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STOCK-BASED COMPENSATION
 6 Months Ended
Jun. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION Stock-Based CompensationPMI grants equity awards primarily through its Amended and Restated 2005 Stock Option Plan (the “2005 Plan”), which was approved as amended and restated by its stockholders on December 1, 2010; and its 2015 Equity Incentive Plan, which was approved by its stockholders on April 7, 2015 and subsequently amended by an Amendment No. 1, Amendment No. 2 and Amendment No. 3, which were approved by PMI's stockholders effective as of February 15, 2016, May 31, 2016, and September 5, 2018 respectively (as amended, the “2015 Plan”). In March 2015, the 2005 Plan expired, except that any awards granted under the 2005 Plan prior to its expiration remain in effect pursuant to their terms.
Stock Option Reprice
On May 3, 2016 and March 17, 2017, the Compensation Committee of the Board of Directors of PMI approved two separate stock option repricing programs authorizing PMI’s officers to reprice certain outstanding stock options held by employees and directors that had exercise prices above the current fair market value of PMI’s Common Stock on those respective dates.
On August 11, 2020, the Compensation Committee of the Board of Directors of PMI approved a stock option repricing program (the “2020 Repricing” and together with the 2016 Repricing and the 2017 Repricing, the “Repricings”) authorizing PMI’s officers to reprice certain outstanding stock options held by employees and directors that have exercise prices above the
current fair market value of PMI’s common stock. The repricing was effected on August 11, 2020 for eligible directors and employees.
PMI believes that the Repricings will encourage the continued service of valued employees and directors, and motivate such service providers to perform at high levels, both of which are critical to the Company’s continued success. PMI expects to incur additional stock based compensation charges as a result of the Repricings.
The financial statement impact of the above Repricings was not material for the six months ended June 30, 2021. As of June 30, 2021, the unamortized Repricings expense (net of forfeitures) of $46 thousand will be recognized over the remaining weighted-average vesting period of 1.8 years.
Stock Option Activity
Stock option activity under the 2005 Plan and 2015 Plan is summarized for the six months ended June 30, 2021 below:
Options
Issued and
Outstanding
Weighted
Average
Exercise
Price
Balance as of January 1, 202172,915,449 $0.02 
Options issued8,668,166 $0.10 
Options exercised(1,754,458)$0.02 
Options forfeited(11,742,812)$0.02 
Options expired(14,595)$0.02 
Balance as of June 30, 202168,071,750 $0.03 
Options vested and expected to vest as of June 30, 202152,252,350 $0.03 
Options vested and exercisable at June 30, 202147,648,686 $0.02 
Other Information Regarding Stock Options
The weighted-average remaining life for options outstanding as of June 30, 2021 was 6.87 years.
The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires PMI to make assumptions and judgments about the variables used in the calculation, including the fair value of PMI’s common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of PMI’s common stock, a risk-free interest rate, and expected dividends. Given the absence of a publicly traded market, the Company considered numerous objective and subjective factors to determine the fair value of PMI’s common stock at each grant date. These factors included, but were not limited to: (i) contemporaneous valuations of common stock performed by unrelated third-party specialists, (ii) the prices for PMI’s preferred stock sold to outside investors, (iii) the rights, preferences and privileges of PMI’s preferred stock relative to PMI’s common stock, (iv) the lack of marketability of PMI’s common stock, (v) developments in the business, (vi) secondary transactions of PMI’s common and preferred shares, and (vii) the likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of Prosper, given prevailing market conditions. As PMI’s stock is not publicly traded, volatility for stock options is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of PMI. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options using the simplified method. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. PMI uses an expected dividend yield of zero as it does not anticipate paying any dividends in the foreseeable future.
PMI also estimates forfeitures of unvested stock options. Expected forfeitures are based on the Company’s historical experience. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest.
The fair value of PMI’s stock option awards granted during the three and six months ended June 30, 2021 and 2020 was estimated at the date of grant using the Black-Scholes model with the following average assumptions:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Volatility of common stock67.60 %55.37 %64.00 %47.93 %
Risk-free interest rate1.04 %0.44 %1.01 %0.66 %
Expected life6.0 years6.0 years6.0 years6.0 years
Dividend yield— %— %— %— %
Restricted Stock Unit Activity
For the six months ended June 30, 2021, PMI did not grant any RSUs. In previous years, PMI granted RSUs to certain employees that are subject to three-year or four-year vesting terms and the occurrence of a liquidity event.
The following table summarizes the number of PMI’s RSU activity for the six months ended June 30, 2021:
Number of SharesWeighted-Average Grant Date Fair Value
Unvested at January 1, 20214,661,141 $0.91 
Forfeited(1,786,793)$0.54 
Unvested at June 30, 20212,874,348 $1.14 
Share Based Compensation
The following table presents the amount of stock-based compensation related to stock-based awards granted to employees recognized in Prosper’s condensed consolidated statements of operations for the periods presented (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Origination and servicing$30 $34 $62 $72 
Sales and marketing16 15 32 26 
General and administrative222 343 493 799 
Total stock-based compensation$268 $392 $587 $897 

Prosper capitalized stock-based compensation as internal-use software and website development costs of an immaterial amount and $0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $0.1 million and $0.1 million for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, the unamortized stock-based compensation expense, adjusted for forfeiture estimates, related to unvested stock-based awards was approximately $1.3 million, which will be recognized over a remaining weighted-average vesting period of approximately 2.0 years.