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Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

7. Stock-Based Compensation

The Company periodically 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 was subsequently approved by the stockholders of the Company. The 2020 Plan 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, initially for a total of 2,333,333 shares of the Company’s common stock, under terms and conditions as determined by the Company’s Board of Directors. On October 7, 2022, the stockholders of the Company approved an amendment to 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.

As of March 31, 2023, unexpired stock options for 2,603,125 shares were issued and outstanding under the 2020 Plan and 1,530,208 shares were available for issuance under the 2020 Plan.

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.

There were no stock options requiring an assessment of value issued during the three months ended March 31, 2023 and 2022.

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 stock options to purchase 58,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options are exercisable for a period of five years at 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 portion of 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 March 31, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $24,710 and $24,710, 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 stock options to purchase 83,334 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options are exercisable for a period of five years at 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 portion of 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 March 31, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $35,300 and $35,300, 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 stock options to purchase 58,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options are exercisable for a period of five years at 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 portion of 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 March 31, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $24,710 and $24,710, respectively, with respect to these stock options.

On April 9, 2021, the Board of Directors appointed Gil Schwartzberg to fill the vacancy created by a former director’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 stock options to purchase 250,000 shares of the Company’s common stock, exercisable for a period of five years 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, 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 $753,611 ($3.0144 per share), of which $376,800 was attributable to the portion of 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 was being charged to operations ratably from April 9, 2021 through June 30, 2023. However, vesting of these stock options terminated on October 30, 2022, the date that Mr. Schwartzberg died. During the three months ended March 31, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $0 and $41,764, 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 stock options to purchase 250,000 shares of the Company’s common stock, exercisable for a period of five years 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, 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 $658,363 ($2.6335 per share), of which $329,188 was attributable to the portion of 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 March 31, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $37,983 and $37,983, 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 to purchase 100,000 shares (a total of 500,000 shares) of the Company’s common stock, exercisable for a period of five years 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, 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 $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 March 31, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $105,123 and $175,205, 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 stock options to purchase 250,000 shares of the Company’s common stock, exercisable for a period of five years 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, 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 $158,525 ($0.6341 per share), of which $79,263 was attributable to the portion of 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 ended March 31, 2023, the Company recorded a total charge to general and administrative costs in the consolidated statement of operations of $9,588 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 to purchase 100,000 shares (a total of 500,000 shares) of the Company’s common stock, exercisable for a period of five years 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, 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 $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 ended March 31, 2023, the Company recorded a total charge to general and administrative costs in the consolidated statement of operations of $23,394 with respect to these stock options.

On November 6, 2022, the Board of Directors granted to each of the four officers of the Company stock options to purchase 200,000 shares (a total of 800,000 shares) of the Company’s common stock, exercisable for a period of five years at an exercise price of $2.00 per share, vesting 25% on issuance and 25% on each anniversary date thereafter until fully vested, subject to continued service. The total fair value of the 800,000 stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $262,560 ($0.3282 per share), which is being charged to operations ratably from November 6, 2022 through November 6, 2025. During the three months ended March 31, 2023, the Company recorded a total charge to general and administrative costs in the consolidated statement of operations of $16,172 with respect to these stock options.

On November 6, 2022, the Company issued a stock option, in the form of a warrant, to BioPharmaWorks to purchase 100,000 shares of the Company’s common stock, which was fully vested upon issuance and is exercisable for a period of five years at $0.5025 per share (the closing market price on the issue date). The fair value of the warrant, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $43,264 ($0.4326 per share) and was charged to general and administrative costs in the consolidated statement of operations on that date.

Dr. Philip Palmedo, a director of the Company since 2006, did not stand for re-election to the Company’s Board of Directors at the Company’s Annual Meeting of Stockholders held on October 7, 2022, and Gil Schwartzberg, a director of the Company, died on October 30, 2022. Accordingly, the unvested stock options for each such person ceased vesting effective as of the respective dates that their service on the Company’s Board of Directors terminated. Furthermore, the expiration date of all vested stock options owned by such persons are contractually scheduled to expire one year from the respective dates that their service on the Company’s Board of Directors terminated.

A summary of stock-based compensation costs for the three months ended March 31, 2023 and 2022 is as follows:

		2023				2022
		Three Months Ended March 31,
		2023				2022

Related parties		$	276,980			$	339,672
Non-related parties			—				—
Total stock-based compensation costs		$	276,980			$	339,672

A summary of stock option activity, including options issued in the form of warrants, during the three months ended March 31, 2023 is as follows:

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in Years)

Stock options outstanding at December 31, 2022			3,894,792			$	2.9183
Granted			—				—
Exercised			(12,500	)			0.5025
Expired			—				—
Stock options outstanding at March 31, 2023			3,882,292			$	2.9260				2.79

Stock options exercisable at December 31, 2022			2,819,792			$	3.2834
Stock options exercisable at March 31, 2023			2,913,542			$	3.2431				2.28

Total deferred compensation expense for the outstanding value of unvested stock options was approximately $605,000 at March 31, 2023, which will be recognized subsequent to March 31, 2023 over a weighted-average period of approximately 15 months.

The exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, at March 31, 2023 are as follows:

Exercise Prices				Options Outstanding (Shares)				Options Exercisable (Shares)

$	0.5025				87,500				87,500
$	0.7400				575,000				309,375
$	1.6800				33,333				33,333
$	2.0000				800,000				200,000
$	2.0600				200,000				200,000
$	2.8000				250,000				234,375
$	3.0000				666,667				666,667
$	3.0300				425,000				387,500
$	3.2000				203,125				203,125
$	3.2100				150,000				150,000
$	6.0000				166,667				166,667
$	6.6000				41,667				41,667
$	7.1400				200,000				150,000
$	12.0000				83,333				83,333
					3,882,292				2,913,542

The intrinsic value of exercisable but unexercised in-the-money stock options at March 31, 2023 was approximately $56,500, based on a fair market value of $0.83 per share on March 31, 2023.

Outstanding stock options to acquire 968,750 shares of the Company’s common stock had not vested at March 31, 2023.

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