On May 16, 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) as the successor to and continuation of the 2013 Equity Incentive Plan (the “2013 Plan”). The 2018 Plan initially consisted of 12,000,000 new shares plus the number of unallocated shares remaining available for grant for new awards under the 2013 Plan. In May 2020, the 2018 Plan was amended to increase the number of shares of common stock that may be issued under the 2018 Plan by 12,500,000 shares.

Effective upon the approval of the 2018 Plan by the Company’s stockholders in May 2018, no additional awards have been or may be granted under the 2013 Plan. Any Prior Plans’ returning shares will increase the number of shares issuable under the 2018 Plan. The Prior Plans’ returning shares are shares subject to outstanding stock awards granted under the 2013 Plan or the 2004 Equity Incentive Plan (collectively, “Prior Plans”) that, from and after the effective date of the 2018 Plan, (i) expire or terminate for any reason prior to exercise or settlement, (ii) are forfeited, cancelled or otherwise returned to the Company because of the failure to meet a contingency or condition required for the vesting of such shares, or (iii) other than with respect to outstanding stock options and stock appreciation rights granted under the Prior Plans with an exercise or strike price of at least 100% of the fair market value of the underlying common stock on the date of grant, are reacquired or withheld (or not issued) by the Company to satisfy a tax withholding obligation in connection with a stock award.

The 2018 Plan provides for the granting of stock awards including stock options and restricted stock units to employees, directors and consultants.

The Company’s board of directors or its compensation committee determines eligibility, vesting schedules and criteria, and exercise prices for stock awards granted under the 2018 Plan. Options and restricted stock unit awards under the 2018 Plan, or the Prior Plans expire not more than ten years from the date of the grant and are exercisable upon vesting. Stock options that vest over time generally vest over four years. Current time-based vesting stock option grants vest and become exercisable at the rate of 25% after one year and ratably on a monthly basis over a period of 36 months thereafter. The Company also issues PNQ awards with performance conditions. For PNQs, the Company evaluates the probability that the performance conditions will be met and estimates the service period for recognition of the associated expense. RSUs with time-based vesting generally vest at a rate of 25% per year over four years with consideration satisfied by service to the Company. Certain RSUs issued to nonemployee directors vest immediately upon grant, but the underlying shares of common stock will not be delivered until there is a separation of service such as resignation, retirement or death. The Company also issued Market RSUs. The grant date fair value and the effect of the market conditions was estimated using a Monte Carlo valuation.

Market RSUs issued during the year ended December 31, 2021 had a grant date fair value of $9.30 per share and will vest on May 17, 2024 provided that the closing price of the Company’s common stock on such vesting date is not less than the closing price on May 17, 2021. The fair value of the Market RSUs was determined using a share price of $4.26, risk-free interest rate of 0.34%, volatility of 88%, and a dividend yield of 0%. The number of shares delivered on the vesting date is determined by the percentile ranking of MannKind total shareholder return (TSR) over the period from May 18, 2021 until May 17, 2024 related to the TSR of the Russell 3000 Pharmaceutical & Biotechnology Index over the same period, as follows: less than 25th percentile=0% of target, 25th percentile=50% of target, 50th percentile=100% of target, 75th percentile=200% percent of target, 90th percentile or higher=300% maximum. Payout values will be interpolated between the percentile rankings above. The resulting stock-based compensation expense will be recognized over the service period regardless of whether the market conditions are achieved, as long as the service condition is rendered.

The following table summarizes information about the Company’s stock-based award plans as of December 31, 2021:

	Outstanding Options		Outstanding Restricted Stock Units		Shares Available for Future Issuance
2004 Equity Incentive Plan		206,358		—		—
2013 Equity Incentive Plan		3,639,936		2,600		—
2018 Equity Incentive Plan		6,800,852		7,606,425		5,344,810
2004 Non-Employee Directors’ Stock Option Plan		8,000		—		—
Total		10,655,146		7,609,025		5,344,810

Share-based payment transactions are recognized as compensation cost based on the fair value of the instrument on the date of grant. The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options. The expected term of an option granted is based on combining historical exercise data with expected weighted time outstanding. Expected weighted time outstanding is calculated by assuming the settlement of outstanding awards is at the midpoint between the remaining weighted average vesting date and the expiration date. The Company recognizes forfeitures as they occur. During the years ended December 31, 2021 and 2020, the Company recorded RSU and option based stock compensation expense of $11.5 million, $6.2 million and employee stock purchase plan compensation of $0.7 million and $0.3 million, respectively.

