On July 1, 2020, the Company’s board of directors approved the Existing Plan which permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, RSAs, RSUs and other stock-based awards to employees, directors, officers and consultants. On July 1, 2020, 3,529,412 shares of common stock were authorized for issuance under the Existing Plan. On September 16, 2020, the Company increased the number of shares of common stock authorized for issuance under the Existing Plan to 3,845,294.

On September 16, 2020, the Company’s stockholders approved the New Plan, which became effective upon the execution of the underwriting agreement in connection with the IPO. The number of shares available for future issuance under the New Plan is the sum of (1) 3,390,168 new shares of common stock, (2) 209,841 remaining shares of common stock reserved under the Existing Plan that became available for issuance upon the effectiveness of the New Plan and (3) the number of shares of common stock subject to outstanding awards under the Existing Plan when the New Plan became effective that thereafter expire or are forfeited, canceled, withheld to satisfy tax withholding or to purchase or exercise an award, repurchased by the Company or are otherwise terminated. The number of shares of common stock reserved for issuance under the New Plan will automatically increase on January 1 of each year, for a period of ten years, from January 1, 2021 continuing through January 1, 2030, by 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. No future issuances were made under the Existing Plan upon the effectiveness of the New Plan.

On July 1, 2020, options to purchase 2,896,782 shares of common stock under the Existing Plan were awarded to certain employees and consultants of the Company with an exercise price per share of $0.80, which were expected to vest over a four-year period, all of which were subsequently cancelled (the “Cancelled Options”). The grant date fair value of the Cancelled Options was $13.8 million at the original grant date. In exchange, the Company awarded 2,518,932 RSUs on September 2, 2020, which are expected to vest over a four-year term. The Company accounted for the changes in award terms as a modification in accordance with ASC 718 Compensation – Stock Compensation. The modification is accounted for as an exchange of the original award for a new award with total compensation cost equal to the grant-date fair value of the original award plus any incremental value measured on the modification date. The Company determined that there was no incremental value as the fair value of the original award immediately before the modification was greater than the fair value of the new award immediately after the modification. Accordingly, the Company will recognize the remaining compensation cost of $13.2 million over the vesting period of the RSUs.

The estimated fair value of the Company’s common stock at July 1, 2020 was $5.28 per share, as determined using information derived from the issuance price of the Company’s Series B convertible preferred stock of $17.00 per share on July 2, 2020. The valuation of the common stock was determined using an option-pricing model under which shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class, adjusted for a discount for the lack of marketability to account for a lack of access to an active public market.

The following assumptions were used to estimate the fair value of the Cancelled Options that were granted on July 1, 2020:

During the three months ended September 30, 2020, options to purchase 185,342 shares of common stock were granted with a weighted-average exercise price per share of $19.55. On September 2, 2020, options to purchase 16,342 shares of common stock under the Existing Plan were awarded to certain directors of the Company with an exercise price per share of $14.90, and on September 23, 2020, 169,000 shares of common stock under the New Plan were awarded with an exercise price per share of $20.00. The stock options generally vest over three or four years and have a ten-year contractual term.

The following weighted-average assumptions were used to estimate the fair value of stock options, excluding the Cancelled Options, for the nine months ended September 30, 2020:

Risk-free interest rate	0.46%
Expected dividend yield		-
Expected term in years	6.7
Expected volatility		80	%

The following table summarizes stock option activity, excluding the Cancelled Options, during the nine months ended September 30, 2020:

	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2020		-	$	-		-	$	-
Options granted		185,342		19.55		10.0		528
Outstanding at September 30, 2020		185,342	$	19.55		10.0	$	528
Vested and expected to vest at September 30, 2020		185,342	$	19.55		10.0	$	528
Options exercisable at September 30, 2020		-	$	-		-	$	-

The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock as of September 30, 2020 and the exercise price of the stock options. The weighted-average grant date fair value per share for the stock option awards, excluding the Cancelled Options, granted during the nine months ended September 30, 2020 was $13.73. As of September 30, 2020, the total unrecognized compensation related to unvested stock option awards granted was $2.5 million, which the Company expects to recognize over a weighted-average period of approximately 3.6 years.

On September 2, 2020, the Company issued 331,121 RSUs to an employee under the Existing Plan; 25% of the shares of common stock underlying the RSUs vest at each anniversary over a four-year period. The RSUs are subject to a service-based vesting condition. The RSUs were also subject to a liquidity-based performance vesting condition that was met upon the closing of the IPO. The Company at any time may accelerate the vesting of the RSUs. Such shares are not accounted for as outstanding until they vest. As of September 30, 2020, the total unrecognized compensation related to unvested RSUs granted, including the remaining compensation cost associated with the RSUs granted on September 2, 2020 in exchange for the Cancelled Options, was $17.8 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.2 years. The Company’s RSU activity for the nine months ended September 30, 2020 was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value per Share
Nonvested at January 1, 2020		-	$	-
Replacement restricted units granted		2,518,932		5.25
Restricted units granted		331,121		14.90
Vested		-		-
Nonvested at September 30, 2020		2,850,053	$	6.37

RA Session II, the Company’s President and Chief Executive Officer, was awarded 769,058 RSAs under the Existing Plan on July 1, 2020, which are expected to vest over a three-year term, subject to continuous employment. As of September 30, 2020, the total unrecognized compensation related to unvested RSAs granted was $3.7 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 1.4 years. The fair value of these RSAs at the grant date of July 1, 2020 was $5.28 per share.

The Company’s RSA activity for the nine months ended September 30, 2020 was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value per Share
Nonvested at January 1, 2020		-	$	-
Restricted stock granted		769,058		5.28
Vested		-		-
Nonvested at September 30, 2020		769,058	$	5.28

The following table summarizes the total stock-based compensation expense for the stock options, RSAs and RSUs recorded in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 (in thousands):

	For the Three Months Ended September 30, 2020		For the Nine Months Ended September 30, 2020
Research and development expense	$	399	$	399
General and administrative expense		942		942
Total	$	1,341	$	1,341