Quarterly report pursuant to Section 13 or 15(d)

Stockholders??? (Deficit) Equity

v3.20.1
Stockholders’ (Deficit) Equity
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Stockholders’ (Deficit) Equity Stockholders’ (Deficit) Equity
Preferred Stock
On February 19, 2019, all outstanding shares of Series A and Series B preferred stock and accrued dividends on these shares were converted into 2,534,766 and 954,696 shares of common stock upon the closing of the Company’s IPO. The Company amended its articles of incorporation on February 19, 2019 to no longer have preferred shares authorized under the amended certificate of incorporation.
Adoption of 2012 Long Term Incentive Plan
In November 2012, the Company’s Board and stockholders adopted the 2012 Long Term Incentive Plan (the “2012 Stock Plan”). The 2012 Stock Plan is designed to enable the Company to offer employees, officers, directors and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the 2012 Stock Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Company’s Board. The 2012 Stock Plan reserves shares of common stock for issuance in accordance with the 2012 Stock Plan’s terms. Total number of shares reserved and available for issuance under the plan is 789,745 shares. As of March 31, 2020, 14,745 shares remained under the 2012 Stock Plan. The Company no longer utilizes the 2012 Stock Plan and instead utilizes the 2018 Stock Plan.
Adoption of 2018 Stock Plan
In June 2018, the Company’s Board and stockholders adopted the 2018 Stock Plan. The 2018 Stock Plan is designed to enable the Company to offer employees, officers, directors and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the 2018 Stock Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Company’s Board. The 2018 Stock Plan reserves shares of common stock for issuance in accordance with the 2018 Stock Plan’s terms. Total number of shares reserved and available for issuance under the plan is 3,400,000 shares. As of March 31, 2020, 143,950 shares remained available for grant under the 2018 Stock Plan.
Restricted Stock
Restricted stock activity for the three months ended March 31, 2020 is summarized as follows:
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Outstanding, December 31, 2019 158,336    $ 11.54   
Vested (12,498)   11.54   
Outstanding, March 31, 2020 145,838    $ 11.54   
On May 8, 2019, the Company granted and issued 200,000 shares of restricted common stock to three consultants in connection with the provision of services pursuant to agreements entered into in April 2019. The consultants were each accredited investors. 25,000 shares vested within four months of the approval date of the agreement. The remaining 175,000 shares vest over 42 months, beginning on September 19, 2019. As of March 31, 2020, 54,162 shares have vested and 145,838 remain unvested.
During the three months ended March 31, 2020 and 2019, the Company recorded $126,219 and $264,453, respectively, in stock-based compensation for the restricted shares previously issued.
As of March 31, 2020, there was $1,556,698 of unrecognized compensation expense related to restricted shares.
Stock Options
The following table summarizes stock option activities for the three months ended March 31, 2020:
Number of
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining Life
(in Years)
Aggregate
Intrinsic
Value
Outstanding, December 31, 2019 2,883,550    $ 2.70    8.62 $ 23,861,981   
Granted 387,500    11.74    —    —   
Outstanding, March 31, 2020 3,271,050    $ 3.77    8.53 $ 15,391,278   
Exercisable, March 31, 2020 968,950    $ 1.74    8.45 $ 6,528,096   
During the three months ended March 31, 2020, the Company granted certain individuals options to purchase 387,500 shares of common stock with an average exercise price of $11.74 per share, with contractual terms ranging from five to ten years, and vesting periods ranging from 8.33% monthly over one year to 25.00% per year over four years. The options have an aggregate grant date fair value of $3,247,052 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rates ranging from 1.42% to 1.56% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected lives ranging from 5.75 to 6.25 years based on the simplified method (vesting plus contractual term divided by two), (3) expected volatility ranging from 83.1% to 83.4% based on the historical volatility of comparable companies' stock, (4) no expected dividends and (5) fair value of the Company's stock ranging from $11.71 to $13.50 per share.
All options issued and outstanding are being amortized over their respective vesting periods. During the three months ended March 31, 2020 and 2019, the Company recorded option expense of $585,267 and $247,592, respectively. The unrecognized compensation expense for options at March 31, 2020 was $6,146,925.
Warrants
During the year ended December 31, 2018, the Company issued warrants to purchase 776,350 shares of common stock at an exercise price of $1.75. The warrants expire five years from the date of issuance. The warrants were issued to placement agents and investors in connection with certain notes.
