Atomera (ATOM) 10-Q 8 Nov 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 04, 2016
Document And Entity Information
Entity Registrant Name	Atomera Inc
Entity Central Index Key	1,420,520
Document Type	10-Q
Trading Symbol	ATMR
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,024,564
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,016

Condensed Balance Sheets (Unaud

Condensed Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current Assets:
Cash and cash equivalents	$ 28,189	$ 3,197
Restricted Investment	0	15
Prepaid expenses and other current assets	155	48
Total current assets	28,344	3,260
Property and equipment, net	30	15
Deferred offering costs	0	145
Security Deposit	37	0
Total assets	28,411	3,420
Current liabilities:
Accounts payable	277	301
Accrued expenses	106	131
Accrued payroll related expenses	95	14
Senior secured convertible promissory notes payable, net	0	16,095
Total liabilities	478	16,541
Stockholders' equity (deficiency):
Preferred stock, $0.001 par value, authorized 2,500 shares; none issued and outstanding at September 30, 2016 and December 31, 2015	0	0
Common stock, $0.001 par value, authorized 47,500 shares; 12,025 shares issued and outstanding at September 30, 2016 and 1,617 issued and outstanding as of December 31, 2015	12	2
Additional paid-in capital	120,489	70,452
Subscription receivable	0	(188)
Accumulated deficit	(92,568)	(83,387)
Total stockholders' equity (deficiency)	27,933	(13,121)
Total liabilities and stockholders' equity (deficiency)	$ 28,411	$ 3,420

Condensed Balance Sheets (Unau3

Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	2,500	2,500
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	47,500	47,500
Common stock, issued	12,025	1,617
Common stock, oustanding	12,025	1,617

Condensed Statements of Operati

Condensed Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Operating Expenses:
Research and development	$ 940	$ 434	$ 2,753	$ 1,530
General and administrative	1,607	342	3,361	2,481
Selling and marketing	225	7	435	18
Total operating expenses	2,772	783	6,549	4,029
Loss from operations	(2,772)	(783)	(6,549)	(4,029)
Other income/(expense):
Interest income	6	2	8	5
Interest expense	(1,330)	(568)	(2,640)	(1,363)
Total other expense, net	(1,324)	(566)	(2,632)	(1,358)
Net loss:	$ (4,096)	$ (1,349)	$ (9,181)	$ (5,387)
Net loss per common share, basic and diluted	$ (.55)	$ (1.09)	$ (2.58)	$ (4.37)
Weighted average number of common shares outstanding, basic and diluted	7,382	1,233	3,553	1,233

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$ (9,181)	$ (5,387)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	10	7
Debt issuance cost amortization	1,526	421
Stock-based compensation	1,124	374
Non-cash warrant fair value for services rendered	0	1,016
Non-cash interest expense	1,114	942
Compensation in exchange for settlement of subscription receivable	188	0
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(107)	(5)
Security deposit	(37)	0
Accounts payable	(24)	(426)
Accrued expenses	(25)	(83)
Accrued payroll expenses	81	31
Net cash used in operating activities	(5,331)	(3,110)
NET CASH USED IN INVESTING ACTIVITIES
Acquisition of property and equipment	(25)	(2)
Release of restricted investment	15	0
Net cash used in investing activities	(10)	(2)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured convertible promissory notes payable	0	1,097
Net proceeds from senior secured convertible promissory notes payable	5,467	6,615
Proceeds from initial public offering	27,600	0
Payment of offering costs	(2,738)	0
Proceeds from exercise of stock options	4	0
Net cash provided by financing activities	30,333	7,712
Net increase in cash and cash equivalents	24,992	4,600
Cash at beginning of period	3,197	21
Cash and cash equivalents at end of period	28,189	4,621
Non-cash financing activities:
Warrant issued as debt discount on secured notes	709	156
Warrant issued for underwriting of initial public offering	539	0
Conversion of secured notes into equity	23,492	0
Total non-cash financing activities	$ 24,740	$ 156

1. NATURE OF OPERATIONS

1. NATURE OF OPERATIONS	9 Months Ended
	Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NATURE OF OPERATIONS	Atomera Incorporated (“Atomera” or the “Company”) was incorporated in the state of Delaware in March 2007 under the name MEARS Technologies, Inc. and is engaged in the development, commercialization and licensing of proprietary processes and technologies for the semiconductor industry. On January 12, 2016, the Company changed its name to Atomera Incorporated. The Company is in the development stage, having not yet started planned principal operations, and is devoting substantially all of its efforts toward technology research and development. The Company has primarily financed operations through private placements of equity and debt securities and the Company’s Initial Public Offering (the “IPO”) which was consummated on August 10, 2016 (see Note 10).

