In 2011, the Company established its 2011 Stock Option Plan (the “2011 Plan”) that provided for the granting of stock options to employees and nonemployees of the Company.

In July 2021, the board of directors and stockholders adopted and approved the 2021 Incentive Award Plan, (the “2021 Plan”). Under the 2021 Plan, the Company has the ability to issue incentive stock options ("ISOs"), nonqualified stock options ("NSOs"), stock appreciation rights, dividend equivalent rights, restricted stock awards, and restricted stock unit awards. Options under the 2021 Plan can be granted for periods of up to 10 years. For incentive stock options granted to a grantee who, at the time the option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary of the Company, the term of the incentive stock option may be granted for periods of up to five years. The ISOs and NSOs will be granted at a price per share not less than the fair value at the date of grant. The exercise price of an ISO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. Options granted to new hires generally vest over a four-year period, with 25% vesting at the end of one year and the remaining vesting in 36 equal monthly installments thereafter; options granted as merit awards generally vest monthly over a four-year period. The Company initially reserved 5,200,000 shares of common stock for future issuance under the 2021 Plan. This initial reserve will be increased annually on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031. These annual increases shall be equal to the lesser of (i) 5% of the aggregate number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Common Stock as determined by the Board, subject to certain limitations.

The 2011 Plan was terminated in connection with the IPO and no further grants will be made under the 2011 Plan from the date the 2021 Plan became effective. The terms under the 2011 Plan are consistent with those described above for the 2021 Plan.

At December 31, 2022 and 2021, there were 6,099,584 shares and 5,321,687 shares, respectively, of common stock available for issuance under the 2021 Plan, respectively.

The following table summarizes stock option activity under the 2011 and 2021 Plans:


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Contractual Term (in years)		Average Intrinsic Value (in thousands)
Outstanding, December 31, 2021		4,996,945		$	6.05		7.6	$	58,420
Grants		1,388,900			17.04
Forfeited/cancelled		(882,457	)		7.53
Exercised		(683,482	)		0.84
Outstanding, December 31, 2022		4,819,906		$	9.67		7.7	$	19,463
Vested and exercisable as of December 31, 2022		2,288,715		$	6.76		6.8	$	14,220
Vested and expected to vest as of December 31, 2022		4,819,906		$	9.67		7.7	$	19,463

The weighted-average grant-date fair values of options granted during the year ended December 31, 2022 and 2021 was $9.56 and $11.35 per share, respectively. The aggregate intrinsic value of options exercised were $5.3 million during the year ended December 31, 2022. The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying options and the estimated fair value of the common stock on the date of exercise.

During the year ended December 31, 2022, the Company recorded stock-based compensation of $9.7 million related to options. As of December 31, 2022, the unrecognized stock-based compensation of unvested options was $22.8 million, which is expected to be recognized over a weighted-average period of 2.5 years.

The Company estimated the fair value of stock options using the Black-Scholes option-pricing model. The fair value of stock options is recognized on a straight-line basis over the requisite service periods of the awards. The fair value of stock options was estimated using the following weighted-average assumptions:


	Years ended December 31,
	2022	2021
Expected term (in years)	5.38 – 6.95	4.99 – 6.18
Expected volatility	58.74% – 64.97%	56.74% – 61.08%
Risk-free interest rate	1.35% – 3.97%	0.47% – 1.33%
Dividend yield	–	–

The expected term is calculated using the simplified method, which is available if there is insufficient historical data about exercise patterns and post vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant or for each vesting tranche for awards with graded vesting. The midpoint of the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting tranches, the time from grant until the midpoints for each of the tranches may be averaged to provide an overall expected term.

The Company used an average historical stock price volatility of a peer group of publicly traded companies to be representative of its expected future stock price volatility, as the Company did not have any trading history for its common stock. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size, and financial leverage of potential comparable companies. For each grant, the Company measured historical volatility over a period equivalent to the expected term.

The risk-free interest rate is based on the implied yield currently available on US Treasury zero-coupon issues with remaining terms equivalent to the expected term of a stock award.

The Company has not paid, and does not anticipate paying, any dividends in the near future. Accordingly, the Company has estimated the dividend yield to be 0%.

RSUs are share awards that entitle the holder to receive freely tradable shares of the Company’s common stock upon vesting. The RSUs cannot be transferred, and the awards are subject to forfeiture if the holder’s employment terminates prior to the release of the vesting restrictions. The RSUs generally vest over a four-year period with straight-line vesting in equal amounts on an annual basis, provided the employee remains continuously employed with the Company. The fair value of the RSUs is equal to the closing price of the Company’s common stock on the grant date.

The following table summarizes restricted share award activity:


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Outstanding, December 31, 2021		53,250		$	22.91
Grants		1,101,923			14.32
Forfeited/cancelled		(130,022	)		17.62
Vested		(11,028	)		20.86
Outstanding, December 31, 2022		1,014,123		$	14.25

During the year ended December 31, 2022, the Company recorded stock-based compensation of $2.9 million related to RSUs. As of December 31, 2022, the unrecognized stock-based compensation of unvested RSUs was $11.8 million, which is expected to be recognized over a weighted-average period of 3.3 years.

Inn July 2021, the board of directors and stockholders also adopted and approved the 2021 Employee Stock Purchase Plan (the “ESPP”). The Company initially reserved 850,000 shares of common stock for future issuance under the ESPP. This initial reserve is subject to annual increase on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031. These annual increases shall be equal to the lesser of (i) 1% of the aggregate number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Common Stock as determined by the Board, subject to certain limitations.

The Company's first six-month offering period under the ESPP began during the second quarter of 2022. The Company has two offering periods annually, running for six-months, with the first offering period beginning in the second quarter, and the second offering period beginning in the fourth quarter. The purchase of shares for participants in the ESPP occurs at the conclusion of each offering period.

For the year ended December 31, 2022, participants in the ESPP purchased 98,924 shares for a total of $0.7 million. As of December 31, 2022, the Company has collected withholdings of $0.2 million in the current offering period for purchase of shares. The Company recorded $0.4 million of stock-based compensation associated with the ESPP for the year ended December 31, 2022. There was no stock-based compensation associated with the ESPP for the year ended December 31, 2021.

As of December 31, 2022, there were 1,226,123 shares of common stock available for issuance under the ESPP.

The fair value of shares to be issued under the ESPP was estimated using the Black-Scholes valuation model with the following assumptions for the year ended December 31, 2022:


		Year ended December 31,
		2022
Expected term (in years)		0.48 - 0.50
Expected volatility		76.50% - 97.38%
Risk-free interest rate		1.51% - 4.62%
Dividend yield		–

The following is a summary of stock-based compensation expense by function (in thousands):


	Years Ended December 31,
	2022		2021
Cost of goods sold	$	167	$	71
Research and development		1,315		495
Selling, general and administrative		11,481		4,517
Total stock-based compensation expense	$	12,963	$	5,083