NOTE 5 – EQUITY

Common Stock Warrants

In December 2017, 225,000 shares of common stock were issued in connection with the exercise of warrants issued and sold to various purchasers as part of a registered offering that closed on April 10, 2017. The warrants were exercised at a price of $1.00 per share, and $225,000 in cash was received during the quarter ended December 31, 2017.

Below is a table summarizing the warrants issued and outstanding as of December 31, 2017 (“Price” reflects the weighted average exercise price per share):

As of December 31, 2017, the warrants have a weighted average remaining term of 4.19 years and have an intrinsic value of $12,212,051.

Stock Based Compensation

The Company’s Consolidated 2016 Stock Plan (“the Plan”) provides for granting stock options and restricted stock awards to employees, directors and consultants of the Company. The Company uses the Black-Scholes pricing model for determining the fair value of stock options and warrants granted as share based compensation.

The following assumptions were used to calculate the fair value of the Company's warrants and options issued during the three months ended December 31, 2017:

Warrants. In October 2017, the Company issued a warrant to purchase 250,000 shares of common stock to a consultant for services to be rendered. The warrant vests in six equal consecutive monthly amounts at the end of each calendar month starting October 31, 2017, at an exercise price of $1.00 per share, for a term of two years from the date of issuance.

During the three month period ended December 31, 2017, the Company recognized $152,192 of expense related to warrants granted as stock based compensation. Unamortized expense as of December 31, 2017 for outstanding warrants issued as stock based compensation amounted to $73,569. Refer to the Common Stock Warrants table within this note for information regarding all outstanding warrants.

Options. In October 2017, the Company granted nonqualified stock options to purchase an aggregate of 1,640,000 shares of common stock to certain directors, employees, executive officers and key consultants. Other than the issuance of a stock option to purchase 80,000 shares of common stock issued to one key consultant, one third of the shares of common stock subject to the stock options became exercisable immediately, and one third of the shares of common stock subject to the stock options will become exercisable on each of October 16, 2018 and October 16, 2019. With respect to the stock option to purchase 80,000 shares of common stock issued to one key consultant, one quarter of the shares of common stock subject to the stock option vested immediately, and the remaining three quarters of the shares of common stock subject to the stock option are exercisable upon the achievements of certain milestones in connection with the Company’s MAKO clinical study. All but one milestone has been achieved. As such, the 20,000 shares of common stock associated with this unmet performance condition have been accounted for as forfeitures and 60,000 shares have vested as of December 31, 2017. The stock options have an exercise price of $0.67 per share and expire on October 15, 2022. 

During the three month period ended December 31, 2017, the Company recognized $477,094 of expense related to options granted. Unamortized option expense as of December 31, 2017 for all options outstanding amounted to $599,557. The Company expects to recognize this compensation cost over a weighted-average period of 1.48 years.

Below is a table summarizing the Company’s activity for the three month period ended December 31, 2017 (“Price” reflects the weighted average exercise price per share):

As of December 31, 2017, the outstanding options have a weighted average remaining term of 4.25 years and an intrinsic value of $2,532,800.

Restricted Stock. During the three month period ended December 31, 2017, the Company recognized $135,701 of expense related to restricted stock awards. As of December 31, 2017, there was $59,400 of unamortized expense. The Company expects to recognize this compensation cost over a weighted-average period of .03 years.

Below is a table summarizing the Company’s activity for the three months ended December 31, 2017: