Canton Strategic Holdings, Inc. Stock Compensation Disclosure

Note 4 – Stock Based Compensation

 

Incentive Plans and Options

 

Under the Company’s 2017 Stock Incentive Plan (the “2017 Plan”) the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. Up to 261 shares of the Company’s common stock may be issued pursuant to the 2017 Plan.

 

The Company has granted options to acquire 255 shares of common stock at $4,950 per share under the 2017 Plan, and 6 options to acquire shares of common stock remain available for issuance. As of December 31, 2024 and 2023, there were options outstanding to acquire 255 shares of common stock. As of December 31, 2024 and 2023, all such options were fully vested, and the weighted average remaining contractual life for such options was approximately 3.2 and 4.2 years, respectively.

 

In July 2019, the Company authorized an additional plan, the 2019 Stock Incentive Plan (the “2019 Plan”). Under the 2019 Plan, the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. At both December 31, 2024 and December 31, 2023, a total of 10,452 shares were authorized for issuance under the 2019 Plan.

 

 

As of December 31, 2024 and 2023, the Company has granted options to acquire 10,452 shares of common stock under the 2019 Plan and 0 shares of common stock remain available for issuance under the 2019 Plan. There are stock options outstanding to acquire 5,512 shares of common stock with a weighted-average exercise price of $1,105.50 and weighted average contractual terms of 6.8 years and 7.8 years at December 31, 2024 and 2023, respectively.

 

On August 17, 2023, the Company authorized a new plan, the Tharimmune, Inc. 2023 Omnibus Incentive Plan (the “2023 Plan”). Under the 2023 Plan, the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. Initially, options to purchase up to 6,934 shares of the Company’s common stock were available to be issued pursuant to the 2023 Plan. Under an amendment to the 2023 Plan by vote of the Company’s stockholders on May 14, 2024, an amended total of up to 173,600 options to purchase shares of the Company’s common stock may be issued pursuant to the 2023 Plan. In addition, under the amendment, an “evergreen” provision was added to automatically increase the number of shares available under the 2023 Plan on January 1 annually, beginning January 1, 2025 and ending January 1, 2033, equal to the lesser of five percent of the shares of Common Stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year or such lesser number of shares of the Company’s Common Stock as determined by the Board of Directors. Effective January 1, 2025, an additional 98,688 options to purchase shares of the Company’s common stock were added to the 2023 Plan.

 

During the year ended December 31, 2024, the Company granted 102,853 options to acquire shares of common stock under the 2023 Plan. At December 31, 2024 and 2023, 70,412 and 6,934 shares of common stock remain available for issuance under the 2023 Plan, respectively. There are stock options outstanding to acquire 103,188 and 335 shares of common stock with a weighted-average exercise price of $3.11 and $59.14 and weighted-average contractual terms of 9.6 years and 9.9 years at December 31, 2024 and 2023, respectively.

 

The following table summarizes stock-based activities under the 2017, 2019, and 2023 Stock Incentive Plans:

 

Schedule of Stock Option Activity

						Weighted				Weighted
		Shares				Average				Average
		Underlying				Exercise				Contractual
		Options				Price				Terms
Outstanding at December 31, 2022			4,393			$	1,628.69				7.2 years
Granted			1,709			$	129.17				9.2 years
Outstanding at December 31, 2023			6,102			$	1,208.72				7.8 years
Granted			102,853			$	2.925				9.6 years
Outstanding at December 31, 2024			108,955			$	70.46				9.5 years
Exercisable options at December 31, 2024			48,435			$	138.56				9.2 years
Vested and expected to vest at December 31, 2024			108,955			$	70.46				9.5 years

 

 

The fair value of stock option awards is estimated at the date of grant using the Black-Scholes option-pricing model. The estimated fair value of each stock option is then expensed over the requisite service period, which is generally the vesting period (ranging between immediate vesting and four years). The determination of fair value using the Black-Scholes model is affected by the Company’s share price as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, expected life, risk-free interest rate and forfeitures. Forfeitures are accounted for as they occur.

 

 

Stock options granted during the years ended December 31, 2024 and 2023 were valued using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

Schedule of Options Weighted Average Assumptions

		For the years ended December 31,
		2024				2023
Expected volatility			100.8	%			95.10% - 103.3%
Risk-free interest rate			3.80	%			3.99% - 4.53%
Expected dividend yield			0	%			0%
Expected life of options in years			5.0				5.0
Estimated fair value of options granted		$	2.23				$46.05 - $108.22

 

The weighted-average grant date fair value of stock options granted during years ended December 31, 2024 and 2023 was approximately $2.23 and $96.04, respectively. The weighted-average fair value of stock options vested during the years ended December 31, 2024 and 2023 was approximately $16.38 and $95.97, respectively.

 

Total stock-based compensation expense included in the accompanying consolidated statements of operations was as follows:

 

Schedule of Stock-Based Compensation Expense

		2024				2023
		For the years ended December 31,
		2024				2023
Research and development		$	338,022			$	404,895
General and administrative			372,291				426,967
Total stock-based compensation		$	710,313			$	831,862

 

As of December 31, 2024, the total unrecognized compensation expense related to non-vested options was approximately $0.8 million and is expected to be recognized over the remaining weighted-average service period of approximately 0.59 years.

