STOCK-BASED COMPENSATION | Note 12 – Stock-based Compensation 2019 Equity Incentive Plan Effective as of November 18, 2019, the Company adopted the 2019 Omnibus Incentive Plan (“2019 Plan”) administered by the Board. The 2019 Plan provides for the issuance of incentive stock options, non-statutory stock options, and restricted stock awards, for the purchase of up to a total of 4,000,000 shares of the Company’s common stock to employees, directors, and consultants and replaces the previous plan. The Board or a committee of the Board has the authority to determine the amount, type, and terms of each award. The options granted under the 2019 Plan generally have a contractual term of ten years and a vesting term of four years with a one-year cliff. The exercise price for options granted under the 2019 Plan must generally be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board. The incentive stock options granted under the 2019 Plan to 10% or greater stockholders must have an exercise price at least equal to 110% of the fair value of the Company’s common stock at the date of grant, as determined by the Board, and have a contractual term of ten years. In connection with the closing of the IPO, effective as of March 25, 2021 the 2019 Plan was amended and restated as a result of which the aggregate number of shares of common stock that may be issued pursuant to the 2019 Plan was increased from 6,000,000 to 7,400,000. On April 15, 2022, the Board approved, subject to stockholder approval, an increase in the aggregate number of shares of common stock that may be issued pursuant to the 2019 Plan from 7,400,000 to 13,400,000. On June 21, 2022, the stockholders approved this increase. As of December 31, 2022, the Company had 5,424,815 shares available for future grant under the 2019 Plan. 2021 Employment Inducement Plan On September 15, 2021 the Company’s Board adopted the Movano, Inc. 2021 Inducement Award Plan (the “Inducement Plan”) without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules (“Rule 5635(c)(4)”). In accordance with Rule 5635(c)(4), awards under the Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s Board, or an employee who is being rehired following a bona fide period of non-employment by the Company or a subsidiary, as a material inducement to the employee’s entering into employment with the Company or its subsidiary. An aggregate of 2,000,000 shares of the Company’s common stock have been reserved for issuance under the Inducement Plan. As of December 31, 2022, the Company had 1,286,250 shares available for future grant under the Inducement Plan. Stock Options Stock option activity for the years ended December 31, 2022 and 2021 was as follows (in thousands, except share, per share, and remaining life data): Number of Weighted Weighted Intrinsic Outstanding at December 31, 2020 3,188,011 $ 0.66 9.0 years $ 8,155 Granted 2,684,500 $ 4.05 Exercised (134,541 ) $ 0.56 Cancelled (145,833 ) $ 0.59 Outstanding at December 31, 2021 5,592,137 $ 2.29 8.6 years $ 9,912 Granted 2,525,000 $ 2.77 Exercised (77,000 ) $ 0.40 Cancelled (1,120,243 ) $ 3.15 Outstanding at December 31, 2022 6,919,894 $ 2.34 8.2 years $ 2,034 Exercisable as of December 31, 2022 3,762,779 $ 1.74 7.7 years $ 1,826 Vested and expected to vest as of December 31, 2022 6,769,694 $ 2.32 8.2 years $ 1,988 The weighted-average grant date fair value of options granted during the years ended December 31, 2022, and 2021 was $1.48 and $2.54 per share, respectively. During the years ended December 31, 2022 and 2021, 77,000 and 134,531 options were exercised for proceeds of $31,000 and $0.1 million, respectively. The fair value of the 1,707,794 and 839,380 options that vested during the years ended December 31, 2022 and 2021 was approximately $3.2 million and $0.7 million, respectively. On June 21, 2022, the Company granted an award of 100,000 options to the Company’s founder at an exercise price of $5.00 per share. The options will vest in full upon the shipment of 20,000 product units on or before June 30, 2023. If the shipments have not occurred by June 30, 2023, the options will be cancelled and forfeited. For year ended December 31, 2022, the Company has not recognized stock compensation expense of approximately $0.1 million related to this award as the successful achievement of the performance conditions is not yet probable. The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of the stock options was estimated using the following weighted average assumptions for the years ended December 31, 2022 and 2021. Year Ended December 31, 2022 2021 Dividend yield — % — % Expected volatility 61.97 % 66.38 % Risk-free interest rate 2.78 % 0.93 % Expected life 6.07 years 6.05 years Dividend Rate Expected Volatility Risk-Free Interest Rate Expected Term Forfeiture Rate The Company has recorded stock-based compensation expense for the years ended December 31, 2022 and 2021 related to the issuance of stock option awards to employees and nonemployees in the consolidated statement of operations and comprehensive loss as follows: Year Ended December 31, 2022 2021 Research and development $ 1,169 $ 716 Sales, general and administrative 1,927 1,138 $ 3,096 $ 1,854 As of December 31, 2022, unamortized compensation expense related to unvested stock options was approximately $6.6 million, which is expected to be recognized over a weighted average period of 2.6 years. |