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Stock-Based Incentive Compensation Plans
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Incentive Compensation Plans Stock-Based Incentive Compensation Plans
A summary of shares available for grant under the Company’s 2021 Equity Incentive Plan, or the 2021 Plan, is as follows:
Shares Available for Grant
Shares available for grant as of January 1, 20231,443,946 
Authorized1,252,287 
Granted/Awarded(2,308,591)
Cancelled1,305,842 
Withheld for taxes49,733 
Shares available for grant as of September 30, 2023
1,743,217 
In July 2023, the Company’s Compensation Committee of the Board of Directors approved the NeuroPace, Inc. 2023 Inducement Plan, or the Inducement Plan. The terms of the Inducement Plan are similar to the terms of the 2021 Plan with the exception that incentive stock options may not be issued under the Inducement Plan and awards under the Inducement Plan may only be issued to eligible recipients under the applicable Nasdaq rules. The Inducement Plan was adopted by the Compensation Committee without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The Company has initially reserved 380,424 shares of its common stock for issuance pursuant to awards granted under the Inducement Plan, and granted an option to purchase 380,424 shares of its common stock to its Chief Executive Officer, or CEO, as a material inducement for the CEO to join the Company.
A summary of stock option activity for the nine months ended September 30, 2023 is set forth below:
Options Outstanding
Number of SharesWeighted-Average Exercise PriceWeighted Average Remaining Contractual Term (in Years)
Balances as of January 1, 20233,446,583 $3.61 8.06
Granted695,225 $3.85 
Exercised(494,849)$0.03 
Cancelled(662,642)$5.00 
Balances at September 30, 2023
2,984,317 $3.95 6.70
Vested and exercisable at September 30, 2023
1,874,089 $3.38 5.45
Vested and expected to vest at September 30, 2023
2,984,317 $3.95 6.70
Early Exercise of Stock Options
The terms of the Company’s 2020 Stock Plan, or the 2020 Plan, and the 2021 Plan, permit the exercise of options granted under the plans prior to vesting, subject to required approvals. The shares of common stock issued from the early exercise of unvested stock options are restricted and continue to vest over the original implied service period. 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 and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. The cash received in exchange for exercised and unvested shares related to stock options granted is recorded as a liability for the early exercise of stock options in accrued liabilities on the accompanying balance sheet and will be transferred into common stock and additional paid-in capital as the shares vest. As of September 30, 2023 and December 31, 2022, there were 41,907 and 78,389 shares of common stock, respectively, issued pursuant to early exercised options and subject to repurchase.
Employee Stock Purchase Plan
In April 2021, the Company adopted the 2021 Employee Stock Purchase Plan, or ESPP. The Company allows eligible employees to purchase shares of the Company's common stock through payroll deductions at a price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each offering period, which is typically six months. There were 580,000 shares of common stock initially reserved for issuance under the ESPP. In January 2023, the number of shares of common stock available for issuance under the ESPP was increased by 250,457 shares as a result of the automatic increase provision in the ESPP.
As of September 30, 2023, 515,687 shares under the ESPP remain available for purchase. The Company issued 164,710 and 147,217 shares under the ESPP during the nine months ended September 30, 2023 and 2022, respectively. The offering period and purchase period is determined by the board of directors. A new offering period of six months has been authorized beginning June 7, 2023 through December 6, 2023.
Restricted Stock Units
Activity with respect to restricted stock units was as follows:
Number of Shares Underlying Outstanding Restricted Stock UnitsWeighted Average Grant Date Fair Value
Unvested, January 1, 20231,756,209 $10.15 
Granted1,993,790 $4.62 
Vested(590,698)$9.89 
Cancelled(643,200)$7.17 
Unvested, September 30, 2023
2,516,101 $6.59 
Stock-Based Compensation
The Company recognized stock-based compensation as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of goods sold$155 $129 $449 $402 
Research and development751 563 1,984 1,751 
Selling, general and administrative1,515 1,490 4,768 4,120 
Total stock-based compensation$2,421 $2,182 $7,201 $6,273 
The above stock-based compensation expense related to the following equity-based awards (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Stock options and restricted stock units$2,333 $2,054 $7,010 $5,897 
ESPP88 128 191 376 
Total stock-based compensation$2,421 $2,182 $7,201 $6,273 
As of September 30, 2023, the total unrecognized stock-based compensation expense related to unvested stock options and restricted stock units was $17.8 million, which will be amortized on a straight-line basis over a weighted average remaining period of 2.4 years.
As of September 30, 2023, the Company had unrecognized stock-based compensation expense relating to the ESPP awards of $0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years.