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Note 7 - Stockholders' Equity and Stock-based Compensation

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Shareholders' Equity and Share-Based Payments [Text Block]

7. Stockholders' Equity and Stock-Based Compensation

Preferred Stock

The Company’s Board of Directors (the “Board”) has the authority to issue preferred stock in one or more series and to fix the rights, preferences, privileges, restrictions and the number of shares constituting any series or the designation of the series.

2022 Registered Direct Offering

On November 22, 2022, the Company completed a common stock offering pursuant to which certain investors purchased 1,666,667 shares of common stock at a price of $30.00 per share. Net proceeds of the offering were approximately $47.3 million after deducting offering expenses.

Common Stock Warrant Distribution

See Notes 2 and 13 regarding the distribution of common stock warrants on January 3, 2024.

At the Market (ATM) Common Stock Issuance

On May 1, 2023, the Company entered into an at-the-market offering program (“ATM”) to sell, from time to time, shares of Company common stock having an aggregate offering price of up to $200 million in common stock pursuant to a shelf registration statement that was filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 1, 2023 and became effective immediately upon filing. The Company is obligated to pay a commission of up to 3% of the gross proceeds from the sale of shares of common stock under the ATM. As of the filing of this Annual Report on Form 10-K, the Company is no longer a Well-Known Seasoned Issuer, as defined by the SEC. Thus, the Company is not eligible to sell securities under the ATM under its existing “automatic” shelf registration statement on Form S-3 unless and until it files a new Form S-3 that is declared effective by the SEC.

There were no common stock sales under the ATM during the year ended December 31, 2024 and 2023.

2008 Equity Incentive Plan

Under the Company’s 2008 Equity Incentive Plan, or 2008 Equity Plan, its employees, directors and consultants received share-based awards, including grants of stock options and performance awards. The 2008 Equity Plan expired in December 2017. Share-based awards generally expire ten years from the date of grant.

2018 Equity Incentive Plan

The Company’s Board or a designated Committee of the Board is responsible for administration of the Company’s 2018 Omnibus Incentive Plan (the 2018 Plan) and determines the terms and conditions of each option granted, consistent with the terms of the 2018 Plan. The Company’s employees, directors, and consultants are eligible to receive awards under the 2018 Plan, including grants of stock options and performance awards. Share-based awards generally expire ten years from the date of grant. The 2018 Plan, as amended in May 2022, provides for issuance of up to 5,000,000 shares of common stock, par value $0.001 per share, subject to adjustment as provided in the 2018 Plan.

When stock options or performance awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled. The Company may then use its cash to pay tax authorities the amount of statutory taxes owed by and on behalf of the award recipient.

Stock Options

The following summarizes information about stock option activity during 2024:

						*Weighted Average*				*Weighted Average*
		*Number of*				*Weighted Average*				*Remaining Contractual*				*Aggregate Intrinsic Value*
		*Options*				*Exercise Price*				*Term in Years*				*in Millions*

Outstanding as of December 31, 2023			3,039,029			$	15.13				6.21			$	30.28
Options granted			2,083,000				26.65
Options exercised			(240,147	)			5.25
Options forfeited/canceled			(418,854	)			24.64
Outstanding as of December 31, 2024			4,463,028				20.15				7.61			$	0.30
Vested and expected to vest at December 31, 2024			3,965,665				19.93				7.44			$	0.30
Exercisable at December 31, 2024			1,794,501			$	12.86				4.95			$	0.30

Of the stock options exercised during the year ended December 31, 2024, 6,634 stock options were net settled in satisfaction of the exercise price, with no cash proceeds received. In addition, an employee surrendered 6,500 shares of common stock in conjunction with a net exercise of a stock option. The common shares surrendered were retired by the Company.

The following summarizes information about stock options at December 31, 2024 by a range of exercise prices:

								*Options outstanding*												*Options exercisable*
												*Weighted*
												*average*				*Weighted*								*Weighted*
								*Number of*				*remaining*				*average*				*Number of*				*average*
*Range of exercise prices*								*outstanding*				*contractual*				*exercise*				*vested*				*exercise*
*From*				To				*options*				*life (in years)*				*price*				*options*				*price*
$	0.95			$	4.10				900,303				3.5			$	2.80				900,303			$	2.80
$	5.46			$	17.54				1,049,656				7.1			$	16.21				560,765			$	15.06
$	18.78			$	26.57				539,277				8.7			$	21.90				197,198			$	21.81
$	26.91			$	26.91				1,080,000				9.7			$	26.91				364			$	26.91
$	27.42			$	77.00				893,792				9.2			$	33.02				135,871			$	57.40
									4,463,028				7.6			$	20.15				1,794,501			$	12.86

The Company uses Black-Scholes to estimate the fair value of options granted. Black-Scholes considers a number of factors, including the market price of the Company’s common stock. Factors utilized in Black-Scholes to value each stock option granted, and the weighted average fair value of options granted during the years ended December 31, 2024, 2023 and 2022 were as follows:

2024

2023

2022

Volatility

151% to 170%

152% to 155%

151% to 154%

Risk-free interest rates

3.53% to 4.47%

3.82% to 4.37%

1.98% to 3.69%

Expected life of option (in years)

7

7

7

Dividend yield

zero

zero

zero

Forfeiture rate

4.3

%

zero

zero

Weighted average fair value of stock options granted

$

25.85

$

18.21

$

35.16

Volatility is based on reviews of the historical volatility of the Company’s common stock. Risk-free interest rates are based on yields of U.S. treasury notes in effect at the date of grant. Expected life of option is based on actual historical option exercises. Dividend yield is zero because the Company does not anticipate paying cash dividends in the foreseeable future.

As of December 31, 2024, the Company expects to recognize compensation expense of $50.6 million related to non-vested options held by equity plan participants over the weighted average remaining recognition period of 2.3 years.

Performance Awards

The following summarizes information about performance award activity during 2024:

		*Number of Performance Awards*
Outstanding as of December 31, 2023			7,142
Granted			—
Vested			—
Forfeited/canceled			—
Outstanding as of December 31, 2024			7,142

During the year ended December 31, 2022, a total of 57,143 shares of restricted stock awards expired as performance criteria related to these Performance Awards were not attained. These shares of restricted stock were returned to the 2008 Equity Incentive Plan, which expired in December 2017, and thus were retired.

If and when outstanding Performance Awards vest, the Company would recognize $101,000 in stock-based compensation expense. These performance awards expire in 2026.

Stock-Based Compensation Expense

The following summarizes information about stock-based compensation expense, in thousands:

		*Years ended December 31,*
		*2024*				*2023*				*2022*

Research and development		$	6,492			$	2,050			$	1,631

General and administrative			9,799				2,536				435

Total stock-based compensation expense		$	16,291			$	4,586			$	2,066

On September 13, 2024, the Company entered into a Consulting Agreement with our former President and Chief Executive Officer for a period of one year, which was subsequently terminated on January 23, 2025. The services to be provided under the Consulting Agreement were not deemed substantive for continuous service requirements of stock option vesting, resulting in a stock option modification under ASC 718. The Company's stock-based compensation expense for the year ended December 31, 2024 included approximately $0.6 million from the stock option modification accounting. See further discussion in Note 2 under "Related Party Transactions". There were no such costs during the years ended December 31, 2023 and 2022.