Equity-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

We maintain three equity-based incentive compensation plans, the 2016 Equity Incentive Plan, the 2007 Equity Incentive Plan, and the Modigene Inc. 2007 Equity Incentive Plan that provide for grants of stock options and restricted stock to our directors, officers, key employees and certain outside consultants. Equity awards granted under our 2016 Equity Incentive Plan are exercisable for a period of up to 10 years from the date of grant. Equity awards granted under our 2007 Equity Incentive Plan are exercisable for a period of either 7 years or 10 years from the date of grant. Equity awards granted under the Modigene plan are exercisable for a period of up to 10 years from date of grant. Vesting periods range from immediate to 5 years. We currently grant equity awards under the 2016 Equity Incentive Plan only.

We classify the cash flows resulting from the tax benefit that arises when the tax deductions exceed the compensation cost recognized for those equity awards (excess tax benefits) as cash flows from operations. There were no excess tax benefits for the years ended December 31, 2022, 2021, and 2020.

Valuation and Expense Information

We recorded equity-based compensation expense of $18.5 million, $13.6 million and $8.9 million for the years ended December 31, 2022, 2021, and 2020, respectively, all of which were reflected as operating expenses. Of the $18.5 million of equity based compensation expense recorded for the year ended December 31, 2022, $12.3 million was recorded as selling, general and administrative expenses, $3.8 million was recorded as research and development expenses and $2.4 million was recorded as a cost of revenue. Of the $13.6 million of equity based compensation expense recorded for the year ended December 31, 2021, $10.4 million was recorded as selling, general and administrative expense, $1.9 million was recorded as research and development expenses and $1.3 million was recorded as a cost of revenue. Of the $8.9 million of equity based compensation expense recorded for the year ended December 31, 2020, $6.8 million was recorded as selling, general and administrative expense, $1.8 million was recorded as research and development expenses and $0.3 million was recorded as cost of revenue.

As of December 31, 2022, there was $23.1 million of unrecognized compensation cost related to the equity awards granted under our equity-based incentive compensation plans. Such cost is expected to be recognized over a weighted-average period of approximately 1.80 years.

Stock Options

We estimate the fair value of each stock option on the date of grant using the Black-Scholes-Merton Model option-pricing formula and amortize the fair value to expense over the stock option’s vesting period using the straight-line attribution approach. We account for forfeitures as they occur and apply the following assumptions in our Black-Scholes-Merton Model option-pricing formula:


	Year Ended December 31, 2022	Year Ended December 31, 2021	Year Ended December 31, 2020
Expected term (in years)	3.74 - 10.0	3.75 - 10.0	4.0 - 10.0
Risk-free interest rate	1.71% - 4.02%	0.34% - 1.34%	0.16% - 1.41%
Expected volatility	58.63% - 78.52%	58% - 78.94%	56% - 76%
Expected dividend yield	0%	0%	0%

Expected Term: For the expected term of options grants, we used an estimate of the expected option life based on historical experience.

Risk-Free Interest Rate: The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the option.

Expected Volatility: The expected volatility for stock options was based on the historical volatility of our Common Stock.

Expected Dividend Yield: We do not intend to pay dividends on Common Stock for the foreseeable future. Accordingly, we used a dividend yield of zero in the assumptions.

We maintain incentive stock plans that provide for the grants of equity awards to our directors, officers, employees and non-employee consultants. As of December 31, 2022, there were 8,675,694 shares of Common Stock reserved for issuance under our equity-based incentive plans. We intend to issue new shares upon the exercise of stock options. Stock options granted under these plans were granted at an option exercise price equal to the closing market value of the Common Stock on

the applicable date of the grant. Stock options granted under these plans to employees typically become exercisable over four years in equal annual installments after the date of grant, and stock options granted to non-employee directors become exercisable in full one-year after the grant date, subject to, in each case, continuous service with us during the applicable vesting period. We assumed stock options to grant Common Stock as part of the mergers with Acuity Pharmaceuticals, Inc., Froptix, Inc., OPKO Biologics and BioReference, which reflected various vesting schedules, including monthly vesting to employees and non-employee consultants.

A summary of option activity under our stock option plans as of December 31, 2022, and the change during the year is presented below:


Options	Number of options	Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2021	46,805,766	$	6.13	6.54	$	39,626
Granted	4,125,176	$	2.99
Exercised	(211,187)	$	2.34
Forfeited	(2,501,698)	$	4.01
Expired	(2,130,416)	$	7.80
Outstanding at December 31, 2022	46,087,641	$	5.90	5.32	$	—
Vested and expected to vest at December 31, 2022	46,087,641	$	5.90	5.32	$	—
Exercisable at December 31, 2022	33,747,590	$	6.78	4.22	$	—

A summary of restricted stock unit activity as of December 31, 2022, and the change during the year is presented below:


Restricted stock units	Number of shares	Weighted average fair value		Weighted average remaining contractual term (years)	Aggregate intrinsic value (in thousands)
Unvested at December 31, 2021	661,376	$	3.78	0.00	$	3,181
Granted	3,386,579	$	3.11
Actual vested	(1,599,212)	$	3.44
Unvested and expected to vest at December 31, 2022	2,448,743	$	3.07	9.39	$	3,061

The total intrinsic value of stock options exercised for the years ended December 31, 2022, 2021, and 2020 was $0.2 million, $0.8 million and $0.4 million, respectively.

The weighted average grant date fair value of stock options granted for the years ended December 31, 2022, 2021, and 2020 was $1.29, $2.62, and $1.39, respectively. The weighted average grant date fair value of restricted stock units granted for the years ended December 31, 2022, 2021, and 2020 was $3.11, $3.78 and $0.00, respectively.

The total fair value of stock options vested during the years ended December 31, 2022, 2021, and 2020 was $17.7 million, $8.1 million and $10.6 million, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2022, 2021, and 2020 was $5.5 million, $0.0 million and $0.0 million, respectively.

During the year ended December 31, 2022, we modified the terms of certain outstanding stock options for 95 grantees, including options issued to GeneDx employees, to accelerate the vesting period of the stock options. For the year ended December 31, 2022, we recognized additional equity-based compensation expense of $7.1 million as a result of the stock option modifications.