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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation STOCK-BASED COMPENSATION
Summary of Plans— Upon completion of the Merger on March 13, 2019, X4’s 2015 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2015 Plan”), Arsanis’ 2017 Equity Incentive Plan (the “2017 Plan”) and Arsanis’ 2017 Employee Stock Purchase Plan (the “2017 ESPP”) were assumed by the Company. In June 2019, the Company adopted the 2019 Inducement Equity Incentive Plan (the “2019 Plan”). These plans are administered by the Board of Directors or by a committee thereof. The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years. Incentive stock options granted to employees and restricted stock awards granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over four years. Non-statutory options granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over three or four years. Shares that are expired, terminated, surrendered or canceled under the Plans without having been fully exercised will be available for future awards. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.
2015 Employee, Director and Consultant Equity Incentive Plan— In 2015, the Board of Directors and shareholders of X4 adopted the 2015 Plan, which provided for the Company to grant incentive stock options or nonqualified stock options, restricted stock awards and other stock-based awards to employees, directors and consultants of the Company. The total number of shares of common stock that may be issued under the 2015 Plan is 1.0 million shares. As of December 31, 2020, there were a de minimis number shares available for issuance under the 2015 Plan.
2017 Equity Incentive Plan— Under the 2017 Plan, the Company may grant incentive stock options, non-qualified options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. On June 10, 2020, the Company's stockholders approved an amendment and restatement of the 2017 Plan. The amendments increased the number of shares of common stock reserved for issuance under the 2017 Plan by an additional 474 thousand shares and amended the “evergreen” provision of the 2017 Plan to provide for an automatic increase in the share reserve on the first day of each year, beginning on January 1, 2021 and ending on January 1, 2027, in an amount equal to the lower of 4.0% of the number of shares of the Company’s common stock outstanding on January 1 of each year or an amount determined by the Company’s Board of Directors. As of December 31, 2020, approximately 26 thousand shares were available for future issuance under the 2017 Plan. Pursuant to the evergreen provision of the 2017 Plan, as of January 1, 2021, an additional 652 thousand shares became available for future issuance under the 2017 Plan.
2017 Employee Stock Purchase Plan— The 2017 ESPP provides participating employees with the opportunity to purchase shares of the Company’s common stock at defined purchase prices over six-month offering periods. For the twelve months ended December 31, 2020, 26,643 shares of common stock were issued under the 2017 ESPP. As of December 31, 2020, approximately 144 thousand shares were available for future issuance under the 2017 ESPP. Pursuant to the evergreen provision of the 2017 ESPP, on January 1, 2021, an additional 85 thousand shares became available for future issuance under the 2017 ESPP.
2019 Inducement Equity Incentive Plan— On June 17, 2019, the Board of Directors approved the adoption of the 2019 Plan, which is used exclusively for the grant of equity awards to individuals who were not previously employees of the Company (or following a bona fide period of non-employment), as an inducement material to such individual’s entering into employment with the Company, pursuant to Nasdaq Listing Rule 5635(c)(4). The total number of shares of common stock that may be issued under the 2019 Plan, as amended, is 800,000 shares. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2019 Plan. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future grants. As of December 31, 2020, approximately 173 thousand shares were available for future issuance under the 2019 Plan.
Stock Option Valuation— The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:


Year Ended
December 31,



2020

20192018
Risk-free interest rate


0.6 %

2.0 %2.8 %
Expected term (in years)


6.01

5.995.94
Expected volatility


94.9 %

88.5 %86.0 %
Expected dividend yield


0 %

0 %0 %

Stock Options
The following table summarizes the Company’s stock option activity for the twelve months ended December 31, 2020:

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Contractual
Term (Years)

Aggregate Intrinsic
Value
Outstanding as of December 31, 20191,297,029 

$17.05 

8.4

$1,286 
Granted864,616 

8.06 




Exercised(17,689)

7.25 




Forfeited(269,442)

17.43 




Outstanding as of December 31, 20201,874,514 

$12.94 

8.3

$7 
Exercisable as of December 31, 2020682,632 

$17.42 

7.0

$— 
Vested and expected to vest as of December 31, 20201,404,246 

$13.35 

8.1

$4 
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock to the extent the stock option had a lower exercise price. The aggregate intrinsic value of stock options exercised during the twelve months ended December 31, 2020 and 2019 was $42 thousand and $363 thousand, respectively. The intrinsic value of options exercised during the years ended December 31, 2018 was not significant. The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2020, 2019 and 2018 was $6.12, $10.78, and $7.05, respectively.
Restricted Stock Units— During the twelve months ended December 31, 2020, the Company granted 692,331 restricted stock units to employees at a weighted average grant date fair value of $9.34 per share. The restricted stock units granted were primarily performance-based restricted stock units, which vest in part upon on the Company’s achievement of operational milestones and over time thereafter for the subsequent two years as the employee continues to provide services to the Company. As of December 31, 2020, two out of the four performance criteria had been achieved. The Company believes that the achievement of the remaining operational milestones is probable and, accordingly, stock-based compensation expense has been recognized for the awards using the accelerated attribution model based on the fair value of the awards as of the date of grant and management’s best estimate of the date each operational milestone will be achieved. The Company updates its estimates related to the probability and timing of achievement of the operational milestones each period until the award either vests or is forfeited. These restricted stock units had a grant date fair value of $6.5 million, which will be recognized as stock-based compensation expense, net of estimated forfeitures, over the estimated vesting period.
The following table summarizes the Company’s restricted stock activity for the twelve months ended December 31, 2020:
Number of Shares
Unvested at December 31, 2019101,773 
Granted692,331 
Vested(134,074)
Forfeited(87,570)
Unvested at December 31, 2020572,460 

Stock-Based Compensation— As of December 31, 2020, total unrecognized compensation expense related to unvested stock options and restricted stock units was $8.6 million, which is expected to be recognized over a weighted average period of 2.4 years.
Stock-based compensation expense was classified in the consolidated statements of operations as follows:

Year Ended
December 31,

2020

20192018
Research and development expense$2,316 

$909 $258 
General and administrative expense3,112 

1,141 501 
Total stock-based compensation$5,428 

$2,050 $759