In 2013, LBS adopted the 2013 Employee, Director, and Consultant Equity Incentive Plan, (as amended and restated, the “2013 Plan”). Upon the closing of the Merger, each outstanding, unexercised and unexpired LBS option under the 2013 Plan, whether vested or unvested, was assumed by the Company and converted into an option to purchase common stock of the Company and became exercisable by the holder of such option in accordance with its terms. In connection with the closing of the Merger, no further awards will be made under the 2013 Plan.

In April 2021, in connection with the closing of the Merger, the Company’s stockholders approved the Palisade Bio, Inc. 2021 Equity Incentive Plan (the “2021 EIP Plan”). As of March 31, 2023, there were 70,672 shares of the Company's common stock authorized and available for issuance as equity-based awards under the 2021 EIP Plan.

Also in April 2021, the Company's stockholders approved the Palisade Bio, Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The 2021 ESPP was adopted in order to provide eligible employees of the Company an opportunity to purchase shares of the Company's common stock. As of March 31, 2023, there were 34,603 shares of the Company's common stock authorized and available under the ESPP and there have been no shares issued under the ESPP.

In November 2021, the Company's compensation committee of the Board adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant equity-based awards to individuals not previously employed by the Company, as an inducement to join the Company. As of March 31, 2023, there were 6,574 shares of the Company's common stock authorized and available for issuance as equity-based awards under the 2021 Inducement Plan.

The Company believes that stock options align the interests of its employees and directors with the interests of its stockholders. Stock option awards are generally granted with an exercise price equal to the market price of Company’s stock at the date the grants are awarded, a term as determined by the Company's Board but generally not to exceed ten-years, and generally vest in equal proportions each quarter over three years. The Company's equity incentive plans allow for the issuance of both incentive stock options and non-statutory stock options.

The fair value of options granted in the three months ended March 31, 2023 and March 31, 2022 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:


	Three Months Ended March 31,
	2023			2022
Weighted-average exercise price per share	$	2.36		$	48.67
Weighted-average expected term (years)		5.81			5.81
Weighted-average risk-free interest rate		3.76	%		1.85	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		69.54	%		73.77	%

Risk-free interest rate. The Company bases the risk-free interest rate assumption on observed interest rates appropriate for the expected term of the stock option grants.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Expected volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption is based on historical volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

The following table summarizes stock option activity and related information under the 2013 Plan, the 2021 EIP Plan and the 2021 Inducement Plan for the three months ended March 31, 2023:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		43,658		$	311.74		6.08	$	—
Granted		30,620			2.36		9.88		—
Exercised		—			—		—		—
Forfeited, expired or cancelled		(10,489	)		242.03		—		—
Outstanding at March 31, 2023		63,789			174.70		8.70		35,644
Vested and expected to vest at March 31, 2023		63,789			174.70		8.70		35,644
Exercisable at March 31, 2023		22,383			463.61		6.97		—

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2023 was $1.51 per share. The fair value of the options vested during the three months ended March 31, 2023 was approximately $0.1 million.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 81,500 stock options that are conditional subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional stock options as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional stock options if and when shareholder approval is received.

During the three months ended March 31, 2023, the Company granted under the 2021 EIP Plan time-based restricted stock units ("RSUs") to employees. The RSUs generally vest proportionally each quarter over a term of one or three years.

The following table summarizes RSU activity and related information under the 2021 EIP Plan for the three months ended March 31, 2023:


	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Life (Years)
Non-vested at December 31, 2022		—		$	—		—
Granted		44,632			3.25		—
Vested		—			—		—
Forfeited		(2,479	)		3.15		—
Non-vested at March 31, 2023		42,153			3.26		1.47

None of the RSUs granted the during three months ended March 31, 2023 vested during the three months ended March 31, 2023.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 59,500 restricted stock units that are conditional and subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional restricted stock units as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional RSUs if and when shareholder approval is received.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 68,700 performance-based stock units ("PSUs") which vest (a) 50% when the volume weighted average price of the Company’s common stock over 20 consecutive trading days is $3.20 or greater, and (b) 50% when such volume weighted average price of the Company’s common stock over 20 consecutive trading days is $4.25 or greater. The PSUs are conditional subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional PSUs as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional PSUs if and when shareholder approval is received.

The allocation of stock-based compensation for all stock awards is as follows (in thousands):


	Three Months Ended March 31,
	2023		2022

Research and development expense	$	49	$	52
General and administrative expense		44		306
Total	$	93	$	358

As of March 31, 2023, the unrecognized compensation cost related to outstanding options was $0.5 million, which is expected to be recognized over a weighted-average period of approximately 1.84 years and the unrecognized compensation cost related to outstanding RSUs was $0.1 million which is expected to be recognized over a weighted average period of approximately 1.47 years.