Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Note 7 – Stock-Based Compensation

The Company has three equity compensation plans: the 2009 Stock Option Plan, 2014 Equity Incentive Plan and the 2018 Stock Incentive Plan (the “Plans”).

In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan pursuant to which the Company may grant up to 91,367 shares as ISOs, NQs and restricted stock units (“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015 and each January 1 thereafter and prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity Incentive Plan, the Plan Limit was and shall be increased by the lesser of (x) 4% of the number of shares of Common Stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. In March 2019, the Plan was amended and restated which removed the annual increase component and was limited to 826,292 shares.

As previously disclosed, on December 8, 2020, the Board of Directors of the Company adopted, subject to stockholder approval, the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Inventive Plan (the “Restated Plan”), which would amend and restate the Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Current Plan”). The Company held its annual meeting of stockholders on June 17, 2021 (the “Annual Meeting”). The stockholders voted to approve the Restated Plan at the Annual Meeting. The Restated Plan is identical to the Current Plan in all material respects, except as follows: (a) the number of shares of Common Stock authorized for issuance under the Restated Plan will increase from 826,292 shares to 3,339,243 shares, plus the total number of shares that remained available for issuance, that are not covered by outstanding awards issued under the Current Plan, immediately prior to December 8, 2020; and (b) the Restated Plan will terminate on December 7, 2030, unless earlier terminated. Please reference the disclosure in Note 9.

In 2018, the Company’s stockholders approved the 2018 Stock Incentive Plan pursuant to which the Company may grant up to 558,071 shares as (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Preferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards.

Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four-year term and NQs generally vest over a one-to-five-year term. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding. As of September 30, 2021 there were 190,799 shares available for grant under the 2018 Stock Incentive Plan.

On June 17, 2019, the Board adopted the 2019 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of non-qualified stock options. The Inducement Plan was recommended for approval by the Compensation Committee of the Board and subsequently approved and adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

On December 9, 2020, the Company amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 200,000 shares to 500,000 shares. The 2019 Inducement Plan is administered by the Compensation Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the 2019 Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board (or any parent or subsidiary of the Company), or following a bona fide period of non-employment by the Company (or a parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. As of September 30, 2021, there were 362,700 shares available for grant under the 2019 Inducement Plan.

The Company’s stock-based compensation expense related to stock options was recognized in operating expense as follows:

	Three Months September 30, 2021				Nine Months Ended September 30,
	2021		2020		2021		2020
	(unaudited)				(unaudited)
Stock-Based Compensation
Research and development	$	596,762	$	61,557	$	824,580	$	168,083
General and administrative		1,105,000		68,235		1,576,401		132,815
Total	$	1,701,763	$	129,792	$	2,400,980	$	300,898

The fair value of options granted during the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 was estimated using the Black-Scholes option valuation model utilizing the following assumptions. There were 63,800 options granted during the three-month period ended September 30, 2021.

	Three Months September 30, 2021						Nine Months Ended September 30,
	2021			2020			2021			2020
	Weighted Average			Weighted Average			Weighted Average			Weighted Average
	(unaudited)						(unaudited)
Volatility		100.16	%		–	%		100.58	%		97.00	%
Risk-Free Interest Rate		0.77	%		–	%		55.88	%		0.38	%
Expected Term in Years		6.08			–			6.28			6.07
Dividend Rate		–			–			–			–
Fair Value of Option on Grant Date	$	11.81		$	–		$	7.43		$	1.10

The following table summarizes the number of options outstanding and the weighted average exercise price:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options outstanding at December 31, 2020		1,650,897		$	11.87		7.03	$	226,731
Granted		1,722,730			3.34		9.28	$	8,803,138
Exercised		(95,737	)		7.24		–	$	–
Forfeited		(326,038	)		29.71		–	$	–
Options outstanding at September 30, 2021		2,951,852		$	5.07		7.99	$	29,754,366
Vested and expected to vest at September 30, 2021		2,951,852		$	5.07		7.99	$	29,754,366
Exercisable at September 30, 2021		1,130,039		$	7.66		5.81	$	8,914,003

At September 30, 2021 there was approximately $11,300,108 of unamortized stock option compensation expense, which is expected to be recognized over a remaining average vesting period of 2.97 years.