The 2011 Equity Incentive Plan (the “2011 Plan”) was adopted by the Board on April 28, 2011 and approved by the Company’s stockholders on June 15, 2011. The 2011 Plan serves as the successor to the Company’s 2006 Stock Option Plan (the “2006 Plan”). Since the effective date of the 2011 Plan, all future equity awards were made from the 2011 Plan, and no additional awards will be granted under the 2006 plan. Under the 2011 Plan, 3,000,000 shares of the Company’s common stock were initially reserved for issuance pursuant to a variety of share-based compensation awards, plus any shares available for issuance under the 2006 Plan or are subject to awards under the 2006 Plan which are forfeited or lapse unexercised and which following the effective date are not issued under the 2006 Plan. In accordance with the provision of the 2011 Plan, the Board approved an increase of 1,500,000 shares each year to the plan on January 1, 2019 and 2020.

As of December 31, 2019, the Company had 3,860,390 stock options outstanding and an additional 1,547,211 shares of common stock available for grant under the 2011 Plan. As of December 31, 2018, there were 3,552,890 stock options outstanding and 1,136,211 shares of common stock available for grant under the 2011 Plan.

Options are granted to purchase common stock at prices that are equal to the fair value of the common shares on the date the option is granted. Vesting is determined by the Board at the time of grant. The term of any stock option awards under the Company’s 2011 Plan is no more than 10 years except for qualified options granted to the CEO (five years) and certain contractors (two years).

The grant-date fair value of each option grant is estimated using the Black-Scholes option pricing model and amortized on a straight-line basis over the requisite service period, which is generally the vesting period, for each separately vesting portion of the award as if the award was, in substance, multiple awards. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the following:

Expected dividend yield. The expected dividend yield is zero, as the Company has never paid dividends to common shareholders and does not currently anticipate paying any in the foreseeable future.

Expected stock price volatility. The expected stock price volatility was calculated based on the Company’s own volatility since the DuPont Transaction. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities since 2016, as the DuPont Transaction resulted in significant changes in the Company’s business and capital structure.

Expected life of option. The expected life of option was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The Company uses the weighted average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except for the options granted to the CEO (i.e., 5 years) and certain contractors (i.e., 2 years).

Discount for lack of marketability. The Company applies a discount to reflect the lack of marketability due to the holding period restriction of its shares under Rule 144 prior to its April 2019 uplisting to the NASDAQ. The discount for lack of marketability is no longer applicable since the uplisting of the Company’s common stock.


	Years Ended December 31,
	2019	2018
Risk-Free interest rate	1.69% - 2.50%	2.24% - 2.96%
Expected dividend yield	—%	—%
Expected stock price volatility	28.59% - 37.29%	27.80% - 30.36%
Expected life of options	2 - 6.25 Years	5 - 6.25 years
Discount for lack of marketability	0 - 8.48%	9.35%


	Shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2017	2,712,390	$1.62	6.09	$69,090
Granted	1,120,500	1.44
Exercised	(30,000)	0.15
Expired	—	—
Canceled	(250,000)	1.69
Outstanding at December 31, 2018	3,552,890	$1.57	5.06	$1,149,461
Granted⁽¹⁾	1,089,000	2.26
Exercised ⁽²⁾	(781,500)	1.60
Expired	—	—
Canceled	—	—
Outstanding at December 31, 2019	3,860,390	$1.76	5.69	$13,287,932

Exercisable at December 31, 2019	2,747,073	$1.65	4.61	$9,712,729

•Annual share-based compensation awards on January 2, 2019, including: (a) 600,000 stock options with an exercise price of $1.87 per share granted to executives and key personnel, vesting upon grant, or one year anniversary, or vest annually in equal installments over four years, (b)300,000 stock options with an exercise price of $1.87 per share granted to the Board, vesting 25% upon grant and the remaining 75% will vest annually in equal installments over four years, and (c) 24,000 stock options with an exercise price of $1.87 per share granted to employees, vesting annually in equal installments over four years.

•One-time awards granted on (a) January 2, 2019 of 50,000 stock options with an exercise price of $1.87 per share granted to a contractor, vesting upon one year anniversary, (b) March 7, 2019 of 15,000 stock options with an exercise price of $3 per share granted to a contractor, vesting upon one year anniversary, (c) June 25, 2019 of 75,000 stock options with an exercise price of $5.83 per share granted to three members of the Board, vesting upon one year anniversary, and (d) June 28, 2019 of 25,000 stock options with an exercise price of $6.26 per share granted to the Chief Financial Officer, vesting immediately.

•A total of 781,500 stock options exercised with a weighted average market price of $1.60, including (a) net share exercise of 440,000 stock options resulting in the issuance of 304,171 shares of common stock, and surrender of 135,829 shares, and (b) 341,500 stock options exercised with cash payment.

The weighted average grant-date fair market value of stock options granted for the years ended December 31, 2019 and 2018 was $0.69 and $0.41 respectively, based on the Black-Scholes option pricing model. The intrinsic value of options exercised for the years ended December 31, 2019 and 2018 was $2,925,662 and $39,360, respectively.

As of December 31, 2019 and 2018, total unrecognized compensation cost related to non-vested stock options granted under the Company’s share option plan was $222,330, and $162,786, respectively, which is expected to be recognized over a weighted average period of 1.83 years and 2.39 years, respectively. The Company will adjust unrecognized compensation cost for actual forfeitures as they occur.

We recognize all share-based payments to employees, consultants, and our Board, as non-cash compensation expense, in research and development expenses or general and administrative expenses in the consolidated statement of operations, and these charges had no impact on the Company’s reported cash flows. Stock-based compensation expense is calculated on the grant date fair values of such awards, and recognized each period based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur.

For performance-based awards, the Company recognizes related stock-based compensation expense based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date. For the year ended December 31, 2019, the Company recognized the expense related to the performance-based awards granted prior years upon the Company’s April 2019 uplisting to the NASDAQ of approximately $483,000.