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Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Note 11 – Stock-Based Compensation

During 2015, the Company established the Long Term Incentive Plan (“Incentive Plan”), under which incentive stock options, nonqualified stock options, restricted stock or other awards may be awarded to employees, directors or consultants of the Company. The options typically vest over a four-year period. As of December 31, 2021, the maximum number of shares available for issuance under the Incentive Plan was 2,825,173 shares. Upon the effectiveness of the Company’s 2021 Incentive Award Plan, the Company ceased granting awards under the Incentive Plan. However, the Incentive Plan continues to goven awards outstanding thereunder.

On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective on July 29, 2021. The 2021 Plan provides for the grant of incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares reserved for issuance under the 2021 Plan was initially equal to 2,590,000 plus an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 4% of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors. No more than 15,350,000 shares of Class A common stock may be issued under the 2021 Plan upon the exercise of incentive stock options. Shares issued under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. If an award under the 2021 Plan expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, cancelled without having been fully exercised/settled or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2021 Plan. In addition, shares subject to stock options issued under the Incentive Plan may become available for issuance under the 2021 Plan to the extent such stock options are canceled, forfeited, exchanged, settled in cash or

otherwise terminated. As of December 31, 2021, there were 2,298,432 shares available for future issuance under the 2021 Plan.

On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on July 29, 2021. A total of 250,000 shares of Class A common stock were initially reserved for issuance under this plan. The number of shares of Class A common stock that may be issued under the 2021 ESPP will automatically increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 1% of the shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the board of directors, provided that not more than 3,340,000 shares of Class A common stock may be issued under the 2021 ESPP. As of December 31, 2021, no shares had been issued under the 2021 ESPP.

During the year ended December 31, 2021 and 2020, the Company recognized stock-based compensation expense of $1,802,623 and $1,086,769, respectively. As of December 31, 2021, compensation expense remaining to be recognized for outstanding stock options was $8,403,600 and to be recognized over a weighted-average period of 2.93 years.

The fair value of options granted is calculated on the grant date using the Black-Scholes option valuation model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer public companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For the year ended December 31, 2021, the Company granted 1,452,462 shares of stock options at a weighted-average grant date fair value of $6.29. For the year ended December 31, 2020, the Company granted 343,169 shares at a weighted-average grant date fair value of $3.06.

The Company used the following assumptions in its application of the Black-Scholes option pricing model for grants during the year ended December 31, 2021 and 2020:


	Year Ended December 31,
	2021	2020

Weighted-average risk-free interest rate	0.89% - 1.71%	0.36% - 1.45%
Expected term (in years)	5.83 - 10 years	5.92 - 10 years
Expected dividend yield	0%	0%
Expected volatility	66.76% - 80.99%	67.30% - 80.85%

The following table summarizes the stock option activity during the year ended December 31, 2021 under the Plan:


				Weighted
		Weighted-		Average
		Average		Remaining
	Number of	Exercise Price		Contractual	Aggregate
	Options	per Share		Term (in Years)	Intrinsic Value

Outstanding at of December 31, 2020	1,801,263	$	3.01
Granted	1,452,462		10.07
Exercised	(117,847)		3.01
Cancelled	(276,334)		3.58
Outstanding at December 31, 2021	2,859,544	$	6.55	8.30	$	27,615,466

Vested and exercisable at December 31, 2021	1,102,543	$	3.01	7.14	$	14,507,723
Vested and expected to vest at December 31, 2021	2,859,544	$	6.55	8.30	$	27,615,466

For the year ended December 31, 2021 and 2020, the Company recognized share-based compensation expense recognized on the accompanying consolidated statements of operations as follows:


	Year Ended December 31,
	2021		2020

Cost of revenue	$	103,329	$	108,027
Research and development		768,679		503,111
General and administrative		930,615		475,631
Total	$	1,802,623	$	1,086,769