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 32,000 shares of our common stock. On July 18, 2025, our shareholders approved an increase of shares available under the 2019 Plan, which now provides for the aggregate issuance of 432,000 shares of our common stock. At December 31, 2025, we have 232,521 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the years ended December 31, 2025 and 2024 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, 2024 and 2025:

Schedule of Stock Option Activity 

During the year ended December 31, 2025, we granted the following stock options:

No forfeiture rate was applied to these stock options. The aggregate intrinsic value of outstanding options was $0 at both December 31, 2024 and 2025. No stock options were exercised during the years ended December 31, 2024 or 2025. At December 31, 2025, unrecognized stock-based compensation expense for stock options of $615,000 is expected to be fully recognized over a weighted average period of 2.8 years.

We used the Black-Scholes option pricing model to calculate the grant date fair value of the stock options granted in 2025 with the following assumptions:

Schedule of Stock Option Assumptions 

Restricted Stock Awards

During the year ended December 31, 2024, restricted stock awards (RSA) for 50 shares of common stock vested and were issued. We did not have any other activity related to RSAs during the years ended December 31, 2024 and 2025.

Restricted Stock Units

The following table summarizes our restricted stock unit (RSU) activity during the years ended December 31, 2024 and 2025:

Schedule of Restricted Stock Units (“RSUs”) Activity 

During the year ended December 31, 2025, we granted the following RSUs:

At December 31, 2025, unrecognized stock-based compensation expense for RSUs of approximately $254,000 is expected to be fully recognized over a weighted average period of 2.7 years. The unrecognized expense excludes $12,250 related to certain RSUs with a performance milestone that is not currently probable of occurring.

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, excluding pre-funded warrants, during the years ended December 31, 2024 and 2025:

Schedule of Warrants Activity 

During the years ended December 31, 2024 and 2025, we completed financings that included common warrants to purchase shares of our common stock. See Note 4 for details. We did not have any stock-based compensation expense related to our stock purchase warrants at December 31, 2025.