Context Therapeutics Inc.CNTX
Context Therapeutics Inc. Stock Compensation Disclosure
Share-based Compensation
The aggregate intrinsic value in the above table is calculated as the difference between fair market value of the Company’s common stock price and the exercise price of the stock options. The weighted average fair value of share-based awards granted during the years ended December 31, 2024 and 2023 was $1.19 and $0.65, respectively. As of December 31, 2024, the unrecognized compensation cost related to outstanding share-based awards was $1.6 million and is expected to be recognized as expense over a weighted-average period of approximately 2.7 years.
In April 2021, the Company adopted the 2021 Long-Term Performance Incentive Plan (“2021 Incentive Plan”). Under the 2021 Incentive Plan, the Company can grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and stock grants. The 2021 Incentive Plan allows for the issuance of up to 1,266,092 shares of common stock (the “Share Limit”). The Share Limit automatically increases on January 1st of each year, during the term of the 2021 Incentive Plan, commencing on January 1 of the year following the year in which the effective date occurs, in an amount equal to four percent (4%) of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year; provided that the board of directors may determine that there will be no such increase or a smaller increase for any particular year. As of December 31, 2024, 209,115 shares remained available for future grants.
In addition, from time to time, the Company makes inducement grants of stock options to new hires, which awards are made pursuant to the Nasdaq’s inducement grant exception to the shareholder approval requirement for grants of equity compensation. During the year ended December 31, 2024, the Company granted inducement stock options covering 317,407 shares of the Company’s common stock to new employees.
Share-based awards generally vest over a period of one year to four years, and share-based awards that lapse or are forfeited are available to be granted again. The contractual life of all share-based awards is 10 years. The expiration dates of the outstanding share-based awards range from January 2028 to October 2034.
The Company measures share-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the service period of the awards. Share-based compensation is allocated to employees and consultants based on their respective departments. All board of directors’ compensation is charged to general and administrative expense.
Share-based compensation expense related to the issuance of stock options was as follows for the years ended December 31, 2024 and 2023:
| Year ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Research and development | $ | 61,121 | $ | 61,545 | ||||||||||
| General and administrative | 780,746 | 1,015,320 | ||||||||||||
| $ | 841,867 | $ | 1,076,865 | |||||||||||
The weighted average assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option awards granted during 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| Expected stock price volatility | 95.54% | 91.98% | |||||||||
| Expected term (in years) | 6.00 | 6.00 | |||||||||
| Risk-free interest rate | 4.13% | 3.86% | |||||||||
| Expected dividend yield | — | — | |||||||||
As the Company began trading publicly in October 2021, there is a lack of Company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Additionally, due to an insufficient history with respect to stock option activity and post-vesting cancellations, the expected term assumption for employee grants is based on a permitted simplified method, which is based on the vesting period and contractual term for each tranche of awards. The mid-point between the weighted-average vesting term and the expiration date is used as the expected term under this method. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The following table summarizes the share-based award activity for the periods presented:
Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at January 1, 2024 | 2,164,031 | $ | 2.20 | 8.4 | $ | 260,688 | |||||||||||||||||
| Granted | 1,244,604 | $ | 1.51 | ||||||||||||||||||||
| Forfeited | (135,020) | $ | 1.30 | ||||||||||||||||||||
| Outstanding at December 31, 2024 | 3,273,615 | $ | 1.97 | 8.2 | $ | 176,045 | |||||||||||||||||
| Vested and exercisable at December 31, 2024 | 1,466,077 | $ | 2.69 | 7.2 | $ | 92,875 | |||||||||||||||||
| Vested and expected to vest at December 31, 2024 | 3,273,615 | $ | 1.97 | 8.2 | $ | 176,045 | |||||||||||||||||
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.