Equity

On May 2, 2016, the Company amended and restated its certificate of incorporation to increase the number of shares authorized to 80,000,000 of which 5,000,000 shares of preferred stock are authorized and 75,000,000 shares of common stock are authorized.

Preferred Stock

We are authorized to issue up to 5,000,000 shares of preferred stock. Our certificate of incorporation authorizes the board to issue these shares in one or more series, to determine the designations and the powers, preferences and relative, participating, optional or other special rights and the qualifications, limitations and restrictions thereof, including the dividend rights, conversion or exchange rights, voting rights (including the number of votes per share), redemption rights and terms, liquidation preferences, sinking fund provisions and the number of shares constituting the series. As of December 31, 2017, there was no issued preferred stock.

Common Stock

Settlement of a Liability

In January 2017, the Company issued 79,167 shares of common stock to a consultant in full settlement for prior services rendered to the Company. Settlement occurred February 21, 2017 with the issuance of the shares, resulting in a gain on settlement of $0.15 million recorded in gain in settlement of liability on the Statements of Operations. The obligation of $0.24 million had been recorded by the Company in accounts payable and accrued expenses as of December 31, 2016.

Follow-On Public Offering

In February 2017, the Company completed a public offering and sold 3,710,000 shares of the Company’s common stock. The offering price per unit was $1.35. The Company received net cash proceeds of $4.5 million after deducting underwriting discounts, commissions and direct offering expenses payable by us. See Note 6 above regarding Warrant issuances related to our February 2017 public offering.

At Market Issuance Sales Agreement (ATM)

On September 15, 2017, the Company entered into an At Market Issuance Sales Agreement (the “Agreement” or “ATM”) with Roth Capital Partners, LLC and National Securities Corporation (collectively, the “Agents”). Pursuant to the terms of the Agreement, the Company may sell from time to time through the Agents shares of the Company's common stock with an aggregate sales price of up to $13.0 million.

Any sales of Shares pursuant to the Agreement will be made under the Company's effective shelf registration statement on Form S-3 (File No. 333-219434) which became effective on August 21, 2017 and the related prospectus supplement and the accompanying prospectus, as filed with the Securities and Exchange Commission (the “SEC”) on September 15, 2017. Under the Agreement, the Company may sell Shares through an Agent by any method that is deemed an at the market offering as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).

Sales of the Shares may be made at market prices prevailing at the time of sale, subject to such other terms as may be agreed upon at the time of sale, including a minimum sales price that may be stipulated by the Company's Board of Directors or a duly authorized committee thereof. The Company or the Agents, under certain circumstances and upon notice to the other, may suspend the offering of the Shares under the Agreement. The offering of the Shares pursuant to the Agreement will terminate upon the sale of Shares in an aggregate offering amount equal to $13.0 million, or sooner if either the Company or the Agents terminate the Agreement pursuant to its terms.

The Company agreed to pay a commission to the Agents of 3.0% of the gross proceeds of the sale of the Shares sold under the Agreement and to reimburse the Agents for certain expenses. The Company has also provided the Agents with customary indemnification rights. The Company is not obligated to make any sales of Common Stock under the Agreement.

As of December 2017, the Company had sold 776,016 shares of common stock from $2.05 to $2.71 per share with gross proceeds of $1.6 million under this Agreement.

Initial Public Offering

On May 31, 2016, the Company completed its IPO and sold 1,540,026 shares of the Company’s common stock. The IPO price per share was $6.00. The Company received net cash proceeds of $8,464,183 after deducting underwriting discounts, commissions and direct offering expenses payable by us. Pursuant to our agreement with our underwriters, as additional compensation, we issued the underwriters warrants to purchase 107,802 shares of common stock exercisable for a period of 5 years from date of issuance at an exercise price of $7.50 per share. The relative fair value of these warrants was $374,763 and is included in stock issuance costs calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.39% (2) expected life of 5 years, (3) expected volatility of 80.61%, and (4) zero expected dividends.

