Accounting for Share-Based Payments

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

On June 3, 2013, we adopted the 2013 Equity Incentive Plan (the “Plan”). Stock options granted under the Plan typically will vest after three years of continuous service from the grant date and will have a contractual term of ten years. We granted options during the three months ended June 30, 2021 and at the time that these grants were made, we had 35,229 options available for grant under the Plan. We accounted for the option grant as liability-classified awards requiring us to measure the fair value of the awards each reporting period since there were not enough shares available at the time of the grant. As of December 31, 2021, the liability related to the awards was $1.6 million and has been included in accrued expenses in our consolidated balance sheet with the corresponding expense included in our consolidated statements of operations and comprehensive loss. At our annual meeting of stockholders on October 7, 2021, shareholders voted against our 2021 Omnibus Equity Incentive Plan. Therefore, we will continue to account for this option grant as liability-classified until we receive stockholder approval to increase the available options to grant.

We classify stock-based compensation expense in our consolidated statement of operations in the same way the award recipient's payroll costs are classified or in which the award recipients' service payments are classified. We recorded stock-based compensation expense as follows:


	Year Ended December 31,
	2021		2020
General and administrative	$	3,267,349	$	1,798,288
Research and development	1,401,466		581,072
Total stock-based compensation expense	$	4,668,815	$	2,379,360

A summary of stock option activity under the Plan is presented below:


	Number of Options	Exercise Price Per Share					Weighted Average Exercise Price Per Share		Intrinsic Value		Weighted Average Remaining Contractual Team
Balance outstanding, December 31, 2020	2,460,677	$	1.63	-	$	2,452.80	$	4.17	$	990,930	9.40 years
Granted	6,315,000	$	1.70	-	$	—	$	1.70	$	—
Exercised	—	$	—	-	$	—	$	—	$	—
Forfeited	—	$	—	-	$	—	$	—	$	—
Cancelled	(703)	$	—	-	$	—	$	820.13	$	—
Balance outstanding, December 31, 2021	8,774,974	$	1.63	-	$	2,016.00	$	2.33	$	—	9.10 years
Awards outstanding, vested awards and those expected to vest at December 31, 2021	8,569,714	$	1.63	-	$	2,016.00	$	2.34	$	—	9.10 years
Vested and exercisable at December 31, 2021	1,274,076	$	1.63	-	$	2,016.00	$	5.32	$	—	8.40 years

There were 2,423,500 options granted to employees during the year ended December 31, 2020. The total fair value of awards vested during the year ended December 31, 2021 was $4.4 million. The total fair value of awards vested during the year ended December 31, 2020 was de minimis.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of our common stock for those stock options that had exercise prices lower than the fair value of our common stock.

As of December 31, 2021, the unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures, was $7.4 million to be recognized over a weighted-average remaining vesting period of approximately 1.84 years.

The following weighted-average assumptions are used in the Black-Scholes valuation model to estimate fair value of stock option awards when granted to employees.


	Year Ended December 31,
	2021			2020
Stock price	$	1.70		$	2.50
Risk-free interest rate	1.35		%	0.34		%
Dividend yield	—			—
Expected volatility	119.2		%	126.3		%
Expected term (in years)	5.9			6.0

Risk-free interest rate—Based on the daily yield curve rates for U.S. Treasury obligations with maturities which correspond to the expected term of our stock options.

Dividend yield— We have not paid any dividends on our common stock since inception and do not anticipate paying dividends on our common stock in the foreseeable future.

Expected volatility—We base expected volatility on the trading price of our common stock.

Expected term—The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in SAB No. 107, which SAB No. 107, options are considered to be “plain vanilla” if they have the following basic characteristics: (i) granted “at-the-money”; (ii) exercisability is conditioned upon service through the vesting date; (iii) termination of service prior to vesting results in forfeiture; (iv) limited exercise period following termination of service; and (v) options are non-transferable and non-hedgeable.

In December 2007, the SEC issued SAB No. 110, Share-Based Payment, (“SAB No. 110”). SAB No. 110 was effective January 1, 2008 and expresses the views of the Staff of the SEC with respect to extending the use of the simplified method, as discussed in SAB No. 107, in developing an estimate of the expected term of “plain vanilla” share options in accordance with ASC 718. We will use the simplified method until we have the historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107, as amended by SAB No. 110. For the expected term, we

have “plain-vanilla” stock options, and therefore used a simple average of the vesting period and the contractual term for options granted as permitted by SAB No. 107.Forfeitures—ASC 718 allows for the election of forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.