Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

9.	Stock-Based Compensation

Summary of Stock-Based Compensation Plans

At December 31, 2021, the Company has a stock-based compensation plan where the Company’s common stock has been made available for equity-based incentive grants as part of the Company’s compensation programs. In December 2019, the Company adopted the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) which provided originally for the issuance of up to 4,000,000 shares of the Company’s common stock, subsequently increased to 7,000,000 in December 2021, in the form of options, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligible persons. At December 31, 2021, 3,266,179 shares were available for future grant under the 2019 Plan. Also, the Company previously had the 2009 Incentive Compensation Plan (the “2009 Plan”) which, after amendments, provided for issuance of up to 6,733,334 shares of the Company’s common stock in the form of options, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligible persons. Provisions of the 2009 Plan stipulated that no grants could be made after February 2019; however, grants made prior to that date remain outstanding for their legal term.

In addition, the Company has awarded 1,477,379 non-plan stock option grants to employees and non-employees. These non-plan grants have vesting periods and expiration dates similar to those options granted under the Incentive Plans. At December 31, 2021, there were no non-plan grants outstanding.

Stock-Based Compensation

Following is the stock-based compensation expense related to common stock options, restricted common stock, common stock warrants and deferred stock units:

	Year Ended December 31,
	2021		2020
Research and development	$	420	$	516
General and administrative		1,656		1,283
Total stock-based compensation expense	$	2,076	$	1,799

The fair value of the options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used:

	2021			2020
Risk-free interest rate		0.66	%		1.26	%
Expected life of the options	6.0 years			6.0 years
Expected volatility of the underlying stock		91.7	%		97.9	%
Expected dividend rate		0	%		0	%

As noted above, the fair value of stock options is determined by using the Black-Scholes option pricing model. For all options granted since January 1, 2006 the Company has generally used option terms of between 5 to 10 years, generally with 5 to 6 years representing the estimated life of options granted to employees. The volatility of the common stock is estimated using historical volatility over a period equal to the expected life at the date of grant. The risk-free interest rate used in the Black-Scholes option pricing model is determined by reference to historical U.S. Treasury constant maturity rates with terms equal to the expected terms of the awards. An expected dividend yield of zero is used in the option valuation model, because the Company does not expect to pay any cash dividends on common stock in the foreseeable future. At December 31, 2021, the Company does not anticipate any option awards will be forfeited in the calculation of compensation expense due to the limited number of employees that receive stock option grants and the Company’s historical employee turnover.

The following table summarizes the stock option activity in the stock-based compensation plans:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2019		3,000,256		$	4.88
Granted		1,095,000			2.51
Forfeited/Cancelled		(23,057	)		1.80
Exercised		(84,624	)		2.61
Outstanding, December 31, 2020		3,987,575		$	4.29
Granted		2,660,000			2.39
Forfeited/Cancelled		(1,603,073	)		5.31
Exercised		(148,941	)		2.35
Outstanding, December 31, 2021		4,895,561		$	3.14		7.94	$	246
Exercisable, December 31, 2021		2,158,477		$	4.09		6.29	$	169

The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, which would have been received by option holders if all option holders had exercised all options with an exercise price lower than the market price on December 31, 2021, based on the closing price of the Company’s common stock of $2.07 on that date.

The weighted-average grant-date fair values of options granted during 2021 and 2020 were $1.78 and $1.92, respectively. As of December 31, 2021 and 2020, there were unvested options to purchase 2,737,084 and 651,667 shares of common stock, respectively. Total expected unrecognized compensation cost related to such unvested options is $3,654,000 at December 31, 2021, which is expected to be recognized over a weighted-average period of 2.07 years.

The aggregate intrinsic value of stock options exercised for the year ended December 31, 2021 and 2020 was $532,447 and $39,792, respectively.

During the years ended December 31, 2021 and 2020, 284,583 and 850,833 options became vested, respectively. The total grant date fair value of options vested during the years ended December 31, 2021 and 2020 was $514,287 and $2,531,758, respectively.

The following table summarizes additional information regarding outstanding and exercisable options under our stock-based compensation plans at December 31, 2021:

	Options Outstanding						Options Exercisable
Exercise Price (Range)	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
			(in years)
$0.87 – 1.00		120,500		4.96	$	0.89		120,500	$	0.89
$1.01 – 3.00		3,404,521		8.65		2.32		962,437		2.54
$3.01 – 5.00		1,013,040		7.12		4.14		718,040		4.36
$5.01 – 8.00		220,000		6.11		5.92		220,000		5.92
$8.01 – 13.38		137,500		2.06		13.38		137,500		13.38
		4,895,561		7.94	$	3.14		2,158,477	$	4.09

Restricted Stock Issuances

In January 2020, two directors elected to take restricted stock grants in lieu of cash retainers for 2020. A total of 32,693 shares of restricted stock valued at approximately $93,500 was amortized to expense on a straight-line basis until January 9, 2021 when the stock vested in full.

In March 2021, one director elected to take a restricted stock grant in lieu of cash retainers for 2021. A total of 16,588 shares of restricted stock valued at approximately $35,000 is being amortized to expense on a straight-line basis until December 31, 2021 when the stock vested in full.

Deferred Stock Units

In September 2020, the Company entered into an employment agreement with its new Chief Executive Officer whereby 20% of his base salary and performance bonuses will be paid in cash, and 80% will be paid in the form of deferred stock units (“DSUs”) in accordance with the terms and subject to the provisions set forth in the DSU Agreement. DSUs credited to Mr. Lewis as of any date shall be fully vested and nonforfeitable at all times. The Company shall issue the shares underlying the outstanding whole number of DSUs credited to Mr. Lewis as follows: twenty five percent shall be issued on March 1, 2023, twenty five percent shall be issued on September 1, 2023 and fifty percent shall be issued on March 1, 2024.

For the year ended December 31, 2021, $400,000 of Mr. Lewis’ compensation was recorded as stock compensation expense representing 142,206 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $2.81 per share. Also, Mr. Lewis’ bonus for the year ended December 31, 2020 of $60,000 (which was included in accrued compensation at December 31, 2020) was approved in March 2021 and represents 27,027 shares of common stock to be issued under the DSU agreement with a grant date fair value of $2.22 per share. The $60,000 was reclassified from accrued compensation to additional paid in capital in March 2021. For the year ended December 31, 2020, approximately $132,000 of his compensation was recorded as stock compensation expense representing 50,307 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $2.62 per share. There is no unrecognized compensation expense related to the DSUs.