Stock-Based Compensation

3 Months Ended

Mar. 31, 2025

Stock-Based Compensation

Stock-Based Compensation

14. Stock-Based Compensation

2019 Inducement Plan

In October 2019, Cara’s Board of Directors adopted the 2019 Inducement Plan (the “2019 Plan”) which was a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq Listing Rule 5635(c)(4) (“Rule 5635”) for the purpose of awarding (i) non-statutory stock options, (ii) restricted stock awards, (iii) restricted stock unit awards, (iv) other stock awards (collectively, the Inducement Awards) to new employees of Cara, as inducement material to such new employees entering into employment with Cara. In November 2019, Cara filed a Registration Statement on Form S-8 with the SEC covering the offering of up to 8,333 shares of its common stock, par value $0.001, pursuant to Cara’s 2019 Plan. Initial grants of Inducement Awards made to employees vested as to 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months and subsequent grants vested monthly over a period of four years from the grant date.

2014 Equity Incentive Plan

Cara’s 2014 Equity Incentive Plan (the “2014 Plan”) was administered by Cara’s Board of Directors or a duly authorized committee thereof, referred to as the Plan administrator. The 2014 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation, collectively referred to as Stock Awards. Additionally, the 2014 Plan provided for the grant of performance cash awards. Incentive stock options could be granted only to employees. All other awards could be granted to employees, including officers, non-employee directors, and consultants. No incentive stock options could be granted under the 2014 Plan after the tenth anniversary of the effective date of the 2014 Plan. Stock Awards granted under the 2014 Plan vested at the rate specified by the Plan administrator. Initial grants of Stock Awards made to employees and non-employee consultants generally vested as to 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months and subsequent grants generally vested monthly over a period of four years from the grant date, or upon the probable achievement of corporate goals. Stock options initially granted to members of Cara’s Board of Directors generally vested over a period of three years in equal quarterly installments from the date of the grant, subject to the option holder’s continued service as a director through such date. Subsequent grants to directors that were made automatically at Annual Meetings of Stockholders vested fully on the earlier of the first anniversary of the date of grant and the next Annual Meeting of Stockholders. The Plan administrator determined the term of Stock Awards granted under the 2014 Plan up to a maximum of ten years. The maximum number of shares that could be issued pursuant to the exercise of incentive stock options under the 2014 Plan was 833,333.

Restricted Stock Units

Under the 2014 Plan, there were no restricted stock units granted during each of the three months ended March 31, 2025 and 2024. No restricted stock units were granted under the 2019 Inducement Plan during the three months ended March 31, 2025 and 2024.

As of March 31, 2025, Cara’s restricted stock units consisted of time-based restricted stock units. All performance-based restricted stock units either vested or were forfeited in 2024. For time-based restricted stock units, Cara recognized compensation expense associated with these restricted stock units ratably over the award’s vesting period following the grant date. For performance-based restricted stock units, vesting was contingent on the achievement of certain performance targets, subject to the recipient’s continuous service through each performance target. Recognition of compensation expense associated with these performance-based awards began when, and to the extent, the performance criteria were probable of achievement and the employee had met the service conditions.

During the three months ended March 31, 2025 and 2024, Cara recognized compensation expense relating to restricted stock units as follows:

	Three Months Ended
	March 31,
	2025			2024
Research and development	$	—	$	255
General and administrative		326		1,357
Total restricted stock unit expense	$	326	$	1,612

A summary of restricted stock unit activity related to employees and non-employee members of Cara’s Board of Directors as of and for the three months ended March 31, 2025 is presented below:

		Weighted
	Number of	Average Grant
	Units	Date Fair Value
Outstanding, December 31, 2024	26,638	$	52.53
Awarded	—		—
Vested and released	(792)		447.95
Forfeited	—		—
Outstanding, March 31, 2025	25,846	$	40.39
Restricted stock units exercisable (vested and deferred), March 31, 2025	—

Stock Options

Under the 2014 Plan, there were no stock options granted during the three months ended March 31, 2025. Cara granted 52,087 stock options during the three months ended March 31, 2024. No stock options were granted under the 2019 Inducement Plan during the three months ended March 31, 2025 and 2024. There was no stock compensation expense recognized for the stock options granted during the three months ended March 31, 2024 as these were performance-based options that were not probable of achievement as of March 31, 2024. The fair values of stock options granted during the three months ended March 31, 2024 were estimated as of the dates of grant using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended
	March 31,
	2025	2024
Risk-free interest rate	—	4.12%
Expected volatility	—	89.6%
Expected dividend yield	—	0%
Expected life of employee and Board options (in years)	—	6.25

The weighted-average grant date fair value per share of options granted to employees and non-employee members of Cara’s Board of Directors for their Board service during the three months ended March 31, 2024 was $27.36. No options were granted to non-employee consultants during the three months ended March 31, 2025 and 2024.

During the three months ended March 31, 2025 and 2024, Cara recognized compensation expense relating to stock options as follows:

	Three Months Ended
	March 31,
	2025		2024
Research and development	$	—	$	504
General and administrative		1,100		1,229
Total stock option expense	$	1,100	$	1,733

A summary of stock option award activity related to employees and non-employee members of Cara’s Board of Directors as of and for the three months ended March 31, 2025 is presented below:

		Weighted
	Number of	Average Exercise
	Shares	Price
Outstanding, December 31, 2024	113,487	$	319.80
Granted	—		—
Exercised	—		—
Forfeited	—		—
Expired	—		—
Outstanding, March 31, 2025	113,487	$	319.80
Options exercisable, March 31, 2025	64,989

Cara does not expect to realize any tax benefits from its stock option activity or the recognition of stock-based compensation expense because Cara currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related to excess tax benefits have been reported in cash flows from operations for each of the three months ended March 31, 2025 and 2024.

On April 15, 2025, the Merger was consummated and the Combined Company assumed and approved certain incentive plans. In addition, all remaining unvested Cara options and restricted stock units as of March 31, 2025 fully vested on April 15, 2025 (see Note 18, Subsequent Events).