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.
As
of June 30, 2023, unexpired stock options for 300,313 shares were issued and outstanding under the 2020 Plan and 113,020 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.
For
stock options requiring an assessment of value during the six months ended June 30, 2023, 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 |
|
|
4.565 |
% |
Expected dividend yield |
|
|
0 |
% |
Expected volatility |
|
|
138.05 |
% |
Expected life |
|
|
3.5 years |
|
For
stock options requiring an assessment of value during the six months ended June 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 |
|
|
153.17 |
% |
Expected life |
|
|
3.5 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 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 is being charged to operations ratably from August 12, 2020 through August 12, 2023. During
the three months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement
of operations of $24,985 and $24,985, respectively, with respect to these stock options. During the six months ended June 30, 2023 and
2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $49,695 and $49,695,
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 is being charged to operations ratably from August 1, 2020 through August 1, 2023. During
the three months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement
of operations of $35,693 and $35,693, respectively, with respect to these stock options. During the six months ended June 30, 2023 and
2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $70,993 and $70,993,
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 is being charged to operations ratably from August 12, 2020 through August 12, 2023. During the three months ended June
30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $24,985
and $24,985, respectively, with respect to these stock options. During the six months ended June 30, 2023 and 2022, the Company recorded
charges to general and administrative costs in the consolidated statement of operations of $49,695 and $49,695, 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. 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 and six months ended June 30, 2022, the
Company recorded charges to general and administrative costs in the consolidated statement of operations of $42,228 and $83,992, 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. During the three months ended June 30, 2023 and 2022, the Company recorded charges to general and
administrative costs in the consolidated statement of operations of $38,405 and $38,405, respectively, with respect to these stock options.
During the six months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated
statement of operations of $76,388 and $76,388, 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.
During the three months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated
statement of operations of $106,290 and $177,150, respectively, with respect to these stock options. During the six months ended June
30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $211,412
and $352,355, 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. During the three months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative
costs in the consolidated statement of operations of $9,695 and $80,647, respectively, with respect to these stock options. During the
six months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated statement
of operations of $19,284 and $80,647, 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.
During the three months ended June 30, 2023 and 2022, the Company recorded charges to general and administrative costs in the consolidated
statement of operations of $23,655 and $0, respectively, with respect to these stock options. During the six months ended June 30, 2023
and 2022, the Company recorded charges to general and administrative costs in the consolidated statement of operations of $47,049 and
$0, 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. During the
three months and six months ended June 30, 2023, the Company recorded a total charge to general and administrative costs in the consolidated
statement of operations of $16,352 and $32,524, 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.
During the three months and six months ended June 30, 2023, the Company did not record a charge to operations 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, 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 and six months ended June 30, 2023 and 2022 is as follows:
Summary of Stock-based Compensation Costs
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties |
|
$ |
280,060 |
|
|
$ |
424,094 |
|
|
$ |
557,040 |
|
|
$ |
763,766 |
|
Non-related parties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total stock-based compensation costs |
|
$ |
280,060 |
|
|
$ |
424,094 |
|
|
$ |
557,040 |
|
|
$ |
763,766 |
|
A
summary of stock option activity, including options issued in the form of warrants, during the six months ended June 30, 2023 is as follows:
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, 2022 |
|
|
389,479 |
|
|
$ |
29.1826 |
|
|
|
|
|
Granted |
|
|
40,000 |
|
|
|
5.8800 |
|
|
|
|
|
Exercised |
|
|
(1,250 |
) |
|
|
5.0250 |
|
|
|
|
|
Expired |
|
|
— |
|
|
|
— |
|
|
|
|
|
Stock options outstanding at June 30, 2023 |
|
|
428,229 |
|
|
$ |
27.0764 |
|
|
|
2.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercisable at December 31, 2022 |
|
|
281,979 |
|
|
$ |
32.8335 |
|
|
|
|
|
Stock options exercisable at June 30, 2023 |
|
|
301,979 |
|
|
$ |
31.9708 |
|
|
|
2.75 |
|
Total
deferred compensation expense for the outstanding value of unvested stock options was approximately $517,000 at June 30, 2023, which
will be recognized subsequent to June 30, 2023 over a weighted-average period of approximately 21 months.
The
exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, at June 30, 2023
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)
|
|
|
|
|
|
|
|
|
|
$ |
5.025 |
|
|
|
8,750 |
|
|
|
8,750 |
|
$ |
5.880 |
|
|
|
40,000 |
|
|
|
— |
|
$ |
7.400 |
|
|
|
57,500 |
|
|
|
36,250 |
|
$ |
16.800 |
|
|
|
3,333 |
|
|
|
3,333 |
|
$ |
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 |
|
|
|
15,000 |
|
$ |
120.000 |
|
|
|
8,332 |
|
|
|
8,332 |
|
|
|
|
|
|
428,229 |
|
|
|
301,979 |
|
The
intrinsic value of exercisable but unexercised in-the-money stock options at June 30, 2023 was approximately $7,500, based on a fair
market value of $5.88 per share on June 30, 2023.
Outstanding
stock options to acquire 126,250 shares of the Company’s common stock had not vested at June 30, 2023.
The
Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.
|