1. Business and Basis of Presentation

 

PhaseRx, Inc. (referred to as “PhaseRx”, 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.

 

Liquidity

 

We have financed our operations since inception primarily through the sale of preferred and common stock and the issuance of convertible notes and term loans. On October 13, 2017, we announced that we would be reducing costs and seeking a strategic partner for the Company’s assets. 

 

We believe our cash and cash equivalents balance of $5.3 million at September 30, 2017, is sufficient to fund our operations through February 2018. On October 12, 2017, we conducted a reduction in our workforce to reduce operating costs and conserve cash resources while we pursue strategic options for our research and development assets. Under this plan, which was completed in October 2017, we reduced our workforce by 10 employees (or 50%), including some executive officers. As a part of the reduction in workforce, we also announced that we will delay the development of our lead product candidate PRX-OTC. We are exploring various strategic alternatives, including but not limited to a potential merger transaction. However, no decision has been made as to whether we will engage in a transaction or transactions and there can be no assurance that the review of strategic alternatives will result in a transaction, or the terms or timing of any potential transaction that may take place. The Company may need to obtain additional equity and/or debt financing, especially if the Company is not able to consummate a potential transaction in a timely basis.  If the Company attempts to obtain additional equity or debt financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.

 

We anticipate that we will continue to incur losses for the foreseeable future. Our expected recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

On August 22, 2017, we received a letter from The Nasdaq Capital Market (“Nasdaq”) indicating that we no longer comply with the minimum stockholders’ equity requirement. In accordance with Nasdaq Listing Rules we had 45 calendar days to submit a plan to regain compliance. On September 21, 2017, we submitted a plan of compliance to the Nasdaq. On October 23, 2017, we were notified by Nasdaq that the staff has rejected our plan of compliance and initiated immediate delisting procedures for our common stock from Nasdaq.We are currently appealing this decision.  

 

Basis of Presentation

   

The accompanying interim consolidated financial statements are unaudited. The accompanying unaudited consolidated 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 consolidated statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our 2016 annual report on the Form 10-K. The accompanying consolidated financial information as of December 31, 2016 has been derived from the audited 2016 consolidated financial statements included in our 2016 annual report on the Form 10-K filed with the Securities and Exchange Commission on March 27, 2017. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017, or any other future period.

2. Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of PhaseRx and its wholly owned subsidiary, PhaseRx Ireland Limited. All material intercompany transactions and balances have been eliminated in consolidation.

  

Use of Estimates

 

The preparation of consolidated 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 consolidated financial statements, management has made its best estimates and judgments of certain amounts included in the consolidated 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 or 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 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.

 

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 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, prior to the initial public offering (“IPO”), the 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, directors and nonemployee consultants. 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 following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share amounts):

 

		Three Months Ended September 30,						Nine Months Ended  September 30,
		2017			2016			2017			2016
Net loss attributable to common stockholders		$	(2,750)		$	(3,343)		$	(10,414)		$	(16,660)
Weighted average shares used in computation of basic and diluted net loss per share attributable to common stockholders			11,690			11,690			11,690			6,120
Basic and diluted net loss per share attributable to common stockholders		$	(0.23)		$	(0.29)		$	(0.89)		$	(2.72)

    

Concentration of Risk

 

 

Recent Accounting Pronouncements

 

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 on our financial statements.

  

In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses that changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU is effective for us in the first quarter of 2020 and must be adopted using a modified retrospective transition approach. 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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments that clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for us in the first quarter of 2018 with early adoption permitted and must be applied retrospectively to all periods presented. 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 May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation , which is intended to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance to a change to the terms or conditions of a share-based payment award. This ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years with early adoption permitted. We are evaluating the impact of this guidance but do not expect that the adoption will have a material impact on our financial statements.

3. Term Loan

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 funded $6 million to us (the “Term Loan”). 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%, resulting in a rate of 10.00% as of September 30, 2017. 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 began 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 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. 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 total debt discount, inclusive of the end of term charge and other fees, amounted to $659,000 related to this Term Loan is being amortized to interest expense over the term of the Term Loan.

