Note 6 – Stock-Based Compensation

Equity Incentive Plans

2013 Equity Incentive Plan

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the 2013 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 1,500,000 shares, bringing to 8,785,967 the total number of shares approved for issuance under that plan. 

As of September 30, 2022, 1,180,012 shares of common stock remain eligible to be issued through equity-based instruments under the 2013 Equity Incentive Plan.

2014 Non-Employee Equity Compensation Plan

Effective on May 26, 2020, the Company’s stockholders approved the amendment and restatement of the 2014 Non-Employee Equity Compensation Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 800,000 shares, bringing to 1,650,000 the total number of shares approved for issuance under that plan.

As of September 30, 2022, 634,867 shares of common stock remain eligible to be issued through equity-based instruments under the 2014 Non-Employee Equity Compensation Plan.

2015 Performance Share Unit Plan

Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the 2015 Performance Share Unit Plan to increase the number of shares reserved for issuance through equity-based instruments thereunder by 1,700,000 shares, bringing to 5,110,104 the total number of shares approved for issuance under that plan.

As of September 30, 2022, 2,124,013 shares of common stock remain eligible to be issued through equity-based instruments under the 2015 Performance Share Unit Plan.

2017 Equity Inducement Plan

On December 28, 2017, the Board approved the 2017 Equity Inducement Plan. Under the 2017 Equity Inducement Plan, the Board reserved 600,000 shares for the grant of RSUs. These grants will be administered by the Board or a committee of the Board. These awards will be granted to individuals who (a) are being hired as an employee by the Company or any subsidiary and such award is a material inducement to such person being hired; (b) are being rehired as an employee following a bona fide period of interruption of employment with the Company or any subsidiary; or (c) will become an employee of the Company or any subsidiary in connection with a merger or acquisition.

As of September 30, 2022, 1,569,170 shares of common stock remain available to be issued through equity-based instruments under the 2017 Equity Inducement Plan. On July 20, 2022, the Board increased the number of shares of common stock reserved and available for issuance under the 2017 Equity Inducement Plan by 2,000,000 shares.

Employee Stock Purchase Plan

In April 2015, the Company’s Board approved the ESPP, under which 600,000 shares of common stock have been reserved for purchase by the Company’s employees, subject to the approval by the Company’s stockholders. On May 21, 2015, the Company’s stockholders approved the ESPP. Effective on June 16, 2021, the Company’s stockholders approved the amendment and restatement of the ESPP to increase the number of shares reserved for issuance through equity-based instruments thereunder by 700,000 shares, bring to 1,550,000 the total number of shares approved for issuance under that plan. Under the ESPP, employees may designate an amount not less than 1% but not more than 10% of their annual compensation for the purchase of Company shares. No more than 7,500 shares may be purchased by an employee under the ESPP during an offering period. An offering period shall be six months in duration commencing on or about January 1 and July 1 of each year. The exercise price of the option will be the lesser of 85% of the fair market of the common stock on the first business day of the offering period and 85% of the fair market value of the common stock on the applicable exercise date.

Note 6 – Stock-Based Compensation, continued

As of September 30, 2022, 353,751 shares of common stock remain eligible to be issued under the ESPP. Employees contributed $84,977 through payroll withholdings to the ESPP as of September 30, 2022 for the current offering period which will end on December 31, 2022 with shares deemed delivered on that date.

Stock Option Activity

During the nine months ended September 30, 2022, the Board granted our Chief Executive Officer 300,000 stock options under the 2013 Equity Incentive Plan at an exercise price of $1.27 per share with half of the options vesting on the second anniversary of the vesting start date and a quarter of the options vesting on each of the two following anniversaries.

The Company estimated the fair value of stock options granted during the second quarter of 2022 using the Black-Scholes option pricing model. No stock options were granted during the first quarter or third quarter of 2022. The fair values of stock options granted during the second quarter of 2022 were estimated using the following assumptions:

The following is a summary of the Company’s stock option activity during the nine months ended September 30, 2022:

As of September 30, 2022, the unamortized fair value of options was $255,253. The unamortized amount will be expensed over a weighted average period of 2.8 years.

