Note

5—Equity

Initial Public Offering

April 3, 2018,

the Company completed its IPO, whereby the Company sold an aggregate of

1,280,000

shares of its common stock, at

$5.00

per share, resulting in net proceeds of

$5,025,000

after underwriting discounts, commissions and estimated offering expenses of

$895,000.

Additionally, the underwriters have been issued warrants to purchase common stock equal to

of the securities sold in the IPO, or

38,400

shares of Common Stock.

Private Placement

May 9, 2018,

the Company completed a private placement, whereby the Company sold to investors an aggregate of

828,500

shares of its common stock at

$12.07

per share and warrants to purchase up to

621,376

shares of the Company’s common stock with an initial exercise price equal to

$15.62

per share. The per share price and warrant exercise price were subject to automatic adjustment, if applicable, based on the volume weighted average daily prices on the

three

days after the registration statement registering the resale of the shares of common stock sold to the investors and the shares of the common stock issuable upon exercise of the warrant was declared effective and the Company’s stockholders approved the transaction. In

event would the purchase price or warrant exercise price be less than

$4.25

per share. The Company received net proceeds of

$9,250,000

after commissions and expenses.

August 1, 2018,

following the effectiveness of our Registration Statement on Form S-

(File

No.

333

225090

) and pursuant to the terms of the Purchase Agreement and Warrants, we issued to the original investors in the private placement an aggregate of

1,174,440

additional shares of our common stock and the Warrants became exercisable for a total of

2,283,740

shares of our common stock with an exercise price equal to

$4.25

per share. On

March 15, 2019

and

June 25, 2019,

we issued an aggregate of

350,000

shares of Common Stock held in abeyance for an investor in the private placement.

Stock Issuances

During the

nine

months ended

September 30, 2019

, we issued

253,707

shares of Common Stock for service provided to us, valued at

$392,432,

and we issued

350,000

shares of Common Stock held in abeyance for an investor in the private placement.

During the year ended

December 31, 2018

, we issued

200,009

shares of Common Stock, taking into account the forward-split ratio from the Company’s IPO, for services provided to us, valued at

$553,303

and we issued

3,282,940

shares of Common Stock in the Company’s IPO and private placement for cash of

$16,400,000.

Preferred Stock

In connection with the Company’s IPO, all Preferred Stock included in Series A through Series G, totaling

1,394,953

shares at

March 31, 2018

were converted to

9,324,177

shares of Common Stock as a result of the forward-split (See Capital Stock Note). Upon the completion of the IPO, the Company is authorized to issue

10,000,000

shares of Preferred Stock at a par value of

$0.001

per share,

none

of which is outstanding at

September 30, 2019

Common Stock

Upon the completion of the IPO, all of the Company’s Non-Voting Common Stock automatically converted into Voting Common Stock on a

one

-to-

one

basis. Immediately following the completion of the IPO, the Company is authorized to issue

200,000,000

shares of Common Stock at a par value of

$0.001

per share, all of which is Voting Common Stock. There are

15,842,855

shares of Common Stock outstanding at

September 30, 2019

Common Stock Purchase Warrants

Common Stock purchase warrant activity for the period and year ended

September 30, 2019

and

December 31, 2018

, respectively, are as follows:

	Number of			Weighted Avg.
	Warrants			Exercise Price
Outstanding at January 1, 2018		748,060		$	5.17
Issued		3,166,492			4.47
Cancelled or expired		(15,385	)		—
Exercised		(34,615	)		—
Outstanding at December 31, 2018		3,864,552		$	4.60
Issued		—			—
Cancelled or expired		—			—
Exercised		—			—
Outstanding at September 30, 2019		3,864,552		$	4.60

The Company did

not

issue warrants in the

nine

-month period ended

September 30, 2019

In the year ended

December 31, 2018

, we granted (i) warrants to purchase

38,400

shares of our Common Stock at

$6.25

per share to the underwriter of the Company’s IPO and (ii) warrants to purchase

2,283,740

shares of our Common Stock at

$4.25

per share to the investors in our private placement. We also granted warrants to purchase up to

844,352

shares of common stock in consideration of services valued at

$2,203,506

including (i)

425,000

shares of common stock to Cancer Revolution, LLC, (ii)

225,000

shares of common stock to Cancer Biotech, LLC, (iii)

144,352

shares of common stock to Inception Capital Management, LLC, and (iv) up to

50,000

shares of common stock to World Wide Holdings, LLC at

$5.00

per share.

January 29, 2018,

the Company entered into an agreement with FundAthena, Inc. whereby the Company agreed to grant warrants to purchase

6,000

shares of our Common Stock at

$5.00

per share in consideration of services valued at

$30,000

provided to the Company. At

September 30, 2019

, the Company has

not

issued these warrant shares.

September 20, 2018,

World Wide Holdings, LLC exercised its warrant to purchase

50,000

shares via a cashless exercise option. As a result, the Company issued

34,615

shares of Common Stock to World Wide Holdings in exchange for the cashless exercise of the warrant and the remaining

15,385

shares of Common Stock were cancelled.

