Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

8. Stock-Based Compensation

2019 Plan

In 2019, the Company adopted the 2019 Equity Incentive Plan (the 2019 Plan). The 2019 Plan provides for the Company to grant qualified stock options, non-qualified stock options, and restricted stock awards to employees, non-employee directors and consultants of the Company under terms and provisions established by the board of directors. Under the terms of the 2019 Plan, options are granted at an exercise price no less than fair value of the Company’s common stock on the grant date, except in certain cases related to employees outside of the U.S. However, for any employee who is a 10% or greater stockholder, options are granted at an exercise price no less than 110% of the fair value of the Company’s common stock on the grant date. Option awards granted typically have 10-year terms measured from the option grant date. However, if any employee is a 10% or greater stockholder, the awards have 5-year terms measured from the option grant date. While no shares are available for future issuance under the 2019 Plan, it continues to govern outstanding equity awards granted thereunder.

2021 Plan and ESPP

The compensation committee of the Company's board of directors adopted and the Company's stockholders approved the 2021 Equity Incentive Plan (2021 Plan) and the 2021 Employee Stock Purchase Plan (the ESPP), which became effective immediately prior to the effectiveness of the Company's IPO. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards. The Company's employees, officers, directors and consultants are eligible to receive awards under the 2021 Plan. Under the terms of the 2021 Plan, options are granted at an exercise price no less than fair value of the Company’s common stock on the grant date, except in certain cases related to significant corporate transactions. Option awards granted typically have 10-year terms measured from the option grant date. As of December 31, 2022, the total number of shares authorized for issuance under the 2021 Plan was 3,887,174. In addition, the number of shares of common stock reserved for issuance under our 2021 Plan will automatically increase on January 1 of each year, beginning on January 1, 2022, and continuing through and including January 1, 2031, by 5% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year, or a lesser number of shares determined by our board prior to the applicable January 1st.

The ESPP allows employees, including executive officers, to contribute up to 15% of their earnings, subject to certain limitations, for the purchase of the Company's common stock at a price per share equal to the lower of (a) 85% of the fair market value of a share of common stock on the first day of the offering period, or (b) 85% of the fair market value of a share of common stock on the last day of the offering period. As of December 31, 2022, there were 521,555 shares of common stock reserved for future issuance under our ESPP plan. The number of shares of common stock reserved for issuance under our ESPP will automatically increase on January 1 of each calendar year, beginning on January 1, 2022 and continuing through and including January 1, 2031, by the lesser of (1) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year or (2) a number of shares determined by our board. Shares subject to purchase rights granted under our ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under the ESPP.

As of December 31, 2022, no shares have been granted or purchased under the ESPP.

Stock Options

Awards with vesting conditions under both plans typically include either: (i) vesting 25% on the first anniversary of the grant date with the remainder vesting monthly over the following three years or (ii) monthly vesting over four years.

The activity for stock options is as follows:

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contract		Intrinsic
	Options			Exercise		Terms		Values
	Outstanding			Price		(in years)		(in thousands)
Balance as of December 31, 2021		2,922,135		$	3.62		9.14	$	21,144
Options granted		3,150,770			5.68
Options cancelled and forfeited		(84,634	)		3.87
Options exercised		—			—				—
Balance as of December 31, 2022		5,988,271		$	4.70		8.83		5,699
Vested and expected to vest, December 31, 2022(1)		5,943,271		$	4.67		8.83		5,699
Options exercisable as of December 31, 2022		1,824,032		$	3.69		8.25		3,078

(1) Excludes 45,000 stock options awards outstanding for the period ended December 31, 2022, subject to only performance conditions that have been assessed and deemed not probable.

The aggregate intrinsic value disclosed in the above table is based on the difference between the exercise price of the stock option and the fair value of the Company’s common stock as of the respective period-end dates. The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2022 and 2021 was $4.00 per share and $7.39 per share, respectively.

The Black-Scholes option pricing model for employee and nonemployee stock options incorporates the following assumptions:

•Fair Value of Common Stock — Prior to the completion of the Company's IPO, the fair value of the Company's common stock was determined by using straight-line interpolation between the value of common stock derived from valuations performed by independent third party specialists, further described in Note 2 to the consolidated financial statements Summary of Significant Accounting Policies – Fair Value of Common Stock. After the completion of the Company's IPO, the fair value of each share of common stock is based on the closing price of the Company's common stock on the date of grant as reported on the Nasdaq Global Market.

•Volatility — The expected stock price volatilities are estimated based on the historical and implied volatilities of comparable publicly traded companies as the Company does not have sufficient history of trading its common stock.

•Risk-free Interest Rate — The risk-free interest rates are based on US Treasury yields in effect at the grant date for notes with comparable terms as the awards.

•Expected Term — The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

•Dividend Yield — The expected dividend yield assumption is based on the Company’s current expectations about its anticipated dividend policy.

The fair value of the Company’s stock option awards was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2022 and 2021:

	Year Ended December 31,
	2022	2021
Expected term (in years)	5.50-6.50	5.78 - 6.08
Expected volatility	77.33% - 91.74%	77.19% - 79.57%
Risk-free interest rate	1.69% - 4.22%	0.91% - 1.84%
Expected dividend yield	0.00%	0.00%

Restricted Stock

The Company has restricted stock awards with service conditions that vest 25% on the first anniversary of the grant date and monthly thereafter. The restricted stock awards are subject to repurchase by the Company at the original purchase price in the event that the award recipient’s employment or relationship is terminated prior to the shares vesting.

The activity for restricted stock awards is as follows:

				Weighted-Average Grant-Date Fair
	Number of Shares			Value
Unvested at December 31, 2021		332,364		$	7.30
Granted		—			—
Vested		(154,869	)		6.83
Forfeited		—			—
Unvested at December 31, 2022		177,495		$	8.32

The fair value of restricted stock awards vested during the years ended December 31, 2022 and 2021 was approximately $0.6 million and $0.1 million, respectively.

The following table shows stock-based compensation for stock options and restricted stock awards included in the Company’s consolidated statements of operations and comprehensive loss (in thousands):

	Year Ended December 31,
	2022		2021
Research and development expense	$	2,538	$	987
General and administrative expense		4,453		2,750
Total stock-based compensation expense	$	6,991	$	3,737

As of December 31, 2022, there was $18.1 million of unrecognized compensation cost related to unvested stock options and $1.5 million of unrecognized compensation cost related to unvested restricted stock awards granted, which is expected to be recognized over a weighted average period of 2.75 years and 2.34 years, respectively.