Stock-Based Compensation |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | 6. Stock-Based Compensation Equity Plans The Company inherited the 2017 Equity Incentive Plan (the "2017 Plan") as part of its merger with Tocagen, Inc. in June 2020. The 2017 Plan was terminated in May 2021 and replaced by the 2021 Equity Incentive Plan (the “2021 Plan”). The 2017 Plan will continue to govern outstanding awards issued under the 2017 Plan. The 2021 Plan had an initial reserve of 1,000,000 shares available for grant. The 2021 Plan was amended in June 2022 to increase the shares available for grant by an additional 1,500,000 shares. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of the Company and its affiliates. Service-based awards generally vested over a four-year period, with the first 25% of such awards vesting following twelve months of continued employment or service with the remaining awards vesting monthly in equal installments over the following thirty-six months. For certain service-based awards to the board of directors, vesting occurs in thirty-six equal monthly installments over a three-year period for initial grants and in twelve equal monthly installments over a twelve-month period for subsequent grants. As of March 31, 2023, there were 187,277 shares available for issuance under the 2021 Plan. On July 26, 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Inducement Plan”) and reserved 500,000 shares for future grant under the 2020 Inducement Plan. As of March 31, 2023, there were 115,000 shares available for issuance under the 2020 Inducement Plan.
Stock Options The risk-free interest rate valuation assumption for options is based on the U.S. Treasury yield curve rate at the date of grant with a maturity approximating the expected term of the option. The expected term assumption for options granted to employees is determined using the simplified method that represents the average of the contractual term of the option and the weighted average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. Due to the Company’s limited trading of its common stock and lack of company-specific historical or implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies in the life sciences industry whose shares are publicly traded. The Company selects the peer group based on comparable characteristics, including development stage, product pipeline, and enterprise value. The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. 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. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. Prior to the Merger, the fair value per share was determined by the Company’s Board of Directors, as of the date of each grant based on independent third-party valuations, taking into consideration various objective and subjective factors. Subsequent to the Merger, the fair value per share is the closing stock price on the option grant date. The weighted average grant-date fair value of stock options granted in the three months ended March 31, 2023 and 2022 was $0.82 and $0.96, respectively. The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing model were as follows.
The table below summarizes the stock option activity during the three months ended March 31, 2023:
The aggregate intrinsic value of options at March 31, 2023 is based on the Company’s fair value of its stock price on that date of $1.01 per share. Restricted Stock Unit Awards There were 1,100,000 restricted stock units granted during the three months ended March 31, 2023 with of the restricted stock units vesting every quarter. The Company made a change in accounting estimate in the three months ended March 31, 2022 related to the vesting of performance-based restricted stock units. As a result of this change in accounting estimate, $158,000 of expense that had been previously recognized in 2021 was reversed in the three months ended March 31, 2022. The table below summarizes the restricted stock unit awards activity during the three months ended March 31, 2023:
2017 Employee Stock Purchase Plan In May 2021, the Company’s board of directors reactivated the Company’s 2017 Employee Stock Purchase Plan (“ESPP”) which had previously been suspended. The ESPP allows eligible employees to withhold up to 15% of their earnings to purchase shares of the Company’s common stock at a price per share equal to the lower of (i) 85% of the fair market value of a share of the Company’s common stock on the first date of an offering or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. The Company had 521,522 shares available for future issuance under the ESPP as of March 31, 2023. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year through January 1, 2027, by the lesser of (a) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (b) 300,000 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b). The Company issued 7,000 shares under the ESPP during the three months ended March 31, 2023. The ESPP is considered a compensatory plan. The Company recorded stock-based compensation expense related to its ESPP of $2 thousand for the three months ended March 31, 2023. The Company did not record stock-based compensation expense related to its ESPP for the three months ended March 31, 2022. Stock-Based Compensation Expense Stock-based compensation expenses included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 were (in thousands):
As of March 31, 2023, there was unrecognized stock-based compensation expense related to stock options and restricted stock units with service conditions of $6.2 million, which is expected to be recognized over a weighted-average period of 2.03 years. Total unrecognized stock-based compensation expenses related to stock options and restricted stock units with performance conditions were approximately $0.2 million. |