On June 21, 2021, the 2021 Plan was adopted by the Company’s board of directors and approved by the Company’s stockholders. As of the adoption date, the 2019 Plan was terminated. No terms were changed for grants previously awarded under the 2019 Plan, and the Company concluded a modification did not occur. Under the 2019 Plan, the Company primarily granted employees incentive stock options, which had a maximum term of ten years from the date of the grant. Generally, the incentive stock options granted under the 2019 Plan have a four year, service-based vesting period. All of the options granted under the 2019 Plan had an exercise price equal to the fair value of a share of common stock on the date of the grant, according to Company policy.

The 2021 Plan permits the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, and stock bonus awards. The 2021 Plan initially reserved 3,444,343 shares of Common Stock, including the transfer of remaining shares reserved under the 2019 Plan. In addition, the number of shares reserved for issuance under the 2021 Plan will increase automatically on the first day of each fiscal year beginning with the 2022 fiscal year.

Under the 2021 Plan, the term of each stock option must be stated in the stock award agreement. In the case of an incentive stock option, the term will be ten years from the date of grant, or such shorter term as may be provided in the stock award agreement. Moreover, in the case of an incentive stock option granted to a participant who owns stock representing more than 10% of the total combined voting power of all classes of our stock or the stock of any of our affiliates, the term of the incentive stock option will be five years from the date of grant or such shorter term as may be provided in the stock award agreement. Under the 2021 Plan, the Company continues to have a policy to grant options with an exercise price equal to the fair value of a share of common stock, as determined by the closing price on NASDAQ on the grant date.

The following summarizes the Company’s stock option activity for the year ended December 31, 2021:


	Shares			Weighted	Weighted Average
	Issuable			Average	Remaining	Aggregate
	under			Exercise	Contract	Intrinsic
	Options			Price	Term	Value
Outstanding at December 31, 2019		586,662		0.13	9.6 years	$	5,500
Granted		263,976		0.20
Exercised		(75,851	)	0.13
Forfeited or cancelled		(32,740	)	0.12
Outstanding at December 31, 2020		742,047		0.16	9.1 years	$	39,078
Exercisable at December 31, 2020		88,531		0.15	9.0 years	$	5,413

Outstanding at December 31, 2020		742,047		0.16	9.1 years	$	39,078
Granted		1,249,287		4.16
Exercised		(206,455	)	0.13
Forfeited or cancelled		(14,140	)	0.19
Outstanding at December 31, 2021		1,770,739		2.96	9.0 years	$	1,124,215
Exercisable at December 31, 2021		41,084		0.17	7.9 years	$	87,522

The aggregate intrinsic value is calculated based on the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options as of the reporting date. The intrinsic value of stock options exercised during the years ended December 31, 2020 and 2021 was $6,032 and $447,115, respectively. The weighted-average fair value of options granted during the years ended December 31, 2020 and 2021 was $0.20 and $4.16 per share, respectively.

For stock option grants with service-based vesting, stock-based compensation expense represents the portion of the grant date fair value of employee stock option grants recognized over the requisite service period of the awards on a straight-line basis, net of estimated forfeitures. For options that vest upon the achievement of performance milestones, the Company estimates fair value at the date of grant and compensation expense is recognized using the accelerated attribution method when it is determined that the performance criteria is probable of being met.

In determining the grant date fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and its determination generally requires significant judgment.

Fair Value of Common Stock—Prior to our initial public offering, the estimated fair value of our common stock was determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuation of our common stock as well as our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation to the date of the grant. Since the completion of our initial public offering on July 19, 2021, the fair value of each share of common stock underlying stock option grants is based the quoted market price on the primary stock exchange on which our common stock is traded on the day the stock award or option is granted.

Expected term—The expected term of stock options is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data.

Expected volatility—We have limited information on the income volatility of our stock as shares of our common stock were not actively traded on any public markets prior to July 19, 2021. The expected volatility was derived from the historical stock volatilities of comparable peer public companies within our industry.

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

Dividend yield—The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.

For the year ended December 31, 2020, for options with service-based vesting conditions, the Company recognized $9,590 of employee stock-based compensation expense in research and development expenses and $12,285 of employee stock-based compensation in general and administrative expenses in the accompanying statements of operations. For the year ended December 31, 2021, for options with service-based vesting conditions, the Company recognized $25,239 of employee stock-based compensation expense in research and development expenses and $335,736 of employee stock-based compensation in general and administrative expenses in the accompanying statements of operations.

As of December 31, 2020, the Company had an aggregate of $103,045 of unrecognized employee stock-based compensation cost for options with service-based vesting, which is expected to be recognized over a weighted average vesting period of 5.12 years.