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Warrants

9 Months Ended

Sep. 30, 2019

Note 7 — Warrants

On January 26, 2018 the Company issued a five-year warrant to purchase 400,000 shares of common stock at $0.01 per share to Liquid Patent Advisors, LLC ("LPA"). The warrant represented consideration for business and strategic development performed during 2018. The fair value of the warrant on the grant date was estimated using the Black-Scholes-Merton option pricing model with a common stock value of $1.67 per share, a contractual life of 2.5 years, a dividend yield of 0%, a volatility of 102.4% and an assumed risk-free interest rate of 2.19%. The fair value of the warrant was determined to be $664,224 and is included in general and administrative expenses in the statement of operations.

On March 13, 2018 and March 22, 2018, the Company issued to National Securities Corporation warrants to purchase shares of the Company's common stock in an amount equal to 10% of the shares of common stock issuable upon conversion of 5,662,000 shares of the Company's Series A Preferred Stock at an exercise price equal to the conversion price of the Series A Preferred Stock. Upon the conversion of the Series A Preferred Stock in October 2019 (see, Note 6), the warrant adjusted to provide for the purchase of 619,879 shares of common stock at an exercise price of $2.50 per share. The warrants represented placement agent compensation in connection with the 2018 Private Placement. The fair value of the warrants on the grant date was estimated using the Black-Scholes-Merton option pricing model with a common stock value of $1.67 per share, a contractual life of 2.5 years, a dividend yield of 0%, a volatility of 102.4% and an assumed risk-free interest rate of 2.36%. The fair value of the warrants was determined to be $480,485 and is included in general and administrative expenses in the statement of operations.

On April 6, 2018, the Company issued a five-year warrant to purchase 10,000 shares of common stock at $2.50 per share to BP Directors, LP ("BP"). The warrant represented consideration for board service from Dr. Aaron Fletcher. The fair value of the warrant on the grant date was estimated using the Black-Scholes-Merton option pricing model with a common stock value of $1.67 per share, a contractual life of 5.5 years, a dividend yield of 0%, a volatility of 89% and an assumed risk-free interest rate of 2.58%. The warrant vests and is being amortized over a one-year period. The fair value of the warrant was determined to be $11,075 and has been amortized in general and administrative expenses in the statement of operations.

On September 26, 2018, the Company issued a ten-year warrant to purchase 82,012 shares of common stock at $2.50 per share to BP. The warrant represented consideration for board service from Dr. Aaron Fletcher. The fair value of the warrant on the grant date was estimated using the Black-Scholes-Merton option pricing model with a common stock value of $1.67 per share, a contractual life of 6.3 years, a dividend yield of 0%, a volatility of 93.5% and an assumed risk-free interest rate of 2.96%. The warrant vests and is being amortized over a one-year period. The fair value of the warrant was determined to be $100,293 and has been amortized in general and administrative expenses in the statement of operations.

On May 16, 2019 and May 23, 2019, the Company issued to National Securities Corporation warrants to purchase shares of the Company's common stock. The fair value of the warrants on the grant date was estimated using the Black-Scholes-Merton option pricing model with a common stock value of $1.67 per share, a contractual life of 5 years, a dividend yield of 0%, a volatility of 89.6% and an assumed risk-free interest rate of 2.11%. The fair value of the warrants was determined to be approximately $347,000 and was included in general and administrative expenses in the statement of operations. On September 13, 2019, these warrants were cancelled by the individual warrant holders and the Company determined that the related expense should be reversed. The reversal of the expense was recorded during the three months ended September 30, 2019, when the warrants were cancelled.

In determining the fair value for warrants, the expected life of the Company's warrants was determined using the contractual life. The methodology in determining all other inputs to calculate the fair value utilizing the Black-Scholes-Merton option pricing model is the same as the stock option methodology described in Note 8 for stock options.

A summary of warrant activity for the nine months ended September 30, 2019 is as follows:

	Number of Shares			Range of Exercise Prices		Weighted-Average Exercise Prices		Weighted-Average Remaining Life
Outstanding at December 31, 2018		1,058,212		$	0.01 – $2.50	$	1.56		4.6
Issued		326,800			2.50		2.50		5.0
Forfeited		(326,800	)		2.50		2.50		5.0
Outstanding at September 30, 2019		1,058,212		$	0.01 – $2.50	$	1.56		3.9

The warrants outstanding at September 30, 2019 had an aggregate intrinsic value of approximately $664,000.