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Stock-Based Compensation

9 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

NOTE 9 – Stock-Based Compensation

During the three and nine month periods ended June 30, 2022 and 2021, stock-based compensation expense related to stock-based awards was included in selling, general and administrative expenses and research and development costs as follows in the accompanying condensed statements of operations.

		Three Months Ended								Nine Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
Selling, general and administrative		$	211,472			$	816,033			$	569,347			$	1,251,412
Research and development			44,076				62,819				121,989				199,628
Total stock-based compensation expense		$	255,548			$	878,852			$	691,336			$	1,451,040

Stock Options

During the three month periods ended June 30, 2022 and 2021, under the 2017 Equity Incentive Plan (the “2017 Plan”), the Company granted 88,690 and 81,446 stock options, respectively, to its officers and employees. During the nine month periods ended June 30, 2022 and 2021, the Company granted 150,690 and 703,117, respectively, to its officers, employees and consultants. 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 a certain milestone is met. The grant date fair value of the grants issued during the three month periods ended June 30, 2022 and 2021 was $0.57 and $3.65 per share, respectively. The grant date fair value of the grants issued during the nine month periods ended June 30, 2022 and 2021 was $0.76 and $3.01 per share, respectively.

The total expense for the three months ended June 30, 2022 and 2021 related to stock options was $137,109 and $500,149, respectively. The total expense for the nine months ended June 30, 2022 and 2021 related to stock options was $444,891 and $817,761, respectively. The total number of stock options outstanding as of June 30, 2022 and September 30, 2021 was 1,245,582 and 1,122,560, 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 period ended June 30, 2022 and 2021:

		Three Months Ended								Nine Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
Expected stock price volatility			53.5	%			56.0	%			53.5	%			55.9	%
Expected life of options (years)			5.3				5.9				5.6				6.0
Expected dividend yield			0	%			0	%			0	%			0	%
Risk free interest rate			2.8	%			1.0	%			2.3	%			0.6	%

During the three month periods ended June 30, 2022 and 2021, 64,841 and 162,266 stock options vested, respectively, and 5,167 and 21,437 stock options were forfeited during these periods, respectively. During the nine month periods ended June 30, 2022 and 2021, 265,901 and 268,793 stock options vested, respectively and 27,668 and 31,583 stock options were forfeited during these periods, respectively. During the three and nine months ended June 30, 2021, 780 and 1,538 stock options were exercised, respectively, with an intrinsic value of $1,693 and $2,648, respectively. No options were exercised during the three and nine months ended June 30, 2022.

Restricted Stock Units

During the three and nine months ended June 30, 2022, the Company granted an aggregate of 87,720 and 443,670 restricted stock units (“RSUs”) to certain directors, officers and employees under the 2017 Plan. The weighted average grant date fair value of the RSUs granted during the three and nine months ended June 30, 2022 was $1.14 and $1.91 per unit, respectively. The RSUs vest over a one to three year period with some of the RSUs vesting ratably on a monthly and others vesting at 50 percent on the first anniversary of the grant date with the remaining RSUs vesting in equal monthly installments on the last day of each month over 24 months, subject to the recipient’s continued service on such dates. During the three and nine month periods ended June 30, 2021, 13,776 RSUs were granted to directors at a weighted average grant date fair value of $7.26.

During the three months ended June 30, 2022 and 2021, 9,606 and 7,077 RSUs vested, respectively, and no RSUs were forfeited during these periods. During the nine months ended June 30, 2022 and 2021, 18,694 and 23,453 RSUs vested, respectively, and no RSUs were forfeited during these periods. The total expense for the three months ended June 30, 2022 and 2021 related to these RSUs was $118,439 and $39,702, respectively. The total expense for the nine months ended June 30, 2022 and 2021 related to these RSUs was $246,445 and $123,278, 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.

No other stock-based awards were issued during the three and nine month periods ended June 30, 2022 and no expense associated with stock awards was recorded during the three and nine months ended June 30, 2022.

Inducement Plan

On October 4, 2021, the Company adopted the NeuroOne Medical Technologies Corporation 2021 Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 420,350 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The Inducement Plan was approved by the Company’s Board of Directors without stockholder approval in accordance with such rule.

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. Effective January 1, 2022, 1,614,538 shares were added to the 2017 Plan as a result of the evergreen provision.

General

As of June 30, 2022, 1,709,534 shares were available in the aggregate for future issuance under the 2017 Plan and Inducement Plan. No shares were available for future issuance under the 2016 Equity Incentive Plan. Unrecognized stock-based compensation was $1,927,956 as of June 30, 2022. The unrecognized share-based expense is expected to be recognized over a weighted average period of 2.2 years.