On June 28, 2017, the Company’s shareholders approved the 2017 Stock Incentive Plan (the “2017 Plan”). The 2017 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock grants and stock-based awards. The 2017 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years. The number of shares initially reserved for issuance under the 2017 Plan was 1,785,416 shares of common stock. The shares of common stock underlying any awards that are forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2017 Plan will be added back to the shares of common stock available for issuance under the 2017 Plan.

On October 18, 2017, the Company’s shareholders approved an amendment to the 2017 Plan, which became effective upon the completion of the Company’s initial public offering, to increase the total number of shares reserved for issuance under the 2017 Plan from 1,785,416 to 2,696,401. Additionally, the number of shares of common stock that may be issued under the 2017 Plan would be automatically increased on each January 1, beginning with the fiscal year ending December 31, 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the lowest of (i) 607,324 shares of common stock, (ii) 4% of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s board of directors or compensation committee.

On August 17, 2021, the Company's shareholders approved amendments to the 2017 Plan. The amendments provided for the following: (i) increased the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by

3,170,254 shares, (ii) removed the “evergreen” provision historically included in the 2017 Plan, and (iii) made certain other amendments.

In September 2022, the Company's shareholders approved an amendment to the 2017 Plan to increase the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 2,000,000 shares.

As of December 31, 2022, there were 4,382,875 shares remaining available to be issued under the 2017 Plan, as amended.

On March 11, 2019, the Company adopted the 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”) to reserve 331,500 shares of its common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with Spero within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The terms and conditions of the 2019 Inducement Plan are substantially similar to those of the 2017 Plan.

In June 2020, the board of directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance under the 2019 Inducement Plan by 700,000 shares. In December 2022, the board of directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance under the 2019 Inducement Plan by 875,000 shares.

As of December 31, 2022, there were 1,030,096 shares remaining available to be issued under the 2019 Inducement Plan, as amended.

The following table summarizes stock option activity for all of our plans during 2022:


	2017 Plan			2019 Inducement Plan			Total Number of Stock Options
Outstanding as of December 31, 2021		3,893,605			997,111			4,890,716
Granted		956,604			—			956,604
Exercised		(56,120	)		—			(56,120	)
Forfeited or cancelled		(1,161,257	)		(650,844	)		(1,812,101	)
Outstanding as of December 31, 2022		3,632,832			346,267			3,979,099

As of December 31, 2022, a total of 11,595,127 shares have been authorized and reserved for issuance under all equity plans and 5,412,971 shares were available for future issuance under such plans.

The fair value of stock options is estimated using the Black-Scholes option-pricing model. The Company does not have sufficient company-specific historical and implied volatility information and it therefore estimates its expected share volatility based on the historical volatility of a set of publicly traded peer companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. The Company has estimated the expected term of the Company’s stock option awards utilizing the “simplified” method for awards that qualify as “plain-vanilla.” The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of stock option awards granted to employees and directors were as follows, presented on a weighted average basis:


	Year Ended December 31,
	2022			2021
Risk-free interest rate		1.7	%		0.8	%
Expected term (in years)		6.2			6.2
Expected volatility		82.7	%		92.6	%
Expected dividend yield		0.0	%		0.0	%

The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2022:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		4,890,716		$	11.75		7.62	$	24,263
Granted		956,604			11.12
Exercised		(56,120	)		7.48
Forfeited or cancelled		(1,812,101	)		13.21
Outstanding as of December 31, 2022		3,979,099		$	10.99		5.27	$	1
Outstanding as of December 31, 2022 - vested and expected to vest		3,979,099		$	10.99		5.27	$	1
Exercisable at December 31, 2022		2,688,861		$	9.76		4.58	$	—

The weighted average grant-date fair value of stock options granted during the year ended December 31, 2022 was $7.94 per share. The weighted average grant-date fair value of awards granted during the year ended December 31, 2021 was $13.37 per share. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was approximately $0.1 million and $1.2 million, respectively. The Company satisfies stock option exercises with newly issued shares of its common stock.

As of December 31, 2022, total unrecognized compensation cost related to unvested stock option grants was approximately $11.4 million. This amount is expected to be recognized over a weighted average period of approximately 2.42 years.

The Company granted 1,420,750 restricted stock units (“RSUs”) to employees during the year ended December 31, 2022.

The following table summarizes RSU activity under all equity plans (excluding performance-based RSUs) during the year months ended December 31, 2022:


	Number of RSU Shares			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2021		513,690		$	17.08
Granted		1,420,750			5.88
Vested and released		(226,043	)		7.00
Forfeited or cancelled		(408,000	)		14.16
Outstanding as of December 31, 2022		1,300,397		$	7.51

As of December 31, 2022, there was approximately $8.1 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of approximately 2.83 years.

The fair value of the RSUs is determined on the date of grant based on the market price of the Company’s common stock on that date. Each RSU represents the right to receive one share of the Company’s common stock, $0.001 par value per share, upon vesting. Other than RSUs granted as retention awards, the RSUs vest in four equal annual installments, subject to the individual’s continued service to the Company through the applicable vesting date, and are subject to the terms and conditions of the Company’s form of RSU agreement under the 2017 Plan and 2019 Plan.

In July 2022, as part of the retention awards referenced in Footnote 10, the Company issued awards containing performance-based vesting criteria ("performance-based awards") to be issued on May 31, 2023, with a value of $1.7 million based on the common stock price at such time, subject to the discretion of the Company's Board or Compensation Committee to pay in cash or a combination of cash and stock. Performance-based awards will be recorded as an accrued liability on the Company's condensed consolidated balance sheet and accrued over time as achievement of performance metrics become probable. The performance-based awards are eligible for vesting based on the achievement of certain performance criteria by May 31, 2023 relating to pipeline execution, business development, and financial stewardship. Performance-based awards for which the performance criteria have not

been achieved as specified by May 31, 2023 will lapse and be forfeited. The performance-based awards will be subject to acceleration of vesting in the event of termination of employment without cause by the Company or by the executive for good reason (each as defined in the executive’s employment agreement).

In September 2022, the Company approved an award of 140,000 performance-based stock units as part of an executive inducement grant ("Inducement PSUs"). The Inducement PSUs are eligible for vesting based on the same performance criteria, above. To the extent these performance criteria are met by May 31, 2023, 50% of the Inducement PSUs will vest on September 12, 2023 and 50% will vest on September 12, 2024.

The Company recognized $1.0 million of compensation expense associated with performance-based awards and an insignificant amount of expense associated with the Inducement PSUs during the year ended December 31, 2022, as the performance conditions were considered probable of achievement.

The Company recorded share-based compensation expense, for both RSUs and stock options in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):


	Year Ended December 31,
	2022		2021

Research and development expenses	$	3,678	$	4,163
General and administrative expenses		5,445		5,267
Total	$	9,123	$	9,430