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Stock-Based Compensation

9 Months Ended

Sep. 30, 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 233,333 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 180,000 shares, to a total of 413,333 shares. The Company has scheduled a meeting of stockholders for November 27, 2023 to consider and vote on, among other matters, a proposal to increase the number of common shares issuable under the 2020 Plan by 336,667 shares, to a total of 750,000 shares.

As of September 30, 2023, there was a deficiency of 136,980 shares with respect to stock options issuable under the 2020 Plan. However, subject to approval of the proposal to increase the number of common shares issuable under the 2020 Plan at the meeting of stockholders scheduled for November 27, 2023, there will be unexpired stock options for 550,313 shares issued and outstanding under the 2020 Plan and 199,687 shares 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.

For stock options requiring an assessment of value during the nine months ended September 30, 2023, 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			4.843	%
Expected dividend yield			0	%
Expected volatility			138.05	%
Expected life			4.0 years

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:

Risk-free interest rate			3.03	%
Expected dividend yield			0	%
Expected volatility			198.79	%
Expected life			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 stock options to purchase 5,833 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 $71.40 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 ($68.718 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 was charged to operations ratably from August 12, 2020 through August 12, 2023. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $11,806 and $25,259 for the three months ended September 30, 2023 and 2022, respectively, and $61,501 and $74,954 for the nine months ended September 30, 2023 and 2022, 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 8,333 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 $71.40 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 ($68.718 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 was charged to operations ratably from August 1, 2020 through August 1, 2023. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $12,551 and $36,085 for the three months ended September 30, 2023 and 2022, respectively, and $83,544 and $107,078 for the nine months ended September 30, 2023 and 2022, 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 5,833 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 $71.40 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 ($68.718 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 was charged to operations ratably from August 12, 2020 through August 12, 2023. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $11,806 and $25,259 for the three months ended September 30, 2023 and 2022, respectively, and $61,501 and $74,954 for the nine months ended September 30, 2023 and 2022, 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 25,000 shares of the Company’s common stock, exercisable for a period of five years at an exercise price of $32.00 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 ($30.144 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. Although 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, the vesting of these stock options terminated on October 30, 2022 as a result of the death of Mr. Schwartzberg on that date. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $42,692 and $126,684 for the three months and nine months ended September 30, 2022, 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 25,000 shares of the Company’s common stock, exercisable for a period of five years at an exercise price of $28.00 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 ($26.335 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 was charged to operations ratably from May 11, 2021 through June 30, 2023. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $0 and $38,827 for the three months ended September 30, 2023 and 2022, respectively, and $76,388 and $115,215 for the nine months ended September 30, 2023 and 2022, 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 10,000 shares (a total of 50,000 shares) of the Company’s common stock, exercisable for a period of five years at an exercise price of $30.30 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 ($28.423 per share), which was charged to operations ratably from July 1, 2021 through June 30, 2023. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $0 and $179,100 for the three months ended September 30, 2023 and 2022, respectively, and $211,412 and $531,455 for the nine months ended September 30, 2023 and 2022, 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 25,000 shares of the Company’s common stock, exercisable for a period of five years at an exercise price of $7.40 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 ($6.341 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. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $9,801 and $9,801 for the three months ended September 30, 2023 and 2022, respectively, and $29,084 and $90,449 for the nine months ended September 30, 2023 and 2022, 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 to purchase 10,000 shares (a total of 50,000 shares) of the Company’s common stock, exercisable for a period of five years at an exercise price of $7.40 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 ($6.334 per share), which is being charged to operations ratably from July 1, 2022 through June 30, 2024. The Company recorded charges to general and administrative costs in the consolidated statement of operations of $23,916 and $39,860 for the three months ended September 30, 2023 and 2022, respectively, and $70,965 and $39,860 for the nine months ended September 30, 2023 and 2022, respectively, 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 20,000 shares (a total of 80,000 shares) of the Company’s common stock, exercisable for a period of five years at an exercise price of $20.00 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 80,000 stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $262,560 ($3.282 per share), which is being charged to operations ratably from November 6, 2022 through November 6, 2025. The Company recorded a total charge to general and administrative costs in the consolidated statement of operations of $16,528 and $49,053 for the three months and nine months ended September 30, 2023, respectively, 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 10,000 shares of the Company’s common stock, which was fully vested upon issuance and is exercisable for a period of five years at $5.025 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 ($4.326 per share) and was charged to general and administrative costs in the consolidated statement of operations on that date.

