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 ("RSUs"). Options under the 2021 Plan can typically be granted for periods of up to ten years. For stock options granted to a grantee who, at the time the option is granted, owned 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 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 a stock option granted to a 10% stockholder shall be not less than 110% of the grant date fair value of the shares. Options granted to new hires generally vest over a four-year period, with 25% of the shares vesting on the first anniversary of the grant date and the remaining shares vesting in 36 equal monthly installments thereafter; options granted as merit awards generally vest in 48 equal monthly installments following the grant date. RSUs granted generally vest over a four-year period with straight-line vesting in equal amounts.

The Company initially reserved 5,200,000 shares of common stock for future issuance under the 2021 Plan. 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 are 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. Pursuant to the evergreen provision, the initial share reserve was increased by 2,414,907 and 2,375,235 shares on January 1, 2023 and 2022, respectively.

The 2011 Plan was superseded by the 2021 Plan at the time of the IPO and no further grants have been made under the 2011 Plan from the date the 2021 Plan became effective.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, 2023 and 2022, there were 6,033,176 shares and 6,099,584 shares, respectively, of common stock available for issuance under the 2021 Plan.

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, 2022		4,819,906		$	9.67		7.7	$	19,463
Grants		1,360,308			6.37
Forfeited/cancelled		(829,897	)		12.18
Exercised		(370,127	)		1.03
Outstanding, December 31, 2023		4,980,190		$	9.00		7.4	$	5,924
Vested and exercisable as of December 31, 2023		2,670,019		$	8.62		6.4	$	3,797
Vested and expected to vest as of December 31, 2023		4,980,190		$	9.00		7.4	$	5,924

The weighted-average grant-date fair values of options granted during the year ended December 31, 2023 and 2022 was $3.78 per share and $9.56 per share, respectively. The aggregate intrinsic value of options exercised was $1.7 million during the year ended December 31, 2023. 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, 2023, the Company recorded stock-based compensation expense of $8.5 million related to options. As of December 31, 2023, the unrecognized stock-based compensation of unvested options was $14.1 million, which is expected to be recognized over a weighted-average period of 1.8 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,
	2023	2022
Expected term (in years)	5.60 – 6.07	5.38 – 6.95
Expected volatility	60.72% – 61.80%	58.74% – 64.97%
Risk-free interest rate	3.07% – 4.35%	1.35% – 3.97%
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 shares of 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, 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, 2022		1,014,123		$	14.25
Grants		2,392,662			6.28
Forfeited/cancelled		(441,759	)		12.14
Vested		(243,665	)		13.96
Outstanding, December 31, 2023		2,721,361		$	7.61

During the year ended December 31, 2023, the Company recorded stock-based compensation of $5.5 million related to RSUs. As of December 31, 2023, the unrecognized stock-based compensation associated with unvested RSUs was $16.2 million, which is expected to be recognized over a weighted-average period of 2.9 years.

In July 2021, the board of directors and stockholders 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. Pursuant to the evergreen provision, the initial share reserve was increased by 482,981 and 475,074 shares on January 1, 2023 and 2022, respectively.

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, 2023, participants in the ESPP purchased 220,877 shares for a total of $0.9 million. As of December 31, 2023, the Company has collected payroll withholdings of $0.1 million in the current offering period for the purchase of shares under the ESPP. The Company recorded stock-based compensation expense associated with the ESPP of $0.6 million for the year ended December 31, 2023.

As of December 31, 2023 and 2022, there were 1,488,227 shares and 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 years ended December 31, 2023 and 2022, respectively:


	Years ended December 31,
	2023	2022
Expected term (in years)	0.48 - 0.50	0.48 - 0.50
Expected volatility	66.72% - 197.51%	76.50% - 97.38%
Risk-free interest rate	4.62% - 5.40%	1.51% - 4.62%
Dividend yield	–	–

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


	Years Ended December 31,
	2023		2022
Cost of goods sold	$	289	$	167
Research and development		2,111		1,315
Selling, general and administrative		12,181		11,481
Total stock-based compensation expense	$	14,581	$	12,963