STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Equity Incentive Plans During 2013, the Company adopted an equity compensation plan, the 2013 Equity Incentive Plan, or 2013 Plan, for eligible employees, officers, directors, advisors, and consultants. The 2013 Plan provided for the grant of incentive and non-statutory stock options. In June 2018, the Company's Board of Directors and stockholders approved the 2018 Equity Incentive Plan, or 2018 Plan. Any shares of common stock covered by awards granted under the 2013 Plan that terminated after June 22, 2018 by expiration, forfeiture, or cancellation were added to the 2018 Plan reserve and shares available for future issuance under the 2013 Plan were canceled. In 2020, the Company’s Board of Directors approved a plan to issue up to 5,000,000 shares of the Company’s common stock, or 2020 Inducement Plan, as an incentive to hiring key personnel. As of December 31, 2021, no shares of common stock have been issued under the 2020 Inducement Plan. The initial number of shares of common stock available for issuance under the 2018 Plan was 4,000,000. Unless our Board of Directors provides otherwise, beginning on January 1, 2019 and continuing until the expiration of the 2018 Plan, the total number of shares of common stock available for issuance under the 2018 Plan will automatically increase annually on January 1 by the lesser of (i) 3,200,000 shares of Common Stock, (ii) 4% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year and (iii) an amount determined by the Board of Directors. Under the 2018 Plan, any shares that are forfeited or expired are added back to the shares available for issuance. In the year ended December 31, 2021, the number of shares of common stock reserved for issuance under the 2018 Plan was increased by 2,008,431 shares. As of December 31, 2021, 1,329,921 shares of common stock were available for future issuance of stock options and restricted stock and other stock-based awards under the 2018 Plan. The terms of the stock option agreements, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the plans. Generally, stock options granted by the Company vest over a period of one The 2013 Plan provides for early exercise where the stock option holders may exercise their stock options prior to vesting. Under the 2018 Plan, early exercise of stock options may be allowed on a grant by grant basis. Common stock that is issued upon the early exercise of options is subject to repurchase by the Company at the original exercise price at the option of the Company until the vesting date of the stock options. As of December 31, 2021, and 2020, no shares of the Company's common stock were subject to repurchase. Stock Option Exchange Program On July 16, 2021, the Company commenced a tender offer to its employees, excluding executive officers, to exchange eligible stock options for replacement stock options with modified terms, or Exchange Offer. Pursuant to the Exchange Offer, the Company offered employees who held outstanding stock options under the 2018 Plan with an exercise price equal to or greater than $20.00 per share, or Eligible Options, the opportunity to tender each Eligible Option in exchange for a new replacement stock option with modified terms, or New Options. The Exchange Offer expired on August 12, 2021. Pursuant to the Exchange Offer, employees elected to exchange outstanding stock options to purchase an aggregate of 1,419,182 shares of common stock for New Options to purchase 621,406 shares of common stock. The New Options have an exercise price of $3.88 per share, which was the closing price per share of the Company’s common stock on the grant date of August 16, 2021. As a result, 797,776 shares of common stock returned to the 2018 Plan reserve and became available for future issuance under the 2018 Plan. Each New Option granted in exchange for a vested option will vest in full on the one-year anniversary following the grant date of the New Option. Each New Option granted in exchange for an unvested option will vest one-third on the one-year anniversary following the grant date of the New Option and followed by equal monthly installments over the remaining two-year period. Each New Option has a maximum term of seven years and was granted as a nonqualified stock option under the 2018 Plan. The exchange of stock options was treated as a modification for accounting purposes. The incremental expense of $0.3 million for the New Options was calculated using the Black-Scholes option pricing model and will be recognized over the new service period. The unamortized expense remaining on the exchanged options as of the modification date of August 16, 2021, will continue to be recognized over the remainder of the original requisite service period. The following table summarizes stock option activity under the 2013 Plan and the 2018 Plan for the year ended December 31, 2021. Shares Weighted- Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (thousands) Balance at December 31, 2020 8,030,415 $ 19.25 7.1 $ 10,137 Granted 4,792,580 6.71 Granted due to Exchange Offer 621,406 3.88 Exercised (282,628) 1.31 Forfeited or canceled (951,406) 25.82 Cancelled due to Exchange Offer (1,419,182) 30.25 Balance at December 31, 2021 10,791,185 11.24 7.7 $ 30,694 Vested and expected to vest at December 31, 2021 10,225,651 11.31 7.8 $ 29,529 Exercisable at December 31, 2021 4,919,378 16.28 6.6 $ 14,372 In the year ended December 31, 2018, the Company began to issue restricted stock units, or RSUs, to directors under the 2018 Plan. Awards granted to directors vest on the earlier of the one-year anniversary of the award's date of grant or the date of the Company’s next annual meeting of stockholders that occurs following the date of grant. During the year ended December 31, 2020, the Company granted RSUs to certain employees as retention awards which vested on December 31, 2021. The RSUs that vested in 2021 were net share settled, such that the Company withheld shares with a value equivalent to the employees' obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The Company withheld 21 thousand shares for the year ended December 31, 2021 based on the value of the RSUs on their respective vesting dates as determined by the Company's closing stock price. The following table summarizes RSU activity under the 2018 Plan for the year ended December 31, 2021. Shares Weighted- Unvested balance at December 31, 2020 90,020 $ 16.88 Granted 108,012 5.17 Vested (96,614) 16.13 Forfeited (3,000) 11.71 Unvested balance at December 31, 2021 98,418 4.92 The total vest date fair value of RSUs vested