Stock Options and Equity-Classified Warrants

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock Options and Equity-Classified Warrants

10. Stock Options and Equity-Classified Warrants

Stock Options

The Company has a 2000 Long-Term Incentive Plan under which 233,334 shares of common stock were originally reserved for issuance. As of December 31, 2019, there were 5,091 shares subject to outstanding stock options. This plan expired on August 6, 2010, and thus no further shares are available for future grant under this plan.

The Company also has a 2008 Stock Incentive Plan under which 5 million shares of common stock are reserved for issuance. As of December 31, 2019, there were approximately 2.3 million shares subject to outstanding stock options and approximately 0.8 million shares outstanding related to restricted stock grants issued from the 2008 Plan. This plan expired on November 20, 2018 and thus no further shares are available for future grant under this plan.

In 2019, the Company adopted a 2019 Stock Incentive Plan under which 5.4 million shares of common stock are reserved for issuance. As of December 31, 2019, there were 5.4 million shares subject to outstanding stock options. This Plan expires on November 14, 2029.

The Company follows the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees.

The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	2019			2018
Risk-free interest rate		1.82	%		2.42	%
Expected volatility		85	%		92	%
Expected lives (years)		10			6
Expected dividend yield		0.00	%		0.00	%

The Company’s computation of expected volatility is based on the historical daily volatility of its publicly traded stock. For option grants issued during years ended December 31, 2019 and 2018, the Company used a calculated volatility for each grant. The Company lacks adequate information about the exercise behavior at this time and has determined the expected term assumption under the simplified method provided for under ASC 718, which averages the contractual term of the Company’s options of ten years with the average vesting term of three years for an average of six years. In 2018, the Company used the average term of six years. In 2019, since all of the issued options immediately vested, the Company used the full term of ten years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the U.S. Treasury rates in effect at the time of the grant for instruments with a similar expected life. The Company accounts for forfeitures as they occur. No amounts relating to stock-based compensation have been capitalized. No amounts relating to employee stock-based compensation have been capitalized.

At December 31, 2019, there remained approximately $0.1 million of unrecognized compensation expense related to unvested stock options granted to current employees and directors, to be recognized as expense over a weighted-average period of 0.57 years. Presented below is the Company’s stock option activity for employees and directors:

	Stock Options						Weighted Average Exercise Price
	2019			2018			2019		2018
Outstanding — beginning of year		2,190,826			2,492,179		$	11.55	$	11.35
Granted		5,150,000			1,667			0.26		1.89
Exercised		—			—			—		—
Forfeited		(186,512	)		(275,085	)		9.49		7.64
Expired		(27,974	)		(27,935	)		43.30		31.87
Outstanding — end of year		7,126,340			2,190,826			3.32		11.55
Exercisable at end of year		7,034,242			1,887,387		$	3.34	$	13.08
Weighted average fair value of stock options granted during the year:	$	0.22		$	1.43

Through December 31, 2018, stock options paid in consideration of services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of ASC 505-50.

Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to performance, the value of these options, as calculated using the Black-Scholes option pricing model, is determined, and compensation expense recognized or recovered during the period is adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense is subject to adjustment until the common stock options are fully vested.

The Company recorded $54,500 in expenses related to the issuance of stock options to certain consultants in exchange for services during 2019 and $0 for 2018.

At December 31, 2019, there was no unrecognized compensation expense related to unvested non-employee stock options. Presented below is the Company’s non-employee stock option activity:

	Stock Options					Weighted Average Exercise Price
	2019		2018			2019		2018
Outstanding — beginning of year		365,000		373,333		$	5.49	$	5.70
Granted		250,000		—			0.26		—
Exercised		—		—			—		—
Expired/Forfeited		—		(8,333	)		0		14.70
Outstanding — end of year		615,000		365,000			3.36		5.49
Exercisable at end of year		615,000		365,000		$	3.36	$	5.49
Weighted average fair value of stock options granted during the year:	$	0.22	$	—

The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	2019	2018
Risk-free interest rate	1.82%	—
Expected volatility	85%	—
Expected lives (years)	10	—
Expected dividend yield	—	—

The following table summarizes significant ranges of outstanding stock options under the three plans at December 31, 2019:

Range of Exercise Prices		Number of Options		Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Contractual Life	Weighted Average Exercise Price
$	0.26 — 1.00		5,400,000	9.96	$	0.26		5,400,000	9.96	$	0.26
$	1.01 — 3.00		1,050,664	7.61		2.04		958,564	7.57		2.07
$	3.01 — 15.00		852,362	4.97		12.56		852,362	4.97		12.56
$	15.01 — 48.30		438,314	3.91		26.19		438,314	3.91		26.19
			7,741,340	8.75	$	3.32		7,649,242	8.76	$	3.34

There was no aggregate intrinsic value to the outstanding options, options vested, and options exercised during 2019.

The following table sets forth the total stock-based compensation expense resulting from stock options included in the Company’s Statements of Operations:

	Years Ended December 31,
	2019			2018
Research and development – employee	$	(2,672	)	$	95,485
General and administrative – employee		1,409,158			989,154
Total employee stock-based compensation	$	1,406,486		$	1,084,639
General and administrative – non-employee	$	54,500			—
Total non-employee stock-based compensation	$	54,500		$	—

Restricted Stock

In December 2017, the Company granted to Steven Kriegsman, Chief Executive Officer, 387,597 shares of restricted common stock, pursuant to the 2008 Plan. This restricted stock vests in equal annual instalments over three years.  The fair value of the restricted stock is based on the market price of the Company’s shares on the grant date less the par value received as consideration.  The fair value of the restricted stock on the grant date was $679,000. In December 2016, the Company granted to Steven Kriegsman, Chief Executive Officer, 387,597 shares of restricted common stock, pursuant to the 2008 Plan. This restricted stock vests in equal annual instalments over three years. The Company recorded an employee stock-based compensation expense for restricted stock of approximately $544,000 and $559,000 for the years ended December 31, 2019 and 2018, respectively.   No restricted stock was granted in 2019 nor 2018.

Equity-Classified Warrants

A summary of the Company’s warrant activity and related information for the years ended December 31 are shown below.

	Warrants						Weighted Average Exercise Price
	2019			2018			2019		2018
Outstanding — beginning of year		693,916			3,980,781		$	7.16	$	4.92
Granted		—			—			—		—
Exercised		—			—			—		—
Forfeited		—			—			—		—
Expired		(500,000	)		(3,287,585	)		6.60		3.65
Outstanding — end of year		193,916			693,916			8.60		7.16
Exercisable at end of year		193,916			693,916		$	8.60	$	7.16
Weighted average fair value of warrants granted during the year:	$	—		$	—

The following table summarizes additional information concerning warrants outstanding and exercisable at December 31, 2019:

					Warrants Outstanding
Range of Exercise Prices		Number of Shares		Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Contractual Life	Weighted Average Exercise Price
$	4.62 — 4.62		84,554	1.10	$	4.62		84,554	1.10	$	4.62
$	10.44 —10.44		83,335	1.11		10.44		83,335	1.11		10.44
$	12.30 — 12.30		21,140	1.10		12.30		21,140	1.10		12.30
$	33.60 — 33.60		4,167	4.21		33.60		4,167	4.21		33.60
			193,196	1.17	$	8.60		193,916	1.17	$	8.60