Note 3 - Stock-based Compensation

On June 19, 2019, our stockholders approved, and we adopted, the Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The 2019 Plan allows us, under the direction of our Board of Directors or a committee thereof, to make grants of stock options, restricted and unrestricted stock and other stock-based awards to employees, including our executive officers, consultants and directors. The 2019 Plan provides for the aggregate issuance of 300,000 shares of our common stock. At March 31, 2024, we have 35,508 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the three month ended March 31, 2024 and 2023 as follows:

 Schedule of Stock-based Compensation Expense

Stock Options

No stock options to purchase shares of common stock were forfeited or expired during the three months ended March 31, 2024. At March 31, 2024, we had outstanding and exercisable options for the purchase of 6,992 shares with a weighted average exercise price of $364.72 and a weighted average remaining contractual life of 1.9 years. At March 31, 2024, we did not have any unrecognized stock-based compensation expense related to our granted stock options.

Restricted Stock Awards

During the three months ended March 31, 2024, we vested 1,250 Restricted Stock Awards (“RSAs”) with a weighted average grant-date fair value of $9.26 per share. We had no RSAs outstanding at March 31, 2024.

Restricted Stock Units

Activity with respect to our Restricted Stock Units (“RSUs”) during the three months ended March 31, 2024 was as follows:

 Schedule of Restricted Stock Units (“RSUs”) Activity

On January 1, 2024, we granted RSUs for the future issuance of no more than 39,202 shares of our common stock, contingent upon receiving shareholder approval to increase the number of shares available under our 2019 Omnibus Incentive Plan (“Incentive Plan”) at our annual shareholder meeting in June 2024. The number of shares to be issued under the RSUs will be based on the greater of: (i) $30.00 per share or (ii) the closing price per share on the day we receive shareholder approval to increase the number of shares available under the Incentive Plan.

At March 31, 2024, unrecognized stock-based compensation expense of $723,000 for RSUs (which excludes the above grant on January 1, 2024) is expected to be fully recognized over a weighted average period of 1.4 years. The unrecognized expense excludes $420,000 of expense related to certain grants of RSUs with performance milestones that are not probable of occurring at this time.

Holders of our vested RSUs will be issued shares of our common stock upon meeting the distribution restrictions contained in their Restricted Stock Unit Award Agreement. The distribution restrictions are different (longer) than the vesting schedule, imposing an additional restriction on the holder. Unlike RSAs, while certain employees may hold fully vested RSUs, the individual does not hold any shares or have any rights of a shareholder until the distribution restrictions are met. Upon distribution to the employee, each RSU converts into one share of our common stock. The RSUs contain dividend equivalent rights.

Warrants

During the three months ended March 31, 2024, other than warrants to purchase 1,617,777 shares of common stock as part of our public offering (see Note 2), we did not grant any warrants to purchase shares of our common stock and warrants to purchase 5,000 shares of common stock expired. We also repurchased a warrant issued to a consultant in 2023 for the purchase of 15,000 shares of our common stock in exchange for a payment of $10,000.

At March 31, 2024, we had outstanding stock purchase warrants for the purchase of 1,778,284 shares with a weighted average exercise price of $6.17 and a weighted average remaining contractual life of 4.5 years. All the outstanding stock purchase warrants are exercisable at March 31, 2024. We did not have any unrecognized stock-based compensation expense related to our granted stock purchase warrants at March 31, 2024.