2. LIQUIDITY AND MANAGEMENT PLA

2. LIQUIDITY AND MANAGEMENT PLANS	9 Months Ended
	Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
LIQUIDITY AND MANAGEMENT PLANS	At September 30, 2016, the Company had cash and cash equivalents of approximately $28.2 million and a working capital surplus of approximately $27.9 million. The Company has not generated revenues since inception and has incurred recurring operating losses. At September 30, 2016, the Company had an accumulated deficit of approximately $92.6 million. In August 2016, the Company completed its IPO of 3,680,000 shares of common stock, raising net proceeds of approximately $24.7 million. During the fourth quarter of 2016 and in 2017, the Company’s operating plans include increased headcount in research and development and sales and business development. Based on the funds it has available as of the date of the filing of this report, including proceeds of its IPO, the Company believes that it has sufficient capital to fund its current business plans over, at least, 12 months from the date of filing this quarterly report, and to enable one or more customers to license and qualify its technology and start full-scale industrial production of devices that incorporate the Company’s technology. However, as a development stage company the Company is subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays in a new business. Accordingly, the Company may require additional capital, the receipt of which cannot be assured. In the event the Company requires additional capital, there can be no guarantee that funds will be available on commercially reasonable terms, if at all.

3. SUMMARY OF SIGNIFICANT ACCOU

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Basis of presentation The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, since they are interim financial statements, the accompanying condensed financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s financial position and the results of operations for the periods presented have been included. Interim results are not necessarily indicative of results for a full year. The condensed financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2015 which are included in the Company’s final IPO prospectus filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933 on August 8, 2016. Deferred offering costs The Company complies with the requirements of the Accounting Standards Codification (“ASC”) Topic 340, Other Assets and Deferred Costs Stock-based compensation The Company computes stock-based compensation in accordance with authoritative guidance. The Company uses the Black-Scholes-Merton option-pricing model to determine the fair value of its stock options. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of the common stock of the Company, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect the Company’s best estimates, but they involve inherent uncertainties based on market conditions generally outside the control of the Company. As a result, if other assumptions had been used, stock-based compensation cost, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation cost could be materially affected in future periods. The Company accounts for the fair value of equity instruments issued to non-employees using either the fair value of the services received or the fair value of the equity instrument, whichever is considered more reliable . Use of estimates The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include the fair value of stock-based compensation and warrants, valuation allowance against deferred tax assets and related disclosures. Actual results could differ from those estimates. Recent accounting pronouncements In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01 Financial Instruments-Overall In February 2016, the FASB issued ASU No. 2016-02, which replaces the existing guidance in ASC Topic 840 Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718), On August 26, 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force),

4. BASIC AND DILUTED LOSS PER S

4. BASIC AND DILUTED LOSS PER SHARE	9 Months Ended
	Sep. 30, 2016
Earnings Per Share [Abstract]
BASIC AND DILUTED LOSS PER SHARE	Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares and dilutive share equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per share are equal. The following potential common stock equivalents were not included in the calculation of diluted net loss per common share because the inclusion thereof would be anti-dilutive (in thousands): September 30, 2016 2015 Stock Options 1,363 388 Warrants 765 303 Conversion of Notes Payable – 4,279 2,128 4,970

