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Equity-based Compensation

9 Months Ended

Sep. 30, 2021

10. Equity-based Compensation

On September 15, 2017, the Company’s board of directors approved the 2017 Amended and Restated Equity Incentive Plan (the “Plan”), which provides for the granting of incentive stock options, non-qualified stock options and stock awards to employees, certain consultants and directors. The Board, or its designated committee, has the sole authority to select the individuals to whom awards are granted and determine the terms of each award, including the number of shares and the schedule upon which the award becomes exercisable.

The aggregate number of shares of common stock of the Company that may be issued under the Plan is 4,726,847 (taking into account shares of common stock that may become issuable pursuant to Section 3(b) of the Plan in respect of shares of common stock reserved under the Company’s Amended and Restated 2007 Equity Incentive Plan). The Plan also allows for a provision for shares granted which are cancelled, forfeited, exchanged or surrendered without having been exercised to subsequently be available for reissuance under the Plan.

The Company recorded total equity-based compensation expense in the statement of operations and comprehensive loss related to incentive stock options and nonstatutory stock options as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	(4)	$	56	$	30	$	161
General and administrative		76		73		234		181
Total equity-based compensation	$	72	$	129	$	264	$	342

As of September 30, 2021, total future compensation expense related to unvested awards yet to be recognized by the Company was $887. Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted-average remaining vesting period of approximately 2.6 years.

The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	Nine Months Ended September 30,
	2021	2020
Fair value of common stock	$1.75 - $6.15	$1.20
Expected volatility	100.82% - 101.83%	104.60% - 109.34%
Risk-free interest rate	0.67% - 1.06%	0.38% - 1.60%
Dividend yield	0.00%	0.00%
Expected term (years)	5.00 - 6.22	5.00 - 6.25

Expected Term — The expected term represents the period that the stock-based awards are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock option awards granted, expected term has been calculated using the simplified method.

Risk-Free Interest Rate — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.

Expected Volatility — Since the Company is privately held and does not have a trading history of common stock, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that the Company considers to be comparable to our business over a period equivalent to the expected term of the stock-based awards.

Dividend Yield — The expected dividend yield is zero as the Company has not paid and does not anticipate paying any dividends in the foreseeable future.

Fair Value of Common Stock — The fair value of the shares of common stock underlying the stock-based awards has historically been determined by the board of directors with input from management. Because there has been no public market for the common stock, the board of directors has determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having contemporaneous valuations of the common stock performed by a third-party valuation specialist.

Activity for options was as follows:


	Options Outstanding
						Weighted
		Weighted-		Aggregate		Average
		Average		Intrinsic		Remaining
	Number of	Exercise		Value		Contractual Life
	Options	Price		(in 000’s)		(In Years)
Balance, December 31, 2020	4,587,865	$	0.98
Options granted	67,232	$	2.25
Options exercised	(25,783)	$	0.73
Options forfeited	(161,479)	$	1.12
Options expired	(148,843)	$	0.94
Balance, September 30, 2021	4,318,992	$	1.00	$	22,213	6.4
Exercisable as of September 30, 2021	3,023,934	$	0.92	$	15,800	5.6
Vested and expected to vest as of September 30, 2021	3,982,080	$	1.00	$	20,494	6.3

The weighted-average grant date fair value of stock options granted was $1.79 during the nine months ended September 30, 2021. There were no stock options granted for the three months ended September 30, 2021 and 67,232 stock options granted at an aggregate fair value of $121 for the nine months ended September 30, 2021. The total grant-date fair value of stock options vested during the three and nine months ended September 30, 2021 was $83 and $383, respectively. During the three and nine months ended September 30, 2021, there were 4,996 and 25,783 stock options exercised, respectively, with an aggregate grant date fair value of $3 and $14, respectively. The intrinsic value of stock options exercised during the three and nine months ended September 30, 2021 was $26 and $140, respectively.

The Company granted 349,150 option awards containing performance conditions to an executive during 2019. As of September 30, 2021, the Company determined that the achievement of the performance targets was not probable and therefore, there was no expense recognized for these awards during the three and nine months ended September 30, 2021. As of September 30, 2021, total unrecognized compensation expense related to un-vested performance-based awards was $254, which would be recognized commencing with the period in which the performance condition is deemed probable of achievement.