| STOCKHOLDERS' EQUITY | NOTE 8 Initial Public Offering During the nine months ended September
30, 2019, the Company completed its initial public offering in which the Company sold 1,020,820 shares of its common stock for
gross proceeds of $8,166,560 (net proceeds of $7,251,142). Lincoln Park Transaction On May 15, 2019, the Company entered into
the Lincoln Park Purchase Agreement pursuant to which Lincoln Park has agreed to purchase from us up to an aggregate of $20.0 million
of the Company's common stock (subject to certain limitations) from time to time over the 24-month term of the agreement.
The Company also entered into a registration rights agreement with Lincoln Park pursuant to which the Company filed with the Securities
and Exchange Commission (the "SEC") the registration statement to register for resale under the Securities Act of 1933,
as amended, or the Securities Act, the shares of common stock that have been or may be issued to Lincoln Park under the Purchase
Agreement. The registration statement was effective as of July 2, 2019. As a result, on May 15, 2019, 70,000 newly
issued shares of the Company's common stock were issued to Lincoln Park as consideration for Lincoln Park's commitment
to purchase shares of the Company's common stock under the agreement, and 30,000 newly issued shares of common stock, valued
at $10.00 per share, were sold to Lincoln Park in an initial purchase for an aggregate gross purchase price of $300,000 ($230,000
net of offering costs). Under the terms and subject to the conditions
of the Lincoln Park Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln
Park is obligated to purchase up to, an additional $19.7 million worth of shares of the Company's common stock. Such future
sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company's
option, over the 24-month term of the agreement. As contemplated by the Lincoln Park Purchase
Agreement, and so long as the closing price of the Company's common stock exceeds $3.50 per share, then the Company may direct
Lincoln Park, at its sole discretion to purchase up to 20,000 shares of its common stock on any business day. The price per share
for such purchases will be equal to the lower of: (i) the lowest sale price on the applicable purchase date and (ii) the arithmetic
average of the three (3) lowest closing sale prices for the Company's common stock during the twelve (12) consecutive business
days ending on the business day immediately preceding such purchase date (in each case, to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction that occurs on or after the date of the purchase
agreement). The maximum amount of shares subject to any single regular purchase increases as the Company's share price increases,
subject to a maximum of $1.0 million. In addition to regular purchases, the Company
may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional purchases if the closing sale
price of the common stock exceeds certain threshold prices as set forth in the purchase agreement. In all instances, the Company
may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially
owning more than 19.99% of its common stock immediately prior to the execution of the Lincoln Park Purchase Agreement. There are
no trading volume requirements or restrictions under the purchase agreement nor any upper limits on the price per share that Lincoln
Park must pay for shares of common stock. The Lincoln Park Purchase Agreement and
the registration rights agreement contain customary representations, warranties, agreements and conditions to completing future
sale transactions, indemnification rights and obligations of the parties. The Company has the right to terminate the purchase agreement
at any time, at no cost or penalty. During any "event of default" under the purchase agreement, all of which are outside
of Lincoln Park's control, Lincoln Park does not have the right to terminate the purchase agreement; however, the Company
may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured. In addition, in
the event of bankruptcy proceedings by or against the Company, the purchase agreement will automatically terminate. Actual sales of shares of common stock
to Lincoln Park under the purchase agreement will depend on a variety of factors to be determined by the Company from time to time,
including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate
sources of funding for the Company and its operations. Lincoln Park has no right to require any sales by the Company, but is obligated
to make purchases from the Company as it directs in accordance with the purchase agreement. Lincoln Park has covenanted not to
cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company's shares. April and May 2019 Stock Sale During April and May 2019, the Company
sold 522,212 shares of its common stock to certain investors for cash proceeds of $4,727,879, of which the Company's CEO
purchased 11,100 shares for $119,325 of cash and the Company's CFO purchased 5,000 shares for $53,550 of cash. Luminus Stock Sale During the nine months ended September
30, 2018, to complete a series of funding provided for in the Company's joint development agreement dated September 3, 2016,
the Company received $900,000 in cash from Luminus in exchange for 400,000 shares of the Company's common stock. Luminus
is owned by a significant shareholder of the Company. Common Stock Issuable Pacific Seaboard Consulting Agreement On May 16, 2018, the Company entered into
a consulting agreement with Pacific Seaboard Investments Ltd. ("Pacific Seaboard") for corporate governance, compliance
services regarding the filing of a listing application and assist with activities related to its initial public offering. The term
of the consulting agreement is from April 24, 2018 to May 1, 2021. In consideration of the consultant's services, the Company
agreed to issue 600,000 shares of its restricted common stock, of which 200,000 shares were to be issued on May 16, 2018, 200,000
shares shall be locked up for six months after the effective date of the Company's registration statement and 200,000 shares
shall be locked up for 10 months after the date of the Company's offering. Pursuant to this agreement, the Company recorded
$4,626,000 as common stock issuable as of December 31, 2018 for the 600,000 shares of common stock to be issued. During June 2019,
the Company issued 400,000 shares of its common stock to Pacific Seaboard, whereby the Company was initially required to issue
600,000 shares to Pacific Seaboard, but subsequently received a waiver from Pacific Seaboard during April 2019 permanently waiving
the last 200,000 shares owed. The Company recorded a waiver of common stock issuable of $1,542,000 during the nine months ended
September 30, 2019 pursuant to the waiver agreement. Settlement As of September 30, 2019 and December 31,
2018, the Company had common stock issuable of $50,000 for 33,335 common shares related to a legal settlement valued at approximately
$1.50 per share (see Note 7). Stock options A summary of stock option activity is presented
in the table below for the nine months ended September 30, 2019:
Number of Shares Weighted- average Exercise Price Weighted-average Remaining Contractual Term (years) Aggregate Intrinsic Value
Outstanding at January 1, 2019 1,632,000 $ 7.80 9.07 $ -
Granted - - - -
Exercised - - - -
Expired/Forfeited - - - -
Outstanding at September 30, 2019 1,632,000 $ 7.80 8.32 $ -
Exercisable at September 30, 2019 1,299,333 $ 7.80 8.29 $ - During the nine months ended September
30, 2019 and 2018, the Company recognized stock-based compensation expense of $2,924,091 and $4,420,542, respectively, related
to stock options. As of September 30, 2019, there was approximately $2,117,984 of total unrecognized compensation cost related
to non-vested stock options which is expected to be recognized over a weighted-average period of approximately 1.56 years. Warrants In connection with the Company's
initial public offering in February 2019, the Company issued warrants to the placement agents to purchase 40,982 shares of the
Company's common stock at an exercise price of $9.60 per common share, which warrants are exercisable until December 19,
2023. The fair value of these warrants was valued at $247,452 based on the Black-Scholes Option Pricing Model, and accounted for
as an offering cost in equity. The assumptions used for these warrants consist of an exercise price of $9.60 per share, expected
dividends of 0%, expected volatility of 106.85%, a risk free rate of 2.51% and an expected life of 4.9 years. These warrants have
no intrinsic value as of September 30, 2019. In October 2017, in connection with the
Xencor License Agreement, the Company issued fully vested warrants to purchase an additional number of shares of common stock equal
to 10% of the fully diluted Company shares immediately following such purchase. See Note 4. These warrants have no intrinsic value
as of September 30, 2019. On June 30, 2017, the Company issued fully
vested warrants to purchase 31,667 shares of the Company's common stock to a third party in conjunction with the common stock
sold for cash. The warrants have a $1.50 exercise price and expire on June 30, 2020. These warrants have an intrinsic value of
$139,335 as of September 30, 2019. Stock-based Compensation by Class of Expense The following summarizes
the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months
ended September 30, 2019 and 2018 respectively:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
Research and development $ 426,308 $ 428,075 $ 1,278,924 $ 1,712,298
General and administrative 548,388 551,481 1,645,167 7,334,244
Total $ 974,696 $ 979,556 $ 2,924,091 $ 9,046,542 |
