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Stock-Based Compensation
 9 Months Ended
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation

6. Stock-Based Compensation

 

The Company issues common stock and stock options as incentive compensation to directors and as compensation for the services of employees, contractors, and consultants of the Company.

 

On July 14, 2020, the Board of Directors of the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the granting of equity-based awards, consisting of stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards to employees, officers, directors and consultants of the Company and its affiliates for up to 2,333,333 shares of the Company’s common stock, under terms and conditions as determined by the Company’s Board of Directors. The 2020 Plan was subsequently approved by the stockholders of the Company.

 

As of September 30, 2022, unexpired stock options for 2,100,000 shares were issued and outstanding under the 2020 Plan and 233,333 shares were available for issuance under the 2020 Plan. Subsequently, on October 7, 2022, the Company held a meeting of stockholders, at which meeting the stockholders approved a proposal to amend the 2020 Plan to increase the number of common shares issuable thereunder by 1,800,000 shares, to a total of 4,133,333 shares.

 

 

The fair value of a stock option award is calculated on the grant date using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the grant date. The expected dividend yield assumption is based on the Company’s expectation of dividend payouts and is assumed to be zero. The estimated volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The fair market value of the common stock is determined by reference to the quoted market price of the common stock on the grant date.

 

For stock options requiring an assessment of value during the nine months ended September 30, 2022, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model with the following assumptions:

Schedule of Fair Value of Each Option Award Estimated Assumption

 

Risk-free interest rate   3.03%
Expected dividend yield   0%
Expected volatility   153.17%
Expected life   3.5 years 

 

For stock options requiring an assessment of value during the nine months ended September 30, 2021, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

Risk-free interest rate   0.89%
Expected dividend yield   0%
Expected volatility   198.79%
Expected life   3.5 to 3.6 years 

 

On July 15, 2020, as amended on August 12, 2020, in connection with the employment agreement entered into with Eric J. Forman, Mr. Forman was granted options for 58,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options have a term of five years and an exercise price of $7.14 per share, which was equal to the closing market price of the Company’s common stock on the grant date. The options vested 25% on August 12, 2020, 2021 and 2022, respectively, with the final 25% vesting on August 12, 2023, subject to continued service. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $400,855 ($6.8718 per share), of which $100,214 was attributable to the stock options fully-vested on August 12, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from August 12, 2020 through August 12, 2023. During the three months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $25,259 and $25,259, respectively, with respect to these stock options. During the nine months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $74,954 and $74,954, respectively, with respect to these stock options.

 

On August 1, 2020, in connection with an employment agreement entered into with Dr. James S. Miser, M.D., Dr. Miser was granted options for 83,334 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options have a term of five years and an exercise price of $7.14 per share, which was equal to the closing market price of the Company’s common stock on the effective date of the employment agreement. The options vested 25% on August 1, 2020, 2021 and 2022, respectively, with the final 25% vesting on August 1, 2023, subject to continued service. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $572,650 ($6.8718 per share), of which $143,163 was attributable to the stock options fully-vested on August 1, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from August 1, 2020 through August 1, 2023. During the three months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $36,085 and $36,085, respectively, with respect to these stock options. During the nine months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $107,078 and $107,078, respectively, with respect to these stock options.

 

 

On August 12, 2020, in connection with the employment agreement entered into with Robert N. Weingarten, Mr. Weingarten was granted options for 58,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options have a term of five years and an exercise price of $7.14 per share, which was equal to the closing market price of the Company’s common stock on the grant date. The options vested 25% on August 12, 2020, 2021 and 2022, respectively, with the final 25% vesting on August 12, 2023, subject to continued service. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $400,855 ($6.8718 per share), of which $100,214 was attributable to the stock options fully-vested on August 12, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from August 12, 2020 through August 12, 2023. During the three months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $25,259 and $25,259, respectively, with respect to these stock options. During the nine months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $74,954 and $74,954, respectively, with respect to these stock options.

 

Effective January 6, 2021, in recognition of their service as directors of the Company over the past year, the Company granted fully-vested stock options to purchase 50,000 shares of common stock to each of Dr. Winson Sze Chun Ho, Dr. Yun Yen, Dr. Stephen Forman, and Dr. Philip Palmedo (an aggregate of 200,000 shares), exercisable for a period of five years from the grant date at $3.21 per share, which was the approximate fair market value of the Company’s common stock on such date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $571,312 ($2.8566 per share) and was charged to general and administrative costs in the consolidated statement of operations on the grant date.

 

On April 9, 2021, Winson Sze Chun Ho resigned from the Company’s Board of Directors to focus on clinical and pre-clinical cancer research in academic medicine. Concurrent with his resignation, the Board of Directors appointed Gil Schwartzberg to fill the vacancy created by Dr. Ho’s resignation. In connection with his appointment to the Board of Directors, and in accordance with the Company’s cash and equity compensation package for members of the Board of Directors, Mr. Schwartzberg was granted options exercisable for a period of five years to purchase 250,000 shares of the Company’s common stock at an exercise price of $3.20 per share (the closing market price on the grant date), vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $753,611 ($3.0144 per share), of which $376,800 was attributable to the stock options fully-vested on April 9, 2021 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from April 9, 2021 through June 30, 2023. During the three months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $42,692 and $42,692, respectively, with respect to these stock options. During the nine months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $126,684 and $457,543, respectively, with respect to these stock options.

