Quarterly report pursuant to Section 13 or 15(d)

Equity

v3.7.0.1
Equity
6 Months Ended
Jun. 30, 2017
Equity [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
5.
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 June 30, 2017, there was no issued preferred stock.
 
Common Stock
 
On January 13, 2017, the Company agreed to issue 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 Statement 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.
 
On February 14, 2017, the Company completed a public offering and sold 3,923,923 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 4 above regarding Warrant issuance related to our February public offering.
 
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 six months ended June 30, 2017:
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
 
 
 
 
 
Weighted
 
Weighted
 
Remaining
 
 
 
 
 
 
 
Average
 
Average
 
Contractual
 
Aggregate
 
 
 
Number of
 
Grant Date
 
Exercise
 
Term
 
Intrinsic
 
 
 
Shares
 
Fair Value
 
Price
 
(in years)
 
Value
 
Outstanding, December 31, 2016
 
 
510,000
 
$
3.40
 
$
5.28
 
 
9.29
 
$
48,500
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
20,000
 
$
1.76
 
$
2.31
 
 
 
 
 
 
 
Outstanding, June 30, 2017
 
 
530,000
 
$
3.33
 
$
5.17
 
 
8.57
 
$
83,500
 
Exercisable, June 30, 2017
 
 
50,000
 
$
0.14
 
$
0.20
 
 
2.92
 
$
83,500
 
 
In January 2017, the Company granted members of its science advisory board options in the aggregate to purchase 20,000 shares of the Company’s common stock with an exercise price of $2.31 per share, a term of 10 years, and a vesting period of 4 years. The exercise price was based upon the closing price of the stock on the day of the grant. The options have an aggregated fair value of $35,196 that was calculated using the Black-Scholes option-pricing model.
 
Variables used in the Black-Scholes option-pricing model include ranges of: (1) discount of 1.30%-2.24%, (2) expected lives of 6 to 6.25 years, (3) expected volatility of 70.18% to 89.11%, and (4) zero expected dividends. The Company, due to the limited number of participants in the plan and their positions within the Company, uses a 0% estimated forfeiture rate. For the six months ended June 30, 2017, the Company recorded $0.2 million in stock-based compensation in relation to the options. As of June 30, 2017, there was $1.3 million of unrecognized compensation cost, net of estimated forfeitures, related to the Company’s non-vested equity awards, which is expected to be recognized over a weighted average period of 3.04 years.
 
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. 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.