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STOCK-BASED COMPENSATION | 6 Months Ended
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Jun. 30, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company's Board of Directors adopted, and the Company's stockholders approved, the 2017 Equity Incentive Plan (“2017 Plan”), which became effective on May 4, 2017. The initial reserve of shares of common stock issuable under the 2017 Plan was 3,052,059 shares. The 2017 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of stock-based awards. Additionally, the 2017 Plan provides for the grant of performance cash awards. The Company's employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan. Following the adoption of the 2017 Plan, no further awards will be granted under the Company’s prior plan. Pursuant to the terms of the 2017 Plan, on each January 1st, the plan limit shall be increased by the lesser of (x) 5% of the number of shares of common stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine at its discretion. On January 1, 2023 and January 1, 2022 an additional 3,523,344 and 1,000,000 shares, respectively, were reserved for issuance under the 2017 Plan. As of June 30, 2023, there were 4,131,738 shares of the Company’s common stock reserved and available for issuance under the 2017 Plan. The Company's Board of Directors adopted, and the Company's stockholders approved, the 2017 Employee Stock Purchase Plan (“2017 ESPP”), which became effective on May 4, 2017. The initial reserve of shares of common stock issuable under the 2017 ESPP was 279,069 shares. The 2017 ESPP allows employees to purchase common stock of the Company at a 15% discount to the market price on designated semi-annual purchase dates. During the three months ended June 30, 2023 and 2022, there were no shares purchased under the 2017 ESPP, and the Company recorded expense of $13,446 and $20,176, respectively. During the six months ended June 30, 2023 and 2022, 29,830 and 38,583 shares, respectively, were purchased under the 2017 ESPP, and the Company recorded expenses of $28,600 and $41,195, respectively. The number of shares of common stock reserved for issuance under the 2017 ESPP automatically increases on January 1 of each year, beginning on January 1, 2018 and continuing through and including January 1, 2027, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (ii) 550,000 shares or (iii) such lesser number of shares determined by the Board. The Board acted prior to each of January 1, 2023 and January 1, 2022 to provide that there be no increase in the number of shares reserved for issuance under the 2017 ESPP on either such date. As of June 30, 2023, there were 386,777 shares of the Company’s common stock reserved and available for issuance under the 2017 ESPP. The Company’s Board of Directors adopted and the Company’s stockholder’s approved the 2014 Equity Incentive Plan (“2014 Plan”), which authorized the Company to grant shares of common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units. The 2014 Plan was terminated as to future awards in May 2017, although it continues to govern the terms of options that remain outstanding under the 2014 Plan. No additional stock awards will be granted under the 2014 Plan, and all outstanding stock awards granted under the 2014 Plan that are repurchased, forfeited, expire or are cancelled will become available for grant under the 2017 Plan in accordance with its terms. As of June 30, 2023, options to purchase 1,663,597 shares of common stock were outstanding under the 2014 Plan. Unless specified otherwise in an individual option agreement, stock options granted under the prior plan and the 2017 Plan generally have a ten-year term and a four-year graded vesting period. The vesting requirement is generally conditioned upon the grantee’s continued service with the Company during the vesting period. Once vested, all options granted are exercisable from the date of grant until they expire. The option grants are non-transferable. Vested options generally remain exercisable for 90 days subsequent to the termination of the option holder’s service with the Company. In the event of the option holder’s death or disability while employed by or providing service to the Company, the exercisable period extends to 12 months. Performance-based option awards generally have similar terms, with vesting commencing on the date the performance condition is achieved and expire in accordance with the specific terms of the agreement. At June 30, 2023, there were no performance-based options outstanding. The fair value of options granted during the three and six months ended June 30, 2023 and 2022 was estimated using the Black-Scholes option valuation model. The inputs for the Black-Scholes option valuation model require significant assumptions that are detailed in the table below. The risk-free interest rates were based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life was based on the simplified method in accordance with the SEC Staff Accounting Bulletin No. Topic 14D. Beginning in January 1, 2023, the expected volatility was estimated based on historical volatility information of the Company since