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Share-Based Compensation | 3 Months Ended
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Mar. 31, 2022
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
SHARE-BASED COMPENSATION |
NOTE 3: | SHARE-BASED COMPENSATION
The Company previously granted stock options under its 2006 Stock Incentive Plan (the “2006 Plan”) and its 2015 Stock Incentive Plan (the “2015 Plan”). As of March 31, 2022 there were 2,466,385 stock options outstanding under the 2006 Plan and 2015 Plan and no remaining stock options available to be granted under such plans. On March 12, 2019, the Company’s board of directors adopted, and, on March 14, 2019 the Company’s stockholders approved, the Precision BioSciences, Inc. 2019 Incentive Award Plan (“2019 Plan”) and the 2019 Employee Stock Purchase Plan (“2019 ESPP”), both of which became effective on March 27, 2019. The 2019 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-based awards. The number of shares available for issuance under the 2019 Plan initially equaled 4,750,000 shares of common stock. The 2019 Plan provides for an annual increase to the number of shares of common stock available for issuance on the first day of each calendar year beginning January 1, 2020 and ending on and including January 1, 2029 by an amount equal to the lesser of (i) 4% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the board of directors. As of March 31, 2022, the aggregate number of shares available for issuance under the 2019 Plan has been increased by 6,589,999 pursuant to this provision. Any shares that are subject to awards outstanding under the Company’s 2006 Plan and 2015 Plan as of the effective date of the 2019 Plan that expire, lapse, or are terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, to the extent so unused, will become available for award grants under the 2019 Plan. As of March 31, 2022, 1,435,206 shares were available to be issued under the 2019 Plan. The 2019 Plan had 8,569,187 stock options and 2,320,362 restricted stock units (“RSUs”) outstanding as of March 31, 2022. Up to 525,000 shares of the Company’s common stock were initially reserved for issuance under the 2019 ESPP. The 2019 ESPP provides for an annual increase to the number of shares available for issuance on the first day of each calendar year beginning January 1, 2020 and ending on and including January 1, 2029 by an amount equal to the lesser of (i) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by our board of directors. As of March 31, 2022, the aggregate number of shares available for issuance under the 2019 ESPP has been increased by 1,647,499 shares pursuant to this provision. No more than 5,250,000 shares of our common stock may be issued under our 2019 ESPP. The purchase price of the shares under the 2019 ESPP, in the absence of a contrary designation, will be 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the purchase date. As of March 31, 2022, the Company had issued 331,175 shares under the 2019 ESPP. As of March 31, 2022, 1,841,324 shares were available to be issued under the 2019 ESPP. The Company recognized share-based compensation expense related to the ESPP of less than $0.1 million during the three months ended March 31, 2022 and 2021. On August 9, 2021, the Company’s board of directors approved the adoption of the Precision BioSciences, Inc. 2021 Employment Inducement Incentive Award Plan (“Inducement Award Plan”). The Inducement Award Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other share-based awards to newly hired employees who have not previously been an employee or member of the board, or an employee who is being rehired following a bona fide period of non-employment by the Company. No more than 3,000,000 shares of the Company’s common stock may be issued under the Inducement Award Plan. As of March 31, 2022, 2,125,792 shares were available to be issued under the Inducement Award Plan. The Inducement Award Plan had 850,000 stock options and 24,208 RSUs outstanding as of March 31, 2022. The Company recorded employee and nonemployee share-based compensation expense as follows (in thousands):
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Employee |  | $ | 3,554 |  |  | $ | 3,278 |
Nonemployee |  |  | 836 |  |  |  | 354 |
|  | $ | 4,390 |  |  | $ | 3,632 |
Share-based compensation expense is included in the following line items in the condensed consolidated statements of operations (in thousands):
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Research and development |  | $ | 2,012 |  |  | $ | 2,082 |
General and administrative |  |  | 2,378 |  |  |  | 1,550 |
|  | $ | 4,390 |  |  | $ | 3,632 |
Determining the appropriate fair value model to measure the fair value of the stock option grants on the date of grant and the related assumptions requires judgment. The fair value of each stock option grant is estimated using a Black-Scholes option-pricing model on the date of grant as follows:
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Estimated dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Weighted-average expected stock price volatility |  |  | 78.47 | % |  |  | 73.69 | %
Weighted-average risk-free interest rate |  |  | 1.85 | % |  |  | 0.66 | %
Expected term of options (in years) |  |  | 6.08 |  |  |  | 6.43 |
Weighted-average fair value per option |  | $ | 2.73 |  |  | $ | 8.32 |
The expected volatility rates are estimated based on the actual volatility of a peer group comprised of the Company and other comparable public companies over the expected term. The expected term represents the average time that stock options that vest are expected to be outstanding. The Company does not have sufficient history of exercising stock options to estimate the expected term of employee stock options and thus utilizes a weighted value considering actual history and estimated expected term based on the midpoint of final vest date and expiration date. The risk-free rate is based on the United States Treasury yield curve at the time of grant for the expected term of the option. The following table summarizes activity in the Company’s stock option plans for the three months ended March 31, 2022:
|  | Outstanding Option Shares |  |  | Weighted-Average Exercise Price |
Balance as of January 1, 2022 |  |  | 9,920,314 |  |  | $ | 9.28 |
Granted |  |  | 2,938,074 |  |  |  | 3.98 |
Exercised |  |  | (233,001 | ) |  |  | 1.46 |
Forfeited/canceled |  |  | (739,815 | ) |  |  | 10.00 |
Balance as of March 31, 2022 |  |  | 11,885,572 |  |  | $ | 8.08 |
The intrinsic value of stock options exercised was $0.5 million and $6.8 million during the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, the Company granted 1,620,098 RSUs with a grant date fair value of $6.3 million. The fair value of each award was determined based on the market price of the Company’s common stock on the date of grant. The fair value of the RSUs will be recognized as expense over the requisite vesting period. The following table summarizes the Company’s RSU activity for the three months ended March 31, 2022:
|  | RSU Awards |  |  | Weighted-Average Grant Date Fair Value |
Unvested RSUs as of January 1, 2022 |  |  | 773,503 |  |  |  | 11.29 |
Granted |  |  | 1,620,098 |  |  | $ | 3.88 |
Forfeited |  |  | (49,031 | ) |  |  | 10.44 |
Vested |  |  | — |  |  |  | — |
Unvested RSUs as of March 31, 2022 |  |  | 2,344,570 |  |  | $ | 6.19 |
There was approximately $43.2 million of total unrecognized compensation cost related to unvested stock options and RSUs as of March 31, 2022, which is expected to be recognized over a weighted-average period of 2.8 years.

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