Stock Based Compensation

9 Months Ended

Sep. 30, 2021

Stock Based Compensation

Stock Based Compensation

7. Stock-Based Compensation

2016 Plan

The 2016 Plan provides for the Company to grant incentive stock options or non-qualified stock options, restricted stock, restricted stock units, and other equity awards to employees, directors, and consultants of the Company. The 2016 Plan is administered by the board of directors of the Company or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting, and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated. Recipients of stock options shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to the estimated fair market value of such stock on the date of grant. The exercise price may be less than fair market value if the stock award is granted pursuant to an assumption or

substitution for another stock award in the event of a merger or sale of the Company. The maximum term of options granted under the 2016 Plan is ten years, and stock options typically vest over a four-year period. The board of directors may assign vesting terms to the stock options granted as deemed appropriate. The 2016 Plan allows for early exercise of all stock option grants if authorized by the board of directors at the time of grant. The shares of common stock issued from the early exercise of stock options are restricted and continue to vest over the original service based vesting condition of the original stock option award. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The board of directors may, at its discretion, accelerate unvested awards held by employees in the event of a change of control of the Company unless assumed or substituted by the acquirer or surviving entity.

During the nine months ended September 30, 2021, the Company increased the number of shares of common stock authorized for issuance under the 2016 Plan from 1,997,099 to 3,110,588 shares. As of September 30, 2021, 63,173 shares remained available for future issuance under the 2016 Plan.

Stock-based compensation expense recorded in the statements of operations is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development expenses	$	182	$	24	$	344	$	78
General and administrative expenses		396		51		724		149
Total	$	578	$	75	$	1,068	$	227

Stock Option Valuation

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted during the nine months ended September 30, 2021 and the year ended December 31, 2020:

	September 30,		December 31,
	2021		2020
Risk‑free interest rate	0.99	%	0.53	%
Expected volatility	74	%	75	%
Expected dividend yield	—		—
Expected term (in years)	6.02		5.99

Early Exercise of Unvested Stock Options

Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in current liabilities on the balance sheet. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. Vesting can occur in the year of exercise and thereafter. There were 136,520 and 27,869 unvested shares related to early exercises of stock options as of September 30, 2021 and December 31, 2020, respectively. For each of the periods ended September 30, 2021 and December 31, 2020, the liability associated with the unvested early exercise of stock options was $0.4 million and less than $0.1 million, respectively.

Stock Options

The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2021:

		Weighted‑		Weighted‑
		Average		Average	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value (2)
				(in years)	(in thousands)
Outstanding as of December 31, 2020	1,625,256	$	1.88
Granted	1,166,904		9.36
Exercised	(401,322)		2.18
Forfeited	(21,275)		3.07
Outstanding as of September 30, 2021	2,369,563	$	5.51	8.99	$	20,029
Vested and exercisable as of September 30, 2021	391,322	$	1.84	7.68	$	4,746
Unvested and exercisable as of September 30, 2021 (1)	1,978,241	$	6.24	9.25	$	15,283
(1) This represents the number of unvested options outstanding as of September 30, 2021 that are expected to vest in the future.
(2) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money as of September 30, 2021.

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2021 was $2.3 million. The company received $0.9 million in proceeds for the exercise of these options.

The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2021 and 2020 was $6.02 per share and $1.38 per share, respectively. As of September 30, 2021, there was $7.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.3 years.

Restricted Stock Awards

The Company issued restricted stock to its founders and certain officers of the Company. In general, the shares of restricted stock vest over a four-year period, with 25% of the shares vesting after one year, followed by monthly vesting over the remaining three years.

If the holders of the above restricted stock cease to have a business relationship with the Company,

the Company may reacquire any unvested shares of restricted stock held by these individuals for the original purchase price or fair value, whichever is lower at the time of repurchase. The amounts received to date for the purchase price of restricted stock are immaterial. The unvested shares of restricted stock are not considered outstanding shares for accounting purposes until the shares vest.

A summary of unvested restricted stock during the nine months ended September 30, 2021 is as follows:

		Weighted‑
		Average
		Grant‑Date
	Shares	Fair Value
Unvested as of December 31, 2020	11,537	$	0.007
Vested	(11,537)		0.007
Unvested as of September 30, 2021	—	$	—