Stock-Based Compensation

3 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

(8) Stock-Based Compensation

Xtant Medical Holdings, Inc. 2018 Equity Incentive Plan

On August 1, 2018, our stockholders approved the Xtant Medical Holdings, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) at the 2018 annual meeting of stockholders of Xtant. The 2018 Plan became effective immediately upon approval by our stockholders and will expire on July 31, 2028, unless terminated earlier. The 2018 Plan replaced the Amended and Restated Xtant Medical Equity Incentive Plan (the “Prior Plan”) with respect to future grants of equity awards. The Prior Plan will continue to govern equity awards granted under the Prior Plan. The 2018 Plan permits the Board, or a committee thereof, to grant to eligible employees, non-employee directors, and consultants of the Company non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards. The Board may select 2018 Plan participants and determine the nature and amount of awards to be granted. Subject to adjustment as provided in the 2018 Plan, the number of shares of our common stock available for issuance under the 2018 Plan is 1,307,747 shares. Under the 2018 Plan, shares of our common stock related to awards granted under the plan that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of the shares will be available again for grant under the plan.

The Board has granted various awards under the 2018 Plan to certain directors, officers and employees. As of March 31, 2019, stock options to purchase an aggregate of 180,770 shares of our common stock, a restricted stock award for 13,021 shares of common stock and restricted stock units covering 40,000 shares were outstanding under the 2018 Plan. During the three months ended March 31, 2019, options to purchase 370,000 shares of common stock granted under the 2018 Plan were forfeited and cancelled as a result of the termination of employment of optionees. As of March 31, 2019, of the 1,307,747 shares of common stock available for issuance under the 2018 Plan, 1,060,935 shares remained available for future issuance. Shares of common stock issued under the 2018 Plan may be newly issued shares or reacquired shares.

From time to time, we have granted options to purchase shares of our common stock outside of any stockholder-approved plan to new hires (collectively the “Non-Plan Grants”). As of March 31, 2019, no Non-Plan Grants were outstanding. During the three months ended March 31, 2019, Non-Plan Grants to purchase 25,000 shares of common stock were forfeited and cancelled as a result of the termination of employment of the optionee.

Stock options granted under the 2018 Plan may be either incentive stock options to employees, as defined in Section 422A of the Internal Revenue Code of 1986, or non-qualified stock options. The exercise price of all stock options granted under the 2018 Plan must be at least equal to the fair market value of the shares of common stock on the date of the grant. The 2018 Plan is administered by the Board. Stock options granted under the 2018 Plan are generally not transferable, vest in installments over the requisite service period, and are exercisable during the stated contractual term of the option only by the optionee.

Stock-based compensation expense recognized in the consolidated statements of operations for the three months ended March 31, 2019 and 2018 is based on awards expected to vest and reflects an estimate of awards that will be forfeited. ASU No. 2018-07, Stock Compensation (Topic 718), requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock options to purchase an aggregate of 100,000 shares of common stock were issued during the three months ended March 31, 2019; zero options were issued during the same period in 2018.

Stock option activity, including options granted under the 2018 Plan, the Prior Plan, and the Non-Plan Grants, was as follows:

	2019							2018
	Shares			Weighted Average Exercise Price Per Share		Weighted Average Fair Value at Grant Date Per Share		Shares			Weighted Average Exercise Price Per Share		Weighted Average Fair Value at Grant Date Per Share
Outstanding at January 1		496,958		$	9.90	$	6.62		67,465		$	71.03	$	36.85
Granted		100,000		$	2.24	$	1.95		—			—		—
Cancelled or expired		(395,000	)	$	4.71	$	3.69		(131	)	$	88.82	$	55.76
Outstanding at March 31		201,958		$	10.62	$	6.74		67,334		$	74.70	$	36.74
Exercisable at March 31		71,249		$	24.35	$	14.09		67,334		$	74.70	$	36.74

The estimated fair value of stock options granted is done using the Black-Scholes-Merton method applied to individual grants. Key assumptions used to estimate the fair value of stock awards are as follows:

	Three Months Ended
	March 31,
	2019			2018
Risk free interest rate		2.7	%		—
Dividend yield		0	%		—
Expected term		10.0 years			—
Expected volatility		91	%		—
Expected forfeiture rate		30	%		—

The aggregate intrinsic value of options outstanding as of March 31, 2019 was $77,000. The closing price of our common stock at March 31, 2019 ($3.01) was less than the exercise prices of all options issued under the Prior Plan or the 2018 Plan, other than an option to purchase 100,000 shares at an exercise price of $2.24.

During the three months ended March 31, 2018, all options were fully vested and expensed due to the change in control as a result of the Corporate Restructuring, noted above.

Total stock-based compensation recognized for employees and directors was $0.1 million and $0.4 million for the three months ended March 31, 2019 and 2018, respectively, and was recognized as Non-cash compensation expense.