The Company adopted the 2012 Stock Incentive Plan (the “2012 Plan”) in November 2012 pursuant to which the Company can issue incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock awards. Recipients of stock options or stock appreciate rights shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to the estimated fair market value of such stock on the date of grant. The exercise price may be less than fair market value if the stock award is granted pursuant to an assumption or substitution for another stock award in the event of a merger or sale of the Company. The maximum term of options granted under the 2012 Plan is ten years, and stock options typically vest over a four-year period. The Board may assign vesting terms to the stock option grants as deemed appropriate. The Company also has the right of refusal to purchase any proposed disposition of shares issued under the 2012 Plan. The 2012 Plan allows for early exercise of all stock option grants if authorized by the Board at the time of grant. The shares of common stock issued from the early exercise of stock options are restricted and vest over time. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. At the discretion of the Board, unvested shares held by employees may accelerate vesting in the event of a change of control of the Company unless assumed or substituted by the acquirer or surviving entity. The 2012 Plan has been subsequently amended and provides for the issuance of up to 6,941,421 shares of common stock as of September 30, 2023, of which 2,732,632 shares of common stock remained available for future grant under the 2012 Plan upon the effectiveness of the 2021 Equity Incentive Plan (the “2021 Plan”) and were made available for future issuance under the 2021 Plan.

In June 2021, the Company’s board of directors adopted and the Company’s stockholders approved the 2021 Plan, which became effective immediately prior to the effectiveness of the registration statement for the IPO. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. Upon effectiveness of the 2021 Plan, the number of shares of common stock reserved for issuance under the 2021 Plan was 5,932,632, which represents 3,200,000 shares along with 2,732,632 shares of common stock reserved for issuance under the 2012 Plan that remained available for grant under the 2012 Plan immediately prior to the effectiveness of the 2021 Plan. Shares of the Company's common stock subject to outstanding awards granted under the 2012 Plan that expire unexercised or are terminated, surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right will become available for issuance under the 2021 Plan. Upon adoption of the 2021 Plan, the Company ceased the grant of additional awards under the 2012 Plan. The 2021 Plan includes an "evergreen" provision, which provides for an annual increase to be added on January 1st of each year beginning in 2022 and continuing through and including 2031 by the lesser of (i) 5% of the number of shares of Stock outstanding as of such date and (ii) an amount determined by the board of directors. On January 1, 2023, the number of shares of Common Stock reserved and available for issuance under the 2021 Plan increased by 1,778,784 shares.

At September 30, 2023, 7,820,567 shares of common stock remained available for future grant under the 2021 Plan.

In June 2021, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effectiveness of the registration statement for the IPO. The ESPP is administered by the compensation committee of the Company’s board of directors, except that the Company’s board of directors may at any time act as the administrator of the ESPP. On July 13, 2023, the Compensation Committee suspended all future purchases under the ESPP, effective as of July 14, 2023, such that no new ESPP option periods will commence after July 14, 2023.

The ESPP provides participating employees with the opportunity to purchase shares of common stock, with an initial aggregate share pool of 300,000 shares of common stock. The number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1st of each year beginning in 2022 and continuing through and including 2031 by the least of (i) 1% of the number of shares of Stock outstanding as of such date, (ii) 600,000 shares of

Stock and (iii) the number of shares of Stock determined by the Company’s board of directors on or prior to such date for such year, up to a maximum of 6,300,000 shares in the aggregate. On January 1, 2023, the number of shares of Common Stock reserved and available for issuance under the ESPP increased by 355,756 shares.

The ESPP allows eligible employees to authorize payroll deductions of between 1% and 15% of their regular base salary or wages to be applied toward the purchase of shares of the Company's common stock on the last trading day of the offering period, subject to certain limitations contained in the ESPP. Participating employees will purchase shares of the Company's common stock at a discount of 15% on the lesser of the closing price of the Company's common stock on the Nasdaq Global Select Market (i) on the first trading day of the offering period or (ii) the last trading day of the offering period. The Company utilizes the Black Scholes option pricing model to compute the fair market value of the shares subject to outstanding options under the ESPP and compensation expense is recognized over the offering period.

Participation in the ESPP is voluntary. Eligible employees become participants in the ESPP by enrolling in the plan and authorizing payroll deductions in accordance with the terms of the ESPP. At the end of each offering period, accumulated payroll deductions are used to purchase the Company’s shares at the discounted price. The Company makes no contributions to the ESPP. A participant may withdraw from the ESPP or reduce contributions to the ESPP during an offering period. If the participant elects to withdraw during an offering period, all contributions are refunded as soon as administratively practicable. If a participant elects to withdraw during an offering period, the participant may not re-enroll in the current offering but may elect to participate in future offerings, subject to the terms of the ESPP. Only whole shares of the Company may be purchased under the ESPP.

The Company issued 62,754 common shares under the ESPP during the nine months ended September 30, 2023 at an average price per share of $1.45. Cash received from purchases under the ESPP for the nine months ended September 30, 2023 was $0.1 million. The Company recognized an immaterial amount of compensation expense for the ESPP during the nine months ended September 30, 2023.

Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in long-term liabilities on the condensed consolidated balance sheets. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. As of September 30, 2023 and December 31, 2022, there were 7,333 and 59,445 unvested shares related to early exercises of stock options, respectively.

The assumptions that the Company used in the Black Scholes option-pricing model to determine the grant date fair value of stock options granted were as follows:


	September 30, 2023	December 31, 2022
Risk-free interest rate range	3.64-3.65%	1.89%-4.23%
Dividend yield	0.0%	0.0%
Expected life of options (years)	6.0	6.0
Volatility rate range	93.0-93.3%	92.4%-93.3%

The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2023:


	Number of shares			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value (in thousands)
Outstanding as of December 31, 2022		3,460,897		$	5.60		8.23	$	375
Granted		1,054,357		$	1.69		—		—
Exercised		(457,579	)	$	1.32		—		—
Forfeited or cancelled		(1,384,844	)	$	5.55		—		—
Outstanding as of September 30, 2023		2,672,831		$	4.82		8.02	$	1,530
Options vested and exercisable as of September 30, 2023		1,439,617		$	6.04		7.37	$	575

As of September 30, 2023, there was $2.9 million of unrecognized stock-based compensation expense related to the share-based compensation arrangements under the 2012 Plan. The Company expects to recognize this amount over a weighted-average period of 2.3 years.

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the reporting period. There were no stock options granted during the three months ended September 30, 2023. The weighted-average grant date fair value of the Company’s stock options granted during the three months ended September 30, 2022 was $1.78.

The total fair value of options vested during the three months ended September 30, 2023 and 2022 was $2.0 million and $1.8 million, respectively.

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development	$	183	$	505	$	820	$	1,393
General and administrative		416		688		1,597		2,420
Total stock-based compensation expense	$	599	$	1,193	$	2,417	$	3,813