Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Retirement Benefits [Abstract]

Stock-Based Compensation

8. Stock-Based Compensation

A summary of stock option activity for the six months ended June 30, 2023, is presented below (in thousands, except per share and contractual life data).

	Number of Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in Years)
Options outstanding as of December 31, 2022		5,272		$	3.07		7.15
Granted		1,122		$	1.25
Exercised		(101	)	$	0.44
Forfeited or expired		(154	)	$	2.78
Options outstanding, vested and expected to vest as of June 30, 2023		6,139		$	2.79		7.03
Options exercisable as of June 30, 2023		3,941		$	3.29		5.94

The estimated aggregate intrinsic value of stock options exercisable as of June 30, 2023, was $0.3 million. As of June 30, 2023, there was $2.4 million of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted average period of 1.2 years.

During the six months ended June 30, 2023, we granted stock options to purchase 1,121,817 shares of common stock to certain employees and board members. The options are exercisable for a period of ten years from the date of grant at a weighted average price of $1.25 per share, which was calculated at the fair value of our common stock on the respective grant date. The options generally vest over a period of four years. The fair value of options subject to only service conditions are valued using the Black-Scholes option pricing model, while those subject to performance or market conditions are valued using the Monte-Carlo Simulation model. During the six-months ended June 30, 2023, 200,000 options were issued and valued at $0.1 million using the Monte-Carlo model using the following assumptions:

● Beginning Stock Price. We utilized the Company's publicly traded share price as of the Valuation Date as the beginning stock value. At the Valuation Date, the publicly traded common share price was $1.09 per share.

● Drift Rate. In determining the value of the instrument in the risk-neutral framework, riskfree rates were estimated based on the applicable treasury rate for the projection period. For each simulation, the term of the risk-free rate was based on the term from the Valuation Date through the latest date on which the award could vest (i.e., two years following the Performance Period End Date). Please note that, for the purposes of calculating the service period associated with the Subject Interest, the Company’s cost of equity was utilized as the drift rate.

● Volatility. The total equity volatility (standard deviation) was based on a total equity volatility analysis.

● Period. The period was measured as the number of years from the Valuation Date through the PSO expiration date (10 years following the date of grant).

● Dividends. The Company has not historically paid dividends. In addition, the Company does not expect to pay dividends going forward. As such, no dividends were considered in our analysis.

During the six-months ended June 30, 2023, 921,817 options were issued and valued at $0.9 million using the Black-Scholes option-pricing model using the following assumptions: expected term of 4.00 to 6.20 years, volatility of 100%, risk-free interest rate of 3.99% to 4.45%, and expected dividend rate of 0.0%.

We also granted 402,500 RSU’s (as defined below) during the quarter. These RSUs had market conditions which required our stock price to exceed $3.15 per share for three consecutive days in the four years from grant date for the RSUs to vest.

The following table summarizes restricted stock unit (“RSU”) activity for the six months ended June 30, 2023 (in thousands, except per share data):

	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2022		—	$	—
Awarded		403		0.93
Vested and released		—		—
Forfeited/canceled		—		—
Outstanding as of June 30, 2023		403	$	0.93

As of June 30, 2023, there was $0.2 million of total unrecognized compensation cost related to the outstanding RSUs that will be recognized over a weighted average period of 1.2 years.

Stock-based compensation expense recognized for stock-based awards in the condensed consolidated statements of operations for the three and six months ended June 30, 2023, and 2022 was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	284	$	324	$	532	$	514
General and administrative		240		70		361		220
Total	$	524	$	394	$	893	$	734