Note 8 - Equity Transactions

On July 21, 2015, the Board of Directors approved a new employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 225,000 Series A preferred shares to Dr. Diwan. 75,000 shares vested on June 30, 2016 and 75,000 shares vested on June 30, 2017. The remainder of the shares will vest over the remaining term of the employment agreement ending, June 30, 2018 and are subject to forfeiture. The Company recognized a noncash compensation expense related to the issuance of the Series A Preferred Shares for the three months ended September 30, 2017 and 2016 of $66,786 and $74,317, respectively. The balance of $200,358 will be recognized as the remaining shares are vested.

On July 21, 2015, the Board of Directors approved a new employment agreement with Dr. Eugene Seymour, the Company’s Chief Executive Officer. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 225,000 Series A preferred shares to Dr. Seymour. 75,000 shares vested on June 30, 2016 and 75,000 shares vested on June 30, 2017. The remainder of the shares will vest over the remaining term of the employment agreement, ending June 30, 2018 and are subject to forfeiture. The Company recognized a noncash compensation expense related to the issuance of the Series A Preferred Shares for the three months ended September 30, 2017 and 2016 of $66,786 and $74,317, respectively. The balance of $200,358 will be recognized as the remaining shares are vested.

For the three months ended September 30, 2017, the Company’s Board of Directors authorized the issuance of 7,716 fully vested shares of its Series A Convertible Preferred stock for employee compensation. The Company recorded an expense of $25,227.

The fair value of the Series A Preferred stock was the following for the dates indicated:

Date	Shares		Value
7/31/2017		2,572	$	8,242
8/31/2017		2,572		8,397
9/30/2017		2,572		8,588
		7,716	$	25,227

There is currently no market for the shares of Series A Preferred Stock and they can only be converted into shares of common stock upon a Change of Control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A Preferred stock granted to various employees and others on the date of grant. The Series A Preferred stock fair value is based on the greater of i) the converted value to common at a ratio of 1:3.5; or ii) the value of the voting rights since the Holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a Change of Control. The valuations of the Series A Preferred Stock at each issuance used the following inputs:

The common stock price was in the range $1.35 to $1.40;

The calculated weighted average number of shares of common stock in the period;

A 26.63% premium over the common shares for the voting preferences;

The calculated weighted average number of total voting shares and the monthly shares representing voting rights of 12.27% to 12.30% of the total;

The conversion value is based on an assumption for calculation purposes only of a Change of Control in 4 years from October 31, 2016 and a remaining restricted term of 3.25 to 3.09 years;

32.18% to 31.85% restricted stock discount (based on a restricted stock analysis and call-put analysis curve: 59.78% to 58.33% volatility, 1.55% to 1.46% risk free rate) applied to the converted common.

In August 2017, the Scientific Advisory Board (SAB) was granted fully vested warrants to purchase 11,432 shares of common stock with an exercise price of $1.56 per share expiring in August 2021. The fair value of the warrants was $5,773 and was recorded as consulting expense for the three months ended September 30, 2017.

The Company estimated the fair value of the warrants granted to the Scientific Advisory Board on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:

Expected life (year)	4

Expected volatility	55.56	%

Expected annual rate of quarterly dividends	0.00	%

Risk-free rate(s)	1.67	%

For the three months ended September 30, 2017, the Company’s Board of Directors authorized the issuance of 20,062 fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded an expense of $27,000 for the three months, which was the fair value on the dates of issuance.

For the three months ended September 30, 2017, the Company’s Board of Directors authorized the issuance of 8,358 fully vested shares of its common stock with a restrictive legend for Director Services. The Company recorded an expense of $11,250 for the three months, which was the fair value on the date of issuance.