In January and February 2019, the Company issued warrants to purchase 300,000 shares of common stock at an exercise price of $1.75 on various dates. The warrants were issued to investors in connection with certain notes.
On February 19, 2019, the Company issued warrants to the underwriters of the Company's IPO to purchase 152,081 shares of common stock at an exercise price of $6.00. The warrants expire five years from the date of issuance.
The aggregate grant date fair value of these 1,228,431 warrants was $1,636,232, which was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option-pricing model include (1) discount rates in the range of 2.5% to 2.8% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected terms of five years based on the terms of the warrants, (3) expected volatility of 84% to 85% based on the historical volatility of comparable companies' stock, (4) no expected dividends, and (5) fair value of the Company's stock at $1.67 per share for warrants issued prior to the IPO, a value determined by the Company's Board of Directors after reviewing and considering, among other factors, a valuation report issued by an independent appraisal firm, or the fair value of the Company's stock at the closing of its' IPO on February 19, 2019 of $4.87 for warrants on that day.
The fair value amount was included in discounts on convertible notes payable and was amortized over the life of the convertible notes payable. As a result of the Company’s IPO closing on February 19, 2019, $664,953 of unamortized discount on convertible notes payable was accelerated and recorded as expense.
PIPE Offerings
On June 16, 2019, the Company entered into a private offering with certain institutional and accredited investors for the sale by the Company of 675,000 units (each a “June Unit”) of common stock issued at $14.00 per June Unit for total gross proceeds of $9,450,000. Each June Unit consisted of (i) one share of the Company’s common stock, and (ii) a warrant to purchase 0.7 shares (a total of 472,500) of common stock (each a “June Warrant”) (collectively, "June PIPE"). The June Warrants included in the June Units are exercisable at a price of $16.00 per share commencing on the date of issuance and will expire on August 23, 2024. On July 1, 2019, the Company filed a Registration Statement on Form S-1 to register for resale the common stock underlying the June Units sold with the Company's June 2019 private offering. Net proceeds from the closing of the sale of the June Units on June 19, 2019 were $8,643,302 after deducting the placement agent fees and offering expenses.
The grant date fair value of these 472,500 June Warrants was $4,420,503, which was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option-pricing model include (1) discount rate of 1.85% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected term of five years based on the term of the warrants, (3) expected volatility of 85% based on the historical volatility of comparable companies' stock, (4) no expected dividends, and (5) fair value of the Company's stock at $14.30 per share.
On October 10, 2019, the Company entered into a private offering with certain institutional and accredited investors for the sale by the Company of 485,250 units (each an “October Unit”) of common stock issued at $12.88 per October Unit for total gross proceeds of $6,250,020. Each October Unit consisted of (i) one share of the Company’s common stock and (ii) a warrant to purchase 1.1 shares (a total of 533,775) of common stock (each an “October Warrant”) (collectively, "October PIPE"). The October Warrants included in the October Units are exercisable at a price of $12.88 per share commencing on the date of issuance and will expire on October 10, 2024. On November 8, 2019, the Company filed a Registration Statement on Form S-1 to register for resale the common stock underlying the October Units sold with the Company's October 2019 private offering. Net proceeds from the closing of the sale of the October Units on October 11, 2019 were $5,738,111 after deducting the placement agent fees and offering expenses.
The grant date fair value of these 533,775 October Warrants was $4,537,648, which was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option-pricing model include (1) discount rate of 1.59% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected term of five years based on the term of the warrants, (3) expected volatility of 82.92% based on the historical volatility of comparable companies' stock, (4) no expected dividends, and (5) fair value of the Company's stock at $12.88 per share.

The fair value amount of these PIPE transaction warrants were included in additional paid-in-capital as deal costs.
The following table summarizes warrant activity for the three months ended March 31, 2020:
Number of
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term
(in Years)
Aggregate
Intrinsic
Value
Outstanding, December 31, 2019 1,374,608    $ 10.97    4.43 $ 13,591   
Granted —    —    —    —   
Exercised (11,394)   1.75    —    76,682   
Forfeited (cashless exercise) (3,606)   1.75    —    —   
Outstanding, March 31, 2020 1,359,608    $ 11.07    4.19 $ —   
Exercisable, March 31, 2020 1,359,608    $ 11.07    4.19 $ —