Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Stock-Based Compensation

Stock-Based Compensation

14. Stock-Based Compensation

2019 Inducement Plan

In October 2019, the Company’s Board of Directors adopted the 2019 Inducement Plan, or the 2019 Plan, which is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq Listing Rule 5635(c)(4), or Rule 5635, for the purpose of awarding (i) non-statutory stock options, (ii) restricted stock awards, (iii) restricted stock unit awards, (iv) other stock awards (collectively, the Inducement Awards) to new employees of the Company, as inducement material to such new employees entering into employment with the Company. In November 2019, the Company filed a Registration Statement on Form S-8 with the SEC covering the offering of up to 300,000 shares of its common stock, par value $0.001, pursuant to the Company’s 2019 Plan. Initial grants of Inducement Awards made to employees vest as to 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months and subsequent grants vest monthly over a period of four years from the grant date.

2014 Equity Incentive Plan

The Company’s 2014 Equity Incentive Plan, or the 2014 Plan, is administered by the Company’s Board of Directors or a duly authorized committee thereof, referred to as the Plan administrator. The 2014 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation, collectively referred to as Stock Awards. Additionally, the 2014 Plan provides for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other awards may be granted to employees, including officers, non-employee directors, and consultants. No incentive stock options may be granted under the 2014 Plan after the tenth anniversary of the effective date of the 2014 Plan. Stock Awards granted under the 2014 Plan vest at the rate specified by the Plan administrator. Initial grants of Stock Awards made to employees and non-employee consultants generally vest as to 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months and subsequent grants vest monthly over a period of four years from the grant date. Stock options initially granted to members of the Company’s Board of Directors generally vest over a period of three years in equal quarterly installments from the date of the grant, subject to the option holder’s continued service as a director through such date. Subsequent grants to directors that are made automatically at Annual Meetings of Stockholders vest fully on the earlier of the first anniversary of the date of grant and the next Annual Meeting of Stockholders. The Plan administrator determines the term of Stock Awards granted under the 2014 Plan up to a maximum of ten years.

The aggregate number of shares of the Company’s common stock reserved for issuance under the 2014 Plan has automatically increased on January 1 of each year, beginning on January 1, 2015 and will continue to increase on January 1 of each year through and including January 1, 2024, by 3% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors. On January 1, 2023, the aggregate number of shares of common stock that may be issued pursuant to Stock Awards under the 2014 Plan automatically increased from 10,589,103 to 12,203,023. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2014 Plan is 30,000,000 shares.

Restricted Stock Units

On March 1, 2023, the Compensation Committee of the Company’s Board of Directors, or the Compensation Committee, approved and granted a total of 407,000 restricted stock units to certain employees under the 2014 Plan with a grant date fair value of $10.06 per share. Vesting of the restricted stock units is contingent on the achievement of certain performance targets, subject to the recipient’s continuous service through each performance target. Recognition

of compensation expense associated with these awards begins when, and to the extent, the performance criteria are probable of achievement and the employee has met the service conditions. For the three months ended March 31, 2023, no stock compensation expense relating to these restricted stock units was recognized. As of March 31, 2023, 407,000 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

On October 12, 2022, the Compensation Committee of the Company’s Board of Directors, or the Compensation Committee, approved and granted a total of 7,267 time-based restricted stock units under the 2014 Plan, with a grant date fair value of $9.42 per share, to an executive officer of the Company. The restricted stock unit grant fully vests on August 31, 2023, subject to the recipient’s continued service through such date. For the three months ended March 31, 2023, the Company recognized $19 of stock compensation expense associated with these awards, all of which was recorded within G&A expense. As of March 31, 2023, 7,267 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

Pursuant to the Company’s non-employee director compensation policy, an aggregate of 59,380 restricted stock units were granted to non-employee directors on June 2, 2022, the date of the Company’s 2022 Annual Meeting of Stockholders, under the 2014 Plan with a grant date fair value of $8.42 per share. The restricted stock units will vest on the earlier of (i) June 2, 2023 and (ii) immediately prior to the Company’s next Annual Meeting of Stockholders following the grant date, subject to the recipient’s continued service through such date. As a result, the Company recognizes compensation expense associated with these restricted stock units ratably over the one-year vesting period following the grant date. For the three months ended March 31, 2023, stock compensation expense associated with these awards of $123 was recognized in G&A expense. As of March 31, 2023, 59,380 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

