PHASERX, INC., 10-Q filed on 8/2/2016
Quarterly Report
Document And Entity Information
6 Months Ended
Jun. 30, 2016
Aug. 1, 2016
Document Information [Line Items]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q2 
 
Entity Registrant Name
PHASERX, INC. 
 
Entity Central Index Key
0001429386 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Smaller Reporting Company 
 
Trading Symbol
PZRX 
 
Entity Common Stock, Shares Outstanding
 
11,690,329 
Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Current assets
 
 
Cash and cash equivalents
$ 15,198 
$ 3,290 
Marketable securities
5,993 
Prepaids and other current assets
505 
388 
Total current assets
21,696 
3,678 
Property and equipment, net
301 
236 
Total assets
21,997 
3,914 
Current liabilities
 
 
Accounts payable
542 
396 
Accrued liabilities
522 
445 
Accrued interest
37 
3,199 
Convertible notes, net of debt discount
19,841 
Deferred rent
20 
47 
Total current liabilities
1,121 
23,928 
Term loan payable, net of debt discount
5,519 
Preferred stock warrant liability
3,163 
Total liabilities
6,640 
27,091 
Commitments and contingencies (Note 7)
   
   
Stockholders' equity(deficit)
 
 
Preferred stock, $0.0001 par value, 5,000,000 shares authorized at June 30, 2016
Common stock; $0.0001 par value; 50,000,000 shares and 65,600,000 shares authorized at June 30, 2016 and December 31, 2015, respectively; 11,690,329 and 532,885 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
Additional paid-in capital
78,002 
453 
Accumulated other comprehensive income
14 
Accumulated deficit
(62,660)
(49,343)
Total stockholders' equity (deficit)
15,357 
(48,889)
Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)
21,997 
3,914 
Series A Preferred Stock [Member]
 
 
Current liabilities
 
 
Temporary Equity, Carrying Amount
20,212 
Series A-1 Preferred Stock [Member]
 
 
Current liabilities
 
 
Temporary Equity, Carrying Amount
$ 0 
$ 5,500 
Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2016
Dec. 31, 2015
Preferred Stock, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Preferred Stock, Shares Authorized
5,000,000 
 
Common Stock, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Common Stock, Shares Authorized
50,000,000 
65,600,000 
Common Stock, Shares, Issued
11,690,329 
532,885 
Common Stock, Shares, Outstanding
11,690,329 
532,885 
Series A Preferred Stock [Member]
 
 
Temporary Equity, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Temporary Equity, Shares Authorized
45,100,000 
Temporary Equity, Shares Issued
20,216,583 
Temporary Equity, Shares Outstanding
20,216,583 
Temporary Equity, Liquidation Preference
 
$ 20,217 
Series A-1 Preferred Stock [Member]
 
 
Temporary Equity, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Temporary Equity, Shares Authorized
10,500,000 
Temporary Equity, Shares Issued
5,500,000 
Temporary Equity, Shares Outstanding
5,500,000 
Temporary Equity, Liquidation Preference
 
$ 5,500 
Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Revenue
$ 0 
$ 0 
$ 0 
$ 375 
Operating expenses
 
 
 
 
Research and development
1,416 
1,160 
2,850 
2,442 
General and administrative
880 
283 
1,559 
567 
Noncash financial advising fees
7,515 
7,515 
Total operating expenses
9,811 
1,443 
11,924 
3,009 
Loss from operations
(9,811)
(1,443)
(11,924)
(2,634)
Interest expense
(1,383)
(320)
(1,583)
(570)
Other income, net
110 
16 
190 
37 
Total other income (expense)
(1,273)
(304)
(1,393)
(533)
Net loss
$ (11,084)
$ (1,747)
$ (13,317)
$ (3,167)
Basic and diluted net loss per share
$ (1.84)
$ (3.29)
$ (4.05)
$ (6.27)
Shares used in computation of basic and diluted net loss per share
6,013 
531 
3,288 
505 
Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Net loss
$ (11,084)
$ (1,747)
$ (13,317)
$ (3,167)
Other comprehensive income:
 
 
 
 
Unrealized gain (loss) on marketable securities
14 
Comprehensive loss
$ (11,084)
$ (1,747)
$ (13,303)
$ (3,167)
Statement of Stockholders' Equity (Deficit) (USD $)
In Thousands, except Share data
Total
Bridge Loan [Member]
Convertible Debt [Member]
Common Stock [Member]
Common Stock [Member]
Bridge Loan [Member]
Common Stock [Member]
Convertible Debt [Member]
Additional Paid-in Capital [Member]
Additional Paid-in Capital [Member]
Bridge Loan [Member]
Additional Paid-in Capital [Member]
Convertible Debt [Member]
AOCI Attributable to Parent [Member]
AOCI Attributable to Parent [Member]
Bridge Loan [Member]
AOCI Attributable to Parent [Member]
Convertible Debt [Member]
Retained Earnings [Member]
Retained Earnings [Member]
Bridge Loan [Member]
Retained Earnings [Member]
Convertible Debt [Member]
Balance at Dec. 31, 2015
$ (48,889)
 
 
$ 1 
 
 
$ 453 
 
 
$ 0 
 
 
$ (49,343)
 
 
Balance (shares) at Dec. 31, 2015
 
 
 
532,885 
 
 
 
 
 
 
 
 
 
 
 
Debt discount for beneficial conversion feature on bridge loan
1,021 
 
 
 
 
 
1,021 
 
 
 
 
 
 
 
 
Issuance of stock in initial public offering, net of $2,025 in offering costs
16,475 
 
 
 
 
16,475 
 
 
 
 
 
 
Issuance of stock in initial public offering, net of $2,025 in offering costs (shares)
 
 
 
3,700,000 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock to financial advisor, noncash
560 
 
 
 
 
560 
 
 
 
 
 
 
Issuance of common stock to financial advisor, noncash (shares)
 
 
 
112,000 
 
 
 
 
 
 
 
 
 
 
 
Conversion of preferred stock
25,716 
 
 
 
 
25,716 
 
 
 
 
 
 
Conversion of preferred stock (shares)
 
 
 
3,229,975 
 
 
 
 
 
 
 
 
 
 
 
Conversion of notes payable, bridge loan and related accrued interest
 
4,086 
19,404 
 
 
4,086 
19,404 
 
 
Conversion of notes payable, bridge loan and related accrued interest (shares)
 
 
 
 
1,021,525 
2,788,880 
 
 
 
 
 
 
 
 
 
Cashless exercise of warrants
2,440 
 
 
 
 
2,440 
 
 
 
 
 
 
Cashless exercise of warrants (shares)
 
 
 
303,096 
 
 
 
 
 
 
 
 
 
 
 
Exercise of options
 
 
 
 
 
 
 
 
 
 
Exercise of options (shares)
1,968 
 
 
1,968 
 
 
 
 
 
 
 
 
 
 
 
Noncash financial advising fees
6,955 
 
 
 
 
6,955 
 
 
 
 
 
 
Warrant liability reclassified to equity upon expiration
535 
 
 
 
 
535 
 
 
 
 
 
 
Debt discount for warrant issued with term loan payable
205 
 
 
 
 
205 
 
 
 
 
 
 
Stock-based compensation
156 
 
 
 
 
156 
 
 
 
 
 
 
Accretion of Series A preferred stock
(4)
 
 
 
 
(4)
 
 
 
 
 
 
Unrealized gain on marketable securities
14 
 
 
 
 
 
 
14 
 
 
 
 
Net loss
(13,317)
 
 
 
 
 
 
 
 
(13,317)
 
 
Balance at Jun. 30, 2016
$ 15,357 
 
 
$ 1 
 
 
$ 78,002 
 
 
$ 14 
 
 
$ (62,660)
 
 
Balance (shares) at Jun. 30, 2016
 
 
 
11,690,329 
 
 
 
 
 
 
 
 
 
 
 
Statement of and Stockholders' Equity (Deficit) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs
$ 2,025 
Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Operating activities
 
 
Net loss
$ (13,317)
$ (3,167)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Noncash financial advising fees
7,515 
Amortization of debt discount
1,426 
56 
Depreciation and amortization
92 
225 
Stock-based compensation
156 
11 
Noncash interest expense
115 
514 
Deferred contract revenue
(375)
Preferred stock warrant liability
(190)
209 
Changes in operating assets and liabilities
 
