Calyxt, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-based Payment Arrangement [Abstract]

6. STOCK-BASED COMPENSATION

The Company uses broad-based stock plans to attract and retain highly qualified officers and employees and to help ensure that management’s interests are aligned with those of its shareholders. The Company has also granted equity-based awards to directors, non-employees, and certain employees of Cellectis.

In December 2014, the Company adopted the Calyxt, Inc. Equity Incentive Plan (2014 Plan), which allowed for the grant of stock options, and in June 2017, it adopted the 2017 Omnibus Plan (2017 Plan), which allowed for the grant of stock options, RSUs, PSUs and other types of equity awards. In July 2021, the Company also adopted the Calyxt, Inc. Employee Inducement Incentive Plan (the Inducement Plan), from which PSUs were granted to Michael A. Carr.

As of March 31, 2023, 9,259 shares were registered and available for grant under effective registration statements, while 238,983 shares were available for grant in the form of stock options, restricted stock, RSUs, and PSUs under the 2017 Plan. Stock-based awards currently outstanding also include awards granted under the 2014 Plan and the Inducement Plan. No further awards will be granted under either the 2014 Plan or the Inducement

Plan

Stock Options

The estimated fair values of stock options granted, and the assumptions used for the Black-Scholes option pricing model were as follows:


	Three Months Ended March 31,
	2023		2022
Estimated fair values of stock options granted	$	—	$	9.71
Assumptions:
Risk-free interest rate		—		1.9% - 2.4	%
Expected volatility		—		89.7% - 91.8	%
Expected term (in years)		—		5.75 - 6.89

The Company estimates the fair value of each stock option on the grant date, or other measurement date if applicable, using a Black-Scholes option pricing model, which requires it to make predictive assumptions regarding employee exercise behavior, future stock price volatility, and dividend yield. The Company estimates the risk-free interest rate based on the United States Treasury

zero-coupon

yield curve at the date of grant for the expected term of the option. The Company estimates its future stock price volatility using the weighted-average historical volatility calculated from a group of comparable public companies over the expected term of the option. The expected term of stock options is estimated using the average of the vesting tranches and the contractual life of each grant for employee options, or the simplified method, as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The use of the simplified method is dependent upon the type of equity award granted and the term of the award. The Company does not pay dividends and does not expect to pay dividends in the foreseeable future.

Option strike prices are set at 100 percent or more of the closing share price on the date of grant and generally vest over three to six years following the grant date. Options expire 10 years after the date of the grant.

Modification of Stock Options

On March 1, 2023, the Company’s Board of Directors (Board) approved the modification of the award terms of all outstanding stock options with a

90-day

post-separation exercise period from the current 90 days to five years from date of grant.

The modification did not affect the vesting or service period of the stock options. These modifications were considered to be Type I and incremental stock compensation expense of $0.2 million was determined for all modified awards, of which $0.1 million was recognized associated with vested awards in the three months ended March 31, 2023. The remaining incremental expenses will be recognized over the remaining service period of the awards.

Information on stock option activity is as follows:


	Options Exercisable		Weighted- Average Exercise Price Per Share		Options Outstanding			Weighted- Average Exercise Price Per Share
Balance as of December 31, 2022		339,707	$	99.35		584,171		$	73.51
Granted						—			—
Exercised						—			—
Forfeited or expired						(21,206	)		38.12

Balance as of March 31, 2023		381,873	$	92.18		562,965		$	74.85

Stock-based compensation expense related to stock option awards is as follows:


	Three Months Ended March 31,
In Thousands	2023		2022
Stock-based compensation expense	$	354	$	180

As of March 31, 2023, options outstanding and exercisable had no aggregate intrinsic value and the weighted average remaining contractual term was 5.2 years as of that date.

Net cash proceeds from the exercise of stock options less shares used for minimum withholding taxes and the intrinsic value of options exercised were as follows:


	Three Months Ended March 31,
In Thousands	2023		2022
Net cash proceeds	$	—	$	—

Intrinsic value of options exercised	$	—	$	—

As of March 31, 2023, unrecognized compensation expense related to

non-vested

stock options was $2.5 million. This expense will be recognized over 20 months on average.

Restricted Stock Units

The Company grants RSUs which generally vest over three to five years after the date of grant. Information on restricted stock unit activity is as follows:


	Number of Restricted Stock Units Outstanding			Weighted- Average Grant Date Fair Value
Unvested balance as of December 31, 2022		122,914		$	19.90
Granted		348,759			4.34
Vested		(68,831	)		15.33
Forfeited		(9,442	)		17.24

Unvested balance as of March 31, 2023		393,400		$	6.97

The total grant-date fair value of restricted stock unit awards that vested is as follows:


	Three Months Ended March 31,
In Thousands	2023		2022
Grant-date fair value	$	1,055	$	617

Stock-based compensation expense related to RSUs is as follows:


	Three Months Ended March 31,
In Thousands	2023		2022
Stock-based compensation expense	$	311	$	205

As of March 31, 2023, unrecognized compensation expense related to RSUs was $2.2 million. This expense will be recognized over 29 months on average.

The Company accounts for stock-based compensation awards granted to employees of Cellectis as deemed dividends. The Company recorded deemed dividends as follows:


	Three Months Ended March 31,
In Thousands	2023		2022
Deemed dividends from grants to Cellectis employees	$	—	$	37

Performance Stock Units

From

time-to-time,

the Company issues PSUs to certain individuals in management in order to align their objectives with stockholders of the Company. Depending upon the type of PSU award, the Company uses a Monte Carlo simulation pricing model when estimating the fair value of these awards.

2022 Grant

In March 2022, the Company granted 53,000 PSUs under the 2017 Plan to five employees including four executive officers. The PSUs include three annual performance periods (2022, 2023, and 2024) and target performance levels for each of those periods linked to the achievement of Company objectives as determined annually for the respective period by the Compensation Committee. Once the annual objectives are approved, the associated expense will be recognized on a straight-line basis over the period through the determination date, which can be no later than March 15 of the following year. Earned awards will be settled in shares of Company stock no later than the March 15 determination date in the following calendar year. The grant date for the tranche of awards linked to 2022 performance was May 4, 2022, and on March 1, 2023, the Company’s Board determined the 2022 tranche of PSUs would vest at 100%. Determination of expense for the 2023 and 2024 tranches of PSUs for the four executive officers will be made when the associated business objectives are determined.

2021 Grant

In July 2021, the Company granted 60,000 PSUs under the Inducement Plan to Mr. Carr. The PSUs will vest if the Company’s stock remains above three specified price levels for thirty calendar days over the three-year performance period. The PSUs will be settled in unrestricted shares of the Company’s common stock on the vesting date.

2019 Grant

In June 2022, PSUs granted to two executive officers in 2019 were forfeited because the underlying performance criteria were not met. These PSUs contained a market condition and had a five-year service period. The Company continue

to expense these PSUs over the remaining service period.

PSU activity for the three months ended March 31, 2022, is as follows:


	Number of Performance Stock Units Outstanding
Unvested balance as of December 31, 2022		113,000
Granted		—
Vested		(17,670	)
Forfeited		(1,666	)

Unvested balance as of March 31, 2023		93,664

Stock-based compensation expense related to PSUs is as follows:


	Three Months Ended March 31,
In Thousands	2023		2022
Stock-based compensation expense	$	163	$	146

As of March 31, 2023, unrecognized compensation expense related to PSUs was $0.8 million. This expense will be recognized over 16 months on average.