Share-based compensation

12 Months Ended

Dec. 31, 2021

Share-based compensation

Share-based compensation

11. Share-based compensation

In July 2008, the Board of Directors adopted the 2008 Equity Incentive Plan ("the 2008 Plan”) which provided for the grant of qualified incentive stock options and non-qualified stock options, restricted stock or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the issuance or purchase of shares of the Company’s common stock. The 2008 Plan was replaced in July 2018 with the 2018 Equity Incentive Plan (the 2018 Plan and collectively with the 2008 Plan, the Plans). At the time that the 2008 Plan was terminated, there were 388,748 shares available for grant that were transferred to the 2018 Plan. On September 24, 2020, the 2018 Plan was terminated and replaced with the 2020 Equity Incentive Plan (2020 Plan). Additionally, the number of shares of our common stock reserved for issuance under the 2020 Plan will automatically increase on January 1 of each year, beginning on January 1, 2021 and continuing through and including January 1, 2030, by 4% of the total number of shares of our 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. As of December 31, 2021, there were 1,372,897 shares available for future issuance under the 2020 Plan.

The Company also adopted the 2020 Employee Stock Purchase Plan (ESPP Plan) on September 18, 2020 which provides for the grant of purchase rights to purchase shares of the Company’s common stock to eligible employees, as defined by the ESPP Plan. The maximum number of shares of common stock that may be issued under the ESPP Plan will not exceed 125,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1 of each calendar year for a period of up to ten years, commencing on the first January 1 following the year in which an IPO occurs and ending on, and including, January 1, 2030, in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, and (ii) 1,000,000 shares of common stock. No shares of common stock have been issued under the ESPP Plan as of December 31, 2021.

The 2020 Plan and the ESPP Plan are administered by the Board of Directors subject to the Board’s right to delegate to a committee. The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors. Stock options awarded under the Plans and the 2020 Plan generally expire 10 years after the grant date unless the Board of Directors sets a shorter term. Vesting periods for awards under the Plans and the 2020 Plan are determined at the discretion of the Board of Directors. Stock options granted to employees, officers, members of the Board of Directors and consultants of the Company typically vest over one to four years. Certain options provide for accelerated vesting if there is a change in control, as defined in the Plans and the 2020 Plan.

Share-based compensation expense recorded as research and development and general and administrative expenses in the statements of operations is as follows (in thousands):

	Year Ended December 31,
In thousands)	2021		2020
General and administrative	$	2,071	$	441
Research and development		1,377		180
	$	3,448	$	621

Unrecognized compensation cost related to unvested options was $13.3 million as of December 31, 2021 and will be recognized over an estimated weighted average period of 3.4 years.

Stock options

The weighted average assumptions used in the Black-Scholes option-pricing model for stock options granted were:

	Year ended December 31,
	2021			2020
Expected volatility		83.0	%		83.0	%
Risk-free interest rate		1.0	%		0.6	%
Expected term (in years)		6.0			6.1
Expected dividend yield		—			—
Fair value of common stock	$	23.04		$	5.30

A summary of option activity under the Plans and the 2020 Plan during the year ended December 31, 2021 is as follows:

				Weighted
		Weighted		average
		average		remaining
	Number of	exercise price		contractual
	shares	per share		term (years)
Outstanding at January 1, 2021	1,472,840	$	3.14	8.51
Granted	803,481	$	23.04	9.25
Forfeited	(23,031)	$	19.88	—
Exercised	(247,534)	$	0.40	5.21
Outstanding at December 31, 2021	2,005,756	$	11.26	8.50
Exercisable at December 31, 2021	659,478	$	3.14	7.60
Vested or expected to vest at December 31, 2021	2,005,756	$	11.26	8.50

The weighted-average grant date fair value per share of stock options granted during the years ended December 31, 2021 and 2020 was $16.49 and $3.71, respectively. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021 and 2020 was $4.0 million and $1.2 million, respectively. The aggregate intrinsic value of stock options outstanding at December 31, 2021 and 2020 is $11.3 million and $10.1 million, respectively.

In August 2020, the Company granted a total of 92,169 stock options to two of its officers, which option awards included both performance-based and service-based vesting conditions. These option awards were subsequently modified in September 2020 to eliminate the performance-based criteria. As a result of the modification, only service-based vesting conditions remained. All other terms and conditions of these option awards remain unchanged. Since the performance condition was not considered probable of being achieved prior to the modification, no share-based compensation expense was recorded prior to the modification. At the time of the modification, the fair value of these options awards was recalculated at $8.69 per option.

Restricted Stock Awards

During August 2021, the Company granted 13,500 fully vested shares of common stock to a consultant in exchange for various strategic and advisory services. The Company recorded stock-based compensation expense of $0.2 million for the year ended December 31, 2021 related to shares granted. No such transaction occurred for the year ended December 31, 2020. As of December 31, 2021, there was no unvested portion of the restricted stock award as all shares were fully vested upon grant.