Equity Incentive Plans |
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| Equity Incentive Plans | Equity Incentive Plans 2023 Employment Inducement Incentive Plan In November 2023, the Company approved the 2023 Employment Inducement Incentive Plan (the "2023 Inducement Plan"). The terms of the 2023 Inducement Plan are substantially similar to the terms of the Company’s 2019 Incentive Award Plan (as described below) with the exception that incentive stock options may not be issued under the 2023 Inducement Plan and awards under the 2023 Inducement Plan may only be issued to eligible recipients under the applicable Nasdaq rules. The 2023 Inducement Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the 2023 Inducement Plan may only be made to an employee who has not previously been an employee or member of the board of directors of the Company or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. The Company has initially reserved 6,762,279 shares of the Company’s common stock for issuance pursuant to awards granted under the 2023 Inducement Plan. As of June 30, 2026, an aggregate of 4,062,685 shares of common stock were available for issuance under the 2023 Inducement Plan. As of June 30, 2026 and December 31, 2025, 2,605,428 and 4,811,455 shares of common stock, respectively, were subject to outstanding awards under the 2023 Inducement Plan. 2019 Equity Incentive Plan In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”). The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries. A total of 5,750,000 shares of common stock were approved to be initially reserved for issuance under the 2019 Plan. The number of shares that remained available for issuance under the 2017 Plan (as defined below) as of the effective date of the 2019 Plan were, and shares subject to outstanding awards under the 2017 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be, added to the shares reserved under the 2019 Plan. The Company’s board of directors and stockholders approved an amendment and restatement to the 2019 Plan in 2025 to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the 2019 Plan by 11,350,000 shares of common stock. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2026 and ending with January 1, 2035, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of June 30, 2026, an aggregate of 8,033,648 shares of common stock were available for issuance under the 2019 Plan. As of June 30, 2026 and December 31, 2025, 56,759,243 and 44,796,989 shares of common stock, respectively, were subject to outstanding awards under the 2019 Plan. On May 15, 2026, the Board approved an amendment and restatement of the 2019 Plan (the “Restated Plan”), to increase the number of shares of common stock authorized for issuance thereunder. The Restated Plan was effective on May 18, 2026, subject to the occurrence of the closing of the Exchange Offer and stockholder approval. On July 14, 2026, the Company’s stockholder approved the Restated Plan. Pursuant to the Restated Plan, the number of shares reserved for issuance is equal to the sum of the following: •The number of shares of common stock reserved for issuance under the existing 2019 Plan prior to the effective date of the Restated Plan (which was 69,238,008 shares); plus •On the date following the closing date of the Exchange Offer, an increase equal to 71,965,321 shares; plus •An annual increase on January 1 of each calendar year during the term of the Restated Plan commencing January 1, 2027 and ending on and including January 1, 2036, equal to the lesser of (A) 5% of the Evergreen Fully-Diluted Shares Outstanding (as defined in the Restated Plan) on such date (rounded up to the nearest whole share) or (B) such number of shares of common stock determined by the plan administrator; plus •Any outstanding awards under the Company’s 2017 Stock Incentive Plan (the “2017 Plan”) as of the effective date of the Restated Plan that become available after such date in accordance with the share counting provisions of the Restated Plan. 2019 Employee Stock Purchase Plan In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective as of February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 700,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 1% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. During the six months ended June 30, 2026, 807,765 shares were issued pursuant to the ESPP. As of June 30, 2026, an aggregate of 7,250,975 shares of common stock were available for issuance under the ESPP. 2017 Equity Incentive Plan The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) permitted the granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards. Subsequent to the adoption of the 2019 Plan, no additional equity awards can be made under the 2017 Plan. As of June 30, 2026 and December 31, 2025, 1,877,695 and 1,955,471 shares of common stock, respectively, were subject to outstanding options under the 2017 Plan. As of June 30, 2026, no shares of restricted stock awards granted under the 2017 Plan were unvested. Stock Options The fair value of each employee and non-employee time-vested stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company uses its own volatility to the extent it has sufficient trading history, and for awards in which sufficient trading history is not available, a peer group is used to calculate the expected volatility. