Stock Based Compensation

6 Months Ended

Jun. 30, 2021

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 has 3,284,480 shares of its common stock reserved under the 2018 Plan. 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 three and six months ended June 30, 2021 and 2020 for stock options and warrants:

	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Research and development	$	69,457	$	136,736	$	43,605	$	43,605
General and administrative		671,078		1,634,214		251,751		677,595
	$	740,535	$	1,770,950	$	295,356	$	721,200

As of June 30, 2021, there was approximately $7,792,000 of total unrecognized compensation expense related to non-vested share-based compensation arrangements that are expected to vest. This cost is expected to be recognized over a weighted-average period of 2.6 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 assumptions:

	Six Months June 30, 2021
Weighted average exercise price	$	14.17
Weighted average grant date fair value	$	11.97
Assumptions
Expected volatility		89%-97	%
Weighted average expected term (in years)		6.0-10.0
Risk-free interest rate		1.03%-1.09	%
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 for employee awards and the contractual term for nonemployee awards. The dividend yield considers that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable future. 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, 2021:

	Number of Shares			Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (In Years)		Intrinsic Value
Outstanding at January 1, 2021		2,610,495		$	5.63		8.60	$	22,789,233
Granted		15,000			14.17		—		—
Exercised		(252,156	)		2.74		—		—
Outstanding at June 30, 2021		2,373,339		$	5.99		8.20	$	10,693,880
Exercisable at June 30, 2021		801,762		$	3.66		7.77	$	4,768,540

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 the Company’s common stock for those stock options that had strike prices lower than the fair value of the Company’s common stock. The intrinsic value of the options exercised during 2021 was approximately $3,751,000.

Warrants

On February 1, 2021, the Company issued a five-year warrant to purchase 25,000 shares of common stock at $15.90 per share to a consultant. The fair value of the warrant on the grant date was estimated using the Black-Scholes-Merton option pricing model with a common stock value of $16.13 per share, a contractual life of 5.0 years, a dividend yield of 0%, volatility of 97.09% and an assumed risk-free interest rate of 0.42%. The warrant is immediately exercisable. The fair value of the warrant was determined to be approximately $293,000 and was recorded in general and administrative expenses in the condensed consolidated statement of operations during the six months ended June 30, 2021.

In determining the fair value for warrants, the expected life of the Company’s warrants was determined using the contractual life. The methodology in determining all other inputs to calculate the fair value utilizing the Black-Scholes-Merton option pricing model is the same as the stock option methodology described in above for stock options.