STOCK AWARDS, WARRANTS AND OPTIONS

6 Months Ended

Jun. 30, 2022

STOCK AWARDS, WARRANTS AND OPTIONS

STOCK AWARDS, WARRANTS AND OPTIONS

4.            STOCK AWARDS, WARRANTS AND OPTIONS

Warrants

The following table summarizes all warrant activity for the six months ended June 30, 2022:

		Weighted Average
	Warrants	Exercise Price
Outstanding at December 31, 2021	105,782	$	1.37
Granted	—		—
Exercised	—		—
Outstanding at June 30, 2022	105,782	$	1.37

The following table summarizes all outstanding warrants to purchase shares of the Company’s common stock:

		Warrants Outstanding
		June 30,	December 31,	Exercise Price		Expiration
Type	Grant Date	2022	2021	per Share		Date
Common Warrants	12/19/2019	40,782	40,782	$	1.10	12/19/2024
Common Warrants	3/27/2020	65,000	65,000	$	1.5313	3/27/2025
		105,782	105,782

Stock Options

The Company’s Board of Directors (the “Board”) has approved five stock option plans: (i) the 2006 Stock Option Plan, (ii) the 2012 Restated Equity Incentive Plan (which superseded the 2006 Stock Option Plan) (the “2012 Plan”), (iii) the 2012 Non-Employee Director Stock Option Plan (the “2012 Non-Employee Director Plan”), (iv) the 2020 Equity Incentive Plan (the “2020 Plan”), and (v) the 2021 Equity Incentive Plan (the “2021 Plan”).

In September 2012, the Board approved the 2012 Non-Employee Director Plan, which authorized 269,731 shares of common stock, reserved for issuance of non-qualified options to members of the Board who are not employees of the Company.

In November 2012, the Board approved the 2012 Plan, which superseded the 2006 Stock Option Plan. Under the 2012 Plan, the Company may grant stock options, stock appreciation rights, restricted stock awards, and performance/unit share awards to employees, consultants and other service providers. Pursuant to the 2012 Plan, inclusive of annual evergreen provisions and amendments, the Company is authorized to issue 710,142 shares of common stock.

In June 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan (the “2020 Plan”), which authorized 2,500,000 shares of common stock to be issued and allows for the grant of stock options as well as other forms of equity-based compensation.  Pursuant to the “evergreen” provision, on January 1, 2021, 823,084 shares were added under the 2020 Plan. Upon approval of the 2021 Plan on June 11, 2021, no new shares have been or will be added to the share reserve under the 2020 Plan pursuant to its “evergreen” provisions.

In June 2021, the Company’s stockholders approved the 2021 Plan, which authorized 3,500,000 shares of common stock reserved under the 2021 Plan for the issuance of stock awards.  The number of shares available for issuance under the 2021 Plan shall be automatically increased on January 1 of each year, commencing with January 1, 2022, by an amount equal to 5% of the outstanding shares of Common Stock as of the last day of the immediately preceding fiscal year. On January 1, 2022, 1,209,250 shares were added under the 2021 Plan.

As of June 30, 2022, 2,601,223 options remain available for issuance under the respective stock option plans.

Each of the Company’s stock option plans are administered by the Board, or the compensation committee of the Board, which determines the recipients and types of awards to be granted, as well as the number of shares subject to the awards, the exercise price and the vesting schedule. Each stock option granted will be designated in the award agreement as either an incentive stock option or a nonstatutory stock option. Notwithstanding such designation, however, to the extent that the aggregate fair market value of the shares with respect to which incentive stock options are exercisable for the first time by the participant during any calendar year (under all plans of the Company and any parent or subsidiary) exceeds $100,000, such options will be treated as nonstatutory stock options. Stock options are granted with an exercise price equal to the closing price of the Company’s common stock on the date of grant, and generally vest over a period of one to four years. The term of stock options granted under each of the plans cannot exceed ten years.

The estimated weighted average fair value of the options granted during the three months ended June 30, 2022 and 2021 were approximately $3.04 and $3.82 per share, respectively. The estimated weighted average fair value of the options granted during the six months ended June 30, 2022 and 2021 were approximately $2.90 and $3.27 per share, respectively.

The Company estimates the fair value of each option award using the Black-Scholes option-pricing model. The Company used the following assumptions to estimate the fair value of stock options issued in the six months ended June 30, 2022 and 2021:

	June 30, 2022		June 30, 2021
Expected volatility	123 - 124	%	123 - 124	%
Expected term	6 - 7 years		6 years
Dividend yield	0	%	0	%
Risk-free interest rates	1.5 - 2.9	%	0.5 - 1.1	%

Employee and non-employee stock-based compensation expense was as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
General and administrative	$	910,638	$	625,141	$	1,768,221	$	1,258,261
Research and development		247,266		87,158		455,012		207,000
Total	$	1,157,904	$	712,299	$	2,223,233	$	1,465,261

The Company does not recognize an income tax benefit as the Company believes that an actual income tax benefit may not be realized. For non-qualified stock options, the loss creates a timing difference, resulting in a deferred tax asset, which is fully reserved by a valuation allowance.

Common stock, stock options or other equity instruments issued to non-employees (including consultants) as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. The fair value of stock options is determined using the Black-Scholes option-pricing model. The Company calculates the fair value for non-qualified options as of the date of grant and expenses over the applicable vesting periods. We account for forfeitures upon occurrence.

As of June 30, 2022, the total unrecognized fair value compensation cost related to non-vested stock options was approximately $12.7 million, which is expected to be recognized over a weighted average period of approximately 1.5 years.

The following is a schedule summarizing employee and non-employee stock option activity for the six months ended June 30, 2022:

	Number of	Weighted Average		Aggregate
	Options	Exercise Price		Intrinsic Value
Outstanding at December 31, 2021	3,793,824	$	2.68	$	3,104,631
Granted	2,563,370		3.31
Exercised	(235,112)		1.39	$	454,156
Expired/Cancelled	(85,661)		3.92
Outstanding at June 30, 2022	6,036,421	$	2.98	$	4,381,251
Exercisable at June 30, 2022	1,931,479	$	2.31	$	2,587,286

The aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock for each of the respective periods.