 
Prepaids and other current assets
(117)
17 
Accounts payable
146 
(28)
Accrued liabilities
77 
(198)
Deferred rent
(27)
(90)
Net cash used in operating activities
(4,124)
(2,826)
Investing activities
 
 
Purchases of marketable securities
(5,979)
Purchases of property and equipment
(157)
(10)
Net cash used in investing activities
(6,136)
(10)
Financing activities
 
 
Proceeds from issuance of common stock, net of issuance costs
16,475 
Proceeds from issuance of term loan, net of issuance costs
5,693 
Proceeds from issuance of convertible note, net of issuance costs
1,382 
Proceeds from exercise of common stock warrants
10 
Proceeds from issuance of original issue discount promissory note
400 
Payment of original issue discount promissory note
(400)
Net cash provided by financing activities
22,168 
1,392 
Net increase (decrease) in cash and cash equivalents
11,908 
(1,444)
Cash and cash equivalents
 
 
Beginning of period
3,290 
2,031 
End of period
15,198 
587 
Noncash investing and financing activities:
 
 
Accretion of Series A preferred stock
Conversion of preferred stock into common stock
25,716 
Debt discount for beneficial conversion feature on bridge loan
1,021 
Warrant liability reclassified to equity upon expiration
535 
Debt discount for warrant issued in connection with term loan payable
205 
Notes Payable, Other Payables [Member]
 
 
Noncash investing and financing activities:
 
 
Conversion of debt instrument into common stock
19,404 
Bridge Loan [Member]
 
 
Noncash investing and financing activities:
 
 
Conversion of debt instrument into common stock
$ 4,086 
$ 0 
Business and Basis of Presentation
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
1. Business and Basis of Presentation
 
PhaseRx, Inc. (referred to as the “Company,” “we,” “us,” or “our”) was incorporated in the State of Delaware on March 9, 2006 and is located in Seattle, Washington. We are a biopharmaceutical company developing a portfolio of products for the treatment of inherited enzyme deficiencies in the liver using intracellular enzyme replacement therapy, or i-ERT. Our i-ERT approach is enabled by our proprietary Hybrid messenger RNA, or mRNA, Technology platform, which allows synthesis of the missing enzyme inside the cell. Our initial product portfolio targets the three urea cycle disorders ornithine transcarbamylase deficiency, or OTCD, argininosuccinate lyase deficiency, or ASL deficiency, and argininosuccinate synthetase deficiency, or ASS1 deficiency. In June 2016, we selected PRX-OTC as our lead product candidate for treatment of OTCD and demonstrated preclinical proof of concept for a second product candidate PRX-ASL, for the treatment of ASL deficiency. We expect to obtain human clinical safety and efficacy data in OTCD patients  for our first program in 2018.
 
Our activities since inception have consisted principally of performing research and development activities and raising capital. Our activities are subject to significant risks and uncertainties, including possible failure of preclinical testing and failing to secure additional funding before we achieve sustainable revenue and profit from operations. As of June 30, 2016, we had an accumulated deficit of $62.7 million.
 
Initial Public Offering
 
In May 2016, we completed our initial public offering (“IPO”) and sold 3,700,000 shares of common stock at a price of $5.00 per share to the public. The shares began trading on The NASDAQ Capital Market on May 18, 2016. The aggregate net proceeds received by us from the IPO, net of underwriting discounts and commissions and offering expenses, was $16.5 million. Immediately prior to the pricing of the IPO, all then outstanding shares of our convertible preferred stock, convertible notes and loans were converted into 7,040,380 shares of common stock and warrants were exercised by cashless exercise to purchase 303,096 shares of common stock. The related carrying value of shares of preferred stock, notes and warrants in the aggregate amount of $51.6 million was reclassified as common stock and additional paid-in capital. Additionally, we amended and restated our certificate of incorporation, effective May 17, 2016 to, among other things, change the authorized number of shares of common stock to 50,000,000 and the authorized number of shares of preferred stock to 5,000,000.
 
Prior to the IPO, our recurring operating losses raised substantial doubt about our ability to continue as a going concern. During the quarter ended June 30, 2016, we successfully completed the IPO and secured a term loan with Hercules Capital, Inc. (see detailed disclosure in note 4). We believe we have sufficient cash to fund our operations for the next 12 months.
 
Conversion Price Amendment
 
On May 17, 2016, we amended our third amended and restated certificate of incorporation to reduce the conversion price of our preferred stock to $0.747165 per share.
 
Reverse Stock Split
 
On May 17, 2016, following the effectiveness of the conversion price amendment, we effected a reverse stock split at a ratio of 1-for-10.656096 of our issued and outstanding shares of common stock. Issued and outstanding stock options were split on the same basis and exercise prices were adjusted accordingly.
 
All information presented in these financial statements and related notes reflect the 1-for-10.656096 reverse stock split of our outstanding shares of common stock, stock options and warrants and the revision to the conversion price of our preferred stock.
 
Basis of Presentation
 
The accompanying interim balance sheet as of June 30, 2016, the statements of operations for the three and six months ended June 30, 2016 and 2015, the statements of comprehensive loss for the three and six months ended June 30, 2016 and 2015, the statement of stockholders’ equity (deficit) for the six months ended June 30, 2016 and the statements of cash flows for the six months ended June 30, 2016 and 2015 and the related footnote disclosures are unaudited. The accompanying unaudited financial statements reflect, in the opinion of our management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from the accompanying statements. These interim financial statements should be read in conjunction with the audited financial statements and related notes thereto included in our final prospectus dated May 17, 2016, filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”) on May 18, 2016. The accompanying financial information as of December 31, 2015 has been derived from the audited 2015 financial statements included in the final prospectus. Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016, or any other future period.
Summary of Significant Accounting Policies
Significant Accounting Policies [Text Block]
2. Summary of Significant Accounting Policies
 
Use of estimates
 
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
 
In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, fair value measurements, financing activities, accruals and other contingencies.
 
Cash Equivalents and Marketable Securities
 
We invest our excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, marketable securities, or long-term marketable securities on the balance sheets, classified as available-for-sale and reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss). Realized gains and losses on the sale of these securities are recognized in net income or loss. We consider all highly liquid investments with original maturities at purchase of 90 days or less to be cash equivalents, an investment with a maturity greater than twelve months from the balance sheet date as long-term marketable securities and a maturity less than twelve months as short-term at the balance sheet date. Our cash equivalents and marketable securities consist principally of commercial paper and money market securities.
 
Interest earned on securities is included in interest income. Gains are recognized when realized in our statements of operations. Losses are recognized when realized or when we have determined that an other-than-temporary decline in fair value has occurred. The cost of securities sold is based on the specific identification method.
 
We periodically evaluate whether declines in fair values of our investments below their cost are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as our ability and intent to hold the investment until a forecasted recovery occurs. Factors considered include quoted market prices, recent financial results and operating trends, credit quality of debt instrument issuers, other publicly available information that may affect the value of our investments, duration and severity of the decline in value, and our strategy and intentions for holding the investment. Additionally, we assess whether it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis.
 
Fair Value of Financial Instruments
 
We establish the fair value of our assets and liabilities using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We established a fair value hierarchy based on the inputs used to measure fair value. The three levels of the fair value hierarchy are as follows:
 
Level 1:  Quoted prices in active markets for identical assets or liabilities.
 
Level 2:  Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
 
Level 3:  Unobservable inputs in which little or no market data exists, therefore determined using estimates and assumptions developed by us, which reflect those that a market participant would use.
 
We measure and report at fair value our cash equivalents and marketable securities. The carrying value of accounts payable and accrued liabilities approximate their respective fair values due to their relative short maturities. The carrying value of our Hercules term loan approximates fair value because the interest rate is reflective of the rate we could obtain on debt with similar terms and conditions. We estimated the fair value of the preferred stock warrant liability using Level 3 inputs.
 
We may apply the fair value option to any eligible financial assets or liabilities, which permits an instrument by instrument irrevocable election to account for selected financial assets and liabilities at fair value. To date, we have not applied this election.
 
Derivative Financial Instruments
 
We evaluate our financial instruments such as convertible preferred stock and convertible notes to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. At each reporting date, we review our convertible securities to determine their classification is appropriate.
 
Deferred Financing Costs
 
We defer costs related to the issuance of debt and include them on the accompanying balance sheets as a deduction from the debt liability. Deferred financing costs are amortized over the term of the related loan using the effective interest method and are included as a component of interest expense on the accompanying statements of operations.
 