On February 25, 2022, the Compensation Committee also approved and granted a total of 145,170 time-based restricted stock units to certain employees under the 2014 Plan with a grant date fair value of $10.46 per share. The restricted stock units vest in three equal installments annually from the date of the grant. As a result, the Company recognizes compensation expense associated with these restricted stock units ratably over the three-year vesting period following the grant date. In February 2023, 42,920 of these restricted stock units vested and were settled in shares of the Company’s common stock in satisfaction of the first year of vesting. For the three months ended March 31, 2023 and 2022, the Company recognized $114 and $50, respectively, of stock compensation expense associated with these awards, with $47 recorded in R&D expense and $67 recorded in G&A expense for the three months ended March 31, 2023, and $18 recorded in R&D expense and $32 recorded in G&A expense for the three months ended March 31, 2022. As of March 31, 2023, 82,250 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

On December 17, 2021, the Compensation Committee approved and granted a total of 63,573 time-based restricted stock units to certain employees under the 2014 Plan with a grant date fair value of $12.45 per share. The restricted stock units vest in two equal installments on December 15, 2022 and June 15, 2023. As a result, the Company recognizes compensation expense associated with these restricted stock units ratably over the 18-month vesting period following the grant date. For the three months ended March 31, 2023 and 2022, the Company recognized $108 and $131, respectively, of stock compensation expense associated with these awards, with $52 recorded in R&D expense and $56 recorded in G&A expense for the three months ended March 31, 2023, and $52 recorded in R&D expense and $79 recorded in G&A expense for the three months ended March 31, 2022. As of March 31, 2023, 26,199 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

On October 29, 2021, the Compensation Committee also approved and granted 147,942 time-based restricted stock units in connection with the appointment of the Company’s new CEO under the 2014 Plan with a grant date fair value of $16.83 per share. The first tranche of 142,000 restricted stock units vests 25% on the first anniversary of the date of

grant and the balance quarterly over the next 36 months. The second tranche of 5,942 restricted stock units fully vested on March 31, 2022. As a result, the Company recognizes compensation expense associated with these two restricted stock unit tranches ratably over their respective vesting periods following the grant date. In January 2023, 8,875 of these restricted stock units vested and were settled in shares of the Company’s common stock in satisfaction of the quarterly period of vesting. For the three months ended March 31, 2023 and 2022, stock compensation expense associated with these awards of $147 and $206, respectively, was recognized in G&A expense. As of March 31, 2023, 97,625 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

Pursuant to the Company’s non-employee director compensation policy, an aggregate of 43,200 restricted stock units were granted to non-employee directors on June 3, 2021, the date of the Company’s 2021 Annual Meeting of Stockholders, under the 2014 Plan with a grant date fair value of $13.06 per share. The restricted stock units vested on June 3, 2022. As a result, the Company recognized compensation expense associated with these restricted stock units ratably over the one-year vesting period following the grant date. For the three months ended March 31, 2023, there was no stock compensation expense recognized as these restricted stock units were fully vested in June 2022. For the three months ended March 31, 2022, stock compensation expense of $139 was recognized in G&A expense for these restricted stock units. As of March 31, 2023, there were no outstanding restricted stock units available to vest or settle in shares of the Company’s common stock.

