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Share-Based Compensation

6 Months Ended

Jun. 30, 2021

(10) Share-Based Compensation

Since inception, the Company has sold shares of restricted stock to co-founders, directors, managers, and advisors generally at prices believed to be fair market value at the time of the sale. Shares of restricted stock were reserved at the time of issue. To the extent that the sale price was less than the estimated fair market value at the grant date, a charge is recorded for the periods in which such shares vest. The vesting period for restricted stock is generally two to three years.

In April 2020, the Board approved the TransCode Therapeutics, Inc. 2020 Stock Option and Incentive Plan (the “Plan”) providing for the issuance of options or other awards to purchase up to 3,032,787 shares of the Company’s Common Stock. The Plan provides for grants of equity in the form of stock awards, stock options and other instruments to employees, members of the Board, officers and consultants of and advisors to the Company. The Plan is administered by the Board or, at the discretion of the Board, by a committee of the Board. The amount and terms of grants are determined by the Board. The terms of options granted under the Plan generally are for ten (10) years after date of grant and are exercisable in cash or as otherwise determined by the Board. The vesting period for equity-based awards is determined at the discretion of the Board and is generally two to four years. If grants of stock options under the Plan terminate, expire, or are surrendered or cancelled, the shares subject to such grants will again be available under the Plan. In 2020, the Board awarded options to purchase 1,756,279 shares of Common Stock under the Plan, all of which were outstanding at June 30, 2021. In January 2021, the Board awarded options to purchase 36,393 shares of Common Stock under the Plan, all of which were outstanding at June 30, 2021.

The exercise price for incentive stock options is determined at the discretion of the Board but for grants to any person possessing less than 10% of the total combined voting power of all classes of stock may not have an exercise price less than 100% of the fair market value of the Common Stock on the grant date (110% for grants to any person possessing more than 10% of the total combined voting power of all classes of stock). The option term for incentive stock option awards may not be greater than ten years from the date of the grant (five years for grants to any person possessing more than 10% of the total combined voting power of all classes of stock).

At June 30, 2021, options to purchase 1,240,115 shares were available for future grants and there were 763,968 options that were vested and exercisable. Information about options to purchase Common Stock of the Company under the Plan is as follows:


		Weighted
		average		Weighted
		exercise		average
	Number of	price		contractual
	shares	per share		term (years)
Outstanding at December 31, 2019	—		—	—
Granted	1,756,279	$	0.25	5.9
Exercised	—		—	—
Forfeited	—		—	—
Outstanding at December 31, 2020	1,756,279	$	0.25	5.9
Granted	36,393	$	3.91	9.8
Exercised	—		—	—
Forfeited	—		—	—
Outstanding at June 30, 2021	1,792,672	$	0.32	6.2

The intrinsic value of the outstanding options as of June 30, 2021, was $6,430,882.

Option valuation

The assumptions that the Company used to determine the grant-date fair value of options granted in the three and six months ended June 30, 2021, were as follows:


	Three and six months ended
	June 30, 2021
Risk-free interest rate		0.59	%
Expected term (in years)		6.0
Expected volatility		97.20	%
Expected dividend yield		—	%
Fair value per share of underlying stock	$	3.91

The weighted average grant date fair value of the options granted in 2021 was $3.01 per share.

The Company recorded share-based compensation expense of $34,514 and $82,945 during the three months and six months ended June 30, 2021, respectively. Share-based compensation in the three months ended June 30, 2021, comprised $33,816 related to stock options and $698 related to restricted stock. Share-based compensation in the six months ended June 30, 2021, comprised $81,548 related to stock options and $1,397 related to restricted stock. The remaining compensation costs to be recognized on the stock options is $312,534 over 2.4 years.