Stock-Based Compensation Plan

12 Months Ended

Dec. 31, 2022

Stock-Based Compensation Plan

Stock-Based Compensation Plan

9. Stock-Based Compensation Plan

The 2022 Plan – On December 15, 2022, the Company’s stockholders approved the Bio-Path Holdings, Inc. 2022 Stock Incentive Plan (the “2022 Plan”), which replaced the 2017 Stock Incentive Plan, as amended (the “2017 Plan,” and together with the 2022 Plan, the “Plans”). As of stockholder approval of the 2022 Plan on December 15, 2022, no further awards will be made under the 2017 Plan. The 2022 Plan provides for the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Shares, Restricted Share Units, Stock Appreciation Rights and other stock-based awards, or any combination of the foregoing, to the Company’s employees, non-employee directors and consultants. As of December 31, 2022, there were 1,300,000 shares of common stock reserved for future issuance of awards under the 2022 Plan. Under the 2022 Plan, the exercise price of awards is determined by the Board of Directors or the compensation committee of the Board of Directors, and for options, may not be less than the fair market value as determined by the closing stock price at the date of the grant. Each option and award under the 2022 Plan shall vest and expire as determined by the Board of Directors or the compensation committee. Options expire no later than ten years from the date of grant. All grants provide for accelerated vesting if there is a change in control, as defined in the 2022 Plan.

Stock option awards granted for the years 2022 and 2021 were estimated to have a weighted average fair value per share of $3.71 and $6.22, respectively. The fair value calculation is based on stock options granted during the year using the Black-Scholes option-pricing model on the date of grant. In addition, for all stock options granted, exercise price was determined based on the fair value as

determined by the closing stock price at the date of the grant. For stock options granted during 2022 and 2021 the following weighted average assumptions were used in determining fair value:

	2022		2021
Risk-free interest rate	2.43	%	1.15	%
Expected volatility	127	%	128	%
Expected term in years	6.0		6.0
Dividend yield	—	%	—	%

The Company determines the expected term of its stock option awards using the simplified method based on the weighted average of the length of the vesting period and the term of the exercise period. Expected volatility is determined by the volatility of the Company’s historical stock price over the expected term of the grant. The risk-free interest rate for the expected term of each option granted is based on the U.S. Treasury yield curve in effect at the time of grant.

Option activity under the Plans for the year ended December 31, 2022 was as follows (in thousands, except as noted):

				Weighted
		Weighted-		Average
		Average		Remaining		Aggregate
		Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
	(in thousands)
Outstanding at December 31, 2021	486	$	14.58		8.4	$	7,800
Granted	192		3.71		9.3
Forfeited	(2)		7.02
Expired	(18)		5.96
Outstanding at December 31, 2022	658	$	11.67		7.9	$	—
Vested and expected to vest December 31, 2022	634	$	11.90		7.9	$	—
Exercisable at December 31, 2022	321	$	18.62		7.3	$	—

The aggregate intrinsic value represents the total pretax intrinsic value (the difference between the Company’s closing stock price on December 31, 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022. This amount changes based on the fair value of the Company’s stock.

Option activity under the Plans for the year ended December 31, 2021 was as follows (in thousands, except as noted):

				Weighted
		Weighted-		Average
		Average		Remaining		Aggregate
		Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
	(in thousands)
Outstanding at December 31, 2020	274	$	20.57		8.7	$	3,750
Granted	213		7.02		9.3
Expired	(1)		72.67
Outstanding at December 31, 2021	486	$	14.58		8.4	$	7,800
Vested and expected to vest December 31, 2021	451	$	15.21		8.4	$	7,114
Exercisable at December 31, 2021	178	$	28.09		7.6	$	3,412

The aggregate intrinsic value represents the total pretax intrinsic value (the difference between the Company’s closing stock price on December 31, 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2021. This amount changes based on the fair value of the Company’s stock.

Stock-Based Compensation Expense – Total stock-based compensation expense for the year ended 2022 was $0.9 million, which consisted of research and development expense of $0.2 million and general and administrative expense of $0.7 million. As of December 31, 2022, future stock-based compensation expense for all outstanding unvested options was $1.3 million, which is expected to be recognized over a weighted-average vesting period of 2.2 years. Total stock-based compensation expense for the year ended 2021 was $0.8 million, which consisted of research and development expense of $0.2 million and general and administrative expense of $0.7 million.