Revenue Recognition
 
Non-refundable, upfront payments received in connection with collaborative research and development agreements are deferred and recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, whichever is longer.
 
Research and Development Costs
 
Research and development costs are expensed as incurred. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research services, the costs of laboratory supplies, equipment and facilities, license fees and other external costs. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
 
Stock-Based Compensation
 
We expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. We use the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date. We recognize stock-based compensation, net of estimated forfeitures, on the graded-vesting method as expense over the requisite service period. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to volatility, expected option term and fair value of our common stock. Measurement of stock-based compensation for options granted to nonemployees is subject to periodic adjustment as the underlying equity instruments vest.
 
We have granted stock options with performance conditions to certain executive officers and directors. At each reporting date, we evaluate whether the achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon our assessment of achievement of each performance condition or the occurrence of the event which will trigger the options to vest.
 
Comprehensive Loss
 
Comprehensive loss is comprised of net loss and other comprehensive income or loss. Other comprehensive income or loss consists of unrealized gains and losses on marketable securities.
 
Net Loss Per Share
 
The computation of basic and diluted net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period and excludes all outstanding stock options, warrants, preferred stock, as well as shares issuable upon conversion of all outstanding convertible notes and term loans from the calculation of diluted net loss per common share, as all such securities are anti-dilutive to the computation for all the periods presented. For the three months and six months ended June 30, 2016, the computation of diluted net loss per share excluded 1,222,289 shares. For the three months and six months ended June 30, 2015, the computation of diluted net loss per share excluded 6,198,474 shares.
 
The following table presents the calculation of basic and diluted net loss per share:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(11,084)
 
$
(1,747)
 
$
(13,317)
 
$
(3,167)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares used in computation of basic and diluted net loss per share
 
 
6,013
 
 
531
 
 
3,288
 
 
505
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
 
$
(1.84)
 
$
(3.29)
 
$
(4.05)
 
$
(6.27)
 
 
Concentration of Risk
 
We maintain our cash, cash equivalents and investments with high quality, accredited financial institutions. These amounts at times may exceed federally insured limits. We have not experienced any credit losses in such accounts and do not believe we are exposed to significant risk on these funds. Our cash, cash equivalents and marketable securities balances of $20.9 million and $3.0 million as of June 30, 2016 and December 31, 2015 were uninsured.
 
Recent Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU is effective for public entities for annual periods beginning after December 15, 2017. In June 2015, the FASB deferred for one year the effective date of the new revenue guidance, with an option that would permit companies to adopt the guidance as early as the original effective date. Early adoption prior to the original effective date is not permitted. We are evaluating the impact this guidance may have on our revenue recognition, but do not expect that the adoption will have a material impact on our financial statements.
 
In April 2015, the FASB issued ASU 2015-03 Simplifying the Presentation of Debt Issuance Costs guidance to simplify the presentation of debt issuance costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction for the debt liability as opposed to recorded as a separate asset, except when incurred before receipt of the funding from the associated debt liability. This is similar to the presentation of debt discounts or premiums. This ASU requires retrospective application which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We have adopted this guidance. The adoption of this guidance did not have a material impact on our financial statements.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU is intended to provide more transparent and economically neutral information about the assets and liabilities that arise from leases than previous guidance. The ASU is effective for public entities for annual periods beginning on or after December 15, 2018. Early adoption is permitted, and adoption must be applied on a modified retrospective basis. We are evaluating the impact of this guidance but do not expect that the adoption will have a material impact on our financial statements.
 
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting which amends ASC 718, Compensation — Stock Compensation. The ASU includes provisions intended to simplify various provisions related to how share-based payments are accounted for and presented in the financial statements. The ASU is effective for public entities for annual periods beginning on or after December 15, 2016 and interim periods within that reporting period. Early adoption is permitted in any interim or annual period. We are evaluating the impact of this guidance but do not expect that the adoption will have a material impact on our financial statements.
Cash Equivalents and Marketable Securities
Cash, Cash Equivalents, and Marketable Securities [Text Block]
3. Cash Equivalents and Marketable Securities
 
We did not have any available-for-sale security holdings in 2015. Securities available-for-sale at cost and fair market value by contractual maturity as of June 30, 2016 were as follows:
 
 
 
Cost or
Amortized
Cost
 
Fair
Value
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
5,979
 
$
5,993
 
Due after one year through two years
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
$
5,979
 
$
5,993
 
 
We did not incur any realized gains and losses on sales of available-for-sale securities for the three and six months ended June 30, 2016. None of the securities have been in a continuous unrealized loss position for more than 12 months as of June 30, 2016.
 
Marketable securities available-for-sale consisted of the following as of June 30, 2016:
 
 
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
 
 
(In thousands)
 
Commercial paper
 
$
5,979
 
$
14
 
$
-
 
$
5,993
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
5,979
 
$
14
 
$
-
 
$
5,993
 
 
Fair values were determined for each individual security in the investment portfolio. We utilize third-party pricing services for all security valuations. We review the pricing methodology, including the collection of market information, used by the third-party pricing services. On a periodic basis, we also review and validate the pricing information received from the third-party providers.
Term Loan, Convertible Notes Payable and Other Debt
Debt Disclosure [Text Block]
4. Term Loan, Convertible Notes Payable and Other Debt
 
Hercules Term Loan and Warrants
 
On June 7, 2016, we entered into a Loan and Security Agreement (the “Loan Agreement”) by and among us, the several banks and other financial institutions or entities from time to time parties to the Loan Agreement (the “Lenders”) and Hercules Capital, Inc. (‘Hercules”), in its capacity as administrative agent for itself and the Lenders, pursuant to which the Lenders agreed to make a term loan available to us for working capital and general business purposes, in a principal amount of up to $8 million (the “Term Loan”). On June 7, 2016, the Lenders funded $6 million of the Term Loan. An additional $2 million of the Term Loan may be requested by us during the period commencing upon us entering into an arms-length strategic corporate development transaction that is validating in the agent’s and Lenders’ sole discretion (the “Milestone Event”) and ending upon the earlier to occur of (a) December 15, 2016, (b) the date which is 45 days after the consummation of the Milestone Event and (c) the occurrence of an event of default under the Loan Agreement. The Term Loan is secured by substantially all of our assets other than our intellectual property.
 
The Term Loan bears interest at a floating annual rate equal to the greater of (i) 9.25% and (ii) the sum of (a) 9.25%, plus (b) the prime rate as reported by The Wall Street Journal minus 3.50%. We are required to make interest payments in cash on the first business day of each month, beginning on July 1, 2016. The Term Loan will begin amortizing on July 3, 2017, in equal monthly installments of principal and interest, with such payments beginning on July 3, 2017, and continuing on the first business day of each month thereafter until the Term Loan is repaid. The final maturity date of the Term Loan is December 2, 2019. Upon repayment of the term loan, we are required to pay an end of term charge to the Lenders equal to 5.85% of the aggregate original principal amount of all Term Loan advances extended by the Lenders to us.
 
At our option, we may prepay all or any portion of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the Term Loan, subject to a prepayment fee of 3% of the amount prepaid if the prepayment occurs on or prior to June 7, 2017, 2% of the amount prepaid if the prepayment occurs after June 7, 2017 but on or prior to June 7, 2018, or 1% of the amount prepaid if the prepayment occurs after June 7, 2018.
 
In connection with the Loan Agreement, we also issued to Hercules Technology III, L.P., as the sole Lender on June 7, 2016, a warrant to purchase up to 63,000 shares of common stock at an exercise price of $5.00 per share. In the event that any additional Term Loans are made to us, the warrant will be exercisable for up to an additional number of shares of common stock equal to (i) $105,000 divided by (ii) the volume-weighted average daily price for a share of common stock for the 30 consecutive trading days ending on the trading day immediately preceding the date on which the warrant becomes exercisable for such additional shares (the “Additional Shares Exercise Price”), at the Additional Shares Exercise Price. The warrant may be exercised either for cash or on a cashless “net exercise” basis. The warrant is immediately exercisable and expires on June 7, 2021.
 
The warrant issued met the requirements to be accounted for as equity. The $212,000 fair value of the warrant was determined using the Black-Scholes option model with the following assumptions: no dividend yield; expected life of 5 years; risk-free interest rate of 1.23%; and volatility rate of 81.6%. The proceeds from the Term Loan were allocated between the debt and warrant based on their relative fair values. The relative fair value of the warrant amounted to $205,000 and was recorded as an increase in the additional paid-in capital and debt discount.
 
