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Equity-Based Compensation | 6 Months Ended
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Jun. 30, 2021
Share-based Payment Arrangement [Abstract] |
Equity-Based Compensation | Equity-Based Compensation 2017 Equity Incentive Plan Awards that may be awarded under the 2017 Equity Incentive Plan include non-qualified and incentive stock options, stock appreciation rights, bonus shares, restricted stock, restricted stock units, performance units and cash-based awards. The number of shares of common stock reserved for issuance under the 2017 Equity Incentive Plan automatically increases on January 1 of each year, beginning on January 1, 2020, by the lesser of (i) 4,600,000 shares, (ii) 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or (iii) a lesser number of shares determined by the Compensation Committee of the Board. The Compensation Committee made the determination to increase the share reserve for the 2017 Equity Incentive Plan by 4,382,567 shares, effective January 1, 2021. As of June 30, 2021, the aggregate number of equity awards available for grant under the 2017 Equity Incentive Plan was 2,831,213. Inducement Grant In May 2021, the Company granted stock options to purchase up to 600,000 shares of common stock as a material inducement to Brian C. Bock, the Company’s Chief Financial Officer, to enter into employment with the Company (the “Inducement Grant”). The Inducement Grant, which was made pursuant to a stand-alone nonstatutory stock option agreement (the “Inducement Award Agreement”), was approved by the Compensation Committee of the Board, was awarded in accordance with Nasdaq Listing Rule 5635(c)(4) and outside of the Company’s 2017 Equity Incentive Plan and is subject to the terms and conditions of the Inducement Award Agreement. As such, any shares underlying the Inducement Grant are not, upon forfeiture, cancellation or expiration, returned to a pool of shares reserved for future issuance. As of June 30, 2021, stock options to purchase up to 600,000 shares of common stock remained outstanding under the Inducement Grant. Employee Stock Purchase Plan The 2017 Employee Stock Purchase Plan (the "ESPP") was adopted by the Board in September 2017 and approved by the Company's stockholders in September 2017. Through the ESPP, eligible employees may authorize payroll deductions of up to 15% of their compensation to purchase common stock. The maximum number of shares that an employee may purchase on any exercise date in an offer period will be the smaller of (i) 7,500 shares or (ii) such number of shares as has a fair market value (determined as of the offering date for such offer period) equal to $25,000 within one calendar year minus the fair market value of any other shares of common stock that are attributed to such calendar year. The purchase price per share at each purchase date is equal to 85% of the lower of (i) the closing market price per share of Exicure common stock on the employee’s offering date or (ii) the closing market price per share of Exicure common stock on the exercise date. Each offering period is approximately six-months in duration and the first offering period began on November 16, 2020 and ended on May 14, 2021. In connection with the end of the first offering period on May 14, 2021, the Company issued 103,096 shares of common stock that were purchased under the ESPP. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2018 and each January 1 thereafter through January 1, 2027, by the least of (i) 300,000 shares; (ii) 0.3% of the outstanding shares of common stock on the last day of the immediately preceding calendar year; or (iii) a lesser number of shares determined by the Board. On January 1, 2021 and 2020, the number of shares of common stock available for issuance under the ESPP increased by 258,207 shares and 262,954 shares, respectively. As of June 30, 2021, there were 1,100,791 shares available for issuance under the ESPP. Equity-based compensation expense is classified in the statements of operations as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Research and development expense | $ | 361 |  |  | $ | 203 |  |  | $ | 618 |  |  | $ | 360 |
General and administrative expense | 403 |  |  | 341 |  |  | 663 |  |  | 625 |
