Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Stock-Based Compensation

11. Stock-Based Compensation

11. Stock-Based Compensation

2012 Equity Incentive Plan

The 2012 Equity Incentive Plan, as amended, was adopted by the Company’s board and approved by the members of Celcuity LLC on August 10, 2012. The Company reserved a maximum of 625,000 shares of common stock for issuance under the 2012 Equity Incentive Plan. The 2012 Equity Incentive Plan provides for options, restricted stock awards, performance stock awards or stock bonuses. The exercise price of each option granted under the 2012 Equity Incentive Plan is not less than 100% of the fair market value of one share on the date of grant. The maximum permitted term of options granted under the 2012 Equity Incentive Plan is ten years. The Company’s board administers the 2012 Equity Incentive Plan and determines the provisions of incentive awards, including eligible recipients, number of shares subject to an incentive award, exercise price, vesting schedule, duration of an incentive award and other restrictions an incentive award may be subject to. The 2012 Equity Incentive Plan was frozen on September 6, 2017 and any new awards will be issued under the terms of the 2017 Amended and Restated Stock Incentive Plan.

2017 Stock Incentive Plan

The 2017 Amended and Restated Stock Incentive Plan (the “2017 Plan”) was adopted by the Company’s board on September 6, 2017, became effective following the corporate conversion on September 15, 2017, and was approved by stockholders at the Company’s annual stockholder meeting on May 10, 2018. The 2017 Plan was amended and approved by stockholders at the Company’s annual stockholder meeting on May 14, 2020. The Company initially reserved a maximum of 750,000 shares of common stock for issuance under the 2017 Plan. The number of shares reserved for issuance was automatically increased by 102,540 shares on January 1, 2020 and will increase automatically on January 1 of each of 2021 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of Company common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. The 2017 Plan provides for options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards and stock bonuses. The exercise price of each option granted under the 2017 Plan is not less than 100% of the fair market value of one share on the date of grant. The maximum permitted term of options granted under the 2017 Plan is ten years. The 2017 Plan is generally administered by the compensation committee of the Company’s board, which has the authority to interpret the 2017 Plan, grant awards and make all other determinations necessary for the administration of the 2017 Plan.

The following table summarizes the activity for all stock options outstanding for the years ended December 31:

	2020					2019
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding at beginning of year		585,215		$	14.37		478,503		$	9.73
Granted		277,986			7.17		248,756			19.69
Exercised		-			-		(66,489	)		5.13
Forfeited/Expired		(13,252	)		11.54		(75,555	)		10.55
Balance at December 31		849,949		$	9.33		585,215		$	14.37
Options exercisable at December 31:		397,425		$	10.35		264,280		$	9.52
Weighted Average Grant Date Fair Value for Options Granted During the year:				$	4.63				$	13.46

The following table summarizes additional information about stock options outstanding and exercisable at December 31, 2020:

Options Outstanding								Options Exercisable
Options Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Options Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
	849,949		7.92	$	9.33	$	2,010,091		397,425	$	10.35	$	762,234

The Company recognized stock-based compensation expense for stock options of $1,668,859 and $990,839 for the years ended December 31, 2020 and 2019, respectively. In May 2020, the Company modified the exercise price on 203,750 stock option awards to $5.10, the closing market price on the Nasdaq Capital Market on May 14, 2020. No director or officer awards were modified. The effect on stock-based compensation for the year ended December 31, 2020 was approximately $83,000. The effect on stock-based compensation over the remaining service period will be approximately $136,000. 

The Black-Scholes option-pricing model was used to estimate the fair value of equity-based awards with the following weighted-average assumptions for the years ended December 31:

	2020	2019
Risk-free interest rate	.35% - 1.66%	1.42% -2.47%
Expected volatility	73.3% - 77.1%	76.2%-80.0%
Expected life (years)	5.5 to 6.1	5.2 to 6.3
Expected dividend yield	0%	0%

The inputs for the Black-Scholes valuation model require management’s significant assumptions. Prior to the Company’s IPO, the price per share of common stock was determined by the Company’s board based on recent prices of common stock sold in private offerings. Subsequent to the IPO, the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date. The risk-free interest rates are based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life was based on the simplified method in accordance with SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility was estimated based on historical volatility information of peer companies that are publicly available in combination with the Company’s calculated volatility since being publicly traded.

All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options issued in connection with such agreements would also be cancelled.

Restricted stock awards were granted to two members of the Company’s board during the year ended December 31, 2020. The Company had 15,686 and 0 shares of restricted stock outstanding as of December 31, 2020 and 2019, respectively, and 0 and 2,571 shares of restricted stock vested during the years ended December 31, 2020 and 2019. The Company recognized stock-based compensation expense for restricted stock of $52,727 and $17,047 for the years ended December 31, 2020 and 2019, respectively.

The total remaining shares available for grant under the 2017 Plan is 198,922.

Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized as follows: 

2021	$	1,387,174
2022		1,057,679
2023		704,222
2024		200,244
Total estimated compensation cost to be recognized	$	3,349,319

2017 Employee Stock Purchase Plan

The Company’s 2017 Employee Stock Purchase Plan (the “ESPP”) was adopted by the Company’s board on September 6, 2017 and approved by stockholders at the Company’s annual stockholder meeting on May 10, 2018. The Company initially reserved a total of 100,000 shares for issuance under the ESPP. The number of shares reserved for issuance was automatically increased by 51,270 shares on January 1, 2020 and will increase automatically on each subsequent January 1 by the number of shares equal to 0.5% of the total outstanding number of shares of Company common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. The total remaining shares available for issuance under the employee stock purchase plan as of December 31, 2020 is 112,211.

The ESPP provides participating employees with an opportunity to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP is available to all employees unless they are employed for less than 20 hours per week or own 5% or more of the total combined voting power or value of the Company’s common stock. The ESPP is administered using overlapping 24 month offering periods, referred to as an Offering Period. Each Offering Period has four six-month purchase periods. A new Offering Period and purchase period begin every six months on May 1 and November 1 of each year. Participating employees may purchase common stock, on a voluntary after tax-basis, at a price equal to 85% of the fair market value of a share of common stock on either the offering date or the purchase date, whichever is lower. If the purchase date has a lower price, the employee will automatically be placed in the Offering Period beginning immediately after the purchase date. The Company recognized stock-based compensation expense related to the ESPP of $42,293 and $33,103 for the years ended December 31, 2020 and 2019, respectively.

The Company recognized total stock-based compensation expense, as follows for the years ended December 31: 

	2020		2019
Stock-based compensation expense in operating expenses:
Research and development	$	1,055,094	$	567,305
General and administrative		708,785		473,684
Total	$	1,763,879	$	1,040,989