Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Stock-Based Compensation

Stock-Based Compensation

(8) Stock-Based Compensation

The Company maintains the Amended and Restated 2014 Omnibus Incentive Compensation Plan, as amended (the “2014 Plan”), which allows for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, performance units and other stock-based awards to employees, officers, non-employee directors, consultants, and advisors. In addition, the 2014 Plan provides selected executive employees with the opportunity to receive bonus awards that are considered qualified performance-based compensation. The 2014 Plan is subject to automatic annual increases in the number of shares authorized for issuance under the 2014 Plan on the first trading day of January each year equal to the lesser of 1.5 million shares or 10% of the number of shares of common stock outstanding on the last trading day of December of the preceding year. As of January 1, 2022, the number of shares of common stock that may be issued under the 2014 Plan was automatically increased by 1.5 million shares, increasing the total number of shares of common stock available for issuance under the 2014 Plan to 10,804,869 shares. As of September 30, 2022, 1,442,876 shares were available for future issuance under the 2014 Plan.

Options issued under the 2014 Plan have a contractual life of 10 years and may be exercisable in cash or as otherwise determined by the board of directors. The Company has granted options to employees and non-employee directors. Stock options granted to employees primarily vest 25% upon the first anniversary of the grant date and the balance of unvested options vests in quarterly installments over the remaining three years. Stock options granted annually to non-employee directors vest on the earlier of the one-year anniversary of the grant date, or the date of the Company’s next annual stockholders’ meeting that occurs after the grant date. The Company’s non-employee director compensation policy enables directors to receive stock options in lieu of quarterly cash payments. Any option granted to the directors in lieu of cash compensation vests in full on the grant date. The Company records forfeitures as they occur.

Stock-based compensation expense for performance-based grants are recorded when management estimates that the vesting of these shares is probable based on the status of the Company’s research and development programs and other relevant factors, which were established by the Company’s board of directors. The Company’s board of directors determines if the performance conditions have been met.

During the nine months ended September 30, 2021, the Company granted 506,911 time-based restricted stock awards to employees with two-year cliff vesting of which 469,911 restricted stock awards remained outstanding as of September 30, 2022. In addition, during the nine months ended September 30, 2021, the Company granted 506,911 performance-based restricted stock awards to employees of which 187,964 restricted stock awards have fully vested and 281,947 restricted stock awards remained outstanding as of September 30, 2022. The performance-based conditions for these performance-based grants were deemed probable of achievement during the six months ended June 30, 2021 and, as of September 30, 2022, the Company has recorded $1.6 million in stock-based compensation expense related to these grants. As of September 30, 2022, there was $40,696 of unrecognized stock-based compensation expense related to these performance-based awards, which will be expensed over the estimated service period related to each performance condition.

During the nine months ended September 30, 2022, the Company granted 841,654 time-based restricted stock awards to employees, non-employee directors and consultants of which 804,654 restricted stock awards remained outstanding as of September 30, 2022. In addition, during the nine months ended September 30, 2022, the Company granted 556,500 performance-based restricted stock awards to employees of which 548,000 restricted stock awards remained outstanding as of September 30, 2022. As of September 30, 2022, satisfaction of the related performance conditions has not been deemed probable of being achieved and there was $1.1 million of unrecognized stock-based compensation expense related to these performance-based awards, which will be expensed over the estimated service period related to each performance condition once the performance conditions have been deemed probable.

For the nine months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense related to its stock option grants and restricted stock awards, as follows:

	Stock Option Grants				Restricted stock awards				Total
	2022		2021		2022		2021		2022			2021
Research and development	$	776,809	$	1,198,492	$	723,638	$	1,245,175	$	1,500,447	$	2,443,667
General and administrative		941,321		1,307,844		868,357		1,017,668		1,809,678		2,325,512
	$	1,718,130	$	2,506,336	$	1,591,995	$	2,262,843	$	3,310,125	$	4,769,179

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2022:

		Weighted-		Weighted-
		Average		Average	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Life (in Years)	Value
Outstanding as of December 31, 2021	5,224,913	$	8.74
Granted	1,136,728		2.17
Forfeited	(85,625)		10.97
Outstanding as of September 30, 2022	6,276,016		7.52	6.17	$	—
Exercisable as of September 30, 2022	4,303,603		9.58	5.00	$	—
Vested and expected to vest as of September 30, 2022	6,276,016	$	7.52

The weighted-average grant date fair values of options granted during the nine months ended September 30, 2022 and 2021 were $1.74 and $2.84, respectively.

The fair values of stock options granted were calculated using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Nine months ended September 30,
	2022	2021
Weighted-average risk-free interest rate	2.02%	0.37%
Expected term of options (in years)	6.11	6.21
Expected stock price volatility	100.23%	95.60%
Expected dividend yield	0%	0%

As of September 30, 2022, there was $3.9 million of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.40 years. During the nine months ended September 30, 2021, the Company received $47,906 in cash from the exercise of employee stock options.

The following table summarizes the Company’s restricted stock award activity under the 2014 Plan for the nine months ended September 30, 2022:

		Weighted
		Average		Aggregate
		Grant Date		Intrinsic
	Shares	Fair Value		Value
Unvested as of December 31, 2021	989,822	$	3.62
Granted	1,398,154		2.17
Forfeited	(25,500)		2.41
Vested	(242,964)		3.60
Unvested as of September 30, 2022	2,119,512	$	2.86	$	1,551,483
Expected to vest as of September 30, 2022	1,566,512	$	2.85	$	1,146,687

As of September 30, 2022, excluding performance-based restricted stock awards that have not been deemed probable, there was $1.5 million of unrecognized stock-based compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted-average period of 0.62 years.