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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 2016 Stock Incentive Plan (as Amended and Restated) The Company’s 2016 Stock Incentive Plan (the “2016 Plan”) provides for the grant of incentive stock options, non-qualified stock options and restricted stock awards to employees, directors, and consultants of the Company. Stock options granted under the 2016 Plan generally vest over four years and expire no later than ten years after the grant date. Following the Merger, the 2016 Plan was terminated. No additional stock awards will be granted under the 2016 Plan. All awards previously granted and outstanding as of the effective date of the Merger, were adjusted to reflect the impact of the Merger, but otherwise remain in effect pursuant to their original terms. The shares underlying any award granted under the 2016 Plan that are forfeited back to or repurchased or reacquired by the Company, will revert to and again become available for issuance under the 2022 Plan. 2022 Stock Incentive Plan On June 8, 2022, upon the Merger, the Company adopted a 2022 Stock Incentive Plan (the “2022 Plan”). The 2022 Plan provides for the grant of incentive stock options to employees, and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants. The exercise price of an option granted under the 2022 Plan shall not be less than the fair market value of a common stock share on the date of grant. With respect to a 10% stockholder, the exercise price of an option granted shall not be less than 110% of the fair value of the common stock share on the date of grant. Stock options granted under the 2022 Plan generally vest over four years and expire no later than ten years after the grant date. The Company initially reserved 2,492,735 shares of common stock for issuance under the 2022 Plan. On the first day of each year commencing January 1, 2023, the 2022 Plan will automatically increase by 5% of the outstanding number of shares of common stock of the Company on the last day of the preceding calendar year or such lesser number of shares as approved by the Company’s Board of Directors prior to the effective date of the annual increase. In addition, the shares underlying any award granted under the 2016 Plan that are forfeited back to or repurchased or reacquired by the Company, will revert to and again become available for issuance under the 2022 Plan. As of June 30, 2023, the total number of shares of common stock available for issuance under the 2022 Plan is 1,942,991. 2022 Inducement Equity Plan On August 5, 2022, the Company adopted a 2022 Inducement Equity Plan (the “2022 Inducement Plan”). The 2022 Plan provides for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to persons not previously an employee of the Company and its affiliates. The exercise price of an option granted under the 2022 Inducement Plan shall not be less than the fair market value of a common stock share on the date of grant. Stock options granted under the 2022 Inducement Plan generally vest over four years and expire no later than ten years after the grant date. The Company initially reserved 2,000,000 shares of common stock for issuance under the 2022 Inducement Plan. As of June 30, 2023, the total number of shares of common stock available for issuance under the 2022 Inducement Plan is 1,144,890. 2022 Employee Stock Purchase Plan On June 8, 2022, upon the Merger, the Company adopted a 2022 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of the Company's common stock at a price equal to 85% of the lower of the fair market values of the stock on the first day of an offering or on the date of purchase. The Company’s ESPP operates with rolling offering periods, which are generally 24 months. The Company initially reserved 592,584 shares of common stock for issuance under the ESPP. On the first day of each year commencing January 1, 2023, the 2022 Plan will automatically increase by 1% of the outstanding number of shares of common stock of the Company on the last day of the preceding calendar year or such lesser number of shares as approved by the Company’s Board of Directors prior to the effective date of the annual increase. As of June 30, 2023, the total number of shares of common stock available for issuance under the ESPP is 546,155. Stock options The following table summarizes the Company’s stock option activity and related information under all equity plans, excluding performance and market awards:
|  | Number of Options |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022 |  | 4,191,426 |  |  | $ | 3.18 |  |  | 9.1 |  | $ | 6 |
Granted |  | 2,794,596 |  |  | $ | 1.64 |  |  |  |  |
Forfeited |  | (411,588) |  |  | $ | 3.55 |  |  |  |  |
Outstanding at June 30, 2023 |  | 6,574,434 |  |  | $ | 2.50 |  |  | 9.0 |  | $ | 2 |
Vested and exercisable at June 30, 2023 |  | 1,247,904 |  |  | $ | 3.63 |  |  | 7.9 |  | $ | 2 |
The weighted-average grant date fair values of stock options granted during the six months ended June 30, 2023 and 2022 were $1.18 and none, respectively. The aggregate intrinsic values of stock options exercised during the six months ended June 30, 2023 and 2022 were none and $0.5 million, respectively. As of June 30, 2023, the unrecognized stock-based compensation expense related to stock options was approximately $8.6 million, expected to be recognized over a weighted-average period of 2.6 years. Early Exercise of Stock Options into Restricted Stock For the six months ended June 30, 2023 and 2022, the Company issued zero shares of common stock upon exercise of unvested stock options. As of June 30, 2023 and December 31, 2022, 80,180 and 105,500 shares were held by employees subject to repurchase at an aggregate price of $0.2 million and $0.3 million, respectively. Performance Awards In connection with the Merger, on December 19, 2021, Legacy Senti approved 8,400,892 performance award options to existing employees that vest contingent upon the satisfaction of both a four-year service condition and a performance condition tied to the consummation of the Merger. The awards and the associated recognition of stock-based compensation were contingent on the Merger being consummated. As of the approval date of the performance awards, Legacy Senti did not have sufficient common stock available for issuance. Upon the Merger, the Company increased the number of shares authorized and 6,796,074 awards were granted on June 8, 2022. Refer to Note 6, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized.