2018

Equity Incentive Plan

The Company’s board of directors and stockholders has approved and adopted the Company’s

2018

Equity Incentive Plan (

“2018

Plan”), which became effective on the completion of the IPO on

April 3, 2018.

The

2018

Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs

may

be granted only to employees. All other awards

may

be granted to employees, including officers, and to the Company’s non-employee directors and consultants, and affiliates.

A total of

4,160,000

shares of Common Stock are available under the

2018

Plan, which includes

554,963

shares of Common Stock reserved for issuance under our

2009

Equity Incentive Plan that were added to

2018

Plan.

further grants will be made under the

2009

Plan and any shares subject to outstanding stock options under the

2009

Plan that would otherwise be returned to the

2009

Plan will instead be added to the shares initially reserved under the

2018

Plan.

In addition, the number of shares of common stock reserved for issuance under the

2018

Plan will automatically increase on

January 1

of each year, beginning on

January 1, 2019

of the total number of shares of the Company’s Common Stock outstanding on

December 31

of the preceding calendar year, or a lesser number of shares determined by the administrator of the

2018

Plan. On

January 1, 2019,

the number of shares of common stock reserved for issuance under the

2018

Plan was increased by an aggregate of

761,957

shares.

2018

Employee Stock Purchase Plan

The Company’s board of directors and stockholders has approved and adopted the Company’s

2018

Employee Stock Purchase Plan (“ESPP”), which will become effective when the Board determines to make this benefit available to employees. The ESPP authorizes the issuance of

208,500

shares of the Company’s common stock pursuant to purchase rights granted to our eligible employees. The number of shares of common stock reserved for issuance will automatically increase on

January 1

of each calendar year, from

January 1, 2019

by the lesser of

of the total number of shares of our common stock outstanding on

December 31

of the preceding calendar year or a number determined by the administrator of the ESPP. The administrator of the ESPP, which is our Board of Directors, determined

not

to increase the number of shares reserved for issuance under the ESPP on

January 1, 2019.

Stock Options

December 31, 2018

, the Company had outstanding stock options to purchase

4,535,681

shares of Common Stock. In the

nine

months ended

September 30, 2019

, the Company granted stock options to employees and consultants to purchase

1,461,715

shares of Common Stock with exercise prices ranging from

$1.45

$1.62

per share and cancelled options to purchase

91,813

shares of Common Stock due to the inactivity of service providers.

September 30, 2019

, the Company has outstanding stock options to purchase

5,905,583

shares of Common Stock that have been granted to various employees, vendors and independent contractors. These options can vest immediately or over periods ranging from

twelve

(

) to

forty-eight

(

) months, are exercisable for a period of

ten

(

) years, and enable the holders to purchase shares of our Common Stock at exercise prices ranging from

$0.001

$9.80

per share. The per-share fair values of these options range from

$0.001

$7.93,

based on Black-Scholes-Merton pricing models with the following assumptions:

Expected term:	10 years
Risk-free rate:	2.33% – 2.60%
Volatility:	76.87%
Dividend yield:	0%

The weighted average remaining contractual term for the outstanding options at

September 30, 2019

and

December 31, 2018

7.64

and

7.83

years, respectively.

Stock option activity for the

nine

months and year ended

September 30, 2019

and

December 31, 2018

, respectively, is as follows:

	Number of			Weighted Avg.
	Shares			Exercise Price
Outstanding at January 1, 2018		2,628,749		$	1.31
Options granted		2,034,525			6.21
Options exercised		—			—
Options expired		(127,593	)		—
Outstanding at December 31, 2018		4,535,681		$	3.31
Options granted		1,461,715			1.60
Options exercised		—			—
Options expired or cancelled		(91,813	)		—
Outstanding at September 30, 2019		5,905,583		$	2.94

Share-Based Compensation

As of

December 31, 2018,

the Company’s total compensation cost related to nonvested time-based stock option awards granted to employees and board members and

not

yet recognized was approximately

$4.5

million. The Company expects to record this stock-based compensation expense over the next

three

years, in the amount of

$3.3

million with respect to stock option awards using a graded vesting method and

$1.2

million with respect to stock option awards using a cliff vesting method. As of

December 31, 2018,

the weighted average term over which these expenses are expected to be recognized are

2.34

years and

0.69

years, for stock options granted using a graded vesting method and a cliff vesting method respectively.

As of

December 31, 2018,

the Company’s total compensation cost related to nonvested performance-based stock option awards granted to an employee and

not

yet recognized was approximately

$2.6

million. One-half of this amount, or

$1.3

million,

may

be recognized and recorded, upon the achievement of certain milestones, within

0.92

years from

December 31, 2018,

and the remaining

$1.3

million

may

be recognized and recorded within

2.42

years from

December 31, 2018.

In the

nine

months ended

September 30, 2019

, the Company's total share-based compensation was approximately

$2.9

million with approximately

$2.5

million representing the vesting of options issued to service providers, employees, and board members.