The total debt discount, inclusive of the end of term charge and other fees, amounted to $659,000 related to this Term Loan which will be amortized to interest expense over the term of the Term Loan.
 
Convertible Loan – Bridge Loan Financing
 
On December 21, 2015, we entered into a loan and security agreement with 17 investors, pursuant to which these investors made term loans to us in the aggregate principal amount of $4.0 million. Interest accrued on the term loans at the rate of 5% per annum. The entire outstanding principal balance of $4.0 million of the term loans together with all accrued and unpaid interest of $86,000 were converted into 1,021,525 shares of our common stock upon the closing of our IPO, at a conversion price equal to 80% of the IPO offering price. The value of the beneficial conversion feature of $1.0 million was recorded as a debt discount with an offsetting credit to additional paid in capital. The discount was fully amortized to interest expense on the conversion date.
 
Convertible Notes Payable
 
Prior to 2016 we issued to investors, including beneficial owners of more than 5% of our capital stock, convertible promissory notes, in the aggregate principal amount of $16.2 million and seven-year warrants to purchase shares of the same class and series of capital stock into which the notes convert. The notes carried interest at a rate of 8% per annum. On December 11, 2015, the noteholders agreed that for purposes of calculating the number of conversion shares, the notes ceased accruing interest as of December 31, 2015. The accrued interest payable on convertible notes payable totaled $3.2 million as of December 31, 2015. Immediately prior to the consummation of the IPO, the convertible notes and unpaid accrued interest thereon were converted into 2,788,880 shares of our common stock and the seven-year warrants to purchase 2,452,242 shares of preferred stock with an exercise price of $0.01 were exercised on a cashless basis resulting in the issuance of 303,096 shares of our common stock.
 
The fair value of the warrants was recorded as debt discount and warrant liabilities upon issuance of the convertible notes on the balance sheets because the warrants were exercisable into redeemable Series A preferred stock. The debt discount was amortized to interest expense over the term of the notes. The fair value of the warrant liabilities was re-measured at each reporting period using the Black-Scholes option pricing model. Any increase in fair value was recorded as expense and any decrease in the fair value was recorded as income in the statement of operations.
 
Warrants to purchase 1,049,999 shares of preferred stock with an exercise price of $1.00 expired upon the IPO. The balance of the warrant liability for the expired warrants of $535,000 was reclassified as additional paid-in capital during the quarter ended June 30, 2016.
 
The related warrant liabilities were zero and $3.2 million as of June 30, 2016 and December 31, 2015, respectively.
 
Promissory Note
 
On May 2, 2016, we issued an original issue discount promissory note in the aggregate amount of $440,000 payable to a lender in exchange for a $400,000 loan. The note was repaid after the closing of the IPO.
 
Interest expense
 
We recognized total interest expense of $1.4 million and $320,000 during the three months ended June 30, 2016 and 2015, respectively. We recognized total interest expense of $1.6 million and $570,000 during the six months ended June 30, 2016 and 2015, respectively.
Fair Value Measurements
Fair Value Disclosures [Text Block]
5. Fair Value Measurements
 
The following table sets forth the fair value of our assets and liabilities measured at fair value at June 30, 2016 and December 31, 2015:
 
 
 
June 30, 2016
 
Description
 
Balance
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market
 
$
6,144
 
$
6,144
 
$
-
 
$
-
 
Commercial paper
 
 
14,491
 
 
-
 
 
14,491
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial assets
 
$
20,635
 
$
6,144
 
$
14,491
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add Cash:
 
 
556
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents and marketable securities
 
$
21,191
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock warrant liability
 
$
-
 
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial liabilities
 
$
-
 
$
-
 
$
-
 
$
-
 
 
 
 
December 31, 2015
 
Description
 
Balance
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
(In thousands)
 
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market
 
$
-
 
$
-
 
$
-
 
$
-
 
Commercial paper
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial assets
 
$
-
 
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add Cash:
 
$
3,290
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents and marketable securities
 
$
3,290
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock warrant liability
 
$
3,163
 
$
-
 
$
-
 
$
3,163
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial liabilities
 
$
3,163
 
$
-
 
$
-
 
$
3,163
 
 
The warrants exercisable into Series A preferred stock were issued in connection with the issuance of convertible notes. We determined the fair value of warrants using the Black-Scholes option pricing model with the following assumptions (level 3 inputs): no dividend yield; expected life ranging from 3.1 to 7.0 years; risk-free interest rates ranging from 1.3% to 2.1%; and volatility rates ranging from 84.0% to 97.7%. The value of our underlying preferred stock was assumed to be equal to Series A preferred stock liquidation preference value of $1.00 per share. 
 
The changes in the balances of the Level 3 preferred stock warrant liability measured at fair value for the three and six months ended June 30, 2016 and 2015 were as follows (in thousands):
 
 
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Balance as of January 1,
 
$
3,163
 
$
2,695
 
Change in fair value
 
 
(81)
 
 
(23)
 
Balance as of March 31,
 
 
3,082
 
 
2,672
 
Additional preferred stock warrants issued
 
 
-
 
 
246
 
Change in fair value
 
 
(109)
 
 
(15)
 
Warrants exercised
 
 
(2,438)
 
 
-
 
Warrants expired
 
 
(535)
 
 
-
 
Balance as of June 30,
 
$
-
 
$
2,903
 
Stockholders' Equity (Deficit)
Stockholders' Equity Note Disclosure [Text Block]
6. Stockholders’ Equity (Deficit)
 
Convertible Preferred Stock
 
We had 20,216,583 shares of Series A preferred stock, held of record by 15 stockholders and 5,500,000 shares of Series A-1 preferred stock, held of record by one stockholder, outstanding as of December 31, 2015, all of which converted into an aggregate of 3,229,975 shares of common stock immediately prior to the pricing of our IPO.
 
Pursuant to our fourth amended and restated certificate of incorporation, we are authorized to issue 5,000,000 shares of preferred stock. Our fourth amended and restated certificate of incorporation authorizes our board, without any further stockholder action or approval, to issue these shares in one or more classes or series, to establish from time to time the number of shares to be included in each class or series and to fix the rights, preferences and privileges of the shares of each wholly unissued class or series and any of its qualifications, limitations or restrictions. There was no preferred stock issued or outstanding at June 30, 2016.
 
Warrants
 
As of June 30, 2016, other than the warrant to purchase 63,000 shares of our common stock at $5.00 per shares issued to Hercules in connection with the Term Loan, we also had a warrant issued to a former lender to purchase  14,133 shares of common stock at an exercise price of $7.96 that expires on December 1, 2020. 
 
Common Stock
 
In December 2015, we engaged Palladium Capital Advisors, LLC (“Palladium”) to serve as a non-exclusive agent in connection with a bridge loan financing and as a non-exclusive advisor in connection with our IPO and for the provision of general capital markets advice.
 
Prior to the consummation of the bridge loan financing, we determined, following discussions with Palladium, to request certain of our stockholders to transfer an aggregate of 1,393,880 shares of our common stock to Titan Multi-Strategy Fund I, LTD (“Titan”) and certain of its third-party designees at a nominal purchase price in order to induce Titan to serve as the initial committed investor in the bridge financing and also in expectation of receiving other support from Titan, Palladium and their respective contacts in connection with our proposed IPO, including introductions to certain prospective underwriters.
 
As a result of this request, some of our existing investors, who collectively beneficially owned the majority of our common stock, entered into stock purchase agreements with Titan and certain of its third-party designees, pursuant to which, concurrently with the closing of the IPO, sold an aggregate of 1,393,880 shares of our common stock to Titan and certain of its third-party designees at a nominal purchase price. We recorded the fair value of this stock amounting to $7.0 million, based on the IPO price of $5.00, as a noncash financial advising fee in our statement of operations to reflect the economic benefits that we received from our principal stockholders.
 
We have also issued to Palladium, as consideration for serving as a non-exclusive advisor, 112,000 shares of our common stock in June 2016. We valued the stock based on the IPO price of $5.00 per share. The $560,000 fair value of the stock was recorded as a noncash financial advising fee during the three months ended June 30, 2016.
 
