Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Deficit

v3.19.1
Stockholders' Deficit
3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
STOCKHOLDERS' DEFICIT

8 — STOCKHOLDERS' DEFICIT

  

Equity Issuances/Repurchases

 

In 2018, the Company issued shares of common stock as follows:

 

On April 1, 2018, the Company issued 292,309 shares of common stock to Company officers and a director in compensation for termination, by mutual agreement of the Performance Bonus Plan. At the time of this issuance, the company recognized an equity-based compensation expense of $1,461,545.

 

During the first three months of 2019, 93,100 previously-registered shares of common stock were issued as a result of the exercise of tradeable warrants to purchase 93,100 shares of common stock at an exercise price of $6.25 per share (ADILW) for cash payments of $581,875.

 

During the first three months of 2019, 2,166 unregistered shares of common stock were issued as a result of the exercise of tradeable warrants to purchase 2,166 shares of common stock at an exercise price of $0.005 per share for cash payments of $12.

 

On January 22, 2019, the Company issued 250,000 unregistered shares of common stock upon the exercise of the warrant to purchase 300,000 shares of common stock at an exercise price of $3.75 per share for a cash payment of $468,750 and the cashless exercise of the remaining warrant.

 

On January 31, 2019, the Company issued 22,311 unregistered shares of common stock upon the full cashless exercise of a warrant to purchase 65,130 shares of common stock at an exercise price of $4.99 per share.

 

On February 22, 2019, the Company concluded the Follow-on Offering of 2,475,000 shares of common stock and warrants to purchase 1,856,250 shares of common stock at an exercise price of $4.0625 per share. The shares of common stock and accompanying warrants were sold to the public at a price of $3.25 per share and three quarters warrant. The underwriters were granted an over-allotment option to purchase up to 371,250 shares of common stock and 278,437 warrants at a price of $3.25 per share of common stock and three quarters warrant. The underwriters partially exercised their over-allotment option by purchasing 370,000 shares of common stock and warrants to purchase 277,500 shares common stock. Gross proceeds of the offering, totaled $9,246,249, which after offering expenses, resulted in net proceeds of $8,195,673.

 

During the three months ended March 31, 2019, the Company issued 93,750 shares of common stock to consultants at a total cost of $154,854.

 

Stock Options

 

The following table provides the activity in options for the respective periods:

 

    Total Options Outstanding     Weighted Average Remaining Term (Years)     Weighted Average Exercise Price     Weighted Average Fair Value at Issue  
Outstanding December 31, 2017     174,282       9.50       5.70       4.84  
Issued     68,900       10.00     $ 2.80     $ 2.21  
Outstanding December 31, 2018     243,182       8.93     $ 4.88     $ 4.09  
Issued     1,173,000       10.00       3.31       2.56  
Cancelled     (15,215     8.26       5.70       4.23  
Outstanding March 31, 2019     1,400,967       9.62       3.55       2.81  
Outstanding March 31, non-vested     1,293,006       9.87     $ 3.40     $ 2.62  

 

All 1,173,000 options issued in the three months ended March 31, 2019 were issued under the 2017 equity incentive plan, under which 508,100 options remain issuable at March 31, 2019. At March 31, 2019, the intrinsic value totals of the outstanding options were $188,927.

 

The Company used the Black Scholes valuation model to determine the fair value of the options issued, using the following key assumptions for the three months ended March 31, 2019 and year ended December 31, 2018:

 

    Q1 2019   2018
Fair Value per Share    $3.01-3.39   $2.80
Expected Term     6.5 years     6.5 years
Expected Volatility     97.37-97.48%   95.77%
Risk free rate     2.32-2.51%   2.79%

 

Compensation expense associated with issuance of options was recognized using the straight line method over the requisite service period, which is the implied service period. During the three months ended March 31, 2019 and 2018, total equity-based compensation expense from the options issued was $129,150 and $69,161, respectively, which were classified as R&D and G&A expense as presented in the table below. As of March 31, 2019, $3,381,987 in further compensation expense resulting from issued options remained to be recognized over a weighted average remaining service period of 2.74 years.

 

See Equity Issuances section in the Note for additional stock based compensation expense incurred in the first quarter of 2019. The components of stock-based compensation expense included in the Company's Statements of Operations for the three months ended March 31, 2019 and 2018 are as follows:

 

   

Three Months ended

March 31

 
    2019     2018  
Research and development Options Expense     43,174       -  
Total research and development expenses     43,174       -  
General and administrative Options Issuance Expense     85,976       69,161  
Stock issued to consultants     154,854       -  
Total general and administrative expenses     240,830       69,161  
Total stock-based compensation expense   $ 284,004     $ 69,161  

  

Stock Warrants

 

On January 18, 2019, the Company exchanged a previously issued warrant to purchase 300,000 shares of common stock with an exercise price of $3.75 per share for a new warrant to purchase 300,000 shares of common stock. The terms of the new warrant were substantially the same as those of the old warrant, except for the cashless exercise terms of the new warrant, which differed with old warrant to the benefit of the warrant holder. The Company recognized a non-cash expense of $441,763 as a result of this exchange.

 

On February 22, 2019, the Company issued 2,132,750 warrants for the purchase of 2,133,750 shares common stock at an exercise price of $4.0625 per share of common stock on the conclusion of its Follow-on Offering. See Equity Issuances/Repurchases above.

 

In three months ended March 31, 2019, 93,100 warrants with an exercise price of $6.25 per share of common stock were exercised for $581,875, 125,000 warrants with an exercise price of $3.75 per share of common stock were exercised for $468,750, 2,166 warrants with an exercise price of $0.005 per share of common stock were exercised for $12, and 240,130 warrants were exercised cashlessly for the issue of 147,311 shares of common stock. The total received in exercise fees for exercise of warrants was $1,050,637, resulting in the issue of a total of 367,577 shares of common stock on the exercise of 460,396 warrants.

 

The following table provides the activity in warrants for the respective periods.

 

   

Total

Warrants

    Weighted Average Remaining Term (Years)    

Weighted

Average

Exercise

Price

    Average Intrinsic Value  
Outstanding December 31, 2017     482,555       11.20       5.51       1.38  
Issued     4,547,204       5.00       5.82       0.00  
Cancelled           NA       NA       NA  
Exercised     (25,000 )     4.59       6.25       0.06  
Outstanding December 31, 2018     5,054,759       5.07     $ 5.72       0.61  
Issued     2,133,750       5.00       4.0625       0.00  
Cancelled           NA       NA       NA  
Exercised     460,396       4.41       4.59       1.28  
Outstanding March 31, 2019     6,728,113       4.85       5.27       0.07