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Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

Note 11 – Stock-based Compensation

2019 Equity Incentive Plan

Effective as of November 18, 2019, the Company adopted the 2019 Omnibus Incentive Plan (“2019 Plan”) administered by the Board. The 2019 Plan provides for the issuance of incentive stock options, non-statutory stock options, and restricted stock awards, for the purchase of up to a total of 4,000,000 shares of the Company’s common stock to employees, directors, and consultants and replaces the previous plan. The Board or a committee of the Board has the authority to determine the amount, type, and terms of each award. The options granted under the 2019 Plan generally have a contractual term of ten years and a vesting term of four years with a one-year cliff. The exercise price for options granted under the 2019 Plan must generally be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board. The incentive stock options granted under the 2019 Plan to 10% or greater stockholders must have an exercise price at least equal to 110% of the fair value of the Company’s common stock at the date of grant, as determined by the Board, and have a contractual term of ten years.

In connection with the closing of the IPO, effective as of March 25, 2021 the 2019 Plan was amended and restated as a result of which the aggregate number of shares of common stock that may be issued pursuant to the 2019 Plan was increased from 6,000,000 to 7,400,000.

As of March 31, 2022, the Company had 55,822 shares available for future grant pursuant to the 2019 Plan.

2021 Employment Inducement Plan

On September 15, 2021 the Company’s Board adopted the Movano, Inc. 2021 Inducement Award Plan (the “Inducement Plan”) without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules (“Rule 5635(c)(4)”). In accordance with Rule 5635(c)(4), awards under the Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s Board, or an employee who is being rehired following a bona fide period of non-employment by the Company or a subsidiary, as a material inducement to the employee’s entering into employment with the Company or its subsidiary. An aggregate of 2,000,000 shares of the Company’s common stock have been reserved for issuance under the Inducement Plan. The Company will continue to grant awards under the 2019 Plan pursuant to the terms thereof. During the three months ended March 31, 2022, awards totaling 720,000 were issued under the Inducement Plan.

As of March 31, 2022, the Company had 1,280,000 shares available for future grant under the Inducement Plan.

Stock Options

Stock option activity for the three months ended March 31, 2022 was as follows (in thousands, except share, per share, and remaining life data):

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Life		Intrinsic Value
Outstanding at December 31, 2021			5,592,137			$	2.29			8.6 years		$	9,912
Granted			780,000			$	2.78
Outstanding at March 31, 2022			6,372,137			$	2.35			8.5 years		$	4,831

Exercisable as of March 31, 2022			2,646,608			$	1.15			7.9 years		$	4,012

Vested and expected to vest as of March 31, 2022			6,321,937			$	2.36			8.6 years		$	4,712

The weighted-average grant date fair value of options granted during the three months ended March 31, 2022 and 2021,was $1.55 and $2.66, respectively. During the three months ended March 31, 2022 and 2021, no and 134,531 options were exercised for proceeds of $0 and $76,000, respectively. The fair value of the 594,364 and 187,763 options that vested during the three months ended March 31, 2022 and 2021 was approximately $1.2 million and $0.1 million, respectively.

The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of the stock options was estimated using the following weighted average assumptions for the three months ended March 31, 2022 and 2021.

		Three Months Ended March 31,
		2022				2021

Dividend yield			—	%			—	%
Expected volatility			61.98	%			67.70	%
Risk-free interest rate			1.90	%			0.64	%
Expected life			6.03 years				6.05 years

Dividend Rate—The expected dividend rate was assumed to be zero, as the Company had not previously paid dividends on common stock and has no current plans to do so.

Expected Volatility—The expected volatility was derived from the historical stock volatilities of several public companies within the Company’s industry that the Company considers to be comparable to the business over a period equivalent to the expected term of the stock option grants.

Risk-Free Interest Rate—The risk-free interest rate is based on the interest yield in effect at the date of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.

Expected Term—The expected term represents the period that the Company’s stock options are expected to be outstanding. The expected term of option grants that are considered to be “plain vanilla” are determined using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. For other option grants not considered to be “plain vanilla,” the Company determined the expected term to be the contractual life of the options.

Forfeiture Rate—The Company recognizes forfeitures when they occur.

The Company has recorded stock-based compensation expense for the three months ended March 31, 2022 and 2021 related to the issuance of stock option awards to employees and nonemployees in the condensed consolidated statement of operations and comprehensive loss as follows (in thousands):

		Three Months Ended March 31,
		2022				2021
Research and development		$	305			$	79
General and administrative			410				276
		$	715			$	355

As of March 31, 2022, unamortized compensation expense related to unvested stock options was approximately $8.3 million, which is expected to be recognized over a weighted average period of 2.9 years.