During the period from January 1, 2016 through May 2, 2016, the Company sold 234,297 common shares for $702,894.

On June 20, 2016, the Company agreed to issue 24,000 shares of common stock to PCG Advisory Group, the Company’s investor relations firm, for services provided. The fair value of these shares was $157,680 based on the market price on the grant date.

GSK Consulting Agreement

On July 29, 2017, the Company entered into a consulting agreement with GSK Strategies, LLC (“GSK”), for its investor relations operations. The consulting agreement covers for a period of twelve months from the date of July 29, 2017. In exchange for the consulting services, the Company agreed to issue two warrants (collectively, the “Warrants”) to purchase 100,000 and 50,000 shares of common stock at exercise prices of $2.41 and $3.00 per share, respectively, subject to approval by Nasdaq of a listing of additional shares application, which was received in August 2017. Each of the Warrants vests over a 12-month period in equal monthly installments starting July 29, 2017, provided that GSK is providing services to the Company pursuant to the consulting agreement on each vesting date. The Warrants became initially exercisable on August 8, 2017, and expire five years from the initial exercise date. The Company recorded stock compensation expense for the non-employee consulting agreement of $104,000 during the year ended December 31, 2017 based on the fair value of the warrants vested as of December 31, 2017.

Adoption of 2015 Stock Plan

On December 5, 2015, the Board of Directors of the Company approved the Company’s 2015 Stock Plan, which was amended on April 22, 2016. The expiration date of the plan is December 5, 2025 and the total number of underlying shares of the Company’s common stock available for grant to employees, directors and consultants under the plan is 2,500,000 shares. The awards under the 2015 Stock Plan can be in the form of stock options, stock awards or stock unit awards.



The following is a summary of option activities for the years ended December 31, 2016 and 2017:
	Number of Shares		Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, December 31, 2015	200,000		$	0.14	$	0.20
Granted - 2016	460,000		3.75		5.83
Cancelled - 2016	(150,000	)	0.14		0.20
Outstanding, December 31, 2016	510,000		$	3.40	$	5.28	9.29	$	275,500
Granted - 2017	835,000		$	1.59	$	2.42
Cancelled - 2017	—
Outstanding, December 31, 2017	1,345,000		$	1.93	$	3.50	9.07	$	83,000

Exercisable, December 31, 2017	50,000		$	0.13	$	0.20	2.42	$	83,000

The fair value of the option grants has been estimated, with the following weighted-average assumptions:



	Year Ended December 31,
	2017				2016
Risk-free interest rate	1.83	%	to	1.95%	1.3%
Volatility	80%				70.18	%	to	70.44%
Expected life (years)	5.0		to	6.25	6		to	6.25
Expected dividend yield	—%				—%

Stock-based compensation expense for the years ended December 31, 2017 and 2016, are as follows (in thousands):



	Year Ended December 31,
	2017		2016
General and administrative	$	684	$	321
Research and development	23		3
Total	$	707	$	324

Options granted during 2017 have an aggregated fair value of $1.4 million that was calculated using the Black-Scholes option-pricing model. At December 31, 2017, total compensation cost not yet recognized was $2.5 million and the weighted average period over which this amount is expected to be recognized is 8.7 years. The aggregate fair value of options vesting in the years ended December 31, 2017 and 2016 was $3.1 million and $1.8 million, respectively. No options were exercised in 2017 or 2016. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the above paragraph and table. The expected term of the options was computed using the “plain vanilla” method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin 107 because we do not have sufficient data regarding employee exercise behavior to estimate the expected term. The volatility was determined by referring to the average historical volatility of a peer group of public companies because we do not have sufficient trading history to determine our historical volatility. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company entered into a separation agreement with its former Chief Financial Officer in October 2016 and as part of the agreement, options to purchase 150,000 shares of common stock issued to the former Chief Financial Officer were cancelled and the vesting was accelerated on the remaining options to purchase 50,000 shares of common stock.