Stock Based Compensation

3 Months Ended

Mar. 31, 2022

Share-Based Payment Arrangement [Abstract]

STOCK BASED COMPENSATION

NOTE 6 – 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.

In September 2021, the Company’s board of directors approved its 2021 Stock Incentive Plan (“2021 Plan”), which was also approved by the stockholders of the Company at the Company’s annual meeting of stockholders held on November 4, 2021. The 2021 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 4,200,000 shares of its common stock reserved under the 2021 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 2021 Plan.

The following table summarizes the stock-based compensation expense recorded in the Company’s results of operations during the three months ended March 31, 2022 and 2021 for stock options and warrants:

	Three Months Ended		Three Months Ended
	March 31, 2022		March 31, 2021
Research and development	$	205,809	$	67,279
General and administrative		971,893		963,136
	$	1,177,702	$	1,030,415

As of March 31, 2022, there was approximately $8,135,000 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 2.4 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:

	Three Months March 31, 2022
Weighted average exercise price	$	6.90
Weighted average grant date fair value	$	5.20
Assumptions
Expected volatility		96%-97	%
Expected term (in years)		6.3
Risk-free interest rate		1.79%-2.41	%
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 three months ended March 31, 2022:

	Number of Shares			Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (In Years)		Intrinsic Value
Outstanding at January 1, 2022		2,893,839		$	6.48		8.05	$	9,932,413
Granted		100,000			6.90		—		—
Cancelled		(17,749	)		11.09		—		—
Outstanding at March 31, 2022		2,976,090		$	6.47		7.87	$	4,435,685
Exercisable at March 31, 2022		1,411,441		$	5.00		7.24	$	3,196,095

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.

Option Modification

Effective March 21, 2022, one of the members of the Company’s board of directors, Dr. Brian Windsor, resigned. As part of his resignation from the board of directors, modifications were made to Dr. Windsor’s vested and non-vested stock option awards including acceleration of certain non-vested option awards and the extension of the post-termination exercise period of certain stock option awards. During the three months ended March 31, 2022, in accordance with ASC Topic 718, Compensation—Stock Compensation, the Company recorded a one-time, non-cash incremental compensation expense net of the required reversal of previously recognized compensation attributed to non-vested shares in the amount of approximately $339,000, which is included in general and administrative expense in the accompanying condensed consolidated statements of operations.