Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

v3.21.1
STOCK-BASED COMPENSATION
3 Months Ended
Mar. 31, 2021
STOCK-BASED COMPENSATION  
STOCK-BASED COMPENSATION

4. STOCK-BASED COMPENSATION

Accounting for Stock-Based Compensation

During the three-month periods ended March 31, 2021 and 2020, options granted were 208,500 and 273,750, respectively. The following table summarizes amounts charged to expense for stock-based compensation related to employee and director stock option:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2021

    

2020

 

 

 

 

 

 

 

Employee and director stock option grants:

 

 

  

 

 

  

Research and development

 

$

29,395

 

$

23,735

General and administrative

 

 

95,169

 

 

120,411

Total stock-based compensation

 

$

124,564

 

$

144,146

 

On March 4, 2021, the Company granted 2,810,000 contingent non-statutory stock option awards at an exercise price of $1.74 per share to our employees. Each of these grants is contingent on approval of the 2021 Stock Incentive Plan that is to be voted upon by the stockholders at the Annual Meeting of Stockholders to be held on June 23, 2021. Until such time that the contingent non-statutory stock option awards are approved by stockholders, no expense will be accrued by the Company.

Assumptions Used in Determining Fair Value

Valuation and amortization method. The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the required service period which is generally the vesting period. The estimated fair value of the non-employee options is amortized to expense over the period during which a non-employee is required to provide services for the award (usually the vesting period).

Volatility. The Company estimates volatility based on  the Company’s historical volatility since its common stock is publicly traded.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.

Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. The Company applies the simplified method of estimating the expected term of the options, as described in the SEC’s Staff Accounting Bulletins 107 and 110, as the historical experience is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. The Company applied the simplified method to non-employees who have a truncation of term based on termination of service and utilizes the contractual life of the stock options granted for those non-employee grants which do not have a truncation of service.

Forfeitures. The Company records stock-based compensation expense only for those awards that are expected to vest. The Company accounts for forfeitures as they occur.

Dividends. The Company has not historically recorded dividends related to stock options.

Exercise prices for all grants made during the three months ended March 31, 2021 were equal to the market value of the Company’s common stock on the date of grant.

Stock Option Activity

A summary of stock option activity is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Number of

 

 

 

 

Average

 

 

 

 

 

Shares Issuable

 

 

 

 

Remaining

 

 

 

 

 

Upon Exercise

 

Weighted

 

Contracted

 

Aggregate

 

 

of Outstanding

 

Average

 

Term in

 

Intrinsic

 

    

Options

    

Exercise Price

    

Years

    

Value

Outstanding at December 31, 2020

 

1,184,464

 

$

4.34

 

 

 

$

316,688

Granted

 

208,500

 

$

1.78

 

 

 

 

 

Outstanding at March 31, 2021

 

1,392,964

 

$

3.96

 

8.56

 

$

122,700

 

 

 

 

 

 

 

 

 

 

 

Exercisable, March 31, 2021

 

549,134

 

$

7.32

 

7.63

 

$

1,100

Unvested, March 31, 2021

 

843,830

 

$

1.77

 

9.17

 

$

121,600

 

The aggregate intrinsic value of options outstanding is calculated based on the positive difference between the estimated per-share fair value of common stock at the end of the respective period and the exercise price of the underlying options. There have been no option exercises to date. Shares of common stock issued upon the exercise of options are from authorized but unissued shares.

As of March 31, 2021, there was approximately $968,000 of total unrecognized compensation cost related to unvested stock-based compensation arrangements. Of this total amount, the Company expects to recognize approximately $388,000,  $392,000,  $173,000, and $15,000 during 2021, 2022, 2023, and 2024 respectively. The Company’s expense estimates are based upon the expectation that all unvested options will vest in the future. The weighted-average grant-date fair value of vested and unvested options outstanding at March 31, 2021 was $5.84 and $1.38, respectively.

Restricted Stock Grants. During 2017, the Company issued 46,000 shares under the 2015 Plan of restricted common stock with a weighted average grant date fair value of $20.96. The shares vested annually over a three year period. The following table summarizes the restricted stock grants:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Grant Date

 

Total Grant

 

 

Number of

 

Fair Value

 

Date Fair

 

    

Shares

    

Per Share

    

Value

Outstanding at December 31, 2019

 

9,334

 

$

21.00

 

$

196,000

Vested

 

(9,334)

 

$

21.00

 

$

(196,000)

Outstanding at December 31, 2020

 

 —

 

$

 —

 

$

 —