock at an exercise price of $1.25 and $1.00 per share. The 2015 and 2014 options vest monthly ranging from six months to over a five -year period for one individual. Management has determined that for each round of stock options granted, it was reasonable to estimate the fair value of the common stock options using the Black Scholes option pricing model. Accordingly, the Company has accounted for options using this calculated value method. Based on the fact that the Company is a privately held company with no revenue, management has estimated its expected future equity volatility factor in valuing the Company’s common stock equivalents by starting with its historical volatility adjusted for the volatility of equity interests from comparable publicly traded and privately held published companies to arrive at such industry benchmarks to evaluate. The fair value of each stock option granted and warrant issued during 2015 and 2014 was estimated using the Black Scholes assumptions and or factors as follows:
|  | 2015 |  | 2014 |
Expected dividend yield |  |  | 0% |  |  |  | 0 | %
Risk free interest rate |  | 1.66% | - | 2.43% |  |  | 2.30 | %
Expected life in years |  |  | 10 |  |  |  | 10 |
Expected volatility |  |  | 85% |  |  |  | 85 | %
No stock options expired or were forfeited during the years ended December 31, 2015 and 2014. As of December 31, 2015, the stock options had no intrinsic value as there was no current market value for the shares. The Company recognized stock-based compensation expense pertaining to the options granted of $190,751 and $85,168 during the years ended December 31, 2015 and 2014, respectively. Stock-Based Compensation (continued) As of December 31, 2015 and 2014, the Plan had remaining option shares to be granted of 292,256 and 782,256, respectively. Unrecognized compensation expense related to unvested awards as of December 31, 2015 was approximately $290,985, and will be recognized over the remaining vesting periods of the underlying awards. The following is an analysis of the stock option grant activity under the Plan:
|  |  |  |  |  | Exercise |  |  | Weighted Average |
|  | Number |  |  | Price |  |  | Exercise Price |
Stock Options |  |  |  |  |  |  |  |  |  |  |  |
Outstanding January 1, 2014 |  |  | 977,744 |  |  |  |  |  |  | $ | 0.60 |
Granted |  |  | 240,000 |  |  | $ | 1.00 |  |  |  |  |
Outstanding December, 31, 2014 |  |  | 1,217,744 |  |  |  |  |  |  | $ | 0.68 |
Granted |  |  | 490,000 |  |  | $ | 1.25 |  |  |  |  |
Outstanding December, 31, 2015 |  |  | 1,707,744 |  |  |  |  |  |  | $ | 0.84 |
The following is an analysis of the vested and non-vested stock options under the Plan as of December 31, 2015:
Number of Options | Expiration Date |  | Remaining Contractual Life (Years) |  |  | Exercise Price |
104,150 |  | March 1, 2016 |  |  | 0.17 |  |  | $ | 0.26 |
312,449 |  | March 15, 2016 |  |  | 0.21 |  |  | $ | 0.26 |
55,000 |  | August 1, 2016 |  |  | 0.59 |  |  | $ | 0.26 |
60,000 |  | November 1, 2016 |  |  | 0.84 |  |  | $ | 0.26 |
21,145 |  | February 1, 2017 |  |  | 1.09 |  |  | $ | 1.00 |
290,000 |  | March 1, 2021 |  |  | 5.25 |  |  | $ | 1.00 |
10,000 |  | June 10, 2021 |  |  | 5.45 |  |  | $ | 1.00 |
50,000 |  | April 1, 2022 |  |  | 6.25 |  |  | $ | 1.00 |
75,000 |  | December 1, 2022 |  |  | 6.92 |  |  | $ | 1.00 |
90,000 |  | March 1, 2024 |  |  | 8.17 |  |  | $ | 1.00 |
215,000 |  | March 1, 2025 |  |  | 9.17 |  |  | $ | 1.25 |
75,000 |  | March 9, 2025 |  |  | 9.19 |  |  | $ | 1.25 |
150,000 |  | March 1, 2027 |  |  | 11.17 |  |  | $ | 1.00 |
200,000 |  | January 22, 2030 |  |  | 14.07 |  |  | $ | 1.25 |
1,707,744 |  |  |  |  |  |  |  |  |  |
Warrants The Company has conducted private placement offerings to raise financing since its formation. In connection with the private placement offerings that occurred in 2013, 2011, and 2007, the Company offered its common stock at a fixed purchase price of $1.00 per share, $0.001 par value, and offered 3 warrants for each share purchased. The warrants have an exercise price of $1.00 per share and have an exercise term of ten years from the date of issuance. The Company has warrants outstanding as follows:
|  | December 31, 2015 |  |  | December 31, 2014 |
Financing and stock subscriptions (includes 300,000 warrants to the Major Stockholder and Chairman) |  |  | 2,100,000 |  |  |  | 2,100,000 |
Consultants |  |  | 350,000 |  |  |  | 100,000 |
Major Stockholder and Chairman |  |  | 953,367 |  |  |  | 953,367 |
Total Warrants Issued |  |  | 3,403,367 |  |  |  | 3,153,367 |
A summary of warrant issuances are as follows:
|  |  |  |  |  | Exercise |  |  | Weighted Average |
|  | Number |  |  | Price |  |  | Exercise Price |
Warrants |  |  |  |  |  |  |  |  |  |  |  |
Outstanding January 1, 2014 |  |  | 3,153,367 |  |  |  |  |  |  | $ | 1.01 |
Granted |  |  | - |  |  | $ | - |  |  |  |  |
Outstanding December, 31, 2014 |  |  | 3,153,367 |  |  |  |  |  |  | $ | 1.00 |
Granted |  |  | 250,000 |  |  | $ | 1.25 |  |  |  |  |
Outstanding December, 31, 2015 |  |  | 3,403,367 |  |  |  |  |  |  | $ | 1.05 |
All outstanding warrants are currently exercisable. A summary of warrants issued and outstanding at December 31, 2015 is summarized as follows:
Number of Common Stock Equivalents |  | Expiration Date |  | Remaining Contractual Life(Years) |  | Exercise Price |
100,000 |  | 01/01/2017 |  |  | 1.2 |  |  | $ | 1.25 |
675,000 |  | 07/07/2021 |  | 5.5 | to | 6.7 |  | $ | 1.00 |
2,628,367 |  | 12/20/2023 |  | 7.3 | to | 8.1 |  | $ | 1.05 |
3,403,367 |  |  |  |  |  |  |  |  |  |
The Company recognized stock-based compensation expense pertaining to the warrants issued of $287,878 and $0 during the years ended December 31, 2015 and 2014, respectively. As of December 31, 2015, the Major Stockholder and Chairman has been issued 1,253,367 warrants to purchase 417,789 shares of common stock at an exercise price of $1.00 exercisable over 10 year periods which ends either on May 19, 2021 (warrants to purchase 100,000 shares of common stock) or on February18, 2023 (warrants to purchase 317,789 shares of common stock).

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