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Stock-Based Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

6. Stock-Based Compensation

The Company issues common stock and stock options as incentive compensation to directors and as compensation for the services of employees, contractors and consultants of the Company.

On June 20, 2007, the Board of Directors of the Company approved the 2007 Stock Compensation Plan (the “2007 Plan”), which provided for the granting of awards, consisting of stock options, stock appreciation rights, performance shares, and restricted shares of common stock, to employees and consultants, for up to 416,667 shares of the Company’s common stock, under terms and conditions as determined by the Company’s Board of Directors. The 2007 Plan terminated on June 19, 2017. As of June 30, 2021, unexpired stock options for 83,333 shares were issued and outstanding under the 2007 Plan, which were exercised effective July 14, 2021.

On July 14, 2020, the Board of Directors of the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the granting of equity-based awards, consisting of stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards to employees, officers, directors and consultants of the Company and its affiliates for up to 2,333,333 shares of the Company’s common stock, under terms and conditions as determined by the Company’s Board of Directors. Stockholders holding a majority of the voting power of the common stock of the Company approved the 2020 Plan pursuant to an action by written consent dated July 31, 2020. Stockholders of the Company were notified of such action by written consent pursuant to an Information Statement dated August 31, 2020 and mailed to stockholders on or about September 3, 2020. As of June 30, 2021, unexpired stock options for 400,000 shares were issued and outstanding under the 2020 Plan.

On April 9, 2021, the Board of Directors approved a comprehensive cash and equity compensation package for the members of the Board of Directors and committee members, effective immediately.

Stock-based features of the compensation package consisted of the annual granting of stock options to each non-officer director to purchase 100,000 shares of common stock at the closing market price on the earlier of the date of the annual meeting of shareholders or the last business day of the month ending June 30, vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested, and the granting of stock options to a new director to purchase 250,000 shares of common stock, exercisable at the closing market price on the date of grant for a period of five years, vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested.

Cash-based features of the compensation package are described at Note 8.

The fair value of a stock option award is calculated on the grant date using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the grant date. The expected dividend yield assumption is based on the Company’s expectation of dividend payouts and is assumed to be zero. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The fair market value of the common stock is determined by reference to the quoted market price of the common stock on the grant date.

For stock options requiring an assessment of value during the six months ended June 30, 2021, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model with the following assumptions:


Risk-free interest rate	0.89	%
Expected dividend yield	0	%
Expected volatility	198.79	%
Expected life	3.5 to 3.6 years

There were no stock options requiring an assessment of value during the six months ended June 30, 2020.

On July 15, 2020, as amended on August 12, 2020, in connection with the employment agreement entered into with Eric J. Forman, Mr. Forman was granted options for 58,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options have a term of five years and an exercise price of $7.14 per share, which was equal to the closing price of the Company’s common stock on the grant date. The options vested as to 25% on August 12, 2020, and will vest 25% on each of the first, second and third anniversaries of the grant date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $400,855 ($6.8718 per share), of which $100,214 was attributable to the stock options fully-vested on August 12, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options will be charged to operations ratably from August 12, 2020 through August 12, 2023. During the three months and six months ended June 30, 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $24,985 and $49,695, respectively, with respect to these stock options.

On August 1, 2020, in connection with an employment agreement entered into with Dr. James S. Miser, M.D., Dr. Miser was granted options for 83,334 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options have a term of five years and an exercise price of $7.14 per share, which was equal to the closing price of the Company’s common stock on the effective date of the employment agreement. The options vested as to 25% on the effective date, and will vest 25% on each of the first, second and third anniversaries of the effective date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $572,650 ($6.8718 per share), of which $143,163 was attributable to the stock options fully-vested on August 1, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options will be charged to operations ratably from August 1, 2020 through August 1, 2023. During the three months and six months ended June 30, 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $35,693 and $70,993, respectively, with respect to these stock options.

On August 12, 2020, in connection with the employment agreement entered into with Robert N. Weingarten, Mr. Weingarten was granted options for 58,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options have a term of five years and an exercise price of $7.14 per share, which was equal to the closing price of the Company’s common stock on the grant date. The options vested as to 25% on August 12, 2020, and will vest 25% on each of the first, second and third anniversaries of the grant date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $400,855 ($6.8718 per share), of which $100,214 was attributable to the stock options fully-vested on August 12, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options will be charged to operations ratably from August 12, 2020 through August 12, 2023. During the three months and six months ended June 30, 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $24,985 and $49,695, respectively, with respect to these stock options.

