The Company has three stock-based incentive compensation plans, the Calhoun Vision, Inc. 2015 Equity Incentive Plan, the Calhoun Vision, Inc. 2006 Stock Plan, and the 2021 Equity Incentive Plan (collectively the “Plans”).

The Company’s 2006 Stock Plan (the “2006 Plan”) was originally adopted by the board of directors and approved by the Company’s stockholders in 2006. The Company’s 2006 Plan was terminated in 2015 in connection with the adoption of the Company’s 2015 Plan and as a result no new awards may be issued under the 2006 Plan. However, the 2006 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under the 2006 Plan.

The Company’s 2015 Equity Incentive Plan (the “2015 Plan”) was originally adopted by the Company’s board of directors and approved by the Company’s stockholders in 2015. The 2015 Plan was most recently amended in March 2021. In July 2021, upon completion of the Company's IPO, the 2015 Plan terminated immediately prior to effectiveness of the 2021 Equity Incentive Plan with respect to the grant of future awards.

On July 28, 2021, the Company’s Board of Directors and stockholders adopted and approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options to employees and any subsidiary corporations’ employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, or (“RSUs”), and performance awards to employees, directors, and consultants and subsidiary corporations’ employees and consultants. The number of shares of the Company’s common stock available for issuance under the 2021 Plan is equal to 2,420,135 shares of common stock plus any shares subject to awards granted under the 2015 Plan and the 2006 Plan that, after the effectiveness of the 2021 Plan, expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest, with the maximum number of shares to be added to the 2021 Plan from the 2015 Plan and 2006 Plan is equal to 4,569,530 shares of common stock.

The number of common shares reserved for issuance under the 2021 Plan will be increased automatically on the first day of each fiscal year beginning with the 2022 fiscal year and ending on the ten year anniversary of the date our board of directors approved the 2021 Plan, by a number equal to the least of: (i) 7,260,406 shares of our common stock; (ii) 4% of the outstanding shares of our common stock on the last day of our immediately preceding fiscal year; or (iii) such lesser number of shares of our common stock as the administrator may determine. The 2021 Plan is administered by the Company’s Board of Directors.

On July 28, 2021, the Company’s Board of Directors and stockholders adopted and approved the Company’s 2021 Employee Stock Purchase Plan (“2021 ESPP”). The number of shares of the Company’s common stock available for issuance under the 2021 ESPP is equal to 484,027 shares of common stock.

The 2021 ESPP provides eligible employees of the Company and its subsidiaries with the opportunity to purchase shares of the Company’s Common Stock at a purchase price equal to 85% of the common stock’s fair market value on the first trading day or last trading day of each purchase period, whichever is lower. The 2021 ESPP generally provides for two six-month purchase periods every twelve months: May 1 through October 31 and November 1 through April 30. The initial purchase period began on November 1, 2021.

The number of common shares reserved for issuance under the 2021 ESPP plan will be increased automatically on the first day of each fiscal year beginning with our 2022 fiscal year, by a number equal to the least of: (i) 1,452,081 shares; (ii) 1% of the outstanding shares of our common stock on the last day of our immediately preceding fiscal year; or (iii) such other amount as the administrator may determine. The 2021 ESPP is administered by the Board of Directors.

The purpose of the 2021 Plan and 2021 ESPP plan is to provide a means by which eligible recipients of stock awards may be given an opportunity to benefit from increases in the value of the common stock in order to retain or procure the services of the employees, members of the Board and consultants and provide them with an incentive to promote the Company’s success and accomplish corporate goals.

Stock option awards are generally granted with an exercise price of no less than 100% of estimated fair market value on the date of grant. Time based awards generally vest over four years as follows: one fourth of the total number of shares vest and become exercisable on the one-year anniversary; 1/48th of the total number of shares subject to the option vest and become exercisable on each monthly anniversary thereafter for the remaining three years.