Stock Option Plans
 
2016 Long-Term Incentive Plan
 
On February 8, 2016, our board of directors approved the 2016 Long-Term Incentive Plan, which we refer to as the 2016 Plan. The 2016 Plan provides for the granting of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to our employees and for the granting of nonqualified stock options, restricted stock, stock appreciation rights, restricted stock units, performance awards, dividend equivalent rights, and other awards to our employees, directors and consultants.
 
The 2016 Plan became effective immediately prior to the IPO. We have reserved a total of 1,532,299 shares of our common stock for awards under the 2016 Plan, provided that, such aggregate number of shares reserved for awards will automatically increase on January 1, of each year, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31, of the preceding calendar year. Unless terminated earlier by the board of directors, the 2016 Plan will expire on the tenth anniversary of its effective date.
 
2006 Stock Plan
 
The PhaseRx, Inc. 2006 Stock Plan, as amended and restated on June 13, 2014, and as subsequently amended, or the 2006 Stock Plan, was adopted by our board of directors and approved by our stockholders in March 2006. Our 2006 Stock Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to our employees, and for the grant of non-statutory stock options and stock purchase rights to our employees, directors and consultants. Immediately prior to the IPO, the 2006 Stock Plan ceased to be available for future issuances of awards, and we will not grant any additional awards under the 2006 Stock Plan but will grant awards under the 2016 Plan instead. However, our 2006 Stock Plan will continue to govern the terms and conditions of outstanding awards granted thereunder.
 
Stock-Based Compensation
 
We granted incentive stock options to employees and members of the board of directors for their services on the board of directors and nonqualified stock options to nonemployee consultants for their consulting services. Options, in general, either vest in 48 equal monthly installments or 25% on the first year anniversary and 1/48th of the granted options monthly thereafter, such that options are fully vested on the four-year anniversary of the date of grant.
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
 
 
 
 
 
 
 
Weighted
 
Remaining
 
Average
 
 
 
Number of
 
Average
 
Contractual
 
Intrinsic
 
 
 
Stock Options
 
Exercise Price
 
Life
 
Value (in thousands)
 
Outstanding as of December 31, 2015
 
 
449,410
 
$
0.9861
 
 
6.28
 
$
1,435
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Options granted
 
 
697,714
 
 
3.9332
 
 
9.81
 
 
579
 
Option exercised
 
 
(1,968)
 
 
0.0407
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at June 30, 2016
 
 
1,145,156
 
$
2.7833
 
 
8.44
 
$
2,018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at June 30, 2016
 
 
316,048
 
$
1.3975
 
 
5.65
 
$
887
 
 
At June 30, 2016 we had unrecognized compensation cost of $1.7 million and will be recognized over the weighted-average remaining service period of approximately 3.9 years.
 
Stock-based compensation expense has been included in the Statement of Operations as follows (in thousands):
 
 
 
Three months ended
June 30
 
Six months ended
June 30
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
$
21
 
$
4
 
$
30
 
$
9
 
General and administrative
 
 
117
 
 
1
 
 
126
 
 
2
 
 
 
$
138
 
$
5
 
$
156
 
$
11
 
 
The fair value of the stock options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions during the six months ended June 30, 2016 and 2015:
 
 
 
Six Months Ended
 
Six Month Ended
 
 
 
June 30, 2016
 
June 30, 2015
 
 
 
 
 
 
 
 
 
Weighted average estimated fair value per share
 
$
2.71
 
$
0.11
 
 
 
 
 
 
 
 
 
Weighted average assumptions:
 
 
 
 
 
 
 
Dividend yields
 
 
-
 
 
-
 
Expected term (years)
 
 
6.0
 
 
6.1
 
Risk free interest rate
 
 
1.5
%
 
1.5
%
Volatility
 
 
80.3
%
 
89.6
%
 
The risk-free interest rates used in the Black-Scholes option pricing model are based on the implied yield currently available in United States Treasury securities at maturity with an equivalent term. We have limited stock option exercise information. Accordingly, the expected term of stock options granted was calculated using the simplified method, which represents the average of the contractual term of the stock option and the weighted-average vesting period of the stock option. We have not declared or paid any dividends and do not currently expect to do so in the foreseeable future. The value of our underlying common stock was determined by the board of directors, which relied in part upon the report of third party valuation specialists and input from our management prior to the IPO. The fair value of our option after the IPO is based on the volume weighted average selling price per share of our common stock on the Nasdaq Capital Market during the ten trading day period immediately prior to the date of grant. Expected volatility is based on an average volatility of stock prices for a group of similar publicly traded companies. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model.
Commitments and Contingencies
Commitments and Contingencies Disclosure [Text Block]
7. Commitments and Contingencies
 
In February 2010, we entered into two lease agreements for approximately 14,200 square feet of office, research and development facilities, which became effective in May 2010. The landlord of the facilities is one of our investors. Each lease was for a 65 month term, with a five-year renewal option. Both of the lease agreements included reduced rental payments in the initial years of the 65 month term. In September 2015, we entered agreements to extend the leases to August 2016. We calculated the total rent due over the lease term and are recording equal monthly rent expense over the term. Differences between the recorded rent expense and actual rent paid each month result in an increase or decrease to deferred rent. We also received incentives from the landlord totaling $605,000 to fund certain tenant improvements. These improvements were capitalized as leasehold improvements, with a corresponding credit recorded to deferred rent. The deferred rent balance is being reduced in equal monthly installments over the lease term as a reduction to rent expense. On February 23, 2016, we entered into agreements to extend the terms of the leases to November 30, 2016. We also extended the renewal option date to May 31, 2016. We elected our five-year renewal option in May 2016. We are in the process of negotiating the terms of a new lease.
 
Rent expense for the three months ended June 30, 2016 and 2015 was $206,000 and $166,000, respectively. Rent expense for the six months ended June 30, 2016 and 2015 was $412,000 and $320,000, respectively.
Summary of Significant Accounting Policies (Policies)
Use of estimates
 
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
 
In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, fair value measurements, financing activities, accruals and other contingencies.
Cash Equivalents and Marketable Securities
 
We invest our excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, marketable securities, or long-term marketable securities on the balance sheets, classified as available-for-sale and reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss). Realized gains and losses on the sale of these securities are recognized in net income or loss. We consider all highly liquid investments with original maturities at purchase of 90 days or less to be cash equivalents, an investment with a maturity greater than twelve months from the balance sheet date as long-term marketable securities and a maturity less than twelve months as short-term at the balance sheet date. Our cash equivalents and marketable securities consist principally of commercial paper and money market securities.
 
Interest earned on securities is included in interest income. Gains are recognized when realized in our statements of operations. Losses are recognized when realized or when we have determined that an other-than-temporary decline in fair value has occurred. The cost of securities sold is based on the specific identification method.
 
We periodically evaluate whether declines in fair values of our investments below their cost are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as our ability and intent to hold the investment until a forecasted recovery occurs. Factors considered include quoted market prices, recent financial results and operating trends, credit quality of debt instrument issuers, other publicly available information that may affect the value of our investments, duration and severity of the decline in value, and our strategy and intentions for holding the investment. Additionally, we assess whether it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis.
Fair Value of Financial Instruments
 
We establish the fair value of our assets and liabilities using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We established a fair value hierarchy based on the inputs used to measure fair value. The three levels of the fair value hierarchy are as follows:
 
Level 1:  Quoted prices in active markets for identical assets or liabilities.
 
Level 2:  Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
 
Level 3:  Unobservable inputs in which little or no market data exists, therefore determined using estimates and assumptions developed by us, which reflect those that a market participant would use.
 
We measure and report at fair value our cash equivalents and marketable securities. The carrying value of accounts payable and accrued liabilities approximate their respective fair values due to their relative short maturities. The carrying value of our Hercules term loan approximates fair value because the interest rate is reflective of the rate we could obtain on debt with similar terms and conditions. We estimated the fair value of the preferred stock warrant liability using Level 3 inputs.
 