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Effective March 19, 2026, and in accordance with the terms of the 2019 Plan, the Company's board of directors approved a stock option repricing (the “Option Repricing”) whereby the exercise price of each Eligible Option (as defined below) was immediately reduced to $0.45 per share, the closing stock price on March 19, 2026. For purposes of the Option Repricing, “Eligible Options” were 48,725,528 outstanding stock options as of March 19, 2026 (vested or unvested) granted under the 2019 Plan and held by those eligible employees of the Company identified by the Company's board of directors, including the Company’s executive officers. The reduced exercise price became effective immediately after the repricing. Except for the reduction in the exercise prices of the Eligible Options as described above, the Eligible Options will retain their existing terms and conditions as set forth in the 2019 Plan and the applicable award agreements. The repricing resulted in $2.9 million of incremental cost, which was calculated using the Black-Scholes option-pricing model, of which $1.4 million of the incremental cost was recognized immediately, and $1.5 million of the incremental cost will be recognized on the straight-line basis over the remaining vesting period of the repriced options. The incremental cost is included in general and administrative expense and research and development expense on the condensed consolidated statements of operations and comprehensive loss. The following table summarizes stock option activity during the six months ended June 30, 2026:
The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price on June 30, 2026 and the exercise price of the stock options. The aggregate intrinsic value of stock options exercised was $0.3 million and $0.1 million during the six months ended June 30, 2026 and 2025, respectively. The weighted-average grant date fair value per share for the stock option grants, excluding re-granted stock options due to repricing, during the six months ended June 30, 2026 and 2025 was $2.16 and $0.91, respectively. The aggregate fair value of stock options that vested during the six months ended June 30, 2026 and 2025 was $6.6 million and $6.2 million, respectively. Warrants On July 24, 2023, the Company completed a private placement of 129,869,440 shares of the Company’s common stock and accompanying warrants to purchase up to 32,467,360 shares of the Company's common stock at a combined purchase price of $1.63125 per share and accompanying warrant, or with respect to any purchaser that was an officer, director, employee or consultant of the Company, $1.85125 per share and accompanying warrant. Each warrant has an exercise price per share of $2.04, was immediately exercisable on the date of issuance and will expire five years from the closing of the private placement. On June 4, 2026, in connection with the Exchange Offer, the Company issued 135,789,000 Purchase Warrants pursuant to a warrant agreement by and between the Company and Computershare, Inc., as warrant agent. The Company is permitted to satisfy its obligations under the Purchase Warrants by physical settlement in shares of common stock. Additionally, Purchase Warrants will be exercisable at any time from December 3, 2026 until June 4, 2031. The Purchase Warrants will be exercisable with a cash exercise price equal to the greater of (i) $0.34 and (ii) a 25% premium to the Reference Price, subject to adjustments. On July 1, 2026, the exercise price was established as $0.34. The number of shares of common stock issuable upon exercise of the Purchase Warrants is subject to customary anti-dilution adjustments in the event of stock dividends, stock splits, stock combinations, reclassifications, distributions and similar events, as well as adjustments in connection with certain degressive issuances at a price below the then-current strike price and a reduction to the strike price in connection with a fundamental change based on a Black-Scholes valuation of the Purchase Warrants. The Purchase Warrant Agreement includes a beneficial ownership limitation that provides that the holders may not exercise (nor may the Company allow the exercise of) the Purchase Warrants if, upon giving effect to such exercise, such exercise would cause the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates and any other persons whose beneficial ownership of common stock would be aggregated for the purposes of Section 13(d) of the Exchange Act)) to exceed 4.99% (or, at the holder’s election, up to 9.99%) of the total number of the then issued and outstanding shares of common stock; provided that any increase in such percentage will not be effective until the 61st day after such notice is delivered to the Company. The Purchase Warrant Agreement provides that the Company will prepare a resale registration statement with respect to the shares of common stock underlying the Purchase Warrants, subject to certain terms and exceptions. The Company evaluated the Purchase Warrants for classification as a liability or equity under ASC 815-40. Because the Warrant Agreement required net-cash settlement of any exercise prior to obtaining the requisite stockholder approval, the Purchase Warrants failed to meet the equity-classification conditions in ASC 815-40-25-1(a) and 25-4(a)(1), regardless of indexation, and did not qualify for the scope exception in ASC 815-10-15-74(a). As of June 30, 2026, the Purchase Warrants were therefore classified as a derivative liability, measured at fair value with changes in fair value recognized in earnings. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The summary of the changes in the fair value of the warrant liabilities Level 3 rollforward is as follows (in thousands):
