Note 12. Equity Based Awards

On July 13, 2021, the Company’s stockholders approved the Markforged Holding Corporation 2021 Stock Option and Incentive Plan (“2021 Plan”) and the Markforged Holding Corporation 2021 Employee Stock Purchase Plan (“2021 ESPP”). As of September 30, 2022, 23,746,924 and 6,559,930 shares of common stock were available for issuance under the 2021 Plan and 2021 ESPP, respectively.

Under the 2021 Plan, the Company can grant stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock awards, cash-based awards, and dividend equivalent rights. The 2021 Plan provides that an additional number of shares of common stock will automatically be added to the shares of common stock authorized for issuance under the 2021 Plan on January 1 of each year. The number of shares of common stock added each year will be equal to (i) 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) such lesser amount as determined by the Company’s Board of Directors.

The 2021 ESPP allows eligible employees to authorize payroll deductions between 1% and 15% of the base salary or wages, up to $25,000 annually, to be applied toward the purchase of shares of the Company’s common stock occurring at offering periods determined by the Company. At each offering period, the eligible employee will have the option to acquire common stock at a discount of up to 15% of the lesser of the Company’s common stock on (i) the first trading day of the offering period or (ii) the last day of the offering period. The offering periods under the 2021 ESPP are not to exceed 27 months between periods. On January 1 of each subsequent year under the plan, the number of shares available for issuance under the plan will be increased by the lesser of (i) 4,700,000 shares of common stock, (ii) one percent of the number of shares of common stock issued and outstanding as of December 31 of the immediately preceding year, or (iii) number of shares of common stock determined by the Company. During the nine months ended September 30, 2022 the Company did not recognize stock compensation expense related to the 2021 ESPP as there were no grants under the 2021 ESPP.

Legacy Markforged's 2013 Stock Plan (the “2013 Plan”) was terminated at the Closing and no further awards will be granted thereunder. The 2013 Plan was terminated at Closing and all outstanding awards became outstanding under the 2021 Plan. Option activity under the plan for the year to date period ending September 30, 2022 is as follows:

The aggregate intrinsic value of stock options outstanding at September 30, 2022 was $1.9 million. As of September 30, 2022, the Company had 12,106,386 options vested and expected to vest.

In the nine months ended September 30, 2022 and 2021, the Company did not grant any options to purchase shares of Common Stock.

Restricted Stock Units

During the nine months ended September 30, 2022, the Company awarded RSUs to newly hired employees and continuing employees. The fair value per share of these awards was determined based on the fair market value of our stock on the date of the grant and is being recognized as stock-based compensation expense over the requisite service period. The following table summarizes the RSU activity for the nine months ended September 30, 2022:

Stock-Based Compensation Expense

The Company recorded compensation expense related to options and RSUs of $13.1 million and $5.8 million for the nine months ended September 30, 2022 and 2021, respectively. Total unrecognized stock-based compensation expense for the RSUs outstanding was $40.2 million at September 30, 2022, which is expected to be recognized over a weighted-average period of 3.2 years. Total unrecognized stock-based compensation expense for the options outstanding was $4.5 million at September 30, 2022, which is expected to be recognized over a weighted-average period of 1.6 years.

During the three and nine months ended September 30, 2022, the Company recognized stock-based compensation expense related to the Markforged Earnout of $0.5 million and $2.6 million, respectively. During the three and nine months ended September 30, 2021, the Company recognized stock-based compensation expense related to the Markforged Earnout of $5.6 million.

The unrecognized compensation expense related to the Markforged Earnout is $3.9 million and will be recognized over a remaining period of no more than 2.8 years, dependent on when vesting conditions are met.