Share Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement, Noncash Expense [Abstract]

Equity Plans

The Company grants awards to recipients through the 2017 Equity Incentive Plan, as amended (the “2017 Plan”), which was approved by stockholders and the Board of Directors. The 2017 Plan provides for the issuance of shares that total no more than the sum of (i) 14,500,000 new shares, (ii) approximately 384,000 unallocated shares remaining available for the grant of new awards under the Second Amended and Restated 2007 Equity Incentive Plan, (iii) any returning shares such as forfeited, cancelled, or expired shares and (iv) 500,000 shares pursuant to an inducement award. The number of shares available to be issued under the 2017 Plan will be reduced by (i) one share for each share that relates to an option or stock appreciation right award and (ii) 1.5 shares for each share which relates to an award other than a stock option or stock appreciation right award (a full-value award). As of March 31, 2023, there were approximately 1.4 million remaining shares available for issuance under the 2017 Plan. Options expire 10 years from the date of grant.

The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for stock option awards that are not market based. Determining the appropriate fair-value model and calculating the fair value of stock option awards at the grant date requires judgment, including estimating stock price volatility and expected option life. The fair-value of the restricted stock unit awards at the grant date is based on the market price on the grant date. The Company develops estimates based on historical data and market information, which can change significantly over time, and adjusts for forfeitures as they occur.

General Vesting Conditions

The Company’s stock options and restricted stock unit (RSU) awards are generally subject to a one-year cliff vesting period after which 1/3rd of the shares vest with the remaining shares vesting ratably each month over a two-year period subject to the applicable grantee’s continued service. Beginning in the second quarter of 2022, RSU awards are generally subject to a three-year vesting period with 1/3rd vesting per year on the anniversary of the grant date. Certain stock option awards are market or performance based and vest based on certain triggering events established by the Compensation Committee. Certain executive stock option and RSU awards provide for accelerated vesting if there is a change in control or termination without cause.

Stock Options

The Company used the following weighted average assumptions for options granted during the three months ended March 31, 2023:


Weighted Average:	Three Months Ended March 31, 2023
Expected term	6.2 years
Expected volatility	75.5	%
Risk-free rate	3.5	%
Expected dividends	—	%

Service Period Based Stock Options

The following table summarizes activity of service period-based stock options during the three months ended March 31, 2023:


		Weighted Average
(In thousands except per share data and remaining contractual term)	Number of Options	Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2022	9,397	$	4.21	6.2	$	44
Options Granted	2,204	1.82
Options Exercised	—	—			—
Options Forfeited	(129)	4.32
Outstanding at March 31, 2023	11,472	$	3.75	6.9	$	13	*

Exercisable at March 31, 2023	7,145	$	4.36	5.3	$	—	*

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $1.53, which is the closing price of the Company’s stock on the last day of business for the period ended March 31, 2023.

There were no activities related to performance or market-based stock options during the three months ended March 31, 2023.

Restricted Stock Units

The following table summarizes activity of restricted stock units during the three months ended March 31, 2023:


(In thousands except per share fair value)	Number of RSUs	Weighted Average Fair Value
Unvested shares at December 31, 2022	650	$	2.77
Granted	424	1.82
Vested	(99)	3.28
Forfeited	(30)	2.79
Unvested shares at March 31, 2023	945	$	2.29

Expected to vest at March 31, 2023	945	$	2.29

Total Share-Based Compensation

Total share-based compensation expense was as follows:


	Three Months Ended March 31,
(In thousands)		2023		2022
Share-based compensation expense
Cost of sales		$	79	$	57
Sales and marketing		397		321
Research and development		240		225
General and administrative		557		1,285
Total		$	1,273	$	1,888

In future periods, the Company expects to recognize approximately $7.0 million and $1.9 million in share-based compensation expense for unvested options and unvested restricted stock units, respectively, that were outstanding as of March 31, 2023. Future share-based compensation expense will be recognized over 1.7 and 2.0 weighted average years for unvested options and restricted stock units, respectively. The Company also has total unrecognized share-based compensation expense of $1.0 million pertaining to the Joint Venture. Such expense will only be recognized if Blue Hat Registration is achieved, the timing of which is uncertain as of March 31, 2023. For additional discussion of the Joint Venture, see Note 12, Joint Venture Agreement.