Note 10 - Equity Incentive Plans

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 10.  Equity Incentive Plans

On April 23, 2019, the Company’s stockholders approved the adoption of the 2019 Equity Incentive Plan (the “2019 Plan”), under which the Company is authorized to issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock units, other stock awards and performance awards that may be settled in cash, stock, or other property. The 2019 Plan is designed to secure and retain the services of employees, directors and consultants, provide incentives for the Company’s employees, directors and consultants to exert maximum efforts for the success of the Company and its affiliates, and provide a means by which employees, directors and consultants may be given an opportunity to benefit from increases in the value of the Company’s common stock. Following adoption of the 2019 Plan, all previous plans were frozen, and on forfeiture, cancellation and expiration, awards under those plans are not assumed by the 2019 Plan.

The aggregate number of shares of common stock authorized for issuance under the 2019 Plan was initially 1,600,000 shares, which was increased through an amendment to the 2019 Plan adopted by the Company’s stockholders (a “Plan Amendment”) on June 8, 2020, to 8,000,000, by a Plan Amendment on June 16, 2021, to 16,900,000, and by a Plan Amendment on August 4, 2022, to 28,900,000. Further amendments to the 2019 Plan to increase the share reserve would require stockholder approval. Awards that are forfeited or canceled generally become available for issuance again under the 2019 Plan. Awards have a maximum term of ten years from the grant date and may vest over varying periods, as specified by the Company’s board of directors for each grant.

In the six months ended June 30, 2022, the Company granted 509,061 restricted stock unit (“RSU”) awards to employees which vest annually over four years, subject to each employee’s continued service relationship with the Company. The related compensation cost, which is based on the grant date fair value of the Company’s common stock multiplied by the number of RSUs granted, is recognized, net of estimated forfeitures, as an expense ratably over the service period.

A summary of stock option and RSU transactions in the six months ended June 30, 2022, is as follows:

							Weighted					Weighted
	Shares			Number of			Average		Number of			Average
	Available			Options			Exercise		RSUs			Grant Date
	For Grant			Outstanding			Price		Outstanding			Fair Value
Balance at January 1, 2022		5,582,742			10,216,106		$	4.96		—		$	—
Granted		(5,137,646	)		4,628,585		$	4.49		509,061		$	3.95
Exercised		—			(70,643	)	$	1.11		—		$	—
Forfeited		430,720			(429,196	)	$	6.72		(1,589	)	$	2.89
Canceled		28,750			(38,934	)	$	10.44		—		$	—
Balance at June 30, 2022		904,566			14,305,918		$	4.76		507,472		$	3.95

As of June 30, 2022, there were 14,305,918 options outstanding with a weighted average exercise price of $4.76, a weighted average remaining term of 8.64 years and an aggregate intrinsic value of $7.0 million. Of these options, 4,941,521 were vested, with a weighted average exercise price of $3.33, a weighted average remaining term of 7.42 years and an aggregate intrinsic value of $5.5 million. The Company received $79,000 for the 70,643 options exercised during the six months ended June 30, 2022, which had an intrinsic value of $225,000, and received $892,000 for the 571,926 options exercised during the six months ended June 30, 2021, which had an intrinsic value of $3.2 million.

The weighted average grant date fair value of options awarded in the six months ended June 30, 2022 and 2021, was $3.98 and $6.23, respectively. Their fair values were estimated using the following assumptions:

	Six Months Ended June 30,
	2022		2021
Risk-free interest rate		1.62% - 3.03%		0.98% - 1.07%
Expected term (in years)		6.02 - 6.08		5.44 - 6.07
Expected volatility		125% - 126%		122% - 131%
Dividend yield		—%		—%

The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards, net of estimated forfeitures, to compensation expense over the service period. Total stock-based compensation recognized for options and RSUs was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development	$	2,383	$	644	$	4,410	$	1,223
General and administrative		1,038		1,960		2,141		2,632
Total stock-based compensation	$	3,421	$	2,604	$	6,551	$	3,855

As of June 30, 2022, the unrecognized stock-based compensation cost related to outstanding unvested stock options and RSUs expected to vest was $38.7 million, which the Company expects to recognize over an estimated weighted average period of 3.24 years.

On August 4, 2022, the 2022 Employee Stock Purchase Plan (the “2022 ESPP”) was approved by the Company’s stockholders. 1,800,000 shares are reserved for issuance under the 2022 ESPP, which will become effective on September 1, 2022.