STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2022

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

7. STOCK-BASED COMPENSATION

Equity Incentive Plans

In May 2019, the Company’s board of directors (the “Board”) adopted its 2019 Equity Incentive Plan (“2019 Plan”), which was subsequently approved by its stockholders and became effective on May 13, 2019. As a result, no additional awards under the Company’s 2016 Equity Incentive Plan, as amended (the “2016 Plan”) will be granted and all outstanding stock awards granted under the 2016 Plan that are repurchased, forfeited, expired, or are cancelled will become available for grant under the 2019 Plan in accordance with its terms. The 2016 Plan will continue to govern outstanding equity awards granted thereunder.

The 2019 Plan provides for the issuance of incentive stock options (“ISOs”) to employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other forms of stock awards to the Company’s employees, officers, and directors, as well as non- employees, consultants, and affiliates to the Company. Under the terms of the 2019 Plan, stock options may not be granted at an exercise price less than fair market value of the Company’s common stock on the date of the grant. The 2019 Plan is administered by the Compensation Committee of the Company’s Board.

Initially, subject to adjustments as provided in the 2019 Plan, the maximum number of the Company’s common stock that may be issued under the 2019 Plan was 4,530,000 shares, which is the sum of (i) 1,618,841 new shares, plus (ii) the number of shares (not to exceed 2,911,159 shares) that remained available for the issuance of awards under the 2016 Plan, at the time the 2019 Plan became effective, and (iii) any shares subject to outstanding stock options or other stock awards granted under the 2016 Plan that are forfeited, expired, or reacquired. The 2019 Plan provides that the number of shares reserved and available for issuance under the 2019 Plan will automatically increase each January 1, beginning on January 1, 2020, by 5% of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board. Subject to certain changes in capitalization of the Company, the aggregate maximum number of shares of common stock that may be issued pursuant to the exercise of ISOs shall be equal to 13,000,000 shares of common stock. Stock options awarded under the 2019 Plan expire 10 years after grant and typically vest over four years.

On August 2, 2022, the Board took action in accordance with its authority under the terms of the 2019 Plan to reset the per-share exercise price of all stock options previously granted under the 2019 Plan to $1.05 per share (the "Options Repricing"), which is equal to the closing price of a share of the Company’s common stock on August 1, 2022. The Options Repricing was deemed to be a Type I modification event under ASC 718, Compensation-Stock Compensation. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the Options Repricing, 1,797,517 vested and 1,380,917 unvested stock options outstanding as of August 2, 2022, with original exercise prices ranging from $1.22 to $49.60, were repriced. The Options Repricing resulted in incremental

stock-based compensation expense of $1.4 million, of which $0.9 million related to vested stock option awards and was expensed on the repricing date, and $0.5 million of which related to unvested stock option awards and is being amortized on a ratable basis over the remaining weighted-average vesting period of those awards being approximately 2.4 years.

As of September 30, 2022, there were 1,331,659 shares of common stock available for issuance under the 2019 Plan.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded for employees, directors and non-employees (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Research and development	$	1,178	$	642	$	2,822	$	1,974
General and administrative		1,678		2,003		4,342		6,354
Total stock-based compensation expense	$	2,856	$	2,645	$	7,164	$	8,328

Stock Option Activity

During the nine months ended September 30, 2022 the Company granted 767,913 options to shares of common stock. For the three and nine months ended September 30, 2022, amortization of stock compensation of options amounted to $2.5 million and $6.2 million, respectively, and for the three and nine months ended September 30, 2021, amortization of stock compensation of options amounted to $2.2 million and $7.0 million, respectively. As of September 30, 2022 and 2021, the total unrecognized stock-based compensation balance for unvested options was $9.9 million and $20.2 million, respectively, which is expected to be recognized over 2.3 years and 2.5 years, respectively. The weighted-average fair value per share of options granted during the nine months ended September 30, 2022 and 2021 was $1.79 and $10.01, respectively.

The following table summarizes the information about options outstanding at September 30, 2022:

				Weighted-Average
		Weighted-		Remaining	Aggregate
	Options	Average		Contractual	Intrinsic
(in thousands, except for share data)	Outstanding	Exercise Price		Term (in years)	Value
Outstanding at December 31, 2021	4,704,888	$	13.29	7.7	$	10,305
Options granted	767,913		2.80
Options exercised	(47,602)		1.04			21
Forfeited	(357,833)		20.93
Expired	(141,688)		31.65
Outstanding at September 30, 2022	4,925,678	$	1.99	7.2	$	—
Exercisable at September 30, 2022	3,711,517	$	2.30	6.7	$	—
Nonvested at September 30, 2022	1,214,161	$	1.05	8.5	$	—

Valuation of Stock Options Granted to Employees that Contain Service Conditions Only

The fair value of each option award granted with service-based vesting is estimated on the date of the grant using the Black-Scholes option valuation model based on the weighted average assumptions noted in the table below for those options granted in the nine months ended September 30, 2022 and 2021.

	Nine Months Ended
	September 30,
	2022			2021
Expected term (in years)		5.7			5.6
Volatility		75.83	%		70.99	%
Risk-free interest rate		2.13	%		0.91	%
Dividend yield		—	%		—	%

Restricted Stock Unit Activity

During the nine months ended September 30, 2022, the Company granted 305,600 RSUs to shares of common stock. For the three months ended September 30, 2022 and 2021, amortization of stock compensation of RSUs amounted to $0.4 million and $0.5 million, respectively. For the nine months ended September 30, 2022 and 2021, amortization of stock compensation of RSU’s amounted to $0.9 million and $1.3 million, respectively. As of September 30, 2022 and 2021, the unamortized compensation costs associated with non-vested restricted stock awards were $3.9 million and $5.1 million, respectively, with a weighted-average remaining amortization period of 3.1 and 2.9 years, respectively.

The following table summarizes the information about restricted stock units outstanding at September 30, 2022:

		Weighted-Average
		Grant Date		Aggregate
(in thousands, except for share data)	Shares	Fair Value		Intrinsic Value
Outstanding at December 31, 2021	469,485	$	18.05	$	4,202
Awarded	305,600		3.78
Released	(45,840)		25.57
Forfeited	(196,131)		18.36
Outstanding at September 30, 2022	533,114	$	9.10	$	496
Nonvested at September 30, 2022	528,712	$	9.06	$	492
Weighted Average Remaining Recognition Period (in years)	3.1

2019 Employee Stock Purchase Plan

In May 2019, the Company’s Board and its stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective as of May 13, 2019. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 180,000 shares. The ESPP provides for an annual increase on the first day of each year beginning in 2020 and ending in 2029, in each case subject to the approval of the Board, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the calendar month before the date of the automatic increase and (ii) 360,000 shares; provided that prior to the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii). As of September 30, 2022, no shares of common stock had been issued under the ESPP. The first offering period has not yet been decided by the Board.