6. Share-Based Compensation

Biostage Amended and Restated Equity Incentive Plan

The Company maintains the Amended and Restated Equity Incentive Plan (the Plan) for the benefit of certain officers, employees, non-employee directors, and other key persons (including consultants and advisory board members). All options and awards granted under the Plan consist of the Company’s shares of common stock. The Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent to satisfy stock option exercises and the vesting of restricted stock units. The vesting period for awards is generally four years and the contractual life is ten years. Canceled and forfeited options and awards are available to be reissued under the Plan.

In June 2020, the Company’s shareholders approved the Plan to, among other things, increase of the number of shares of the Company’s common stock available for issuance pursuant thereto by 3,000,000 shares, which increased the total shares authorized to be issued under the Plan to 5,098,000. There were 3,461,091 shares available for issuance as of March 31, 2021.

The Company has granted options to purchase common stock under the Plan. Stock option activity during the three months ended March 31, 2021 was as follows:


	Stock Options
		Weighted –
		average
	Amount	exercise price
Outstanding at December 31, 2020	1,599,720	$	6.33
Granted	16,413		1.80
Canceled	—		—
Outstanding at March 31, 2021	1,616,134	$	6.31

The Company’s outstanding stock options include 338,663 performance-based awards that have vesting provisions subject to the achievement of certain business milestones. Total unrecognized compensation expense for the remaining 243,532 performance-based awards is approximately $0.8 million. No expense has been recognized for these unvested awards as of March 31, 2021 given that the milestone achievements for these awards have not yet been deemed probable for accounting purposes.

Aggregate intrinsic value for outstanding options and exercisable options for the year ended March 31, 2021 was $0 based on the Company’s closing stock price of $1.34 per share as of March 31, 2021. As of March 31, 2021, unrecognized compensation cost related to unvested nonperformance-based awards amounted to $0.3 million, which will be recognized over a weighted average period of 0.3 years.

The Company uses the Black-Scholes option pricing model to value its stock options. The weighted average assumptions for valuing options granted during the three months ended March 31, 2021 were as follows:


Risk-free interest rate	0.47	%
Expected volatility	123.20	%
Expected term	5.3	years
Expected dividend yield	n/a

In February 2020, as part of the termination arrangement with the Company’s former chief executive officer, the Company modified certain options to purchase 236,970 shares of common stock, issued an 80,000 fully vested stock option grant, and accelerated the vesting of 3,300 restricted stock units resulting in recording $153,000, $70,000, and $4,000, respectively, of share-based compensation during the three months ended March 31, 2020.

In March 2020, the Company issued 35,000 common stock awards to an employee that was earned upon the achievement of certain milestones. One of the milestones for 15,000 common shares was achieved on March 27, 2020, and the Company issued 9,795 fully vested share of common stock to the employee with 5,205 common shares withheld to cover taxes. During the three months ended March 31, 2020, the Company recognized a total of $74,800 of share-based compensation with the remaining expense of $65,200 recognized upon the achievement of certain milestones over the requisite service period during the three months ended June 30, 2020.

The Company recorded share-based compensation expense in the following expense categories of its consolidated statements of operations:


	Three Months Ended March 31,
	2021		2020
	(In thousands)
Research and development	$	80	$	92
General and administrative		50		496
Total share-based compensation	$	130	$	588

The Company estimates the fair value of non-employee share options using the Black-Scholes option pricing model reflecting the same assumptions as applied to employee and director options in each of the reporting periods, other than the expected life, which is assumed to be the remaining contractual life of the options.