Note 12 - Stock-based Compensation

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

12. Stock-Based Compensation

2015 Equity Plan

The 2015 Equity Plan provides for increases to the number of shares reserved for issuance thereunder each January 1 equal to 4.0% of the total shares of the Company’s common stock outstanding as of the immediately preceding December 31, unless a lesser amount is stipulated by the Compensation Committee of the Company’s board of directors. As of September 30, 2023, there were 614 shares available for future issuance under the 2015 Equity Plan.

2018 Employee, Director and Consultant Equity Incentive Plan

On March 28, 2018, EIP adopted the 2018 Plan, which was assumed by the Company pursuant to and in accordance with the terms of the Merger Agreement. Under the 2018 Plan, the Company may issue incentive stock options, non-qualified stock options, stock grants, and other stock-based awards to employees, directors, and consultants, as specified in the 2018 Plan and subject to applicable SEC and Nasdaq rules and regulations. The Board of Directors has the authority to determine to whom options or stock will be granted, the number of shares, the term, and the exercise price. Options granted under the 2018 Plan have a term of up to ten years and generally vest over a four-year period with 25% of the options vesting after one-year of service and the remainder vesting monthly thereafter. As of September 30, 2023, there were no shares available for issuance.

The Company recorded stock-based compensation expense in the following expense categories of its unaudited interim condensed consolidated statements of operations for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development	$	30,737	$	41,546	$	101,885	$	134,559
General and administrative		78,431		40,838		140,775		118,288
Total stock-based compensation expense	$	109,168	$	82,384	$	242,660	$	252,847

The following table summarizes the activity related to all stock option grants for the nine months ended September 30, 2023:

	Number of Options		Weighted average exercise price per share
Balance at January 1, 2023		114,516	$	25.98
Options assumed in the Merger		52,574	$	313.67
Granted		162,250	$	5.33
Outstanding at September 30, 2023		329,340	$	61.73
Exercisable at September 30, 2023		148,912	$	111.77

The Black-Scholes option-pricing model was used to estimate the grant date fair value of each stock option grant at the time of grant using the following weighted-average assumptions:

	September 30,
	2023		2022
Expected term (in years)		5.75		6.00
Risk-free interest rate		4.4%		1.9%
Expected volatility		81.7%		80.3%
Dividend yield		0.0%		0.0%

No options were exercised during the three or nine months ended September 30, 2023 and 2022. At September 30, 2023, there was $1.0 million of unrecognized compensation expense that will be recognized over a weighted-average period of 2.3 years.