Note 11 – Stock-Based Compensation

The Company has three equity compensation plans: the 2009 Stock Option Plan, 2014 Equity Incentive Plan and the 2018 Stock Incentive Plan (the “Plans”).

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 and 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) Preferred 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 December 31, 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 “Inducement Plan”). The Inducement Plan provides for the grant of non-qualified stock options. The 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.

On December 9, 2020, the Company amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 200,000 shares to 500,000 shares. 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 December 31, 2020, there were 421,500 shares available for grant under the 2019 Inducement Plan.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2020 and 2019:

	Year Ended December 31,
	2020		2019
Research and development	$	229,977	$	550,605
General and administrative		202,344		2,588,448
Total	$	432,321	$	3,139,053

The following table summarizes the stock option activity for the Company’ stock option plans for the year ended December 31, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at January 1, 2020		1,421,797		$	15.95		6.99
Granted		331,407		$	1.46
Exercised		–		$	–
Forfeited		(84,583	)	$	41.19
Expired		(17,724	)	$	4.69
Options outstanding at December 31, 2020		1,650,897		$	11.87		7.03	$	226,731
Vested and expected to vest at December 31, 2020		1,650,897		$	11.87		7.03	$	226,731
Exercisable at December 31, 2020		1,090,493		$	16.29		5.47	$	–

As of December 31, 2020 there was approximately $1,317,615 of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 2.91 years.

The weighted-average grant date fair value of the stock options granted in 2020 was $1.14 per share.

The fair value of options granted during the year ended December 31, 2020 was estimated using the Black-Scholes option valuation model utilizing the following assumptions:

	Year Ended December 31,
	2020			2019
	Weighted Average
Volatility		97.50	%		88.70	%
Risk-Free Interest Rate		0.39	%		2.31	%
Expected Term in Years		6.04			5.54
Dividend Rate		-			-

Fair Value of Option on Grant Date	$	1.14		$	5.67

Expected volatility. The expected volatility assumption is based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available.

Risk-free interest rate. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock option grants.

Expected term. The expected term represents the period options are expected to be outstanding. The expected term of the options is based on using the simplified method, which is the midpoint between the requisite service period and the contractual term of the option, since the Company has a limited history of being a public company from March 15, 2019 (the date of the Merger) to develop reasonable expectations about future exercise patterns and employment duration for the stock options grants.

Expected dividend rate. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.