Convertible Preferred Stock and Stockholders’ Equity (Deficit)

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Convertible Preferred Stock and Stockholders' Equity (Deficit)

6. Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Convertible Preferred Stock

Prior to its conversion into the Company’s common stock in connection with the Company’s IPO in June 2021, the Company’s outstanding convertible preferred stock was classified as temporary equity in the accompanying balance sheets in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control, including liquidation, sale or transfer of control of the Company. The Company determined not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such events would occur.

The authorized, issued and outstanding shares of convertible preferred stock as of December 31, 2020 consist of the following (in thousands, except share amounts):

	Shares Authorized		Shares Issued and Outstanding		Liquidation Preference		Carrying Value
Series Seed 2		4,148,832		4,148,832	$	17,674	$	17,628
Series Seed		2,689,997		2,689,997		4,035		3,996
Total		6,838,829		6,838,829	$	21,709	$	21,624

In June 2020, the Company entered into a Series Seed 2 preferred stock purchase agreement (“Series Seed 2 SPA”) with existing stockholders, pursuant to which it was authorized to issue up to an aggregate of 4,148,832 shares of the Company’s Series Seed 2

convertible preferred stock in two closings. The first closing took place in June 2020 (the “Initial Closing”) and the second closing took place in December 2020 (the “Second Closing”). In the Initial Closing, the Company issued 1,056,337 shares of Series Seed 2 convertible preferred stock at $4.26 per share for cash proceeds of $4.5 million. In addition, the Company issued 2,036,158 shares of Series Seed 2 convertible preferred stock upon conversion of the Convertible Notes (see Note 4). In the Second Closing, the Company issued 1,056,337 shares of Series Seed 2 convertible preferred stock at $4.26 per share for cash proceeds of $4.5 million. The Company determined that the tranche right associated with the Second Closing did not meet the definition of a freestanding financial instrument and did not require bifurcation.

On March 1, 2021, the Company entered into a Series A preferred stock purchase agreement with various investors, pursuant to which it issued and sold an aggregate of 5,894,740 shares of its Series A convertible preferred stock at a price per share of $9.50 for gross proceeds of $56.0 million.

On April 15, 2021, the Company entered into a Series B preferred stock purchase agreement with various investors, pursuant to which it issued and sold an aggregate of 8,038,073 shares of its Series B convertible preferred stock at a price per share of $15.551 for gross proceeds of $125.0 million.

Initial Public Offering

In June 2021, the Company completed its IPO selling 13,110,000 shares its common stock at $17.00 per share. Proceeds from the Company’s IPO, net of underwriting discounts and commissions and other offering costs, were $204.2 million. In connection with the Company’s IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 26,608,460 shares of the Company's common stock.

2017 Equity Incentive Plan

In August 2017, the Company adopted the Janux Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which provided for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock awards to its employees, members of its board of directors and consultants. The maximum term of options granted under the 2017 Plan is ten years and, in general, the options issued under the 2017 Plan vest over a four-year period from the vesting commencement date. The 2017 Plan allows for the early exercise of stock options, which may be subject to repurchase by the Company at the original exercise price. Upon the effectiveness of the 2021 Plan defined and described below, no further grants will be made under the 2017 Plan. Any outstanding awards granted under the 2017 Plan will remain subject to the terms of the 2017 Plan and applicable award agreements.