 

On May 11, 2021, the Board of Directors appointed Regina Brown to the Board of Directors. In connection with her appointment to the Board of Directors, and in accordance with the Company’s cash and equity compensation package for members of the Board of Directors, Ms. Brown was granted options exercisable for a period of five years to purchase 250,000 shares of the Company’s common stock at an exercise price of $2.80 per share (the closing market price on the grant date), vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $658,363 ($2.6335 per share), of which $329,188 was attributable to the stock options fully-vested on May 11, 2021 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from May 11, 2021 through June 30, 2023. During the three months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $38,827 and $38,827, respectively, with respect to these stock options. During the nine months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $115,215 and $389,117, respectively, with respect to these stock options.

 

 

On June 30, 2021, the Board of Directors, in accordance with the Company’s cash and equity compensation package for members of the Board of Directors, granted to each of the five non-officer directors of the Company stock options exercisable for a period of five years to purchase 100,000 shares (a total of 500,000 shares) of the Company’s common stock at an exercise price of $3.03 per share (the closing market price on the grant date), vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The total fair value of the 500,000 stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $1,421,095 ($2.84225 per share), which is being charged to operations ratably from July 1, 2021 through June 30, 2023. During the three months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $179,100 and $179,100, respectively, with respect to these stock options. During the nine months ended September 30, 2022 and 2021, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $531,455 and $179,100, respectively, with respect to these stock options.

 

On June 17, 2022, the Board of Directors appointed Bas van der Baan to the Board of Directors. In connection with his appointment to the Board of Directors, and in accordance with the Company’s cash and equity compensation package for members of the Board of Directors, Mr. Baan was granted options exercisable for a period of five years to purchase 250,000 shares of the Company’s common stock at an exercise price of $0.74 per share (the closing market price on the grant date), vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $158,525 ($0.6341 per share), of which $79,263 was attributable to the stock options fully-vested on June 17, 2022 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from June 17, 2022 through June 30, 2024. During the three months and nine months ended September 30, 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $9,801 and $90,449, respectively, with respect to these stock options.

 

On June 30, 2022, the Board of Directors, in accordance with the Company’s cash and equity compensation package for members of the Board of Directors, granted to each of the five non-officer directors of the Company stock options exercisable for a period of five years to purchase 100,000 shares (a total of 500,000 shares) of the Company’s common stock at an exercise price of $0.74 per share (the closing market price on the grant date), vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The total fair value of the 500,000 stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $316,700 ($0.6334 per share), which is being charged to operations ratably from July 1, 2022 through June 30, 2024. During the three months and nine months ended September 30, 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $39,860 and $39,860, respectively, with respect to these stock options.

 

A summary of stock-based compensation costs for the three months and nine months ended September 30, 2022 and 2021 is as follows:

 

   2022   2021   2022   2021 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
                 
Related parties  $396,883   $347,222   $1,160,649   $1,854,058 
Non-related parties   —    —    —    — 
Total stock-based compensation costs  $396,883   $347,222   $1,160,649   $1,854,058 

 

 

A summary of stock option activity, including options issued in the form of warrants, during the nine months ended September 30, 2022 is presented below.

Summary of Stock Option Activity Including Options Form of Warrants

  

Number of

Shares

  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining Contractual

Life (in Years)

 
             
Stock options outstanding at December 31, 2021   2,666,667   $3.738      
Granted   750,000    0.740      
Exercised   —    —      
Expired/Forfeited   (91,667)   2.962      
Stock options outstanding at September 30, 2022   3,325,000   $3.083    3.23 
                
Stock options exercisable at September 30, 2022   2,446,875   $3.532    2.84 

 

Total deferred compensation expense for the outstanding value of unvested stock options was approximately $1,411,000 at September 30, 2022, which will be recognized subsequent to September 30, 2022 over a weighted-average period of approximately 12 months.

 

The exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, at September 30, 2022 are as follows:

Schedule of Exercise Prices of Common Stock Options Outstanding and Exercisable Including Options Form of Warrants

Exercise

Prices

  

Options

Outstanding

(Shares)

  

Options

Exercisable

(Shares)

 
          
$0.740    750,000    203,125 
$0.900    33,333    33,333 
$1.680    33,333    33,333 
$2.060    200,000    200,000 
$2.800    250,000    203,125 
$3.000    666,667    666,667 
$3.030    500,000    312,500 
$3.200    250,000    203,125 
$3.210    150,000    150,000 
$6.000    166,667    166,667 
$6.600    41,667    41,667 
$7.140    200,000    150,000 
$12.000    83,333    83,333 
      3,325,000    2,446,875 

 

Based on a fair market value of $0.55 per share on September 30, 2022, there was no intrinsic value attributed to exercisable but unexercised in-the-money common stock options at September 30, 2022.

 

Outstanding stock options to acquire 878,125 shares of the Company’s common stock had not vested at September 30, 2022.

 

The Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.