Arcturus Therapeutics Holdings Inc. Stock Compensation Disclosure
NOTE 9. Share-Based Compensation
In June 2024 at the Company’s 2024 Annual Meeting of Stockholders (the "2024 Annual Meeting"), the stockholders of the Company approved an amendment to the Company’s 2019 Omnibus Equity Incentive Plan (as amended, the “2019 Plan”) which, among other things, increased the aggregate number of shares authorized for use in making awards to eligible persons under the 2019 Plan by 2,000,000 shares, for a total of up to 10,750,000 shares available for issuance. As of December 31, 2024, a total of 1,834,158 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.
In October 2021, the Company adopted the 2021 Inducement Equity Incentive Plan which covers the award of up to 1,000,000 shares of common stock (the “2021 Plan”) effective as of October 15, 2021. Approval of the Company’s stockholders is not required as a condition to the effectiveness of the 2021 Plan for so long as the plan is in compliance with applicable Nasdaq inducement plan rules. In April 2022, the compensation committee of the Company’s board of directors approved a proposal to reduce the total number of shares available for future issuance under the 2021 Plan to 130,000. As of December 31, 2024, a total of 124,697 shares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.
Share Options
The following table presents the weighted-average assumptions used in the Black-Scholes valuation model by the Company in calculating the fair value of stock options granted:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Expected life (in years) |
|
|
5.88 |
|
|
|
6.04 |
|
|
|
6.05 |
|
Expected volatility |
|
|
91.4 |
% |
|
|
76.1 |
% |
|
|
82.1 |
% |
Expected dividend yield |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Risk-free interest rate |
|
|
4.24 |
% |
|
|
3.91 |
% |
|
|
2.93 |
% |
Grant date weighted average fair value |
|
$ |
22.62 |
|
|
$ |
18.87 |
|
|
$ |
15.56 |
|
The following table summarizes the Company’s stock option activity for the year ended December 31, 2024:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
Aggregate |
|
|||
Outstanding – December 31, 2023 |
|
|
7,971,127 |
|
|
$ |
33.55 |
|
|
7.9 years |
|
$ |
53,295 |
|
Granted |
|
|
740,594 |
|
|
$ |
22.62 |
|
|
|
|
|
|
|
Exercised |
|
|
(228,328 |
) |
|
$ |
20.74 |
|
|
|
|
|
|
|
Forfeited/cancelled |
|
|
(404,641 |
) |
|
$ |
42.43 |
|
|
|
|
|
|
|
Outstanding – December 31, 2024 |
|
|
8,078,752 |
|
|
$ |
32.38 |
|
|
7.2 years |
|
$ |
9,247 |
|
Exercisable – December 31, 2024 |
|
|
4,983,108 |
|
|
$ |
37.27 |
|
|
6.4 years |
|
$ |
8,796 |
|
Exercisable and expected to vest – |
|
|
8,078,752 |
|
|
$ |
32.38 |
|
|
7.2 years |
|
$ |
9,247 |
|
At December 31, 2024, the total unrecognized compensation cost of $48.5 million will be recognized over the weighted-average remaining service period of approximately 2.6 years. The fair value of the options vested during the years ended December 31, 2024 , 2023 and 2022 was $40.5 million, $35.3 million and $39.2 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 was $3.3 million, $4.3 million and $1.6 million, respectively.
Restricted Stock Units
In August 2023, the Company granted 18,786 restricted stock units (“RSUs”) to its board of directors, when the market value of the Company's common stock was $34.92 per share. These RSUs fully vested at the Company's 2024 annual stockholders' meeting. However, the release of the units remains subject to specific conditions and will occur only in the event of a board separation or a change in control.
The following table summarizes the Company’s RSU activity for the year ended December 31, 2024:
|
|
Number of |
|
|
Weighted- |
|
||
Outstanding – December 31, 2023 |
|
|
18,786 |
|
|
$ |
34.92 |
|
Awarded |
|
|
- |
|
|
|
|
|
Released |
|
|
- |
|
|
|
|
|
Forfeited |
|
|
- |
|
|
|
|
|
Outstanding – December 31, 2024 |
|
|
18,786 |
|
|
$ |
34.92 |
|
Share-based compensation expenses included in the Company’s statements of operations and comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022 were:
|
|
For the Year Ended December 31, |
|
|||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Research and development |
|
$ |
18,456 |
|
|
$ |
14,950 |
|
|
$ |
14,081 |
|
General and administrative |
|
|
19,532 |
|
|
|
19,699 |
|
|
|
16,530 |
|
Total |
|
$ |
37,988 |
|
|
$ |
34,649 |
|
|
$ |
30,611 |
|
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.