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Stock-Based Compensation
 9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation In 2016, the Company adopted and subsequently amended the 2016 Stock Incentive Plan (the “Plan”). The total number of shares authorized under the Plan as of September 30, 2020 was 3,819,786, and 335,403 shares remain available for future grants as of September 30, 2020. The Plan permits the granting of options and restricted stock. The terms of the agreements are determined by the Company’s Board of Directors. The Company’s awards vest based on the terms in the agreements and generally vest over four years and have a term of 10 years.
The Company measures employee and non-employee stock-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the award. The Company recorded stock-based compensation expense in the following expense categories of its accompanying unaudited interim statements of operations and comprehensive loss (in thousands):
Three months ended September 30,Nine months ended September 30,
2020201920202019
Research and development$159 $93 $350 $151 
General and administrative153 50 279 146 
$312 $143 $629 $297 
 
The following table summarizes option activity under the Stock Plan:
Options
Weighted
average
exercise
price
Weighted average
remaining
contract life
Balance at January 1, 20201,615,375 $2.60
Granted1,116,966 $5.28
Exercised(163,292)$1.28
Forfeited(30,824)$2.95
Outstanding at September 30, 20202,538,225 $3.868.95
Vested and expected to vest September 30, 20202,485,746 $3.858.94
Exercisable at September 30, 2020684,910 $2.608.03
Options granted during the nine months ended September 30, 2020 had a weighted-average grant-date fair value of $3.36. As of September 30, 2020, unrecognized compensation cost for options issued was $4.5 million, and will be recognized over an estimated weighted-average amortization period of 2.88 years. The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2020 was $8.5 million.
The fair value of each option is estimated on the date of grant using a Black-Scholes option pricing model which takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at grant date, expected term, expected stock price volatility, risk-free interest rate, and dividend yield. The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Certain of these inputs are subjective and generally required judgement to determine.
•The expected term of employee stock options with service-based vesting is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of non-employee options is equal to the contractual term.
•The expected stock price volatility is based on historical volatilities of comparable public entities within the Company’s industry.
•The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the respective expected term or contractual term.
•The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.
•As the Company’s common stock has not been publicly traded, its board of directors periodically estimated the fair value of the Company’s common stock considering, among other things, contemporaneous valuations of its common stock prepared by an unrelated third-party valuation firm.
The grant date fair value of each option grant was estimated throughout the nine months ended September 30, 2020 using the Black-Scholes option-pricing model using the following weighted-average assumptions:
Expected term5.91
Expected volatility74.21%
Risk-free interest rate0.47%
Expected dividends—
Fair value of common stock$5.28
For accounting purposes, restricted shares granted are considered the issuance of shares as opposed to the sale of stock and as such, the Company has recognized compensation expense for these awards. Twenty-five percent of the shares became vested after one year and the remaining shares vest monthly over 36 months so long as the grantee remains employed by or provides service to the Company. In the event the grantee ceases to provide service, the Company has the option to repurchase any or all of the unvested shares at the original issuance price. The following table summarizes the activity relating to these shares for the nine months ended September 30, 2020 :
Awards
Balance at January 1, 202031,900
Vested15,111
Outstanding at September 30, 202016,789