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Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

11. Stock-Based Compensation

Oncocyte had a 2010 Stock Option Plan (the “2010 Plan”) under which 5,200,000 shares of common stock were authorized for the grant of stock options or the sale of restricted stock. On August 27, 2018, Oncocyte shareholders approved a new Equity Incentive Plan (the “2018 Incentive Plan”) to replace the 2010 Plan. In adopting the 2018 Incentive Plan, Oncocyte terminated the 2010 Plan and will not grant any additional stock options or sell any stock under restricted stock purchase agreements under the 2010 Plan; however, stock options issued under the 2010 Plan will continue in effect in accordance with their terms and the terms of the 2010 Plan until the exercise or expiration of the individual options.

In 2018, under the 2010 Plan, Oncocyte granted certain stock options with exercise prices ranging from $2.30 per share to $3.15 per share, that will vest in increments upon the attainment of specified performance conditions related to the development of DetermaDx™ and obtaining Medicare reimbursement coverage for that test (“Performance-Based Options”). The Medicare reimbursement conditions will not be met as Oncocyte has determined not to pursue commercialization of DetermaDx™. Approximately 125,000 stock options granted in May 2018 contain a hybrid vesting condition which vest on the earlier to occur of three years of service from the grant date or achieving a defined Performance-Based Option milestone with respect to DetermaDx™ local decision coverage. These stock options are considered to be service-based awards for financial accounting purposes with the fair value of the options being recognized in stock-based compensation expense over an effective three-year service period.

During the three months ended March 31, 2021, no stock-based compensation expense was recorded with regard to the Performance-Based Options due to the discontinuation of development of DetermaDx™. During the three months ended March 31, 2020, certain performance conditions required for vesting were met, and, accordingly, 50,000 shares vested and $106,000 of stock-based compensation expense was recorded with regard to the Performance-Based Options. As of March 31, 2021, there were no Performance-Based Options outstanding.

A summary of Oncocyte’s 2010 Plan activity and related information follows (in thousands except weighted average exercise price):

Options	Shares Available for Grant		Number of Options Outstanding		Weighted Average Exercise Price

Balance at December 31, 2020		-		1,218	$	3.55
Options exercised		-		(90)	$	2.09
Options forfeited, canceled and expired		-		-	$	-
Balance at March 31, 2021		-		1,128	$	3.65
Exercisable at March 31, 2021				1,081	$	3.76

As of March 31, 2021, 11,000,000 shares of common stock were reserved under the 2018 Incentive Plan for the grant of stock options or the sale of restricted stock or for the settlement of hypothetical units issued with reference to common stock (“RSUs”). Oncocyte may also grant stock appreciation rights under the 2018 Incentive Plan.

A summary of Oncocyte’s 2018 Incentive Plan activity and related information follows (in thousands except weighted average exercise price):

	Shares Available for Grant		Number of Options Outstanding		Number of RSUs Outstanding		Weighted Average Exercise Price
Balance at December 31, 2020		3,346		7,212		201	$	2.60
RSUs vested		-		-		-	$	-
RSUs granted		-		-		-	$	-
Options granted		(2,966)		2,966		-	$	5.12
Options exercised		-		(195)		-	$
Options forfeited/cancelled		76		(76)		-	$	2.69
Balance at March 31, 2021		456		9,907		201	$	3.35
Options exercisable at March 31, 2021				2,849			$	2.67

Oncocyte recorded stock-based compensation expense in the following categories on the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 (unaudited and in thousands):

	Three Months Ended March 31,
	2021		2020
Cost of revenues	$	22	$	5
Research and development		257		194
General and administrative		778		634
Sales and marketing		233		104
Total stock-based compensation expense	$	1,290	$	937

The assumptions that were used to calculate the grant date fair value of Oncocyte’s employee and non-employee stock option grants for the three months ended March 31, 2021 and 2020 were as follows (unaudited):

	Three Months Ended March 31,
	2021		2020
Expected life (in years)		6.0		6.0
Risk-free interest rates		1.02%		1.34%
Volatility		102.62%		105.09%
Dividend yield		-%		-%

The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If Oncocyte had made different assumptions, its stock-based compensation expense and net loss for the three months ended March 31, 2021 and 2020 may have been significantly different.

Oncocyte does not recognize deferred income taxes for incentive stock option compensation expense and records a tax deduction only when a disqualified disposition has occurred.