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. On June 28, 2024, our shareholders approved an increase of shares available under the 2019 Plan, which now provides for the aggregate issuance of 800,000 shares of our common stock. At September 30, 2024, we have 353,641 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 as follows:

 Schedule of Stock-based Compensation Expense

Stock Options

Stock options to purchase 4,245 shares of common stock with a weighted-average exercise price of $336.00 expired during the nine months ended September 30, 2024. At September 30, 2024, we had outstanding and exercisable options for the purchase of 2,747 shares with a weighted average exercise price of $409.09 and a weighted average remaining contractual life of 3.9 years. At September 30, 2024, we did not have any unrecognized stock-based compensation expense related to our granted stock options.

Restricted Stock Awards

During the nine months ended September 30, 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 September 30, 2024.

Restricted Stock Units

Activity with respect to our Restricted Stock Units (“RSUs”) during the nine months ended September 30, 2024 was as follows:

 Schedule of Restricted Stock Units (“RSUs”) Activity

On June 28, 2024, we granted RSUs for the future issuance of 39,202 shares of common stock to our employees which vest accordingly: RSUs for the future issuance of 14,969 shares of common stock vest on January 1, 2025; RSUs for the future issuance of 18,173 shares of common stock vest over a three-year period upon meeting service requirements; RSUs for the future issuance of 3,030 shares of common stock vested upon grant due to regaining Nasdaq compliance; and RSUs for the future issuance of 3,030 shares of common stock vest upon dosing the first patient in our Phase 2 study in NGC-Cap.

On July 16, 2024, Russell Skibsted was appointed as our Chief Financial Officer (“CFO”). In addition to cash compensation, the Compensation Committee awarded RSUs for the future issuance of 28,000 shares of common stock to Mr. Skibsted, which vest accordingly: 14,000 vest on July 16, 2025; 7,000 vest upon reaching a market capitalization (i.e. total value of Processa’s outstanding shares of stock at the then current market price) of at least $30 million; and 7,000 vest upon receipt of cumulative financing(s) of at least $15 million.

On September 3, 2024, RSUs for the future issuance of 124,824 shares of common stock were granted to our independent directors and vest on the earlier of June 28, 2025 or the next annual shareholder meeting.

At September 30, 2024, unrecognized stock-based compensation expense of approximately $613,000 for RSUs is expected to be fully recognized over a weighted average period of 0.9 years. The unrecognized expense excludes approximately $432,000 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 nine months ended September 30, 2024, we did not grant any warrants to purchase shares of our common stock other than warrants to purchase 1,617,777 shares of common stock as part of the Offering (see Note 2). Warrants to purchase 7,500 shares of our common stock expired unexercised. 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 September 30, 2024, we had outstanding warrants for the purchase of 1,775,784 shares of our common stock with a weighted average exercise price of $5.95 and a weighted average remaining contractual life of 4.0 years. All the outstanding warrants are exercisable as of September 30, 2024. We did not have any unrecognized stock-based compensation expense related to our granted warrants at September 30, 2024.