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Stock-Based Compensation

9 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

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				Nine months Ended
	June 30,				June 30,
	2019		2018		2019		2018
General and administrative	$	169,658	$	115,000	$	310,763	$	367,000
Research and development		62,430		4,510		110,522		6,947
Total share-based compensation	$	232,088	$	119,510	$	421,285	$	373,947

Equity Awards

During the three and nine month periods ended June 30, 2019, under the 2017 Equity Incentive Plan (the "2017 Plan"), the Company granted 350,119 and 675,667 stock options to its board of directors, employees, consultants and scientific advisory board members where vesting commences upon grant ranging over an immediate to 48 month period based on a time of service vesting condition. The grant date fair value of grants was $1.13 per share during both the three and nine month periods ended June 30, 2019. In addition, during the three and nine month periods ended June 30, 2019, the Company granted 42,018 restricted stock units ("RSUs") under the 2017 Plan to its board of directors where vesting occurs monthly over a twelve month period. The grant date fair value of RSUs was $2.38 per unit during both the three and nine month periods ended June 30, 2019. There were no options or RSUs granted during the three and nine month periods ended June 30, 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 nine month periods ended June 30, 2019:

	Three Months			Nine Months
	Ended			Ended

Expected stock price volatility		50.7	%		50.4	%
Expected life of options (years)		5.4			5.6
Expected dividend yield		0	%		0	%
Risk free interest rate		2.2	%		2.4	%

During the three and nine months ended June 30, 2019, 222,633 and 262,308 stock options vested, respectively. During the three and nine months ended June 30, 2018, no stock options vested. During the three and nine months ended June 30, 2019, 85,051 and 178,606 stock options were exercised, respectively. No stock options were exercised during the three and nine months ended June 30, 2018. Lastly, no stock options were forfeited during the three and nine months ended June 30, 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 June 30, 2019, 1,489,759 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017 Plan. Unrecognized stock-based compensation was $544,107 as of June 30, 2019. The unrecognized share-based expense is expected to be recognized over a weighted average period of 2.8 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 150,000 shares of common stock were awarded during the nine month periods ended June 30, 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 expense referenced above which totaled $115,000 and $367,000 for the nine month periods ended June 30, 2019 and 2018, respectively. The expense was based on the fair value of the underlying common stock at the point of vesting which ranged from $2.30 and $2.52 per share during the periods presented. 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.

In addition, the Company previously had formal obligations to issue future common stock options relating to several consulting agreements. A total of 38,874 stock options were granted in May 2019 related to these consulting agreements. The corresponding stock-based expense related to the stock-based awards was included in research and development expense in the accompanying condensed consolidated statements of operations.