Stock-Based Awards

12 Months Ended

Dec. 31, 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 2012 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, 2020, 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, 2018		1,885			13,867			402		$	2.44
Adjustment due to the AgeX Distribution		117			(2	)		3			-
Increase to the 2012 Plan		8,000			-			-			-
Options granted		(3,581	)		3,581			-			1.06
Options forfeited		2,736			(2,736	)		-			2.13
Restricted stock units vested		-			-			(239	)		-
December 31, 2019		9,157			14,710			166		$	2.17
Options granted		(5,256	)		5,256			-			0.71
Options forfeited		4,101			(4,101	)		-			2.61
Restricted units vested		-			-			(73	)		-
December 31, 2020		8,002			15,865			93		$	1.57
Options exercisable at December 31, 2020					8,341					$	2.16

As of December 31, 2020, options outstanding and options exercisable under the 2012 Plan have a weighted-average remaining contractual term of 6.3 years and 4.1 years, respectively, and intrinsic value of $7.4 million and $0.9 million, respectively.

In connection with the vested RSUs during the year ended December 31, 2020, Lineage paid $27,000 in minimum employee withholding taxes in exchange for 26,000 vested Lineage common shares issuable to the employees and immediately retired those shares. For the year ended December 31, 2020, Lineage recorded a noncash stock-based compensation expense of $0.1 million, in connection with the vested RSUs, included in consolidated stock-based compensation expense.

In connection with the vested RSUs during the year ended December 31, 2019, Lineage paid $0.1 million in minimum employee withholding taxes in exchange for 109,000 vested Lineage common shares issuable to the employees and immediately retired those shares. For the year ended December 31, 2019, Lineage recorded a noncash stock-based compensation expense of $0.3 million, in connection with the vested RSUs, included in consolidated stock-based compensation expense.

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 from the closing date of the Asterias Merger through December 31, 2020 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
March 8, 2019		5,190			-			-	$	-
Options granted		(490	)		490			-		1.59
Options forfeited		140			(140	)		-		1.63
December 31, 2019		4,840			350			-	$	1.57
Options granted		-			-			-		-
Options forfeited		-			-			-		-
December 31, 2020		4,840			350			-	$	1.57
Options exercisable at December 31, 2020					153				$	1.57

As of December 31, 2020, options outstanding and options exercisable under the Asterias Equity Plan both have a weighted-average remaining contractual term of 8.2 years and intrinsic value of $67,000 and $29,000, respectively.

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:

	Year Ended December 31,
	2020		2019
Expected life (in years)		6.2		6.0
Risk-free interest rates		0.8%		2.2%
Volatility		67.7%		63.1%
Dividend yield		-%		-%

The weighted-average estimated fair value of stock options granted under the 2012 Plan and other stock option awards granted outside of the 2012 Plan, during the years ended December 31, 2020 and 2019 was $0.43 and $0.68 per share, respectively.

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

	Year Ended December 31,
	2020		2019
Research and development	$	464	$	516
General and administrative		1,763		3,064
Total stock-based compensation expense	$	2,227	$	3,580

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 year ended December 31, 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.

As of December 31, 2020, total unrecognized compensation costs related to unvested stock options under Lineage’s 2012 Plan was $3.9 million, which is expected to be recognized as expense over a weighted average period of approximately 2.6 years.