Share-based compensation

9 Months Ended

Sep. 30, 2023

Share-based compensation

Share-based compensation

10. Share-based compensation

On September 18, 2020, the Company adopted the 2020 Equity Incentive Plan, or the 2020 Plan, which supersedes all prior equity incentive plans. Under the 2020 Plan, the number of shares of 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 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 number of shares available for future issuance under the 2020 Plan increased by 485,153 shares. On September 29, 2023, the number of shares available for future issuance under the 2020 Plan increased by 2,955,280 shares. As of September 30, 2023, there were 4,205,361 shares available for future issuance under the 2020 Plan.

The Company also adopted the 2020 Employee Stock Purchase Plan, or the ESPP, 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. The maximum number of shares of common stock that may be issued under the ESPP 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. On January 1, 2023, the number of shares available for future issuance under the ESPP increased by 121,288 shares. As of September 30, 2023, there were 473,733 shares available under the ESPP. No shares of common stock have been issued under the ESPP as of September 30, 2023.

The 2020 Plan and the ESPP 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 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 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 2020 Plan.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development	$	466	$	480	$	1,323	$	1,387
General and administrative		617		860		2,017		2,590
	$	1,083	$	1,340	$	3,340	$	3,977

Unrecognized compensation cost related to unvested options and restricted stock awards was $7.4 million as of September 30, 2023 and will be recognized over an estimated weighted average period of 1.2 years.

Stock options

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

	Nine Months Ended September 30,
	2023			2022
Expected volatility		88.5	%		85.6	%
Risk-free interest rate		3.8	%		2.7	%
Expected term (in years)		6.03			5.97
Expected dividend yield		—			—
Fair value of common stock	$	4.87		$	3.64

A summary of option activity under the 2020 Plan and prior Plans during the nine months ended September 30, 2023 was as follows:

		Weighted
		average
	Number of	exercise price
	shares	per share
Outstanding at January 1, 2023	2,519,405		9.60
Granted	658,900		4.87
Forfeited	(98,216)		11.56
Expired	(55,670)		16.59
Outstanding at September 30, 2023	3,024,419		8.38
Exercisable at September 30, 2023	1,669,562		8.76

The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2023 and 2022 was $3.67 and $2.65, respectively. The aggregate intrinsic value for options exercisable at September 30, 2023 was $6.7 million. The aggregate intrinsic value of stock options outstanding at September 30, 2023 was $11.2 million. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2023 was $0.1 million.

Restricted stock awards

During February 2023, the Company granted 25,000 shares of restricted stock awards to a consultant in exchange for services that vest evenly over twelve months with a vesting start date in January 2023. The weighted average grant fair value was $5.62 per share.

In July 2023, the consulting agreement was terminated which ceased the continuation of vesting of the restricted stock awards.