5. NOTES PAYABLE

5. NOTES PAYABLE	9 Months Ended
	Sep. 30, 2016
Debt Disclosure [Abstract]
NOTES PAYABLE	From January 9, 2015 through February 5, 2015, the Company issued promissory notes to certain investors in the aggregate principal amount of approximately $1.1 million. On March 17, 2015, the Company issued Senior Secured Convertible Notes (the “Secured Notes”) to certain investors under which the Company borrowed approximately $7.4 million. National Securities Corporation (“NSC”) acted as placement agent and the Company paid brokerage commissions to NSC of approximately $785,700 and issued to NSC a warrant (the “2015 NSC Warrant”) to purchase ten percent of the common shares issuable upon conversion of Secured Notes in the principal amount of $7,372,557 at an exercise price of $7.362 per share, subject to adjustment to an exercise price equal to the conversion price of the Secured Notes when such conversion price became determinable. The number of shares issuable upon exercise of the 2015 NSC Warrant was initially set at 100,144 shares of the Company’s common stock, subject to later adjustment to a number of shares equal to 10% of the shares issuable upon conversion of the Secured Notes. The brokerage commissions are being amortized as interest expense over the life of the loan. In addition, on March 17, 2015, the Company exchanged all of its existing unsecured convertible promissory notes for Secured Notes with an aggregate principal balance of approximately $7.3 million. The total closing represented $14.75 million. The Secured Notes were due on May 31, 2016 and accrued interest at a rate of 10% per annum, except in any event of default in which case the interest rate shall be 12% per annum. During March 2016, the maturity date of the Secured Notes was extended to May 31, 2017. All other terms of the Secured Notes remained the same. The Secured Notes automatically convert to common stock in the event of an IPO of the Company and are optionally convertible upon a subsequent placement of equity other than an IPO or at the discretion of the note holder. Based on the method of conversion, the Secured Notes are converted into common stock at the Conversion Price, as defined in the agreement. During April 2016, the Company issued additional Secured Notes in the aggregate principal amount of approximately $5,958,000. These notes have the same terms as the previous Secured Notes and mature on May 31, 2017. NSC acted as placement agent and the Company paid NSC a brokerage commission in the amount of ten percent of the proceeds from the Secured Notes placed by NSC, or approximately $438,000, and issued to NSC a warrant to purchase ten percent of the common shares issuable upon conversion of Secured Notes in the principal amount of approximately $4.4 million at an exercise price equal to the conversion price of the Secured Notes. In June 2016, and prior to any exercise of the warrant, NSC elected to cancel the warrant in full and for no consideration. During the three months and nine months ended September 30, 2016, the interest expense on the Secured Notes was approximately $1.3 million and $2.6 million, respectively. During the three and nine months ended September 30, 2015, the interest expense on the Secured Notes was approximately $568,000 and $1.4 million, respectively. On August 10, 2016, upon consummation of the IPO, all principal and accrued interest due under the Secured Notes, totaling approximately $23.5 million converted into 6,264,659 shares of common stock of the Company, which was based on a conversion price of $3.75 (50% of the price of shares sold in to the public in the IPO, as provided in the terms of the Secured Notes). The determination of the conversion price and number of shares issuable upon conversion of the Secured Notes triggered an adjustment to the 2015 NSC Warrant, increasing the number of shares issuable by 96,458 (to a total of 196,502 shares) and setting the exercise price at $3.75 per share. The modification of the number of shares issuable and exercise price of the 2015 NSC Warrant increased its fair value resulting in addition interest expense recognized in August, 2016 (See Note 7).

6. RELATED PARTY TRANSACTIONS

6. RELATED PARTY TRANSACTIONS	9 Months Ended
	Sep. 30, 2016
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	On January 14, 2005, the Company executed a Secured Promissory Note (the “Promissory Note”) with an officer of the Company. Under the Promissory Note, the officer borrowed $187,500 from the Company. The Promissory Note bore interest at a fixed rate of 3.76% per annum, with interest-only payments due annually through the maturity date of January 14, 2014. In December 2015, the Company agreed to extend the term of the note to January 14, 2019, subject to acceleration in the event of the sale of the sale or liquidation of the Company, bankruptcy or like event. Effective January 2016 the Company cancelled the outstanding principal of the note in the amount of $187,500. The cancellation of this note was recognized as a bonus to the officer and included in general and administrative expenses in the accompanying condensed statement of operations for the nine-month period ended September 30, 2016. As of the date of the cancellation of the Promissory Note, there was accrued and unpaid interest under the note in the amount of approximately $7,000, which amount has been repaid by the officer. In return for the cancellation of the note, the officer was required to reimburse the Company for withholding taxes payable by the Company, in the amount of approximately $14,000. During the three and nine month periods ended September 30, 2016, a director, who is also a shareholder of the Company, was paid $0 and $3,000, respectively, for his work as a consultant for the Company. The director was also paid $0 and $7,000 for similar work during the three and nine months ended September 30, 2015, respectively. A director and shareholder of the Company is a partner of a law firm that serves as legal counsel for the Company. During the three months ended September 30, 2016 and 2015, this law firm billed the Company $0 and approximately $1,000, respectively. During the nine months ended September 30, 2016 and 2015, the Company was billed approximately $2,000 and $33,000, respectively. Included in accounts payable on the accompanying condensed balance sheets at September 30, 2016 and December 31, 2015, is $0 and approximately $1,000, respectively, owed to this law firm. Pursuant to the Company’s agreement with this law firm, the firm will either reimburse the Company or pay on its behalf out-of-pocket costs and expenses associated with a patent infringement lawsuit brought by the Company, including any award for attorney’s fees and costs sought by the defendant in that lawsuit.

