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. Stockholders
holding a majority of the voting power of the common stock of the Company approved the 2020 Plan pursuant to an action by written consent
dated July 31, 2020. Stockholders of the Company were notified of such action by written consent pursuant to an Information Statement
dated August 31, 2020 and mailed to stockholders on or about September 3, 2020. As of March 31, 2022, unexpired stock options for 1,400,000
shares were issued and outstanding under the 2020 Plan and 933,333 shares were available for issuance under the 2020 Plan.
Effective
April 9, 2021, the Board of Directors approved a comprehensive cash and equity compensation package for the members of the Board of Directors
and committee members. Cash-based features of the compensation package are described at Notes 5 and 8.
Stock-based
features of the compensation package consisted of the annual granting of stock options to each non-officer director to purchase 100,000
shares of common stock at the closing market price on the earlier of the date of the annual meeting of shareholders or the last business
day of the month ending June 30, vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested, and the granting
of stock options to a new director to purchase 250,000 shares of common stock, exercisable at the closing market price on the grant date
for a period of five years, 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 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 during the three months ended March 31, 2022.
For
stock options requiring an assessment of value during the three months ended March 31, 2021, 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 |
|
|
0.80 |
% |
Expected dividend yield |
|
|
0 |
% |
Expected volatility |
|
|
201.47 |
% |
Expected life |
|
|
2.5 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 as to 25% on August 12, 2020 and August 12, 2021, and will vest 25% on each of the
second and third anniversaries of the grant date. 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 March 31,
2022 and 2021, 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 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 as to 25% on August 1, 2020 and August 1, 2021, and will vest 25% on each
of the second and third anniversaries of the effective date. 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 March 31, 2022
and 2021, 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 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 as to 25% on August 12, 2020 and August 12, 2021, and will vest 25% on each of the second and third anniversaries
of the grant date. 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 March 31, 2022 and 2021, 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.
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 March 31, 2022, the Company recorded a charge to general
and administrative costs in the consolidated statement of operations of $41,764 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 March 31, 2022, the Company recorded a charge to general and administrative costs in the consolidated statement of operations
of $37,983 with respect to these stock options.
On
June 30, 2021, the Board of Directors, in accordance with the recently adopted cash and equity compensation package for the 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 March 31, 2022, the Company recorded a charge to general and administrative costs in the consolidated statement of
operations of $175,205 with respect to these stock options.
A
summary of stock-based compensation costs for the three months ended March 31, 2022 and 2021 is as follows:
Summary of Stock-based Compensation Costs
|
|
2022 |
|
|
2021 |
|
|
|
Three Months Ended March 31,
|
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Related parties |
|
$ |
339,672 |
|
|
$ |
656,032 |
|
Non-related parties |
|
|
— |
|
|
|
— |
|
Total stock-based compensation costs |
|
$ |
339,672 |
|
|
$ |
656,032 |
|
A
summary of stock option activity, including options issued in the form of warrants, during the three months ended March 31, 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 |
|
|
— |
|
|
|
— |
|
|
|
|
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
Expired |
|
|
— |
|
|
|
— |
|
|
|
|
|
Stock options outstanding at March 31, 2022 |
|
|
2,666,667 |
|
|
$ |
3.738 |
|
|
|
3.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercisable at March 31, 2022 |
|
|
2,097,917 |
|
|
$ |
3.737 |
|
|
|
2.94 |
|
Total
deferred compensation expense for the outstanding value of unvested stock options was approximately $1,757,000 at March 31, 2022, which
will be recognized subsequent to March 31, 2022 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, 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)
|
|
|
|
|
|
|
|
|
|
$ |
0.900 |
|
|
|
33,333 |
|
|
|
33,333 |
|
$ |
1.680 |
|
|
|
66,667 |
|
|
|
66,667 |
|
$ |
2.060 |
|
|
|
200,000 |
|
|
|
200,000 |
|
$ |
2.800 |
|
|
|
250,000 |
|
|
|
171,875 |
|
$ |
3.000 |
|
|
|
666,667 |
|
|
|
666,667 |
|
$ |
3.030 |
|
|
|
500,000 |
|
|
|
187,500 |
|
$ |
3.200 |
|
|
|
250,000 |
|
|
|
171,875 |
|
$ |
3.210 |
|
|
|
200,000 |
|
|
|
200,000 |
|
$ |
6.000 |
|
|
|
166,667 |
|
|
|
166,667 |
|
$ |
6.600 |
|
|
|
50,000 |
|
|
|
50,000 |
|
$ |
7.140 |
|
|
|
200,000 |
|
|
|
100,000 |
|
$ |
12.000 |
|
|
|
83,333 |
|
|
|
83,333 |
|
|
|
|
|
|
2,666,667 |
|
|
|
2,097,917 |
|
The
intrinsic value of exercisable but unexercised in-the-money stock options at March 31, 2022 was approximately $11,000, based on a fair
market value of $1.23 per share on March 31, 2022.
Outstanding
stock options to acquire 568,750 shares of the Company’s common stock had not vested at March 31, 2022.
The
Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.
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