| Stock-Based Compensation | 6. Stock-Based Compensation Stock Incentive Plans 2018 Equity Incentive Plan In June 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), which became effective as of June 20, 2018, at which point no further grants will be made under the 2015 Equity Incentive Plan (the “2015 Plan”) described below. Under the 2018 Plan, the Company may grant incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) and other stock-based awards for the purchase of that number of shares of common stock. As of June 30, 2018, 75,621 shares of options and 10,189 RSUs have been granted and 1,812,145 shares were available for future issuance under the 2018 Plan. Initially, subject to adjustment as provided in the 2018 Plan, the aggregate number of shares of the Company’s common stock that may be issued pursuant to stock awards under the 2018 Plan will not exceed 4,000,000 shares, which is the sum of (i) 1,600,692 shares plus (ii) the number of shares reserved, and remaining available for issuance, under the 2015 Plan at the time the 2018 Plan became effective and (iii) the number of shares subject to stock options or other stock awards granted under the 2015 Plan that expire, terminate are forfeited or otherwise not issued, or are withheld to satisfy a tax withholding obligation in connection with an award or to satisfy a purchase or exercise price of an award (such as upon the expiration or termination of a stock award prior to vesting). The number of shares of the Company’s common stock reserved for issuance under the 2018 Plan will automatically increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 5% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. The maximum number of shares that may be issued upon the exercise of ISOs under the 2018 Plan is 12,500,000 shares. The maximum number of shares of common stock subject to stock awards granted under the 2018 Plan or otherwise during any one calendar year to any non-employee director, taken together with any cash fees paid by the Company to such non-employee director during such calendar year for service on the board of directors, will not exceed $750,000 in total value (calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes), or, with respect to the calendar year in which a non-employee director is first appointed or elected to the Company’s board of directors, $1,100,000. 2015 Equity Incentive Plan The Company’s 2015 Equity Incentive Plan provided for the granting of ISOs and NSOs to employees, directors and consultants at the discretion of the board of directors. The Company granted options under its 2015 Plan until April 2018 and it was terminated as to future awards in June 2018, although it continues to govern the terms of options that remain outstanding under the 2015 Plan. After the effective date of the 2018 Plan, no additional stock awards will be granted under the 2015 Plan, and all outstanding stock awards granted under the 2015 Plan that are repurchased, forfeited, expire or are cancelled will become available for grant under the 2018 Plan in accordance with its terms. Options granted under the 2015 Plan expire no later than 10 years from the date of grant. Options granted under the 2015 Plan vest over periods determined by the board of directors, generally over four years. The 2015 Plan allows for early exercise of certain options prior to vesting. Upon termination of employment, the unvested shares are subject to repurchase at the original exercise price. As of June 30, 2018, options to purchase 2,102,045 shares of common stock were outstanding under the 2015 Plan. 2018 Employee Stock Purchase Plan In June 2018, the Company’s board of directors and its stockholders approved the 2018 Employee Stock Purchase Plan (the “ESPP”), which became effective as of June 20, 2018. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 200,000 shares. The ESPP provides for an annual increase on the first day of each year beginning in 2019 and ending in 2028, in each case subject to the approval of the board of directors, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the prior fiscal year or (ii) 375,000 shares; provided, that prior to the date of any such increase, the board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). As of June 30, 2018, no shares of common stock had been issued under the ESPP and 200,000 shares remained available for future issuance under the ESPP. The option price per share of common stock to be paid by a participant upon exercise of the participant’s option on the applicable exercise date for an offering period shall be equal to 85% of the lesser of the fair market value of a share of common stock on (a) the applicable grant date or (b) the applicable exercise date. The first offering period has not yet been decided by the Company’s board of directors. Stock Option Activity The following table summarizes activity under the Company’s stock option plan and related information (in thousands, except share and per share amounts):
Number of Options Outstanding
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value
Outstanding at December 31, 2017