7. WARRANTS

7. WARRANTS	9 Months Ended
	Sep. 30, 2016
Equity [Abstract]
WARRANTS	On February 9, 2015, the Company issued a five-year warrant to purchase 198,767 shares of common stock at $0.15 per share to Liquid Patent Advisors, LLC (formerly known as Liquid Patent Consulting, LLC) (“LPC”). The warrant represented consideration for business, strategic and intellectual property development to be performed during 2015. The fair value of the warrant was determined to be approximating $1.0 million and was recorded as consulting expense and is included in general and administrative expenses in the statement of operations in the nine months ended September 30, 2015. During July 2015, the exercise price within this warrant to purchase 188,829 shares of common stock was modified to an exercise price of $0.87 per share. The modification resulted in a decrease in the fair value of the warrant; such decrease is not recognized under authoritative guidance. As a result of the conversion of the Secured Notes to common stock on August 10, 2016, the 2015 NSC Warrant was adjusted in accordance with its terms (See Note 5). This adjustment consisted of (i) an increase in the number of shares issuable upon exercise of the warrant by 96,458 to a total of 196,602 (10% of the common shares issued upon conversion of the Secured Notes) and (ii) modified the per-share exercise price of the original warrant issued to $3.75. The adjustment increased the fair value of the warrant by approximately $709,000 and was recorded as additional interest expense in the three and nine months ended September 30, 2016 in the condensed statement of operations. The modified warrant expires at the same time as the original warrant, March 17, 2020. On March 17, 2015, the Company issued a five-year warrant to purchase 100,144 shares of common stock at $7.362 per share to NSC as additional consideration for serving as placement agent in connection with the sale of the Secured Notes in the principal amount of $7,400,774 ($7,372,557 of which was placed by NSC, see Note 5). Due to the conversion of the notes to common stock on August 10, 2016, the Company increased the number of shares of the warrant by 96,458 in order to adjust the number of warrant shares to the 10% of the common shares issued and also modified the per-share exercise price of the original warrant issued to $3.75. The fair value of the warrant increased by approximately $709,000 and was recorded as additional interest expense in the three and nine months ended September 30, 2016 in the condensed statement of operations. The modified warrant expires at the same time as the original warrant, March 17, 2020. On August 4, 2016, the Company issued a five-year warrant to purchase 368,000 shares of common stock at $9.375 per share to NSC in consideration for underwriting the Company’s IPO in August 2016. The fair value of these warrants was determined to be approximately $539,000 and is included as a charge to additional paid-in capital as of September 30, 2016 as a deferred offering cost. The Company estimated the fair value of employee and non-employee stock options using the Black-Scholes option pricing model. The weighted-average grant date fair value of warrants granted during the three and nine months ended September 30, 2016 was $2.49. The fair value of warrants was estimated using the following weighted-average assumptions: Assumptions: Expected volatility 43.10% Weighted average expected term (in years) 2.24 Risk-free interest rate 0.61% Expected dividend yield 0% A summary of warrant activity for the nine months ended September 30, 2016 is as follows (shares in thousands except per share and contractual term): Number of Shares Weighted- Average Exercise Prices Weighted-Average Remaining Contractual Term (In Years) Outstanding at January 1, 2016 303 $ 3.41 Issued 464 $ 8.21 Expired (2 ) $ 33.75 Outstanding at September, 2016 765 $ 5.78 4.1 The warrants outstanding at September 30, 2016 had an intrinsic value of approximately $2.2 million based on a per-share stock price of $7.80 as of September 30, 2016.

