NOTE 8 – STOCK OPTIONS

Stock Options Issued, Vested and Cancelled

During the year ended December 31, 2023, the Company issued stock options under the 2021 Plan to employees to purchase an aggregate of 44,000 shares of Common Stock with a strike price of $9.82 per share and a term of ten years. One-third of these options vest within one year of the issuance date and then the remaining stock options vest in equal quarterly installments over the remaining two years. These options had a total fair value of approximately $288,000, as calculated using the Black-Scholes model.

During the year ended December 31, 2023, stock options to purchase an aggregate of 10,000 shares of Common Stock under our 2021 Plan were cancelled with a strike price of $19.20 per share.

During the year ended December 31, 2023, stock options to purchase an aggregate of 44,667 shares of Common Stock, subject to time-based milestone vesting conditions, vested.

During the year ended December 31, 2022, the Company issued stock options under the 2021 Plan to employees to purchase an aggregate of 20,000 shares of Common Stock with strike prices ranging from $19.20 to $25.20 per share and a term of ten years. One-third of these options vest on the one-year anniversary of the issuance date and then the remaining stock options vest in equal quarterly installments over the remaining two years. These options had a total fair value of approximately $180,000, as calculated using the Black-Scholes model.

During the year ended December 31, 2022, the Company issued stock options under the 2021 Plan to its current chief financial officer, to purchase an aggregate of 15,000 shares of Common Stock with a strike price of $25.20 per share and a term of ten years. One-third of these options vest on the one-year anniversary of the issuance date, one-third of these options vest on the two-year anniversary of the issuance date and one-third of these options vest on the three-year anniversary of the issuance date. These options had a total fair value of approximately $174,000, as calculated using the Black-Scholes model.

During the year ended December 31, 2022, the Company issued stock options under the 2021 Plan to a non-executive Board member, to purchase an aggregate of 5,000 shares of Common Stock with a strike price of $21.20 per share and a term of ten years. One-half of these options vest on the one-year anniversary of the issuance date and one-half of these options vest on the two-year anniversary of the issuance date. These options had a total fair value of approximately $49,000, as calculated using the Black-Scholes model.

During the year ended December 31, 2022, stock options to purchase an aggregate of 5,000 shares of Common Stock under our 2021 Plan were cancelled with a strike price of $100.00 per share.

During the year ended December 31, 2022, stock options to purchase an aggregate of 10,833 shares of Common Stock, subject to time-based milestone vesting conditions, vested.

During the year ended December 31, 2022, the Company recorded approximately $22,000 of stock-based compensation which was included as part of general and administrative expense.

Stock-Based Compensation

For the years ended December 31, 2023 and 2022, total stock-based compensation expense related to the Company’s stock options was approximately $520,000 and approximately $440,000, respectively. For the year ended December 31, 2023, the Company recognized approximately $398,000 of stock-based compensation related to its options within general and administrative expense, and approximately $122,000 within research and development expense. For the year ended December 31, 2022, all stock-based compensation expense was recorded within general and administrative expense.

Stock option activity for the years ended December 31, 2023 and 2022 was as follows:

As of December 31, 2023, remaining unamortized stock-based compensation expense related to the stock options was $408,844.

The Company estimates the fair value of each stock option on the date of grant using the Black-Scholes option pricing model, which requires various assumptions including fair value of the underlying share, volatility, expected option life, risk-free interest rate and expected dividends. The fair value of the underlying share was based on the fair value on the grant date. The expected term was based on the expected exercise behavior of grantees. Expected volatility was calculated based on the volatilities of a peer group of companies. The risk-free rate of the option is based on the U.S. Treasury rate for the expected term of the option. The following weighted-average assumptions were used in the Black-Scholes calculations:

The weighted average grant date fair value of options granted during the years ended December 31, 2023 and 2022 was $6.67 per option and $10.00 per option, respectively.