Note 8 – Stock-Based Compensation

Stock Options

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary.

The 2015 Plan authorizes the issuance of up to 3,800,000 shares of common stock under equity awards granted under the 2015 Plan. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.

The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.

The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company's common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years.

Stock Options and Stock Appreciation Rights

The following is a summary of stock options and stock appreciation rights activity under the 2015 Plan and 2005 Plan for the three months ended March 31, 2020:


	2015 Plan			2005 Plan
		Weighted-			Weighted-
		Average			Average
	Stock Options	Exercise Price		Stock Options	Exercise Price
Outstanding at January 1, 2020	3,388,701	$	35.64	501,780	$	64.19
Granted	22,086	$	6.52	—	$	—
Exercised	—	$	—	—	$	—
Canceled	(22,033)	$	37.44	(14,879)	$	47.85
Outstanding at March 31, 2020	3,388,754	$	35.46	486,901	$	64.69
Shares exercisable at March 31, 2020	1,098,087	$	77.97	486,901	$	64.69
Shares available for grant at March 31, 2020	219,732

In 2019, the Company granted 192,400 stock appreciation rights, with a weighted-average exercise price of $5.95, under the 2015 Plan.

Additionally, in 2019, due to the limitations on the equity awards currently available under the 2015 Plan, the Company granted to certain employees 1,014,200 stock options, with a weighted-average exercise price of $5.95, under the 2015 Plan that are subject to approval at the Company's annual meeting of stockholders in June 2020. Furthermore, in April 2020, due to the limitations on the equity awards currently available under the 2015 Plan, the Company granted to all of its employees collectively 2,501,600 stock options, with a weighted-average exercise price of $19.08, and 326,050 restricted stock units under the 2015 Plan that include a performance requirement related to its NVX-CoV2373 program before they begin to vest. These awards are also subject to approval at the Company's annual meeting of stockholders in June 2020. As these stock options and restricted stock units have not yet been approved by the Company's stockholders, the Company will not record any stock-based compensation expense for these awards until such time these awards are approved by the stockholders and a measurement date occurs.

The fair value of stock options granted under the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	Three Months Ended
	March 31,
	2020		2019

Weighted-average Black-Scholes fair value of stock options granted		$5.39		$27.60
Risk-free interest rate		0.6%-1.5%		2.4%-2.6%
Dividend yield		0%		0%
Volatility		133.6%-142.6%		111.7%-126.8%
Expected term (in years)		3.9		4.1-4.5
Expected forfeiture rate		0%		0%

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights outstanding under the 2015 Plan and 2005 Plan as of March 31, 2020 was $12.6 million and 7.6 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights exercisable under the 2015 Plan and 2005 Plan as of March 31, 2020 was $0 and 5.5 years, respectively. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and stock appreciation rights) that would have been received by the holders had all stock option and stock appreciation rights holders exercised their stock options and stock appreciation rights on March 31, 2020. This amount is subject to change based on changes to the closing price of the Company's common stock. The aggregate intrinsic value of stock options and vesting of restricted stock awards for the three months ended March 31, 2020 and 2019 was $0.2 million and $0.1 million, respectively.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan, as amended (the “ESPP”), was approved at the Company's annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 597,500 shares of common stock to be purchased, and the aggregate amount of shares will continue to increase 5% on each anniversary of its adoption up to a maximum of 600,000 shares. The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15% of their compensation, at 85% of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate). At March 31, 2020, there were 276,043 shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	Three Months Ended
	March 31,
	2020		2019
Range of Black-Scholes fair value of ESPP shares granted		$2.57-$35.00		$7.20-$34.80
Risk-free interest rate		1.5%-2.6%		1.2%-2.5%
Dividend yield		0%		0%
Volatility		66.6%-154.4%		52.2%-171.6%
Expected term (in years)		0.5-2.0		0.5-2.0
Expected forfeiture rate		0%		0%

Restricted Stock Units

The following is a summary of restricted stock units activity for the three months ended March 31, 2020:


		Per Share
		Weighted-
		Average
	Number of	Grant-Date
	Shares	Fair Value
Outstanding and Unvested at January 1, 2020	1,102,311	$	5.95
Restricted stock units granted	25,000	$	7.95
Restricted stock units vested	(17,563)	$	8.76
Restricted stock units forfeited	(16,450)	$	5.95
Outstanding and Unvested at March 31, 2020	1,093,298	$	5.95

The Company recorded all stock-based compensation expense in the consolidated statements of operations as follows (in thousands):


	Three Months Ended
	March 31,
	2020		2019
Research and development	$	1,908	$	3,179
General and administrative		2,057		2,379
Total stock-based compensation expense	$	3,965	$	5,558

As of March 31, 2020, there was approximately $23 million of total unrecognized compensation expense related to unvested stock options, stock appreciation rights, restricted stock units and the ESPP. This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of 1.4 years, and will be allocated between research and development and general and administrative expenses accordingly. This estimate does not include the impact of other possible stock-based awards that may be made during future periods and awards that require approval by the stockholders.