Stock-based compensation

3 Months Ended

Mar. 31, 2024

Stock-based compensation

Stock-based compensation

11. Stock-based compensation

Option Exchange Program

On January 17, 2024, the Company’s stockholders, upon recommendation of the board of directors, approved a one-time stock option exchange program (the “Option Exchange Program”) for certain employees, executive officers and non-employee directors of the Company who held certain underwater options and remained employed or otherwise engaged by the Company through the completion of the Exchange Offer. The Company’s offer to participate in the Option Exchange Program commenced on February 8, 2024, and expired on March 8, 2024 (the “Exchange Offer”). Pursuant to the Exchange Offer, 42 eligible holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 603,330 shares of the Company’s common stock (the “Exchanged Options”). On March 11, 2024, promptly following the expiration of the Exchange Offer, the Company granted new options to purchase 603,330 shares of common stock (the “New Options”), pursuant to the terms of the Exchange Offer and the Amended and Restated 2021 Equity Incentive Plan (the “2021 Plan”). The exercise price of the New Options granted was $11.44 per share, which was the closing price of the Company’s common stock on the Nasdaq Capital Market on the grant date of the New Options.

The exchange of stock options was treated as a modification for accounting purposes. As a result of the Option Exchange Program, the Company will recognize incremental stock-based compensation expense of $1.7 million over the requisite service period of the New Options, which is two or four years depending on whether the Exchanged Options were vested at the time of exchange. Since the Exchanged Options were not at-the-money on the modification date, the Company was precluded from utilizing the simplified method as described in SEC Staff Accounting Bulletin Topic 14.D.2 to calculate the expected term as a key assumption in the Black-Scholes pricing model. Therefore, the Company utilized the binomial lattice model to calculate the fair value of the Exchanged Options immediately prior to the exchange. The Company utilized the Black-Scholes option-pricing model to calculate the fair value of the New Options on the modification date. The Company will recognize the remaining unamortized stock compensation expense for the Exchanged Options on the modification date over the original requisite service period of the Exchanged Options.

Stock options

A summary of the Company’s stock option activity and related information for the three months ended March 31, 2024 is as follows:

	Shares	Weighted-average exercise price per share		Weighted-average remaining contractual term (years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2023	2,270,359	$	19.81	7.8	$	559
Granted	31,751		9.77
Exercised	(4,600)		7.97
Forfeited/cancelled	(151,695)		12.89
Expired	(22,914)		163.77
Cancelled under the Option Exchange Program	(603,330)		30.58
Granted under the Option Exchange Program	603,330		11.44
Outstanding at March 31, 2024	2,122,901	$	13.18	8.7	$	4,539
Vested at March 31, 2024	565,008	$	20.83	7.3	$	1,084

The fair value of each stock option granted during the three months ended March 31, 2024 and 2023 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions:

	Three months ended March 31,
	2024		2023
Risk-free interest rate	4.08	%	3.56	%
Volatility	95	%	90	%
Dividend yield	—		—
Expected term (years)	5.8		6.2

Restricted stock units

A summary of the Company’s restricted stock unit activity and related information for the three months ended March 31, 2024 is as follows:

	Shares	Weighted-average grant date fair value per share
Outstanding at December 31, 2023	209,289	$	18.05
Granted	254,574	$	10.00
Vested	(14,279)	$	25.97
Forfeited/cancelled	(23,192)	$	18.12
Outstanding at March 31, 2024	426,392	$	12.98

Employee stock purchase plan

At the Special Meeting of Stockholders, held on December 18, 2018, the stockholders approved the 2018 Employee Stock Purchase Plan (“2018 ESPP”). On June 21, 2019, the board of directors of the Company amended and restated the 2018 ESPP, to account for certain non-material changes to the plan’s administration and, effective May 30, 2023, in connection with the Reverse Stock Split, the board of directors amended and restated the 2018 ESPP to account for the adjustments to the share reserves (the “Amended and Restated 2018 ESPP”). The Amended and Restated 2018 ESPP provides eligible employees with the opportunity, through regular payroll deductions, to purchase shares of the Company’s common stock at 85% of the lesser of the fair market value of the common stock on (a) the date the option is granted, which is the first day of the purchase period, and (b) the exercise date, which is the last business day of the purchase period. The Amended and Restated 2018 ESPP generally allows for two six-month purchase periods per year beginning in January and July, or such other periods as determined by the compensation committee of the Company’s board of directors. The fair value of shares expected to be purchased under the Amended and Restated 2018 ESPP was calculated using the following weighted-average assumptions:

	Three months ended March 31,
	2024		2023
Risk-free interest rate	5.24	%	4.77	%
Volatility	60	%	106	%
Dividend yield	—		—
Expected term (years)	0.5		0.5

For the three months ended March 31, 2024 and 2023, the Company recognized less than $0.1 million in each period of stock-based compensation expense under the Amended and Restated 2018 ESPP. During the three months ended March 31, 2024, the Company issued 7,475 shares of common stock for proceeds of less than $0.1 million under the Amended and Restated 2018 ESPP.