Stock Plans and Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock Plans and Stock-Based Compensation

10. Stock Plans and Stock-Based Compensation

Stock Plans

In September 2013, the Company’s stockholders approved the 2013 Equity Incentive Plan (the 2013 Plan), under which shares of common stock are reserved for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards by the Company. These awards may be granted to employees, members of the Board of Directors, and consultants. The 2013 Plan has a term of ten years and replaced the 2003 Equity Incentive Plan, which had similar terms. The 2013 Plan permits the Company to (i) grant incentive stock options to directors and employees at not less than 100% of the fair value of common stock on the date of grant; (ii) grant nonqualified options to employees, directors, and consultants at not less than 85% of fair value; (iii) award stock bonuses; and (iv) grant rights to acquire restricted stock at not less than 85% of fair value. Options generally vest over a four year period and have a term of ten years. Options granted to 10% stockholders have a maximum term of five years and require an exercise price equal to at least 110% of the fair value on the date of grant. The exercise price of all options granted to date has been at least equal to the fair value of common stock on the date of grant. Stock option exercises are settled with shares reserved under the 2013 Plan. The share reserve under the 2013 Plan will automatically increase on January 1

of each year, for a period of not more than ten years, in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31

of the preceding calendar year, unless the Board determines otherwise prior to December 31

of such calendar year.

In October 2020, the Company’s board of directors approved the 2020 New Hire Plan (the 2020 Plan), under which shares of common stock are reserved for the granting of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards by the Company as an inducement to prospective new hire employees of the Company. The 2020 Plan has a term of ten years. The 2020 Plan permits the Company to (i) grant nonqualified options to new hire employees at not less than 85% of fair value; (ii) award stock bonuses; and (iii) grant rights to acquire restricted stock at not less than 85% of fair value. Options generally vest over a four year period and have a term of ten years. The share reserve under the 2020 Plan may be increased at the discretion of and approval by the board of directors.

Stock Plan Activity

As of December

2021

, there were

1,588,613

and

shares available for grant under the

2013

and

2020

Plans, respectively. On January

2022

, in accordance with the annual share increase provision in the

2013

Plan, the Company added

4,233,896

shares to the

2013

Plan share reserve.

The following table summarizes activity in the Company’s stock option grants:


	Shares Subject to Outstanding Options			Weighted- Average Exercise Price of Options		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2020		8,811,630		$	6.35
Options granted		2,660,965			4.84
Options exercised		(106,847	)		2.05
Options forfeited		(307,018	)		5.89
Options expired		(267,299	)		7.60

Outstanding as of December 31, 2021		10,791,431		$	6.01		7.28	$	1,514

Vested and expected to vest as of December 31, 2021		10,791,431		$	6.01		7.28	$	1,514

Exercisable as of December 31, 2021		6,327,680		$	6.62		6.22	$	1,510

The total intrinsic value of options exercised was $0.2 million and $0.4 million for the years ended December 31, 2021 and 2020, respectively.

The total fair value of options vested was $0.7 million and $3.3 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, unamortized stock-based compensation expense of $16.9 million is expected to be recognized over a weighted average period of 2.6 years.

Incentive Awards

In December 2013, January 2014, and April 2014, as permitted by the 2013 Plan, the Company issued certain incentive awards to directors, employees and a consultant which are subject to 252,752 shares of the Company’s common stock and are exercisable at a weighted average price of $5.21 per share when vested. The Company may determine at its option whether to settle exercised awards in shares of common stock or in cash. Each recipient’s incentive award defines the number of common shares that may be acquired upon exercise provided the Company chooses to settle in shares. For awards settled in cash, the Company must pay the recipient the excess of the fair market value of the Company’s common stock on the date of exercise over the exercise price paid by the recipient multiplied by the number of shares the recipient would be entitled to receive had the award been settled in shares of the Company’s common stock.

Pursuant to their terms, the incentive awards have a term of 10 years and were initially scheduled to vest 100% on the second anniversary of their grant date. However, as a result of the approval by the Company’s stockholders of a 500,000 share increase to the 2013 Plan’s share reserve in June 2014, the incentive awards were automatically modified to vest monthly over four years effective from their grant date. The Company recognized the value of the incentive awards over the remaining four year vesting period which ended in the first quarter of 2018.

The Company recorded no

stock-based compensation expense in the years ended December 31, 2021 and 2020 pertaining to its incentive awards. Incentive awards outstanding totaled

101,182

and

101,441

as of December 31, 2021 and 2020, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the consolidated statements of operations and comprehensive loss and is as follows (in thousands):


	Year Ended December 31,
	2021		2020
Research and development	$	4,470	$	2,739
General and administrative		5,526		4,585

Total stock-based compensation expense	$	9,996	$	7,324

Valuation Assumptions

The following table presents the weighted-average assumptions the Company used in the Black-Scholes option-pricing model to derive the grant date fair values of stock options granted in each of the years presented along with the resulting estimated weighted-average grant date fair values per share:


	Year Ended December 31,
	2021			2020
Expected term (years)		6.1			6.1
Expected volatility		104	%		105	%
Risk-free interest rate		0.9	%		0.4	%
Expected dividend yield		—			—
Weighted-average grant date fair value per share	$	3.91		$	3.91

Expected Term

The Company does not believe it can currently place reliance on its historical exercise and post-vesting termination activity to provide accurate data for estimating the expected term. Therefore, for stock option grants made during the years ended December 31, 2021 and 2020, the Company has elected to use the simplified method for estimating the expected term, which is an average of the contractual term of the options and its ordinary vesting period. The expected term represents the period of time that options are expected to be outstanding.

Expected Volatility

The Company estimates expected volatility by measuring the historical volatility of its common stock price over a historical period commensurate with the expected term of the related award.

Risk-Free Interest Rate

The risk-free interest rate assumption was based on U.S. treasury instruments with constant maturities whose term was consistent with the expected term of stock options granted by the Company.

Expected Dividend Yield

The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero.