Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 10. STOCK-BASED COMPENSATION

On September 23, 2021, the 2021 Equity Incentive Plan (“2021 Plan”) and the 2021 Employee Stock Purchase Plan (“ESPP”) became effective. The 2021 Plan and ESPP provide for annual automatic increases in the number of shares reserved under each plan on January 1 of each year, beginning on January 1, 2022 and through January 1, 2031. The number of shares available for issuance under the 2021 Plan will increase annually in an amount equal to the least of (i) 2,750,000 shares, (ii) a number of shares equal to 4% of the total number of shares of all classes of common stock of the Company outstanding on the last day of the immediately preceding fiscal year, or (iii) such lesser number of shares determined by the Company’s Board of Directors (“Board”) no later than the last day of the immediately preceding fiscal year. The number of shares of common stock available for issuance under the ESPP will increase annually in an amount equal to the least of (i) 550,000 shares of common stock, (ii) a number of shares of common stock equal to 1% of the total number of shares of all classes of common stock of the Company on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Board. As of March 31, 2023, 8,025,655 shares were reserved for issuance under the 2021 Plan, of which 1,220,496 shares were available for future grant and 6,805,159 shares were subject to outstanding options and restricted stock units (“RSUs”), including performance-based awards. As of March 31, 2023, 59,434 shares have been issued under the ESPP and 1,249,573 shares were reserved and available for future issuance.

On March 14, 2022, the compensation committee of the board adopted the 2022 Inducement Equity Incentive Plan (the “2022 Inducement Plan”) under which the Company may grant equity awards to new employees. The only persons eligible to receive grants under the 2022 Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq guidance. As of March 31, 2023, 3,000,000 shares were reserved for issuance under the 2022 Inducement Plan, of which 201,841 shares were available for future grant and 2,798,159 shares were subject to outstanding stock options.

Under the 2021 Plan, the Company can grant incentive stock options, nonstatutory stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards and other awards to employees, directors and consultants. Under the 2022 Inducement Plan, the Company can grant nonstatutory stock options, restricted stock awards, stock appreciation rights, RSUs, performance awards and other awards, but only to an individual, as a material inducement to such individual to enter into employment with the Company or an affiliate of the Company, who (i) has not previously been an employee or director of the Company or (ii) is rehired following a bona fide period of non-employment with the Company. Under the ESPP, the Company can grant purchase rights to employees to purchase shares of common stock at a purchase price which equal to 85% of the fair market value of common stock on the offering date or on the exercise date, whichever is lower.

Stock options under the 2021 Plan and the 2022 Inducement Plan may be granted for periods of up to 10 years and at prices no less than 100% of the fair market value of the shares on the date of grant, provided, however, that the exercise price of an ISO (which cannot be granted pursuant to the 2022 Inducement Plan) granted to a 10% stockholder may not be less than 110% of the fair market value of the shares. Stock options granted to employees and non-employees generally vest ratably over four years.

Stock Option Activity

The following table summarizes the stock option activity, including performance-based stock options, under the 2021 Plan, the 2022 Inducement Plan and the Company’s 2019 Equity Incentive Plan for the three months ended March 31, 2023:

	Options Outstanding
	Number of Shares			Weighted Average Exercise Price		Weighted - Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Balance, January 1, 2023		6,169,180		$	2.25		7.80	$	-
Options granted		3,017,696		$	1.85
Options exercised		(44,413	)	$	0.71
Options cancelled/forfeited		(238,873	)	$	0.78
Balance, March 31, 2023		8,903,590		$	2.16		8.37	$	2,523
Vested and expected to vest, March 31, 2023		8,903,590		$	2.16		8.37	$	2,523
Exercisable – March 31, 2023		3,058,616		$	1.68		6.69	$	2,189

The aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of the options exercised during the three months ended March 31, 2023 was $0.1 million.

The total fair value of options that vested during the three months ended March 31, 2023 and 2022 was $1.5 million and $0.4 million, respectively. The weighted-average grant date fair value of options granted during the three months ended March 31, 2023 and 2022 was $1.52 and $1.95 per share, respectively.

Future stock-based compensation for unvested options as of March 31, 2023 was $10.4 million, which is expected to be recognized over a weighted-average period of 3.2 years, including $0.1 million related to performance-based stock options, which is expected to be recognized over a weighted-average period of 0.5 years.

Performance-based stock options

During the three months ended March 31, 2023, the Company granted 50,000 shares subject to performance-based stock options with the weighted-average exercise price of $1.92 which are included in the table above. As of March 31, 2023, 513,959 shares subject to the performance-based stock options with the weighted-average exercise price of $1.47 per share and weighted-average contractual life of 8.0 years were outstanding.

The following table summarizes the performance-based stock options activity under the 2021 Plan and the 2019 Plan for the year ended March 31, 2023:

	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance, January 1, 2023		463,959	$	1.42		8.06	$	-
Options granted		50,000	$	1.92		-	$	-
Balance, March 31, 2023		513,959	$	1.47		8.02	$	337,635
Vested and expected to vest, March 31, 2023		513,959	$	1.47		8.02	$	337,635
Exercisable		308,959	$	0.73		7.18	$	337,635

Restricted Stock Units (RSUs)

The following table provides a summary of RSUs activity under the 2021 Plan during the three months ended March 31, 2023:

	Number of Shares			Weighted Average Grant date Fair Value
Unvested restricted stock units at January 1, 2023		2,617,445		$	0.79
Vested		(625	)	$	3.54
Unvested restricted stock units at March 31, 2023		2,616,820		$	0.79
Vested and unreleased		-		$	-
Outstanding restricted stock units at March 31, 2023		2,616,820		$	0.79

The total fair value of RSUs that vested during the three months ended March 31, 2023 was less than $0.1 million. Unamortized stock-based compensation for restricted stock units as of March 31, 2023 was $1.1 million, which is expected to be recognized over a weighted-average period of 0.5 years.

In April 2023, 1,308,106 RSUs vested, and the Company released 855,173 shares of the common stock, net of tax withholdings, to the RSU holders.

Employee Stock Purchase Plan

The first offering period under the ESPP commenced in June 2022 and ended in December 2022. The second offering period commenced in December 2022 and will end in June 2023.

The Company issued no shares of common stock under the ESPP and recognized less than $0.1 million compensation expense related to the ESPP during the three months ended March 31, 2023. Unamortized stock-based compensation for shares issuable under the ESPP as of March 31, 2023 was less than $0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years. The Company recorded $0.1 million in accrued expenses and other current liabilities related to contributions withheld as of March 31, 2023.  

Stock-Based Compensation Expense

The following table presents stock-based compensation expenses related to options and RSUs granted to employees and non-employees, ESPP awards and restricted common stock shares issued to founders (in thousands):

	Three Months Ended March 31
	2023		2022
Research and development	$	468	$	222
General and administrative		799		556
Total	$	1,267	$	778

The Company recognized less than $0.1 million of stock-based compensation expense related to performance-based options and RSUs during each of the three months ended March 31, 2023 and 2022.

Valuation of Stock Options

The grant date fair value of stock options was estimated using a Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended March 31,
	2023	2022
Expected term (in years)	5.25 – 6.08	1.00 – 6.08
Expected volatility	103.34% – 104.07%	63.41% – 88.27%
Risk-free interest rate	3.45% – 4.25%	1.40% – 2.35%
Expected dividend yield	—	—

Valuation of ESPP Awards

No ESPP awards were granted during the three months ended March 31, 2023 and 2022.