Note 10 – Stock-Based Compensation, Restricted Stock and Stock Options:

Equity Compensation Plan Information:

On December 16, 2020, the Company adopted its 2020 Long-Term Incentive Plan ( the "2020 Plan"). Under the 2020 Plan, there are 5,333,333 shares of the Company's common stock available for issuance and the 2020 Plan has a term of 10 years. The available shares in the 2020 Plan will automatically increase on the first trading day in January of each calendar year during the term of this Plan, commencing with January 2021, by an amount equal to the lesser of (i) five percent (5%) of the total number of shares of common stock issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 shares of common stock or (iii) such number of shares of common stock as may be established by the Company's Board of Directors.

The Company grants equity-based compensation under its 2020 Plan and its 2016 Equity Incentive Plan (the "2016 Plan"). The 2020 Plan and 2016 Plan allows the Company to grant incentive and nonqualified stock options, and shares of restricted stock to its employees, directors and consultants. As of December 31, 2020, there is a total of 7,333,333 shares of the Company's common stock available under the 2016 Plan.

Stock-based compensation:

The Company recognized total expenses for stock-based compensation (including the issuance of common stock to consultants) during the three and nine months ended December 31, 2020 and 2019, which are included in the accompanying statements of operations, as follows (unaudited):

Restricted stock awards:

A summary of the Company's restricted stock activity during the nine months ended December 31, 2020 is as follows:

During the nine months ended December 31, 2020, the Company issued 1,333,333 shares of fully vested restricted common stock to its Chief Executive Officer. The Company repurchased 166,667 shares of the restricted stock (See Note 9).

In December 2020, the Company canceled 2,000,000 shares of its vested and unvested restricted common stock with a fair value of approximately $0.9 million issued to officers and employees, in exchange for 4,461,130 options to purchase shares of the Company's common stock with a fair value of approximately $10.2 million (See Stock Options).

The fair value of restricted stock awards is measured based on their fair value at the grant date and amortized over the vesting period, which is generally 24 months. As of December 31, 2020, there was no unrecognized stock-based compensation expense related to restricted stock awards.

Stock Options:

The Company provides stock-based compensation to employees, directors and consultants under the Plan. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The risk-free interest rate is determined by referencing the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

On April 13, 2020, the Company granted 2,323,333 options to purchase shares of its common stock with a fair value of approximately $3.2 million to executives and employees of the Company. The options will vest over a period of 24 months.

During the three months ended June 30, 2020, the Company granted 388,889 options to purchase shares of its common stock with a fair value of approximately $0.3 million for consulting services.

In June 2020, the Company granted 33,333 options to purchase shares of its common stock with a fair value of approximately $40,000 to members of the Company's Board of Directors.

On June 22, 2020, the Company's Board of Directors adopted a resolution to accelerate the vesting of all options granted to be fully vested as of June 22, 2020. As of June 30, 2020, the Company had no unrecognized compensation expense related to its stock options granted under the Company's equity incentive plan.

On September 16, 2020, the Company granted 744,644 options to purchase shares of its common stock to its chief financial officer. The options fully vest thirty days from the grant date and have a fair value of approximately $1.1 million.

During the three months ended September 30, 2020, the Company granted 66,667 options to purchase shares of its common stock with a fair value of approximately $0.1 million for consulting services.

During the three months ended December 31, 2020, the Company granted 250,000 options to purchase shares of its common stock with a fair value of approximately $0.9 million to employees.

On October 12, 2020, the Company granted 50,000 options to purchase shares of the Company's common stock in exchange for consulting services. The options have a strike price equal to the lower of the price per share on October 12, 2020 or $1.48 per share, and vest on November 12, 2020. The options have a fair value of $69,000 based on the closing stock price of $1.19 per share on October 12, 2020.

On October 15, 2020, the Company granted 8,333 options to purchase shares of the Company's common stock in exchange for consulting services. The options have a fair value of approximately $9,000 and fully vest on grant date.

On December 1, 2020, the Company granted 133,333 options to purchase shares of its common stock with a fair value of approximately $0.2 million to members of the Company's Board of Directors. The options vest on the 90 day anniversary of the grant date.

On December 3, 2020, the Company granted 16,667 options to purchase shares of the Company's common stock in exchange for consulting services. The options have a fair value of approximately $29,000 and vest equally over a one year period.

On December 30, 2020, the Company granted 4,464,463 options to purchase shares of its common stock with a fair value of approximately $10.2 million to its officers and employees, in exchange for 2,000,000 shares of vested and non-vested restricted common shares. The options vest on the 90 day anniversary of the grant date. The restricted stock had a fair value of approximately $0.9 million on the date the shares were canceled. The incremental fair value of $1.2 million related to the options will be recognized as stock-based compensation expense over the 90 day vesting period.

The following was used in determining the fair value of stock options granted during the nine months ended December 31, 2020.

A summary of activity under the Plan for the nine months ended December 31, 2020 is as follows:

As of December 31, 2020, the unrecognized stock-based compensation expense related to stock options was approximately $1.6 million and will be recognized over a period of nine months.

Warrants:

A summary of the Company's warrant activity during the nine months ended December 31, 2020 is as follows:

During the three months ended June 30, 2020, the Company issued 116,667 warrants to purchase shares of the Company's common stock. The warrants were exercised on a cashless basis on June 30, 2020, and the Company issued 97,222 shares of its common stock.

During the three months ended September 30, 2020 the Company issued 208,000 warrants to purchase shares of the Company's common stock. During the nine months ended December 31, 2020 the Company recorded a $0.2 million loss on issuance of these common stock warrants.

During the three months ended December 31, 2020, the Company reclassified 950,618 warrants from liabilities to equity.

During the nine months ended December 31, 2020, the Company recognized approximately $0.4 million of stock-based compensation expense related to warrants.

The Company estimated the fair value of the warrants using the Black-Scholes pricing model as follows: