NOTE

13.

Equity Incentive Plans

Prior to the Merger, Private Vaxart issued equity awards for compensation purposes to employees, directors and consultants under the Company's

2007

Equity Incentive Plan (the

“2007

Plan”). The

2007

Plan expired in

July 2017

and

further awards

may

be made under the

2007

Plan. Each outstanding stock option to acquire shares of Private Vaxart stock, whether vested or unvested, was assumed in the Merger after adjustment for the impact of the Conversion and the Reverse Stock Split.

November 2016,

Aviragen's stockholders approved the

2016

Equity Incentive Plan (

“2016

Plan”), under which all outstanding awards under their previous plans became available for issuance under the

2016

Plan if such awards are forfeited or otherwise terminated. Under the

2016

Plan, the Company was authorized to issue incentive stock options (“ISOs”), non-qualified stock options (“NQSOs”), restricted stock (“RSAs”) and restricted stock units (“RSUs”). Awards have a maximum term of

ten

years from the grant date and vest over varying periods, as specified by the Company's board of directors for each grant. Following stockholder approval of the

2019

Equity Incentive Plan (the

“2019

Plan”),

further awards are available for grant under the

2016

Plan.

April 23, 2019,

the Company's stockholders approved the adoption of the

2019

Plan, under which the Company is authorized to issue ISOs, NQSOs, stock appreciation rights, RSAs, RSUs, other stock awards and performance awards that

may

be settled in cash, stock, or other property. The

2019

Plan is designed to secure and retain the services of employees, directors and consultants, provide incentives for the Company's employees, directors and consultants to exert maximum efforts for the success of the Company and its affiliates, and provide a means by which employees, directors and consultants

may

be given an opportunity to benefit from increases in the value of the Company's common stock.

The aggregate number of shares of common stock authorized for issuance under the

2019

Plan was initially

1,600,000

shares, which was increased through an amendment to the

2019

Plan adopted by the Company's stockholders on

June 8, 2020,

8,000,000

(the “Plan Amendment”), subject to standard adjustments in the event of a stock split, stock dividend or other extraordinary dividend, or other similar change in the Company's common stock or capital structure. Further amendments to the

2019

Plan to increase the share reserve would require stockholder approval. Awards that expire or are canceled generally become available for issuance again under the

2019

Plan. Awards have a maximum term of

ten

years from the grant date and

may

vest over varying periods, as specified by the Company's board of directors for each grant.

A summary of stock option transactions in each of the

three

years ended

December 31, 2020

, is as follows:

							Weighted
	Shares			Number of			Average
	Available			Options			Exercise
	For Grant			Outstanding			Price

Balance at January 1, 2018		—			304,850		$	9.50
Assumed on consummation of Merger		291,102			627,106		$	26.33
Granted		(431,100	)		431,100		$	5.17
Exercised		—			(2,013	)	$	6.49
Forfeited		71,500			(89,903	)	$	5.90
Canceled		269,148			(405,977	)	$	34.64

Balance at December 31, 2018		200,650			865,163		$	8.13

Authorized under 2019 Plan on Adoption		1,600,000			—		$	—
Removed from 2016 Plan		(223,389	)		—		$	—
Granted		(1,791,030	)		1,791,030		$	0.67
Forfeited		483,849			(592,528	)	$	1.57
Canceled		25,100			(252,013	)	$	9.25

Balance at December 31, 2019		295,180			1,811,652		$	2.74

Authorized under 2019 Plan Amendment		6,400,000			—		$	—
Granted		(5,579,800	)		5,579,800		$	2.66
Exercised		—			(414,676	)	$	1.45
Forfeited		105,910			(105,992	)	$	1.65
Canceled		9,573			(57,751	)	$	10.57

Balance at December 31, 2020		1,230,863			6,813,033		$	2.70

As of

December 31, 2020

, there were

6,813,033

options outstanding with a weighted average exercise price of

$2.70,

a weighted average remaining term of

8.99

years and an aggregate intrinsic value of

$22.5

million. Of these options,

6,502,213

were expected to vest, with a weighted average exercise price of

$2.68,

a weighted average remaining term of

8.97

years and an aggregate intrinsic value of

$21.6

million. Of these,

2,886,541

were vested, with a weighted average exercise price of

$2.65,

a weighted average remaining term of

8.65

years and an aggregate intrinsic value of

$9.9

million.