Effective January 6, 2021, in recognition with their service as directors of the Company over the past year, the Company granted to each of Dr. Winson Sze Chun Ho, Dr. Yun Yen, Dr. Stephen Forman, and Dr. Philip Palmedo, fully-vested stock options to purchase an aggregate of 200,000 shares (50,000 shares to each director) of the Company’s common stock, exercisable for a period of five years from the grant date at $3.21 per share, which was the approximate fair market value of the Company’s common stock on such date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $571,312 ($2.8566 per share) and was recorded as a charge to general and administrative costs in the consolidated statement of operations on the grant date.

On April 9, 2021, Winson Sze Chun Ho resigned from the Company’s Board of Directors to focus on clinical and pre-clinical cancer research in academic medicine. Concurrent with his resignation, the Board of Directors appointed Gil Schwartzberg to fill the vacancy created by Dr. Ho’s resignation. In connection with his appointment to the Board of Directors, and in accordance with the recently adopted cash and equity compensation package for the members of the Board of Directors, Mr. Schwartzberg was granted options exercisable for a period of five years to purchase 250,000 shares of the Company’s common stock at an exercise price of $3.20 per share (the closing market price on the date of grant), vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $753,611 ($3.0144 per share), of which $376,800 was attributable to the stock options fully-vested on April 9, 2021 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options will be charged to operations ratably from April 9, 2021 through June 30, 2023. During the three months and six months ended June 30, 2021, the Company recorded a charge to general and administrative costs in the consolidated statement of operations with respect to these stock options of $414,851.

On May 11, 2021, the Board of Directors appointed Regina Brown to the Board of Directors. In connection with her appointment to the Board of Directors, and in accordance with the recently adopted cash and equity compensation package for the members of the Board of Directors, Ms. Brown was granted options exercisable for a period of five years to purchase 250,000 shares of the Company’s common stock at an exercise price of $2.80 per share (the closing market price on the date of grant), vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $658,363 ($2.6335 per share), of which $329,188 was attributable to the stock options fully-vested on May 11, 2021 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options will be charged to operations ratably from May 11, 2021 through June 30, 2023. During the three months and six months ended June 30, 2021, the Company recorded a charge to general and administrative costs in the consolidated statement of operations with respect to these stock options of $350,290.

On June 30, 2021, the Board of Directors, in accordance with the recently adopted cash and equity compensation package for the members of the Board of Directors, granted to each of the five non-officer directors of the Company stock options exercisable for a period of five years to purchase 100,000 shares (a total of 500,000 shares) of the Company’s common stock at an exercise price of $3.03 per share (the closing market price on the date of grant), vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The total fair value of the 500,000 stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $1,421,095 ($2.84225 per share), which will be charged to operations ratably from July 1, 2021 through June 30, 2023.

A summary of stock-based compensation costs for the three months and six months ended June 30, 2021 and 2020 is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

Related parties	$	850,804	$	—	$	1,506,836	$	—
Non-related parties		—		—		—		—
Total stock-based compensation costs	$	850,804	$	—	$	1,506,836	$	—

A summary of stock option activity, including options issued in the form of warrants, during the six months ended June 30, 2021 is presented below.

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)

Stock options outstanding at December 31, 2020		1,475,000		$	4.136
Granted		1,200,000			3.048
Exercised		(125,001	)		0.808
Expired		—			—
Adjustment attributable to reverse stock split		1			—
Stock options outstanding at June 30, 2021		2,550,000		$	3.787		3.79

Stock options exercisable at June 30, 2021		1,650,000		$	3.831		3.24

Total deferred compensation expense for the outstanding value of unvested stock options was approximately $2,791,000 at June 30, 2021, which will be recognized subsequent to June 30, 2021 over a weighted-average period of approximately 24 months.

The exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, at June 30, 2021 are as follows:

Exercise Prices		Options Outstanding (Shares)		Options Exercisable (Shares)

$	0.900		33,333		33,333
$	1.200		83,333		83,333
$	1.680		66,667		66,667
$	2.800		250,000		125,000
$	3.000		666,667		666,667
$	3.030		500,000		—
$	3.200		250,000		125,000
$	3.210		200,000		200,000
$	6.000		166,667		166,667
$	6.600		50,000		50,000
$	7.140		200,000		50,000
$	12.000		83,333		83,333
			2,550,000		1,650,000

The intrinsic value of exercisable but unexercised in-the-money stock options at June 30, 2021 was approximately $362,251, based on a fair market value of $3.03 per share on June 30, 2021.

Outstanding stock options to acquire 900,000 shares of the Company’s common stock had not vested at June 30, 2021.

The Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.