XML 25 R16.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

3 Months Ended

Dec. 31, 2018

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

Stock-Based Compensation

NOTE 10 – Stock-Based Compensation

During the three month periods ended December 31, 2018 and 2017, stock-based services expense related to stock-based awards amounted to $118,980 and zero, respectively, and was included in general and administrative costs in the accompanying condensed consolidated statements of operations.

Stock Options

During the three month period ended December 31, 2018, under the 2017 Equity Incentive Plan (the “2017 Plan”), the Company granted 175,000 stock options to its scientific advisory board members where vesting commences on January 1, 2019 over a 36 month period based on a time of service vesting condition. The grant date fair value of the scientific advisory board member grants was $1.14 per share. No stock-based expense related to the scientific advisory board grants was recognized during the three month period ended December 31, 2018. There were no stock options granted during the three month period ended December 31, 2017. Lastly, there were no restricted stock award grants during any of the periods presented.

The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock options granted during the three month period ended December 31, 2018:

		2018

Expected stock price volatility			49.8	%
Expected life of options (years)			5.8
Expected dividend yield			0	%
Risk free interest rate			2.8	%

See other stock-based awards section below for stock-based award grants committed, but not formally issued as of December 31, 2018.

During the three months ended December 31, 2018 and 2017, there was no vesting of formally issued stock options or restricted stock awards. No stock options were forfeited during the three months ended December 31, 2018 and 2017. As of December 31, 2018, 1,533,596 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017 Plan.

Unrecognized stock-based compensation was $0.2 million as of December 31, 2018. All of the unrecognized compensation cost related to the scientific advisory board grants. The unrecognized share-based expense is expected to be recognized over a weighted average period of 2.9 years.

Other Stock-Based Awards

250,000 shares of common stock were reserved in February 2018 as a result of a consulting agreement for investor relations services executed in February 2018. Under the agreement, 50,000 shares of common stock were awarded during the three month period ended December 31, 2018 on a time-based vesting condition that was met in November 2018. The compensation expense related to the vested common shares was included in the total stock-based services expense referenced above which totaled $115,000 for the three month period ended December 31, 2018. The expense was based on the fair value of the underlying common stock at the point of vesting which was $2.30 per share. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. As of November 2018, all shares under the February 2018 share reserve were issued, but were not eligible for issuance under either of the 2016 or 2017 Plans as the consulting contract was not with an individual.

As of December 31, 2018, the Company had a formal obligation to issue future common stock options relating to a consulting agreement. The estimated liability associated with the vested portions of these awards was recorded in accrued expenses in the accompanying condensed consolidated balance sheets as of December 31, 2018. The corresponding stock-based services expense related to the stock-based award liability amounted to $3,980 during the three months ended December 31, 2018 and was included in general and administrative expense in the accompanying condensed consolidated statements of operations. There was no corresponding stock-based services expense during the three month period ended December 31, 2017.

The number of option shares and pricing under the consulting agreement will not be set until the occurrence of the award date which is defined as the earlier to occur of a public offering, qualified financing, or June 30, 2019. The number of option shares under the agreement is based on a $3,000 monthly compensation amount divided by the fair value of the underlying common stock on the award date. The exercise price will also be set at the fair value of the underlying common stock on the award date. The liability associated with the unissued options was based on an option share equivalent estimate that reflects the portion of the award where performance vesting conditions have been met as of December 31, 2018 and was based on the fair value of the Company’s common stock on December 31, 2018 as the award date has not occurred. The common stock fair value on December 31, 2018 was $2.20 per share and was determined based on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The total accrued liability for this award at December 31, 2018 was $15,133.

The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock- option liability during the three month period ended December 31, 2018:

		2018

Expected stock price volatility			49.8	%
Expected life of options (years)			5
Expected dividend yield			0	%
Risk free interest rate			2.5	%

Upon the issuance of all of the unissued options associated with the stock-based award liabilities, the estimated number of shares available for future issuance as of December 31, 2018 would be reduced from 1,533,596 shares to 1,518,596 shares as a result of the potential stock option issuance under the second consulting agreement.