Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

2020 Equity Incentive Plan

In September 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”) which, as of the adoption date, replaced the 2016 Stock Incentive Plan. Under the 2020 Plan, the share reserve automatically increases on January 1st of each year beginning in 2021 and ending with a final increase on January 1, 2030 in an amount equal to 4% of the Company’s outstanding common shares on December 31st of the preceding calendar year. The Board of Directors may provide that there will be no increase in the share reserve for any such year or that the increase in the share reserve may be smaller than would otherwise occur. The Board of Directors authorized an increase of 445,809 shares available for issuance under the 2020 Plan effective as of January 1, 2021, and as of September 30, 2021 there were 3,951,085 shares available for future grants. The 2020 Plan permits the granting of options and restricted stock. The terms of the agreements under the 2020 Plan are determined by the Company’s Board of Directors. The Company’s awards vest based on the terms in the agreements and generally vest over four years and have a term of 10 years.

2020 Employee Stock Purchase Plan

The 2020 Employee Stock Purchase Plan (“2020 ESPP”) became effective in connection with the Company’s IPO. A total of 395,795 shares of common stock were reserved for issuance under the 2020 ESPP. Eligible employees may purchase shares of common stock under the 2020 ESPP at 85% of the lower of the fair market value of the Company’s common stock as of the first or the last day of each offering period. Employees are limited to contributing 15% of the employee’s eligible compensation and may not purchase more than $25,000 of stock during any calendar year or more than 600 shares during any one purchase period. The 2020 ESPP share reserve automatically increases on January 1st of each calendar year, for ten years, commencing on January 1, 2021, in an

amount equal to 1% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Board of Directors may act prior to January 1st of a given year to provide that there will be no January 1st increase of the share reserve for such year or that the increase in the share reserve for such year will be a smaller number of shares of common stock than would otherwise occur pursuant to the preceding sentence. Under the 2020 ESPP, the Company issued 2,106 shares of common stock for aggregate cash proceeds of $0.1 million during the three months and nine months ended September 30, 2021. There were no shares of common stock issued during the three and nine months ended September 30, 2020.

The Company recorded stock-based compensation expense in the following expense categories of its accompanying unaudited interim statements of operations and comprehensive loss (amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	620	$	159	$	1,542	$	350
General and administrative	724		153		2,709		279
Total stock-based compensation	$	1,344	$	312	$	4,251	$	629

The following table summarizes option activity under the 2020 Plan and the 2016 Stock Incentive Plan:


	Options	Weighted Average Exercise Price	Weighted Average Remaining Contract Life (Years)
Balance at January 1, 2021	2,742,022	$7.95	8.82
Granted	235,704
Exercised	(460,692)
Forfeited	(25,847)
Balance at September 30, 2021	2,491,187	$10.51	8.18
Vested and expected to vest	2,458,242	$10.41	8.17
Exercisable at the end of the period	1,186,961	$4.32	7.66

Options granted during the nine months ended September 30, 2021 had a weighted-average grant-date fair value of $19.00. As of September 30, 2021, unrecognized compensation cost for options issued was $11.9 million, and will be recognized over an estimated weighted-average amortization period of 2.5 years. The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2021 was $19.3 million.

The fair value of each option is estimated on the date of grant using a Black-Scholes option pricing model which takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at grant date, expected term, expected stock price volatility, risk-free interest rate and dividend yield. The fair value of stock options was determined using the methods and assumptions discussed below.

•The expected term of employee stock options with service-based vesting is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data.

•The expected stock price volatility is based on historical volatilities of comparable public entities within the Company’s industry.

•The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the expected term.

•The expected dividend yield is 0% because the Company has not historically paid, and does not expect for the foreseeable future to pay a dividend on its common stock.

•Prior to the Company’s IPO, its Board of Directors periodically estimated the fair value of the Company’s common stock considering, among other things, contemporaneous valuations of its common stock prepared

by an unrelated third-party valuation firm. Subsequent to the Company’s IPO, the shares are issued at no less than the market price on date of grant.

The grant date fair value of options granted under the Company’s 2020 Plan and shares issued under the Company’s 2020 ESPP were estimated throughout the nine months ended September 30, 2021 using the Black-Scholes option-pricing model using the following weighted-average assumptions:


2020 Plan
Expected term - years			6.08
Expected volatility			81.35%
Risk-free interest rate			0.98%
Expected dividends			—

2020 ESPP
Expected term - years			0.50
Expected volatility			81.08%
Risk-free interest rate			0.68%
Expected dividends			—

For accounting purposes, the restricted shares are considered the issuance of share-based payments as opposed to the sale of stock and as such, the Company has recognized compensation expense for these awards.

The following table summarizes the activity relating to these shares:


			Awards
Outstanding at December 31, 2020			11,752
Vested			(11,752)
Outstanding at September 30, 2021			—