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Equity-Based Compensation

12 Months Ended

Dec. 31, 2020

9. Equity-Based Compensation

Equity Plans

As of December 31, 2020, the Company has three active equity plans, the 2018 Stock Option and Incentive Plan (the “2018 Plan”), the 2017 Stock Option and Incentive Plan (the “2017 Plan”), and the 2018 Employee Stock Purchase Plan (the “2018 ESPP”).

2018 Stock Option and Incentive Plan

The 2018 Plan was adopted by the Company’s Board of Directors on May 2, 2018, and approved by the Company’s stockholders on May 11, 2018. The 2018 Plan has replaced the 2017 Plan as no additional awards will be granted under that plan following the consummation of the IPO. At December 31, 2020 there were 1,962,992 shares available to grant under the 2018 Plan.

The 2018 Plan provides for the grant of equity-based incentive awards, including incentive stock options, non-qualified stock options, restricted stock awards, unrestricted stock awards and restricted stock units to the Company’s officers, employees, directors and other key persons (including consultants). Stock options granted under the 2018 Plan to employees generally vest over four years. The shares of common stock underlying any awards that are forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2018 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan.

The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board of Directors or compensation committee (the “Annual Increase”). These limits are subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization.

2017 Stock Option and Incentive Plan

The 2017 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards, unrestricted stock awards and restricted stock units. Stock options granted under the 2017 Plan to employees generally vest over four years. The shares of common stock underlying any awards that are forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2017 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan.

2018 Employee Stock Purchase Plan

On May 2, 2018, the Board of Directors adopted the 2018 ESPP, and it was approved by the stockholders on May 11, 2018. The 2018 ESPP initially reserved and authorized the issuance of 235,743 shares of common stock to participating

employees. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019, by the lesser of (i) 353,614 shares of common stock, (ii) 1% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or (iii) such lesser number of shares as determined by the 2018 ESPP administrator. The number of shares reserved under the 2018 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of December 31, 2020, no shares have been issued under the 2018 ESPP. At December 31, 2020 there were 795,849 shares available to grant under the 2018 Plan.

Total Equity-Based Compensation Expense

The Company recorded equity-based compensation expense related to all equity-based awards, which was allocated as follows in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2020 and 2019 (in thousands):


	Year Ended
	December 31,
	2020		2019
Research and development expense	$	3,554	$	2,425
General and administrative expense		7,621		5,547
	$	11,175	$	7,972

Equity-based compensation during the year ended December 31, 2020 includes $1.5 million related to the modification of certain equity awards. Equity-based compensation during the year ended December 31, 2019 includes $0.6 million and $0.1 million related to the acceleration and modification, respectively, of certain other equity awards.

Restricted Stock

The following table summarizes restricted common stock activity for the current year:


		Weighted
		Average Fair
		Value per Share
	Number of Shares	at Issuance
Restricted common stock as of December 31, 2019	302,360	$	5.77
Granted	—	$	—
Vested	(202,381)	$	5.77
Forfeited	(42,010)	$	5.77
Restricted common stock as of December 31, 2020	57,969	$	5.77

As of December 31, 2020, the Company had unrecognized equity-based compensation expense of $0.3 million related to restricted stock issued to employees and directors, which is expected to be recognized over a period of 0.6 years.

Stock Options

The following table summarizes the Company’s stock option activity for the current year:


				Weighted
		Weighted		Average
	Number of	Average		Remaining	Aggregate
	Shares	Exercise Price		Contractual Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding as of December 31, 2019	2,401,382	$	12.63	8.36	$	6,523
Granted	2,388,340	$	16.01
Exercised	(676,649)	$	10.78
Cancelled	(433,142)	$	14.38
Outstanding as of December 31, 2020	3,679,931	$	14.96	8.01	$	123,600
Options exercisable as of December 31, 2020	900,142	$	13.72	7.76	$	31,332

Using the Black-Scholes option pricing model, the weighted average fair value of options granted during the year ended December 31, 2020 was $11.29.

The following assumptions were used in determining the fair value of options granted in the year ended December 31, 2020:


	Year Ended
	December 31,
	2020		2019
Risk-free interest rate	0.92	%	2.31	%
Expected dividend yield	0.0	%	0.0	%
Expected term (years to liquidity)	6.21		6.20
Expected volatility	82.09	%	79.50	%

As of December 31, 2020, the Company has unrecognized equity-based compensation expense related to its stock options of $24.7 million which the Company expects to recognize over the remaining weighted-average vesting period of 2.7 years.