Scinai Immunotherapeutics Ltd. Stock Compensation Disclosure
NOTE 11:- SHARE-BASED COMPENSATION
| a. | Option plans: |
Options granted under the Company’s 2005 Israeli Share Option Plan (“Plan”) were exercisable in accordance with the terms of the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over a period of three or four years.
In March 2018, the Company’s Board of Directors approved the adoption of the Company’s 2018 Israeli Share Option Plan (“2018 Plan”) for the grant of options and restricted shares (“RSU”) to employees, directors and service providers. The options are exercisable within 10 years from the date of grant, against payment of the exercise price, in accordance with the terms of the 2018 Plan. The options generally vest over a period of three or four years.
Option grants:
Expected volatility was calculated based upon the Company’s historical share price and historical volatilities of similar entities in the related sector index. The expected term of the options granted is derived from output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The following table lists the inputs to the binomial option-pricing model used for the fair value measurement of equity-settled share options for the above Options Plans for the years 2022 and 2021:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Dividend yield | 0 | % | 0 | % | ||||
| Expected volatility of the share prices | 84 | % | 110 | % | ||||
| Risk-free interest rate | 2.1 | % | 1.7 | % | ||||
| Expected term (in years) | 10 | 10 | ||||||
Based on the above inputs, the fair value of the ADS options was determined to be $0.157, $0.281 and $0.384 per 3ADS option at the grant date.
| b. | The following table summarizes the number of options granted to employees under the Option Plans for the year ended December 31, 2022 and related information: |
| Number of options | Weighted average exercise price | Weighted average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
| Balance as of December 31, 2021 | 28,889,600 | $ | 1.57 | 16.3 | $ | 85 | ||||||||||
| Granted | 1,000,000 | 0.29 | 9 | |||||||||||||
| Expired | (970,000 | ) | 0.01 | 5.69 | ||||||||||||
| Balance as of December 31, 2022 | 28,919,600 | 0.8 | 7.07 | 12 | ||||||||||||
| Exercisable as of December 31, 2022 | 21,084,680 | $ | 0.8 | 6.9 | $ | 5 | ||||||||||
As of December 31, 2022, there are $890 of total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to four years.
| *) | Less than 1 thousand USD |
| c. | The following table summarizes information about the Company’s outstanding and exercisable options granted to employees as of December 31, 2022: |
| Exercise price | Options outstanding as of December 31, 2022 | Weighted average remaining contractual
term | Options exercisable as of December 31, 2022 | Weighted average remaining contractual term | ||||||||||||
| $ 0.007 – 0.452 | 28,919,600 | 7.07 | 21,084,680 | 6.9 | ||||||||||||
| 28,919,600 | 21,084,680 | |||||||||||||||
| d. | A summary of restricted shares activity for the year ended December 31, 2022 is as follows: |
| Number of restricted shares | Weighted average grant date fair value | |||||||
| Balance as of December 31, 2021 | $ | 60,490 | 3.92 | |||||
| Granted | 49,357 | 9.92 | ||||||
| Vested | (278 | ) | 9.76 | |||||
| Forfeited | (1,801 | ) | 13.7 | |||||
| Balance as of December 31, 2022 | 107,768 | 6.49 | ||||||
| e. | The total share-based compensation expense related to all of the Company’s equity-based awards, recognized for the years ended December 31, 2022 and 2021 is comprised as follows: |
Year ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Research and development expenses | $ | 100 | $ | 323 | ||||
| Marketing, general and administrative expenses | 1,502 | 2,434 | ||||||
| Total share-based compensation | $ | 1,602 | $ | 2,757 | ||||
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.