Note 4 – 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 July 18, 2025, shareholders approved to increase the shares available under the 2019 Plan, and it now provides for the aggregate issuance of 10,800,000 shares of our common stock. At September 30, 2025, we have 10,357,420 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the three and nine months ended September 30, 2025 and 2024 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 nine months ended September 30, 2025. At September 30, 2025, 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 2.9 years. At September 30, 2025, we did not have any unrecognized stock-based compensation expense related to our granted stock options.

On October 1, 2025, we granted stock options to purchase 3,267,000 shares of our common stock to our directors and officers with an exercise price of $0.198 that expire on October 1, 2035. These stock options vest 33.3% on October 1, 2026 and the remaining 66.7% vest ratably monthly for the following two years.

Restricted Stock Units

Activity with respect to our Restricted Stock Units (“RSUs”) during the nine months ended September 30, 2025 was as follows:

Schedule of Restricted Stock Units (“RSUs”) Activity 

At September 30, 2025, unrecognized stock-based compensation expense of approximately $108,000 for RSUs is expected to be fully recognized over a weighted average period of 0.8 years. The unrecognized expense excludes approximately $12,000 of expense related to certain grants of RSUs with performance milestones that are being accounted for as though the performance milestones 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. While certain employees may hold fully vested RSUs, the individual does not hold any shares or have any rights of a stockholder 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.

On October 1, 2025, we granted RSUs for the future issuance of 1,089,000 shares of common stock to our directors and officers. These RSUs vest 33.3% on October 1, 2026 and the remaining 66.7% vest monthly for the following two years.

Warrants

During the nine months ended September 30, 2025, we sold 7,019,700 pre-funded warrants, and accompanying Series A Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of our common stock in the January offering. We also sold 13,690,000 pre-funded warrants and accompanying common warrants to purchase up to 28,000,000 shares of common stock, as well as issued placement agent warrants to purchase up to 1,120,000 shares of common stock in the June offering. During the nine months ended September 30, 2025, warrants to purchase 2,912,422 shares of common stock from the June offering, and all pre-funded warrants from the January offering and June offering, were exercised.

At September 30, 2025, we had outstanding exercisable stock purchase warrants for the purchase of 40,059,370 shares with a weighted average exercise price of $0.63 and a weighted average remaining contractual life of 4.2 years. We did not have any unrecognized stock-based compensation expense related to our granted stock purchase warrants at September 30, 2025.

As of November 3, 2025, warrants to purchase an additional 3,781,267 of common stock were exercised for approximately $945,000.