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Equity-Based Compensation | 6 Months Ended
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Jun. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Equity-Based Compensation | Equity-Based Compensation 2017 Equity Incentive Plan On September 22, 2017, the Company’s stockholders approved the Exicure, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which became effective on November 15, 2017. The 2017 Plan provides for the issuance of incentive awards of up to 194,750 shares of Exicure common stock, which includes 72,330 shares of Exicure common stock to be issued to officers, employees, consultants and directors, plus a number of shares not to exceed 122,793 that are subject to issued and outstanding awards under the Exicure OpCo 2015 Equity Incentive Plan (the “2015 Plan”) and were assumed in the merger transaction on September 26, 2017. 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) 153,333 shares, (ii) 5% of the total number of shares of its 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”). No future awards will be made under the 2015 Plan upon the effectiveness of the 2017 Plan. On January 1, 2023, pursuant to the terms of the 2017 Plan, the number of awards that are reserved and may be awarded under the 2017 Plan was automatically increased by 153,333 awards. As of June 30, 2023, the aggregate number of equity awards available for grant under the 2017 Equity Incentive Plan was 574,302. Awards granted under the 2017 Plan are contingent on the participants’ continued employment or provision of non-employee services and are subject to forfeiture if employment or continued service terminates for any reason. The initial award granted to an employee or consultant generally vests 25% on the first 12-month anniversary of the grant date and vests 1/48th monthly thereafter until fully vested at the end of 48 months. Subsequent awards granted to employees or consultants generally vest 1/48th monthly until fully vested at the end of 48 months. The initial stock option grant to a non-employee director vests 1/36th monthly until fully vested at the end of 36 months. Subsequent stock option grants to a non-employee director vests 1/12th monthly until fully vested at the end of 12 months. The term of common stock option grants is 10 years unless terminated earlier as described above. 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) 250 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. 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) 10,000 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, 2023, the number of shares of common stock available for issuance under the ESPP increased by 10,000 shares. As of June 30, 2023, there were 51,971 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,
| 2023 (Restated) |  | 2022 |  | 2023 (Restated) |  | 2022
Research and development expense | $ | — |  |  | $ | 171 |  |  | $ | 154 |  |  | $ | 330 |
General and administrative expense | 969 |  |  | 336 |  |  | 1,123 |  |  | 519 |
| $ | 969 |  |  | $ | 507 |  |  | $ | 1,277 |  |  | $ | 849 |
Unamortized equity-based compensation expense at June 30, 2023 was $532, which is expected to be amortized over a weighted-average period of 1.8 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. The following table presents the assumptions used in the Black-Scholes option-pricing model for stock options granted during the six months ended June 30, 2023 and 2022:
| Six Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022
Expected term | 5.8 to 5.8 years |  | 5.3 to 6.1 years
Risk-free interest rate | 3.83% to 3.83%; weighted avg. 3.83% |  | 2.86% to 3.56%; weighted avg. 2.91%
Expected volatility | 100.9% to 100.9%; weighted avg. 100.9% |  | 95.2% to 95.8%; weighted avg. 95.2%
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. For stock options granted after December 31, 2021, the expected volatility is based on the volatility of shares of the Company. For stock options granted prior to January 1, 2022, 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, 2023 and 2022 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, 2023 | $1.58; weighted avg. $1.58 |  | $1.58; weighted avg. $1.58
Six months ended June 30, 2022 | $3.46 to $5.51; weighted avg. $4.56 |  | $3.46 to $5.51; weighted avg. $4.56
The weighted-average grant date fair value of common stock options granted in the six months ended June 30, 2023 was $1.26 per common stock option. A summary of common stock option activity as of the periods indicated is as follows:
| Options |  | Weighted-Average Exercise Price (1) |  | Weighted-Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value (thousands)
Outstanding - December 31, 2022 | 222,833 |  |  | $ | 4.74 |  |  | 7.5 |  | $ | — |
Granted | 10,000 |  |  | 1.58 |  |  |  |  |
Exercised | — |  |  | — |  |  |  |  |
Forfeited | (65,927) |  |  | 5.40 |  |  |  |  |
Outstanding - June 30, 2023 | 166,906 |  |  | $ | 4.28 |  |  | 6.1 |  | $ | — |
Exercisable - June 30, 2023 | 161,763 |  |  | $ | 4.26 |  |  | 6.1 |  | $ | — |
Vested and Expected to Vest - June 30, 2023 | 166,671 |  |  | $ | 4.28 |  |  | 6.1 |  | $ | — |
(1) On March 24, 2022, the Company’s Board of Directors unanimously approved the repricing of all outstanding and unexercised stock options granted under our 2015 Equity Incentive Plan and 2017 Equity Incentive Plan and held by its current employees, executive officers, and directors. Effective April 1, 2022, the exercise price of the eligible stock options was reduced to $5.51, the closing price of our common stock on April 1, 2022. See below section titled “Repricing of Outstanding and Unexercised Options” for more information. 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, 2022 | 20,885 |  |  | $ | 12.65 |
Granted | 295,992 |  |  | 1.02 |
Settled | (305,569) |  |  | 1.91 |
Forfeited | (3,608) |  |  | 14.58 |
Unvested balance - June 30, 2023 | 7,700 |  |  | $ | 10.41 |
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. Restricted stock units 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. A summary of performance-based restricted stock unit activity of the periods indicated is as follows:
| Performance-Based Restricted Stock Units |  | Weighted-Average Grant Date Fair Value
Unvested balance - December 31, 2022 | 97,643 |  |  | $ | 3.45 |
Granted | — |  |  | — |
Settled | (97,643) |  |  | 1.91 |
Unvested balance - June 30, 2023 | — |  |  | $ | — |
The grant date fair value of performance-based 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. Certain performance metrics must be met by the performance measurement date in 2023 in order for the performance-based restricted stock units granted during 2022 to vest as follows: one-third on May 16, 2023, one-third on May 16, 2024, and one-third on May 16, 2025, in exchange for continued service provided by the performance-based restricted stock unit recipient during that vesting period.

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