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Stock-Based Compensation
 6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement, Disclosure [Abstract]  
Stock-Based Compensation

NOTE 5 – STOCK-BASED COMPENSATION

 

Stock Incentive Plans

 

The Co-Diagnostics, Inc. 2015 Long Term Incentive Plan reserves an aggregate of 6,000,000 shares of common stock issuable upon the grant of awards under the plan. The number of unissued awards authorized under the plan at June 30, 2020 was 3,828,183.

  

Stock Options

 

We use a Black-Scholes model to value granted stock options which requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected option term. In determining the expected volatility our computation is based the stock prices of 3 comparable companies and is based on a combination of historical and market-based implied volatility. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the option was granted with a maturity equal to the expected term of the option. The fair values for the options granted were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

 

    Six months ended June 30,  
    2020     2019  
Risk-free interest rate     1.05 %     1.56 %
Expected life (years)     7.3       10.0  
Expected volatility     62.82 %     63.65 %
Expected dividend yield     None       None  
Stock price   $ 8.14     $ 1.07  

 

We recognized $301,568 and $703,198 of stock-based compensation expense, related to stock options for the three and six months ended June 30, 2020 respectively, which is included in administrative and general expenses.

 

We recognized $126,483 and $214,278 of stock-based compensation expense, related to stock options for the three and six months ended June 30, 2019, respectively, which is included in administrative and general expenses.

 

The following table summarizes option activity during the year ended December 31, 2019 and the six months ended June 30, 2020, respectively.

 

    Number of Options     Weighted Average Exercise Price     Weighted Average Fair Value     Weighted Average Remaining Contractual Life (Years)  
Outstanding at January 1, 2019     1,172,707     $ 1.85     $ 1.09       8.72  
Granted     890,000       1.07       0.52       9.66  
Expired     -       -       -       -  
Forfeited/Cancelled     (40,890 )     3.85       1.59       8.04  
Exercised     -       -       -       -  
Outstanding at December 31, 2019     2,021,817     $ 1.69     $ 0.83       8.73  
Granted     150,000       8.14       4.70       7.30  
Expired     -       -       -       -  
Forfeited/Cancelled     -       -       -       -  
Exercised     (420,289 )     1.53       0.79       7.62  
Outstanding at June 30, 2020     1,751,528     $ 2.28     $ 1.21       8.50  

 

The intrinsic value of options outstanding at June 30, 2020 and 2019 was $15,462,981 and $72,093, respectively. There were 843,333 and 566,667 of unvested option included the table above as of June 30, 2020 and 2019, respectively. At June 30, 2020 there were 843,333 unvested options.

 

Warrants

 

The Company estimates the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model. The Company amortizes the fair value of issued warrants using a vesting schedule based on the terms and conditions of each warrant. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected warrant term. In determining the expected volatility, our computation is based on the stock prices of three comparable companies and on a combination of historical and market-based implied volatility. The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the warrant was issued with a maturity equal to the expected term of the warrant.

 

The following table summarizes warrant activity during the year ended December 31, 2019 and the six months ended June 30, 2020, respectively.

 

    Number of Warrants     Weighted Average Exercise Price     Weighted Average Fair Value     Weighted Average Remaining Contractual Life (Years)  
Outstanding at January 1, 2019     483,535     $ 4.92     $ 1.99       3.29  
Granted     500,000       1.53       1.46       5.00  
Expired     -       -       -       -  
Forfeited/Cancelled     -       -       -       -  
Exercised     -       -       -       -  
Outstanding at December 31, 2019     983,535     $ 1.44     $ 1.03       3.34  
Granted     20,000       16.49       15.19       5.00  
Expired     -       -       -       -  
Forfeited/Cancelled     -       -       -       -  
Exercised     (894,445 )     1.37       1.05       2.80  
Outstanding at June 30, 2020     109,090     $ 2.06     $ 1.17       3.62  

 

The intrinsic value of options and warrants exercised in the six months ended June 30, 2020 was $16,083,097. Total unrecognized stock-based compensation was $468,295 at June 30, 2020 for options granted. The Company expects to recognize the aggregate amount of this compensation expense over the next years in accordance with contractual provisions and vesting as follows:

 

Year Ending December 31,      
2020   $ 198,148  
2021     234,149  
2022     35,998  
Total   $ 468,295