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 March 31, 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 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.

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 share was $1.35. The Company received net cash proceeds of $4.46 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 periods ended December 31, 2016 and the three months ended 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, 2015		200,000	$	0.14	$	0.20
Granted - 2016		460,000		3.75		5.83
Cancelled		(150,000)		0.14		0.20
Outstanding, December 31, 2016		510,000	$	3.40	$	5.28		9.29	$	48,500

Granted - Q1 2017		20,000	$	1 .76	$	2.31
Cancelled – Q1 2017		-		–		–				–
Outstanding, March 31, 2017		530,000	$	3.33	$	5.17		8.82	$	48,500
Exercisable, March 31, 2017		50,000	$	0.14	$	0.20		3.17	$	48,500

During the quarter ended March 31, 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 $2.31, a term of 10 years, and a vesting period of 4 years. The exercise price was based upon the closing price of stock on the day of the grant. These 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. During the quarter ended March 31, 2017, the Company recorded $0.11 million in stock-based compensation in relation to the options. As of March 31, 2017, there was $1.49 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 3.28 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.