| Equity | Note 11. Equity Equity Distribution Agreement On December 14, 2020, we entered into an Equity Distribution Agreement with Piper Sandler (the "Equity Distribution Agreement"). The Equity Distribution Agreement provides that, upon the terms and subject to the conditions set forth therein, we may issue and sell through Piper Sandler, acting as sales agent, shares of our common stock, $ 0.001 par value per share having an aggregate offering price of up to $ 50.0 million. This offering supersedes and replaces the program we commenced in December 2017. We have no obligation to sell any such shares under the Equity Distribution Agreement. The shares of common stock by Piper Sandler will be sold pursuant to a Registration Statement on Form S-3 which we filed on December 14, 2020. In the six months ended June 30, 2023 , the Company issued 730,913 shares of common stock at an average price of $ 2.26 under the Equity Distribution Agreement. We received $ 1.6 million in proceeds from the issuance of these shares. In the six months ended June 30, 2022 , the Company issued 78,285 shares of common stock at an average price of $ 5.75 under the Equity Distribution Agreement. We received $ 0.4 million in proceeds from the issuance of these shares. Lincoln Park Purchase Agreement On February 16, 2022, we entered into a Purchase Agreement ("2022 Purchase Agreement") and a Registration Rights Agreement with Lincoln Park (the "Registration Rights Agreement"). The 2022 Purchase Agreement and Registration Rights Agreement replaced our 2018 Purchase Agreement and Registration Rights Agreement with Lincoln Park. Under the 2022 Purchase Agreement, Lincoln Park committed to purchase up to $ 35.0 million of our common stock over a 36-month period commencing after the satisfaction of certain conditions, which are within our control, as set forth in the 2022 Purchase Agreement. The purchase price per share will be based on prevailing market prices; provided, however, that the prevailing market price is not below $ 1.00 . We agreed to and issued 99,276 shares of our common stock to Lincoln Park for no cash consideration as an initial fee for its commitment to purchase shares of our common stock under the 2022 Purchase Agreement. For the six months ended June 30, 2023 , we issued 300,000 shares of our common stock to Lincoln Park under the 2022 Purchase Agreement and we received $ 0.5 million in proceeds from issuance of these shares. We did no t issue any shares of our common stock for cash consideration to Lincoln Park under the 2022 Purchase Agreement in the six months ended June 30, 2022. Rights Plan On November 8, 2020, our Board of Directors (the "Board") approved and adopted a Rights Agreement (the "Rights Agreement"), dated as of November 8, 2020, by and between the Company and Broadridge Corporate Issuer Solutions, Inc., as rights agent, pursuant to which the Board declared a dividend of one preferred share purchase right (each, a "Right") for each outstanding share of the Company’s common stock held by stockholders as of the close of business on November 23, 2020. One Right also will be issued together with each Common Share issued by the Company after November 23, 2020, but before the Distribution Date (as defined below) (or the earlier redemption or expiration of the Rights) and, in certain circumstances, after the Distribution Date. When exercisable, each Right initially would represent the right to purchase from the Company one one-thousandth of a share of a newly-designated series of preferred stock , Series A Junior Participating Preferred Stock, par value $ 0.001 per share, of the Company, at an exercise price of $ 400.00 per one one-thousandth of a Series A Junior Participating Preferred Share, subject to adjustment. Subject to various exceptions, the Rights become exercisable in the event any person (excluding certain exempted or grandfathered persons) becomes the beneficial owner of ten percent ( 10 %) or more of the Company’s common stock without the approval of the Board. The Rights Agreement was amended on November 4, 2021 to extend the expiration date of such agreement from November 8, 2021 to November 5, 2022 and further amended on November 4, 2022 to extend the expiration of such agreement to November 4, 2023. 2016 Stock Incentive Plan On August 1, 2016, the Company adopted the 2016 Stock Incentive Plan ("2016 SIP"). A total of 0.2 million shares of Aptevo common stock have been authorized for issuance under the 2016 SIP in the form of equity stock options. 2018 Stock Incentive Plan On June 1, 2018, at the 2018 Annual Meeting of the Stockholders, the Company’s stockholders approved a new 2018 Stock Incentive Plan (the "2018 SIP"), which replaced the Restated 2016 Plan on a go-forward basis. All stock options, RSUs or other equity awards granted subsequent to June 1, 2018 have been and will be issued out of the 2018 SIP, which has 0.3 million shares of Aptevo common stock authorized for issuance. The 2018 Plan became effective immediately upon stockholder approval at the 2018 Annual Meeting of the Stockholders. Any shares subject to outstanding stock awards granted under the 2016 SIP that (a) expire or terminate for any reason prior to exercise or settlement; (b) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (c) otherwise would have returned to the 2016 SIP for future grant pursuant to the terms of the 2016 Plan (such shares, the “Returning Shares”) will immediately be added to the share reserve under the 2018 SIP as and when such shares become Returning Shares, up to a maximum of 0.3 million shares. On June 7, 2022, at the 2022 Annual Meeting of Stockholders, our stockholders approved the Amended and Restated 2018 SIP to