8. STOCK BASED COMPENSATION

8. STOCK BASED COMPENSATION	9 Months Ended
	Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
STOCK BASED COMPENSATION	The following table summarizes the stock-based compensation expense recorded in the Company’s results of operations during the three and nine months ended September 30, 2016 and 2015 for stock options and restricted stock (in thousands): Three Months ended September 30, Nine Months ended September 30, 2016 2015 2016 2015 Research and development $ 50 $ 21 $ 60 $ 120 General and administrative 825 9 919 254 Selling and Marketing 145 – 145 – $ 1,020 $ 30 $ 1,124 $ 374 As of September 30, 2016, there was approximately $6.3 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements that are expected to vest. This cost is expected to be recognized over a weighted-average period of one year. The Company records compensation expense for employee awards with graded vesting using the straight-line method. The Company records compensation expense for nonemployee awards with graded vesting using the accelerated expense attribution method. The Company recognizes compensation expense over the requisite service period applicable to each individual award, which generally equals the vesting term. Estimated prospective forfeitures are incorporated in the determination of compensation cost to be recognized. The Company applied an expected forfeiture rate of 4.77% to non-vested stock options for which expense was recognized during the three and nine month periods ended September 30, 2016 and 2015. The Company estimates the fair value of each option award using the Black-Scholes-Merton option pricing model. The Company estimated the fair value of employee and non-employee stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2016 was $3.56. The fair value of employee stock options was estimated using the following weighted-average assumptions: Assumptions: Expected volatility 44.44% Weighted average expected term (in years) 5.76 Risk-free interest rate 1.45% Expected dividend yield 0% The risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility was based upon the historical volatility for industry peers and used an average of those volatilities. The expected life of the Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s activity. The dividend yield considers that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable future. The fair value of the common stock was determined by the board of directors based on a variety of factors, including valuations prepared by third parties, the Company’s financial position, the status of development efforts within the Company, the current climate in the marketplace and the prospects of a liquidity event, among others. The following table summarizes stock option activity during the nine months ended September 30, 2016 (in thousands except exercise prices and contractual terms): Number of Shares Weighted- Average Exercise Prices Weighted-Average Remaining Contractual Term (In Years) Intrinsic Value Outstanding at January 1, 2016 511 $ 7.05 Granted 858 $ 7.44 Exercised (1 ) $ 5.70 Expired (5 ) $ 26.19 Outstanding at September 30, 2016 1,363 $ 7.21 9.4 $ 1,178 Exercisable at September 30, 2016 196 $ 8.54 8.2 $ 223 Vested and expected to vest at September 30, 2016 1,307 $ 7.52 9.6 $ 1,132 During the nine months ended September 30, 2016, the Company granted options under its Employee Stock Option Plan to purchase 858,265 shares of its common stock to its employees. The fair value of these options was approximately $3.1 million. In August 2016, the Company issued 440,364 shares of restricted stock as a management bonus for completing the IPO, with a fair value of approximately $3.5 million to be amortized over the vesting period. The following table summarizes all restricted stock activity during the nine months ended September 30, 2016 (in thousands except per share data): Number of Shares Weighted- Average Grant Date Fair Value Outstanding at January 1, 2016 – – Granted 462 $ 8.03 Cancelled – – Outstanding non vested shares at September 30, 2016 462 $ 8.03 During April 2016, the Board of Directors of the Company resolved that upon the completion of an IPO the 2007 Stock Incentive Plan shall be amended to increase common shares issuable thereunder to 3,199,447 shares of common stock, representing 20% of the total issued and outstanding shares of Common Stock on a fully-diluted basis immediately after the IPO. On August 12, 2016 the Company filed a registration statement on Form S-8 (which became effective upon filing) for the registration of 3,199,447 shares of common stock pursuant to the 2007 Equity Incentive Plan. The total number of equity instruments available for grant under the 2007 Stock Incentive Plan was approximately 1.4 million as of September 30, 2016.

9. COMMITMENTS AND CONTINGENCIE

9. COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	Operating Leases On November 5, 2014, the Company entered into a lease agreement for the use of 1,730 square feet of office space in Wellesley Hills, Massachusetts. The lease with monthly payments of $4,613 commenced on December 1, 2014 and expires on November 30, 2016. On January 19, 2016, the Company entered into a real estate lease agreement for a 3,396 square foot office facility in Los Gatos, California as its new corporate headquarters. The lease commenced on February 1, 2016 and expires on January 31, 2018. The lease rate is $12,395 per month, which will increase to $13,074 per month commencing February 1, 2017. Approximate future minimum lease payments required under the operating leases are as follows (in thousands): Years ending December 31, Amount Remaining period in 2016 $ 47 2017 156 2018 13 Total $ 216 Officer Compensation In January 2016, the Company entered into employment agreements with three officers. The agreements call for an annual base salary of $250,000 and a bonus of up to 30% of base salary for one officer and annual base salaries of $220,000 and a bonus of up to 15% of base salary for the other two officers. In the event of involuntary termination, each officer is entitled to six months of severance pay. In June 2016, the Company terminated one of the officers effective as of June 30, 2016. The severance expense related to this termination is included in general and administration expense of the condensed statements of operation for nine months ended September 30, 2016. In February 2016, the Company entered into an employment agreement with an officer. The agreement calls for an annual base salary of $225,000 and a bonus of up to 30% of base salary. In the event of involuntary termination, the officer is entitled to six months of severance pay.