We may apply the fair value option to any eligible financial assets or liabilities, which permits an instrument by instrument irrevocable election to account for selected financial assets and liabilities at fair value. To date, we have not applied this election.
Derivative Financial Instruments
 
We evaluate our financial instruments such as convertible preferred stock and convertible notes to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. At each reporting date, we review our convertible securities to determine their classification is appropriate.
Deferred Financing Costs
 
We defer costs related to the issuance of debt and include them on the accompanying balance sheets as a deduction from the debt liability. Deferred financing costs are amortized over the term of the related loan using the effective interest method and are included as a component of interest expense on the accompanying statements of operations.
Revenue Recognition
 
Non-refundable, upfront payments received in connection with collaborative research and development agreements are deferred and recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, whichever is longer.
Research and Development Costs
 
Research and development costs are expensed as incurred. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research services, the costs of laboratory supplies, equipment and facilities, license fees and other external costs. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
Stock-Based Compensation
 
We expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. We use the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date. We recognize stock-based compensation, net of estimated forfeitures, on the graded-vesting method as expense over the requisite service period. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to volatility, expected option term and fair value of our common stock. Measurement of stock-based compensation for options granted to nonemployees is subject to periodic adjustment as the underlying equity instruments vest.
 
We have granted stock options with performance conditions to certain executive officers and directors. At each reporting date, we evaluate whether the achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon our assessment of achievement of each performance condition or the occurrence of the event which will trigger the options to vest.
Comprehensive Loss
 
Comprehensive loss is comprised of net loss and other comprehensive income or loss. Other comprehensive income or loss consists of unrealized gains and losses on marketable securities.
Net Loss Per Share
 
The computation of basic and diluted net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period and excludes all outstanding stock options, warrants, preferred stock, as well as shares issuable upon conversion of all outstanding convertible notes and term loans from the calculation of diluted net loss per common share, as all such securities are anti-dilutive to the computation for all the periods presented. For the three months and six months ended June 30, 2016, the computation of diluted net loss per share excluded 1,222,289 shares. For the three months and six months ended June 30, 2015, the computation of diluted net loss per share excluded 6,198,474 shares.
 
The following table presents the calculation of basic and diluted net loss per share:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(11,084)
 
$
(1,747)
 
$
(13,317)
 
$
(3,167)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares used in computation of basic and diluted net loss per share
 
 
6,013
 
 
531
 
 
3,288
 
 
505
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
 
$
(1.84)
 
$
(3.29)
 
$
(4.05)
 
$
(6.27)
 
Concentration of Risk
 
We maintain our cash, cash equivalents and investments with high quality, accredited financial institutions. These amounts at times may exceed federally insured limits. We have not experienced any credit losses in such accounts and do not believe we are exposed to significant risk on these funds. Our cash, cash equivalents and marketable securities balances of $20.9 million and $3.0 million as of June 30, 2016 and December 31, 2015 were uninsured.
Recent Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU is effective for public entities for annual periods beginning after December 15, 2017. In June 2015, the FASB deferred for one year the effective date of the new revenue guidance, with an option that would permit companies to adopt the guidance as early as the original effective date. Early adoption prior to the original effective date is not permitted. We are evaluating the impact this guidance may have on our revenue recognition, but do not expect that the adoption will have a material impact on our financial statements.
 
In April 2015, the FASB issued ASU 2015-03 Simplifying the Presentation of Debt Issuance Costs guidance to simplify the presentation of debt issuance costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction for the debt liability as opposed to recorded as a separate asset, except when incurred before receipt of the funding from the associated debt liability. This is similar to the presentation of debt discounts or premiums. This ASU requires retrospective application which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We have adopted this guidance. The adoption of this guidance did not have a material impact on our financial statements.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU is intended to provide more transparent and economically neutral information about the assets and liabilities that arise from leases than previous guidance. The ASU is effective for public entities for annual periods beginning on or after December 15, 2018. Early adoption is permitted, and adoption must be applied on a modified retrospective basis. We are evaluating the impact of this guidance but do not expect that the adoption will have a material impact on our financial statements.
 
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting which amends ASC 718, Compensation — Stock Compensation. The ASU includes provisions intended to simplify various provisions related to how share-based payments are accounted for and presented in the financial statements. The ASU is effective for public entities for annual periods beginning on or after December 15, 2016 and interim periods within that reporting period. Early adoption is permitted in any interim or annual period. We are evaluating the impact of this guidance but do not expect that the adoption will have a material impact on our financial statements.
Summary of Significant Accounting Policies (Tables)
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
The following table presents the calculation of basic and diluted net loss per share:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(11,084)
 
$
(1,747)
 
$
(13,317)
 
$
(3,167)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares used in computation of basic and diluted net loss per share
 
 
6,013
 
 
531
 
 
3,288
 
 
505
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
 
$
(1.84)
 
$
(3.29)
 
$
(4.05)
 
$
(6.27)
 
Cash Equivalents and Marketable Securities (Tables)
We did not have any available-for-sale security holdings in 2015. Securities available-for-sale at cost and fair market value by contractual maturity as of June 30, 2016 were as follows:
 
 
 
Cost or
Amortized
Cost
 
Fair
Value
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
5,979
 
$
5,993
 
Due after one year through two years
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
$
5,979
 
$
5,993
 
Marketable securities available-for-sale consisted of the following as of June 30, 2016:
 
 
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
 
 
(In thousands)
 
Commercial paper
 
$
5,979
 
$
14
 
$
-
 
$
5,993
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
5,979
 
$
14
 
$
-
 
$
5,993
 
Fair Value Measurements (Tables)
The following table sets forth the fair value of our assets and liabilities measured at fair value at June 30, 2016 and December 31, 2015:
 
 
 
June 30, 2016
 
Description
 
Balance
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market
 
$
6,144
 
$
6,144
 
$
-
 
$
-
 
Commercial paper
 
 
14,491
 
 
-
 
 
14,491
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial assets
 
$
20,635
 
$
6,144
 
$
14,491
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add Cash:
 
 
556
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents and marketable securities
 
$
21,191
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock warrant liability
 
$
-
 
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial liabilities
 
$
-
 
$
-
 
$
-
 
$
-
 
 
 
 
December 31, 2015
 
Description
 
Balance
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
(In thousands)
 
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market
 
$
-
 
$
-
 
$
-
 
$
-
 
Commercial paper
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial assets
 
$
-
 
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add Cash:
 
$
3,290
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents and marketable securities
 
$
3,290
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock warrant liability
 
$
3,163
 
$
-
 
$
-
 
$
3,163
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total financial liabilities
 
$
3,163
 
$
-
 
$
-
 
$
3,163
 
The changes in the balances of the Level 3 preferred stock warrant liability measured at fair value for the three and six months ended June 30, 2016 and 2015 were as follows (in thousands):
 
 
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Balance as of January 1,
 
$
3,163
 
$
2,695
 
Change in fair value
 
 
(81)
 
 
(23)
 
Balance as of March 31,
 
 
3,082
 
 
2,672
 
Additional preferred stock warrants issued
 
 
-
 
 
246
 
Change in fair value
 
 
(109)
 
 
(15)
 
Warrants exercised
 
 
(2,438)
 
 
-
 
Warrants expired
 
 
(535)
 
 
-
 
Balance as of June 30,
 
$
-
 
$
2,903
 
Stockholders' Equity (Deficit) (Tables)
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
 
 
 
 
 
 
 
Weighted
 
Remaining
 
Average
 
 
 
Number of
 
Average
 
Contractual
 
Intrinsic
 
 
 
Stock Options
 
Exercise Price
 
Life
 
Value (in thousands)
 
Outstanding as of December 31, 2015
 
 
449,410
 
$
0.9861
 
 
6.28
 
$
1,435
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Options granted
 
 
697,714
 
 
3.9332
 
 
9.81
 
 
579
 
Option exercised
 
 
(1,968)
 
 
0.0407
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at June 30, 2016
 
 
1,145,156
 
$
2.7833
 
 
8.44
 
$
2,018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at June 30, 2016
 
 
316,048
 
$
1.3975
 
 
5.65
 
$
887
 
Stock-based compensation expense has been included in the Statement of Operations as follows (in thousands):
 
 
 
Three months ended
June 30
 
Six months ended
June 30
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
$
21
 
$
4
 
$
30
 
$
9
 
General and administrative
 
 
117
 
 
1
 
 
126
 
 
2
 
 
 
$
138
 
$
5
 
$
156
 
$
11
 
The fair value of the stock options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions during the six months ended June 30, 2016 and 2015:
 
 
 
Six Months Ended
 
Six Month Ended
 
 
 
June 30, 2016
 
June 30, 2015
 
 
 
 
 
 
 
 
 
Weighted average estimated fair value per share
 
$
2.71
 
$
0.11
 
 
 
 
 