| $ | 764 |  |  | $ | 544 |  |  | $ | 1,281 |  |  | $ | 985 |
Unamortized equity-based compensation expense at June 30, 2021 was $8,350, which is expected to be amortized over a weighted-average period of 3.2 years. The Company utilizes the Black-Scholes option-pricing model to determine the fair value of common stock option grants. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model also requires the input of highly subjective assumptions. In addition to an assumption on the expected term of the option grants as discussed below, application of the Black-Scholes model requires additional inputs for which we have assumed the values described in the table below:
| Six Months Ended June 30,
| 2021 |  | 2020
Expected term | 5.0 to 6.1 years |  | 5.2 to 6.1 years
Risk-free interest rate | 0.36% to 1.12%; weighted avg. 1.05% |  | 0.41% to 1.68%; weighted avg. 0.67%
Expected volatility | 81.7% to 83.6%; weighted avg. 82.6% |  | 81.0% to 85.8%; weighted avg. 83.8%
Forfeiture rate | 5 | % |  | 5 | %
Expected dividend yield | — | % |  | — | %
The expected term is based upon the “simplified method” as described in Staff Accounting Bulletin Topic 14.D.2. Currently, the Company does not have sufficient experience to provide a reasonable estimate of an expected term of its common stock options. The Company will continue to use the “simplified method” until there is sufficient experience to provide a more reasonable estimate in conformance with ASC 718-10-30-25 through 30-26. The risk-free interest rate assumptions were based on the U.S. Treasury bond rate appropriate for the expected term in effect at the time of grant. The expected volatility is based on calculated enterprise value volatilities for publicly traded companies in the same industry and general stage of development. The estimated forfeiture rates were based on historical experience for similar classes of employees. The dividend yield was based on expected dividends at the time of grant. The fair value of the underlying common stock and the exercise price for the common stock options granted during the six months ended June 30, 2021 and 2020 are summarized in the table below:
Common Stock Options Granted During Period Ended: | Fair Value of Underlying Common Stock |  | Exercise Price of Common Stock Option
Six months ended June 30, 2021 | $1.54 to $2.57; weighted avg. $1.88 |  | $1.54 to $2.57; weighted avg. $1.88
Six months ended June 30, 2020 | $1.19 to $2.80: weighted avg. $1.85 |  | $1.19 to $2.80: weighted avg. $1.85
The weighted-average grant date fair value of common stock options granted in the six months ended June 30, 2021 and 2020 was $1.31 and $1.29 per common stock option, respectively. A summary of common stock option activity as of the periods indicated is as follows:
| Options |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value (thousands)
Outstanding - December 31, 2020 | 7,227,296 |  |  | $ | 2.24 |  |  | 6.8 |  | $ | 1,719 |
Granted | 4,270,086 |  |  | 1.88 |  |  |  |  |
Exercised | (342,246) |  |  | 1.60 |  |  |  |  |
Forfeited | (95,702) |  |  | 2.27 |  |  |  |  |
Outstanding - June 30, 2021 | 11,059,434 |  |  | $ | 2.12 |  |  | 7.8 |  | $ | 1,019 |
Exercisable - June 30, 2021 | 4,580,439 |  |  | $ | 2.29 |  |  | 5.5 |  | $ | 832 |
Vested and Expected to Vest - June 30, 2021 | 10,559,034 |  |  | $ | 2.13 |  |  | 7.7 |  | $ | 1,007 |
The aggregate intrinsic value of common stock options exercised during the six months ended June 30, 2021 was $77 and $89, respectively. A summary of restricted stock unit activity of the periods indicated is as follows:
| Restricted Stock Units |  | Weighted-Average Grant Date Fair Value
Unvested balance - December 31, 2020 | — |  |  | $ | — |
Granted | 286,000 |  |  | 1.90 |
Unvested balance - June 30, 2021 | 286,000 |  |  | $ | 1.90 |
The grant date fair value of restricted stock units is based on the Company’s closing stock price at the date of grant. At vesting, each outstanding restricted stock unit will be exchanged for one share of the Company’s common stock. The restricted stock units granted during the 2021 period generally vest evenly on a quarterly basis over a period of 4 years in exchange for continued service provided by the restricted stock unit recipient during that vesting period.

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