Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Note 8 – Stock-Based Compensation

In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan (the “Original 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 Original 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 Board adopted and the Company’s stockholders approved the Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Prior Plan”) which amended and restated the Original Plan in order to remove the annual increase component and was limited to 826,292 shares.

On December 8, 2020, the Board adopted and on June 17, 2021, the stockholders approved, the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Restated Plan”), which amended and restated the Prior Plan. The Restated Plan is identical to the Prior Plan in all material respects, except (a) the number of shares of Common Stock authorized for issuance under the Restated Plan was increased from 826,292 shares to 4,165,535 shares, plus the total number of shares that remained available for issuance, that were not covered by outstanding awards issued under the Prior Plan, immediately prior to December 8, 2020; and (b) the Restated Plan was amended to terminate on December 7, 2030, unless earlier terminated. On July 14, 2023, the Company’s stockholders approved an amendment to the Restated Plan, increasing the number of shares of common stock for issuance from 4,165,535 to 6,565,535 shares. As of December 31, 2023, there were 3,051,449 shares available for grant under the Restated Plan.

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. As of December 31, 2023, there were 190,799 shares available for grant under the 2018 Stock Incentive Plan.

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 period. 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.

On June 17, 2019, the Board adopted the 2019 Inducement Plan (the “Inducement Plan”). On December 8, 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. On May 17, 2022, the Company further amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 500,000 shares to 1,100,000 shares. On January 22, 2024, the Company further amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 1,100,000 shares to 2,100,000 shares. The Inducement Plan provides for the grant of non-qualified stock options. The Inducement Plan, and each amendment thereto, 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.

The 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 Inducement Plan may only be made to an employee who has not previously been an employee of the Company or member of the Board of Directors of the Company (or any 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 December 31, 2023, there were 112,010 shares available for grant under the Inducement Plan.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022:

	Year Ended December 31,
	2023		2022
Research and development	$	3,013,326	$	1,868,352
General and administrative		4,600,995		3,327,804
Total	$	7,614,321	$	5,196,156

The following table summarizes the stock option activity for the Company’ stock option plans for the year ended December 31, 2023:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at January 1, 2023		4,171,311		$	5.56		7.89		32,779,920
Granted		1,414,000		$	10.31		9.18		290
Exercised		(81,935	)	$	3.77		–		–
Forfeited		(456,405	)	$	10.64		–		–
Expired		(17,626	)		16.17
Options outstanding at December 31, 2023		5,029,345		$	6.43		7.42	$	4,395,227
Vested and expected to vest at December 31, 2023		5,029,345		$	6.43		7.42	$	4,395,227
Exercisable at December 31, 2023		2,829,330		$	5.60		6.53	$	3,315,101

As of December 31, 2023 there was approximately $13,950,484 of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 2.47 years.

The Company entered into an agreement with DC Consulting for certain consulting services and issued 200,000 shares in connection with the agreement.

The weighted-average grant date fair value of the stock options granted in 2023 was $9.59 per share.

The fair value of options granted during the year ended December 31, 2023 and 2022 were estimated using the Black-Scholes option valuation model utilizing the following assumptions:

	Year Ended December 31,
	2023			2022
	Weighted Average
Volatility		142.84	%		99.63	%
Risk-Free Interest Rate		4.14	%		1.79	%
Expected Term in Years		6.06			6.39
Dividend Rate		–			–

Fair Value of Option on Grant Date	$	9.59		$	4.40

Expected volatility. The expected volatility assumption was changed on January 1, 2023 from using volatilities of a peer group of similar companies in the biotechnology industry whose share prices were publicly available, to using the volatility of the Company’s historical share price performance over the contractual term of the options.

Risk-free interest rate. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock option grants.

Expected term. The expected term represents the period options are expected to be outstanding. The expected term of the options is based on using the simplified method, which is the midpoint between the requisite service period and the contractual term of the option, since the Company has a limited history of being a public company to develop reasonable expectations about future exercise patterns and employment duration for the stock options grants.

Expected dividend rate. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.