Note 7 - Stock-based Compensation

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 7 — Stock-Based Compensation

As of September 30, 2021, the Company had three stock-based employee compensation plans: the Amended and Restated Stock Incentive Plan (“Incentive Plan”), the Amended and Restated Inducement Equity Incentive Plan (“Inducement Plan”) and the Amended and Restated Employee Stock Purchase Plan (“ESPP”). The Incentive Plan was amended and restated in April 2021 and approved by the Company’s stockholders on May 25, 2021. The Inducement Plan was adopted by the Board of Directors on April 24, 2019 and amended and restated by the Board of Directors in February 2020, July 2020, and July 2021. The ESPP was amended and restated in April 2021 and approved by the Company’s stockholders on May 25, 2021.

Stock-based compensation expense of $26,140 ($19,973 of expense related to the Incentive Plan, $5,025 of expense related to the Inducement Plan, and $1,142 of expense related to the ESPP) was recognized during the nine months ended September 30, 2021, while $8,907 ($7,492 of expense related to the Incentive Plan, $1,053 of expense related to the Inducement Plan and $362 of expense related to the ESPP) was recognized during the nine months ended September 30, 2020. In August 2021, the Company modified outstanding stock option awards held by an executive officer separating from employment with the Company. In connection with this separation of employment, the Company accelerated the vesting of 582,084 unvested stock options held by the executive, making them immediately exercisable.

There was approximately $60,420 of total unrecognized compensation expense related to non-vested stock option awards granted by the Company as of September 30, 2021. As of September 30, 2021, the Company expected to recognize that expense as follows: $6,324 during the remainder of 2021, $21,474 in 2022, $16,788 in 2023, $14,020 in 2024 and $1,814 in 2025. In addition, the Company has outstanding performance-based stock options for which no compensation expense is recognized until “performance” has occurred and the award vests.

Stock Incentive Plan

The Company grants stock option awards and restricted stock unit awards to its employees, directors, and consultants under the Incentive Plan. Under the Incentive Plan, stock option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards and restricted stock units granted to employees generally vest 25% each year until fully vested after four years.

In August 2013, December 2014 and December 2019, the Company issued 1,032, 1,250 and 315 performance-based stock options, respectively. These awards vest upon successful completion of specific development milestones. As of September 30, 2021, 100%, 85% and 100% of the August 2013, December 2014 and December 2019 grants, respectively, have vested. During 2020, the Company recognized $1,768 and $684 of stock compensation expense related to two milestones within the August 2013 and December 2019 grants for which achievement became probable.

Stock option awards granted to non-employee directors of the Company generally vest over one year. All stock option awards have contractual terms of 10 years. The vesting and exercise provisions of all awards granted under the Incentive Plan are subject to acceleration in the event of certain stockholder-approved transactions, or upon the occurrence of a change in control as defined in the Incentive Plan.

Related activity under the Incentive Plan is as follows:

							Weighted
							Average
	Awards			Options			Exercise
	Available			Outstanding			Price
Balance December 31, 2020		4,592			24,885		$	6.52
Plan amendment		7,500			-			-
Restricted stock unit awards granted		(100	)		-			-
Stock option awards granted		(2,108	)		2,108			11.87
Stock option awards exercised		-			(2,205	)		4.11
Stock option awards cancelled		208			(208	)		7.47
Balance September 30, 2021		10,092			24,580		$	7.18

For stock option awards granted under the Incentive Plan during the first nine months of 2021 and 2020, the fair value was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions noted in the table below. The weighted average grant date fair value per share of the awards granted during the first nine months of 2021 and 2020 was $8.11 and $3.35, respectively. The fair value of the stock option awards is amortized to expense over the vesting periods using a straight-line expense attribution method.

Inducement Equity Incentive Plan

The Company has the ability to grant stock option awards to newly-hired employees as inducements material to each employee entering employment with the Company. Stock option awards granted to newly hired employees are granted with an exercise price equal to the market price of the Company’s stock at the date of grant and generally vest 25% each year until fully vested after four years. Each stock option has a term of 10 years and is subject to the terms and conditions of the Inducement Plan. The vesting and exercise provisions of all awards granted under the Inducement Plan are subject to acceleration in the event of certain stockholder-approved transactions, or upon the occurrence of a change in control as defined in the Inducement Plan.

Related activity under the Inducement Plan is as follows:

							Weighted
							Average
	Awards			Options			Exercise
	Available			Outstanding			Price
Balance December 31, 2020		229			4,171		$	3.88
Plan amendment		1,500			-			-
Stock option awards granted		(738	)		738			14.23
Stock option awards exercised		-			(386	)		3.61
Stock option awards cancelled		122			(122	)		3.86
Balance September 30, 2021		1,113			4,401		$	5.64

For stock option awards granted under the Inducement Plan during the first nine months of 2021 and 2020, the fair value was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions noted in the table below. The weighted average grant date fair value per share of the awards granted during the first nine months of 2021 and 2020 was $9.74 and $2.41, respectively.

The following table summarizes the key assumptions used by the Company to value the stock option awards granted under the Incentive Plan and the Inducement Plan during the first nine months of 2021 and 2020, respectively. The expected life is based on the average of the assumption that all outstanding stock option awards will be exercised at full vesting and the assumption that all outstanding stock option awards will be exercised at the midpoint of the current date (if already vested) or at full vesting (if not yet vested) and the full contractual term. The expected volatility represents the historical volatility on the Company’s publicly traded common stock. The Company has assumed no expected dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future. The weighted average risk-free interest rate is the implied yield currently available on zero-coupon government issues with a remaining term equal to the expected term.

Weighted Average Assumptions for Stock Option Awards Granted to

Employees and Directors under the Plans

	2021			2020
Expected Life in Years		5.5			5.5
Expected Volatility		84.2	%		83.8	%
Expected Dividend Yield		0.0	%		0.0	%
Risk-Free Interest Rate		0.8	%		0.4	%

Employee Stock Purchase Plan (“ESPP”)

The Company has reserved a total of 7,975 shares of common stock to be purchased under the ESPP, of which 6,056 shares remain available for purchase as of September 30, 2021. Eligible employees may authorize up to 15% of their salary to purchase common stock at the lower of 85% of the beginning or 85% of the ending price during six-month purchase intervals. No more than 3 shares may be purchased by any one employee at the six-month purchase dates, and no employee may purchase stock having a fair market value at the commencement date of $25 or more in any one calendar year. The Company issued 316 shares during the first nine months of 2021 under the ESPP. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option were determined using a Black-Scholes option pricing model.