Equity Incentive Plans

9 Months Ended

Sep. 30, 2023

Equity Incentive Plans

Equity Incentive Plans

12.           Equity Incentive Plans

2019 Equity Incentive Plan and 2023 Inducement Plan

The Company’s board of directors adopted and our stockholders approved our 2019 Equity Incentive Plan (the “2019 Plan”) on June 2, 2019, and June 7, 2019, respectively. The 2019 Plan became effective on June 19, 2019, and no further grants will be made under the Company’s 2010 Equity Incentive Plan (the “2010 Plan”). The purpose of the 2019 Plan, through the grant of stock awards including stock options and other stock-based awards, including restricted stock units (“RSUs”), is to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for our success and that of the Company’s affiliates, and provide a means by which the eligible recipients may benefit from increases in the value of the Company’s Class A common stock.

On February 9, 2023, the 2023 Inducement Plan, or the Inducement Plan, became effective. Subject to adjustment from time to time as provided in the Inducement Plan, 1.0 million shares of Class A common stock are available for issuance under the Inducement Plan. The purpose of the Inducement Plan is to attract, retain and motivate certain new employees of the Company. The Inducement Plan is administered by the compensation committee of the Company’s board of directors. Under the terms of the Inducement Plan, the compensation committee may grant equity awards, including nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, and other stock awards to new employees of the Company.

Stock Option Repricing

Effective June 13, 2022, the Company’s board of directors approved a one-time repricing of previously granted and outstanding vested and unvested stock options with exercise prices greater than or equal to $9.00 per share under the 2010 Plan and the 2019 Plan held by eligible employees. As a result, the exercise price for these awards was modified to $1.845 per share, which was the closing price of the Company’s Class A common stock as reported on the Nasdaq Global Select Market on June 13, 2022. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 3,606,163 vested and unvested stock options outstanding as of June 13, 2022 with original exercise prices ranging from $9.87 to $22.10, were repriced.

The repricing resulted in incremental stock-based compensation expense of $2.5 million, of which $0.1 million and $0.2 million were expensed during the three months ended September 30, 2023 and 2022, respectively, and $0.3 million and $1.7 million were expensed during the nine months ended September 30, 2023 and 2022, respectively. Remaining $0.3 million related to unvested stock option awards will be amortized on a straight-line basis over the weighted-average vesting period of those awards of approximately 0.5 years.

Stock Options

Stock option activity under the 2019 Plan, the 2010 Plan and the Inducement Plan is as follow:

	Options Outstanding
				Weighted-
				Average	Aggregate
		Weighted-		Remaining	Intrinsic
	Number	Average		Contractual	Value
	of Shares	Exercise Price		Life (years)	(in thousands)
Balances, December 31, 2022	6,373,534	$	3.56	7.3	$	2
Granted	2,981,883		1.45
Cancelled	(715,601)		2.94
Balances, September 30, 2023	8,639,816	$	2.88	7.4	$	—
Vested and expected to vest at September 30, 2023	8,639,816	$	2.88	7.4	$	—
Exercisable at September 30, 2023	5,213,153	$	3.58	6.4	$	—
Vested at September 30, 2023	5,213,153	$	3.58	6.4	$	—

The weighted-average exercise price, weighted-average remaining contractual life and aggregate intrinsic value as of September 30, 2023 reflect the impact of the stock option repricing discussed above. The weighted-average grant date fair value of options granted in the nine months ended September 30, 2023 and 2022 was $1.08 and $1.28, respectively. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, assuming no expected dividends and the following weighted average assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Expected life (in years)	6.05		—		5.97		5.88
Volatility	99.1	%	—	%	87.2	%	85.9	%
Risk-free interest rate	4.2	%	—	%	3.8	%	3.2	%

Expected volatility is based on volatilities of public peer companies operating in the Company’s industry. The expected life of the options is estimated using the simplified method detailed in SEC Staff Accounting Bulletin No. 107. The simplified method calculates the expected term as the mid-point between the weighted-average time to vesting and the contractual maturity. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Restricted Stock Units

The 2019 Plan provides for the issuance of RSUs to employees, directors and consultants. RSUs vest over either period of two years with 50% vesting on the one year anniversary of the award and the remainder vesting on the two year anniversary of the award or three years with 33% vesting in the first year, 33% vesting in the second year, and 33% vesting in the third year of the award vesting period.

The following table summarizes RSU activity for the nine months ended September 30, 2023:

		Weighted-Average
	Number	Grant Date
	of Shares	Fair Value per RSU
Unvested Balances, December 31, 2022	330,440	$	6.15
RSUs Granted	439,458		1.49
RSUs Vested	(435,567)		4.66
RSUs Cancelled	(86,080)		3.33
Unvested Balances, September 30, 2023	248,251	$	1.49

2019 Employee Stock Purchase Plan

The Company’s board of directors adopted the 2019 Employee Stock Purchase Plan (“ESPP”) on June 2, 2019, and the Company’s stockholders approved the ESPP on June 7, 2019. During the three months ended September 30, 2023 and 2022, the expense related to the ESPP was $0.1 million and $0.2 million, respectively. During the nine months ended September 30, 2023 and 2022, the expense related to the ESPP was $0.3 million and $0.7 million, respectively. The fair value of each ESPP is estimated on the date of grant using the Black-Scholes option pricing model, assuming no expected dividends and the following range of assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Expected life (in years)	0.5 - 2.0		0.5 - 2.0		0.5 - 2.0		0.5 - 2.0
Volatility	105.1 - 139.7	%	88.0 - 96.7	%	84.6 - 139.7	%	79.0 - 96.7	%
Risk-free interest rate	4.9 - 5.5	%	3.3 - 3.5	%	4.9 - 5.5	%	0.6 - 3.5	%

The Company recognized $2.3 million and $3.9 million of stock based compensation expense related to the 2019 Plan, 2010 Plan, and ESPP for the three months ended September 30, 2023 and 2022, respectively. The Company recognized $8.4 million and $13.7 million of stock-based compensation expense related to the 2019 Plan, 2010 Plan, and ESPP for the nine months ended September 30, 2023 and 2022, respectively. The compensation expense is allocated on a departmental basis, based on the classification of the option holder, as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development	$	968	$	1,869	$	3,570	$	6,576
General and administrative		1,329		2,015		4,813		7,132
	$	2,297	$	3,884	$	8,383	$	13,708

No income tax benefits have been recognized in the statements of operations for stock-based compensation arrangements and no stock-based compensation costs have been capitalized as property and equipment as of September 30, 2023.

Unrecognized compensation expense as of September 30, 2023 totaled $7.7 million related to non-vested stock options with a remaining weighted-average requisite service period of 1.9 years and $0.3 million related to non-vested RSUs with a remaining weighted-average requisite service period of 1.8 years.