The Company has stock-based compensation plans under which it grants stock options, restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs") to officers, directors and third parties. Total stock-based compensation for the periods presented are as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Cost of sales	$	2,369	$	735	$	24,601	$	1,440
Research and development		6,790		1,653		9,587		3,987
Sales, general and administrative		10,914		8,689		26,541		25,037
Total	$	20,073	$	11,077	$	60,729	$	30,464

As of September 30, 2023, there was $70.5 million of unrecognized compensation expense for RSUs and PRSUs to be recognized over a weighted average period of 1.69 years.

The Company has entered into Development Service Agreements for the development of a wide variety of potential products and intellectual property. Under these agreements, future royalty payments for product and/or intellectual property rights may be paid in either cash or restricted shares of the Company’s common stock at the election of the developer, depending on the terms of the agreement. Certain of these agreements were amended to remove the cash royalty option and require settlement in restricted shares of the Company’s common stock. During the three and nine months ended September 30, 2023, the vesting conditions of certain of these awards were deemed probable. Stock-based compensation associated with these awards is included in cost of sales and research and development on the condensed consolidated statements of operations.

The Company issued approximately 789,000 and 5,714,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three and nine months ended September 30, 2023, respectively. The Company issued approximately 563,000 and 3,103,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three and nine months ended September 30, 2022, respectively.

Employees are eligible to participate in the Employee Stock Purchase Plan ("ESPP") approved by its shareholders. During the three months ended September 30, 2023, there were no shares issued under the ESPP. During the nine months ended September 30, 2023, there were approximately 247,000 shares issued under the ESPP. During the three months ended September 30, 2022, there were no shares issued under the ESPP. During the nine months ended September 30, 2022, there were approximately 222,000 shares issued under the ESPP.

The Company estimates the fair value of shares issued to employees under the ESPP using the Black-Scholes option-pricing model. The assumptions used to estimate the fair value of stock options granted and stock purchase rights under the ESPP are as follows:


	Three and Nine Months Ended
	September 30,
	2023		2022
Risk-free interest rate	4.54% - 5.41%		0.07% - 1.54%
Expected dividend yield		—		—
Expected term (years)	0.41 - 0.60			0.50
Volatility	40.87% - 62.77%		50.29% - 64.53%

On August 11, 2023, the Company completed an at the market offering of 668,484 shares of the Company’s common stock, $0.0001 par value per share, pursuant to the sales agreement between the Company and Cowen and Company, LLC. The net proceeds from the offering were approximately $9.9 million, including the underwriting discounts and commissions and offering expenses paid by the Company.

On April 19, 2023, the Company completed a registered securities offering (the “Offering”) of 4,285,715 shares of the Company’s common stock, $0.0001 par value per share, pursuant to the Underwriting Agreement between the Company and Cowen and Company, LLC, at a price of $14.00 per share. The net proceeds from the Offering were approximately $57.5 million, including the underwriting discounts and commissions and offering expenses paid by the Company.

The 2018 common stock warrants (the “2018 PIPE Warrants”) had a five-year life and were exercisable by cash or cashless exercise. The 2018 PIPE Warrants expired in May 2023, and no 2018 PIPE warrants remained outstanding as of September 30, 2023. During the nine months ended September 30, 2023, there were approximately 6,311,000 2018 PIPE Warrant exercises for total cash proceeds of $0.4 million. During the three months ended September 30, 2022, there were approximately 14,000 2018 PIPE Warrant cashless exercises. During the nine months ended September 30, 2022, there were approximately 140,000 2018 PIPE Warrant exercises for total cash proceeds of $0.4 million.

The SafeOp common stock warrants (the “SafeOp Warrants”), had a five-year life and were exercisable by cash or cashless exercise. The SafeOp Warrants expired in May 2023, and no SafeOp warrants remained outstanding as of September 30, 2023. During the nine months ended September 30, 2023, there were 937,000 cashless SafeOp Warrant exercises. During the three months ended September 30, 2022, there were no SafeOp Warrant exercises. During the nine months ended September 30, 2022, there were approximately 257,000 SafeOp Warrant cashless exercises.

In connection with debt financing entered into with Squadron Medical in 2018, and amended in 2019 and 2020, the Company issued common stock warrants to Squadron Medical and a participant lender (the “Squadron Medical Warrants”). The Squadron Medical Warrants expire in May 2027 and are exercisable by cash exercise. No Squadron Medical Warrants have been exercised as of September 30, 2023.

The Company issued warrants to Mr. Patrick S. Miles, the Company’s Chairman and Chief Executive Officer (the “Executive Warrants”). The Executive Warrants had a five-year term and are exercisable by cash or cashless exercise. In October 2022, the term was extended to seven years. No Executive Warrants have been exercised as of September 30, 2023.

A summary of all outstanding warrants for common stock as of September 30, 2023, are as follows (in thousands, except for strike price data):


	Number of Warrants		Strike Price		Expiration
2018 Squadron Medical Warrants		845	$	3.15	May 2027
2019 Squadron Medical Warrants		4,839	$	2.17	May 2027
2020 Squadron Medical Warrants		1,076	$	4.88	May 2027
Executive Warrants		1,327	$	5.00	December 2024
Other(1)		139	$	7.41	Various through February 2026
Total		8,226

(1)

Weighted-average strike price.

All outstanding warrants were deemed to qualify for equity classification under authoritative accounting guidance.