4. Fair Value Measurements

 

The following table sets forth the fair value of our assets measured at fair value at September 30, 2017 and December 31, 2016 (in thousands):

  

		September 30, 2017
Description		Balance			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Money market		$	4,083		$	4,083		$	-		$	-
Commercial paper			500			-			500			-
Total financial assets		$	4,583		$	4,083		$	500		$	-
Add Cash:			674
Total cash, cash equivalents and marketable securities		$	5,257

 

		December 31, 2016
Description		Balance			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Money market		$	7,731		$	7,731		$	-		$	-
Commercial paper			7,544			-			7,544			-
Total financial assets		$	15,275		$	7,731		$	7,544		$	-
Add Cash:			204
Total cash, cash equivalents and marketable securities		$	15,479

5. Stock-Based Compensation  

 

 

								Weighted
								Average			Average
					Weighted			Remaining			Intrinsic
		Number of			Average			Contractual			Value
		Stock Options			Exercise Price			Life			(in thousands)
Outstanding as of December 31, 2016			1,751,473		$	2.54
Options granted			401,000			1.27
Options forfeited			(117,987)			2.85
Outstanding at September 30, 2017			2,034,486		$	2.28			7.98		$	181
Exercisable at September 30, 2017			822,781		$	2.12			6.53		$	143

  

Stock-based compensation expense has been included in the Statement of Operations as follows (in thousands):

  

		Three months ended September 30						Nine months ended September 30
		2017			2016			2017			2016
Research and development		$	77		$	167		$	281		$	197
General and administrative			144			299			538			425
		$	221		$	466		$	819		$	622

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 nine months ended September 30, 2017 and 2016:

 

		Nine Months Ended				Nine Months Ended
		September 30, 2017				September 30, 2016
Weighted average estimated fair value per share		$	0.75			$	2.60
Weighted average assumptions:
Dividend yields			-				-
Expected term (years)			5.7				5.9
Risk free interest rate			1.9	%			1.4	%
Volatility			80.3	%			80.3	%

 

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. 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.

Principles of Consolidation

 

The consolidated financial statements include the accounts of PhaseRx and its wholly owned subsidiary, PhaseRx Ireland Limited. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

 

The preparation of consolidated 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 consolidated financial statements, management has made its best estimates and judgments of certain amounts included in the consolidated 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 or 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 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.

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 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, prior to the initial public offering (“IPO”), the 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, directors and nonemployee consultants. 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 following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share amounts):

 

		Three Months Ended September 30,						Nine Months Ended  September 30,
		2017			2016			2017			2016
Net loss attributable to common stockholders		$	(2,750)		$	(3,343)		$	(10,414)		$	(16,660)
Weighted average shares used in computation of basic and diluted net loss per share attributable to common stockholders			11,690			11,690			11,690			6,120
Basic and diluted net loss per share attributable to common stockholders		$	(0.23)		$	(0.29)		$	(0.89)		$	(2.72)

Concentration of Risk

 

Recent Accounting Pronouncements

 

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 on our financial statements.

  

In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses that changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU is effective for us in the first quarter of 2020 and must be adopted using a modified retrospective transition approach. 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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments that clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for us in the first quarter of 2018 with early adoption permitted and must be applied retrospectively to all periods presented. 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 May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation , which is intended to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance to a change to the terms or conditions of a share-based payment award. This ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years with early adoption permitted. We are evaluating the impact of this guidance but do not expect that the adoption will have a material impact on our financial statements.

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share amounts):

 

		Three Months Ended September 30,						Nine Months Ended  September 30,
		2017			2016			2017			2016
Net loss attributable to common stockholders		$	(2,750)		$	(3,343)		$	(10,414)		$	(16,660)
Weighted average shares used in computation of basic and diluted net loss per share attributable to common stockholders			11,690			11,690			11,690			6,120
Basic and diluted net loss per share attributable to common stockholders		$	(0.23)		$	(0.29)		$	(0.89)		$	(2.72)

The following table sets forth the fair value of our assets measured at fair value at September 30, 2017 and December 31, 2016 (in thousands):

  

		September 30, 2017
Description		Balance			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Money market		$	4,083		$	4,083		$	-		$	-
Commercial paper			500			-			500			-
Total financial assets		$	4,583		$	4,083		$	500		$	-
Add Cash:			674
Total cash, cash equivalents and marketable securities		$	5,257

 

		December 31, 2016
Description		Balance			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Money market		$	7,731		$	7,731		$	-		$	-
Commercial paper			7,544			-			7,544			-
Total financial assets		$	15,275		$	7,731		$	7,544		$	-
Add Cash:			204
Total cash, cash equivalents and marketable securities		$	15,479

Stock-based compensation expense has been included in the Statement of Operations as follows (in thousands):

  

		Three months ended September 30						Nine months ended September 30
		2017			2016			2017			2016
Research and development		$	77		$	167		$	281		$	197
General and administrative			144			299			538			425
		$	221		$	466		$	819		$	622

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 nine months ended September 30, 2017 and 2016:

 

		Nine Months Ended				Nine Months Ended
		September 30, 2017				September 30, 2016
Weighted average estimated fair value per share		$	0.75			$	2.60
Weighted average assumptions:
Dividend yields			-				-
Expected term (years)			5.7				5.9
Risk free interest rate			1.9	%			1.4	%
Volatility			80.3	%			80.3	%