Total stock-based compensation expense recognized in the accompanying consolidated statements of operations is included in the following categories (in thousands):

	Year Ended December 31,
	2021		2020
Cost of goods sold	$	407	$	446
Cost of revenue — collaborations and services		1,708		626
Research and development		614		338
Selling, general and administrative		9,471		5,101
Total	$	12,200	$	6,511

The expected volatility assumption used in the Company’s Black-Sholes option valuation model is based on an assessment of the historical volatility derived from an analysis of historical trade activity. The Company has selected risk-free interest rates based on U.S. Treasury securities with an equivalent expected term in effect on the date the options were granted. Additionally, the Company uses historical data and management judgment to estimate stock option exercise behavior and employee turnover rates to estimate the number of stock option awards that will eventually vest. There were no options issued in the year ended December 31, 2021. The Company calculated the fair value of employee stock options granted during the year ended December 31, 2020 using the following assumptions:

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2021		12,264,616		$	3.41		6.45	$	15,414
Granted		—			—
Exercised		(586,572	)		1.72
Forfeited		(258,410	)		1.59
Expired		(764,488	)		11.57
Outstanding at December 31, 2021		10,655,146		$	2.96		5.82	$	25,458
Exercisable at December 31, 2021		8,009,961		$	3.40		5.58	$	18,436

There were no stock options granted in the year ended December 31, 2021. The weighted average grant date fair value of the stock options granted during the year ended December 31, 2020 was $0.97. Total fair value of stock options vested during the years ended December 31, 2021 and 2020 was $2.3 million and $4.5 million, respectively. The total intrinsic value of options exercised during the years ended

December 31, 2021 and 2020 was $1.7 million and $0.5 million, respectively. Intrinsic value is measured using the fair market value at the date of exercise for options exercised or at December 31 for outstanding options, less the applicable exercise price.

Cash received from the exercise of options during the years ended December 31, 2021 and December 31, 2020 was approximately $1.0 million and $0.6 million, respectively.

As of December 31, 2021 and 2020, the Company recognized a $0.1 million and $0.2 million, respectively, of compensation costs related to the performance-based stock options. As of December 31, 2021 and 2020, there was $0.3 million and $0.4 million, respectively of unrecognized compensation costs related to performance-based stock options subject to performance conditions.

	Number of Shares			Weighted Average Grant Date Fair Value per Share
Outstanding at January 1, 2021		6,037,542		$	2.20
Granted		3,326,798			5.82
Vested		(1,516,065	)		2.22
Forfeited		(239,250	)		2.58
Outstanding at December 31, 2021		7,609,025			3.77

Total fair value of restricted stock units vested during the years ended December 31, 2021 and 2020 was $6.7 million and $2.5 million, respectively. Intrinsic value of restricted stock units vested is measured using the closing share price on the day prior to the vest date. The total grant date fair value of restricted stock units outstanding as of December 31, 2021 and 2020 was $19.3 million and $13.3 million, respectively.

As of December 31, 2021, there was $2.1 million of unrecognized compensation expense related to options and PNQs and $21.1 million of unrecognized compensation expense related to restricted stock units and market based stock units, which are expected to be recognized over the weighted average period of 1.32 to 2.59 years. The Company evaluates stock awards with performance conditions as to the probability that the performance conditions will be met and uses that information to estimate the date at which those performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period.

The Company provides all employees, including executive officers, the ability to purchase our common stock at a discount under our 2004 employee stock purchase plan (the “ESPP”). The ESPP is designed to comply with Section 423 of the Internal Revenue Code (“IRC”) and provides all employees with the opportunity to purchase up to $25,000 worth of our common stock (based on the undiscounted fair market value at the commencement of the offering period) each year at a purchase price that is the lower of 85% of the fair market value of the common stock on either the date of purchase or the commencement of the offering period. An employee may not purchase more than 5,000 shares of common stock on any purchase date. The executives’ rights under the ESPP are identical to those of all other employees.

The Company issued 0.5 million and 0.6 million shares of common stock pursuant to the ESPP for the years ended December 31, 2021 and 2020, respectively. There were approximately 1.1 million shares of common stock available for issuance under the ESPP as of December 31, 2021.