Stock-Based Compensation

6 Months Ended

Jun. 30, 2025

Stock-Based Compensation

Stock-Based Compensation

8. Stock-Based Compensation

In 2021, the Company adopted its 2021 Incentive Compensation Plan, which was subsequently amended and restated in each of 2022 and 2024 (as amended and restated, the “2021 Plan”). Upon adopting the 2021 Plan, no further awards have been or will be made under the Company’s 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”). Under the 2021 Plan, the Company may grant incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards to employees, non-employee directors, consultants, and advisors. At June 30, 2025, there were 230,801 shares available for future issuance with respect to new awards and outstanding awards.

Stock-based compensation expense includes stock options granted to employees and non-employees and has been reported in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss in either R&D expenses or general and administrative expenses depending on the function performed by the optionee. No net tax benefits related to the stock-based compensation costs have been recognized since the Company’s inception. The Company recognized stock-based compensation expense related to stock options and restricted stock units (“RSUs”) as follows for the three and six months ended June 30, 2025, and 2024:


		Three Months Ended June 30,						Six Months Ended June 30,
		2025			2024			2025			2024
Research and development		$	17,000		$	(4,000)		$	33,000		$	147,000
General and administrative			88,000			384,000			233,000			566,000
Total stock-based compensation expense		$	105,000		$	380,000		$	266,000		$	713,000

A summary of stock option activity for the six months ended June 30, 2025 is as follows:


		Options Outstanding
							Weighted
				Weighted-			Average
				Average			Remaining		Aggregate
		Number		Exercise			Contractual		Intrinsic
		of Shares		Price			Term (in years)		Value
Balance, December 31, 2024		423,107		$	11.89		8.75		$	2,698,000
Granted		152,742		$	1.77
Forfeitures		(1,333)		$	17.67
Expired		(23,057)		$	115.38
Balance, June 30, 2025		551,459		$	4.86		8.50		$	25,000
Exercisable at June 30, 2025		407,066		$	5.84		8.09		$	25,000

The Company accounts for all stock-based payments made to employees, non-employees and directors using an option pricing model for estimating fair value. Accordingly, stock-based compensation expense is measured based on the estimated fair value of the awards on the date of grant. Compensation expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required services to the Company using the straight-line single option method.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, assumptions related to the expected price volatility of the common stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s stock.

As of June 30, 2025, there was $263,000 of unrecognized compensation expense related to the unvested stock options which is expected to be recognized over a weighted-average period of approximately 1.0 years.

The weighted-average assumptions underlying the Black-Scholes calculation of grant date fair value of stock options include the following:


		Six Months Ended June 30,
		2025			2024
Risk-free interest rate			4.17	%		—	%
Expected volatility			120.47	%		—	%
Expected term			5.32	years		—	years
Expected dividend yield			—	%		—	%
Weighted average grant date fair value		$	2.34		$	—

The weighted-average valuation assumptions were determined as follows:

●

Risk-free interest rate: The Company based the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

●

Expected term of options: Due to its lack of sufficient historical data, the Company estimates the expected life of its employee stock options using the “simplified” method, as prescribed in Staff Accounting Bulletin (“SAB”) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

●

Expected stock price volatility: Expected volatility is based on the historical volatility of the Company’s common stock.

●

Expected annual dividend yield: The Company has never paid, and does not expect to pay, dividends in the foreseeable future. Accordingly, the Company assumed an expected dividend yield of 0.0%.

The Company grants RSUs to employees under the 2021 Plan, which typically have a vesting term of 33% on each of the first and second anniversaries, and 34% on the third anniversary of the date of grant. In April 2024, the compensation committee of the Board approved RSU grants as inducement awards (“Inducement RSUs”) to certain of the Company’s employees who joined the Company in connection with the Merger. The inducement RSUs vest 25% on each of the first four anniversaries of the date of grant. The Inducement RSUs were granted outside of the Company’s incentive plans in accordance with Nasdaq Listing Rule 5635(c)(4). During the six months ended June 30, 2025, the Company granted 9,603 RSUs with a weighted average grant date fair value of $7.81 per RSU.

A summary of RSU activity for the six months ended June 30, 2025 is as follows:


		Number of Units		Weighted average grant date fair value
Outstanding and unvested December 31, 2024		22,421		$ 25.12
Granted		9,603		$ 7.81
Vested		(6,509)		$ 25.44
Outstanding and unvested June 30, 2025		25,515		$ 18.53

At June 30, 2025, the unrecognized compensation cost related to unvested service-based RSUs was $425,000, which will be recognized over the remaining service period of 2.59 years.

Grants of PSUs and SARs

During 2020 and 2021, the compensation committee of the Board and the Board approved a cash bonus program of cash-settled stock appreciation right awards to the Company’s employees and non-employee directors, and cash-settled performance stock unit awards to the Company’s employees. These awards were granted outside of the Company’s 2018 Plan and the 2021 Plan. As the Company’s stock price has decreased since these awards were issued, their impact on the results of operations and balance sheet of the Company are not material during 2025 or 2024.