 

Warrants

 

In connection with the IPO, the Company issued warrants to purchase such number of shares of the Company’s common stock equal to 5% of the total shares of common stock issued in the IPO, or 500 warrants. The warrants are exercisable at $1,875.00 per share, were not exercisable within the first six months after issuance, and may, under certain circumstances, be exercised on a cashless basis. The exercise price of the warrants is subject to standard antidilutive provision adjustments for stock splits, stock combinations, or similar events affecting the Company’s common stock. The Company has determined that these warrants should be classified as equity instruments since they do not require the Company to repurchase the underlying common stock and do not require the Company to issue a variable amount of common stock. In addition, these warrants are indexed to common stock and do not have any unusual antidilution rights.

 

In connection with the May 2023 Offering as described in Note 3 to the consolidated financial statements, the Company issued warrants to designees of the underwriter (the “Representative’s Warrants”) to purchase 424 shares of the Company’s common stock (which is equal to 3% of the number of shares sold in the public offering) at an initial exercise price of $234.375 per share, subject to adjustment. The Representative’s Warrants are exercisable at any time and from time to time, in whole or in part, during the four- and one-half year period commencing 180 days from the commencement of sales of the shares of common stock in the public offering.

 

In connection with the November 2023 Offering as described in Note 3 to the consolidated financial statements, the Company issued pre-funded warrants to purchase 545,000 shares of the Company’s common stock at an exercise price of $0.015 (the “November 2023 Pre-Funded Warrants”). The November 2023 Pre-Funded Warrants were issued to those purchasers whose purchase of common stock in the November 2023 Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of outstanding common stock immediately following the consummation of the offering. The November 2023 Pre-Funded Warrants were immediately exercisable and could be exercised at any time until exercised in full. The Company also granted the underwriters a 45-day option to purchase up to an additional 100,000 shares of common stock and/or prefunded warrants. The underwriters exercised the option to purchase 66,667 pre-funded warrants at an initial exercise price of $0.015 per share, subject to adjustment (the “November 2023 Underwriters Pre-Funded Warrants”). These pre-funded warrants were immediately exercisable and could be exercised at any time until exercised in full. The underwriters received warrants to purchase 20,000 shares of common stock with an initial exercise price of $18.75, exercisable beginning May 27, 2024, and expiring May 2, 2028 (the “November 2023 Underwriters Warrants”). As of December 31, 2024 and 2023, all of the November 2023 Pre-Funded Warrants and the November 2023 Underwriters Pre-Funded Warrants have been exercised and the additional warrants to purchase 20,000 shares of common stock have not yet been exercised.

 

 

In connection with the June 2024 PIPE Offering as described in Note 3 to the consolidated financial statements, the Company issued the June 2024 Pre-Funded Warrants to purchase 452,253 shares of the Company’s common stock at an exercise price of $0.001, the June 2024 PIPE Warrants to purchase 329,771 shares of the Company’s common stock at an exercise price of $3.09, and the June 2024 Placement Agent Warrants to purchase up to 19,786 shares of the Company’s common stock, exercisable at $3.09 per share. The June 2024 Pre-Funded Warrants were immediately exercisable and are able to be exercised at any time until exercised in full. The June 2024 PIPE Warrants and June 2024 Placement Agent Warrants were immediately exercisable and are able to be exercised until five and a half years from the effective date, or December 21, 2029. As of December 31, 2024, 368,533 of the June 2024 Pre-Funded Warrants have been exercised and none of the June 2024 PIPE Warrants or June 2024 Placement Agent Warrants have been exercised.

 

In connection with the December 2024 PIPE Offering as described in Note 3 to the consolidated financial statements, the Company issued the December 2024 Pre-Funded Warrants to purchase 491,157 shares of the Company’s common stock at an exercise price of $0.001 and the December 2024 PIPE Warrants to purchase 480,721 shares of the Company’s common stock at an exercise price of $2.031. The December 2024 Pre-Funded Warrants were immediately exercisable and are able to be exercised at any time until exercised in full. The December 2024 PIPE Warrants are exercisable six months from the date of issuance and are able to be exercised until five and a half years from the effective date, or December 9, 2030. As of December 31, 2024, none of the December 2024 Pre-Funded Warrants and December 2024 PIPE Warrants have been exercised.

 

Terms of the warrants outstanding at December 31, 2024 are as follows:

 

Schedule of Warrants

		Initial		Expiration		Exercise				Warrants				Warrants				Warrants
Issuance Date		Exercise Date		Date		Price				Issued				Exercised				Outstanding
January 14, 2022		July 10, 2022		January 11, 2027		$	1,875.00				500				-				500
May 2, 2023		November 2, 2023		May 2, 2028		$	234.375				424				-				424
November 30, 2023		November 30, 2023		N/A		$	0.015				545,000				545,000				-
November 30, 2023		November 30, 2023		N/A		$	0.015				66,667				66,667				-
November 30, 2023		May 27, 2024		May 2, 2028		$	18.75				20,000				-				20,000
June 21, 2024		June 21, 2024		N/A		$	0.001				452,253				368,533				83,720
June 21, 2024		June 21, 2024		December 21, 2029		$	3.09				329,771				-				329,771
December 9, 2024		June 9, 2025		December 9, 2030		$	2.031				480,721				-				480,721
December 9, 2024		December 9, 2024		N/A		$	0.001				491,157				-				491,157