Note 6 – Stockholder’s Equity 

Initial Public Offering 

On February 16, 2018, the Company closed its IPO in which it sold 3,500,000 shares of the Company’s common stock at a public offering price of $5.00 per share. In connection with the closing of the IPO, (1) the Company received net proceeds of approximately $15,000 after deducting underwriting discounts and commissions of $1,400 and other offering expenses of approximately $1,100, (2) the amendment to the registration rights agreement described below became effective, (3) the amendment to the Certificate of Designation described above in Note 4 became effective, (4) all outstanding shares of Series A Convertible Preferred Stock converted, on a one-to-one basis, into shares of the Company’s common stock, (5) the Company issued the Royalty Payment Rights Certificates as described in Note 4, and (6) the Company issued warrants to certain of the former Series A Convertible Preferred Stock and common stock holders, pursuant to the amendment to the Registration Rights Agreement, the amendment to the Certificate of Designation, and the execution of a lock up agreement, to purchase an aggregate of 1,095,682 shares of the Company’s common stock (the “Ten Percent Warrants”). The Ten Percent Warrants are exercisable any time on or after the 180-day anniversary of the completion of the IPO, have a five-year term, and provide for cashless exercise. In addition, the Company granted the representative of the several underwriters in the IPO (the “Representative”) a 30-day option (the “Over-Allotment Option”) to purchase up to an aggregate 525,000 additional shares of the Company’s common stock at an exercise price of $5.00 per share. 

The Ten Percent Warrants were valued using the Black-Scholes option pricing model under the following assumptions, (i) expected life of 5 years, (ii) volatility of 67.08%, (iii) risk-free rate of 2.63%, and (iv) dividend rate of zero. The fair value of the Ten Percent Warrants was estimated to be $3,156 which was recorded as warrant expense in the accompanying condensed consolidated statements of comprehensive loss.   

On March 12, 2018, the Company closed the sale of an additional 56,000 shares of its common stock at a price of $5.00 per share, pursuant to the Representative’s partial exercise of the Over-Allotment Option. In connection with the closing of the partial exercise of the Over-Allotment Option, the Company received net proceeds of $258 after deducting underwriting discounts and commissions of $22. 

Registration Rights 

The Company entered into an amended registration rights agreement to waive investors’ rights to receive penalties which became effective upon the closing of the IPO. Accordingly, all penalties or other amounts due to the investors under the registration rights agreement have been forever waived and discharged, and the Company may be required to file a registration statement in accordance with the registration rights agreement, as amended, within 225 days after the IPO date. 

Issuance of Stock 

On March 27, 2018, the Company’s Board of Directors approved the issuance of 15,000 shares of the Company’s common stock to a third party for services to be provided. The stock vests immediately and is subject to a lock-up through February 14, 2019. The Company recorded the fair market value of the stock on the date of issuance as stock-based compensation in the amount of $69. 

Exercise of Options 

On February 21, 2018, a consultant exercised 896 options on a cashless basis which resulted in the issuance of 394 shares of the Company’s common stock. 

Stock Based Compensation 

Stock Options 

The following table summarizes stock option activity during the three months ended March 31, 2018: 

At March 31, 2018, unamortized stock compensation for stock options was $2,494, with a weighted-average recognition period of 1.21 years. 

At March 31, 2018, outstanding options to purchase 657,305 shares of common stock were exercisable with a weighted-average exercise price per share of $4.31. 

Stock Based Compensation 

The following table sets forth total non-cash stock-based compensation by operating statement classification for the three months ended March 31, 2018 and 2017:  

 The options granted during the three months ending March 31, 2018 were valued using the Black-Scholes option pricing model using the following weighted average assumptions: (i) expected life of 5.7 years, (ii) volatility of 67.04%, (iii) risk free interest rate of 2.63% and (iv) dividend yield of zero. 

2016 Equity Incentive Plan 

The Company has one equity incentive plan that was adjusted in 2016. As of March 31, 2018, there are 2,641,250 shares of common stock available for issuance under the 2016 Equity Incentive Plan (the “Equity Plan”). The number of shares of common stock available for issuance under the Equity Plan shall increase annually by six percent (6%) of the total number of shares of our Common Stock outstanding on December 31st of the preceding calendar year; provided, however, that the board of directors may act prior to the first day of any calendar year to provide that there shall be no increase such calendar year, or that the increase shall be a lesser number of shares of our Common Stock than would otherwise occur.  

As of March 31, 2018, there were 745,788 shares reserved for future issuance under the Equity Plan.