Stock-Based Awards

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Awards

12. Stock-Based Awards

Equity Incentive Plan Awards

Effective November 8, 2019, Lineage adopted an amendment changing the name of the BioTime, Inc. 2012 Equity Incentive Plan to the Lineage Cell Therapeutics, Inc. 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan provides for the grant of stock options, restricted stock, restricted stock units (“RSUs”) and stock appreciation rights. As of December 31, 2019, a maximum of 24,000,000 common shares were available for grant under the 2012 Plan. Recipients of stock options are eligible to purchase common shares at an exercise price equal to the fair market value of such shares on the date of grant. The maximum term of options granted under the 2012 Plan is 10 years. Stock options generally vest over a four-year period based on continuous service; however, the 2012 Plan allows for other vesting periods. Upon the expiration of the restrictions applicable to an RSU, Lineage will either issue to the recipient, without charge, one common share per RSU or cash in an amount equal to the fair market value of one common share. RSUs granted from the 2012 Plan reduce the shares available for grant by two shares for each RSU granted.

A summary of Lineage’s 2012 Plan activity and other stock option awards granted outside of the 2012 Plan related information is as follows (in thousands, except per share amounts):

	Shares Available for Grant		Number of Options Outstanding		Number of RSUs Outstanding		Weighted Average Exercise Price
December 31, 2019		9,157		14,710		166	$	2.17
Restricted stock units vested		-		-		(42)		-
Options granted		(4,946)		4,946		-		0.70
Options exercised		-		-		-		-
Options expired/forfeited/cancelled		3,211		(3,211)		-		2.67
June 30, 2020		7,422		16,445		124	$	1.63
Options exercisable at June 30, 2020				8,090			$	2.31

At the effective time of the Asterias Merger, Lineage assumed sponsorship of the Asterias 2013 Equity Incentive Plan (the “Asterias Equity Plan”), with references to Asterias and Asterias common stock therein to be deemed references to Lineage and Lineage common shares. There were 7,309,184 shares available under the Asterias Equity Plan immediately before the closing of the Asterias Merger, which became 5,189,520 shares immediately following the Asterias Merger. The shares available under the Asterias Equity Plan will be for awards granted to those former Asterias employees who continued as Lineage employees upon consummation of the Asterias Merger.

A summary of activity under the Asterias Equity Plan is as follows (in thousands, except per share amounts):

	Shares Available for Grant		Number of Options Outstanding		Weighted Average Exercise Price
December 31, 2019		4,840		350	$	1.57
Options granted		-		-		-
Options exercised		-		-		-
Options forfeited		-				-
June 30, 2020		4,840		350	$	1.57
Options exercisable at June 30, 2020				109	$	1.57

Stock-based compensation expense

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model applying the weighted-average assumptions noted in the following table:

	Six Months Ended June 30, (unaudited)
	2020		2019
Expected life (in years)		6.25		6.1
Risk-free interest rates		0.8%		2.5%
Volatility		67.5%		60.2%
Dividend yield		0%		0%

Operating expenses include stock-based compensation expense as follows (in thousands):

	Three Months Ended June 30, (unaudited)				Six Months Ended June 30, (unaudited)
	2020		2019		2020		2019
Research and development	$	121	$	161	$	217	$	283
General and administrative		485		601		1,015		1,919
Total stock-based compensation expense	$	606	$	762	$	1,232	$	2,202

The expense related to 84,940 shares of Asterias restricted stock unit awards that immediately vested on the closing of the Asterias Merger and converted into the right to receive common shares of Lineage based on the Merger Exchange Ratio, resulting in 60,304 common shares of Lineage issued on March 8, 2019, was included in stock-based compensation expense for the six months ended June 30, 2019. The expense was not included as part of the purchase price of the Asterias Merger because these awards were principally attributable to post-combination services.