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Note 4 - Equity
 9 Months Ended
Sep. 30, 2022
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]

Note 4 - Equity

 

Registered Direct Offerings

 

On February 10, 2021, the Company completed a registered direct offering in which the Company sold to investors an aggregate of 4,000,000 shares of the Company's common stock at $6.25 per share. The Company received net proceeds of approximately $23.2 million after commissions and expenses.

 

Stock Issuances

 

During the nine months ended September 30, 2022, we issued (i) 15,000 shares of common stock for services provided to us valued at $35,550 to the Chairman of our Scientific Advisory Board, (ii) 13,643 shares of common stock upon the exercise of warrants on a cashless basis, and (iii) 116,973 shares of common stock upon the exercise of options by an executive.

 

During the year ended December 31, 2021, we issued (i) 670,889 shares of common stock upon the exercise of options for cash proceeds of $677,912, and (ii) 86,138 shares of common stock for services provided to us valued at $156,045 to the Chairman of our Scientific Advisory Board and a consultant.

 

Preferred Stock

 

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, none of which are outstanding at September 30, 2022.

 

Common Stock

 

The Company is authorized to issue 200,000,000 shares of common stock with a par value of $0.001 per share, all of which are voting common stock. There were 48,020,324 shares of the Company's common stock outstanding at September 30, 2022.

 

Common Stock Purchase Warrants

 

Common stock purchase warrant activity for the period and year ended September 30, 2022, and December 31, 2021, respectively, is as follows:

 

  

Number of

  

Weighted Average

 
  

Warrants

  

Exercise Price

 

Outstanding at January 1, 2021

  2,154,747  $4.37 

Issued

  50,000   5.29 

Outstanding at December 31, 2021

  2,204,747  $4.39 

Issued

  100,000   1.44 

Cancelled or expired

  (112,993)  4.47 

Exercised

  (13,643)  0.50 

Outstanding at September 30, 2022

  2,178,111  $4.28 

Vested or expected to vest at September 30, 2022

  25,002   3.02 

Exercisable at September 30, 2022

  1,869,778  $4.63 

 

During the nine-month period ended September 30, 2022, the Company issued (i) a warrant to purchase up to 50,000 shares of common stock to a service provider at an exercise price of $1.38 per share, the fair market value of a share of common stock on the date of issuance, and (ii) a warrant to purchase up to 50,000 shares of common stock to a service provider at an exercise price of $1.49 per share, the fair market value of a share of common stock on the date of issuance. During the nine-month period ended September 30, 2022, we recorded share-based compensation of $47,882 associated with the vesting of warrants. 

 

In the year ended  December 31, 2021, the Company issued (i) a warrant to purchase up to 25,000 shares of common stock to a service provider at an exercise price of $7.22 per share, the fair market value of a share of common stock on the date of issuance and (ii) a warrant to purchase up to 25,000 shares of common stock to a service provider at an exercise price of $3.36 per share, the fair market value of a share of common stock on the date of issuance. During the year ended  December 31, 2021, we recorded share-based compensation of $200,282 associated with the vesting of warrants. 

 

On January 29, 2018, the Company entered into an agreement with a consultant whereby the Company agreed to grant warrants to purchase up to 6,000 shares of the Company's common stock at an exercise price of $5.00 per share in consideration of services valued at $30,000 provided to the Company. At September 30, 2022, the Company has not issued these warrants.

 

2018 Equity Incentive Plan

 

The Company’s board of directors and stockholders have approved and adopted the Company’s 2018 Equity Incentive Plan (“2018 Plan”), which became effective on the completion of the IPO on April 3, 2018. The 2018 Plan provides for the grant of incentive stock options that are intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and performance-based cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to the Company’s non-employee directors and consultants.

 

A total of 4,160,000 shares of common stock were initially available under the 2018 Plan, plus a number of shares of common stock (not to exceed 2,628,749 shares) subject to outstanding awards under our 2009 Equity Incentive Plan (the “2009 Plan”) as of the IPO that expire, are forfeited or otherwise terminate or that are used to cover the exercise price or applicable tax withholdings. No further grants will be made under the 2009 Plan.

 

In addition, the number of shares of common stock reserved for issuance under the 2018 Plan automatically increases on January 1 of each year, since  January 1, 2019, by 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our Board or a committee appointed to administer the 2018 Plan.