3. SUMMARY OF SIGNIFICANT ACC15

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Basis of presentation	Basis of presentation The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, since they are interim financial statements, the accompanying condensed financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s financial position and the results of operations for the periods presented have been included. Interim results are not necessarily indicative of results for a full year. The condensed financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2015 which are included in the Company’s final IPO prospectus filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933 on August 8, 2016.
Deferred offering costs	Deferred offering costs The Company complies with the requirements of the Accounting Standards Codification (“ASC”) Topic 340, Other Assets and Deferred Costs
Stock-based compensation	Stock-based compensation The Company computes stock-based compensation in accordance with authoritative guidance. The Company uses the Black-Scholes-Merton option-pricing model to determine the fair value of its stock options. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of the common stock of the Company, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect the Company’s best estimates, but they involve inherent uncertainties based on market conditions generally outside the control of the Company. As a result, if other assumptions had been used, stock-based compensation cost, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation cost could be materially affected in future periods. The Company accounts for the fair value of equity instruments issued to non-employees using either the fair value of the services received or the fair value of the equity instrument, whichever is considered more reliable .
Use of estimates	Use of estimates The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include the fair value of stock-based compensation and warrants, valuation allowance against deferred tax assets and related disclosures. Actual results could differ from those estimates.
Recent accounting pronouncements	Recent accounting pronouncements In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01 Financial Instruments-Overall In February 2016, the FASB issued ASU No. 2016-02, which replaces the existing guidance in ASC Topic 840 Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718), On August 26, 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force),

4. BASIC AND DILUTED LOSS PER16

4. BASIC AND DILUTED LOSS PER SHARE (Tables)	9 Months Ended
	Sep. 30, 2016
Earnings Per Share [Abstract]
Schedule of potential common stock equivalents not included in the calculation of diluted net loss per common share	September 30, 2016 2015 Stock Options 1,363 388 Warrants 765 303 Conversion of Notes Payable – 4,279 2,128 4,970

7. WARRANTS (Tables)

7. WARRANTS (Tables)	9 Months Ended
	Sep. 30, 2016
Equity [Abstract]
Schedule of assumptions	Assumptions: Expected volatility 43.10% Weighted average expected term (in years) 2.24 Risk-free interest rate 0.61% Expected dividend yield 0%
Schedule of warrant activity	Number of Shares Weighted- Average Exercise Prices Weighted-Average Remaining Contractual Term (In Years) Outstanding at January 1, 2016 303 $ 3.41 Issued 464 $ 8.21 Expired (2 ) $ 33.75 Outstanding at September, 2016 765 $ 5.78 4.1

8. STOCK BASED COMPENSATION (Ta

8. STOCK BASED COMPENSATION (Tables)	9 Months Ended
	Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Schedule of stock-based compensation expense	Three Months ended September 30, Nine Months ended September 30, 2016 2015 2016 2015 Research and development $ 50 $ 21 $ 60 $ 120 General and administrative 825 9 919 254 Selling and Marketing 145 – 145 – $ 1,020 $ 30 $ 1,124 $ 374
Schedule of weighted-average assumptions	Assumptions: Expected volatility 44.44% Weighted average expected term (in years) 5.76 Risk-free interest rate 1.45% Expected dividend yield 0%
Schedule of stock option activity	Number of Shares Weighted- Average Exercise Prices Weighted-Average Remaining Contractual Term (In Years) Intrinsic Value Outstanding at January 1, 2016 511 $ 7.05 Granted 858 $ 7.44 Exercised (1 ) $ 5.70 Expired (5 ) $ 26.19 Outstanding at September 30, 2016 1,363 $ 7.21 9.4 $ 1,178 Exercisable at September 30, 2016 196 $ 8.54 8.2 $ 223 Vested and expected to vest at September 30, 2016 1,307 $ 7.52 9.6 $ 1,132
Schedule of restricted stock option activity	Number of Shares Weighted- Average Grant Date Fair Value Outstanding at January 1, 2016 – – Granted 462 $ 8.03 Cancelled – – Outstanding non vested shares at September 30, 2016 462 $ 8.03

9. COMMITMENTS AND CONTINGENC19

9. COMMITMENTS AND CONTINGENCIES (Tables)	9 Months Ended
	Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
Schedule of future minimum lease payments required under operating leases	Years ending December 31, Amount Remaining period in 2016 $ 47 2017 156 2018 13 Total $ 216

2. LIQUIDITY AND MANAGEMENT P20

2. LIQUIDITY AND MANAGEMENT PLANS (Details Narrative) - USD ($) shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Cash	$ 28,200
Working capital surplus	27,900
Accumulated deficit	$ (92,568)	$ (83,387)
IPO [Member]
Number of shares issued	3,680
Net proceeds from IPO	$ 24,700

3. SUMMARY OF SIGNIFICANT ACC21

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Deferred offering costs	$ 0	$ 145
IPO [Member]
Additional paid-in-capital deferred offering costs	$ 3,400

4. BASIC AND DILUTED LOSS PER22

4. BASIC AND DILUTED LOSS PER SHARE (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Number of anti-dilutive common stock	2,128	4,970
Stock Options [Member]
Number of anti-dilutive common stock	1,363	388
Warrants [Member]
Number of anti-dilutive common stock	765	303
Conversion Of Notes Payable [Member]
Number of anti-dilutive common stock	0	4,279