the Company's initial public offering. All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options underlying the agreements would also be canceled. The Company granted 50,000 stock options to nonemployee consultants for services rendered during the three and six months ended June 30, 2023 and no stock options during the three and six months ended June 30, 2022. There were 130,834 unvested nonemployee options outstanding as of June 30, 2023 and 2022. Total expense recognized related to nonemployee stock options for the three months ended June 30, 2023 and 2022 was $163,199 and $160,337, respectively. Total expense recognized related to nonemployee stock options for the six months ended June 30, 2023 and 2022, was $271,784 and $355,107, respectively. Total unrecognized compensation expenses related to the nonemployee stock options was $994,411 as of June 30, 2023. The Company did not recognize any expense for nonemployee performance-based option awards during the six months ended June 30, 2023 or 2022. The Company granted 270,000 and 2,426,750 stock options to employees during the three months ended June 30, 2023 and 2022, respectively. The Company granted 2,950,500 and 4,296,355 stock options to employees during the six months ended June 30, 2023 and 2022, respectively. There were 6,710,485 and 7,354,964 unvested employee options outstanding as of June 30, 2023, and 2022, respectively. Total expense recognized related to the employee stock options for the three months ended June 30, 2023 and 2022 was $1.8 million and $1.5 million, respectively. Total expense recognized related to the employee stock options for the six months ended June 30, 2023 and 2022 was $3.6 million and $2.6 million, respectively. Total unrecognized compensation expense related to employee stock options was $12.8 million as of June 30, 2023. No expense for employee performance-based options was recognized during the six months ended in June 30, 2023 and 2022. The Company’s stock-based compensation expense was recognized in operating expenses as follows:
| Three Months Ended |  | Six Months Ended
| June 30, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
Research and development | $ | 579,917 |  |  | $ | 387,384 |  |  | $ | 1,090,177 |  |  | $ | 782,876 |
General and administrative | 1,368,731 |  |  | 1,332,833 |  |  | 2,774,988 |  |  | 2,262,153 |
Total | $ | 1,948,648 |  |  | $ | 1,720,217 |  |  | $ | 3,865,165 |  |  | $ | 3,045,029 |
| Three Months Ended |  | Six Months Ended
| June 30, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
Stock options | $ | 1,935,202 |  |  | $ | 1,700,041 |  |  | $ | 3,836,565 |  |  | $ | 3,003,834 |
Employee Stock Purchase Plan | 13,446 |  |  | 20,176 |  |  | 28,600 |  |  | 41,195 |
Total | $ | 1,948,648 |  |  | $ | 1,720,217 |  |  | $ | 3,865,165 |  |  | $ | 3,045,029 |
The fair value of employee options granted during the three and six months ended June 30, 2023 and 2022 was estimated utilizing the following assumptions:
| Three Months Ended |  | Six Months Ended
| June 30, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
| Weighted Average |  | Weighted Average |  | Weighted Average |  | Weighted Average
Volatility | 84.11 | % |  | 87.20 | % |  | 84.56 | % |  | 87.20 | %
Expected term in years | 6.08 |  | 6.08 |  | 6.07 |  | 6.08
Dividend rate | 0.00 | % |  | 0.00 | % |  | 0.00 | % |  | 0.00 | %
Risk-free interest rate | 3.63 | % |  | 2.78 | % |  | 3.97 | % |  | 2.16 | %
Fair value of option on grant date | $ | 2.66 |  |  | $ | 2.38 |  |  | $ | 1.92 |  |  | $ | 2.17 |
The fair value of non-employee options granted during the three and six months ended June 30, 2023 and 2022 was estimated utilizing the following assumptions:
| Three Months Ended |  | Six Months Ended
| June 30, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
| Weighted Average |  | Weighted Average |  | Weighted Average |  | Weighted Average
Volatility | 83.00 | % |  | — | % |  | 83.00 | % |  | — | %
Expected term in years | 5.25 |  | 0.00 |  | 5.25 |  | 0.00
Dividend rate | 0.00 | % |  | 0.00 | % |  | 0.00 | % |  | 0.00 | %
Risk-free interest rate | 3.89 | % |  | — | % |  | 3.89 | % |  | — | %
Fair value of option on grant date | $ | 2.42 |  |  | $ | — |  |  | $ | 2.42 |  |  | $ | — |
The following table summarizes the number of options outstanding and the weighted average exercise price:
| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life in Years |  | Aggregate Intrinsic Value
Options outstanding December 31, 2022 | 12,961,238 |  |  | $ | 4.13 |  |  | 7.42 |  | $ | 62,158 |
Granted | 3,000,500 |  |  | 2.62 |  |  | 9.69 |  |
Exercised | (91,078) |  |  | 2.52 |  |  |  |  |
Forfeited or expired | (421,825) |  |  | 3.25 |  |  |  |  |
Options outstanding June 30, 2023 | 15,448,835 |  |  | $ | 3.87 |  |  | 7.37 |  | $ | 5,854,085 |
Vested and exercisable at June 30, 2023 | 8,607,516 |  |  | $ | 4.64 |  |  | 6.17 |  | $ | 2,406,178 |
At June 30, 2023 there was approximately $13.8 million of unrecognized stock–based compensation expense related to employee and nonemployee grants, which is expected to be recognized over a remaining average vesting period of 2.43 years.

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