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Stock-Based Compensation

9 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

NOTE 9 – Stock-Based Compensation

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

	Three Months Ended				Nine months ended
	June 30,				June 30,
	2020		2019		2020		2019
General and administrative	$	291,545	$	169,658	$	1,351,003	$	310,763
Research and development		92,138		62,430		152,138		110,522
Total share-based compensation	$	383,683	$	232,088	$	1,503,141	$	421,285

Stock Options

During the three month period ended June 30, 2020 and 2019, under the 2017 Equity Incentive Plan (the "2017 Plan"), the Company granted 144,175 and 350,119 stock options, respectively, to its employees, consultants and scientific advisory board members. During the nine month periods ended June 30, 2020 and 2019, under the 2017 Plan, the Company granted 964,175 and 675,667 stock options, respectively, to its employees, consultants and scientific advisory board members. Vesting generally occurs over an immediate to 48 month period based on a time of service condition although vesting acceleration is provided under one grant in the event that certain milestones are met. The grant date fair value of the grants issued during the three month periods ended June 30, 2020 and 2019 was $0.73 and $1.13 per share, respectively. The grant date fair value of the grants issued during the nine month periods ended June 30, 2020 and 2019 was $1.01 and $1.13 per share, respectively. The total expense for the three months ended June 30, 2020 and 2019 related to stock options was $103,998 and $224,866, respectively. The total expense for the nine month periods ended June 30, 2020 and 2019 related to stock options was $630,887 and $271,520, respectively. The total number of stock options outstanding as of June 30, 2020 and September 30, 2019 was 1,438,485 and 845,840, respectively.

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, 2020 and 2019:

	Three Months Ended						Nine months ended
	June 30,						June 30,
	2020			2019			2020			2019

Expected stock price volatility		54.3	%		50.7	%		53.0	%		50.4	%
Expected life of options (years)		5.3			5.4			5.6			5.6
Expected dividend yield		0	%		0	%		0	%		0	%
Risk free interest rate		0.4	%		2.2	%		1.5	%		2.4	%

During the three and nine month periods ended June 30, 2020, 52,488 and 475,182 stock options vested, respectively, and 222,633 and 262,308 stock options vested during the three and nine months ended June 30, 2019, respectively. During the three and nine month periods ended June 30, 2020, 27,182 and 294,985 stock options were forfeited, respectively, and no options were forfeited during the three and nine month periods ended June 30, 2019.

Restricted Stock Units

During the three and nine month periods ended June 30, 2020, 67,113 and 234,964 restricted stock units ("RSUs") were granted, respectively. During the three and nine month periods ended June 30, 2019, 42,018 RSUs were granted. During the three and nine month periods ended June 30, 2020, 20,962 and 154,234 RSUs vested, respectively. The total expense for the three and nine month period ended June 30, 2020 related to the RSU's was $38,535 and $352,929, respectively. The total expense for the three and nine month period ended June 30, 2019 related to the RSU's was $7,222. The number of RSUs forfeited during the three and nine month periods ended June 30, 2020 was zero and 7,003, respectively. No RSUs were forfeited during the three and nine month periods ended June 30, 2019.

Other Stock-Based Awards

2020 Activity

In October 2019, two consulting agreements were executed whereby up to 115,000 shares of common stock were issued as of June 30, 2020 of which 102,500 shares of common stock were vested as of June 30, 2020 under these agreements. On April 22, 2020, the Company entered into an amendment (the "Amendment") to one of the consulting agreements. Pursuant to the Amendment, the Company issued an additional 35,000 shares in exchange for consulting services of which 14,000 shares of common stock were vested as of June 30, 2020 under the Amendment. Vesting was based on a time-based vesting condition ranging over a three to nine month period commencing upon the execution of the consulting agreements.

In February 2020, an additional consulting agreement was executed whereby up to 90,000 shares of common stock were issuable of which 76,500 shares of common stock were issued and vested as of June 30, 2020 under this agreement. On May 21, 2020, 66,583 shares of common stock were issued as compensation to a former 2019 Paulson Note holder related to a prior 2019 Paulson Note conversion and release of liability.

Compensation expense related to the stock awards granted under the consulting agreements and to the former 2019 Paulson Note holder referenced above amounted to $241,150 and $519,325 for the three and nine month periods ended June 30, 2020, respectively, and was included in the total stock-based expense. The expense was based on the fair value of the underlying common stock at the point of vesting which ranged from $1.51 to $2.65 per share.

2019 Activity

In February 2018, 250,000 shares of common stock were reserved as a result of a consulting agreement for investor relations services executed in February 2018. Under the agreement, zero and 50,000 shares of common stock were awarded during the three and nine month period ended June 30, 2019, respectively, 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 expense referenced above which totaled zero and $115,000 for the three and nine month periods ended June 30, 2019, respectively. 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 June 30, 2019, the Company had formal obligation to issue future common stock options relating to several consulting agreements. The corresponding stock-based compensation expense related to the stock-based award liabilities amounted to zero and $27,543 during the three and nine month periods ended June 30, 2019, respectively, and was included in general and administrative expense in the accompanying condensed statements of operations.

General

As of June 30, 2020, 1,879,400 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017 Plan. Unrecognized stock-based compensation was $0.9 million as of June 30, 2020. The unrecognized share-based expense is expected to be recognized over a weighted average period of 2.4 years.