Stock-Based Compensation

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

10.

Stock-Based Compensation

2012 Equity Incentive Plan

The 2012 Equity Incentive Plan, as amended, was adopted by the Company’s board and approved by the members of the Company on August 10, 2012. The Company reserved a maximum of 625,000 common shares available for issuance under the 2012 Equity Incentive Plan. The 2012 Equity Incentive Plan provides for share options, restricted share awards, performance share awards or share bonuses. The exercise price of each share option granted under the 2012 Equity Incentive Plan is not less than one hundred percent (100%) of the fair market value of one share on the date of grant. The maximum permitted term of options granted under the 2012 Equity Incentive Plan is ten years. The Company’s board has administered the plan and determined the provisions of incentive awards, including eligible recipients, number of shares subject to an incentive award, exercise price, vesting schedule, duration of an incentive award and other restrictions an incentive award may be subject to. The 2012 Equity Incentive Plan was fixed on September 6, 2017 and any new awards will be issued under the terms of the 2017 Stock Incentive Plan.

2017 Stock Incentive Plan

The 2017 Stock Incentive Plan, or the 2017 Plan, was adopted by the Company’s board on September 6, 2017, became effective following the corporate conversion which took place on September 15, 2017, and was approved by stockholders at the Company’s annual stockholder meeting on May 10, 2018. The Company reserved a maximum of 750,000 common shares available for issuance under the 2017 Plan. The number of shares reserved for issuance under the 2017 Plan will increase automatically on January 1, 2019 and each subsequent anniversary through January 1, 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of the Company’s common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. The maximum permitted term of options granted under the 2017 Plan is ten years. The 2017 Plan provides for share options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards and stock bonuses. The exercise price of each share option granted under the 2017 Plan is not less than one hundred percent (100%) of the fair market. The 2017 Plan will generally be administered by the compensation committee of the Company’s board of directors and has the authority to interpret the plan, grant awards and make all other determinations necessary for the administration of the plan.

The Black-Scholes option-pricing model was used to estimate the fair value of equity-based awards with the following weighted-average assumptions for the period ending September 30:

	2018	2017
Risk-free interest rate	2.52 - 2.97%	2.00 %
Expected volatility	72.0% - 76.0%	75.0%
Expected life (years)	6.25 to 10.00	6.25 to 10.00
Expected dividend yield	0%	0%

The inputs for the Black-Scholes valuation model require management’s significant assumptions. Prior to the Company’s IPO, the common share price was determined by the Company’s board based on recent prices of common shares sold in private offerings prior to the IPO. Subsequent to the IPO, the common share price was determined by using the quoted price on the grant date. The risk-free interest rates were based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life was based on the simplified method in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility was estimated based on historical volatility information of peer companies that are publicly available.

All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees, except the expected life is equal to the contractual term. In the event the Company terminates any of its consulting agreements, the unvested options underlying the agreements would also be cancelled. Unvested nonemployee options were marked-to-market as of April 1, 2018, the date that the Company adopted the newly issued ASU No. 2018-07.

The following table summarizes the activity for all stock options outstanding for the nine months ended September 30 under the Plan:

	2018					2017
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding at beginning of year		501,603		$	7.58		302,088		$	5.91
Granted		41,421			21.85		191,730			8.56
Exercised		(49,700	)		7.60		-			-
Forfeited		-			-		(15,365	)		3.60
Balance at September 30		493,324		$	8.75		478,453		$	7.05

Options exercisable at September 30:		265,531		$	6.83		178,275		$	5.65

Weighted Average Grant Date Fair Value for Options Granted During the period:				$	15.25				$	5.42

The following table summarizes additional information about stock options outstanding and exercisable at September 30, 2018 under the Plan:

Options Outstanding								Options Exercisable
Options Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Options Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
	493,324		7.99	$	8.75	$	9,873,199		265,531	$	6.83	$	5,823,852

The Company recognized stock-based compensation expense for stock options of $777,849 and $561,097 for the nine months ended September 30, 2018 and 2017, respectively, and $273,066 and $138,282 for the three months ended September 30, 2018 and 2017, respectively.

A restricted stock award of 2,571 and 5,250 shares was granted to a member of the board of directors in 2018 and 2017, respectively. The Company has 2,571 and 0 restricted shares outstanding as of September 30, 2018 and 2017, respectively, and 5,250 and 0 shares vested as of September 30, 2018 and 2017, respectively. The Company recognized stock-based compensation expense for the restricted stock of $74,161 and $0 for the nine months ended September 30, 2018 and 2017, respectively, and $13,067 and $0 for the three months ended September 30, 2018 and 2017, respectively.

The total remaining shares available for grant under the 2017 plan is 644,028.

Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized as follows:

2018	$	226,782
2019		627,387
2020		385,282
2021		209,986
2022		46,776

Total estimated compensation cost to be recognized	$	1,496,213

2017 Employee Stock Purchase Plan

The Company’s employee stock purchase plan, or ESPP, was adopted by the Company’s board on September 6, 2017, and approved by stockholders at the Company’s annual stockholder meeting on May 10, 2018. The Company has reserved a total of 100,000 shares for issuance. The number of shares authorized and reserved for issuance under the ESPP will be automatically increased on the first day of each of the Company’s fiscal years beginning in 2019 by the number of shares equal to 0.5% of the total outstanding number of shares of common stock. However, the Company’s board may reduce the amount of the increase in any particular year. The ESPP provides participating employees with an opportunity to purchase shares of the Company’s common stock at a discount through payroll deductions. The plan is available to all employees unless they are employed for less than 20 hours per week or own 5% or more of the total combined voting power or value of the Company’s common stock. The plan is administered using overlapping 24 month offering periods, referred to as an Offering Period. Each Offering Period has four six-month purchase periods. A new Offering Period and purchase period begin every six months on May 1 and November 1 of each year. Participating employees may purchase common stock, on a voluntary after tax-basis, at a price equal to 85% of the fair market value of a share of common stock on either the offering date or the purchase date, whichever is lower. If the purchase date has a lower price, the employee will automatically be placed in the Offering Period beginning immediately after the purchase date. The Company recognized stock-based compensation expense of $61,030 and $0 for the nine months ended September 30, 2018 and 2017, respectively, and $14,143 and $0 for the three months ended September 30, 2018 and 2017, respectively.

The Company recognized total stock-based compensation, as follows for the three months and nine months ended September 30:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Stock-based compensation expense in operating expenses:
Research and development	$	217,499	$	126,600	$	555,034	$	420,789
General and administrative		82,777		11,682		358,006		140,308
Total	$	300,276	$	138,282	$	913,040	$	561,097