Stock Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock Based Compensation

Stock Based CompensationThe Company's 2017 Stock Incentive Plan (the “2017 Plan”) and 2010 Stock Incentive Plan (the “2010 Plan”) provides for the issuance of 4,806,513 shares of the Company's common stock. The Company has granted stock options to executive officers, employees, members of the Company's board of directors, and certain outside consultants. The terms and conditions upon which options become exercisable vary among grants; however, option rights expire no later than ten years from the date of grant and employee and Board of Director awards generally vest over three to five years on a straight-line basis. As of March 31, 2020, the Company had 3,961,490 vested and unvested stock options outstanding and 397,098 shares reserved for future awards.

Share-based compensation expense was approximately $2.3 million and $1.0 million for the quarters ended March 31, 2020 and 2019, respectively. The company issued $0.4 million of common stock to one of the Company's executives during the quarter ended March 31, 2020.

The assumptions used in the Black-Scholes option-pricing model are determined as follows:

	March 31, 2020
Volatility	78.00	%
Risk-free interest rate	1.42%-1.55%
Expected life (in years)	2.75-6.08
Dividend yield	0	%

The expected volatility assumptions have been based on the historical and expected volatility of our stock and comparable companies, measured over a period generally commensurate with the expected term or acceptable period to determine reasonable volatility. The weighted average expected option term for the quarter ended March 31, 2020, reflects the application of the simplified method prescribed in Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 107 (as amended by SAB 110), which defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches.

Stock Options

A summary of stock option activity for employees, directors and consultants is as follows:

	Number of Shares	Weighted Average Exercise Price
Outstanding as of December 31, 2019	4,006,351	$	10.92
Granted	638,563	14.95
Exercised	(223,643)	7.87
Forfeited	(459,781)	12.22
Outstanding as of March 31, 2020	3,961,490	$	11.59
Options vested and exercisable as of March 31, 2020	1,022,419	$	11.72

As of March 31, 2020, there was $19.1 million of total unrecognized compensation cost related to non-vested stock compensation arrangements granted to employees, directors and consultants under the 2017 Amended Plan, which is expected to be recognized over a weighted-average period of approximately 2.7 years.

Warrants

The Company did not issue any stock options to consultants during the three month ended March 31, 2020 compared to 50,000 stock options at a weighted average exercise price of $9.93 for the three month ended March 31, 2019. Stock option expense related to consultants was $0.03 million and $0.01 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was $0.2 million of total unrecognized compensation cost related to non-vested stock compensation arrangements granted to non-employees under the 2017 Amended Plan, which is expected to be recognized over a weighted-average period of approximately 1.9 years.

A summary of warrants activity for non-employees is as follows:

	Number of Warrants	Weighted Average Exercise Price
Outstanding as of December 31, 2019	1,550,975	$	6.08
Issued	—	—
Expired	—	—
Exercised	(11,049)	$	1.80
Outstanding as of March 31, 2020	1,539,926	$	6.12
Warrants exercisable as of March 31, 2020	1,539,926	$	6.12

There were no warrants issued in the three months ended March 31, 2020, compared with 40,279 in the three months ended March 31, 2019. Of the total outstanding warrants as of March 31, 2020, 1,249,189 are held by Acuitas Group Holdings LLC, whose sole managing member is the Company's chairman and chief executive officer.

Performance-Based and Market-Based Awards

The Company’s Compensation Committee designed a compensation structure to align the compensation levels of certain executives to the performance of the Company through the issuance of performance-based and market-based stock options. The performance-based options vest upon the Company meeting certain revenue targets and the total amount of compensation expense recognized is based on the number of shares that the Company determines are probable of vesting. The market-based options vest upon the Company’s stock price reaching a certain price at a specific performance period and the total amount of compensation expense recognized is based on a monte carlo simulation that factors in the probability of the award vesting. The following table summarizes the Company’s outstanding awards under this structure:

Grant Date	Performance Measures	Vesting Term	Performance Period	# of Shares	Exercise Price
December 2017	Weighted Average Price of our common stock is $15.00 for at least twenty trading days within a period of thirty consecutive trading days ending on the trading day prior to January 1, 2023.	Fully vest on January 1, 2023	January 1, 2023	642,307	$	7.50
August 2018	Weighted Average Price of our common stock is $15.00 for at least twenty trading days within a period of thirty consecutive trading days ending on the trading day prior to January 1, 2023.	Fully vest on January 1, 2023	January 1, 2023	397,693	$	7.50
April 2018	The Options will be divided into five equal tranches and Performance Targets to be established by Board of Directors for each tranche at the beginning of the fiscal year	Amended and vested 115,950 options based on severance agreement	Amended and vested 115,950 options based on severance agreement	115,950	$	7.50

During the quarter ended March 31, 2020, the Company amended the option agreement of one of the Company's former executives to vest additional options previously forfeited and extend the period to exercise, resulting in $0.6 million of additional stock compensation expense.