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Note 7 - Stock Option Plans and Stock-based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Text Block]

7. STOCK OPTION PLANS AND STOCK-BASED COMPENSATION

Stock-Based Compensation Expense

The Company records stock-based compensation expense in connection with the amortization of the fair value of stock options granted to employees, non-employee consultants and non-employee directors. During the three months ended September 30, 2021 and 2020, the Company recorded stock-based compensation of $27,590 and $0 respectively. During the nine months ended September 30, 2021, and 2020, the Company recorded stock-based compensation of $44,679 and $0 respectively. As of September 30, 2021, and 2020, the Company had unrecognized stock-based compensation expense of $220,676 and $0.

Determining Fair Value

Valuation and Recognition – The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes pricing model utilizes the following assumptions:

Expected Term – Expected life of an option award is the average length of time over which the Company expects employees will exercise their options, which is based on historical experience with similar grants.

Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the awards.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

Dividend Yield – The Company has not paid a dividend and does not anticipate paying a dividend in the foreseeable future.

The assumptions used in estimating the fair value of options granted in 2021 are summarized as follows:

Expected Term in years - 5.75 - 6.08

Volatility - 91.4% - 92.2%

Risk-free interest rate – 0.95% - 1.10%

Dividend Yield – 0.00%

Activity under the stock plans for the nine months ending September 30, 2021, is as follows:

	Shares available for Grant		Number of Options Outstanding		Weighted Average Exercise price per share
Balance, January 1, 2020		1,384,761		65,471	$	16.86
Granted		81,227		81,227	$	4.38
Balance, September 30, 2021		1,303,534		146,698	$	9.95
Vested, September 30, 2021		—		65,471	$	16.86
Vested and expected to vest, September 30, 2021		—		146,698	$	9.95

Options outstanding under the stock plans are as follows as of September 30, 2021:

Options Outstanding		Weighted average remaining contractual life (years)		Options Exercisable		Weighted Average Exercise Prices
	48,724		1.10		48,724	$	11.89
	16,747		3.19		16,747	$	31.33
	65,227		9.54		—	$	4.30
	16,000		9.71		—	$	4.73
	146,698		6.03		65,471	$	9.95