On June 30, 2023, 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 four non-officer directors of the Company stock options to purchase 10,000 shares (a total of 40,000 shares) of the Company’s common stock, exercisable for a period of five years at an exercise price of $5.88 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 $192,593 ($4.8131 per share), which is being charged to operations ratably from July 1, 2023 through June 30, 2025. The Company recorded a total charge to general and administrative costs in the consolidated statement of operations of $24,232 for the three months and nine months ended September 30, 2023 with respect to these stock options.

On September 26, 2023, in connection with the employment agreement entered into with Bastiaan van der Baan, Mr. van der Baan was granted stock options to purchase 250,000 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 $1.95 per share, which was equal to the closing market price of the Company’s common stock on the grant date. The options vest in equal increments quarterly over a three-year period commencing on the last day of each calendar quarter commencing October 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 $403,066 ($1.612 per share), which is being charged to operations ratably from September 26, 2023 through September 30, 2026. The Company recorded a charge to general and administrative costs in the consolidated statement of operations of $1,466 for the three months and nine months ended September 30, 2023 with respect to these stock options.

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. Gil Schwartzberg, a director of the Company, died on October 30, 2022. Dr. John S. Kovach, the Chairman of the Board of Directors and the Company’s President and Chief Executive Officer, and Chief Scientific Officer, died on October 5, 2023. Accordingly, the unvested stock options for each of such persons ceased vesting effective as of the respective dates that their service to the Company terminated. Furthermore, the expiration date of all vested stock options owned by each of such persons are contractually scheduled to expire one year from the respective dates that their service to the Company terminated.

A summary of stock-based compensation costs for the three months and nine months ended September 30, 2023 and 2022 is as follows:

		2023				2022				2023				2022
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2023				2022				2023				2022

Related parties		$	112,106			$	396,883			$	669,146			$	1,160,649
Non-related parties			—				—				—				—
Total stock-based compensation costs		$	112,106			$	396,883			$	669,146			$	1,160,649

A summary of stock option activity, including options issued in the form of warrants, during the nine months ended September 30, 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			389,479			$	29.1826
Granted			290,000				2.4920
Exercised			(1,250	)			5.0250
Expired			(3,333	)			16.800
Stock options outstanding at September 30, 2023			674,896			$	17.8197				4.96

Stock options exercisable at December 31, 2022			281,979			$	32.8335
Stock options exercisable at September 30, 2023			313,959			$	31.8997				1.93

Total deferred compensation expense for the outstanding value of unvested stock options was approximately $808,000 at September 30, 2023, which will be recognized subsequent to September 30, 2023 over a weighted-average period of approximately 28 months.

The exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, at September 30, 2023 are as follows:

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

$	1.950				250,000				—
$	5.025				8,750				8,750
$	5.880				40,000				5,000
$	7.400				57,500				41,563
$	20.000				80,000				20,000
$	20.600				20,000				20,000
$	28.000				25,000				25,000
$	30.000				66,667				66,667
$	30.300				42,500				42,500
$	32.000				20,313				20,313
$	32.100				15,000				15,000
$	60.000				16,667				16,667
$	66.000				4,167				4,167
$	71.400				20,000				20,000
$	120.000				8,332				8,332
					674,896				313,959

Based on a fair market value of $2.45 per share on September 30, 2023, there was no intrinsic value attributed to exercisable but unexercised common stock options at September 30, 2023.

Outstanding stock options to acquire 360,938 shares of the Company’s common stock had not vested at September 30, 2023.

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