In 2011 Private Tempest adopted the 2011 Equity Incentive Plan, and in 2017, Private Tempest adopted the 2017 Equity Incentive Plan, together “the Plans”. Upon adoption of the 2017 Equity Incentive Plan, the 2011 Equity Incentive Plan was terminated. Both the Plans provide for the granting of stock awards to employees, directors and consultants of the Company. Awards issuable under the Plans include incentive stock options (“ISO”), nonqualified stock options (“NSO”), stock appreciation rights (“SAR”), restricted stock awards, restricted stock unit awards and other stock awards. As a result of the merger, the Plans of Private Tempest were assumed by the Company.

Options to purchase the Company’s common stock may be granted at a price not less than the fair market value in the case of both NSOs and ISOs, except for an employee or

non-employee

with options who owns more than 10 percent of the voting power of all classes of stock of the Company, in which case the exercise price shall be no less than 110 percent of the fair market value per share on the grant date. Stock options granted under the Plans generally vest over four years and expire no later than ten (10) years from the date of grant. Vested options can be exercised at any time.

The grant date fair market value of the shares of common stock underlying stock options has historically been determined by the Company’s Board of Directors. Because there has been no public market for the Company’s common stock, the Board of Directors exercises reasonable judgment and considers a number of objective and subjective factors to determine the best estimate of the fair market value, which include valuations performed by an independent

third-party,

important developments in the Company’s operations, sales of convertible preferred stock, actual operating results, financial performance, the conditions in the life sciences industry, the economy in general, the stock price performance and volatility of comparable public companies, and the lack of liquidity of the Company’s common stock.

Stock option activity under the Plans is set forth below:


							Weighted-
	Shares						Average
	Available			Total Options			Exercise
	for Grant			Outstanding			Price

Balance—January 1, 2021		489,797			452,165		$	5.35

Assumed in reverse recapitalization		—			178,732			178.64
Granted		(186,482	)		186,482			20.99
Exercised		—			(10,654	)		4.60
Cancelled and forfeited		5,667			(6,316	)		18.36


Balance—June 30, 2021		308,982			800,409			47.70

The following table summarizes information about stock options outstanding at June 30, 2021:


			Weighted
			Average		Weighted
			Remaining		Average		Aggregate
			Contractual		Exercise		Intrinsic
	Shares		Life (In Years)		Price		Value
Options outstanding		800,409		8.46	$	47.70	$	2,594,131
Vested and expected to vest		799,823		8.46	$	47.63	$	2,593,281
Exercisable		366,374		7.64	$	89.59	$	1,133,181

Employee Stock Options

—During the six months ended June 30, 2021, the Company granted employees stock options to purchase 184,872 shares of common stock with a weighted-average grant date fair value of $12.70 per share. As of June 30, 2021, there was total unrecognized compensation costs related to unvested employee stock options of $3,047. These costs are expected to be recognized over a

weighted-average

period of approximately 1.6 years.

The Company estimated the fair value of stock options using the

Black-Scholes

option pricing valuation model. The fair value of employee stock options is being amortized on the

straight-line

basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following assumptions for the six months ended June 30, 2021:


Expected term (in years)			6.0 – 6.1
Expected volatility			67%
Risk-free interest rate			1.0% – 1.1%
Dividends			0%

Expected Term

—The expected term of options granted represents the period of time that the options are expected to be outstanding. Due to the lack of historical exercise history, the expected term of the Company’s employee stock options has been determined utilizing the simplified method for awards that qualify as

plain-vanilla

options.

Expected Volatility

—The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available.

Risk

-Free

Interest Rate

—The

risk-free

interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

Dividends

—The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used.

Non

-Employee

Stock Options

— During the six months ended June 30, 2021, the Company granted

non-employees

stock options to purchase 1,610 shares of common stock with a weighted-average grant date fair value of $7.46 per share. As of June 30, 2021, there was total unrecognized compensation costs related to unvested

non-employee

stock options of $25. These costs are expected to be recognized over a

weighted-average

period of approximately 1.3 years.

The Company estimated the fair value of stock options using the

Black-Scholes

option pricing valuation model. The fair value of

non-employee

stock options is being amortized on the

straight-line

basis over the requisite service period of the awards. The fair value of

non-employee

stock options was estimated using the following assumptions for the six months ended June 30, 2021:


Expected term (in years)	10
Expected volatility	66	%
Risk-free interest rate	1.50	%
Dividends	0	%

Expected Term

—The expected term of options granted represents the period of time that the options are expected to be outstanding. The Company has valued its

non-employee

stock options using the contractual term as the expected term.

Expected Volatility

Risk

-Free

Interest Rate

—The

risk-free

interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

Dividends

Stock

-Based

Compensation Expense

—The following table summarizes the components of

stock-based

compensation expense recognized in the Company’s statement of operations for the three and six months ended June 30, 2021 and 2020:


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Research and development	$	45	$	176	$	122	$	231
General and administrative		366		51		409		(1	)

	$	411	$	227	$	531	$	230