Performance Share Units (“PSUs”)

On July 20, 2022, the Board granted the Company’s Chief Executive Officer, Cesar Johnston, up to 287,000 PSUs under the Company’s 2015 Performance Share Unit Plan pursuant to the terms of Mr. Johnston’s offer letter with the Company (See Note 4 – Commitments and Contingencies). The up to 287,000 PSUs that have been approved shall vest as follows: (a) up to 187,000 PSU shares shall vest on December 31, 2022, subject to Mr. Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr. Johnston of certain performance metrics previously determined by the Compensation Committee and approved by the Board, and (b) up to an additional 50,000 PSU shares shall vest on each of December 31, 2023 and December 31, 2024, subject to Mr. Johnston’s continued service as Chief Executive Officer and the achievement, to be determined in the Compensation Committee’s sole discretion, by Mr. Johnston of certain performance metrics to be recommended by the Compensation Committee and approved by the Board at a subsequent date. As of September 30, 2022, only 187,000 PSUs have approved performance criteria.

Note 6 – Stock-Based Compensation, continued

As of September 30, 2022, the unamortized fair value of the PSUs was $84,670. The unamortized amount will be expensed over a weighted average period of 0.25 years. A summary of the activity related to PSUs for the nine months ended September 30, 2022 is presented below:

Restricted Stock Units (“RSUs”)

During the nine months ended September 30, 2022, the Board granted various employees RSUs covering 1,038,700 shares of common stock under the 2013 Equity Incentive Plan. The awards vest over terms ranging from two to four years.

During the nine months ended September 30, 2022, the Compensation Committee and the Board granted various non-employees RSUs covering 290,055 shares of common stock under the 2014 Non-Employee Equity Compensation Plan. The awards vest over terms ranging from one to two years.

During the nine months ended September 30, 2022, the Board granted various employees RSUs covering 601,000 shares of common stock under the 2017 Equity Inducement Plan. The awards vest over four years.

As of September 30, 2022, the unamortized fair value of the RSUs was $3,212,555. The unamortized amount will be expensed over a weighted average period of 1.9 years. A summary of the activity related to RSUs for the nine months ended September 30, 2022 is presented below:

Employee Stock Purchase Plan (“ESPP”)

The current offering period under the ESPP started on July 1, 2022 and will conclude on December 31, 2022. The recently completed offering period under the ESPP started on January 1, 2022 and concluded on June 30, 2022. During the year ended December 31, 2021, there were two offering periods. The first offering period began on January 1, 2021 and concluded on June 30, 2021. The second offering period began on July 1, 2021 and concluded on December 31, 2021.

The weighted-average grant-date fair value of the purchase option for each designated share purchased under the ESPP was approximately $0.36 and $1.05 for the nine months ended September 30, 2022 and 2021, respectively, which represents the fair value of the option, consisting of three main components: (i) the value of the discount on the enrollment date, (ii) the proportionate value of the call option for 85% of the stock and (iii) the proportionate value of the put option for 15% of the stock. The Company recognized compensation expense for the ESPP of $22,084 and $76,814 for the three months ended September 30, 2022 and 2021, respectively, and the Company recognized compensation expense for the ESPP of $104,485 and $194,781 for the nine months ended September 30, 2022 and 2021, respectively.

Note 6 – Stock-Based Compensation, continued

The Company estimated the fair value of ESPP purchase options granted during the nine months ended September 30, 2022 and 2021 using the Black-Scholes option pricing model. The fair values of ESPP purchase options granted were estimated using the following assumptions:

Stock-Based Compensation Expense

The following tables summarize total stock-based compensation costs recognized for the three and nine months ended September 30, 2022 and 2021:

The total amount of stock-based compensation was reflected within the statements of operations as: