Traws Pharma, Inc. Stock Compensation Disclosure
9. Stock-Based Compensation
In 2021, the Company adopted its 2021 Incentive Compensation Plan, which was subsequently amended and restated in each of 2022 and 2024 (as amended and restated, the “2021 Plan”). Upon adopting the 2021 Plan, no further awards have been or will be made under the Company’s 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”). Under the 2021 Plan, the Company may grant incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards to employees, non-employee directors, consultants, and advisors. On November 21, 2025, the Company’s stockholders approved an amendment and restatement of the Company’s Amended and Restated 2021 Incentive Compensation Plan (as so amended and restated, the “Amended Plan”), to increase the number of shares of common stock reserved and authorized for issuance thereunder by 1,500,000 shares and extend the term of the Amended Plan until November 20, 2035. At December 31, 2025, there were 827,840 shares available for future issuance with respect to new awards and outstanding awards.
Stock-based compensation expense includes stock options granted to employees and non-employees and has been reported in the Company’s consolidated statements of operations and comprehensive loss in either R&D expenses or general and administrative expenses depending on the function performed by the optionee. No net tax benefits related to the stock-based compensation costs have been recognized since the Company’s inception. The Company recognized stock-based compensation expense related to stock options and restricted stock units (“RSUs”) as follows for the year ended December 31, 2025, and 2024:
Year ended December 31, | ||||||
| 2025 | | 2024 | |||
Research and development | $ | 124,000 | $ | 181,000 | ||
General and administrative | 604,000 | 1,209,000 | ||||
Total stock-based compensation expense | $ | 728,000 | $ | 1,390,000 | ||
A summary of stock option activity for the twelve months ended December 31, 2025 is as follows:
| Options Outstanding | |||||||||
Weighted | ||||||||||
Weighted- | Average | |||||||||
Average | Remaining | Aggregate | ||||||||
Number | Exercise | Contractual | Intrinsic | |||||||
| of Shares | | Price | | Term (in years) | | Value | |||
Balance, December 31, 2024 |
| 423,107 | $ | 11.89 |
| 8.75 | $ | 2,698,000 | ||
Granted |
| 924,650 | $ | 2.57 |
| |||||
Forfeitures and expirations |
| (24,391) | $ | 113.45 |
| |||||
Balance, December 31, 2025 |
| 1,323,366 | $ | 3.55 |
| 9.11 | $ | 85,000 | ||
Exercisable at December 31, 2025 | 456,900 | $ | 5.58 | 7.71 | $ | 67,000 | ||||
Vested and expected to vest at December 31, 2025 |
| 1,323,366 | $ | 3.55 |
| 9.11 | $ | 85,000 | ||
The Company accounts for all stock-based payments made to employees, non-employees and directors using an option pricing model for estimating fair value. Accordingly, stock-based compensation expense is measured based on the estimated fair value of the awards on the date of grant. Compensation expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required services to the Company using the straight-line single option method.
The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, assumptions related to the expected price volatility of the common stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s stock.
As of December 31, 2025, there was $1,592,000 of unrecognized compensation expense related to the unvested stock options which is expected to be recognized over a weighted-average period of approximately 0.92 years.
The weighted-average assumptions underlying the Black-Scholes calculation of grant date fair value include the following:
Year ended December 31, | |||||||
| 2025 | | 2024 |
| |||
Risk-free interest rate |
| 3.82 | % | 3.46 | % | ||
Expected volatility |
| 122.0 | % | 117.9 | % | ||
Expected term |
| 5.47 | years | 6.00 | years | ||
Expected dividend yield |
| — | % | — | % | ||
Weighted average grant date fair value | $ | 2.21 | $ | 7.36 | |||
The weighted-average valuation assumptions were determined as follows:
| ● | Risk-free interest rate: The Company based the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term. |
| ● | Expected term of options: Due to its lack of sufficient historical data, the Company estimates the expected term of its employee stock options using the “simplified” method, as prescribed in Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option. |
| ● | Expected stock price volatility: Expected volatility is based on the historical volatility of the Company’s common stock. |
| ● | Expected annual dividend yield: The Company has never paid, and does not expect to pay, dividends in the foreseeable future. Accordingly, the Company assumed an expected dividend yield of 0.0%. |
The Company grants RSUs to employees under the 2021 Plan, which typically have a vesting term of 33% on each of the first and second anniversaries, and 34% on the third anniversary of the date of grant. In April 2024, the compensation committee of the Board approved RSU grants as inducement awards (“Inducement RSUs”) to certain of the Company’s employees who joined the Company in connection with the Merger. The inducement RSUs vest 25% on each of the first four anniversaries of the date of grant. The Inducement RSUs were granted outside of the Company’s incentive plans in accordance with Nasdaq Listing Rule 5635(c)(4). During the year ended December 31, 2025, the Company granted 140,651 RSUs with a weighted average grant date fair value of $2.70 per RSU.
A summary of RSU activity for the year ended December 31, 2025 is as follows:
Number of Units | Weighted average grant date fair value | |||
Outstanding and unvested December 31, 2024 | 22,421 | $ 25.12 | ||
Granted | 140,651 | $ 2.70 | ||
Vested | (6,509) | $ 25.44 | ||
Outstanding and unvested December 31, 2025 | 156,563 | $ 4.97 |
At December 31, 2025, the unrecognized compensation cost related to unvested service-based RSUs was $628,000, which will be recognized over the remaining service period of 1.58 years.
Grants of PSUs and SARs
During 2020 and 2021, the compensation committee of the Board and the Board approved a cash bonus program of cash-settled stock appreciation right (“SAR”) awards to the Company’s employees and non-employee directors, and cash-settled performance stock unit (“PSU”) awards to the Company’s employees. These awards were granted outside of the Amended 2018 Plan and the 2021 Plan. As the Company’s stock price has decreased since these awards were issued, their impact on the results of operations and balance sheet of the Company was not material during 2025 or 2024.
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.