Stock Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK BASED COMPENSATION

NOTE 7 – STOCK BASED COMPENSATION

In January 2018, the Company's board of directors approved its 2018 Stock Incentive Plan ("2018 Plan"). The 2018 Plan provides for the grant of non-qualified stock options and incentive stock options to purchase shares of the Company's common stock, the grant of restricted and unrestricted share awards and grant of restricted stock units. The Company initially reserved 1,630,000 shares of its common stock under the 2018 Plan; however, upon completion of the Company's IPO the number of shares reserved for issuance under the 2018 Plan increased to 3,284,480, representing 15% of the Company's outstanding shares of common stock calculated on a fully diluted basis upon the close of the IPO. All of the Company's employees and any subsidiary employees (including officers and directors who are also employees), as well as all of the Company's nonemployee directors and other consultants, advisors and other persons who provide services to the Company will be eligible to receive incentive awards under the 2018 Plan.

The following table summarizes the stock-based compensation expense recorded in the Company's results of operations during the periods ended June 30, 2020 and 2019 for stock options and warrants:

	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020		Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Research and development	$	43,605	$	43,605	$	—	$	—
General and administrative		251,751		677,595		486,396		607,622
	$	295,356	$	721,200	$	486,396	$	607,622

As of June 30, 2020, there was approximately $4,043,000 of total unrecognized compensation expense related to non-vested options that are expected to vest. This cost is expected to be recognized over a weighted-average period of 2.5 years.

The Company records compensation expense for awards with graded vesting using the straight-line method. The Company recognizes compensation expense over the requisite service period applicable to each individual award, which generally equals the vesting term. The Company estimates the fair value of each option award using the Black-Scholes-Merton option pricing model. Forfeitures are recognized when realized.

The Company estimated the fair value stock options using the Black-Scholes option pricing model. The fair value of stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The fair value of stock options issued was estimated using the following weighted-average assumptions:

	Six Months Ended June 30, 2020
Weighted average exercise price	$	5.18
Weighted average grant date fair value	$	4.02
Assumptions
Expected volatility		87-90	%
Expected terms (in years)		6.3-10
Risk-free interest rate		0.43-1.47	%
Expected dividend yield		0.00	%

The risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company's expected volatility was based upon the historical volatility for industry peers and used an average of those volatilities. The expected life of the Company's options was determined using the simplified method as a result of limited historical data regarding the Company's activity. The dividend yield considers that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable future.

For grants prior to the IPO, the fair value of the common stock was determined by the board of directors based on a variety of factors, including valuations prepared by third parties, the Company's financial position, the status of development efforts within the Company, the current climate in the marketplace and the prospects of a liquidity event, among others. For grants after the IPO, the Company uses the closing stock price on the date of grant as the fair value of the common stock.

The following table summarizes stock option activity during the six months ended June 30, 2020:

	Number of Shares			Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (In Years)		Intrinsic Value
Outstanding at January 1, 2020		2,139,078		$	3.46		9.17	$	4,052,512
Granted		182,255			5.18		—		—
Cancelled		(20,000	)		5.24		—		—
Outstanding at June 30, 2020		2,301,333		$	3.58		8.75	$	5,027,263
Exercisable at June 30, 2020		681,381		$	2.50		8.13	$	2,219,552