Stockholders' Equity

12 Months Ended

Dec. 31, 2023

Stockholders' Equity

Stockholders' Equity

7. Stockholders’ Equity

In 2005, we adopted the 2005 Stock Option and Incentive Plan (2005 Plan) that authorizes us to grant options, restricted stock and other equity-based awards. As of December 31, 2023, 577 options to purchase shares of common stock were outstanding pursuant to grants in connection with the 2005 Plan. No additional shares are available for issuance under the 2005 Plan. The amount, terms of grants, and exercisability provisions are determined and set by our board of directors.

Effective August 2014, we adopted our 2014 Equity Incentive Plan, as amended (2014 Plan) that authorizes us to grant options, restricted stock, and other equity-based awards, subject to adjustment in accordance with the 2014 Plan. As of December 31, 2023, 4,924,969 options to purchase shares of common stock and no restricted shares of common stock were outstanding pursuant to grants in connection with the 2014 Plan, and 907,095 shares of common stock were available for future issuance. As of December 31, 2023, 1,257,019 restricted stock units were outstanding pursuant to the 2014 Plan. The amount, terms of grants, and exercisability provisions are determined and set by our board of directors. In accordance with the 2014 Plan, on January 1, 2024, the shares of common stock available for future grants under the 2014 Plan was increased to 3,090,220.

In addition, during the years ended December 31, 2023 and 2022, we granted 566,685 and 788,885 options, respectively, to purchase shares of common stock and 2,500 and 39,900 restricted stock units, respectively, outside of our 2014 Plan as inducement grants material to new employees entering into employment agreements with us pursuant to Nasdaq Listing Rule 5635(c)(4). The amount, terms of grants, and exercisability provisions of these grants are determined and set by our board of directors, and are largely consistent with the terms and exercisability provisions of grants under our 2014 Plan.

Stock Options

Options issued under both the 2005 Plan and 2014 Plan and the inducement grants have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the board of directors. Vesting generally

occurs over a period of not greater than four years. A summary of stock option activity for the years ended December 31, 2023 and 2022 is presented below (in thousands, except share and per share amounts):

		Weighted‑
		Average		Aggregate
		Exercise Price		Intrinsic
	Shares	Per Share		Value
Outstanding—December 31, 2021	4,738,855	$	12.23
Granted	2,026,981		8.77
Exercised	(238,312)		7.52
Forfeited	(415,816)		10.49
Expired	(381,489)		14.61
Outstanding—December 31, 2022	5,730,219	$	10.87
Granted	2,117,451		6.43
Exercised	(126,735)		6.35
Forfeited	(267,239)		8.34
Expired	(288,715)		13.34
Outstanding—December 31, 2023	7,164,981	$	9.64	$	17,854
Exercisable—December 31, 2023	4,620,748	$	10.64	$	9,292

The weighted average remaining contractual term of options outstanding and exercisable as of December 31, 2023 is 7.5 and 6.9 years, respectively.

Intrinsic value in the table above was determined by calculating the difference between the market value of our common stock on the last trading day of 2023 of $10.87 per share and the exercise price for any in-the-money options.

The weighted-average grant date fair value of options granted was $5.20 and $7.00 per share in 2023 and 2022, respectively, and was estimated at the date of grant using the Black-Scholes option-pricing model with the following ranges of weighted-average assumptions:

	2023				2022
Expected stock price volatility	99	-	104	%	103	-	116	%
Expected term of options	5.3	-	6.1	years	5.7	-	6.5	years
Risk‑free interest rate	3.35	-	4.82	%	1.65	-	4.46	%
Expected annual dividend yield			0	%			0	%

The weighted-average valuation assumptions were determined as follows:

● Expected stock price volatility: The expected volatility is based on historical volatility of our stock price.

● Expected term of options: We estimated the expected term of our stock options with service-based vesting using the “simplified” method, as prescribed in SAB No. 107, whereby the expected life equals the average of the vesting tranches and the original contractual term of the option due to our lack of sufficient historical data.

● Risk-free interest rate: We base the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

● Expected annual dividend yield: The estimated annual dividend yield is 0% because we have not historically paid, and do not expect for the foreseeable future to pay, a dividend on our common stock.