2021 Equity Incentive Plan

On June 4, 2021, the Company’s board of directors and stockholders adopted the 2021 Equity Incentive Plan (the “2021 Plan,” and together with the 2017 Plan the “Plans”), which became effective on June 10, 2021. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock awards, performance cash awards and other forms of stock awards to employees, directors and consultants. The maximum term of options granted under the 2021 Plan is ten years and, in general, the options issued under the 2021 Plan vest over a four-year period from the vesting commencement date. The 2021 Plan does not permit early exercises. A total of 2,775,890 new shares of common stock were initially reserved for issuance under the 2021 Plan. The number of shares reserved that were remaining under the 2017 Plan as of the effective date of the 2021 Plan, or 1,424,110 shares, were added to the shares initially reserved under the 2021 Plan upon its effectiveness and any future cancellations under the 2017 Plan will become available for future issuance under the 2021 Plan. In addition, the number of shares of common stock available for issuance under the 2021 Plan will automatically increase on January 1 of each calendar year through January 1, 2031, in an amount equal to 5% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s board of directors. As of December 31, 2021, there were 4,237,149 shares authorized for issuance under the 2021 Plan, inclusive of shares added from 2017 Plan cancellations.

A summary of the Company’s stock option activity under its Plans is as follows (in thousands, except share, per share data and years):

	Number of Outstanding Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Balance at December 31, 2020		1,096,533		$	0.47		9.31	$	3,214
Granted		5,230,595		$	10.69
Exercised		(635,316	)	$	2.59
Forfeited or cancelled		(37,149	)	$	6.16
Balance at December 31, 2021		5,654,663		$	9.65		9.22	$	62,954
Vested and expected to vest at December 31, 2021		5,654,663		$	9.65		9.22	$	62,954
Exercisable at December 31, 2021		5,066,553		$	7.37		9.17	$	62,645

The weighted-average grant date fair value per share of option grants for the years ended December 31, 2021 and 2020 was $8.01, and $0.44, respectively. The total intrinsic value of stock options exercised for the years ended December 31, 2021 and 2020 was $1.0 million and $0, respectively. As of December 31, 2021, total unrecognized stock-based compensation cost associated with option grants was $35.4 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.1 years.

The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants under its Plans were as follows:

	Year Ended December 31,
	2021		2020
Risk-free interest rate	0.8% – 1.6%		0.7% – 1.8%
Expected volatility	83% – 87%		85%
Expected term (in years)	5.5 – 10.0			10.0
Expected dividend yield		—		—

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities similar to the expected term of the awards.

Expected volatility. Given the Company’s limited historical stock price volatility data, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, for employees, which is an average of the contractual term of the option and its vesting period. The expected term for nonemployee options is generally the contractual term.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends and, therefore, used an expected dividend yield of zero.

2021 Employee Stock Purchase Plan

On June 4, 2021, the Company’s board of directors and stockholders adopted the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on June 10, 2021. The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP. The price of common stock purchased under the ESPP is equal to 85% of the lower of the fair market value of the common stock at the commencement date of each offering period or the relevant date of purchase. A total of 466,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will automatically increase on January 1 of each calendar year through January

1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase and (ii) 932,000 shares; provided that before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). In June 2021, employees began to enroll in the ESPP and the Company’s first offering period commenced. For the year ended December 31, 2021, stock-based compensation expense related to the ESPP was $0.2 million and unrecognized stock-based compensation expense related to the ESPP was $0.5 million as of December 31, 2021.

Stock-Based Compensation Expense

Stock-based compensation expense has been reported in the statements of operations and comprehensive loss as follows (in thousands):

	Year Ended December 31,
	2021		2020
Research and development	$	3,018	$	22
General and administrative		3,892		50
Total	$	6,910	$	72

Unvested Stock Liabilities

A summary of the Company’s unvested shares and unvested stock liabilities is as follows (in thousands, except share data):

	Number of Unvested Shares			Unvested Stock Liabilities
Balance at December 31, 2020		211,137		$	52
Early exercised shares		521,896			1,626
Vested shares		(353,208	)		(475	)
Balance at December 31, 2021		379,825		$	1,203

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consists of the following:

	December 31,		December 31,
	2021		2020
Conversion of preferred stock		—		8,760,535
Common stock options outstanding		5,654,663		1,096,533
Shares available for issuance under the Plans		3,629,039		220,147
Shares available for issuance under the ESPP		454,548		—
Total		9,738,250		10,077,215