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Stock-Based Compensation

6 Months Ended

Mar. 31, 2019

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

Stock-Based Compensation

NOTE 10 – Stock-Based Compensation

Share-based compensation expense was included in general and administrative and research and development expenses as follows in the accompanying condensed consolidated statements of operations:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2019				2018				2019				2018
General and administrative		$	26,105			$	252,000			$	141,105			$	252,000
Research and development			44,112				2,437				48,092				2,437
Total share-based compensation		$	70,217			$	254,437			$	189,197			$	254,437

Stock Options

During the three and six month period ended March 31, 2019, under the 2017 Equity Incentive Plan (the "2017 Plan"), the Company granted 150,548 and 325,548 stock options to its employees, consultants and scientific advisory board members where vesting commences upon grant ranging over a 36 to 48 month period based on a time of service vesting condition. The grant date fair value of grants was $1.11 and $1.12 per share during the three and six month periods ending March 31, 2019, respectively. There were no stock options granted during the three and six month periods ending March 31, 2018.

The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock options granted during the three and six month periods ended March 31, 2019:

		Three Months				Six Months
		Ended				Ended

Expected stock price volatility			50.7	%			50.2	%
Expected life of options (years)			6.0				5.9
Expected dividend yield			0	%			0	%
Risk free interest rate			2.6	%			2.7	%

See other stock-based awards section below for stock-based award grants committed, but not formally issued as of March 31, 2019.

During the three and six months ended March 31, 2019, 39,675 stock options vested and during the three and six months ended March 31, 2018, no stock options vested. During the three and six months ended March 31, 2019 and 2018, 93,555 and zero stock options were exercised, respectively. No stock options were forfeited during the three and six months ended March 31, 2019 and 2018.

Evergreen provision

Under the 2017 Plan, the shares reserved automatically increase on January 1st of each year, for a period of not more than ten years from the date the 2017 Plan is approved by the stockholders of the Company, commencing on January 1, 2019 and ending on (and including) January 1, 2027, to an amount equal to 13% of the fully-diluted shares outstanding as of December 31st of the preceding calendar year. Notwithstanding the foregoing, the Board may act prior to January 1st of a given year to provide that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. "Fully Diluted Shares" as of a date means an amount equal to the number of shares of common stock (i) outstanding and (ii) issuable upon exercise, conversion or settlement of outstanding Awards under the 2017 Plan and any other outstanding options, warrants or other securities of the Company that are (directly or indirectly) convertible or exchangeable into or exercisable for shares of common stock, in each case as of the close of business of the Company on December 31 of the preceding calendar year. On January 1, 2019, 498,848 shares were added to 2017 Plan as a result of the evergreen provision.

As of March 31, 2019, 1,881,896 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017 Plan. Unrecognized stock-based compensation was $319,234 as of March 31, 2019. The unrecognized share-based expense is expected to be recognized over a weighted average period of 3.2 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 and 100,000 shares of common stock were awarded during the six month periods ended March 31, 2019 and 2018, respectively, subject to time-based vesting conditions. The compensation expense related to the vested common shares was included in the total stock-based services expense referenced above which totaled $115,000 and $252,000 for the six month periods ended March 31, 2019 and 2018, respectively. The expense was based on the fair value of the underlying common stock at the point of vesting which was $2.30 and $2.52 per share during the six month periods ending March 31, 2019 and 2018, respectively. 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 from the Company's authorized but unissued shares, but were not eligible to be issued under the 2016 Plan or 2017 Plan reserves.

As of March 31, 2019, the Company had formal obligations to issue future common stock options relating to several consulting agreements. 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 March 31, 2019. The corresponding stock-based services expense related to the stock-based award liabilities amounted to $23,563 and $27,543 during the three and six month periods ended March 31, 2019, respectively, and was included in research and development expense in the accompanying condensed consolidated statements of operations. The corresponding stock-based services expense relating to the stock-based award liabilities amounted to $2,437 during the three and six month periods ended March 31, 2018 and was included in research and development expense in the accompanying condensed consolidated statements of operations.

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 March 31, 2019 and was based on the fair value of the Company's common stock on March 31, 2019 as the award date has not occurred. The common stock fair value on March 31, 2019 was $2.38 per share and was determined based on a non-marketable basis and was according to the market approach, considering the traded price, forward multiples from guideline public companies and recent private placement transactions, using allocation and marketability-discount methodologies. The total accrued liability for this award at March 31, 2019 was $38,696.

The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock- option liability outstanding as of March 31, 2019:

		2018

Expected stock price volatility			50.7	%
Expected life of options (years)			5
Expected dividend yield			0	%
Risk free interest rate			2.2	%

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 March 31, 2019 would be reduced from 1,881,896 shares to 1,846,602 shares as a result of the potential stock option issuance under the second consulting agreement.