Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Stockholders' Equity

5.Stockholders’ Equity

ATM Program
 

In December 2021, the Company entered into an Open Market Sale AgreementSM (the “Sales Agreement”) with Jefferies LLC, pursuant to which the Company is able to offer and sell, from time to time in its sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million. The Company has no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. During the three and six months ended June 30, 2022, the Company sold 2,721,316 shares of common stock for net proceeds of $3.9 million (see Note 7).
 

Common Stock Warrants

A summary of warrant activity and changes in warrants outstanding is presented below:

	Number of Shares Underlying Warrants		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (in years)
Balance at December 31, 2021		4,234,910	$	10.50		3.31
Issued		—	$	—		—
Forfeited		—	$	—		—
Exercised		—	$	—		—
Balance at June 30, 2022		4,234,910	$	10.50		2.82

All warrants met the criteria for classification in stockholders’ equity.

Equity Incentive Plans

Stock Option Awards

Contemporaneous with the Merger closing: (i) Oncternal’s 2015 Equity Incentive Plan, as amended (“2015 Plan”) was assumed by the Company, and (ii) the Company adopted the 2019 Incentive Award Plan (“2019 Plan”) under which the sum of: (a) 1,954,150 shares of common stock, and (b) an annual increase on the first day of each calendar year beginning January 1, 2020, and ending on and including January 1, 2029, equal to the lesser of (A) 5% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares of common stock as is determined by the Board, are reserved for issuance.

In July 2015, Oncternal adopted the 2015 Plan which provided for the issuance of up to 631,120 shares of common stock for incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards and other stock awards to its employees, members of its board of directors and consultants. In general, the options issued under the 2015 Plan expire ten years from the date of grant and vest over a four-year period. Certain grants vest based on the achievement of development or regulatory milestones. The 2015 Plan was terminated as to new grant awards in June 2019.

The 2019 Plan provides for the issuance of shares of common stock for incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards and other stock awards to its employees, members of its board of directors and consultants. In general, the stock options issued under the 2019 Plan expire ten years from the date of grant and vest over a four-year period. Certain stock option grants vest based on the achievement of development or regulatory milestones. The 2019 Plan allows for the early exercise of all stock option grants if authorized by the board of directors at the time of grant.

In February 2021, the Company’s board of directors adopted the 2021 Employment Inducement Incentive Award Plan (the “Inducement Plan”). The Inducement Plan is a non-shareholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. The Inducement Plan is used exclusively for the issuance of non-statutory stock options to certain new hires who satisfied the requirements to be granted inducement grants under Nasdaq rules as an inducement material to the individual’s entry into employment with the Company. The terms of the Inducement Plan are substantially similar to the terms of the 2019 Plan. As amended in May 2021 and December 2021, the Company has reserved 2,800,000 shares of common stock under the Inducement Plan.

As of June 30, 2022, 2,103,953 shares remain available for issuance under the 2019 Plan and Inducement Plan. A summary of the Company’s stock option activity under the 2015 Plan, 2019 Plan and Inducement Plan is as follows:

	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		6,444,744		$	5.28			$	613,190
Granted		2,139,718		$	1.80
Forfeited		(380,184	)	$	4.52
Exercised		—		$	—
Outstanding at June 30, 2022		8,204,278		$	4.40		8.5	$	148,560
Options vested and expected to vest as of June 30, 2022		8,204,278		$	4.40		8.5	$	148,560
Options vested and exercisable as of June 30, 2022		2,617,257		$	4.91		7.1	$	117,365

For the six months ended June 30, 2022 and 2021, the weighted average grant date fair value per share of option grants was $1.43 and $4.74, respectively. The intrinsic value is calculated as the difference between the fair value of the Company’s common stock at the time of the option exercise and the exercise price of that stock option. For the three months ended June 30, 2022 and 2021, the weighted-average intrinsic value of stock options exercised was none and $3.89 per share, respectively.

Restricted Stock Unit Awards

Restricted stock unit awards (“RSUs”) are rights to receive shares of the Company’s common stock upon satisfaction of specific vesting conditions. The Company began issuing RSUs in the first quarter of 2022. The RSUs generally vest over a two-year period. Restricted stock unit activity under Equity Incentive Plans is summarized as follows:

	Number of Restricted Stock Units			Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2021		—		$	—
Granted		464,007		$	2.43
Forfeited		(13,610	)	$	2.43
Exercised		—		$	—
Outstanding at June 30, 2022		450,397		$	2.43
Units expected to vest as of June 30, 2022		450,397		$	2.43
Units vested as of June 30, 2022		—		$	—

Stock-Based Compensation Expense

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants, were as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Risk-free interest rate		3.2	%		1.1	%		2.0	%		0.8	%
Expected volatility		97.0	%		89.1	%		99.8	%		89.6	%
Expected term (in years)		5.9			6.0			6.1			6.2
Expected dividend yield		—	%		—	%		—	%		—	%

Expected volatility. The expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the life sciences industry with comparable characteristics to the Company including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Due to limited historical exercise behavior, it determined the expected life assumption using the simplified method for employees, which is an average of the contractual term of the option and its vesting period. The expected term for nonemployee options is generally the remaining contractual term.

Risk-free interest rate. The risk-free interest rate is based on the implied yield on the U.S. Treasury securities with a maturity date similar to the expected term of the associated stock option award.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends and, therefore, used an expected dividend yield of zero.

RSU awards represent rights to receive shares of common stock contingent upon satisfaction of specific vesting conditions. The stock-based compensation expense for these awards was determined using the closing price on the grant date applied to the total number of shares that were anticipated to fully vest.

Stock-based compensation expense recognized for all equity awards has been reported in the condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Research and development	$	820	$	703	$	1,883	$	1,177
General and administrative		857		1,133		1,772		1,497
	$	1,677	$	1,836	$	3,655	$	2,674

As of June 30, 2022, the unrecognized compensation cost related to non-vested stock options was $15.7 million, which is expected to be recognized over a weighted-average period of 3.0 years.

As of June 30, 2022, the unrecognized compensation cost related to non-vested restricted stock units was $0.8 million, which is expected to be recognized over a weighted-average period of 1.5 years.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance is as follows (in thousands):

	June 30, 2022
Common stock warrants		4,235
Common stock options issued and outstanding		8,204
Restricted stock unit awards		450
Common stock available for issuance under the Inducement Plan and 2019 Plan		2,104
		14,993