9.       Stockholders Equity (Deficit)

Authorized capital

Pursuant to the Company’s original certificate of incorporation, on June 20, 2014, the Company authorized 5,000 shares of common stock with no par value.

On September 24, 2014, pursuant to an amendment of the Company’s certificate of incorporation, the Company increased to 50,000,000 the authorized number of shares of common stock, par value of $0.001 per share.

The holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive a ratable share of dividends, if any, as may be declared by the board of directors.

Common stock issued

On June 20, 2014, the Company issued 261,819 shares of common stock to seven founders of the Company. A total of $39,837 in expenses incurred prior to incorporation was deemed to be contributed by the founders of the Company.

On September 24, 2014 the Company had a forward stock split whereby each share of issued common stock was converted into 4,800 shares of common stock of the Company.

On June 24, 2015, the Company had a reverse stock split whereby each share of issued common stock was converted into 0.91 shares of common stock of the Company. All share and per share amounts in periods preceding the stock split have been adjusted to reflect the split retroactively.

On July 30, 2015, the Company filed a registration statement on form S-1 with the Securities and Exchange Commission. The registration was for the sale of 6,600,000 shares of common stock to raise proceeds of $33,000,000 at an issue price of $5.00 per share. On July 31, 2015, the common shares of the Company began trading on the NADAQ stock exchange. On July 31, 2015, the Company sold 6,600,000 shares of common stock for $33,000,000 less commissions of $2,524,500 and expenses of $577,440 for net proceeds of $29,898,060. The form S-1 included an over-allotment option of 990,000 shares. On August 13, 2015, the Company sold 641,930 shares of the over-allotment option for $3,209,650 less commissions of $245,538 for net proceeds of $2,964,112.

Warrants issued

In connection with the IPO, the Company issued on August 5, 2015 to NSC warrants (“IPO Warrants”) to purchase 660,000 shares of the Company’s common stock at an exercise price of $6.00 per share. The IPO Warrants were fully vested upon issuance, are not exercisable until July 30, 2016 and have a term of five years.

In connection with the over-allotment sale of shares, the Company issued on August 13, 2015 to NSC warrants (“O-A Warrants”) to purchase 64,193 shares of the Company’s common stock at an exercise price of $6.00 per share. The O-A Warrants were fully vested upon issuance, are not exercisable until July 30, 2016 and have a term of five years.

The following assumptions were used in the Black-Scholes-Merton pricing model to estimate the fair value of the warrants.

The fair value was $2,013,870 and $214,243 for the IPO Warrants and O-A Warrants, respectively. The fair value was recorded as increase to IPO cost and increase in additional paid in-capital.

The warrant holders have certain registration rights with respect to the common stock issued upon exercise of the IPO Warrants and O-A Warrants.

Stock based compensation

The 2014 Stock Incentive Plan (the “2014 Plan”) authorized a total of 1,363,637 shares for option grants. As of September 30, 2015, the Company had 708,857 shares available for future grants under the 2014 Stock Incentive Plan (the “2014 Plan”).

Options to purchase stock granted under the 2014 Plan may not exceed a ten-year term. Options granted vest over a three-year period; one third the first year, one third the second year and the remaining third vest on a monthly basis in the third year.

The stock-based compensation expense recorded was allocated as follows:

The following assumptions were used in the Black-Scholes-Merton option pricing model to estimate the fair value of the awards granted during the nine-month period ended September 30, 2015.

The following table summarizes the stock option activity for the nine months ended September 30, 2015.