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Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

Note 10 – 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. Subsequent amendments to the 2019 Plan increased the aggregate number of shares of common stock that may be issued pursuant to the 2019 Plan to 13,400,000.

As of March 31, 2023, the Company had 4,068,199 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.

As of March 31, 2023, the Company had 1,286,250 shares available for future grant under the Inducement Plan.

Stock Options

Stock option activity for the three months ended March 31, 2023 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, 2022			6,919,894			$	2.34			8.2 years		$	2,034
Granted			1,405,375			$	1.29
Exercised			(245,855	)		$	0.44
Cancelled			(48,759	)		$	4.02
Outstanding at March 31, 2023			8,030,655			$	2.21			8.3 years		$	1,679

Exercisable as of March 31, 2023			4,460,535			$	1.79			7.0 years		$	1,530

Vested and expected to vest as of March 31, 2023			7,880,455			$	2.19			7.9 years		$	1,636

The weighted-average grant date fair value of options granted during the three months ended March 31, 2023 and 2022, was $0.78 and $1.55, respectively. During the three months ended March 31, 2023 and 2022, 245,855 and no options were exercised for proceeds of $109,000 and $0, respectively. The fair value of the 439,245 and 594,364 options that vested during the three months ended March 31, 2023 and 2022 was approximately $0.8 million and $1.2 million, respectively.

On June 21, 2022, the Company granted an award of 100,000 options to the Company’s founder at an exercise price of $5.00 per share. The options will vest in full upon the shipment of 20,000 product units on or before June 30, 2023. If the shipments have not occurred by June 30, 2023, the options will be cancelled and forfeited. For the three months ended March 31, 2023, the Company has not recognized stock compensation expense of approximately $0.1 million related to this award as the successful achievement of the performance conditions is not yet probable.

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, 2023 and 2022.

		Three Months Ended March 31,
		2023				2022

Dividend yield			—	%			—	%
Expected volatility			62.38	%			61.98	%
Risk-free interest rate			3.69	%			1.90	%
Expected life			5.99 years				6.03 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, 2023 and 2022 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,
		2023				2022
Research and development		$	217			$	305
Sales, general and administrative			507				410
		$	724			$	715

As of March 31, 2023, unamortized compensation expense related to unvested stock options (excluding the performance award previously described above) was approximately $7.0 million, which is expected to be recognized over a weighted average period of 2.8 years.