On March 30, 2021, the Compensation Committee approved and granted a total of 176,000 restricted stock units to certain employees under the 2014 Plan with a grant date fair value of $20.59 per share. Vesting of the restricted stock units was contingent on the achievement of certain performance targets related to clinical and regulatory milestones, subject to the recipient’s continuous service through each performance target. Recognition of compensation expense associated with these awards begins when, and to the extent, the performance criteria is probable of achievement and the employee has met the service conditions. In February 2022, performance targets relating to 37,999 restricted stock units had been achieved and thus restricted stock units vested and the awards were settled in shares of common stock. For the three months ended March 31, 2023, there was no stock compensation expense recognized as all of these restricted stock units either vested or were forfeited prior to the current period. For the three months ended March 31, 2022, the Company recognized $729 of stock compensation expense associated with these awards in G&A expense. G&A amounts recorded for the three months ended March 31, 2022 included $303 of stock compensation expense relating to the modification of certain of these restricted stock units on November 1, 2021 (see Stock Award Modifications below). As of March 31, 2023, there were no outstanding restricted stock units available to vest or settle in shares of the Company’s common stock.

Additionally on March 30, 2021, the Compensation Committee also approved and granted a total of 100,000 time-based restricted stock units to certain employees under the 2014 Plan with a grant date fair value of $20.59 per share. The restricted stock units vest in three equal installments annually from the date of the grant. As a result, the Company recognizes compensation expense associated with these restricted stock units ratably over the three-year vesting period following the grant date. In March 2023, 15,999 of these restricted stock units vested and were settled in shares of the Company’s common stock in satisfaction of the second year of vesting. In March 2022, 33,336 of these restricted stock units vested and were settled in shares of the Company’s common stock in satisfaction of the first year of vesting. For the three months ended March 31, 2023 and 2022, the Company recognized $81 and $284, respectively, of stock compensation expense associated with these awards, with $54 recorded in R&D expense and $27 in G&A expense for the three months ended March 31, 2023, and $54 recorded in R&D expense and $230 in G&A expense for the three months ended March 31, 2022. G&A amounts recorded for the three months ended March 31, 2022 included $203 of stock compensation expense relating to the modification of certain of these restricted stock units on November 1, 2021 (see Stock Award Modifications below). As of March 31, 2023, 15,999 restricted stock units were outstanding and available to vest and settle in shares of the Company’s common stock.

In February 2020, the Compensation Committee also approved and granted a total of 98,000 time-based restricted stock units to certain employees under the 2014 Plan with a grant date fair value of $16.36 per share. The restricted stock units vest in three equal installments annually from the date of the grant. As a result, the Company recognizes compensation expense associated with these restricted stock units ratably over the three-year vesting period following the grant date. In February 2023, 15,999 of these restricted stock units vested and were settled in shares of the Company’s common stock in satisfaction of the third year of vesting. In February 2022, 32,666 of these restricted stock units vested and were settled in shares of the Company’s common stock in satisfaction of the second year of vesting. For the three months ended March 31, 2023 and 2022, the Company recognized $39 and $219, respectively, of stock compensation expense associated with these awards, with $26 recorded in R&D expense and $13 in G&A expense for the three months ended March 31, 2023, and $43 recorded in R&D expense and $176 in G&A expense for the three months ended March 31, 2022. G&A amounts recorded for the three months ended March 31, 2022 included $155 of stock compensation expense relating to the modification of certain of these restricted stock units on November 1, 2021 (see Stock Award Modifications below). As of March 31, 2023, there were no outstanding restricted stock units available to vest or settle in shares of the Company’s common stock.

A summary of restricted stock unit activity related to employees and non-employee members of the Company’s Board of Directors as of and for the three months ended March 31, 2023 is presented below:

		Weighted
	Number of	Average Grant
	Units	Date Fair Value
Outstanding, December 31, 2022	372,513	$	13.20
Awarded	407,000		10.06
Vested and released	(83,793)		14.20
Outstanding, March 31, 2023	695,720	$	11.24
Restricted stock units exercisable (vested and deferred), March 31, 2023	—

Stock Options

Under the 2014 Plan, the Company granted 1,449,154 and 977,438 stock options during the three months ended March 31, 2023 and 2022, respectively. No stock options were granted under the 2019 Inducement Plan during the three months ended March 31, 2023 and 2022. The fair values of stock options granted during the three months ended March 31, 2023 and 2022 were estimated as of the dates of grant using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended
	March 31,
	2023	2022
Risk-free interest rate	3.62% - 4.22%	1.70% - 2.35%
Expected volatility	76.3% - 81.3%	81.4% - 81.9%
Expected dividend yield	0%	0%
Expected life of employee and Board options (in years)	6.25	6.25

The weighted-average grant date fair value per share of options granted to employees and non-employee members of the Company’s Board of Directors for their Board service during the three months ended March 31, 2023 and 2022 was $7.08 and $7.55. No options were granted to non-employee consultants during the three months ended March 31, 2023 and 2022.