 
 
 
 
Weighted average assumptions:
 
 
 
 
 
 
 
Dividend yields
 
 
-
 
 
-
 
Expected term (years)
 
 
6.0
 
 
6.1
 
Risk free interest rate
 
 
1.5
%
 
1.5
%
Volatility
 
 
80.3
%
 
89.6
%
Business and Basis of Presentation (Details Textual) (USD $)
1 Months Ended 1 Months Ended 6 Months Ended
May 17, 2016
May 31, 2016
Dec. 21, 2015
Jun. 30, 2016
Dec. 31, 2015
May 31, 2016
IPO [Member]
Jun. 30, 2016
IPO [Member]
Retained Earnings (Accumulated Deficit)
 
 
 
$ (62,660,000)
$ (49,343,000)
 
 
Stock Issued During Period, Shares, New Issues
 
 
 
 
 
3,700,000 
 
Shares Issued, Price Per Share
 
 
 
 
 
$ 5.00 
 
Proceeds from Issuance Initial Public Offering
 
 
 
 
 
16,500,000 
 
Class of Warrant or Right, Number of Securities Called by Warrants or Rights
 
303,096 
 
2,452,242 
 
 
 
Debt Conversion, Converted Instrument, Shares Issued
 
7,040,380 
1,021,525 
 
 
 
3,229,975 
Common Stock, Shares Authorized
 
 
 
50,000,000 
65,600,000 
 
 
Preferred Stock, Shares Authorized
 
 
 
5,000,000 
 
 
 
Additional Paid in Capital, Common Stock
 
$ 51,600,000 
 
$ 78,002,000 
$ 453,000 
 
 
Convertible Preferred Stock Conversion Price
$ 0.747165 
 
 
 
 
 
 
Stockholders' Equity, Reverse Stock Split
1-for-10.656096 
 
 
 
 
 
 
Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
 
 
 
 
Net loss
$ (11,084)
$ (1,747)
$ (13,317)
$ (3,167)
Weighted average shares used in computation of basic and diluted net loss per share
6,013 
531 
3,288 
505 
Basic and diluted net loss per share
$ (1.84)
$ (3.29)
$ (4.05)
$ (6.27)
Summary of Significant Accounting Policies (Details Textual) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
1,222,289 
6,198,474 
1,222,289 
6,198,474 
 
Cash, Cash Equivalents, and Short-term Investments
$ 20.9 
 
$ 20.9 
 
$ 3.0 
Cash Equivalents and Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Cost or Amortized Cost, Due in year or less
$ 5,979 
Cost or Amortized Cost, Due after one year through two years
Cost or Amortized Cost
5,979 
Fair Value, Due in one year or less
5,993 
Fair Value, Due after one year through two years
Fair Value
$ 5,993 
Cash Equivalents and Marketable Securities (Details 1) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Cost or Amortized Cost
$ 5,979 
Gross Unrealized Gains
14 
Gross Unrealized Losses
Fair Value
5,993 
Commercial Paper [Member]
 
Cost or Amortized Cost
5,979 
Gross Unrealized Gains
14 
Gross Unrealized Losses
Fair Value
$ 5,993 
Term Loan, Convertible Notes Payable and Other Debt (Details Textual) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended
May 31, 2016
Dec. 21, 2015
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 21, 2015
Convertible Notes Payable [Member]
Jun. 30, 2016
Convertible Notes Payable [Member]
Dec. 31, 2015
Convertible Notes Payable [Member]
Jun. 7, 2016
Hercules Term Loan [Member]
Jun. 30, 2016
Hercules Term Loan [Member]
Jun. 30, 2016
Warrant Two [Member]
May 2, 2016
Lender [Member]
Long-term Line of Credit
 
 
 
 
 
 
 
 
 
 
$ 6,000,000 
 
 
 
Line of Credit Facility, Remaining Borrowing Capacity
 
 
 
 
 
 
 
 
 
 
2,000,000 
 
 
 
Line of Credit Facility, Maximum Borrowing Capacity
 
 
 
 
 
 
 
 
 
 
8,000,000 
 
 
 
Debt instrument End of Term Loan Fee Percentage
 
 
 
 
 
 
 
 
 
 
 
5.85% 
 
 
Debt Instrument Prepayment Fee Percentage, If Paid within Twelve Months
 
 
 
 
 
 
 
 
 
 
 
3.00% 
 
 
Debt Instrument Prepayment Fee Percentage, If Paid within Two Years
 
 
 
 
 
 
 
 
 
 
 
2.00% 
 
 
Debt Instrument Prepayment Fee Percentage, If Paid After Two Years
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
Debt Instrument, Interest Rate Terms
 
 
 
 
 
 
 
 
 
 
 
greater of (i) 9.25% and (ii) the sum of (a) 9.25%, plus (b) the prime rate as reported by The Wall Street Journal minus 3.50%. 
 
 
Class of Warrant or Right, Number of Securities Called by Warrants or Rights
303,096 
 
2,452,242 
 
2,452,242 
 
 
 
 
 
63,000 
63,000 
1,049,999 
 
Class of Warrant or Right, Exercise Price of Warrants or Rights
 
 
$ 0.01 
 
$ 0.01 
 
 
 
 
 
$ 5.00 
$ 5.00 
$ 1.00 
 
Warrants and Rights Outstanding
 
 
 
 
3,200,000 
 
 
 
212,000 
 
535,000 
 
Class of Stock Warrant or Right, Additional Shares tobe Purchased Value
 
 
 
 
 
 
 
 
 
 
105,000 
 
 
 
Fair Value Assumptions, Expected Term
 
 
 
 
 
 
 
 
 
 
5 years 
 
 
 
Fair Value Assumptions, Risk Free Interest Rate
 
 
 
 
 
 
 
 
 
 
1.23% 
 
 
 
Fair Value Assumptions, Expected Volatility Rate
 
 
 
 
 
 
 
 
 
 
81.60% 
 
 
 
Stock Issued During Period Shares Common Stock Warrants Exercised
 
 
 
 
 
 
 
 
2,788,880 
 
 
 
 
 
Debt Conversion, Converted Instrument, Shares Issued
7,040,380 
1,021,525 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Payable
 
86,000 
 
 
 
 
3,200,000 
 
 
 
 
 
 
 
Convertible Notes Payable, Current
 
4,000,000 
 
 
19,841,000 
 
 
 
 
 
 
 
Debt Instrument, Face Amount
 
 
 
 
 
 
 
 
 
16,200,000 
 
 
 
440,000 
Notes Payable
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000 
Interest Expense, Debt
 
 
1,400,000 
320,000 
1,600,000 
570,000 
 
 
 
 
 
 
 
 
Debt Instrument, Interest Rate, Effective Percentage
 
 
 
 
 
 
 
 
 
8.00% 
 
 
 
 
Conversion Price, Percentage of IPO Offering Price
 
 
 
 
 
 
 
80.00% 
 
 
 
 
 
 
Debt Instrument, Convertible, Beneficial Conversion Feature
 
 
 
 
 
 
 
1,000,000 
 
 
 
 
 
 
Warrants Not Settleable in Cash, Fair Value Disclosure
 
 
 
 
 
 
 
 
 
 
205,000 
 
 
 
Debt Instrument, Unamortized Discount
 
 
659,000 
 
659,000 
 
 
 
 
 
 
 
 
 
Stock Issued During Period Shares Stock Warrants Exercised on cashless Basis
 
 
 
 
$ 303,096 
 
 
 
 
 
 
 
 
 
Class of Warrant Or Right Warrants Expiry Term
 
 
 
 
7 years 
 
 
 
 
 
 
 
 
 
Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Financial Assets:
 
 
Total financial assets
$ 20,635 
$ 0 
Add Cash:
556 
3,290 
Total cash, cash equivalents and marketable securities
21,191 
3,290 
Financial Liabilities:
 
 
Preferred stock warrant liability
3,163 
Total financial liabilities
3,163 
Money Market Funds [Member]
 
 
Financial Assets:
 
 
Total financial assets
6,144 
Commercial Paper [Member]
 
 
Financial Assets:
 
 
Total financial assets
14,491 
   
Fair Value, Inputs, Level 1 [Member]
 
 
Financial Assets:
 
 
Total financial assets
6,144 
Add Cash:
 
   
Total cash, cash equivalents and marketable securities
   
   
Financial Liabilities:
 
