Xtant Medical Holdings, Inc. Stock Compensation Disclosure

(12) Stock-Based Compensation

 

Xtant Medical Holdings, Inc. 2023 Equity Incentive Plan

 

On July 26, 2023, our stockholders approved and adopted the Xtant Medical Holdings, Inc. 2023 Equity Incentive Plan (the “2023 Plan”), which replaced the Xtant Medical Holdings, Inc. 2018 Equity Incentive Plan (as amended and restated, the “2018 Plan”) with respect to future grants of equity awards, although the 2018 Plan continues to govern equity awards granted under the 2018 Plan. The 2023 Plan permits the Board of Directors, or a committee thereof, to grant to eligible employees, non-employee directors, and consultants of the Company non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards. The Board of Directors may select 2023 Plan participants and determine the nature and amount of awards to be granted. The maximum number of shares of our common stock available for issuance under the 2023 Plan, subject to adjustment pursuant to the terms of the 2023 Plan, is (i) 5,500,000 shares of common stock; (ii) 7,695,812 shares of common stock remaining available for issuance under the 2018 Plan but not subject to outstanding awards under the 2018 Plan as of July 26, 2023; and (iii) up to 6,686,090 shares of common stock subject to awards outstanding under the 2018 Plan as of July 26, 2023 but only to the extent such awards are subsequently forfeited, cancelled, expire, or otherwise terminate without the issuance of such shares of common stock after such date. As of December 31, 2024, 5,618,848 shares remained available for grant under the 2023 Plan. Under the 2023 Plan, shares of our common stock related to awards granted under the plan that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of the shares become available again for grant under the plan.

 

Total stock-based compensation expense recognized for employees and directors was $4.1 million and $2.7 million for the years ended December 31, 2024 and 2023, respectively, and was recognized as general and administrative expense.

 

Stock Options

 

Stock options granted under the 2023 Plan may be either incentive stock options to employees, as defined in Section 422A of the Internal Revenue Code of 1986, or non-qualified stock options. The exercise price of all stock options granted under the 2023 Plan must be at least equal to the fair market value of the shares of common stock on the date of the grant. The 2023 Plan is administered by the Board. Stock options granted under the 2023 Plan are generally not transferable, vest in installments over the requisite service period, and are exercisable during the stated contractual term of the option only by the optionee.

 

 

Stock option activity, including options granted under the 2023 Plan, the 2018 Plan and the prior plan was as follows:

 Schedule of Stock Options Activity

		2024												2023
		Shares				Weighted Average Exercise Price				Weighted Average Remaining Contract Term (years)				Shares				Weighted Average Exercise Price				Weighted Average Remaining Contract Term (years)
Outstanding at January 1			4,875,828				1.31								3,360,664				1.51
Granted			—				—								1,602,013				1.16
Exercised			(19,858	)			0.64								—				—
Cancelled or expired			(930,567	)			1.38								(86,849	)			6.58
Outstanding at December 31			3,925,403				1.29				6.64				4,875,828				1.31				7.97
Exercisable at December 31			2,947,725				1.36				6.08				2,116,957				1.51				6.93

 

As of December 31, 2024, total compensation expense related to unvested employee stock options not yet recognized was $0.9 million, which is expected to be allocated to expenses over a weighted-average period of 2.4 years. The weighted average grant date fair value of options granted during the year ended December 31, 2023 was $0.99. The was no intrinsic value associated with options exercisable at December 31, 2024. The estimated fair value of stock options granted is determined using the Black-Scholes-Merton method applied to individual grants. There were no stock options granted during the year ended December 31, 2024. Key assumptions used to estimate the fair value of stock options granted during the year ended December 31, 2023 are as follows:

 Schedule of Assumptions of Stock Option Granted

Risk free interest rate			4.3	%
Dividend yield			0	%
Expected term			6.2 years
Expected volatility			111	%

 

Deferred Stock Units and Restricted Stock Units

 

Under our non-employee director compensation program, non-employee directors may elect to receive deferred stock units, or DSUs, in lieu of their annual restricted stock units, or RSUs, which awards are typically granted on August 15^th of each year. Each RSU or DSU represents the right to receive one share of our common stock. DSU and RSU activity for awards granted under the 2023 Plan and 2018 Plan was as follows:

 Schedule of Restricted Stock Activity

		2024								2023
		Shares				Weighted Average Fair Value at Grant Date Per Share				Shares				Weighted Average Fair Value at Grant Date Per Share
Outstanding at January 1			3,524,675				1.07				3,612,433				0.88
Granted			4,195,363				0.84				1,942,614				1.15
Vested			(1,310,937	)			1.13				(1,536,251	)			0.90
Cancelled			(953,629	)			0.92				(494,121	)			0.54
Outstanding at December 31			5,455,472				0.90				3,524,675				1.07

 

Total compensation expense related to unvested DSUs and RSUs not yet recognized was $5.1 million as of December 31, 2024, which is expected to be allocated to expenses over a weighted-average period of 2.5 years.

 

 

Performance Stock Units

 

During 2024, the Company began awarding performance stock units, or PSUs, under the 2023 Plan to certain executive officers and key employees. The Company has awarded an aggregate of 1,894,985 PSUs, assuming target performance, and each PSU award can be earned and vested at the end of a three-year performance period based on the total stockholder return, or TSR, of the Company’s common stock price relative to a group of peer companies and subject to continued service to the Company. The number of shares of the Company’s common stock to be issued upon vesting and settlement of the PSUs range from 0% to 200% of the target number of shares underlying the award, depending on the Company’s performance against the group of peer companies. The fair value of the PSUs was estimated using the Monte Carlo simulation model and the following assumptions: the volatility of the peer companies was unique to each company used in simulation, Company volatility of 93.34%, risk-free interest rate of 4.53%, correlation with index of 0.06, and dividend yield of 0%.

 

Activity for PSU awards granted under the 2023 Plan was as follows for the year ended December 31, 2024:

 Schedule of PSU Awards Activity

		2024
		Shares				Weighted Average Fair Value
Outstanding at January 1			—			$	—
Granted			1,894,985				1.49
Forfeited			(254,276	)			1.49
Vested			—				—
Outstanding at December 31			1,640,709			$	1.49

 

The total compensation cost related to unvested PSUs was $1.8 million as of December 31, 2024, which is expected to be allocated to expenses over a weighted-average period of 2.2 years.