Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

5. Stock-Based Compensation

Following is the stock-based compensation expense related to common stock options, restricted common stock, common stock warrants and deferred stock units:

	Three Months Ended March 31,
	2023		2022
Research and development	$	270	$	225
General and administrative		392		633
Total stock-based compensation expense	$	662	$	858

The following table summarizes the stock option activity in the Company’s equity incentive plans, including non-plan grants to Company executives, from December 31, 2022 through March 31, 2023:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2022		5,745,561		$	2.90
Granted		800,000			1.11
Exercised		—			—
Options forfeited/cancelled		(18,803	)		3.59
Outstanding, March 31, 2023		6,526,758		$	2.67

As of March 31, 2023, there was $2,268,000 of unrecognized compensation related to 2,850,833 unvested options, which is expected to be recognized over a weighted–average period of approximately 1.29 years. The weighted-average grant date fair value for options granted during the three months ended March 31, 2022 was $0.80. The Company granted 800,000 stock options during the three months ended March 31, 2023.

The fair value of all other options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used:

	Three Months Ended March 31,			Three Months Ended March 31,
	2023			2022
Risk-free interest rate		3.76	%		1.23	%
Expected life of the options	5.5 years			5.5 years
Expected volatility of the underlying stock		86	%		95	%
Expected dividend rate		0	%		0	%

In January 2023, the Company’s board chairman elected to take restricted stock grants in lieu of cash retainers for 2023. A total of 36,036 shares of restricted stock valued at approximately $40,000 is being amortized to expense on a straight-line basis until December 31, 2023 when the stock vests in full. In January 2022, the Company’s board chairman elected to take restricted stock grants in lieu of cash retainers for 2022. A total of 17,677 shares of restricted stock valued at approximately $35,000 is being amortized to expense on a straight-line basis until December 31, 2022 when the stock vested in full.

In September 2020, the Company entered into an employment agreement with its new Chief Executive Officer whereby 20% of his base salary and performance bonuses will be paid in cash, and 80% will be paid in the form of deferred stock units (“DSUs”) in accordance with the terms and subject to the provisions set forth in the DSU Agreement. DSUs credited to Mr. Lewis as of any date shall be fully vested and nonforfeitable at all times. Pursuant to an amendment to the DSU Agreement in July 2022, the Company shall issue the shares underlying the outstanding whole number of DSUs credited to Mr. Lewis as follows: twenty five percent shall be issued on March 1, 2023, fifty percent shall be issued on March 1, 2024 and twenty five percent shall be issued on September 1, 2028. On March 1, 2023, twenty five percent of the DSU’s were issued to Mr. Lewis in accordance with the DSU Agreement. A total of 183,900 shares were due to be issued; however, 75,529 shares were withheld to cover income tax withholding of $156,345 resulting in 108,371 shares actually issued.

For the three months ended March 31, 2023, approximately $112,000 of his compensation was recorded as stock compensation expense representing 72,440 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $1.55 per share. For the three months ended March 31, 2022, approximately $103,000 of his compensation was recorded as stock compensation expense representing 55,626 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $1.86 per share.

Also, Mr. Lewis’ bonus for the year ended December 31, 2022 of $210,000 (which was included in accrued compensation at December 31, 2022) was approved in January 2023 and represents 143,836 shares of common stock to be issued under the DSU agreement with a grant date fair value of $1.46 per share. The $210,000 was reclassified from accrued compensation to additional paid in capital in January 2023. There is no unrecognized compensation expense related to the DSUs.