9. Equity Incentive Plan

At the Effective Time of the Merger, the Company assumed Private Augmedix’s 2013 Equity Incentive Plan (“2013 Plan”). Options granted under the Plan may be incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). ISOs may be granted only to Company employees and directors. NSOs, SARs and RSAs may be granted to employees, directors, advisors and consultants. The Board of Directors has the authority to determine to whom options will be granted, the number of options, the term, and the exercise price. No shares of restricted stock, no stock appreciation rights and no RSUs were granted under the 2013 Plan after August 31, 2020.

Pursuant to the Merger, the Company adopted the 2020 Equity Incentive Plan (“2020 Plan”) which serves as successor to the 2013 Plan. The 2020 Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards, cash awards, and stock bonus awards. Certain awards provide for accelerated vesting in the event of a change in control. Options issued may have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the Board of Directors. Vesting generally occurs over a period of not greater than four years.

The number of shares reserved for issuance under the 2020 Plan will increase automatically on January 1, 2021 through 2030 by the number of shares equal to the lesser of 5% of the total number of outstanding shares of our common stock as of the immediately preceding January 1, or a number as may be determined by the Board of Directors. As of September 30, 2021, 454,838 shares remained available for grant under the 2020 Plan. At the Company’s annual meeting of stockholders held on July 1, 2021, the Company’s stockholders approved of an amendment and restatement of the 2020 Plan which increased the number of shares of common stock available for issuance under the 2020 Plan by 643,761 shares.

The Company recorded share-based compensation expense in the following expense categories in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021, and 2020:

No income tax benefits have been recognized in the condensed consolidated statements of operations for stock-based compensation arrangements and no stock-based compensation costs have been capitalized as property and equipment through September 30, 2021.

The fair value of options is estimated using the Black-Scholes option pricing model which takes into account inputs such as the exercise price, the value of the underlying ordinary shares at the grant date, expected term, expected volatility, risk free interest rate and dividend yield. The fair value of each grant of options during the nine months ended September 30, 2021, was determined using the methods and assumptions discussed below.

For the nine months ended September 30, 2021, and 2020, the fair value of options granted was estimated using a Black-Scholes option pricing model with the following weighted average assumptions:

The weighted average grant date fair value of stock option awards granted was $1.61 and $0.10 during the nine months ended September 30, 2021, and 2020, respectively.

The following table summarizes stock option activity under the Plan for the nine months ended September 30, 2021:

There were 180,405 options exercised during the nine months ended September 30, 2021. The options exercised during the nine months ended September 30, 2021, had an intrinsic value of $0.6 million. The aggregate intrinsic value of options outstanding and options exercisable as of September 30, 2021, were $23.3 million and $14.1 million, respectively. At September 30, 2021, future stock-based compensation for options granted and outstanding of $2.6 million will be recognized over a remaining weighted-average requisite service period of 2.6 years.

Performance and Market-Based Options

In March 2021, the Company granted 727,922 stock options to the Chief Executive Officer (“CEO”) under the 2020 Plan with an exercise price of $3.00 per share. The options vest based on the CEO’s continued service in addition to the following terms:

The grant date fair value of the options was determined using a Monte Carlo simulation model. The Company’s assumptions for expected volatility, closing price and risk-free rate were 50.0%, $3.00 and 0.77%, respectively. The aggregate estimated fair value of the options was $0.4 million. The Company recognized $22,000 and $38,000 in share-based expenses for the three and nine months ended September 30, 2021, respectively. As of September 30, 2021, there was $0.1 million of unrecognized compensation costs which the Company plans to recognize over a weighted average period of 2.3 years. Also, as of September 30, 2021, there is an additional $0.2 million of unrecognized compensation cost which the Company will begin to recognize over a weighted average period of 4.4 years beginning on the date the Company is listed on the Nasdaq (Note 13). If the market conditions are achieved, any remaining unrecognized compensation cost associated with those options will be immediately recognized.