 

On  January 1, 2021, and 2022, the number of shares of common stock reserved for issuance under the 2018 Plan was increased by an aggregate of 2,155,884 and 2,393,735 shares, respectively. As of September 30, 2022, a total of 564,272 shares of common stock remain available for issuance under the 2018 Plan.

 

2018 Employee Stock Purchase Plan

 

The Company’s board of directors and stockholders approved and adopted the Company’s 2018 Employee Stock Purchase Plan (“ESPP”), which became effective on April 3, 2018. The ESPP has not yet been utilized as a benefit available to our employees. The ESPP authorizes the issuance of 208,050 shares of the Company’s common stock pursuant to purchase rights that may be granted to our eligible employees. The number of shares of common stock reserved for issuance under the ESPP is automatically increased on January 1 of each calendar year, beginning on January 1, 2019, by 2% of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the administrator of the ESPP. The administrator of the ESPP determined not to increase the number of shares reserved for issuance under the ESPP on  January 1, 2022.

 

Stock Options

 

As of September 30, 2022, the Company had outstanding stock options to purchase 11,291,827 shares of common stock that have been granted to various executives, employees, directors, and independent contractors. These options vest immediately or over periods ranging from 12 to 48 months, are exercisable for a period of up to ten years, and enable the holders to purchase shares of our common stock at exercise prices ranging from $0.30 to $9.80 per share. The per-share fair values of these options range from $0.24 to $7.93, based on Black-Scholes-Merton pricing models with the following assumptions:

 

Expected term (in years):

  10 

Risk-free rate:

  

0.07% – 3.26%

 

Volatility:

  

75.98% – 88.38%

 

Dividend yield:

  

0%

 

 

During the nine-month period ended  September 30, 2022, the Company (i) granted stock options to purchase an aggregate of 2,901,166 shares of the Company's common stock with exercise prices ranging from $1.36 to $3.50 per share to executives and employees, (ii) cancelled options to purchase 66,667 shares of common stock at exercise prices ranging from $2.00 to $3.66 per share in connection with the termination of certain employees, and (iii) issued 116,973 shares of the Company's common stock upon the exercise of options held by an executive with an exercise price of $0.02 per share. 

 

In the year ended  December 31, 2021, the Company (i) granted stock options to purchase an aggregate of 2,519,628 shares of the Company's common stock with exercise prices ranging from $2.72 to $7.22 per share to executives, employees, board members, and consultants, (ii) cancelled options to purchase 118,507 shares of common stock with exercise prices ranging from $1.45 to $7.22 per share in connection with the termination of employment of employees, and (iii) issued 670,889 shares of the Company's common stock upon the exercise of options held by consultants, a former board member, and a former executive, with exercise prices ranging from $0.015 to $2.15 per share.

 

The weighted average remaining contractual term for the outstanding options at  September 30, 2022 and  December 31, 2021 is 7.31 and 7.24 years, respectively.
 

Stock option activity for the nine months ended September 30, 2022, and year ended  December 31, 2021 is as follows:

 

  

Number of

  

Weighted Average

 
  

Shares

  

Exercise Price

 

Outstanding at January 1, 2021

  6,844,069  $2.81 

Options granted

  2,519,628   4.26 

Options exercised

  (670,889)  1.01 

Options expired

  (118,507)  3.00 

Outstanding at December 31, 2021

  8,574,301  $3.35 

Options granted

  2,901,166   2.18 

Options exercised

  (116,973)  0.02 

Options expired or cancelled

  (66,667)  2.55 

Outstanding at September 30, 2022

  11,291,827  $3.09 

Vested or expected to vest at September 30, 2022

  578,807   2.94 

Exercisable at September 30, 2022

  6,579,287  $3.23 

 

Share-Based Compensation

 

For the nine months ended September 30, 2022, the Company's total share-based compensation was approximately $3.2 million, nearly all of which represents the vesting of options issued to executives, employees, and service providers. As of  September 30, 2022, the Company’s total compensation cost related to non-vested time-based stock option awards and warrants granted to executives, employees, board members, and service providers and not yet recognized was approximately $9.6 million. The Company expects to record this stock-based compensation expense over the next three years using a graded vesting method. As of September 30, 2022, the weighted average term over which these expenses are expected to be recognized is 1.97 years. 

 

As of September 30, 2022, there are no performance-based stock option awards outstanding and one performance-based warrant outstanding issued to a service provider. The Company’s total compensation cost related to the non-vested performance-based warrant not yet recognized was approximately $300,000. The entirety of this warrant may be recognized and recorded upon the achievement of certain milestones.