STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

The Company’s Board of Directors (the “Board”) adopted and approved the 2014 Equity Incentive Plan (“2014 Plan”), which authorized the Company to grant shares of common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock and restricted stock units. The types of stock-based awards, including share purchase rights amount, terms, and provisions for exercising grants were determined by the Board.

The Board adopted, and the Company's stockholders approved, the 2017 equity incentive plan (“2017 Plan”), which became effective on May 4, 2017. The initial reserve of shares of common stock under the 2017 Plan was 3,052,059 shares. The 2017 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of stock-based awards. Additionally, the 2017 Plan provides for the grant of performance awards. The Company's employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan. Upon the adoption of the 2017 Plan, no further awards were granted under the 2014 Plan. Pursuant to the terms of the 2017 Plan, on each January 1st, the plan limit shall be increased by the lesser of (x) 5% of the number of shares of common stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board may determine in its discretion. On January 1, 2022, an additional 1,000,000 shares were reserved for issuance under the 2017 Plan. On January 1, 2023, an additional 3,523,344 shares were reserved for issuance under the 2017 Plan. As of December 31, 2023, there were 4,400,759 shares of the Company’s common stock reserved for issuance under the 2017 Plan. On January 1, 2024, an additional 3,534,600 shares were reserved for issuance under the 2017 Plan.

The Board adopted, and the Company's stockholders approved the 2017 employee stock purchase plan (“ESPP”), which became effective on May 4, 2017. The initial reserve of shares of common stock that may be issued under the ESPP was 279,069 shares. The ESPP allows employees to purchase common stock of the Company at a 15% discount to the market price on designated purchase dates. During the years ended December 31, 2023 and 2022, 63,761 and 76,455 shares were purchased under the ESPP and the Company recorded expense of $57,148 and $85,319, respectively. The number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1 of each year, beginning on January 1, 2018 and continuing through and including January 1, 2027, by the lesser of (i) 1% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, (ii) 550,000 shares or (iii) such lesser number of shares determined by the Board. The Board acted prior to January 1, 2024 to provide that there be no increase in the number of shares reserved for issuance under the ESPP. As of December 31, 2023 and 2022, there were 352,846 and 416,607 shares of the Company’s common stock reserved for issuance under the ESPP.

Unless specified otherwise in an individual option agreement, stock options granted under the 2014 Plan and 2017 Plan have a ten-year term and a four-year graded vesting period. The vesting requirement is generally conditioned upon the grantee’s continued service with the Company during the vesting period. Once vested, all options granted are exercisable from the date of grant until they expire. The option grants are non-transferable. Vested options remain exercisable for 90 days under the 2017 Plan and 30 days under the 2014 Plan subsequent to the termination of the option holder’s service with the Company. In the event of the option holder’s death or disability while employed by or providing service to the Company, the exercisable period extends to 18 months or 12 months, respectively under the 2017 Plan and 6 months under the 2014 Plan..

Performance-based option awards generally have similar vesting terms, with vesting occurring on the date the performance condition is achieved and expire in accordance with the specific terms of the agreement. At December 31, 2023 and 2022, there were zero and 100,000 performance-based options outstanding and unvested, respectively, that include options to vest upon the achievement of certain research and development milestones.

The fair value of options granted during the years ended December 31, 2023 and 2022 was estimated using the Black-Scholes option valuation model. The inputs for the Black-Scholes option valuation model require significant assumptions made by management and are detailed in the table below. The risk-free interest rates were based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant

date. The expected life was based on the simplified method in accordance with the SEC Staff Accounting Bulletin No. Topic 14D. The expected volatility was estimated based on the Company's published historical stock prices.

All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options underlying the agreements would also be cancelled.

The Company granted 45,000 and zero stock options to nonemployee consultants for services rendered during the years ended December 31, 2023 and 2022, respectively. There were 98,542 and 127,459 unvested nonemployee options outstanding as of December 31, 2023 and 2022, respectively. Total expense recognized related to the nonemployee stock options for the years ended December 31, 2023 and 2022 was $202,114 and $575,995, respectively. Total unrecognized compensation expenses related to the nonemployee stock options was $133,769 and $626,977 as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, there were no expenses for nonemployee performance-based option awards recognized.

The Company granted 2,993,000 and 4,575,641 stock options to employees during the years ended December 31, 2023 and 2022, respectively. There were 5,376,910 and 6,090,889 unvested employee options outstanding as of December 31, 2023 and 2022, respectively. Total expense recognized related to the employee stock options for the years ended December 31, 2023 and 2022 was $7.5 million and $5.9 million, respectively. Total unrecognized compensation expense related to employee stock options was $9.3 million and $11.5 million as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company recognized zero and $0.1 million, respectively, in expenses for employee performance-based option awards.

The Company’s stock-based compensation expense was recognized in operating expenses as follows:


	For the Year Ended December 31,
	2023		2022
Research and development	$	1,936,746	$	1,770,599
General and administrative	5,348,446		4,786,087
Total	$	7,285,192	$	6,556,686


	For the Year Ended December 31,
	2023		2022
Stock options	$	7,228,044	$	6,471,367
Employee stock purchase plan	57,148		85,319
Total	$	7,285,192	$	6,556,686

The fair value of employee options granted during the years ended December 31, 2023 and 2022, respectively, was estimated by utilizing the following assumptions:


	For the Year Ended December 31,
	2023			2022
	Weighted Average			Weighted Average
Volatility	84.52		%	87.16		%
Expected term in years	6.07			6.07
Dividend rate	0.00		%	0.00		%
Risk-free interest rate	3.97		%	2.21		%
Fair value of option on grant date	$	1.92		$	2.12

The fair value of nonemployee options granted and remeasured during the years ended December 31, 2023 and 2022, respectively, was estimated by utilizing the following assumptions:


	For the Year Ended December 31,
	2023			2022
	Weighted Average			Weighted Average
Volatility	83.73		%	—		%
Expected term in years	5.32			0.00
Dividend rate	0.00		%	0.00		%
Risk-free interest rate	3.86		%	—		%
Fair value of option on grant date	$	2.21		$	—

The following table summarizes the number of options outstanding and the weighted average exercise price:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Options outstanding at December 31, 2021	10,776,758	$	4.97	6.07	$	2,389,890
Vested and exercisable at December 31, 2021	6,188,200	$	5.98	4.63	$	1,531,907
Granted	4,575,641	2.89		9.26
Exercised	(25,518)	1.91
Forfeited or expired	(2,365,643)	5.56
Options outstanding December 31, 2022	12,961,238	$	4.13	7.42	$	62,158
Vested and exercisable at December 31, 2022	6,742,890	$	5.05	6.20	$	61,214
Granted	3,038,000	2.63		9.20
Exercised	(146,346)	2.76
Forfeited or expired	(728,346)	3.44
Options outstanding December 31, 2023	15,124,546	$	3.87	6.90	$	5,212,586
Vested and exercisable at December 31, 2023	9,649,094	$	4.47	5.97	$	2,464,620

At December 31, 2023, there was $9.4 million of unamortized stock-based compensation expense, which is expected to be recognized over a remaining average vesting period of 2.23 years. At December 31, 2022, there was $12.1 million of unamortized stock-based compensation expense, which is expected to be recognized over a remaining average vesting period of 2.26 years.