11. Stock-Based Compensation

2011 Equity Incentive Plan

The Company’s 2011 Equity Compensation Plan (the “2011 Plan”) provided for the Company to sell or issue restricted common stock, RSUs, performance-based awards (“PSUs”), cash-based awards or to grant stock options for the purchase of common stock to officers, employees, consultants and directors of the Company. The 2011 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board. The number of shares of common stock reserved for issuance under the 2011 Plan is 106,490. As of March 31, 2020, PSUs representing 2,470 shares of the Company’s common stock were outstanding under the 2011 Plan. In light of the December 2015 adoption of the 2015 Equity Incentive Plan, (the “2015 Plan”) no future awards under the 2011 Plan will be granted.

2015 Equity Incentive Plan

In December 2015, the Company adopted the 2015 Plan. The 2015 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards and other forms of equity compensation to Company employees, directors and consultants. The aggregate number of shares of common stock authorized for issuance pursuant to the Company’s 2015 Plan is 4,022,526. As of March 31, 2020, 1,634,323 shares remained available for grant under the 2015 Plan.

Stock options and RSUs are granted under the Company’s 2015 Plan and generally vest over a period of one to four years from the date of grant and, in the case of stock options, have a term of 10 years. The Company recognizes the grant date fair value of each option and share of RSU over its vesting period.

The Company recorded stock-based compensation expense in the following expense categories of its statements of operations for the three and six months ended March 31, 2020 and 2019:


	Three months ended March 31,				Six months ended March 31,
	2020		2019		2020		2019
Research and development	$	41,148	$	120,763	$	148,938	$	211,972
General and administrative		263,391		146,979		515,078		928,059
	$	304,539	$	267,742	$	664,016	$	1,140,031

During the six months ended March 31, 2019, the Company awarded stock options with a fair value of $49,121 as settlement for directors fees accrued as of September 30, 2018.

Stock options

As of March 31, 2020, options to purchase common stock of the Company outstanding under the 2015 Plan were as follows:


				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Shares	Exercise Price		Term (Years)
Balance at October 1, 2019	1,389,999	$	3.46
Granted	1,040,810		1.00
Forfeited	(212,258)		2.87
Balance at March 31, 2020	2,218,551		2.36	9.4
Vested and exercisable	377,985		4.03	9.1
Vested and expected to vest at March 31, 2020	2,218,551	$	2.36	9.4

As of March 31, 2020, the aggregate intrinsic value of options outstanding was $29,177. The aggregate intrinsic value represents the total amount by which the fair value of the common stock subject to options exceeds the exercise price of the related options.

The weighted average grant date fair value of the options awarded to employees for the six months ended March 31, 2020 and 2019 was $0.72 and $6.36 per option, respectively. The fair value of the options was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


	Six months ended March 31,
	2020		2019
Risk-free interest rate	1.13	%	2.79	%
Expected life (years)	5.71		5.87
Expected volatility	89.2	%	88.8	%
Expected dividend yield	—		—

As of March 31, 2020, there was $2,431,719 of unrecognized compensation expense that is expected to be recognized over a weighted-average period of 2.84 years.

Performance-based stock units

The Company has issued PSUs, which generally have a ten-year life from the date of grant. Upon exercise, the PSU holder receives common stock or cash at the Company’s discretion.

The following table summarizes the activity related to PSUs during the six months ended March 31, 2020:


				Weighted
				Average
	Number	Base		Remaining
	of	Price		Contractual
	PSUs	Per PSU		Term (Years)
Balance at October 1, 2019	15,691	$	49.97
Forfeitures	(13,221)		50.60
Balance at March 31, 2020	2,470		49.97	4.3
Vested and exercisable at March 31, 2020	2,470		49.97	4.3
Vested and expected to vest at March 31, 2020	2,470	$	49.97	4.3

Restricted stock units

The following table summarizes the activity related to RSUs during the six months ended March 31, 2020:


		Weighted
	Number	Average
	of	Grant Date
	RSUs	Fair Value
Balance at October 1, 2019	109	$	96.00
Vested and settled	(109)		96.00
Balance at March 31, 2020	—	$	—

Restricted stock

In connection with the consulting agreements entered into by the Company and four principals of MTTR, the Company issued an aggregate of 7,244,739 shares of its common stock. Refer to Note 12 for further details on the consulting agreements and terminated strategic partnership agreement. The shares may not be sold until the earlier of (i) six months following FDA approval of ONS-5010, (ii) the date the Company publicly announces not to pursue development of ONS-5010, (iii) a change in control or (iv) January 2025. In addition, the Company has the right to repurchase the shares for $0.01 per share if the consultant terminates his agreement other than for good reason or the Company terminates the agreement for cause. The repurchase right lapses, in tiered percentages, based upon the completion of enrollment of the Company’s NORSE 2 clinical trial of ONS-5010 by certain dates. The repurchase right may also lapse as to 50% or 100% of the shares if the Company enters into certain agreements pertaining to ONS-5010 that meet certain value thresholds or the Company’s share price meets certain predefined targets. The repurchase right also lapses as to 100% of the shares upon the earliest to occur of (i) filing of the biologics license application for ONS-5010, (ii) termination of the agreement by the consultant for good reason or by the Company other than for cause. (iii) in the event of disability, or (iv) upon a change in control.

The grant date fair value of the restricted shares was $0.54 per share and equal to the closing stock price of the Company’s common stock at the time of grant. Compensation expense is recognized over the shorter of the explicit service period or derived service period which was determined to be 4.8 years at the time of grant. Compensation expense may be accelerated when certain performance conditions become probable and the corresponding purchase right has lapsed. During the three and six months ended March 31, 2020, the Company recognized compensation expense related to the restricted stock of $78,984. As of March 31, 2020, there was $3,833,176 of unrecognized compensation expense related to the restricted stock.