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Stock-Based Compensation

9 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

NOTE 9 – Stock-Based Compensation

During the three and nine month periods ended June 30, 2021 and 2020, stock-based expense related to stock-based awards was included in general and administrative and research and development costs as follows in the accompanying condensed statements of operations.

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
General and administrative	$	816,033	$	291,545	$	1,251,412	$	1,351,003
Research and development		62,819		92,138		199,628		152,138
Total stock-based compensation	$	878,852	$	383,683	$	1,451,040	$	1,503,141

Stock Options

During the three month periods ended June 30, 2021 and 2020, under the 2017 Equity Incentive Plan (the “2017 Plan”), the Company granted 81,446 and 48,061 stock options, respectively, to its employees, consultants and scientific advisory board members. During the nine month periods ended June 30, 2021 and 2020, the Company granted 703,117 and 321,397, 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, 2021 and 2020 was $3.65 and $2.19 per share, respectively. The grant date fair value of the grants issued during the nine month periods ended June 30, 2021 and 2020 was $3.01 and $3.03 per share, respectively.

The total expense for the three months ended June 30, 2021 and 2020 related to stock options was $500,149 and $103,998, respectively. The total expense for the nine months ended June 30, 2021 and 2020 related to stock options was $817,761 and $630,887, respectively. The total number of stock options outstanding as of June 30, 2021 and September 30, 2020 was 1,162,838 and 479,509, 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, 2021 and 2020:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Expected stock price volatility		56.0	%		54.3	%		55.9	%		53.0	%
Expected life of options (years)		5.9			5.3			6.0			5.6
Expected dividend yield		0	%		0	%		0	%		0	%
Risk free interest rate		1.0	%		0.4	%		0.6	%		1.5	%

During the three month periods ended June 30, 2021 and 2020, 162,266 and 17,501 stock options vested, respectively and 21,437 and 9,061 stock options were forfeited during these periods, respectively. During the nine month periods ended June 30, 2021 and 2020, 268,793 and 158,399 stock options vested, respectively and 31,583 and 98,331 stock options were forfeited during these periods, respectively. During the three and nine month periods ended June 30, 2021, 780 and 1,538 stock options were exercised, respectively, and the intrinsic value of options exercised during these periods was $1,693 and $2,648, respectively. During the three and nine month periods ended June 30, 2020, 11,340 and 25,515 stock options were exercised, respectively, and the intrinsic value of options exercised during these periods was $46,437 and $149,135, respectively.

Restricted Stock Units

During the three and nine month periods ended June 30, 2021, 13,776 restricted stock units (“RSUs”) were granted During the three and nine months ended June 30, 2020, 22,371 and 78,323 RSUs were granted. During the three months ended June 30, 2021 and 2020, 7,077 and 6,990 RSUs vested, respectively, and no RSUs were forfeited during these periods. During the nine months ended June 30, 2021 and 2020, 23,453 and 51,417 RSUs vested, respectively, and zero and 2,335 RSUs were forfeited during these periods. The total expense for the three months ended June 30, 2021 and 2020 related to these RSUs was $39,702 and $38,535, respectively. The total expense for the nine months ended June 30, 2021 and 2020 related to these RSUs was $123,278 and $352,929, respectively.

Other Stock-Based Awards

In April 2021, two consulting agreements were executed whereby a total of 62,659 shares of common stock were subject to issuance of which 51,330 shares of common stock were issued as of June 30, 2021. Compensation expense related to the stock awards granted under these consulting agreements amounted to $339,001 for the three and nine months ended June 30, 2021 and were included in the total stock-based compensation expense.

In August 2020, an additional consulting agreement was executed whereby 40,000 shares of common stock were issued, subject to Company repurchase. The stock award under the agreement vests over a six-month period. As of June 30, 2021, 40,000 shares were vested under this agreement of which 33,334 shares vested during the nine months ended June 30, 2021. Compensation expense related to the stock award granted under this consulting agreement amounted to $171,000 for the nine months ended June 30, 2021 and was included in the total stock-based compensation expense.

In October 2019, two consulting agreements were executed whereby up to 38,334 shares of common stock were issued as of June 30, 2020 of which 34,167 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 11,667 shares in exchange for consulting services of which 4,667 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 30,000 shares of common stock were issuable of which 25,500 shares of common stock were issued and vested as of June 30, 2020 under this agreement. On May 21, 2020, 22,195 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 $4.53 to $7.95 per share.

General

2017 Plan 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, 2021, 484,623 shares were added to the 2017 Plan as a result of the evergreen provision.

As of June 30, 2021, 361,099 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017 Plan. Unrecognized stock-based compensation was $1,953,964 as of June 30, 2021. The unrecognized share-based expense is expected to be recognized over a weighted average period of 3.0 years.