 
Preferred stock warrant liability
Total financial liabilities
Fair Value, Inputs, Level 1 [Member] |
Money Market Funds [Member]
 
 
Financial Assets:
 
 
Total financial assets
6,144 
Fair Value, Inputs, Level 1 [Member] |
Commercial Paper [Member]
 
 
Financial Assets:
 
 
Total financial assets
   
   
Fair Value, Inputs, Level 2 [Member]
 
 
Financial Assets:
 
 
Total financial assets
14,491 
Add Cash:
 
   
Total cash, cash equivalents and marketable securities
   
   
Financial Liabilities:
 
 
Preferred stock warrant liability
Total financial liabilities
Fair Value, Inputs, Level 2 [Member] |
Money Market Funds [Member]
 
 
Financial Assets:
 
 
Total financial assets
Fair Value, Inputs, Level 2 [Member] |
Commercial Paper [Member]
 
 
Financial Assets:
 
 
Total financial assets
14,491 
   
Fair Value, Inputs, Level 3 [Member]
 
 
Financial Assets:
 
 
Total financial assets
Add Cash:
 
   
Total cash, cash equivalents and marketable securities
   
   
Financial Liabilities:
 
 
Preferred stock warrant liability
3,163 
Total financial liabilities
3,163 
Fair Value, Inputs, Level 3 [Member] |
Money Market Funds [Member]
 
 
Financial Assets:
 
 
Total financial assets
Fair Value, Inputs, Level 3 [Member] |
Commercial Paper [Member]
 
 
Financial Assets:
 
 
Total financial assets
   
   
Fair Value Measurements (Details 1) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Jun. 30, 2016
Mar. 31, 2016
Jun. 30, 2015
Mar. 31, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
 
 
Balance
$ 3,082 
$ 3,163 
$ 2,672 
$ 2,695 
Additional preferred stock warrants issued
 
246 
 
Change in fair value
(109)
(81)
(15)
(23)
Warrants exercised
(2,438)
 
 
Warrants expired
(535)
 
 
Balance
$ 0 
$ 3,082 
$ 2,903 
$ 2,672 
Fair Value Measurements (Details Textual) (USD $)
6 Months Ended
Jun. 30, 2016
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
Preferred Stock, Liquidation Preference, Value
$ 1.00 
Minimum [Member]
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
Fair Value Assumptions, Expected Term
3 years 1 month 6 days 
Fair Value Assumptions, Risk Free Interest Rate
1.30% 
Fair Value Assumptions, Expected Volatility Rate
84.00% 
Maximum [Member]
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
Fair Value Assumptions, Expected Term
7 years 
Fair Value Assumptions, Risk Free Interest Rate
2.10% 
Fair Value Assumptions, Expected Volatility Rate
97.70% 
Stockholders' Equity (Deficit) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Number of Stock Options, Balance beginning of period
449,410 
 
Number of Stock Options, Options granted
697,714 
 
Number of Stock Options, Options exercised
(1,968)
 
Number of Stock Options, Balance end of period
1,145,156 
449,410 
Number of Stock Options, Exercisable - end of period
316,048 
 
Weighted Average Exercise Price, Outstanding
$ 0.9861 
 
Weighted Average Exercise Price, Options granted
$ 3.9332 
 
Weighted-Average Exercise Price, Options exercised
$ 0.0407 
 
Weighted-Average Exercise Price, Outstanding
$ 2.7833 
$ 0.9861 
Weighted-Average Exercise Price, Exercisable - end of period
$ 1.3975 
 
Weighted Average Remaining Contractual Life, Outstanding
8 years 5 months 8 days 
6 years 3 months 11 days 
Weighted Average Remaining Contractual Life, Options granted
9 years 9 months 22 days 
 
Weighted Average Remaining Contractual Life, Exercisable
5 years 7 months 24 days 
 
Average Intrinsic Value, Outstanding
$ 1,435 
 
Average Intrinsic Value, Options granted
$ 579 
 
Average Intrinsic Value, Outstanding
2,018 
1,435 
Average Intrinsic Value, Exercisable
$ 887 
 
Stockholders' Equity (Deficit) (Details 1) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
$ 138 
$ 5 
$ 156 
$ 11 
Research and Development Expense [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
21 
30 
General and Administrative Expense [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
$ 117 
$ 1 
$ 126 
$ 2 
Stockholders' Equity (Deficit) (Details 2)
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Weighted average estimated fair value per share
$ 2.71 
$ 0.11 
Weighted average assumptions:
 
 
Dividend yields
0.00% 
0.00% 
Expected term (years)
6 years 
6 years 1 month 6 days 
Risk free interest rate
1.50% 
1.50% 
Volatility
80.30% 
89.60% 
Stockholders' Equity (Deficit) (Details Textual) (USD $)
1 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended
May 31, 2016
Dec. 21, 2015
Jun. 30, 2016
Jun. 30, 2016
2016 Long Term Incentive Plan [Member]
Jun. 30, 2016
Share-based Compensation Award, Tranche One [Member]
Jun. 30, 2016
Titan Multi-Strategy Fund I LTD [Member]
Jun. 30, 2016
Palladium Capital Advisor [Member]
Jun. 30, 2016
Palladium Capital Advisor [Member]
Jun. 30, 2016
Hercules Term Loan [Member]
Jun. 7, 2016
Hercules Term Loan [Member]
May 31, 2016
IPO [Member]
Jun. 30, 2016
IPO [Member]
Jun. 30, 2016
Lender Warrants [Member]
Jun. 30, 2016
Series A-1 Preferred Stock [Member]
Jun. 30, 2016
Series A Preferred Stock [Member]
Stock Issued During Period, Shares, New Issues
 
 
 
 
 
1,393,880 
 
 
 
 
3,700,000 
 
 
 
 
Preferred Stock, Shares Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
5,500,000 
20,216,583 
Class of Warrant or Right, Number of Securities Called by Warrants or Rights
303,096 
 
2,452,242 
 
 
 
 
 
63,000 
63,000 
 
 
14,133 
 
 
Class of Warrant or Right, Exercise Price of Warrants or Rights
 
 
$ 0.01 
 
 
 
 
 
$ 5.00 
$ 5.00 
 
 
$ 7.96 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period
 
 
 
 
48 months 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage
 
 
 
 
25.00% 
 
 
 
 
 
 
 
 
 
 
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options
 
 
$ 1,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition
 
 
3 years 10 months 24 days 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock, Shares Authorized
 
 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Stock Issued During Period, Value, New Issues
 
 
16,475,000 
 
 
7,000,000 
 
 
 
 
 
 
 
 
 
Shares Issued, Price Per Share
 
 
 
 
 
$ 5.00 
$ 5.00 
$ 5.00 
 
 
$ 5.00 
 
 
 
 
Stock Issued During Period, Shares, Issued for Services
 
 
 
 
 
 
 
112,000 
 
 
 
 
 
 
 
Stock Issued During Period, Value, Issued for Services
 
 
$ 560,000 
 
 
 
$ 560,000 
 
 
 
 
 
 
 
 
Debt Conversion, Converted Instrument, Shares Issued
7,040,380 
1,021,525 
 
 
 
 
 
 
 
 
 
3,229,975 
 
 
 
Class of Warrants or Rights Expiration Date
 
 
 
 
 
 
 
 
 
 
 
 
Dec. 01, 2020 
 
 
Common Stock, Capital Shares Reserved for Future Issuance
 
 
 
1,532,299 
 
 
 
 
 
 
 
 
 
 
 
Common Stock Capital Shares Reserved For Future Issuance Annual Increase Percentage
 
 
 
5.00% 
 
 
 
 
 
 
 
 
 
 
 
Commitments and Contingencies (Details Textual) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended
Feb. 23, 2016
Feb. 28, 2010
sqft
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Schedule Of Commitments And Contingencies [Line Items]
 
 
 
 
 
 
Area of Land
 
14,200 
 
 
 
 
Lessee Leasing Arrangements, Operating Leases, Term of Contract
 
65 months 
 
 
 
 
Lessee Leasing Arrangements, Operating Leases, Renewal Term
 
5 years 
 
 
 
 
Incentive to Lessee
 
$ 605,000 
 
 
 
 
Operating Leases, Rent Expense
 
 
$ 206,000 
$ 166,000 
$ 412,000 
$ 320,000 
Lessee Leasing Arrangements, Operating Leases, Renewal Date
May 31, 2016