The aggregate intrinsic value represents the total pre-tax value (i.e., the difference between the Company's stock price and the exercise price) of stock options outstanding as of

December 31, 2020

, based on our common stock closing price of

$5.71,

which would have been received by the option holders had all their in-the-money options been exercised as of that date.

The intrinsic value of options exercised in the year ended

December 31, 2020

, was

$2.2

million. There were

options exercised in the year ended

December 31, 2019

. The intrinsic value of options exercised in the year ended

December 31, 2018,

was

zero

March 2020,

the Company granted

411,000

performance-based restricted stock unit (“PRSU”) awards to employees which would vest upon the achievement of certain performance conditions by

December 31, 2020,

subject to each employee's continued service relationship with the Company. The related compensation cost, based on the grant date fair value of the Company's common stock of

$1.70

multiplied by the number of PRSUs granted, was recognized as an expense ratably over the estimated vesting period when achievement of the performance condition was considered probable. Based on the Company's evaluation of the probability of achieving the performance condition as of

September 30, 2020,

the Company recognized

$632,000

of related expense during the

nine

months ended

September 30,

2020.

As of

December 31, 2020,

the performance condition had

not

been achieved so these

411,000

PRSUs were canceled and the expense was reversed.

March 24, 2020,

the board of directors of the Company approved the grant of an aggregate of

2,610,000

options with an exercise price of

$1.70

per share (the closing price of the Company's common stock on

March 24, 2020) (

the

“March

Option Awards”), which vests as to

25%

of the underlying shares of common stock on the date of grant and thereafter in

twenty-four

(

) equal monthly installments from

May 1, 2020

until

April 1, 2022;

provided that the stock options were

not

exercisable until the approval by the stockholders of the Plan Amendment. On

June 8, 2020,

the stockholders approved the Plan Amendment and at such time the

March

Option Awards became exercisable, subject to the vesting schedule noted previously.

June 15, 2020,

the Company awarded

900,000

performance-based options and

845,280

time-based options with an exercise price of

$2.46

per share (the closing price of the Company's common stock on the grant date) to its new Chief Executive Officer. Vesting of the time-based options will be as follows:

25%

on the

first

anniversary of the grant date and

75%

in equal monthly installments over the

three

-year period commencing on such

first

anniversary, with accelerated vesting with respect to

50%

of any then-unvested option shares upon a substantial strategic agreement, as determined by the Board, and with accelerated vesting in full in the event of a “Change in Control” (as defined under the

2019

Plan).

Vesting of the performance-based options would occur if the Company achieved a specified closing price during any

ten

consecutive trading days by

November 30, 2020,

with

one

third

based on a closing price of

$5.00,

one

third

based on a closing price of

$7.50

and

one

third

based on a closing price of

$10.00,

subject to continuing employment. Utilizing a Monte Carlo Simulation and assumptions of the fair value of Common Stock of

$2.46,

estimated volatility of

105%,

a risk-free interest rate of

0.35%,

zero

dividend rate and an expected term of

5.23

years, the Company determined the weighted average fair value of these options on the issuance date to be

$0.31

per share, or

$279,000,

which was initially being expensed over the estimated vesting term, assuming vesting occurs by

November 30, 2020,

for each tranche. The tranches based on closing prices of

$5.00,

$7.50

and

$10.00

vested on

July 9, 2020,

July 20, 2020

and

July 24, 2020,

respectively, so the unamortized balance as of

June 30, 2020,

was expensed in the

three

months ended

September 30, 2020.

Excluding these performance-based options, the weighted average grant date fair value of options awarded in the years ended

December 31, 2020,

2019

and

2018

, was

$2.49,

$0.48

and

$3.59,

respectively. Fair values were estimated using the following assumptions:

	Year Ended December 31,
	2020	2019	2018

Risk-free interest rate	0.40% - 0.88%	1.68% - 2.31%	2.79% - 2.80%
Expected term (in years)	5.22 - 10.00	5.39 - 10.00	5.84 - 6.05
Expected volatility	94% - 111%	83% - 85%	78% - 80%
Dividend yield	—%	—%	—%

The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards, net of estimated forfeitures, to compensation expense over the service period. Total stock-based compensation recognized for options was as follows (in thousands):

	Year Ended December 31,
	2020		2019		2018

Research and development	$	1,563	$	253	$	254
General and administrative		2,795		374		285
Total stock-based compensation	$	4,358	$	627	$	539

As of

December 31, 2020

, the unrecognized stock-based compensation cost related to outstanding stock options that are expected to vest was

$8.2

million, which the Company expects to recognize over an estimated weighted average period of

2.31

years.