Note 3 - Stock-based Compensation

The Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) allows us 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 originally provided for the aggregate issuance of 150,000 shares of our common stock. 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 December 31, 2024, we have 353,641 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the years ended December 31, 2024 and 2023 as follows:

Schedule of Stock-based Compensation Expense 

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for all net deferred tax assets relating to this expense.

Stock Options

The following table summarizes our stock option activity during the years ended December 31, 2023 and 2024:

 Schedule of Stock Option Activity

No forfeiture rate was applied to these stock options. The aggregate intrinsic value of outstanding options, all of which are exercisable, was $0 at both December 31, 2023 and 2024. No stock options were exercised during the years ended December 31, 2023 or 2024 and there is no unamortized expense at December 31, 2024 since the options are fully vested.

Restricted Stock Awards

The following table summarizes our restricted stock award (RSA) activity during the years ended December 31, 2023 and 2024:

 Schedule of Restricted Stock Awards (“RSAs”) Activity

Restricted Stock Units

The following table summarizes our restricted stock unit (RSU) activity during the years ended December 31, 2023 and 2024:

 Schedule of Restricted Stock Units (“RSUs”) Activity

During the year ended December 31, 2024, we granted the following RSUs:

Holders of our vested RSUs will be issued shares of our common stock upon the satisfaction of the distribution restrictions contained in their Restricted Stock Unit Award Agreement. The distribution restrictions are typically different (longer) than the vesting schedule, imposing an additional restriction on the holder. Unlike RSAs, while 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

The following table summarizes our warrant activity during the years ended December 31, 2023 and 2024.

 Schedule of Warrants Activity

During the year ended December 31, 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 4). 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.

In February 2023, we amended our financial consulting agreement with Spartan Capital Securities, LLC (“Spartan”), our placement agent for our registered direct offering in February 2023, by extending the term until February 10, 2024. We compensated Spartan for financial consulting services provided under the amendment by granting warrants to purchase 158,007 shares of our common stock on April 17, 2023, with an exercise price of $20.40. The warrants expire on April 17, 2026, and contain both call and cashless exercise provision. We also granted warrants to purchase 15,000 shares of our common stock to a consultant on November 18, 2023, of which warrants to purchase 7,500 shares of our common stock were exercisable, with an exercise price of $7.40. These warrants expire on November 18, 2025.

We used the Black-Scholes option pricing model to calculate the grant date fair value of the two warrants granted in 2023 with the following assumptions:

 Schedule of Warrant Valuation Assumption