Note 10. Stock-Based Compensation

Equity Plans

The Company has four plans that provide for equity-based compensation; two of which are legacy plans for which no further grants are to be made. There are 7,861,748 shares of the Company’s common stock that are reserved for issuance upon exercise or settlement of stock options or other awards under these four plans. In general, initial stock awards vest 25% after one year and then ratably on a monthly basis thereafter and recurring stock awards vest on a monthly or quarterly basis, such that the underlying shares will be fully vested on the fourth anniversary of the grant. Stock awards expire ten years from the date of grant.

In March 2017, the Company approved the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan initially authorized 1,000,000 shares of common stock to be issued and, in subsequent years, an aggregate of 8,372,227 shares of common stock, inclusive of roll-over shares from the Company's 2015 Equity Plan, were approved and added to the 2017 Plan. As of December 31, 2025, 1,027,093 shares remain available for grant under the 2017 Plan.

In July 2021, the Company approved the 2021 Equity Inducement Plan (as amended and restated, the “2021 Inducement Plan”) to reserve 350,000 shares of its common stock to be used exclusively for grants of awards as a material inducement to such individuals' entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. In June 2023 and 2024 and January 2025, the Company amended and restated the 2021 Inducement Plan to register 500,000, 600,000, and 500,000 additional shares, respectively, of its common stock. As of December 31, 2025, 61,245 shares remaining available to be issued under the 2021 Inducement Plan.

In March 2017, the Company approved the 2017 Employee Stock Purchase Plan (the “ESPP”) to reserve 100,000 shares of common stock for issuance and in subsequent years, an aggregate of 1,783,849 shares of common stock were approved and added to the ESPP. Through payroll deductions, full-time employees have the option to purchase the Company’s common stock at a discount of 15% from the market price during predetermined offering periods each year. At December 31, 2025, 1,549,616 shares remain available for purchase under the ESPP.

Stock-based Compensation Expense

The Company recognizes stock-based compensation expense over the requisite service period based on the grant date fair value of the award. The Company has elected to use the Black-Scholes option pricing model to determine the fair value of awards granted. The determination of the fair value of stock-based awards utilizing the Black-Scholes model is affected by the share price and a number of assumptions, including expected volatility, expected life, risk-free interest rate, and expected dividends. Expected volatility is determined by using available historical price information of the Company's common stock. The expected life of the awards is estimated based on the simplified method. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures have not been material in the periods presented.

Stock Options

The weighted-average grant date fair value of stock options granted during the eight-month period ended December 31, 2025 and twelve months ended April 30, 2025 and 2024 was $8.49, $7.75, and $7.57, respectively. The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the eight-month period ended December 31, 2025 and twelve months ended April 30, 2025 and 2024 was $1.8 million, $2.5 million and $0.1 million, respectively.

As of December 31, 2025, there was $14.2 million of unrecognized stock-based compensation expense related to unvested options, which is expected to be recognized over a weighted-average period of 2.7 years.

Restricted Stock Units

During the eight-month period ended December 31, 2025, the Company granted Restricted Stock Units (“RSUs”) from the 2017 Plan. These RSUs are subject to a service condition and vest over a four-year period with quarterly vesting.

As of December 31, 2025, the unrecognized stock-based compensation expense related to the outstanding and unvested RSUs was $20.0 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Performance Stock Units

In January 2023, the Company granted 360,000 PSUs to executives under the 2017 Plan with a grant date fair value of $6.82. The performance-based metric for the awards was the FDA approval of a New Drug Application (“NDA”) for sebetralstat. Upon successful completion of the performance metric, 100% of the PSUs vested in full. This performance metric was certified by the Compensation Committee of the Board in July 2025, upon which $1.2 million of stock-based compensation expense related to these awards was recognized. As of December 31, 2025, there were no shares outstanding.

In June 2023, the Company granted 306,667 PSUs to executives under the 2017 Plan with a grant date fair value of $9.99. The performance-based metric for the awards was the full enrollment for the KVD900-301 clinical trial. This performance metric was certified by the Compensation Committee of the Company's Board in July 2023, with twelve months of quarterly vesting beginning in August 2023. As of December 31, 2025, the cumulative expense from these awards has been recognized and there were no shares outstanding.

In January 2024, the Company granted 306,667 PSUs to executives under the 2017 Plan with a grant date fair value of $12.71. The performance-based metric for the awards was the success of the Company’s Phase 3 clinical trial of the sebetralstat program. This performance metric was certified by the Compensation Committee of the Company's Board in February 2024, with twelve months of quarterly vesting beginning in February 2024. As of December 31, 2025, the cumulative expense from these awards has been recognized and there were no shares outstanding.

In January 2024, the Company granted 81,000 PSUs to employees under the 2017 Plan with a grant date fair value of $12.85. The performance-based metrics for the awards was the successful NDA filing for sebetralstat program and the FDA approval of the NDA. Upon successful completion of the NDA filing metric, which occurred in June 2024, 25% of the PSUs vested. The remaining 75% of the PSUs vested upon successful completion of the FDA. This performance metric was certified by the Compensation Committee of the Board in July 2025, upon which the remaining compensation expense, $0.8 million, related to these awards was recognized. As of December 31, 2025, there were no shares outstanding.