Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
As of December 31, 2020, there are 34,976,000 shares authorized for issuance under the CV Sciences, Inc. Amended and Restated 2013 Equity Incentive Plan (the "2013 Plan"). As of December 31, 2020, the Company had 6,165,000 authorized unissued shares reserved and available for issuance upon exercise and conversion of outstanding awards under the Amended 2013 Plan. On June 11, 2019, the Company’s stockholders approved to add an automatic “evergreen” provision regarding the number of shares to be annually added to the 2013 Plan. As a result, the number of shares of common stock that will be automatically added to the 2013 Plan on January 1 of each year during the term of the plan, starting with January 1, 2020, will be the lesser of: (a) 4% of the total shares of the Company’s common stock outstanding on December 31st of the prior year, (b) 4,000,000 shares of the Company’s common stock, or (c) a lesser number of shares of the Company’s common stock as determined by the Company’s Board of Directors. On January 1, 2021, the Company added 4,000,000 shares to the 2013 Plan.
The stock options are exercisable at no less than the fair market value of the underlying shares on the date of grant, and restricted stock and restricted stock units are issued at a value not less than the fair market value of the common stock on the date of the grant. Generally, stock options awarded are vested in equal increments ranging from two to four years on the annual anniversary date on which such equity grants were awarded. The stock options generally have a maximum term of 10 years.
The Company recognized stock-based compensation expense of $3.9 million and $15.1 million for the years ended December 31, 2020 and 2019, respectively. During the year ended December 31, 2019, the Company recorded stock-based compensation expense of $9.5 million related to the settlement of the Company's former founder's employment agreements. For more information refer to Note 11, Related Parties.
In June 2020, the Company’s board of directors approved a stock option modification that reduced certain employees’ and directors’ stock option exercise prices to $0.66. No other terms were modified. Stock options to purchase a total of 2,130,000 shares of common stock were modified. The modification to the existing stock options resulted in $0.2 million incremental value of the stock options. The incremental value associated with the modification will be recognized over the life of the remaining service period of the options. During the year ended December 31, 2020, the Company recorded $0.1 million in stock-based compensation associated with the repriced options.
As of December 31, 2020, total unrecognized compensation cost related to non-vested stock-based compensation arrangements was $2.7 million which is expected to be recognized over a weighted-average period of 1.3 years.
The following summarizes activity related to the Company's stock options (in thousands, except per share data):
Number of Shares Weighted Average
Exercise Price
Weighted Average
Remaining Contract
Term (in years)
Aggregate Intrinsic Value
Outstanding - December 31, 2019 28,105  $ 0.80  5.4 $ 12,335 
Granted 6,210  0.41  —  — 
Exercised (612) 0.37  —  — 
Forfeited (8,478) 0.91  —  — 
Outstanding - December 31, 2020 25,225  0.48  5.7 2,186 
Exercisable - December 31, 2020 22,254  0.46  5.3 2,010 
Vested or expected to vest - December 31, 2020 25,225  $ 0.48  5.7 $ 2,186 
The Company has established performance milestones in connection with the drug development efforts for its lead drug candidate CVSI-007. The above table includes 5,000,000 vested performance-based options as of December 31, 2020, which were issued outside of the 2013 Plan. As of December 31, 2020, there were 8,000,000 remaining unvested stock options granted outside of the 2013 Plan which vest upon the completion of future performance conditions, including those related to the Settlement Agreement with Mona Jr. (refer to Note 11).
The total intrinsic value of stock options exercised during the year ended December 31, 2020 and 2019 was $0.1 million and $4.3 million, respectively.
The following table presents the weighted average grant date fair value of stock options granted and the weighted-average assumptions used to estimate the fair value on the date of grant using the Black-Scholes valuation model:
For the years ended December 31,
2020 2019
Volatility 132.9% 126.1%
Risk-Free Interest Rate 0.5% 1.6%
Expected Term (in years) 5.33 2.74
Dividend Rate 0.0% 0.0%
Fair Value Per Share on Grant Date $0.36 $1.92
Expected volatility is based on the historical volatility of the Company's common stock. Expected volatility through September 30, 2019 was calculated based on the Company’s peer group, consisting of five companies in the industry in which the Company operates because the Company did not have sufficient historical volatility data. The risk-free interest rates are based on the implied yield available on U.S. Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options. The Company estimates the expected term for stock options awarded to employees, non-employees, officers and directors using the simplified method in accordance with ASC Topic 718, Stock Compensation, because the Company does not have sufficient relevant historical information to develop reasonable expectations about future exercise patterns. In the future, as the Company gains historical data for the actual term over which stock options are held, the expected term may change, which could substantially change the grant-date fair value of future stock option awards, and, consequently, compensation of future grants.
During the year ended December 31, 2019 2,950,000 restricted stock units ("RSU's") vested with a weighted average grant date fair value of $2.14 per share. The total fair value of RSU's vested during the year ended December 31, 2019 was $6.3 million. There are no outstanding RSU's as of December 31, 2020.