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Note 14 - Stock-based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Text Block]

14. Stock-Based Compensation

The Company’s stock-based compensation plans include the Asensus Surgical, Inc. Amended and Restated Incentive Compensation Plan, previously named the TransEnterix, Inc. Amended and Restated Incentive Compensation Plan and prior to that named the TransEnterix, Inc. 2007 Incentive Compensation Plan, or the Plan, as well as options outstanding under the TransEnterix, Inc. Stock Option Plan, or the 2006 Plan. As part of the Merger, options outstanding, whether vested or unvested, under the 2006 Plan were adjusted by the Exchange Ratio of approximately 0.0887, and assumed by the Company concurrent with the closing of the Merger.

The Plan was initially approved by the majority of the stockholders on November 13, 2007. The Plan was amended on June 19, 2012 to increase the number of shares of common stock available for issuance to 76,923 and was amended on October 29, 2013 to (a) increase the number of shares of common stock authorized for issuance under the Plan from 76,923 shares of common stock to 380,000 shares of common stock, (b) increase the per-person award limitations for options or stock appreciation rights from 15,385 to 76,923 shares and for restricted stock, deferred stock, performance shares and/or other stock-based awards from 7,692 to 38,462 shares, and (c) change the name of the Plan to reflect the Merger-related change. The Plan was again amended on May 7, 2015 to (i) increase the number of shares reserved for issuance under the Plan to 918,462 shares; (ii) extend the term of the Plan until May 7, 2025; and (iii) make other changes and updates to the Plan and was further amended in October 2015 to add French Sub-Plan amendments applicable to awards made to France-based employees. The Plan was further amended on June 8, 2016 to (a) approve an increase in the number of shares reserved for issuance under the Plan to 1,456,923 shares and (b) establish maximum equity award limits for initial awards and annual awards to non-employee directors. The Plan was subsequently amended as of May 25, 2017, increasing the number of shares of Common Stock authorized under the Plan to 1,995,385. The Plan was again amended on May 24, 2018, increasing the number of shares of Common Stock authorized under the Plan to 3,149,231. The Plan was again amended in October 2018 to add an Israeli Sub-Plan applicable to awards made to Israel-based employees. The Plan was again amended on April 24, 2019, to increase the number of shares of Common Stock authorized under the Plan to 4,072,308 and to make other changes. The Plan was again amended on June 8, 2020, to increase the number of shares of Common Stock authorized under the Plan to 10,072,308 and to make other changes. The Plan was amended in October 2020 to include the Canadian Sub-Plan.

The October 2013, May 2015, June 2016, May 2017, May 2018, April 2019 and June 2020 amendments were approved by the Board of Directors and stockholders; the French Sub-Plan, the Israeli Sub-Plan, and the Canadian Sub-Plan were approved by the Board of Directors. Under the Plan, which is administered by the Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock and/or deferred stock to employees, officers, directors, consultants and vendors. The exercise price of stock options or stock appreciation rights may not be less than the fair market value of the Company’s shares at the date of grant. Additionally, no stock options or stock appreciation rights granted under the Plan may have a term exceeding ten years.

On August 11, 2020, the Compensation Committee of the Board of Directors approved awards to a newly hired executive officer of non-qualified stock options to acquire 150,000 shares of the Company’s common stock with an exercise price equal to the closing price on the date of grant, 30,000 time-based restricted stock units and 20,000 performance-based restricted stock units, each as inducement grants made outside of the stockholder-approved incentive compensation plan in accordance with NYSE American Company Guide Section 711(a).

The 2006 Plan was adopted and approved by stockholders in September 2006 and provided for the granting of up to 6,154 stock options to employees, directors, and consultants. Under the 2006 Plan, both employees and non-employees were eligible for such stock options. In 2009, the 2006 Plan was amended to increase the total options pool to 85,389. In 2011, the 2006 Plan was amended to increase the total options pool to 259,861. The amendments were approved by the Board of Directors and stockholders. The Board of Directors had the authority to administer the plan and determine, among other things, the exercise price, term and dates of the exercise of all options at their grant date. Under the 2006 Plan, options become vested generally over four years, and expire not more than 10 years after the date of grant. As part of the Merger, options outstanding under the 2006 Plan were adjusted by the Conversion Ratio, and remain in existence as options of the Company.

During the years ended December 31, 2020 and 2019, the Company recognized approximately $7.9 million and $11.5 million, respectively, of stock-based compensation expense, including stock options and restricted stock units.

The Company recognizes as expense, the grant-date fair value of stock options and other stock-based compensation issued to employees and non-employee directors over the requisite service periods, which are typically the vesting periods. The Company uses the Black-Scholes-Merton model to estimate the fair value of its stock-based payments. The volatility assumption used in the Black-Scholes-Merton model is based on the calculated historical volatility based on an analysis of reported data for a peer group of companies as well as the Company’s historical volatility. The expected term of options granted by the Company has been determined based upon the simplified method, because the Company does not have sufficient historical information regarding its options to derive the expected term. Under this approach, the expected term is the mid-point between the weighted average of vesting period and the contractual term. The risk-free interest rate is based on U.S. Treasury rates whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company estimates forfeitures based on the historical experience of the Company and adjusts the estimated forfeiture rate based upon actual experience.

The fair value of options granted were estimated using the Black-Scholes-Merton option pricing model based on the assumptions in the table below:

	Year ended December 31,
	2020			2019
Expected dividend yield		0%			0%
Expected volatility	82%	-	126%	81%	-	92%
Risk-free interest rate	0.2%	-	1.69%	1.39%	-	2.66%
Expected life (in years)	3.8	-	6.1	5.5	-	6.1

The following table summarizes the Company’s stock option activity, including grants to non-employees, for the year ended December 31, 2020:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Options outstanding at December 31, 2019		1,830,958		$	30.71		7.36
Granted		3,005,964			0.54
Forfeited		(293,102	)		19.08
Cancelled		(181,948	)		35.57
Exercised		-			-
Options Outstanding December 31, 2020		4,361,872		$	10.49		6.05

The following table summarizes information about stock options outstanding at December 31, 2020:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Exercisable at December 31, 2020		1,282,678	$	27.71		4.81
Vested or expected to vest at December 31, 2020		4,141,694	$	10.89		6.05

Stock options outstanding, exercisable, and vested or expected to vest at December 31, 2020 had no intrinsic value based on the closing market price of the Company’s common stock at December 31, 2020.

The total intrinsic value of options exercised during 2020 and 2019 was approximately $0 million and $0.2 million, respectively. Proceeds from options exercised during 2020 and 2019 were approximately $0 million and $0.5 million, respectively.

The Company granted 3,005,964 and 623,272 options to employees and non-employees during the years ended December 31, 2020 and 2019, respectively, with a weighted-average grant date fair value of $0.53 and $21.23, respectively.

As of December 31, 2020, the Company had future employee stock-based compensation expense of approximately $4.2 million related to unvested stock options, which is expected to be recognized over an estimated weighted-average period of 1.8 years.