In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the Company's 2014 Equity Incentive Plan (2014 Plan). As of the effective date of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards to individuals who are employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates.

Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of December 31, 2022, there were no shares subject to stock options that have been early exercised.

As of December 31, 2022, the Company had reserved shares of its common stock for future issuance as follows:


	Shares Reserved
Common stock options outstanding		5,877,745
Unvested restricted stock units		329,500
Available for future grants under the 2021 Equity Incentive Plan		546,521
Available for future grants under the 2021 Employee Stock Purchase Plan		383,917
Total shares of common stock reserved		7,137,683

A summary of the Company’s stock option activity and related information for the year ended December 31, 2022 is as follows:


	Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		4,215,643		$	5.49		8.5	$	13,530
Granted		2,067,976			2.51
Exercised		(54,535	)		2.01
Forfeited/Expired		(351,339	)		5.60
Outstanding at December 31, 2022		5,877,745		$	4.47		8.2	$	907
Vested at December 31, 2022		2,159,499		$	5.20		6.7	$	101
Exercisable at December 31, 2022		2,947,283		$	5.12		7.0	$	101

Options exercisable at December 31, 2022 include vested options and options eligible for early exercise. All outstanding options as of December 31, 2022 are expected to vest.

Unrecognized stock-based compensation expense at December 31, 2022 was $10.0 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:


	Year Ended December 31,
	2022			2021
Risk-free interest rate		3.4	%		0.9	%
Expected volatility		84.8	%		78.3	%
Expected term (in years)		6.0			6.0
Expected dividend yield		—	%		—	%

Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

Expected volatility. Since the Company does not have sufficient trading history for its common stock the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Fair value of common stock. For periods prior to the Company's IPO in April 2021, since there had been no public market for the Company’s common stock, the Company’s board of directors, with input from management, determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant.

RSUs consist of performance-based units (PSUs) and market-based units (MSUs). The following table summarizes RSU activities as of December 31, 2022:


	Number of RSUs			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2021		299,500		$	6.32
Granted		60,000			2.95
Cancelled		(30,000	)		6.69
Unvested at December 31, 2022		329,500		$	5.67

The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date. The fair value of the awards was based on the value of the Company’s common stock at the grant date of the award and expense recognition is based on the probability of achieving the performance conditions. Stock-based compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the performance conditions. The Company has 209,500 unvested shares underlying PSUs as of December 31, 2022. The Company concluded that achievement of the performance conditions was not probable as of December 31, 2022 and 2021, and therefore no stock-based compensation expense was recognized for the years ended December 31, 2022 and 2021 in connection with the PSUs. As of December 31, 2022, unrecognized stock-based compensation expense related to the PSUs that were deemed not probable was $1.4 million.

The MSUs vest based on the Company’s closing stock price trading above $20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement. The share price of the Company’s common stock on the date of issuance of the MSUs was $2.78 per share. The fair value was based on Monte Carlo simulation model on the grant date. Stock-based compensation expense is recognized over the derived service period of approximately 3 years. The Company has 120,000 unvested shares underlying MSUs as of December 31, 2022. Stock-based compensation expense related to the

MSUs during the years ended December 31, 2022 and 2021 was immaterial. As of December 31, 2022, there was $0.3 million of unrecognized stock-based compensation expense related to this MSU.

In connection with the CEO’s employment agreement, he is entitled to receive a Performance Award in the amount of $7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $750 million. The Company has determined that the Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions. Since the IPO, neither of the events have yet been satisfied. The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 3), which is recognized as stock-based compensation expense over the derived service period.

For the year ended December 31, 2022, the Company reversed approximately $0.4 million in stock-based compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price.

In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO. As of December 31, 2022, 103,719 shares have been issued under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE). An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE. No shares have been issued under the SAYE through December 31, 2022.

The stock-based compensation expense related to the ESPP and the SAYE for the year ended December 31, 2022, was $0.2 million and was immaterial for the year ended December 31, 2021.

The following table summarizes stock-based compensation expense, including expense associated with award modifications for unvested options, reflected in the consolidated statements of operations and comprehensive loss (in thousands):


	Year Ended December 31,
	2022		2021
Research and development	$	1,593	$	1,036
General and administrative		2,727		2,855
Total	$	4,320	$	3,891

In December 2022, the Company's Compensation Committee approved an extension of the post-termination exercise period applicable to each outstanding stock option, approximately 613,000 shares, held by the Company's non-employee directors, such that upon the termination of service, each option will remain exercisable through

the lessor of i) three years or ii) end of the term of such option from the date of grant. The Company recognized $0.2 million in stock-based compensation expense related to this modification in December 2022.