STOCK-BASED COMPENSATION AWARDS

12 Months Ended

Dec. 31, 2021

STOCK-BASED COMPENSATION AWARDS

STOCK-BASED COMPENSATION AWARDS

NOTE 4  STOCK-BASED COMPENSATION AWARDS

Equity Incentive Plans

In March 2021, the Company’s Board of Directors adopted, and its stockholders approved, the Company’s 2021 Equity Incentive Plan (2021 Plan), which became effective in March 2021 in connection with the IPO. Upon adoption of the 2021 Plan, the Company restricted the grant of future equity awards under its 2017 Equity Incentive Plan, as amended and restated (the 2017 Plan).

The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to its employees, directors, and consultants and its subsidiary corporations’ employees and consultants. The vesting of stock options is stated in each individual grant agreement, which is generally four years. Options granted expire 10 years after the date of grant. A total of 5,040,00 shares of the Company’s common stock were initially reserved for issuance pursuant to the 2021 Plan. The 2021 Plan share reserve will be increased by the number of shares under the 2017 Plan that are repurchased, forfeited, expired or cancelled after the effective date of the 2021 Plan up to the limit under the 2021 Plan. The number of shares available for issuance under the 2021 Plan increases annually on the first day of each fiscal year beginning with the Company’s 2022 fiscal year, equal to the least of (1) 5,040,000 shares, (2) five percent (5%) of the outstanding shares of its common stock as of the last day of the immediately preceding fiscal year; or (c) such other amount as the Company’s Board of Directors may determine.

As of December 31, 2021, there were 3,010,909 shares available for future issuance under the 2021 Plan.

Option activity for the year ended December 31, 2021 is as follows:

						Weighted
						Average
		Weighted				Remaining
		Average		Total Intrinsic		Contractual Life
	Options	Exercise Price		Value		(Years)
Outstanding as of December 31, 2020	6,020,752	$	1.14
Granted	2,249,347	$	17.42
Exercised	(265,040)	$	0.44
Cancelled	(414,332)	$	1.41
Outstanding as of December 31, 2021	7,590,727	$	5.98	$	76,599	8.8
Options exercisable as of December 31, 2021	2,140,103	$	1.99	$	28,583	8.3

The Company recognized $4.4 million and $0.3 million in stock-based compensation expense in connection with the equity incentive plan for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was unrecognized stock-based compensation cost of $25.2 million, which is expected to be recognized over a term of 3.4 years. The aggregate intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was $4.3 million and $58,000 respectively. For options granted during the years ended December 31, 2021 and 2020, the weighted-average grant date fair value was $11.30 and $0.89 per share, respectively. There were additional options issued outside of this plan as discussed under Founder Stock Options.

Founder Stock Options

On September 19, 2017, the Company granted one of its founders the option to purchase 1,795,880 shares of the Company’s common stock at an exercise price of $0.18 per share which vest monthly over a four-year period that expires 15 years after the date of grant. This grant is separate from the Company’s equity incentive plans discussed above. As of December 31, 2021, 1,531,780 options were both outstanding and exercisable. There were no options exercised during the year ended December 31, 2021. Compensation expense with respect to these options was $17,000 and $35,000 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was no unrecognized stock-based compensation expense. As of December 31, 2021, the intrinsic value of options outstanding and exercisable was $23.1 million. The weighted-average remaining contractual life of stock options is 10.5 years as of December 31, 2021.

Fair Value Assumptions

The fair value of option grants is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the use of the following assumptions:

	Year ended December 31,
	2021	2020
Expected term (Years)	5.06 - 6.71	6 - 6.08
Expected volatility	75.0% - 76.4%	75.0%
Risk-free interest rate	0.60% - 1.36%	0.37% - 0.51%
Expected dividend rate	—	—
Fair value common stock	$1.93 - $28.87	$0.64 - $1.93

The expected term is based on the “simplified method” described in the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin Topic 14 which is determined as the midpoint between the vesting date and the contractual end of the option grant. Stock price volatility was estimated based on the estimated stock price volatility of a peer group of publicly traded companies over a similar term. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at the time of grant. The dividend yield was zero as the Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (ESPP) enables eligible employees of the Company to purchase shares of common stock at a discount. As of December 31, 2021, the Company has reserved for issuance 485,780 shares of common stock pursuant to the ESPP. Each offering period is approximately twelve months long. ESPP participants will purchase shares of common stock at a price per share equal to 85% of the lesser of (1) the fair market value per share of the common stock on the first trading day of the offering period or (2) the fair market value of the common stock on the purchase date.

Total stock-based compensation expense related to all equity plans was allocated as follows (in thousands):

	Year ended
	December 31,
	2021		2020
Research and development	$	2,790	$	228
General and administrative		1,614		126
Total stock-based compensation expense	$	4,404	$	354