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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2023
Equity [Abstract] |
Stockholders' Equity | 6. Stockholders’ Equity 2020 Equity Incentive Plan The Company may grant awards of common stock under the 2020 Equity Incentive Plan (the “2020 Plan”) to the Company’s employees, consultants and non-employee directors pursuant to option awards, stock appreciation rights awards, restricted stock awards, restricted stock unit awards, performance stock awards, performance stock unit awards and other stock-based awards. As of September 30, 2023 and December 31, 2022, the total number of common shares authorized for issuance under the 2020 Plan was 9,196,970 and 7,658,509, respective ly. On January 1st of each year, commencing with the first January 1st following the effective date of the 2020 Plan, the shares authorized for issuance under the 2020 Plan shall be increased by a number of shares equal to the lesser of 4% of the total number of shares outstanding on the immediately preceding December 31st and such lesser number of shares determined by the Company’s board of directors. The maximum term of the options granted under the 2020 Plan is no more than ten years. Awards under the 2020 Plan generally vest at 25% one year from the vesting commencement date and ratably each month thereafter for a period of 36 months, subject to continuous service. Stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 has been reported in the condensed statements of operations and comprehensive loss as follows (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Research and development |  | $ | 1,321 |  |  | $ | 1,427 |  |  | $ | 4,322 |  |  | $ | 4,125 |
General and administrative |  |  | 2,196 |  |  |  | 2,161 |  |  |  | 6,484 |  |  |  | 6,937 |
Total |  | $ | 3,517 |  |  | $ | 3,588 |  |  | $ | 10,806 |  |  | $ | 11,062 |
Restricted Stock Units In December 2022, the Company’s board of directors approved an amendment to the Director Compensation Policy, which allows each director to elect to receive their quarterly director fees in the form of restricted stock in lieu of cash. Two board members elected to receive shares of restricted stock in lieu of cash. For the nine months ended September 30, 2023, the Company issued 34,468 shares of fully vested restricted stock to the two board members. Compensation expense was earned and recognized for these fully vested restricted stock grants in the amount of $27,000 and $80,000 for the three and nine months ended September 30, 2023, respectively. The following table summarizes RSU activity under the 2020 Plan for the nine months ended September 30, 2023:
|  | Number of Shares |  |  | Weighted - Average Grant Date Fair Value |
Outstanding at December 31, 2022 |  |  | 510,039 |  |  | $ | 18.00 |
Granted |  |  | 34,468 |  |  | $ | 2.32 |
Vested |  |  | (361,412 | ) |  | $ | 16.50 |
Forfeited |  |  | (21,876 | ) |  | $ | 18.00 |
Outstanding at September 30, 2023 |  |  | 161,219 |  |  | $ | 18.00 |
As of September 30, 2023, total unrecognized stock-based compensation expense for RSUs was $2.9 million, which is expected to be recognized over a remaining weighted-average period of approximately 0.8 years. Stock Options The following table summarizes stock option activity under the 2020 Plan for the nine months ended September 30, 2023:
|  | Number of Options |  |  | Weighted - Average Exercise Price Per Share |  |  | Weighted -Average Remaining Contractual Term (In Years) |  |  | Aggregate Intrinsic Value |
Balance at December 31, 2022 |  |  | 2,736,918 |  |  | $ | 13.82 |  |  |  | 8.82 |  |  | $ | 3,636,148 |
Granted |  |  | 4,006,395 |  |  | $ | 3.75 |  |  |  |  |  |  |
Exercised |  |  | — |  |  | $ | — |  |  |  |  |  |  |
Forfeited |  |  | (364,018 | ) |  | $ | 7.22 |  |  |  |  |  |  |
Expired |  |  | (16,909 | ) |  | $ | 22.44 |  |  |  |  |  |  |
Balance at September 30, 2023 |  |  | 6,362,386 |  |  | $ | 7.83 |  |  |  | 8.76 |  |  |  |
Vested and expected to vest at September 30, 2023 |  |  | 6,362,386 |  |  | $ | 7.83 |  |  |  | 8.76 |  |  | $ | — |
Exercisable at September 30, 2023 |  |  | 1,364,478 |  |  | $ | 15.60 |  |  | 7.45 |  |  | $ | — |
As of September 30, 2023, total unrecognized stock-based compensation cost for unvested common stock options was $17.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.0 years. The weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2023 was $2.62 per share. The total fair value of options vested during the nine months ended September 30, 2023 was $5.7 million. On February 26, 2023, the Compensation Committee of the Company’s board of directors approved a modification to the Company’s 2020 Plan to allow vesting of RSUs or stock options, as applicable, subject to the grantee’s continued service to the Company and/or one of its subsidiaries as an employee, non-employee director, or independent contractor. Unvested RSUs totaling 139,730 shares and 574,244 unvested options which would have been forfeited under the original terms of the 2020 Plan will now continue to vest. The Company applied modification accounting to these awards which resulted in a decrease in fair value to these awards. The Company calculated compensation cost for the modified unvested awards of $416,000 related to the RSUs and $962,000 related to the options, and will recognize these amounts over the remaining requisite service periods. The modification also resulted in an increase to the term of 130,699 fully vested options for which $123,000 of incremental compensation cost was immediately recognized on the date of the modification. The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants were as follows:
|  | Nine Months Ended September 30,
|  | 2023 |  | 2022
Expected volatility |  | 77.9% |  | 74.8%
Risk-free interest rate |  | 3.88% |  | 2.05%
Expected dividend yield |  | 0.0% |  | 0.0%
Expected term |  | 6.05 years |  | 6.04 years
Expected volatility. As the Company’s common stock does not have a significant trading history, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry. Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present plans to pay cash dividends. Expected term. For employees, the expected term represents the period of time that options are expected to be outstanding. Because the Company has minimal historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period. For nonemployees, the expected term is generally the contractual term of the option. Employee Stock Purchase Plan The ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation. As of September 30, 2023 and December 31, 2022, a total of 1,737,098 shares and 1,229,148 shares, respectively, of common stock were authorized for issuance under the ESPP. The number of shares of common stock authorized for issuance will automatically increase on January 1 of each calendar year, from January 1, 2021 through January 1, 2030 by the least of (i) 1.0% of the total number of common shares of our common stock outstanding on December 31 of the preceding calendar year (calculated on a fully diluted basis), (ii) 929,658 common shares or (iii) a number determined by the Company’s board of directors that is less than (i) and (ii). The Company issued 56,793 and 9,482 shares of common stock under the ESPP during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, 1,521,559 shares o f common stock remained available for issuance under the ESPP. Stock-based compensation expense related to the ESPP for the three and nine months ended September 30, 2023 and 2022 was immaterial. Common Stock Reserved for Future Issuance Common stock reserved for future issuance are as follows in common equivalent shares:
|  | September 30, 2023 |  |  | December 31, 2022 |
Common stock options and restricted stock units issued and outstanding |  |  | 6,523,605 |  |  |  | 3,246,957 |
Awards available for future issuance under the 2020 Plan |  |  | 912,955 |  |  |  | 3,012,554 |
Awards available for future issuance under the ESPP |  |  | 1,521,559 |  |  |  | 1,070,402 |
Total common stock reserved for future issuance |  |  | 8,958,119 |  |  |  | 7,329,913 |

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