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Stockholders' Equity and Stock Options
 3 Months Ended
Mar. 31, 2022
Stockholders' Equity Note [Abstract]  
Stockholders' Equity and Stock Options
7.
Stockholders’ Equity and Stock Options

Common Stock and Prefunded warrants

As of March 31, 2022, the Company’s Certificate of Incorporation, as amended and restated, authorized the Company to issue up to 115,000,000 shares of $0.001 par value common stock, of which 17,710,450 shares were issued and outstanding, and up to 5,000,000 shares of $0.001 par value undesignated preferred stock, of which no shares were issued or outstanding. The voting, dividend, and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors of the Company (the “Board”), if any. No cash dividends have been declared or paid to date.

Equity Distribution Agreement

On August 14, 2020, the Company entered into the ATM Agreement with an investment bank in connection with the establishment of an “at-the-market” offering program under which the Company may sell up to an aggregate of $50,000,000 of shares of common stock (the “ATM Shares”) from time to time (the “Offering”).

Under the ATM Agreement, the Company sets the parameters for the sale of ATM Shares, including the number of ATM Shares to be issued, the time period during which sales are requested to be made, limitations on the number of ATM Shares that may be sold in any one trading day and any minimum price below which sales may not be made. Sales of the ATM Shares, if any, under the ATM Agreement may be made in transactions that are deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act. The Company pays its investment bank a commission equal to 3.0% of the gross proceeds of any ATM Shares sold through its investment bank under the ATM Agreement and reimburses the investment bank for certain specified expenses. The ATM Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company and its investment bank, other customary obligations of the parties and termination provisions. The Company has no obligation to sell any of the ATM Shares and may at any time suspend offers under the ATM Agreement.

In 2021, the Company sold 2,342,720 shares under the ATM Agreement for net proceeds of $19.9 million.

As of March 31, 2022, 2,354,244 shares of Common Stock have been sold under the ATM Agreement for net proceeds of $20.1 million. As of May 10, 2022, approximately $29.2 million shares of common stock still remained available for sale by the Company under the ATM Agreement.

2020 Equity Incentive Plan

The Board adopted the 2020 Equity Incentive Plan (the "2020 Plan") on July 16, 2020 and the stockholders of the Company approved the 2020 Plan on September 29, 2020. The 2020 Plan replaces the predecessor plans (the "Prior Plans") that the Company assumed following its merger with Zafgen, Inc. ("Zafgen") in May 2020. Options outstanding under the Prior Plans will remain outstanding, unchanged, and subject to the terms of the Prior Plans and the respective award agreements, and no further awards will be made under the Prior Plans. However, if any award previously granted under the Prior Plans, expires, terminates, is canceled, or is forfeited for any reason after the approval of the 2020 Plan, the shares subject to that award will be added to the 2020 Plan share pool so that they can be utilized for new grants under the 2020 Plan.

The 2020 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, and cash or other stock-based awards. ISOs may be granted only to the Company’s employees, including the Company’s officers, and the employees of the Company’s affiliates. All other awards may be granted to the Company’s employees, including the Company’s officers, the Company’s non-employee directors and consultants, and the employees and consultants of the Company’s affiliates.

The maximum number of shares that may be issued in respect of any awards under the 2020 Plan is the sum of: (i) 1,700,000 shares plus (ii) an annual increase on January 1, 2021 and each anniversary of such date thereafter through January 1, 2030, equal to the lesser of (A) 4% of the shares issued and outstanding on the last day of the immediately preceding fiscal year, and (B) such smaller number of shares as determined by the Board (collectively, the “Plan Limit”). The maximum aggregate number of shares that may be issued under the 2020 Plan is 8,000,000 over the ten-year term of the 2020 Plan. In 2022 and 2021, respectively, options to purchase 450 and 56,966 shares issued under the Prior Plans were cancelled and became available for grant under the 2020 Plan.

As permitted by the 2020 Plan, the Company added 708,418 shares available for grant under the 2020 Plan on January 1, 2022. As of March 31, 2022, 1,114,743 shares of common stock were available for grant under the 2020 Plan.

Stock Valuation

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees:

 

 

 

March 31,

 

December 31,

 

 

2022

 

2021

Risk-free interest rate

 

1.75%

 

0.89%

Expected term (in years)

 

6.25

 

6.19

Expected volatility

 

90%

 

91%

Dividend yield

 

0.00%

 

0.00%

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022 (amounts in millions, except for share and per share data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted Average

 

 

Aggregate

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Intrinsic

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Value (a)

 

 

 

Shares

 

 

Price

 

 

Term (in years)

 

 

(in millions)

 

Outstanding as of December 31, 2021

 

 

2,523,305

 

 

$

1.88

 

 

 

7.6

 

 

 

 

Granted

 

 

600,950

 

 

 

8.81

 

 

 

 

 

 

 

Forfeited/Expired

 

 

(45,744

)

 

 

27.97

 

 

 

 

 

 

 

Outstanding as of March 31, 2022

 

 

3,078,511

 

 

$

16.78

 

 

 

7.9

 

 

$

—

 

Exercisable as of March 31, 2022

 

 

1,195,114

 

 

$

24.53

 

 

 

6.3

 

 

$

—

 

Vested and expected to vest as of March 31, 2022

 

 

3,078,511

 

 

$

16.78

 

 

 

7.9

 

 

$

—

 

 

(a)
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at March 31, 2022.

2022 Option Grants

During the three months ended March 31, 2022, the Company granted options to purchase 600,950 shares of common stock to employees of the Company under the 2020 Plan. The options have an exercise price equal to the closing stock price as of the grant date. These options vest over four years with 25% vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter. The weighted-average grant date fair value of options granted during three months ended March 31, 2022 was $6.61.

In May 2022, the Company granted options to purchase 251,500 shares of common stock to employees and directors of the Company under the 2020 Plan. The options have an exercise price equal to the closing stock price as of the grant date. Of the 251,500 options granted in May 2022, 210,000 were granted to employees and vest over four years with 25% vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter. The remaining 41,500 options were annual grants to the Company's directors and vest one year from the grant date.

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Research and development

 

$

655

 

 

$

438

 

General and administrative

 

 

980

 

 

 

742

 

 

 

$

1,635

 

 

$

1,180

 

As of March 31, 2022, total unrecognized compensation expense related to unvested stock options and restricted stock units was $16.9 million, which is expected to be recognized over a weighted average period of 2.68 years.