Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
3 Months Ended
Mar. 31, 2020
Stockholders' Equity Note [Abstract]  
STOCKHOLDERS' EQUITY

NOTE 7 - STOCKHOLDERS' EQUITY

 

On September 26, 2019, the Company's Board of Directors approved a 1-for-4 reverse split of the Common Stock, which was effective on the NASDAQ Capital Market on September 30, 2019. As a result of the reverse stock split, every 4 shares of issued and outstanding common stock were converted into 1 share of issued and outstanding common stock, with all fractional shares rounded up to the nearest whole share, and the Company's authorized share of common stock were reduced from 200,000,000 to 50,000,000 shares. All share and per share amounts have been retroactively restated to reflect this reverse stock split.

 

Common Stock

 

During the three months ended March 31, 2020, the Company issued 34,114 shares of common stock for cashless exercise of 46,313 warrants. The Company also issued 447,107 shares of common stock for cash exercises of warrants for proceeds of $3,042,173.

 

During the three months ended March 31, 2020, the Company issued 2,434 shares of common stock for cash exercise of options for proceeds of $73,020.

 

Options and Warrants

 

In December 2014, the Board of Directors adopted and the shareholders approved Relmada's 2014 Stock Option and Equity Incentive Plan, as amended (the Plan), which allows for the granting of common stock awards, stock appreciation rights, and incentive and nonqualified stock options to purchase shares of the Company's common stock to designated employees, non-employee directors, and consultants and advisors. The Plan allowed for the granting of 5,152,942 options or stock awards.

 

Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest over four years. As of March 31, 2020, 1,155,086 shares were available for future grants under the Plan.

 

As of March 31, 2020, no stock appreciation rights have been issued.

 

The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock options and warrants. The price of common stock prior to the Company being public was determined from a third party valuation. The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future. The expected volatility was based on historical volatility. The Company routinely reviews its calculation of volatility changes in future volatility, the Company's life cycle, its peer group, and other factors.

 

The Company uses the simplified method for share-based compensation to estimate the expected term for employee option awards for share-based compensation in its option-pricing model.

 

On March 9, 2020, the Company awarded a total of 350,000 options to an employee with exercise price of $45.61 and a 10-year term vesting over 4-year period. The options have an aggregate fair value of $13.1 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.51% (2) expected life of 6.25 years, (3) expected volatility of 107%, and (4) zero expected dividends.

   

On March 19, 2020, the Company awarded a total of 100,000 options to an employee with exercise price of $28.00 and a 10-year term vesting over a 4-year period. The options have an aggregate fair value of $2.3 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.83% (2) expected life of 6.25 years, (3) expected volatility of 108%, and (4) zero expected dividends.

 

On March 25, 2020, the Company awarded a total of 150,000 options to an employee with exercise price of $31.88 and a 10-year term vesting over a 4-year period. The options have an aggregate fair value of $4.0 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.67% (2) expected life of 6.25 years, (3) expected volatility of 108%, and (4) zero expected dividends.

 

At March 31, 2020, the Company has unrecognized stock-based compensation expense of approximately $66,250,000 related to unvested stock options over the weighted average remaining service period of 3.72 years.

 

During the three months ended March 31, 2020, the Company recognized additional compensation expense of approximately $1,500,000 related to acceleration of vesting and a nominal amount related to the modification of certain options in connection with the separation and settlement agreement with Dr. Ottavio Vitolo (see note 8). 

 

Options

 

A summary of the changes in options during the three months ended March 31, 2020 is as follows:

 

    Number
of
Options
    Weighted
Average
Exercise
Price For
Share
    Weighted
Average
Remaining
Contractual
Term
(Years)
    Aggregate
Intrinsic
Value
 
Outstanding and expected to vest at December 31, 2020     3,615,602     $ 19.96       9.2     $ 74,837,043  
Granted     600,000     $ 39.24       9.96     $ -  
Exercised     (2,434 )   $ 30.00       -     $ -  
Forfeited     (215,312 )   $ 21.58       -     $ -  
Outstanding and expected to vest at March 31, 2020     3,997,856     $ 22.76       9.05     $ 60,969,194  
Options exercisable at March 31, 2020     834,719     $ 9.61       7.82     $ 21,228,752  

 

Warrants

 

A summary of the changes in outstanding warrants during the three months ended March 31, 2020 is as follows:

 

    Number of
Shares
    Weighted
Average
Exercise
Price Per
Share
 
Outstanding and vested at December 31, 2020     3,646,872     $ 6.83  
                 
Exercised     (484,117 )     7.22  
Forfeited     (2,040 )     16.00  
Outstanding and vested at March 31, 2020     3,160,715     $ 6.79  

 

At March 31, 2020 the Company had approximately $116,000 of unrecognized compensation expense related to outstanding warrants.

 

At March 31, 2020 and December 31, 2019, the aggregate intrinsic value of warrants vested and outstanding was approximately $85,466,000 and $115,731,000, respectively.

 

The following summarizes the components of stock-based compensation expense which includes stock options and warrants in the unaudited consolidated statements of operations for the three months ended March 31, 2020 and 2019 (rounded to nearest $00):

 

    Three
Months
Ended
March 31,
2020
    Three
Months
Ended
March 31,
2019
 
Research and development   $ 3,293,000     $ 36,200  
General and administrative     1,746,400       358,500  
Total   $ 5,039,400     $ 394,700