PDS Biotechnology CorpPDSB
PDS Biotechnology Corp Stock Compensation Disclosure
Note 8 – Stock-Based Compensation
In 2014, the
Company’s stockholders approved the 2014 Equity Incentive Plan (the “Original Plan”) pursuant to which the Company may grant up to 91,367
shares as ISOs, NQs and restricted stock units (“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015, and each January 1 thereafter and prior to the termination of the 2014 Equity
Incentive Plan, pursuant to the terms of the Original Plan, the Plan Limit was and shall be increased by the lesser of (x) 4%
of the number of shares of Common Stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. In March 2019, the Board adopted and the Company’s
stockholders approved the Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Prior Plan”) which amended and restated the Original Plan in order to remove the annual increase component and was limited to 826,292 shares.
On December 8, 2020, the Board adopted and on
June 17, 2021, the stockholders approved, the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Restated Plan”), which amended and restated the Prior Plan. The Restated Plan is identical to the
Prior Plan in all material respects, except (a) the number of shares of Common Stock authorized for issuance under the Restated Plan was increased from 826,292 shares to 4,165,535 shares, plus the total number of shares
that remained available for issuance, that were not covered by outstanding awards issued under the Prior Plan, immediately prior to December 8, 2020; and (b) the Restated Plan was amended to terminate on December 7, 2030, unless earlier
terminated. On July 14, 2023, the Company’s stockholders approved an amendment to the Restated Plan, increasing the number
of shares of common stock for issuance from 4,165,535 to 6,565,535 shares. As of December 31, 2024, there were 2,301,167 shares available for grant under the Restated Plan.
In 2018, the Company’s stockholders approved the 2018 Stock Incentive Plan pursuant to which the Company may grant up to 558,071 shares as (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Preferred Stock, (v) Stock Reload Options and/or
(vi) Other Stock-Based Awards. As of December 31, 2024, there were 190,799 shares available for grant under the 2018 Stock
Incentive Plan.
Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four-year period. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding.
On June 17, 2019, the Board adopted the 2019 Inducement Plan (the “Inducement
Plan”). On December 8, 2020, the Company amended the Inducement Plan solely to increase the total number of shares of common stock reserved for issuance under the Inducement Plan from 200,000 shares to 500,000
shares. On May 17, 2022, the Company further amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 500,000 shares to 1,100,000 shares. On January 22, 2024,
the Company further amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 1,100,000 shares to 2,100,000 shares. The Inducement Plan provides for the grant of non-qualified stock options. The Inducement Plan, and each amendment thereto, was recommended for approval by the Compensation Committee of the Board and subsequently approved
and adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.
The Inducement Plan is administered by the Compensation Committee of the Board. In accordance with Rule
5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the Inducement Plan may only be made to an employee who has not previously been an employee of the Company or member of the Board of Directors of the Company (or any
parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her
entering into employment with the Company or such subsidiary. As of December 31, 2024, there were 962,407 shares available for
grant under the Inducement Plan.
The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations
and comprehensive loss for the years ended December 31, 2024 and 2023:
|
Year Ended December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Research and development
|
$
|
2,358,795
|
$
|
3,013,326
|
||||
|
General and administrative
|
4,489,397
|
4,600,995
|
||||||
|
Total
|
$
|
6,848,193
|
$
|
7,614,321
|
||||
The following table summarizes the stock option activity for the Company’s stock option plans for the year ended December 31, 2024:
|
Number
of Shares
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life in Years
|
Aggregate
Intrinsic Value
|
|||||||||||||
|
Balance at January 1, 2024
|
5,029,345
|
$
|
6.43
|
7.42
|
4,395,227 | |||||||||||
|
Granted
|
1,199,648
|
$
|
5.11
|
9.20 | – | |||||||||||
|
Exercised
|
(256,073
|
)
|
$
|
3.02
|
– | – | ||||||||||
|
Forfeited
|
(599,857
|
)
|
$
|
8.40
|
– | – | ||||||||||
| Expired |
– | – | – | – | ||||||||||||
|
Options outstanding at December 31, 2024
|
5,373,063
|
$
|
6.08
|
7.11
|
$
|
50,439
|
||||||||||
|
Vested and expected to vest at December 31, 2024
|
5,373,063
|
$
|
6.08
|
7.11
|
$
|
50,439
|
||||||||||
|
Exercisable at December 31, 2024
|
3,296,498
|
$
|
5.88
|
6.14
|
$
|
50,439
|
||||||||||
As of December 31, 2024 there was approximately $10,633,050 of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 2.54 years.
The weighted-average grant date fair value of the stock options granted in 2024 was $4.70 per share.
The fair value of options granted during the year ended December 31, 2024 and 2023 were estimated using the Black-Scholes option
valuation model utilizing the following assumptions:
|
Year Ended December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Weighted Average
|
||||||||
|
Volatility
|
136.89
|
%
|
142.84
|
%
|
||||
|
Risk-Free Interest Rate
|
4.04
|
%
|
4.14
|
%
|
||||
|
Expected Term in Years
|
6.06
|
6.06
|
||||||
|
Dividend Rate
|
–
|
–
|
||||||
|
Fair Value of Option on Grant Date
|
$
|
4.70
|
$
|
9.59
|
||||
Expected volatility. The expected volatility assumption was changed on January 1,
2023 from using volatilities of a peer group of similar companies in the biotechnology industry whose share prices were publicly available, to using the volatility of the Company’s historical share price performance over the contractual term
of the options.
Risk-free interest rate. The risk-free interest rate assumption is based on observed
interest rates appropriate for the expected term of the stock option grants.
Expected term. The expected term represents the period options are expected to be
outstanding. The expected term of the options is based on using the simplified method, which is the midpoint between the requisite service period and the contractual term of the option, since the Company has a limited history of being a
public company to develop reasonable expectations about future exercise patterns and employment duration for the stock options grants.
Expected dividend rate. The expected dividend yield assumption is based on the fact
that the Company has never paid cash dividends and has no present intention to pay cash dividends.
During the year ended December 31, 2023, the Company entered into a Common Stock Purchase Agreement, dated October 11,
2023, with DC Consulting LLC (“DC”) and a Common Stock Purchase Agreement, dated April 12, 2023, with DC, pursuant to which the Company issued DC an aggregate of 200,000 shares of common stock as partial compensation for consulting services provided by DC to the Company pursuant to the Consulting Agreement, dated October 11, 2023, with DC
and the Consulting Agreement, dated April 12, 2023, with DC.
During the year ended December 31, 2024, the Company entered into a Common Stock Purchase Agreement, dated June 17,
2024, with DC, pursuant to which the Company issued DC 100,000 shares of common stock as partial consideration for
consulting services provided by DC to the Company pursuant to the Consulting Agreement, dated June 17, 2024, with DC.
On February 25, 2025, the Company entered into a Common Stock Purchase Agreement, with DC, pursuant to which the Company
issued DC 100,000 shares of common stock as partial consideration for the consulting services provided by DC to the Company
pursuant to the Consulting Agreement, dated February 25, 2025, with DC.
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.