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Note 10 - Stock-based Compensation

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 10 — Stock-Based Compensation

As of March 31, 2022, 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 on April 1, 2021 and approved by the Company’s stockholders on May 25, 2021. It was further amended and restated on April 18, 2022 and has been submitted for approval by the Company’s stockholders at the Company’s annual meeting of stockholders to be held on June 7, 2022. The Inducement Plan was most recently amended and restated by the Board of Directors on July 23, 2021. The ESPP was most recently amended and restated on April 1, 2021 and approved by the Company’s stockholders on May 25, 2021.

Stock-based compensation expense of $9,601 ($8,078 of expense related to the Incentive Plan, $1,225 of expense related to the Inducement Plan, and $298 of expense related to the ESPP) was recognized during the three months ended March 31, 2022, while $5,479 ($4,554 of expense related to the Incentive Plan, $598 of expense related to the Inducement Plan and $327 of expense related to the ESPP) was recognized during the three months ended March 31, 2021.

There was approximately $109,635 of total unrecognized compensation expense related to non-vested stock option and restricted stock unit awards granted by the Company as of March 31, 2022. As of March 31, 2022, the Company expected to recognize that expense as follows: $28,801 during the remainder of 2022, $33,073 in 2023, $30,267 in 2024, $17,094 in 2025 and $400 in 2026. 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, restricted stock and restricted stock units 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. Commencing March 1, 2011, stock option awards and restricted stock units granted to employees generally vest 25% each year until fully vested after four years.

In December 2014, the Company issued 1,250 performance-based stock options. These awards vest upon successful completion of specific development milestones. As of March 31, 2022, 85% of these grants have vested.

In January 2022, the Company issued 221 performance-based restricted stock unit awards. Contingent upon successful achievement of specific commercial or operational objectives in 2022, the awards become eligible for vesting at 50% on the first anniversary of the grant date and 25% on each of the second and third anniversaries of the grant date, until fully vested after three years.

Stock option awards granted to non-employee directors of the Company generally vest over one year. Stock option awards granted to new non-employee directors when they first join the Company’s Board of Directors generally vest, subject to the terms of the Incentive Plan, in 36 equal monthly installments over a three-year period measured from the grant date. 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, 2021			3,651				28,685			$	7.90
Restricted stock unit awards granted			(391	)			—				—
Restricted stock unit awards cancelled			40				—				—
Stock option awards granted			(109	)			109				16.49
Stock option awards exercised			—				(1,033	)			5.83
Stock option awards cancelled			369				(369	)			11.22
Balance March 31, 2022			3,560				27,392			$	7.96

For stock option awards granted under the Incentive Plan during the first three months of 2022 and 2021, 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 of these awards granted during the first three months of 2022 and 2021 was $11.48 and $6.87, respectively. The fair value of the stock option awards is amortized to expense over the vesting periods using a straight-line expense attribution method. For restricted stock units granted under the Incentive Plan, the fair value of the awards was determined based on the market value of the Company’s shares on the grant date. The weighted average grant date fair value of these awards granted during the first three months of 2022 was $15.49. The fair value of the restricted stock unit 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 and restricted stock unit awards to newly-hired employees as inducements material to each employee entering employment with the Company. Awards granted to newly hired employees generally vest 25% each year until fully vested after four years and are subject to the terms and conditions of the Inducement Plan. Each stock option has a term of 10 years. 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, 2021			900				4,408			$	6.20
Restricted stock unit awards granted			(134	)			—				—
Stock option awards granted			(566	)			566				16.10
Stock option awards exercised			—				(51	)			3.22
Stock option awards cancelled			58				(58	)			6.29
Balance March 31, 2022			258				4,865			$	7.42

For stock option awards granted under the Inducement Plan during the first three months of 2022 and 2021, 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 of these awards granted during the first three months of 2022 and 2021 was $11.14 and $5.86, respectively. The fair value of the stock option awards is amortized to expense over the vesting periods using a straight-line expense attribution method. For restricted stock units granted under the Inducement Plan, the fair value of the awards was determined based on the market value of the Company’s shares on the grant date. The weighted average grant date fair value of these awards granted during the first three months of 2022 was $16.27. The fair value of the restricted stock unit awards is amortized to expense over the vesting periods using a straight-line expense attribution method. No restricted stock unit awards were granted under the Inducement Plan during the first three months of 2021.

The following table summarizes the key assumptions used by the Company to value the stock option awards granted under all plans during the first three months of 2022 and 2021, 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

			2022			2021
Expected Life in Years			5.5				5.5
Expected Volatility			84.1	%			84.2	%
Expected Dividend Yield			0.0	%			0.0	%
Risk-Free Interest Rate			1.9	%			0.8	%

Employee Stock Purchase Plan

The Company has reserved a total of 7,975 shares of common stock to be purchased under the ESPP, of which 5,937 shares remain available for purchase as of March 31, 2022. 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. During the three months ended March 31, 2022, and 2021, the Company issued 115 and 193 shares under the ESPP, respectively. 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.