Note 8 – Stock-Based Compensation

The Company has four equity compensation plans: the 2009 Amended Stock Option Plan, the 2010 Equity Incentive Plan, the 2014 Equity Incentive Plan and the 2018 Stock Incentive Plan (the “Plans”). Originally, the Company was able to grant up to 27,410 of Common Stock as both incentive stock options (“ISOs”) and nonqualified stock options (“NQs”) under the 2010 Equity Incentive Plan. In 2013, the Company’s stockholders approved an increase to 63,957 shares authorized for issuance under the 2010 Equity Incentive Plan. In 2014, the Board of Directors of the Company (the “Board”) approved an increase to 67,520 shares authorized for issuance under the 2010 Equity Incentive Plan

In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan pursuant to which the Company may grant up to 91,367 shares as ISOs, NQs and restricted stock units (“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015 and each January 1 thereafter prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity Incentive Plan, the Plan Limit was and shall be increased by the lesser of (x) 4% of the number of shares of Common Stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. On January 1, 2016, 2017, 2018 and 2019 the Plan Limit was increased to 152,366 shares, 210,203 shares, 271,941 shares and 323,529 shares, respectively. In March 2019, the Plan was amended and restated which removed the annual increase component and was limited to 826,292 shares.

In 2018, the Company’s stockholders approved the 2018 Stock Incentive Plan pursuant to which the Company may grant up to 558,071 shares as Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards.

Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four year term and NQs generally vest over a one to five year terms. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding. As of June 30, 2020 there were 190,799 shares available for grant under the 2018 Stock Incentive Plan.

On June 17, 2019, the Board adopted the 2019 Inducement Plan. The 2019 Inducement Plan provides for the grant of non-qualified stock options. The 2019 Inducement Plan was recommended for approval by the Compensation Committee of the Board and subsequently approved and adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

The Board has reserved 200,000 shares of the Company’s common stock for issuance pursuant to non-qualified stock options granted under the 2019 Inducement Plan, and the 2019 Inducement Plan will be administered by the Compensation Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the 2019 Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board (or any parent or subsidiary of the Company), or following a bona fide period of non-employment by the Company (or a parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. As of June 30, 2020, there were 121,500 shares available for grant under the 2019 Inducement Plan.

The Company’s stock-based compensation expense related to stock options was recognized in operating expense as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020		2019
	(unaudited)					(unaudited)
Stock-Based Compensation
Research and development	$	53,842		$	9,387	$	106,526	$	450,087
General and administrative		(7,728	)		9,193		64,580		2,323,364
Total	$	46,113		$	18,580	$	171,106	$	2,773,451

The fair value of options granted during the three and six months ended June 30, 2020 and the three and six months ended June 30, 2019 was estimated using the Black-Scholes option valuation model utilizing the following assumptions.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	Weighted Average			Weighted Average			Weighted Average			Weighted Average
	(unaudited)						(unaudited)
Volatility		97.13	%		94.43	%		97.00	%		88.87	%
Risk-Free Interest Rate		0.34	%		2.19	%		0.38	%		2.34	%
Expected Term in Years		6.07			6.08			6.07			6.17
Dividend Rate		0.00	%		0.00	%		0.00	%		0.00	%
Fair Value of Option on Grant Date	$	1.11		$	4.77		$	1.10		$	5.31

The following table summarizes the number of options outstanding and the weighted average exercise price:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options outstanding at December 31, 2019		1,421,797		$	15.95
Granted		319,907			1.43
Exercised		–			–
Forfeited		(84,227	)		41.34
Expired		(17,724	)		4.69
Options outstanding at June 30, 2020		1,639,753		$	11.94		7.17	$	184,693
Vested and expected to vest at June 30, 2020		1,639,753		$	11.94		7.17	$	184,693
Exercisable at June 30, 2020		1,047,284		$	16.73		5.84	$	–

At June 30, 2020 there was approximately $1,554,689 of unamortized stock option compensation expense, which is expected to be recognized over a remaining average vesting period of 3.39 years.