STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company’s stock-based compensation generally includes stock options, restricted stock units (RSUs), performance share units (PSUs), and purchases under the Company’s former employee stock purchase plan (ESPP). The following table reflects stock‑based compensation expense recognized in the Company’s Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020 (in thousands):


	Years Ended December 31,
	2021		2020
Cost of sales (excluding amortization of intangible assets)	$	—	$	92
Research and development expenses	—		268
Selling, general and administrative expenses	3,545		9,565
Restructuring charges	—		999
Total	$	3,545	$	10,924

The recognized tax benefits on total stock-based compensation expense was immaterial for the years ended December 31, 2021 and 2020.

As of December 31, 2021, the Company had $4.7 million and $2.3 million of total unrecognized compensation expense related to RSUs and stock option grants, respectively, that will be recognized over a weighted average vesting period of 1.92 years and 2.91 years, respectively.

The following table reflects assumptions used to calculate the fair value of option grants for the year ended December 31, 2021:


	2021	2020

Risk-free interest rate	1.25%	0.20% - 0.35%
Dividend yield	—%	—%
Expected option term (in years)	6.0	3.4 - 5.0
Expected stock price volatility	284%	80%

The weighted average grant date fair value of options granted during the years ended December 31, 2021 and 2020 was $1.11 and $1.64 per option share, respectively. There were 72,750 stock options were exercised during the year ended December 31, 2021, and no stock options exercised during 2020. The total intrinsic value of options exercised during the year ended December 31, 2021 was $0.1 million and cash received from stock options exercised during the year ended December 31, 2021 was $0.2 million. Total grant date fair value of options that vested during the years ended December 31, 2021 and 2020 was $0.2 million and $0.7 million, respectively.

Employee Stock Purchase Plan

The Company terminated its ESPP program in June 2021 and did not grant any stock purchase rights under the ESPP program during the year ended December 31, 2021. The weighted average grant date fair value of stock purchase rights granted under the ESPP during the years ended December 31, 2020 was $1.64. The following table reflects assumptions used to calculate the fair value of stock purchase rights granted under the ESPP for the year ended December 31, 2020:


						2020
Employee Stock Purchase Plan
Risk-free interest rate						0.09% - 0.18%
Dividend yield						—%
Expected term (in years)						0.5
Expected stock price volatility						85.8% - 142.3%

2004 Equity Incentive Plan

The Company’s 2004 Equity Incentive Plan (2004 Plan) was adopted by the Board of Directors and approved by the shareholders in May 2004. The 2004 Plan provides for the grant to employees of the Company, including officers, of incentive stock options, and for the grant of non-statutory stock options to employees, directors and consultants of the Company. The number of shares authorized under the 2004 Plan was 3,612,500 shares and there were no more shares available for future issuance at December 31, 2021.

Generally, the exercise price of all incentive stock options and non-statutory stock options granted under the 2004 Plan must be at least 100% and 80%, respectively, of the fair value of the common stock of the Company on the grant date. The term of incentive and non-statutory stock options may not exceed 10 years from the date of grant. An option shall be exercisable on or after each vesting date in accordance with the terms set forth in the option agreement. The right to exercise an option generally vests over four years at the rate of at least 25% by the end of the first year and then ratably in monthly installments over the remaining vesting period of the option.

The following tables reflects activity for the year ended December 31, 2021 under the 2004 Plan (dollar amounts in thousands):


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2020	30,875	$	25.71
Options granted	—	—
Options exercised	—	—
Options forfeited	—	—
Options expired	(10,875)	20.52
Options outstanding as of December 31, 2021	20,000	$	28.54	1.4	$	—
Options vested and expected as of vest at December 31, 2021	20,000	$	28.54	1.4	$	—
Options exercisable as of December 31, 2021	20,000	$	28.54	1.4	$	—

There were no restricted stock units granted under the 2004 Equity Incentive Plan.

2014 Omnibus Incentive Plan

The Company’s 2014 Omnibus Incentive Plan (2014 Plan) was adopted by the Board of Directors and approved by the shareholders in May 2014, and subsequently amended and restated in June 2020 (2014 Amended Plan). The 2014 Amended Plan provides for the grant of stock options, stock appreciation rights, stock awards, cash awards and performance award to the employees, non-employee directors and consultants of the Company. Shares available for grant under the 2014 Amended Plan were increased during the year ended December 31, 2020 by 3,250,000 shares. The number of shares authorized under the 2014 Amended Plan is 7,195,000 shares, of which 52,317 were available for future issuance at December 31, 2021.