The requisite stockholder approval was obtained on July 14, 2026. Reassessing classification as of that date under ASC 815-40-35-8, the Company concluded the Purchase Warrants are indexed to the Company's own stock and satisfy the remaining equity-classification conditions in ASC 815-40-25-10, and reclassified them from a liability to equity at fair value as of that date, with no further remeasurement thereafter. On June 4, 2026, in connection with the Exchange Offer, the Company issued 33,402,727 Prefunded Warrants that have an exercise price of $0.0001 per underlying share of common stock, exercisable via cashless exercise at any time after the date of issuance of such Prefunded Warrant, subject to the ownership limitations described below, and do not expire. The number of shares of common stock issuable upon exercise of each Prefunded Warrant is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, the holders of the Prefunded Warrants are entitled to participate in pro rata distributions and purchase rights on the same basis as if they held the underlying shares of common stock, and in the event of a fundamental transaction, the holders will be entitled to receive, upon exercise, the same kind and amount of securities, cash or property as they would have received had they held the underlying shares immediately prior to such fundamental transaction. The Prefunded Warrants include a beneficial ownership limitation that provides that the holders may not exercise (nor may the Company allow the exercise of) such Prefunded Warrant if, upon giving effect to such exercise, such exercise would cause the aggregate number of shares of common stock beneficially owned by the holder (together with affiliates and any other persons whose beneficial ownership of common stock would be aggregated for the purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) to exceed 9.99% of the total number of the then issued and outstanding shares of common stock as determined in accordance with the terms of each Prefunded Warrant; provided that the Prefunded Warrant holder may decrease (or increase) such percentage to a percentage not in excess of 9.99%; provided further that any increase in such percentage will not be effective until the 61st day after notice of such increase is delivered to the Company. Given that the warrants are indexed to the Company's shares of common stock (and otherwise meet the requirements to be classified in equity), the Company recorded the estimated fair value of the Prefunded Warrants as a component of additional paid-in capital on the Company's unaudited condensed consolidated balance sheets, as part of the accounting for the debt extinguishment. During the six months ended June 30, 2026, no warrants were exercised. As of June 30, 2026, there were 199,867,264 warrants outstanding, including 135,789,000 Purchase Warrants, 33,402,727 Prefunded Warrants and 32,467,360 warrants issued in connection with Company's private placement in July 2023. Restricted Stock Restricted stock grants include performance stock units ("PSUs") and restricted stock units ("RSUs"). The fair value of the PSUs is determined based on the closing market price of the Company's common stock on the grant date. Compensation expense for PSUs is recognized if and when the Company concludes that it is probable that the performance conditions will be achieved. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expense based on its probability assessment. All PSUs vest in full upon the earlier of (i) the approval of an NDA for seralutinib or (ii) a Change in Control (as defined in the 2019 Plan), in either case on or prior to the fourth anniversary of the grant date, and subject to the participant not experiencing a termination of service prior to the applicable vesting date. In the event the PSUs have not vested on or prior to the fourth anniversary of the grant date due to the failure of either of the above events to occur, the PSUs will be forfeited on such date. As of June 30, 2026, the Company determined that the achievement of the performance condition of the PSUs is not probable, and therefore no compensation expense was recorded during the three and six months ended June 30, 2026. The summary of the Company’s restricted stock grants activity during the six months ended June 30, 2026 is as follows:
Stock-Based Compensation Expense Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
As of June 30, 2026, the total unrecognized compensation expense related to the unvested stock option awards granted was $28.9 million, which the Company expects to recognize over a weighted-average period of approximately 2.6 years. As of June 30, 2026, the total unrecognized stock-based compensation expense related to the unvested restricted stock granted was $11.9 million, which the Company expects to recognize over a weighted-average period of approximately 2.3 years. As of June 30, 2026, the total unrecognized compensation expense related to the ESPP was $0.5 million, which the Company expects to recognize over a weighted-average period of approximately 0.8 years.
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