increase the number of shares authorized for issuance under the 2018 SIP by 500,000 shares of common stock. As of June 30, 2023, there are approximately 0.1 million shares available to be granted under the 2018 SIP. Stock options and RSUs under the Amended and Restated 2018 SIP generally vest pro rata over a one-year or three-year period. Stock options terminate ten years from the grant date, though the specific terms of each grant are determined individually. The Company’s executive officers, members of our board of directors, and certain other employees and consultants may be awarded options and/or RSUs with different vesting criteria, and awards granted to non-employee directors will vest over a one-year period. Option exercise and RSU grant prices for new awards granted by the Company equal the closing price of the Company’s common stock on the Nasdaq Capital Market on the date of grant. Stock-Based Compensation Expense Stock-based compensation expense includes amortization of stock options and RSUs granted to employees and non-employees and has been reported in our unaudited condensed consolidated statements of operations as follows:
For the Three Months Ended June 30, For the Six Months Ended June 30,
(in thousands) 2023 2022 2023 2022
Research and development $ 112 $ 53 $ 422 $ 77
General and administrative 353 431 958 1,008
Total stock-based compensation expense $ 465 $ 484 $ 1,380 $ 1,085 The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. The Company recognizes the compensation expense over the vesting period. All assumptions used to calculate the grant date fair value of non-employee equity awards are generally consistent with the assumptions used for equity awards granted to employees. In the event the Company terminates any of its consulting agreements, the unvested equity underlying the agreements would also be forfeited. Stock Options Aptevo utilizes the Black-Scholes valuation model for estimating the fair value of all stock options granted. Set forth below are the assumptions used in valuing the stock options granted:
For the Three Months Ended June 30, For the Six Months Ended June 30,
2023 2022 2023 2022
Expected dividend yield — — — —
Expected volatility — — 103.63 % 106.30 %
Risk-free interest rate — — 4.18 % 1.60 %
Expected average life of options — — 5 years 5 years For the six months ended June 30, 2023 , management has applied an estimated forfeiture rate of 30 %. For the three and six months ended June 30, 2022 , management has applied an estimated forfeiture rate of 31 % and 30 %, respectively. Expected volatility slightly decreased as our stock price fluctuated from a low of $ 1.34 to a high of $ 2.08 for the six months ended June 30, 2023 , compared to a low of $ 3.26 to a high of $ 6.30 for the six months ended June 30, 2022. The following is a summary of option activity for the six months ended June 30, 2023:
Number of Weighted- Weighted-
Balance at December 31, 2022 364,266 $ 15.77 7.39
Granted 103,965 2.11 —
Exercised — — —
Forfeited ( 1,013 ) 27.45 —
Outstanding at June 30, 2023 467,218 12.72 7.56
Exercisable at June 30, 2023 258,798 15.36 6.47
Vested and expected to vest at June 30, 2023 397,969 13.77 7.28 As of June 30, 2023 , we had $ 1.2 million of unrecognized compensation expense related to options expected to vest over a weighted-average remaining vesting period of 1.1 years. The weighted-average grant date fair value per share of options granted during the six months ended June 30, 2023 and 2022 was $ 1.68 and $ 4.43 , respectively. The aggregate intrinsic value of options exercised for the six months ended June 30, 2023 and 2022 was $ 0 . The total fair value of stock options vested for the six months ended June 30, 2023 and 2022 was $ 1.1 million and $ 1.2 million, respectively. The aggregate intrinsic value is the total pretax intrinsic value (the difference between the closing stock price of Aptevo’s common stock on the last trading day of June 2023 and the exercise price, multiplied by the number of in the money options) that would have been received by the option holders had all the option holders exercised their options on the last trading day of the quarter. Restricted Stock Units The following is a summary of RSU activity for the six months ended June 30, 2023:
Number of Weighted
Balance at December 31, 2022 223,775 $ 8.47
Granted 168,168 2.09
Vested ( 50,525 ) 12.13
Forfeited ( 1,414 ) 3.43
Outstanding and expected to vest at June 30, 2023 340,004 $ 4.79 As of June 30, 2023 , there was $ 1.3 million unrecognized stock-based compensation expense related to unvested RSUs expected to vest over the weighted-average period of 1.5 years. The fair value of each RSU has been determined to be the closing trading price of the Company’s common stock on the date of grant as quoted on the Nasdaq Capital Market. Warrants In March 2019, as part of a public offering, we issued warrants to purchase up to 1,725,000 shares of our common stock, 1,571,429 of which have an exercise price of $ 18.20 per share and have a five-year life, and 153,571 of pre-funded warrants with an exercise price of $ 0.14 per share. The pre-funded warrants had a ten-year life and would have expired on March 11, 2029 ; however, all of the pre-funded warrants were exercised in March 2019. We determined the warrants do not meet liability classification pursuant to ASC 480 – Distinguishing Liabilities from Equity . These are therefore included within equity on our unaudited condensed consolidated balance sheet. For the six months ended June 30, 2023 and 2022, the Company did not have any of its warrants exercised. As of June 30, 2023 and 2022 , there were warrants to purchase 350,589 shares of common stock outstanding. |
