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Stock option plans

12 Months Ended

Dec. 31, 2021

9. Stock option plans

In September 2019, the Company’s Board of Directors approved the 2019 Equity Incentive Plan (the “2019 Plan) and each outstanding option to purchase Aprea AB ordinary shares pursuant to a previous plan was cancelled and the Company issued to each holder of such Aprea AB option, a substitute option to purchase, on the same terms and conditions as were applicable to such Aprea AB option, shares of the Company’s common stock pursuant to the 2019 Plan.

The Board of Directors has the discretion to provide for accelerated vesting under the 2019 Plan. At December 31, 2021, there were 907,589 shares available for future grant under the 2019 Plan.

The Company recorded stock-based compensation expense of $7,813,743, $4,983,023 and $1,345,722 during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $13,596,148 of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2019 Plan, which is expected to be recognized over a weighted-average period of approximately 2.3 years.

The fair value of each option award is estimated on the date of grant using Black-Scholes, with the assumptions noted in the table below. Expected volatility for the Company’s common stock was determined based on an average of the historical volatility of a peer group of similar public companies. The expected term of options granted to employees was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The contractual life of the option was used for the expected life of options granted to non-employee. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free rate for periods within the expected life of the option is based upon the Swedish Government Bond Rate in effect at the time of grant.

In determining the exercise prices for options granted prior to completion of the Company’s IPO, the Company’s Board of Directors has considered the fair value of the common stock as of the measurement date. The fair value of the common stock at each award grant date was based upon a variety of factors, including the results obtained from an independent third-party valuation, the Company’s financial position and historical financial performance, the status of technological developments within the Company’s proposed products, an evaluation or benchmark of the Company’s competition, the current business climate in the marketplace, the illiquid nature of the common stock, arm’s length sales of the Company’s capital stock, including Preferred Stock, the effect of the rights and preferences of the preferred shareholders, and the prospects of a liquidity event, among others.

The assumptions used in Black-Scholes are as follows:


	Year ended December 31,
	2021	2020	2019
Expected volatility	88.1% ‑90.2%	78.9% ‑83.8%	73.5% ‑74.5%
Risk‑free rate	0.96% ‑1.04%	0.36% ‑1.43%	1.53% ‑2.63%
Expected dividend yield	0%	0%	0%
Expected term in years	5.50-6.08	5.50-6.08	6.08-7.59

A summary of option activity under the Plan during the years ended December 31, 2021, 2020 and 2019 are as follows:


			Weighted‑		Weighted
			average		average
			exercise		remaining	Aggregate
	Number of		price per		contractual	intrinsic
	options		share		term (in years)	value
Outstanding at January 1, 2019		1,844,188	$	0.82	7.6
Granted		2,018,796		8.82
Exercised		(322,267)		0.23
Cancelled/Forfeited		(40,783)		0.99
Outstanding at December 31, 2019		3,499,934	$	5.49	7.5
Granted		446,800		35.51
Exercised		(164,075)		0.92
Cancelled/Forfeited		(11,200)		38.78
Outstanding at December 31, 2020		3,771,459	$	9.10	6.8
Granted		1,179,650		5.87
Exercised		(226,394)		0.92
Cancelled/Forfeited		(138,100)		16.53
Outstanding at December 31, 2021		4,586,615	$	8.45	6.6	$	2,101,398
Exercisable at December 31, 2021		2,518,554	$	6.89	5.5	$	2,093,937
Vested or expected to vest at December 31, 2021		4,586,615	$	8.45	6.6	$	2,101,398

The weighted-average grant date fair value of options granted during the years ended December 31, 2021, 2020 and 2019, was $4.29, $24.20, $6.68 per share, respectively.

Restricted Stock Units

During the year ended December 31, 2021, the Company granted a total of 500,000 RSUs to executive officers and certain other employees of the Company, 16,000 of which were canceled prior to vesting. The remaining RSUs vest as follows: 322,000, vest ratably on the 6 month, 12 month and 18 month anniversaries of the grant date and 162,000, vest ratably on the one-year, two-year and three-year anniversaries of the grant date. During the year ended December 31, 2021, the Company granted a total of 23,050 RSUs to non-employee directors of the Company. These RSUs vest on the one-year anniversary of the grant date.

As of December 31, 2021, there was $1,644,247 of unrecognized compensation cost related to RSUs granted under the 2019 Plan, which is expected to be recognized over a weighted-average period of approximately 1.9 years.

The following table shows restricted stock unit activity during the year ended December 31, 2021:



		Weighted‑
		average
		grant date
	Shares	fair value
Restricted stock units outstanding at December 31, 2020	—	$	—
Granted	523,050		5.91
Vested	(107,331)		5.94
Cancelled/Forfeited	(16,000)		6.00
Outstanding at December 31, 2021	399,719	$	5.91