Share-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Compensation

Share-Based Compensation

7.  Share-Based Compensation

Biostage Amended and Restated Equity Incentive Plan

The Company maintains the Amended and Restated Equity Incentive Plan (the Plan) for the benefit of certain officers, employees, non-employee directors, and other key persons (including consultants and advisory board members). All options and awards granted under the Plan consist of the Company’s shares of common stock. The Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent to satisfy stock option exercises and vesting of the restricted stock units. The vesting period for awards is generally four years and the contractual life is ten years. Canceled and forfeited options and awards are available to be reissued under the Plan.

In June 2020, the Company’s shareholders approved the Plan, to among other things, increase of the number of shares of the Company’s common stock available for issuance pursuant to the 2013 Equity Incentive Plan by 3,000,000 shares, which increased the total shares authorized to be issued under the Plan to 5,098,000. There were 2,604,979 shares available for issuance as of June 30, 2022.

The Company has granted options to purchase common stock under the Plan. Stock option activity during the six months ended June 30, 2022 was as follows:

		Weighted-average		Weighted-average	Aggregate intrinsic
	Amount	exercise price		contractual life (years)	value (in thousands)
Outstanding at December 31, 2021	2,332,603	$	3.93	8.30	$	129
Granted	189,828		4.67
Canceled / forfeited	(50,097)		2.70
Outstanding at June 30, 2022	2,472,334	$	3.88	8.11	$	4,966
Options exercisable	1,197,964	$	5.19	7.64	$	2,419
Options vested and expected to vest	2,387,217	$	3.92

The Company’s outstanding stock options include 510,742 performance-based awards that have vesting provisions subject to the achievement of certain business milestones. Total unrecognized compensation expense for the remaining performance-based awards is approximately $1.3 million. No expense has been recognized for these awards as of June 30, 2022 given that the milestone achievements for these awards have not yet been deemed probable for accounting purposes.

Aggregate intrinsic value for outstanding options and exercisable options as of June 30, 2022, was approximately $5.0 million and $2.4 million, respectively, based on the Company’s closing stock price of $4.65 per share as of June 30, 2022. As of June 30, 2022, unrecognized compensation cost related to unvested non-performance-based awards amounted to $1.4 million, which will be recognized over a weighted-average period of 1.02 years.

The Company uses the Black-Scholes option pricing model to value its stock options. The weighted average assumptions for valuing options granted during the three months ended June 30, 2022 and 2021 were as follows:

	Six Months Ended June 30,
	2022		2021
Risk-free interest rate	2.59	%	0.47	%
Expected volatility	124.51	%	123.20	%
Expected term (in years)	5.5	years	5.3	years
Expected dividend yield	—	%	—	%

The Company recorded share-based compensation expense in the following expense categories of its consolidated statements of operations:

	June 30,				June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Research and development	$	88	$	69	$	148	$	149
General and administrative		189		62		364		112
Total stock-based compensation	$	277	$	131	$	512	$	261