in the years ended December 31, 2021 and 2020 were $0.7 million and $0.4 million, respectively. Employee Stock Purchase Plan In June 2018, the Company's Board of Directors and stockholders approved the Tricida Inc. ESPP. The ESPP allows eligible employees to have up to 15.0% of their eligible compensation withheld and used to purchase common stock, subject to a maximum of $25,000 worth of stock purchased in a calendar year or no more than 2,500 shares in an offering period, whichever is less. An offering period consisted of a six-month purchase period, with a look back feature to our stock price at the commencement of the offering period. Eligible employees could purchase the Company’s common stock at the end of the offering period at 85% of the lower of the closing price of the Company's common stock on The Nasdaq Global Select Market on the first and last days of the offering periods. In June 2021, the Compensation Committee of the Company's Board of Directors approved modifications to the ESPP, including extending the offering period from six months to 24 months with four six-month purchase periods within each offering period, adjusted the purchase dates from June 30 and December 31 of each calendar year to May 31 and November 30, respectively and increased the maximum number of shares available for purchase during each purchase period to 10,000. The initial number of shares of common stock available for issuance under the ESPP, was 800,000. Unless the Company's Board of Directors provides otherwise, beginning on January 1, 2019, the maximum number of shares which shall be made available for sale under the ESPP will automatically increase on the first trading day in January of each calendar year during the term of the ESPP by an amount equal to the lesser of (i) 1.0% of the total number of shares issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 800,000 shares or (iii) an amount determined by the Board of Directors. In the year ended December 31, 2021, the number of shares of common stock reserved for issuance under the ESPP was increased by 502,107 shares. The Company issued 128,214 shares under the ESPP, representing approximately $0.5 million in employee contributions, for the year ended December 31, 2021. As of December 31, 2021, there were 1,979,016 shares of common stock were available for future issuance under the ESPP. Performance Awards In August 2019, the Company granted 594,000 stock options under its 2018 Plan with a performance-based milestone with graded vesting over 18 months. In September 2020, the Company granted 868,500 stock options under the 2018 Plan with performance-based milestones vesting over the estimated service period required to meet the performance-based targets. In January 2021, the Company granted 1,541,102 stock options under the 2018 Plan with performance-based milestones vesting over the estimated service period required to meet the performance-based targets. Compensation expense for performance-based awards is recorded over the estimated service period when the performance conditions are deemed probable of achievement. Stock Option Valuation Assumptions As stock-based compensation recognized is based on options ultimately expected to vest, the expense has been reduced for estimated forfeitures. The Company uses the Black-Scholes option pricing model to determine the estimated fair value of stock options at the date of the grant. The Black-Scholes model requires the input of subjective assumptions, including expected term, expected volatility, risk-free rate of return, expected dividend yield and the estimated fair value of the underlying common stock on the date of grant. Expected Term: The expected term of the options represents the average period the stock options are expected to remain outstanding. As the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the expected term of options granted is derived from the average midpoint between the weighted average vesting term and the contractual term, also known as the simplified method. Expected Volatility: Beginning in the fourth fiscal quarter of 2019, expected volatility is estimated using a weighted-average historical volatility for our common stock and the historical volatility of the common stock of a representative group of comparable publicly traded companies over a period equal to the expected term of the stock option grants. Prior to the fourth fiscal quarter of 2019, since the Company did not have sufficient trading history for its common stock, the expected volatility was based on the historical volatility of the common stock of comparable publicly traded companies. The Company selected companies with comparable characteristics, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the Company's stock-based awards. Risk-Free Interest Rate: The risk-free interest rate is based on the yield of U.S. Treasury notes as of the grant date with terms commensurate with the expected term of the option. Expected Dividends: The expected dividends assumption is based on the Company’s expectation of not paying dividends in the foreseeable future. The fair value of the stock options granted for the years ended December 31, 2021 and 2020 was calculated with the following assumptions. Years Ended December 31, 2021 2020 Risk-free interest rate 0.6 % 0.8 % Expected volatility 76.5 % 68.6 % Expected term (in years) 5.4 5.8 Expected dividends — % — % The following table summarizes the weighted-average fair value per share of stock options granted and the total intrinsic value of stock options exercised for the years ended December 31, 2021 and 2020. Years Ended December 31, (in thousands, except per share amounts) 2021 2020 Stock options granted - weighted-average grant date fair value per share $ 4.32 $ 16.21 Stock options exercised - intrinsic value 1,565 7,405 Stock-Based Compensation The following table presents stock-based compensation expense as reported in the Company’s statements of operations and comprehensive loss for the years ended December 31, 2021 and 2020. Years Ended December 31, (in thousands) 2021 2020 Research and development $ 10,763 $ 10,966 General and administrative 15,119 17,332 Total $ 25,882 $ 28,298 As of December 31, 2021, there was approximately $39.8 million of unrecognized stock-based compensation associated with stock options which the Company expects to recognize over a weighted-average period of 2.1 years. As of December 31, 2021, there was approximately $0.2 million of unrecognized stock-based compensation associated with RSUs which the Company expects to recognize over a weighted-average period of 0.4 years. |