Note 6 — Stockholders’ Equity

 

Common Stock 

 

The Company is authorized to issue 50,000,000 common shares with a par value of $0.0001 per share, of which 15,000,000 shares are designated as “Class A common stock”. As of September 30, 2016, there were 7,000,000 shares of Class A common stock issued and outstanding to Fortress. Dividends are to be distributed pro-rata to the Class A and common stock holders. The holders of common stock are entitled to one vote per share of common stock held. The Class A common stock holders are entitled to a number of votes per share equal to 1.1 times a fraction, the numerator of which is the sum of the shares of outstanding common stock and the denominator of which is the number of shares of Class A common stock. Accordingly, the holder of shares of Class A common stock will be able to control or significantly influence all matters requiring approval by the Company’s stockholders, including the election of directors and the approval of mergers or other business combination transactions. Each share of Class A common stock is convertible, at the option of the holder thereof, into one (1) fully paid and non-assessable share of common stock subject to adjustment for stock splits and combinations.

 

  

On February 23, 2016, the Company closed on proceeds of $0.6 million in a private placement of shares and warrants to Opus Point Healthcare Fund GP, LLC, a fund managed by Opus Point Partners Management, LLC, a related party. The financing involved the sale of units, each consisting of 10,000 shares of common stock and a warrant exercisable for 3,500 shares of common stock at an exercise price of $7.00 per share, for a purchase price of $45,000 per unit. The warrants have a five-year term and are only exercisable for cash. The Company issued 126,640 unregistered shares of common stock and 44,324 warrants in connection with this transaction. Due to the absence of a placement agent in this transaction, the net proceeds to, and warrants issued by, the Company were consistent with terms of the December 2015 third-party financing, which included the payment of fees and issuance of warrants to a placement agent.

 

Pursuant to the Founders Agreement, the Company issued 3,166 shares to Fortress, representing 2.5% of the aggregate number of shares of common stock issued in the offering noted above. For the nine months ended September 30, 2016, the Company recorded expense of approximately $14,000, related to this stock grant, which is included in general and administrative expenses in the Company’s Condensed Statements of Operations.

 

Also pursuant to the Founders Agreement, on March 17, 2016 the Company issued 688,755 shares of common stock to Fortress, which equaled 2.5% of the fully-diluted outstanding equity of Checkpoint at the time of issuance for the Annual Equity Fee (see Note 4).

 

Restricted Stock

 

In March 2015, the Company issued a restricted stock grant to Dr. Marasco for services in connection with its Scientific Advisory Board. Dr. Marasco was issued a grant for 1.5 million shares of common stock, which vested 25% on the first anniversary of the grant date and monthly thereafter for 48 months. The Company valued the restricted stock utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.8% and a weighted average cost of capital of 30%, resulting in a value of $0.065 per share on grant date. At December 31, 2015, the Company re-measured this non-employee restricted stock utilizing a market approach, based upon a third party financing. Such valuation resulted in a value of $4.39 per share utilizing a volatility of 83%, a risk free rate of return of 1.5% and a term of five years. At September 30, 2016, the Company re-measured this non-employee restricted stock utilizing a market approach, based upon a third party financing. Such valuation resulted in a value of $4.42 per share utilizing a volatility of 83%, a risk free rate of return of 1.35% and a term of five years. For the three months ended September 30, 2016 and 2015, in connection with this grant, the Company recorded expense of $0.4 million and $2.1 million, respectively, in research and development expenses on the Company’s Condensed Statements of Operations. For the nine months ended September 30, 2016 and 2015, the Company recorded expense of $1.6 million and $2.1 million, respectively, in research and development expenses on the Company’s Condensed Statements of Operations.

 

Certain employees and directors have been awarded restricted stock under our 2015 Incentive Plan. The Company incurred approximately $0.3 million and $1.0 million, respectively, related to stock-based compensation expense for the three and nine months ended September 30, 2016, which is included in general and administrative expenses on the Company’s Condensed Statements of Operations. The Company incurred approximately $20,000 related to stock-based compensation expense for the three and nine months ended September 30, 2016, which is included in research and development expenses on the Company’s Condensed Statements of Operations There were no related expenses recognized during the same periods in 2015.

 

The following table summarizes restricted stock award activity for the nine months ended September 30, 2016.

 

					Weighted Average Grant Date
		Number of Units			Fair Value
Nonvested at December 31, 2015			2,500,000		$	1.73
Granted			238,000			4.40
Vested			(515,625)			0.07
Nonvested at September 30, 2016			2,222,375		$	2.41

 

As of September 30, 2016, there was $4.5 million of total unrecognized compensation cost related to non-vested restricted stock, which is expected to be recognized over weighted-average period of 1.98 years.

 

This amount does not include 333,334 shares of restricted stock outstanding as of September 30, 2016 which are performance-based and vest upon achievement of certain corporate milestones. Stock-based compensation for these awards will be measured and recorded if and when it is probable that the milestone will be achieved.

 

Total shares available for the issuance of stock-based awards under the Company’s 2015 Incentive Plan was 762,000 shares at September 30, 2016.

   

Warrants

 

A summary of warrant activities for six months ended September 30, 2016 is presented below:

 

		Warrants			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2015			4,286,782		$	6.61			5.68
Granted			44,324			7.00			4.40
Outstanding as of September 30, 2016			4,331,106		$	6.62			4.92

 

Upon the exercise of warrants, the Company will issue new shares of its common stock.

 

 

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2016 (in thousands).

 

		Three Months Ended September 30,						Nine Months Ended September 30,
		2016			2015			2016			2015
Research and development		$	411		$	2,071		$	1,635		$	2,084
General and administrative			349			-			1,016			-
Total stock-based compensation expense		$	760		$	2,071		$	2,651		$	2,084