1,213,010
$
1.54
8.7
$
999
Additional shares authorized
Options granted
1,111,901
$
5.77
Options exercised
(136,328
)
$
1.56
$
237
Options cancelled
(10,917
)
$
0.90
Outstanding at June 30, 2018
2,177,666
$
3.70
9.0
$
29,609
Options exercisable at June 30, 2018
535,218
$
1.46
7.8
$
8,478
The weighted average grant date fair value of options granted during the six months ended June 30, 2018 was $4.12 per share. The 2015 Plan allows for early exercisable option grants, which permit the grantee to exercise a stock option in exchange for stock before the requisite service is provided (e.g., before the award is vested under its original terms); however, such arrangements permit the Company to subsequently repurchase such shares at the exercise price if the vesting conditions are not satisfied. To date, the Company has made such grants only to non-employee board members. The total intrinsic value of exercised stock options during the three and six months ended June 30, 2018 was $133,000 and $237,000, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company’s common stock at the date of exercise. Early Exercise Stock Purchase Agreements As of June 30, 2018 and December 31, 2017, there were 101,823 and 45,224, respectively, of nonvested common shares outstanding that were exercised early and subject to repurchase by the Company at the original issuance price upon termination of the stockholder’s services. The right to repurchase these shares generally lapses with respect to 25% of the shares underlying the option after the applicable vesting commencement date and 1/48 of the shares underlying the original grant per month for 36 months thereafter. The shares purchased pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be issued until those shares vest. The cash received in exchange for exercised and nonvested shares related to stock options granted is recorded as a liability for the early exercise of stock options on the balance sheets with the corresponding par value in common stock and an offset in additional paid-in capital. As of June 30, 2018 and December 31, 2017, the Company recorded in other current liabilities $158,000 and 18,000, respectively, associated with shares issued upon the early exercise of stock options that are subject to repurchase. Restricted Stock Units Granted to Employees During the three and six months ended June 30, 2018, the Company granted RSUs to certain employees to receive 10,189 shares of common stock pursuant to the 2018 Plan with a weighted-average estimated grant-date fair value of $17.75 per share. These RSUs were fully vested on the grant date. The valuation for these RSUs totaled $181,000 and was recognized as stock-based compensation expense in June 2018. There were no RSUs granted during the three and six months ended June 30, 2017.
Number of RSUs Outstanding
Weighted Average Grant-Date Fair Price
Outstanding at December 31, 2017
—
RSUs granted
10,189
$
17.75
RSUs vested
(10,189
)
$
17.75
Outstanding at June 30, 2018
—
Stock Options Granted to Employees That Contain Performance Condition During the three and six months ended June 30, 2018, the Company granted options to two of its executive officers to purchase an aggregate 115,657 shares of common stock that vest fully upon the achievement of the closing of the Company’s IPO. These options became fully vested on June 25, 2018. The aggregate fair value of these options was estimated at $474,000 and was recognized as stock-based compensation expense in June 2018. Restricted Stock In addition to the nonvested common shares outstanding described above at “Early Exercise Stock Purchase Agreements,” the Company issued restricted stock to its founders. The fair value of restricted stock on the issuance date is deemed equal to the cash consideration paid by the founders. Restricted stock vests over a four-year period from the applicable vesting commencement date. The following summarizes the activity of nonvested restricted stock:
Number of Shares
Nonvested—December 31, 2017
193,394
Vested
(104,537
)
Nonvested—June 30, 2018
88,857
Stock-Based Compensation Expense Total stock-based compensation recognized by function was as follows (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
General and administrative
$
558
$
20
$
625
$
41
Research and development
430
18
489
35
Total stock-based compensation expense
$
988
$
38
$
1,114
$
76
As of June 30, 2018, the unrecognized stock-based compensation cost and the estimated weighted average amortization period, using the straight-line attribution method, was as follows (dollars in thousands):
Unrecognized Compensation Cost
Weighted Average Remaining Amortization Period (Years)
Employee options
$
4,664
3.5
Nonemployee options
7
1.0
Total unrecognized stock-based compensation expense
$
4,671
The fair value of the employee stock options granted is calculated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Expected term (years)
5.5 - 6.1
6.1
5.5 - 6.1
6.1
Expected volatility
82.8
%
82.5
%
82.0 - 82.8%
82.5
%
Risk-free interest rate
2.8
%
2.1
%
2.6 - 2.8%
2.1
%
Expected dividend yield
—
%
—
%
—
%
—
% |
