Note 9 – Stockholders’ Equity

Securities Purchase Agreement

On March 24, 2020, the Company closed on a private placement of approximately $6.0 million of Units. Each Unit consists of (i) one share of the Company’s common stock, (ii) a one-year warrant to purchase 0.5 of a share of common stock (“Class A Warrant”), and (iii) a five-year warrant to purchase 0.75 of a share of common stock (“Class B Warrant”) (collectively, the Class A Warrants and Class B Warrants, the “Warrants”). The Units were sold to the public at a price of $2.21425 per Unit and to certain directors and executive officers at a price of $2.42625 per Unit. The Company generated approximately $5.3 million of net proceeds in the offering after deducting placement agent fees and offering expenses. In the offering, the Company issued an aggregate of 2,675,293 shares of common stock, Class A Warrants to purchase up to 1,337,659 shares of common stock, and Class B Warrants to purchase up to 2,006,495 shares of common stock. The exercise price of the Class A Warrants issued to the public is $2.058 per share and the exercise price of the Class A Warrants issued to the directors and officers is $2.27 per share. The exercise price of the Class B Warrants issued to the public is $2.4696 per share and the exercise price of the Class B Warrants issued to the directors and officers is $2.724 per share.

In connection with the private placement, on March 23, 2020, the Company also entered into a Registration Rights Agreement with the investors. Pursuant to the Registration Rights Agreement, the Company must file with the SEC, no later than 30 days following the date on which the Company files its Form 10-K for the year ended December 31, 2019 with the SEC, a registration statement on Form S-3 covering the shares of common stock issued in the offering and the shares of common stock underlying the Warrants. The Company timely filed the registration statement on Form S-3 (Registration Statement No. 333-237790), which was declared and has remained effective with the SEC since May 13, 2020.

Stock Options

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following approximate assumptions:


	For the Three Months Ended
	March 31,
	2021		2020
Expected term (years)	5.85		5.85
Risk free interest rate	0.92	%	1.32	%
Expected volatility	96	%	101	%
Expected dividends	0.00	%	0.00	%

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. Option forfeitures are accounted for at the time of occurrence. The expected term is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company does not yet have a trading history to support its historical volatility calculations. Accordingly, the Company is utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

The weighted average estimated grant date fair value of the stock options granted for the three months ended March 31, 2021 and 2020 was approximately $3.82 and $4.13 per share, respectively.

A summary of the option activity during the three months ended March 31, 2021 is presented below:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Life	Intrinsic
	Options	Price		In Years	Value
Outstanding January 1, 2021	3,427,705	$	3.37
Granted	1,637		5.11
Outstanding March 31, 2021	3,429,342	$	3.37	7.7	$	7,126,014

Exercisable March 31, 2021	1,862,537	$	3.54	6.7	$	3,889,820

The following table presents information related to stock options as of March 31, 2021:


Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Options	In Years	Options
$	1.24	260,000	4.0	260,000
$	1.95	673,544	6.3	673,544
$	2.72	764,419	—	—
$	2.74	6,000	7.8	4,333
$	2.89	263,500	—	—
$	3.11	659,849	8.4	369,646
$	3.43	58,920	—	—
$	3.48	45,000	—	—
$	3.71	43,000	—	—
$	4.00	2,000	7.6	1,556
$	4.68	25,000	8.8	9,029
$	5.10	6,000	7.4	5,000
$	5.11	1,637	—	—
$	5.19	16,500	7.4	13,750
$	5.25	26,668	5.5	26,668
$	5.77	50,000	—	—
$	6.20	300,387	7.3	283,298
$	6.30	60,000	7.3	53,333
$	8.72	166,918	7.0	162,380
		3,429,342	6.7	1,862,537

Warrants

A summary of the Warrant activity for the three months ended March 31, 2021 is presented below:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Life	Intrinsic
	Warrants	Price		In Years	Value
Outstanding January 1, 2021	2,011,313	$	2.43
Exercised	(644,992)		2.37
Outstanding March 31, 2021	1,366,321	$	2.51	4.0	$	3,530,228

Exercisable March 31, 2021	1,366,321	$	2.51	4.0	$	3,530,228

The following table presents information related to Warrants as of March 31, 2021:


Warrants Outstanding	Warrants Exercisable
		Weighted
	Outstanding	Average	Exercisable
Exercise	Number of	Remaining Life	Number of
Price	Warrants	In Years	Warrants
$2.4696	1,149,941	4.0	1,149,941
$2.7240	216,380	4.0	216,380
	1,366,321	4.0	1,366,321

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense related to stock options and restricted stock units of $656,913 ($329,713 of which was included within research and development expenses and $327,200 was included within general and administrative expenses on the condensed statements of operations) and $583,865 ($307,409 of which was included within research and development expenses and $276,456 was included within general and administrative expenses on the condensed statements of operations) during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was $3,069,508 of unrecognized stock-based compensation expense which the Company expects to recognize over a weighted average period of 1.8 years.