CDT Equity Inc. Stock Compensation Disclosure

11. Share Based Compensation

 

On September 22, 2023, in connection with the Merger, the Company adopted the Conduit Pharmaceuticals Inc. 2023 Stock Incentive Plan (the “2023 Plan”). The 2023 Plan became effective upon the closing of the Merger. The 2023 Plan initially provided for the issuance of up to 114,976 shares of Common Stock. Pursuant to the 2023 Plan’s “evergreen” provision, on February 6, 2025, the Company increased the number of shares of Common Stock available for issuance under the 2023 Plan by 69,240 shares. Total shares available for issuance is 154,125 effective January 1, 2025. The number of authorized shares will automatically increase on January 1, 2026 and continuing annually on each anniversary thereof through (and including) January 1, 2033, equal to the lesser of (i) 5% of the shares of common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of common stock as determined by the Board or the applicable committee of the Board. The 2023 Plan allows for awards to be issued to employees and non-employee directors in the form of options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock units, dividend equivalents, other stock-based, or other cash-based awards. As of December 31, 2024, there were 84,885 shares of Common Stock available for issuance under the 2023 Plan.

 

 

During the year ended December 31, 2024, the Company issued a total of 56,700 stock options to employees and non-employee directors with an aggregate grant date fair value of $0.4 million. For the year ended December 31, 2024 and December 31, 2023, there was a total of $1.6 million and $0.2 million, respectively in stock-based compensation expense recognized within General and Administrative expenses on the consolidated statements of operations and Comprehensive Loss, respectively.

 

On June 24, 2024, in connection with a services agreement with an unrelated third party to provide marketing services, the Company issued 961 shares of its Common Stock (the “Service Shares”). The Company valued the Service Shares at $156 per share, the closing price of the Company’s Common Stock on June 21, 2024, adjusted for the Reverse Stock Split. The total compensation for these shares is $0.2 million which will be recognized within general and administrative expense over the service period of the agreement.

 

On November 18, 2024, certain non-employee directors elected to receive a portion of their unpaid cash retainers due under the Director Compensation Program in the form of shares. In total, $0.1 million of unpaid retainers was settled through the issuance 10,027 shares of Common Stock (the “Retainer Shares”). The Company valued the Retainer Shares at $9.0 per share, the closing price of the Company’s Common Stock on November 18, 2024, adjusted for the Reverse Stock Split. The Company previously accrued in the unpaid retainers in Accrued expenses and other current liabilities in the Company’s consolidated balance sheets. Upon issuance of the shares of Common Stock, the accrual was reduced based on the value of the shares issued.

 

On November 18, 2024, the Board of Directors approved a one-time equity retainer in the form of 750 fully vested shares of Common Stock (the “Board Shares”) to a member of the Board of Directors for prior services. The Company valued the Board Shares at $9.20 per share, the closing price of the Company’s Common Stock on November 18, 2024, adjusted for the Reverse Stock Split. The total compensation for these shares is $75 thousand which was immediately recognized within General and administrative expense in the consolidated statement of operations and comprehensive income (loss). The shares of common stock were issued under the 2023 Plan.

 

November 18, 2024, Mr. Heilbron elected to have the $0.1 million owed to him under the Consulting Agreement paid in share of the Company’s Common Stock. In total 8,161 shares are to be issued to Mr. Heilbron based on the closing price of the Company’s Common Stock on November 18, 2024, $9.20 per share, adjusted for the Reverse Stock Split. As of December 31, 2024, the shares had not been issued to Mr. Heilbron. The value of the shares are recorded as an accrued expense and other current liability on the consolidated balance sheets as of December 31, 2024.

 

 

Restricted Stock

 

In connection with the Merger, as discussed in Notes 1 and 2, and by Unanimous Written Consent of the Board of Directors, the then Chief Financial Officer of the Company was granted 745 RSUs on December 1, 2023 at a weighted average grant date fair value of $551 per unit. The RSUs were to vest in equal annual instalments on the first three anniversaries of the closing of the Merger. Upon the then Chief Financial Officer’s resignation, effective May 15, 2024, all such RSUs were forfeited. On June 7, 2024, by Unanimous Written Consent of the Board of Directors, the Interim Chief Financial Officer of the Company and a Board member were each granted 372 shares of immediately vested restricted stock at a weighted average grant date fair value of $284. The shares of restricted stock were fully vested as of the grant date. No additional RSU’s or shares of restricted common stock were granted during the year ended December 31, 2024. There were 745 shares of restricted common stock vested as of December 31, 2024 and no RSUs vested as of December 31, 2023.

 

The following table summarizes restricted stock activity for the 2023 Plan:

 

Schedule of Restricted Stock Activity

		Number of Awards				Weighted Average Grant Date Fair Value Per Unit
Outstanding at December 31, 2023			745			$	551
Granted			745			$	284
Cancelled/forfeited			(745	)		$	(551	)
Vested			(745	)		$	(284	)
Outstanding at December 31, 2024			-			$	-

 

Stock Options

 

The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option-pricing model. The Company then recognizes the grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

 

	●	Expected volatility – the Company estimates the volatility of the share price of their peer companies at the date of grant using a “look-back” period which coincides with the expected term, defined below. The Company believes using a “look-back” period which coincides with the expected term is the most appropriate measure for determining expected volatility.
	●	Expected term – the Company estimates the expected term using the “simplified” method outlined in SEC Staff Accounting Bulletin No. 107, “Share-Based Payment.”
	●	Risk-free interest rate – the Company estimates the risk- free interest rate using the U.S. Treasury Yield curve for periods equal to the expected term of the options in effect at the time of grant.
	●	Dividends – the Company uses an expected dividend yield of zero because the Company has not declared nor paid a cash dividend, nor are there any plans to declare a dividend.

 

The Company estimated the fair value of stock options granted in the periods presented using a Black-Scholes option-pricing model utilizing the following assumptions:

Schedule of Fair Value of Stock Option Granted 

		For the year ended December 31,
		2024				2023
Expected volatility (%)			83.2 - 85.4	%			79.0% - 80.0	%
Expected term (years)			5.5 - 5.6				3.5 - 6.5
Risk-free interest rate (%)			4.28% - 4.40	%			4.16% - 4.35	%
Expected dividend yield (%)			0	%			0	%

 

The Company accounts for forfeitures as they occur, which may result in the reversal of compensation costs in subsequent periods as the forfeitures arise.

 

The following table summarizes stock option activity for the 2023 Plan:

Schedule of Stock Option Activity 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (years)				Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023			10,717			$	551				8.85			$	-
Granted			56,700			$	8.58				-			$	-
Cancelled/forfeited			1,908			$	551				-			$	-
Exercised			-			$	-				-			$	-
Outstanding at December 31, 2024			65,509			$	81.52				9.72			$	-
Exercisable			23,154			$	84.18				9.66			$	-
Unvested			42,355			$	80.07				9.76			$	-

 

 

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock. As of December 31, 2024, the total compensation cost related to non-vested option awards not yet recognized was $2.4 million with a weighted average remaining vesting period of 2.07 years.