Prior to the Company's IPO in July 2021, the Company’s board of directors, with input from management, considered numerous objective and subjective factors to determine the fair value of common stock. The factors included, but were not limited to: (i) third-party valuations of the Company’s common stock; (ii) the Company’s stage of development; (iii) the status of research and development efforts; (iv) the rights, preferences and privileges of the Company’s convertible preferred stock relative to those of the Company’s common stock; (v) the Company’s operating results and financial condition, including the Company’s levels of available capital resources; (vi) equity market conditions affecting comparable public companies; (vii) general U.S. market conditions and (viii) the lack of marketability of the Company’s common stock. After completion of the Company’s IPO in July 2021, the fair value of common stock is based on the closing price of the Company’s common stock as reported on the Nasdaq Global Select Market.

In determining the fair value of the stock options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment.

Expected term—The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. The Company used the simplified method (based on the mid-point between the vesting date and the end of the contractual term) to determine the expected term.

Expected volatility—Since the Company was privately held and did not have any trading history for its common stock, the expected volatility was estimated based on the average historical volatilities for comparable publicly traded medical device companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle and area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Dividend yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

A summary of stock option activities for the nine months ended September 30, 2021 is as follows:


	Number of Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Avg Remaining Contractual Life (Years)
Options outstanding as of December 31, 2020		4,201,935		$	9.57				6.46
Issued
Granted		1,652,751		$	15.51	$	8.94
Exercised		(321,812	)	$	4.28	$	2.12
Forfeited		(61,053	)	$	19.47	$	10.51
Expired		(17,709	)
Options outstanding as of September 30, 2021		5,454,112		$	11.59				6.97
Exercisable as of September 30, 2021		3,174,863		$	8.76				5.35

A summary of non-vested restricted stock unit activities for the nine months ended September 30, 2021 is as follows:


			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value

Unvested at December 31, 2020		—
Granted		657,729	$	15.46
Vested		—
Forfeited		—
Unvested at September 30, 2021		657,729	$	15.46

As of September 30, 2021 and December 31, 2020 the intrinsic value of options vested was $17.9 million and $26.2 million, respectively, and of all options outstanding was $18.0 million and $26.4 million, respectively. During the nine months ended September 30, 2021 and 2020, the total cash received from the exercise of stock options was $1.4 million and $1.0 million, respectively. The total fair value less strike price of these options was $3.6 million and $2.7 million, respectively.

Stock-based compensation expense was classified in the accompanying condensed consolidated statements of operations and comprehensive income (loss) as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	623	$	626	$	1,760	$	1,541
Selling, general and administrative		1,168		430		2,317		953
Cost of goods sold		222		185		581		454
	$	2,013	$	1,242	$	4,658	$	2,948

As of September 30, 2021 and December 31, 2020, there were 2,270,175 and 1,177,165 unvested options, respectively. Total unrecognized expense related to unvested stock options was approximately $19.7 million and $9.8 million as of September 30, 2021 and December 31, 2020, respectively. Amounts are expected to be recognized over a weighted average period of approximately 3.1 and 2.9 years, respectively.

As of September 30, 2021, there was $9.8 million of total unrecognized compensation costs adjusted for any estimated forfeitures, related to non-vested restricted stock units granted under the 2021 Plan. The unrecognized compensation cost is expected to be recognized over a weighted average period of 3.7 years.

The following table presents the range and weighted-average assumptions, used in the Black-Scholes option pricing model to determine the fair value of stock options:


	Nine Months Ended September 30,
	2021
	Range	Weighted Average
Expected volatility	62.3% to 63.7%	63.3%
Risk-free interest rate	0.6% to 1.6%	1.0%
Expected life (in years)	5.52 to 10.00 years	6 years
Expected dividend yield	0.0%	0.0%
Grant date fair value	$12.54 to $19.94	$15.51

On July 30, 2021, the Board of Directors approved the issuance of 640,567 equity awards to the Company's named executive officers and certain non-employee directors, consisting of 17,577 restricted stock units and 622,990 stock option awards. The awards will vest over one to four years of service.

On August 3, 2021, the Board of Directors approved the issuance of equity awards to certain non-employee directors, consisting of 40,134 restricted stock units. The awards will vest over one to three years of service.