Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

During January 2017, the Company adopted the 2017 Equity Incentive Plan (“2017 Plan”), which provides for the granting of restricted stock, options to purchase shares of common stock and other awards to employees, directors and consultants. In March 2017, the Company amended the 2017 Plan to increase the number of available shares to 660,838. In September 2018, the Company adopted the 2018 Equity Incentive Plan (“2018 Plan”) which provides for the granting of restricted stock, options to purchase shares of common stock, and other awards to employees, directors and consultants, and reserved 1,741,770 shares for this purpose. The 2018 Plan was amended in July 2018 to increase the number of available shares to 1,809,143 shares. In February 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”) and have reserved a total of 5,202,624 shares under the plan. No further shares will be issued under the 2017 and 2018 plans. There are 1,059,253 shares available for issuance under the 2021 plan as of August 1, 2023.

The number of options to be granted under the 2021 Plan, the option exercise prices, and other terms of the options are determined by the Company's Board of Directors (the "Board") in accordance with the terms of the 2021 Plan. Generally, stock options are granted at fair value, become exercisable over a period of one to four years, expire in ten years or less and are subject to the employee’s continued employment.

On March 22, 2023, in order to retain and motivate employees and other key contributors of the Company, the Board approved a one-time stock option repricing (the “Option Repricing”). Pursuant to the Option Repricing, the exercise price of all of the below stock options to purchase shares of the Company’s common stock previously granted under our 2017 Plan, 2018 Plan and 2021 Plan (the “Repriced Options”) was amended as of April 4, 2023 (the “Effective Date”) to reduce the exercise prices of such options to a price equal to or greater than the closing price per share of the Company’s common stock on The

Nasdaq Stock Market on the Effective Date, which was $0.41 per share (the “Nasdaq Market Price”), on the terms described below:


Repriced Options	Terms of Repriced Options vested or vesting within six months following the Effective Date	Terms of Repriced Options vesting more than six months following the Effective Date
All options held by employees other than our executive officers, in good standing on the Effective Date	The Option Repricing exercise price will be equal to 2.5 times the Nasdaq Market Price, or $1.03.	The Option Repricing exercise price will be equal to the Nasdaq Market Price, or $0.41.
All options held by our current executive officers and 100,000 options held by Jerome Zeldis, our former Executive Vice President and Head of Research & Development	The Option Repricing exercise price will be equal to 3.0 times the Nasdaq Market Price, or $1.23.	The Option Repricing exercise price will be equal to 2.0 times the Nasdaq Market Price, or $0.82.
All options held by our directors	The Option Repricing exercise price will be equal to 4.0 times the Nasdaq Market Price, or $1.64.	The Option Repricing exercise price will be equal to 3.0 times the Nasdaq Market Price, $1.23.

The Company treated the Option Repricing as a modification to the original stock option grant because the terms of the agreements were modified. The total number of options issued and outstanding were not impacted by the Option Repricing.

The calculation of the incremental compensation expense is based on the excess of the fair value of the award measured immediately before and after the modification. The total incremental expense calculated to be recognized over the service period is $0.3 million. As a result, the Company recognized an incremental compensation expense for vested shares of $0.2 million associated with the modification arising from the Option Repricing for the three and six months ended June 30, 2023.

Stock-based compensation expense was recorded in the following financial statement line items within the statement of operations for the periods ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development expenses	$	324,422	$	871,307	$	584,152	$	2,004,069
General and administrative expenses	666,711		437,741		1,249,427		950,831
Total stock-based compensation expense	$	991,133	$	1,309,048	$	1,833,579	$	2,954,900

The following is a summary of option activity under the Company’s Stock Option Plans:


	Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2023	3,965,502	$	7.38	8.0	$	—
Granted	851,290	0.41
Exercised	—	—
Cancelled	(653,592)	13.22
Forfeited	(201,415)	5.82
Outstanding as of June 30, 2023	3,961,785	$	1.09	7.9	$	—
Vested or expected to vest as of June 30, 2023	3,961,785	$	1.09	7.9	—
Exercisable as of June 30, 2023	2,122,604	$	1.52	6.8	—
Shares unvested as of June 30, 2023	1,839,181	$	0.59	9.1	$	—

The weighted average fair value of the options granted during the six months ended June 30, 2023 and 2022 was $0.31 and $2.45, respectively. The options were valued using the Black-Scholes option-pricing model for the six months ended June 30, 2023 and 2022 with the following assumptions:


	2023		2022
Expected volatility	90.2	%	78.6% to 81.3%
Risk-free interest rate	3.4	%	1.5% to 3.6%
Expected dividend yield	0	%	0	%
Expected term	6.1 years		5.5 to 6.1 years

No options were exercised in the six months ended June 30, 2023. The intrinsic value of stock options exercised for the six months ended June 30, 2022 was $0.2 million.

As of June 30, 2023, there was $4.9 million of total unrecognized compensation expense related to unvested options that will be recognized over a weighted average period of 2.7 years.

Restricted Stock Units

A restricted stock unit (“RSU”) represents the right to receive one of the Company’s common stock upon vesting of the RSU. The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant.

The following is a summary of RSU activity for the 2021 Plan for the six months ended June 30, 2023:


	Number of restricted units	Weighted average grant date fair value
Unvested and outstanding at January 1, 2023	1,558,000	$	0.45
Granted	—	—
Vested	—	—
Forfeited	(32,500)	0.45
Unvested and outstanding as of June 30, 2023	1,525,500	$	0.45

As of June 30, 2023, there was $0.4 million of unrecognized compensation expense related to unvested RSUs, which are expected to be recognized over a weighted average period of 0.9 years.