Note 10 - Equity Incentive Plans

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 10.  Equity Incentive Plans

On April 23, 2019, the Company’s stockholders approved the adoption of the 2019 Equity Incentive Plan (the “2019 Plan”), under which the Company is authorized to issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), other stock awards and performance awards that may be settled in cash, stock, or other property. The 2019 Plan is designed to secure and retain the services of employees, directors and consultants, provide incentives for the Company’s employees, directors and consultants to exert maximum efforts for the success of the Company and its affiliates, and provide a means by which employees, directors and consultants may be given an opportunity to benefit from increases in the value of the Company’s common stock. Following adoption of the 2019 Plan, all previous plans were frozen, and on forfeiture, cancellation and expiration, awards under those plans are not assumed by the 2019 Plan.

The aggregate number of shares of common stock authorized for issuance under the 2019 Plan was initially 1,600,000 shares, which was increased through an amendment to the 2019 Plan adopted by the Company’s stockholders (a “Plan Amendment”) on June 8, 2020, to 8,000,000, by a Plan Amendment on June 16, 2021, to 16,900,000, by a Plan Amendment on August 4, 2022, to 28,900,000, and by a Plan Amendment on June 11, 2024, to 43,900,000. Further amendments to the 2019 Plan to increase the share reserve would require stockholder approval. Awards that are forfeited or canceled generally become available for issuance again under the 2019 Plan. Awards have a maximum term of ten years from the grant date and may vest over varying periods, as specified by the Company’s board of directors for each grant.

On February 27, 2024, the Company’s board of directors adopted the Vaxart, Inc. 2024 Inducement Award Plan (the “2024 Inducement Plan”). The 2024 Inducement Plan was adopted without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4) and is administered by the Compensation Committee of the board of directors or the independent members of the board of directors. The board of directors reserved 3,000,000 shares of the Company’s common stock for issuance under the 2024 Inducement Plan, subject to adjustment as provided in the plan document. The terms of the 2024 Inducement Plan are substantially similar to the terms of the 2019 Plan, with the exception that incentive stock options may not be issued under the 2024 Inducement Plan and equity awards under the 2024 Inducement Plan (including nonqualified stock options, restricted stock, restricted stock units, and other stock-based awards) may be issued only to an employee who is commencing employment with the Company or any subsidiary or who is being rehired following a bona fide interruption of employment by the Company or any subsidiary, in either case if he or she is granted such award in connection with his or her commencement of employment and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.

A summary of stock option and RSU transactions in the nine months ended September 30, 2024, is as follows:

							Weighted					Weighted
	Shares			Number of			Option Average		Unvested			RSU Average
	Available			Options			Exercise		RSU Shares			Grant Date
	For Grant			Outstanding			Price		Outstanding			Fair Value
Balance as of January 1, 2024		5,685,806			17,938,726		$	2.90		2,126,373		$	1.37
Authorized under 2024 Inducement Plan		3,000,000
Authorized under 2019 Plan		15,000,000
Granted		(7,167,480	)		5,248,437		$	1.12		1,919,043		$	1.14
Exercised					(38,030	)	$	0.78
Released										(571,884	)	$	1.51
Forfeited		1,872,626			(1,435,332	)	$	2.29		(437,294	)	$	1.43
Canceled		293,568			(306,339	)	$	3.81
Balance as of September 30, 2024		18,684,520			21,407,462		$	2.50		3,036,238		$	1.19

As of September 30, 2024, there were 21,407,462 options outstanding with a weighted average exercise price of $2.50, a weighted average remaining term of 6.83 years, and an aggregate intrinsic value of $538,000. Of these options, 12,618,062 were vested, with a weighted average exercise price of $3.02, a weighted average remaining term of 5.40 years, and an aggregate intrinsic value of $379,000.

The Company received $30,000 for the 38,030 options exercised during the nine months ended September 30, 2024, which had an intrinsic value of $7,000, and received $17,000 for the 54,720 options exercised during the nine months ended September 30, 2023, which had an intrinsic value of $31,000. The aggregate intrinsic value represents the total pre-tax value (i.e., the difference between the Company’s stock price and the exercise price) of stock options outstanding as of September 30, 2024, based on the Company’s common stock closing price of $0.85 on September 30, 2024, which would have been received by the option holders had all their in-the-money options been exercised as of that date.

The weighted average grant date fair value of options awarded in the nine months ended September 30, 2024 and 2023, was $1.01 and $0.78, respectively. Their fair values were estimated using the following assumptions:

	Nine Months Ended September 30,
	2024			2023
Risk-free interest rate		3.7% - 4.4	%		3.5% - 4.2	%
Expected term (in years)		6.00			5.50 - 6.00
Expected volatility		128.9% - 130.8	%		127.8% - 133.8	%
Dividend yield		—	%		—	%

The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards, net of estimated forfeitures, to compensation expense over the service period. Total stock-based compensation recognized for options, RSUs and ESPP was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Research and development	$	1,814	$	2,404	$	5,489	$	6,142
General and administrative		661		1,439		3,657		4,275
Total stock-based compensation	$	2,475	$	3,843	$	9,146	$	10,417

As of September 30, 2024, the unrecognized stock-based compensation cost related to outstanding unvested stock options and RSUs expected to vest was $15.9 million, which the Company expects to recognize over an estimated weighted average period of 2.3 years.

On August 4, 2022, the 2022 Employee Stock Purchase Plan (the “2022 ESPP”) was approved by the Company’s stockholders. The Company initially reserved 1,800,000 shares of the Company’s common stock for purchase under the 2022 ESPP, which was increased by 1,800,000 shares through an amendment to the 2022 ESPP adopted by the Company’s stockholders on June 11, 2024, to 3,600,000 shares. The 2022 ESPP generally has a six-month offering period comprised of one purchase period. In May 2024, the 2022 ESPP had a one-time modification following the end of the six-month offering period ended May 31, 2024, to commence the follow-on offering period on July 1, 2024 for a five-month offering period. The purchase price of the stock is equal to 85% of the lesser of the market value of such shares at the beginning of the six-month offering period or the end of such offering period. During the nine months ended September 30, 2024, the Company received $0.3 million and issued 502,423 shares under the 2022 ESPP. As of September 30, 2024, 2,362,902 shares are available and reserved for future issuance under the 2022 ESPP.

The estimated fair value used for the five-month offering period beginning July 1, 2024 and ending November 30, 2024, was $0.28 per share. The estimated fair value used for the six-month offering period beginning December 1, 2023 and ending May 31, 2024 was $0.27 per share.  The estimated fair value used for the six-month offering period beginning June 1, 2023 and ending November 30, 2023 was $0.54 per share. The estimated fair value used for the six-month offering period beginning December 1, 2022 and ending May 31, 2023 was $0.46 per share. As of September 30, 2024, the unrecognized stock-based compensation cost related to outstanding ESPP expected to be recognized is $41,000 by November 30, 2024. The fair value of the 2022 ESPP shares was estimated using the Black-Scholes option pricing model using the following assumptions:

	Five-Month Offering Period Ending November 30,			Six-Month Offering Period Ending May 31,			Six-Month Offering Period Ending November 30,			Six-Month Offering Period Ending May 31,
	2024			2024			2023			2023
Risk-free interest rate		5.3	%		5.3	%		5.4	%		4.6	%
Expected term (in years)		0.42			0.50			0.50			0.50
Expected volatility		102.0	%		75.2	%		98.6	%		84.7	%
Dividend yield		—	%		—	%		—	%		—	%