Stock Option Plan

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

In 2010, the Company adopted the 2010 Equity Incentive Plan (the “2010 Plan”), which provides for the grant of restricted stock awards, stock options, and other share-based awards to employees, consultants, and directors. In November 2020, the Company’s Board of Directors extended the term of the 2010 Plan to July 1, 2021. In 2021, the Company adopted the 2020 Equity Incentive Plan (the “2020 Plan”), which provides for the grant of restricted stock awards, incentive and non-statutory stock options, and other share-based awards to employees, consultants, and directors. As of September 30, 2022, there is an aggregate of 3,300,000 common shares reserved for issuance under the 2020 Plan. All options granted to date have a ten years contractual life and vesting terms of four years. In general, vested options expire if not exercised at termination of service. As of September 30, 2022, a total of 853,061 shares of common stock remained available for future issuance under the 2020 Plan.

Stock-based compensation expense recognized in selling, general, and administrative, and research and development for the three and nine months ended September 30 are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Options	$	633,883	$	778,922	$	2,004,641	$	1,841,930
Restricted stock	377,790		537,693		2,178,883		805,665
Total	$	1,011,673	$	1,316,615	$	4,183,524	$	2,647,595

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options. Fair value is estimated at the date of grant for employee and nonemployee options. The following assumptions were used in the Black-Scholes model to calculate the fair value of stock options granted for the nine months ended September 30, 2022 for the 2010 Plan and the 2020 Plan.


	2010 Plan		2020 Plan
Expected life of options (in years) (1)	6.1		6.1
Dividend yield (2)	0	%	0	%
Risk-free interest rate (3)	2.94	%	2.54	%
Volatility (4)	57.0	%	55.8	%

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(1)The expected life of options is the average of the contractual term of the options and the vesting period.

(2)No cash dividends have been declared on the Company’s common stock since the Company’s inception, and the Company currently does not anticipate declaring or paying cash dividends over the expected life of the options.

(3)The risk-free interest rate is based on the yields on U.S. Treasury debt securities with maturities approximating the estimated life of the options.

(4)Volatility is estimated by management. As the Company has been a private company for most of its existence, there is not enough historical volatility data related to the Company’s Common stock as a public entity. Therefore, this estimate is based on the average volatility of certain public company peers within the Company’s industry.

The following is a summary of the stock option activity under the 2010 Plan, as converted to the Company’s shares due to Reverse Recapitalization, for the nine months ended September 30, 2022:


	Shares	Weighted- Average Exercise Price per Share($)	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value($)
Outstanding - December 31, 2021	1,035,035	3.21	5.90	5,688,201
Granted	—	—	—	—
Exercised	(59,729)	2.09	—	—
Forfeited	(44,030)	7.49	—	—
Expired/Cancelled	(19,249)	6.68	—	—
Outstanding - September 30, 2022	912,027	3.16	5.59	80,968

Options Exercisable at September 30, 2022	824,446	2.54	4.51	80,968
Option Vested at September 30, 2022	823,915	2.54	4.51	80,968

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2022 was zero.

The following is a summary of the stock option activity under the 2020 Plan for the nine months ended September 30, 2022:


	Shares	Weighted- Average Exercise Price per Share ($)	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value($)
Outstanding - December 31, 2021	1,602,850	13.18	9.27	46,920
Granted	281,100	5.25	9.92	—
Exercised	—	—	—	—
Forfeited	(201,388)	10.29	—	—
Expired/Cancelled	(1,250)	8.25	—	—
Outstanding - September 30, 2022	1,681,312	12.10	8.67	—

Options Exercisable at September 30, 2022	519,932	13.36	8.47	—
Option Vested at September 30, 2022	519,932	13.38	8.47	—

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2022 was $2.82.

During the year ended December 31, 2021, 1,640,000 options were modified to lower the exercise price by $0.60 per share, which resulted in $246,000 of incremental compensation cost to be recognized over the remaining vesting period. The amount of additional compensation expense for the three and nine months ended September 30, 2022, was $16,791 and $55,307, respectively. The amount of additional compensation expense for the three and nine months ended September 30, 2021, was $20,758 and 42,486, respectively.

Other Information:


	Nine Months Ended September 30,
	2022		2021
Amount received from option exercised	$	209,280	$	18,325

	September 30, 2022				Weighted average remaining recognition period
Total unrecognized options compensation costs	$	7,083,318			2.69

No amounts relating to the Plan have been capitalized. Compensation cost is recognized over the requisite service period based on the fair value of the options.

A summary of the status of the Company’s nonvested restricted stock units as of December 31, 2021, and changes during the nine months ended September 30, 2022, is presented below:


	Shares	Weighted- Average Grant Date Fair Value($)
Nonvested at December 31, 2021	353,817	11.00
Granted	358,113	4.61
Vested/Release	(204,936)	11.19
Cancelled/Forfeited	(22,456)	8.72
Nonvested and Outstanding at September 30, 2022	484,538	6.30

As of September 30, 2022, there was $2,321,733 of total unrecognized compensation cost related to nonvested restricted stock. The Company expects to recognize this compensation cost over a remaining weighted-average period of approximately 1.3 years.