During the three months ended March 31, 2023 and 2022, the Company recognized compensation expense relating to stock options as follows:

	Three Months Ended
	March 31,
	2023		2022
Research and development	$	1,480	$	1,917
General and administrative		1,241		2,030
Total stock option expense	$	2,721	$	3,947

The following were excluded from the table above as they are not related to stock options: compensation expense for (i) the vesting of certain employees’ restricted stock units for $179 in R&D expense and $330 in G&A expense for the three months ended March 31, 2023; (ii) the vesting of certain employees’ restricted stock units for $167 in R&D expense and $1,452 in G&A expense for the three months ended March 31, 2022; (iii) compensation expense relating to the Board of Directors’ restricted stock units for $123 in G&A expense for the three months ended March 31, 2023; and (iv) compensation expense relating to the Board of Directors’ restricted stock units for $139 in G&A expense for the three months ended March 31, 2022.

A summary of stock option award activity related to employees, non-employee members of the Company’s Board of Directors and non-employee consultants as of and for the three months ended March 31, 2023 is presented below:

		Weighted
	Number of	Average Exercise
	Shares	Price
Outstanding, December 31, 2022	7,689,449	$	14.35
Granted	1,449,154		10.06
Exercised	(93,218)		6.00
Forfeited	(52,626)		11.41
Outstanding, March 31, 2023	8,992,759	$	13.76
Options exercisable, March 31, 2023	5,128,904

The Company does not expect to realize any tax benefits from its stock option activity or the recognition of stock-based compensation expense because the Company currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related to excess tax benefits have been reported in cash flows from operations for the three months ended March 31, 2023 and 2022.

Stock Award Modifications

In November 2021, the Company and the former President and CEO mutually agreed to a transition from CEO to a consulting role through June 30, 2022, if not terminated earlier per the terms of the consulting agreement. As a result, the Company modified the terms of its former CEO’s outstanding Stock Awards to (1) automatically vest any unvested stock options or time-based restricted stock units that would have vested in the twelve month period following the end of the consulting period if continuous service is achieved with the Company during such twelve-month period; (2) extend the period during which the vested stock options may be exercised through the earlier of (i) eighteen months following the separation date (November 8, 2021); or (ii) the original expiration date applicable to each of the stock options, unless terminated earlier in accordance with the 2014 Plan, if continuous service is achieved with the Company; and (3) extend the period in which performance-based vesting milestones for restricted stock units may be achieved through March 31, 2022, if continuous service is achieved with the Company. The consulting agreement ended on June 30, 2022.

The Company determined that vested Stock Awards which had modifications due to the extension of the exercise period were Type 1 modifications pursuant to Financial Accounting Standards Board Accounting Standards Codification 718, or ASC 718, because those Stock Awards would have vested before and after the modification. Acceleration of vesting for the Stock Awards that would have vested in the twelve-month period following the consulting term was determined to be a Type 3 modification requiring stock compensation expense pursuant to ASC 718 because absent the modification terms, those Stock Awards would have been forfeited as of the last day that the former CEO provided continuous service as a consultant. In addition, Type 4 performance-based restricted stock units were not considered probable of achieving performance targets on the modification date, but the vesting targets were achieved with respect to 17,333 performance-based restricted stock units in February 2022, which resulted in additional stock compensation expense being recorded during the three months ended March 31, 2022.

During the three months ended March 31, 2022, total incremental stock compensation expense relating to modifications of stock options, time-based and performance-based restricted stock units of the former CEO was $1,564, which is included in G&A expense for the three months ended March 31, 2022. Of this total amount, $903 is included in G&A expense in the stock option compensation expense table above for the three months ended March 31, 2022.