Restricted Stock and Restricted Stock Units

All issued and outstanding restricted shares of common stock are time-based and generally become vested within two years after the grant date, pursuant to the 2014 Plan. Compensation expense is recorded ratably over the requisite service period. Compensation expense related to restricted stock is measured based on the fair value using the closing market price of our common stock on the date of the grant. As of December 31, 2023, we had no restricted shares of common stock outstanding.

During the year ended December 31, 2023, we granted 1,004,310 restricted stock units, which vest within four years of the grant date, pursuant to the 2014 Plan. Compensation expense related to restricted stock units is measured based on the fair value using the closing market price of our common stock on the date of the grant. As of December 31, 2023, we had 1,271,894 restricted stock units outstanding.

A summary of activity for the years ended December 31, 2023 and 2022 is presented below:

		Weighted‑average
		Grant Date
	Shares	Fair Value per Share
Outstanding—December 31, 2021	26,025	$	12.75
Granted	809,028		8.49
Vested	(37,450)		11.19
Forfeited	(125,627)		9.04
Outstanding—December 31, 2022	671,976		8.39
Granted	1,004,310		6.17
Vested	(262,819)		8.26
Forfeited	(141,573)		6.61
Outstanding—December 31, 2023	1,271,894	$	6.86

Total compensation cost recognized for all stock options and restricted stock units in the statements of operations for the years ended December 31, 2023 and 2022 is as follows (in thousands):

	Year Ended
	December 31,
	2023		2022
Research and development	$	5,806	$	5,364
Selling, general and administrative		9,757		9,526
Total	$	15,563	$	14,890

As of December 31, 2023, there was $15.6 million and $6.4 million of total unrecognized compensation expense related to unvested stock options and restricted stock units, respectively. That expense is expected to be recognized over the next four years as follows, in thousands:

2024	$	12,690
2025		7,348
2026		1,549
2027		366
	$	21,953

Stock Issued in Connection with Ovid License Agreement

On March 29, 2022, pursuant to an exclusive patent license agreement with Ovid Therapeutics Inc. (Ovid), we issued 123,255 shares of our common stock to Ovid. The shares were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (Securities Act) provided by Section 4(a)(2) of the Securities Act and Regulation D thereunder as sales by an issuer not involving any public offering (see Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds). The fair value of these shares is reflected in operating expenses for the year ended December 31, 2022.

Underwritten Public Offering

In connection with an underwritten public offering in November 2022 and the closing of the related exercise of the underwriters’ option in December 2022, we issued a total of 12,421,053 shares of common stock and 2,105,264 pre-funded warrants (the Pre-funded Warrants) resulting in aggregate net proceeds, after underwriting discounts and commissions in the public offering and fees, of $64.5 million. The exercise price and the number of Common Shares issuable upon exercise of each Pre-funded Warrant (the Warrant Shares) are subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Shares as well as upon any distribution of assets, including cash, stock or other property, to our stockholders. The Pre-funded Warrants are exercisable at any time, will not expire and are exercisable in cash or by means of a cashless exercise. A holder of Pre-funded Warrants may not exercise such Pre-funded Warrants if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of Common Shares outstanding immediately after giving effect to such exercise. A holder of Pre-funded Warrants may increase or decrease this percentage not in excess of 19.99% by providing at least 61 days’ prior notice to us.

Sales Pursuant to Equity Distribution Agreement

On July 9, 2020, we entered into an Equity Distribution Agreement (EDA) with JMP Securities LLC (JMP), as amended by the March 31, 2023 Amendment No. 1 to the EDA (Amended EDA), to create an at the market equity program under which we from time to time may offer and sell shares of our common stock without a specified maximum aggregate offering price. The Amended EDA was entered into in connection with our filing of a Registration Statement on Form S-3 (File No. 333-271041) with the SEC (the 2023 Registration Statement), which includes a prospectus supplement covering the offering, issuance and sale by us of up to $75,000,000 of shares of common stock that may be issued and sold under the Amended EDA. Subject to the terms and conditions of the Amended EDA, JMP will be entitled to a commission of up to 3.0% of the gross proceeds from each sale of shares of our common stock. In the year ended December 31, 2023, we sold approximately 3.7 million shares of our common stock pursuant to the Amended EDA, which resulted in net proceeds of approximately $25.8 million. We did not sell any shares of our common stock during the year ended December 31, 2022 under the EDA.