5. NOTES PAYABLE (Details Narra

5. NOTES PAYABLE (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended			4 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Mar. 17, 2015	Apr. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Unsecured Notes converted [Member]
Date of conversion			Mar. 17, 2017
Convertible notes outstanding			$ 7,300
March 2015 Secured Notes [Member]
Initial date of issuance			March 17, 2015
Convertible notes outstanding			$ 7,400
Debt maturity date			May 31, 2017
Debt stated interest rate			10.00%
Debt default interest rate			12.00%
Debt instrument call feature			The Secured Notes automatically convert to common stock in the event of an IPO of the Company and are optionally convertible upon a subsequent placement of equity other than an IPO or at the discretion of the note holder. Based on the method of conversion, the Secured Notes are converted into common stock at the Conversion Price, as defined in the agreement.
April 2016 Secured Notes [Member]
Initial date of issuance				April 2,016
Convertible notes outstanding				$ 5,958
Debt maturity date				May 31, 2017
Debt instrument call feature				The Secured Notes automatically convert to common stock in the event of an IPO of the Company and are optionally convertible upon a subsequent placement of equity other than an IPO or at the discretion of the note holder. Based on the method of conversion, the Secured Notes are converted into common stock at the Conversion Price, as defined in the agreement.
April 2016 Secured Notes [Member] | NSC [Member]
Brokerage fees paid					$ 438
Total Secured Notes [Member]
Convertible notes outstanding							$ 14,750
Interest expense, debt	$ 1,300	$ 568			2,600	$ 1,400
Convertible debt, amount converted					$ 23,500
Stock issued upon conversion of debt, shares issued					6,264,659
Conversion price	$ 3.75				$ 3.75

6. RELATED PARTY TRANSACTIONS (

6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Director and Shareholder [Member]
Consulting expense	$ 0	$ 0	$ 3	$ 7
Promissory Note [Member] | Officer [Member]
Due from Officers or Stockholders	0		0		$ 187
Interest income receivable, related party					7
Bonus to Officer [Member] | Officer [Member]
General and administrative expenses			187
Withholding tax reimbursed			14
Legal Counsel [Member] | Director and Shareholder [Member]
Accounts payable, related parties					$ 1
Legal fees	$ 0	$ 1	$ 2	$ 33

7. WARRANTS (Details Assumption

7. WARRANTS (Details Assumptions) - Warrants [Member]	9 Months Ended
	Sep. 30, 2016
Expected volatility	43.10%
Weighted average expected term (in years)	2 years 2 months 27 days
Risk-free interest rate	0.61%
Expected dividend yield	0.00%

7. WARRANTS (Details Warrant Ac

7. WARRANTS (Details Warrant Activity) - Warrants [Member]	9 Months Ended
	Sep. 30, 2016$ / sharesshares
Warrants and Rights Note Disclosure, Shares Outstanding [Roll Forward]
Outstanding at beginning | shares	303,000
Issued | shares	464,000
Expired | shares	(2,000)
Outstanding at ending | shares	765,000
Warrants and Rights Note Disclosure, Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning | $ / shares	$ 3.41
Issued | $ / shares	8.21
Expired | $ / shares	33.75
Outstanding at ending | $ / shares	$ 5.78
Warrants and Rights Note Disclosure, Weighted Average Remaining Contractual Term [Roll Forward]
Outstanding at ending	4 years 1 month 6 days

7. WARRANTS (Details Narrative)

7. WARRANTS (Details Narrative) - Warrants [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Sep. 30, 2015
Warrants issued		464,000
Weighted-average grant date fair value of warrants		$ 2.49
Intrinsic value	$ 2,200	$ 2,200
Stock price	$ 7.80	$ 7.80
Warrant 1 [Member]
Transaction date			Feb. 9, 2015
Warrants issued			198,767
Fair value of warrants issued			$ 1,000
Warrant 2 [Member]
Transaction date			Mar. 17, 2015
Warrants issued		96,458	100,144
Fair value of warrants issued	$ 709	$ 709
Warrant expiration date		Mar. 17, 2020
Warrant 3 [Member]
Transaction date		Aug. 4, 2016
Warrants issued		368,000
Additional paid-in-capital deferred offering cost		$ 539

8. STOCK BASED COMPENSATION (De

8. STOCK BASED COMPENSATION (Details Compensation Expense) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Allocated stock-based compensation	$ 1,020	$ 30	$ 1,124	$ 374
Research and Development [Member]
Allocated stock-based compensation	50	21	60	120
General and Administrative [Member]
Allocated stock-based compensation	825	9	919	254
Selling and Marketing [Member]
Allocated stock-based compensation	$ 145	$ 0	$ 145	$ 0

8. STOCK BASED COMPENSATION (29

8. STOCK BASED COMPENSATION (Details Assumptions) - Options [Member]	9 Months Ended
	Sep. 30, 2016
Expected volatility	44.44%
Weighted average expected term (in years)	5 years 9 months 4 days
Risk-free interest rate	1.45%
Expected dividend yield	0.00%

8. STOCK BASED COMPENSATION (30

8. STOCK BASED COMPENSATION (Details Stock Option Activity) - Options [Member] $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2016USD ($)$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning | shares	511
Granted | shares	858
Exercised | shares	(1)
Expired | shares	(5)
Outstanding at ending | shares	1,363
Exercisable at ending | shares	196
Vested and expected to vest at ending | shares	1,307
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Prices [Roll Forward]
Outstanding at beginning | $ / shares	$ 7.05
Granted | $ / shares	7.44
Exercised | $ / shares	5.70
Expired | $ / shares	26.19
Outstanding at ending | $ / shares	7.21
Exercisable at ending | $ / shares	8.54
Vested and expected to vest at ending | $ / shares	$ 7.52
Share-based Compensation Arrangement by Share-based Payment Award, Options, Weighted-Average Remaining Contractual Term [Roll Forward]
Outstanding at ending	9 years 4 months 24 days
Exercisable at ending	8 years 2 months 12 days
Vested and expected to vest at ending	9 years 7 months 6 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Intrinsic Value [Roll Forward]
Outstanding at beginning | $	$ 0
Outstanding at ending | $	1,178
Exercisable at ending | $	223
Vested and expected to vest at ending | $	$ 1,132

8. STOCK BASED COMPENSATION (31

8. STOCK BASED COMPENSATION (Details - Restricted stock) - Restricted Stock [Member]	9 Months Ended
	Sep. 30, 2016$ / sharesshares
Number of shares
Restricted stock outstanding, beginning balance | shares	0
Restricted stock granted | shares	462,000
Restricted stock cancelled | shares	0
Restricted stock outstanding, ending balance | shares	462,000
Weighted-Average Grant Date Fair Value
Restricted stock outstanding, beginning balance | $ / shares	$ 0
Restricted stock granted | $ / shares	8.03
Restricted stock cancelled | $ / shares	0
Restricted stock outstanding, ending balance | $ / shares	$ 8.03

8. STOCK BASED COMPENSATION (32

8. STOCK BASED COMPENSATION (Details Narrative) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2016USD ($)$ / sharesshares
Restricted stock issued | shares	440,364
Restricted stock value | $	$ 3,500
2007 Equity Incentive Plan [Member]
Shares available for grant | shares	1,400,000
Options [Member]
Weighted average grant date fair value (in dollars per share) | $ / shares	$ 3.56
Number of options granted | shares	858,000
Fair value of option granted | $	$ 3,100
Options and Restricted Stock [Member]
custom:TotalUnrecognizedCompensationExpenseRelatedToNonvestedSharebasedCompensationArrangements | $	$ 6,300
Unrecognized compensation weighted average period	1 year

9. COMMITMENTS AND CONTINGENC33

9. COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Sep. 30, 2016USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remaining period in 2016	$ 47
2,017	156
2,018	13
Total future minimum payments due	$ 216

9. COMMITMENTS AND CONTINGENC34

9. COMMITMENTS AND CONTINGENCIES (Details Narrative)	9 Months Ended
	Sep. 30, 2016USD ($)
Lease Agreement [Member] | Massachusetts (Wellesley Hills) [Member] | Office Space [Member]
Monthly lease payment	$ 4,613
Frequency of payment	Monthly
Lease expiration date	Nov. 30, 2016
Real Estate Lease Agreement [Member] | California (Los Gatos) [Member] | Office Space [Member]
Monthly lease payment	$ 12,395
Frequency of payment	Monthly
Lease expiration date	Jan. 31, 2018
Employment Agreement [Member] | Officer 1 [Member]
Officers compensation description	Base salary of $250,000 and a bonus of up to 30% of base salary
Employment Agreement [Member] | Officer 2 [Member]
Officers compensation description	Base salary of $220,000 and a bonus of up to 15% of base salary
Employment Agreement [Member] | Officer 3 [Member]
Officers compensation description	Base salary of $220,000 and a bonus of up to 15% of base salary. Terminated June 30, 2016.
Employment Agreement [Member] | Officer 4 [Member]
Officers compensation description	Annual base salary of $225,000 and a bonus of up to 30% of base salary.