|  | Number of Options |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022 |  | 5,368,501 |  |  | $ | 9.92 |  |  | 9.0 |  | $ | — |
Forfeited |  | (201,952) |  |  | $ | 9.92 |  |  |  |  |
Outstanding at June 30, 2023 |  | 5,166,549 |  |  | $ | 9.92 |  |  | 8.4 |  | $ | — |
Vested and exercisable at June 30, 2023 |  | 1,436,378 |  |  | $ | 9.92 |  |  | 8.1 |  | $ | — |
There were no performance based options granted or exercised during the six months ended June 30, 2023, and there were 6,796,074 performance based options granted and no performance based options exercised during the six months ended June 30, 2022. As of June 30, 2023, the unrecognized stock-based compensation expense related to performance based options was approximately $7.8 million, expected to be recognized over a weighted-average period of 1.8 years. Market Awards In connection with the Business Combination Agreement with DYNS, on December 19, 2021, Legacy Senti approved 605,451 market award options to its co-founder and Chief Executive Officer, Dr. Timothy Lu, that vest contingent upon the satisfaction of all three of the following conditions: a service condition, a performance condition tied to the consummation of the Merger, and market conditions. The market condition is achieved in four tranches, where 25% of the options will vest when the trading price of the Company’s stock is above various thresholds of price per share. The award and the associated recognition of stock-based compensation were contingent on the Merger being consummated. The estimated fair value of the market awards at the grant date was based on a Monte Carlo simulation valuation model. As of the approval date, Legacy Senti did not have sufficient common stock available for issuance to allow for exercise of the stock options. Upon the Merger, the Company increased the number of shares authorized and 315,748 awards were granted on June 8, 2022. Through June 30, 2023, these market awards did not meet the vesting thresholds. Refer to Note 6, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized. The were no market based options granted or exercised during the six months ended June 30, 2023, and there were 315,748 market based options granted and no market based options exercised during the six months ended June 30, 2022. As of June 30, 2023, the unrecognized stock-based compensation expense related to market based options was approximately $0.5 million, expected to be recognized over a weighted-average period of 0.9 years. Restricted Stock Units The following table summarizes the Company’s restricted stock units activity and related information under all equity plans:
|  | Number of Restricted Stock Units |  | Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2022 |  | 447,948 |  |  | $ | 2.50 |
Forfeited |  | (112,064) |  |  | $ | 2.50 |
Outstanding at June 30, 2023 |  | 335,884 |  |  | $ | 2.50 |
As of June 30, 2023, the unrecognized stock-based compensation expense related to restricted stock units was approximately $0.5 million, expected to be recognized over a weighted-average period of 1.2 years. Stock-Based Compensation Expense In determining the fair value of the stock-based awards, the Company uses the assumptions below for the Black-Scholes option pricing model, which are subjective and generally require significant judgment. Fair Value of Common Stock — The fair value of the shares of common stock has historically been determined by the Company’s board of directors as there was no public market for the common stock. The board of directors determined the fair value of the common stock by considering a number of objective and subjective factors, including: third-party valuations of the Company’s common stock, the valuation of comparable companies, the Company’s operating and financial performance, and general and industry-specific economic outlook, amongst other factors. As of the closing of the Merger and going forward, the fair value of common stock will be based on the publicly traded market value. Expected Term — The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). The expected term for the ESPP purchase rights is the length of the purchase period. Volatility — The expected volatility is based on the average historical volatility of comparable publicly-traded peer companies, over a period equal to the expected term of the stock option grants, as the Company was not publicly traded prior to the Merger and does not have a trading history for its common stock for a sufficient period of time subsequent to the Merger. Risk-free Rate — The risk-free rate assumption is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. Dividends — The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock. Therefore, the Company uses an expected dividend yield of zero. The assumptions used to determine the grant date fair value of non-market based, stock options granted were as follows, presented on a weighted-average basis:
|  | Six Months Ended June 30,
|  | 2023 |  | 2022
Expected term (in years) |  | 5.9 |  | 5.8
Expected volatility |  | 83% |  | 78%
Risk-free interest rate |  | 3.5% |  | 3.0%
Dividend yield |  | — |  | —
Total stock-based compensation expense was as follows (in thousands):
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
General and administrative |  | $ | 3,081 |  |  | $ | 7,863 |  |  | $ | 6,320 |  |  | $ | 8,322 |
Research and development |  | 353 |  |  | 1,362 |  |  | 877 |  |  | 1,564 |
Total stock-based compensation expense |  | $ | 3,434 |  |  | $ | 9,225 |  |  | $ | 7,197 |  |  | $ | 9,886 |

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