Incentive Stock Options

Generally, the exercise price of all incentive stock options and non-statutory stock options granted under the 2014 Amended Plan must be the fair value of the common stock of the Company on the grant date. The term of incentive and non-statutory stock options may not exceed 10 years from the date of grant. An option shall be exercisable on or after each vesting date in accordance with the terms set forth in the option agreement. The right to exercise an option generally vests over three years at rate of 33% annually or four years at the rate of at least 25% by the end of the first year and then ratably in monthly installments over the remaining vesting period of the option.

The following table reflects option activity for the year ended December 31, 2021 under the 2014 Amended Plan (dollar amounts in thousands):


	Number of Shares	Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2020	232,956	$	36.18
Options granted	2,100,000	1.31
Options exercised	—	—
Options forfeited	(259)	25.73
Options expired	(128,856)	44.84
Options outstanding as of December 31, 2021	2,203,841	$	2.45	9.8	$	1,827
Options vested and expected to vest as of December 31, 2021	2,203,841	$	2.45	9.8	$	1,827
Options exercisable as of December 31, 2021	103,841	$	25.46	6.5	$	—

Restricted Stock Units

The following table reflects RSU activity for the year ended December 31, 2021 under the 2014 Amended Plan (dollar amounts in thousands):


	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term (in years)
Non-vested performance-based restricted stock units as of December 31, 2020	1,374,358	$	5.59
Granted	2,230,065	2.94
Vested	(707,515)	5.50
Forfeited	(275,305)	5.24
Non-vested restricted stock units as of December 31, 2021	2,621,603	$	3.40	1.1

RSUs generally vest over three or four years, with 33% or 25% of each award vesting annually, respectively. The total fair value of RSUs that vested during the years ended December 31, 2021 and 2020 was $1.7 million and $1.1 million, respectively.

Performance-based Restricted Stock Units

The PSU awards are measured exclusively to the relative total shareholder return (TSR) performance, which is measured against the three-year TSR of a custom index of companies. The actual number of shares awarded is adjusted to between zero and 200% of the target award amount based upon achievement in each of the three independent successive one-year tranches. TSR relative to peers is considered a market condition under applicable authoritative guidance. For PSUs granted with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo model, and expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied. The Monte Carlo valuation model considers a variety of potential future share prices for Assertio and its peer companies in a selected market index. The recipients of the PSU awards will have voting rights and the right to receive a dividend, if applicable, once the underlying shares have been issued. No PSUs were granted during the years ended December 31, 2021 and 2020. The total fair value of PSUs that vested during the year ended December 31, 2021 was $0.1 million and no common shares subject to PSU vesting were issued during the year ended December 31, 2020.

The following table reflects PSU activity for the year ended December 31, 2021 under the 2014 Amended Plan (dollar amounts in thousands):


	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Non-vested performance-based restricted stock units as of December 31, 2020	226,461	$	32.93
Granted	—	—
Vested	(19,054)	41.37
Forfeited	(12,181)	41.37
Non-vested performance-based restricted stock units as of December 31, 2021	195,226	$	31.58	0.1	$	426

Zyla Life Sciences Amended and Restated 2019 Stock-Based Incentive Compensation Plan

The 2019 Zyla Plan was assumed in connection with the Zyla Merger, and pursuant to the Zyla Merger Agreement, each outstanding Zyla stock option was cancelled and converted into a stock option to purchase the Company’s Common Stock on the same terms and conditions with (1) the number of shares of Company Common Stock subject to each such option equal to (i) the number of shares of the common stock subject to the option multiplied by (ii) the Merger Exchange Ratio, which was 2.5, rounded, if necessary, to the nearest whole share and (2) an exercise price per share (rounded to the nearest whole cent) equal to the original exercise price of the Zyla stock option divided by (B) the Exchange Ratio. This resulted in the issuance of 1.3 million options with an average fair market value of $2.48 per share value, of which $0.4 million was recognized as merger consideration. The term of Zyla options may not exceed 10 years from the date of grant. An option shall be exercisable on or after each vesting date in accordance with the terms set forth in the option agreement. The right to exercise an option generally vests over three years at the rate of at least 33%, by the end of the first year and then ratably in monthly installments over the

remaining vesting period of the stock option. The number of shares authorized under the 2019 Zyla Plan is 1,246,469 shares and there were no more shares available for future issuance as of December 31, 2021

The following table reflects option activity for the year ended December 31, 2021 under the 2019 Zyla Plan (dollar amounts in thousands):


	Shares	Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2020	985,944	$	2.93
Options granted	—	—
Options exercised	(72,750)	2.40
Options forfeited	(402,296)	2.73
Options expired	(476,340)	2.73
Options outstanding as of December 31, 2021	34,558	3.23		7.0	—
Options vested and expected to vest as of December 31, 2021	34,558	3.23		7.0	—
Options exercisable as of December 31, 2021	25,029	3.23		6.6	54

There were no restricted stock units granted under the 2019 Zyla Plan.