Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Stock-Based Compensation

Stock-Based Compensation

(8) Stock-Based Compensation

The Company has two equity incentive plans: the 2012 Stock Incentive Plan and the Amended and Restated 2019 Equity Incentive Plan. New awards can only be granted under the Amended and Restated 2019 Equity Incentive Plan (the “Plan”). At March 31, 2023, 758,780 shares of common stock were available for future issuances under the Plan. The Plan is subject to an annual increase, subject to prior approval by the Company’s board of directors, equal to the lesser of (i) 432,442 shares, (ii) 4% of the shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by the board of directors. The Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, directors, and other persons, as determined by the Company’s board of directors. The Company estimates forfeitures that it expects will occur and adjusts expense for actual forfeitures in the periods they occur.

The Company measures employee and nonemployee stock-based awards at grant-date fair value and records compensation expense ratably over the vesting period of the award. The Company recorded stock-based compensation expense in the following expense categories of the accompanying consolidated statements of operations and comprehensive loss (in thousands):

	Three months ended March 31,
	2023		2022
Sales and marketing	$	401	$	307
General and administrative		554		464
Research and development		173		130
Total stock‑based compensation	$	1,128	$	901

Stock Options

The Company’s stock options vest based on the terms in each award agreement and generally vest over four years and have a term of 10 years. The following table summarizes stock option activity:

				Weighted
				average
		Weighted		remaining
	Number of	average exercise		contractual term
	shares	price per share		(years)
Outstanding at January 1, 2023	2,071,848		11.49
Granted	180,800		10.53
Exercised	(9,922)		4.44
Canceled/forfeited	(20,302)		11.77
Outstanding at March 31, 2023	2,222,424	$	11.44	7.12
Vested and expected to vest at March 31, 2023	2,165,187	$	11.44	7.07
Exercisable at March 31, 2023	1,354,140	$	11.34	6.07

Included in outstanding options at March 31, 2023, were 379,225 stock options granted outside of the Plan. These grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq listing rule 5635(c)(4). At March 31, 2023, the aggregate intrinsic value of both outstanding options and exercisable options was $2.4 million.

The weighted average grant-date fair value per share of options granted was $7.22 during the three months ended March 31, 2023. The aggregate intrinsic value of options exercised was $60,000 for the three months ended March 31, 2023. At March 31, 2023, the total unrecognized compensation expense related to unvested employee and nonemployee stock option awards was $5.5 million, which is expected to be recognized in expense over a weighted-average period of approximately 2.5 years.

Estimating Fair Value of Stock Options

The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Certain of these inputs are subjective and generally require judgment to determine.

Expected term – The expected term of stock options represents the weighted-average period the stock options are expected to be outstanding. The Company uses the simplified method for estimating the expected term as provided by the SEC. The simplified method calculates the expected term as the average time to vesting and the contractual life of the options.

Expected volatility – Due to the Company’s limited operating history and lack of sufficient company-specific historical or implied volatility, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers, as well as the Company’s, whose share prices are publicly available.

Risk-free interest rate – The risk-free rate assumption is based on U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock options.

Expected dividend – The Company has not paid and does not intend to pay dividends.

The fair value of each option was estimated on the date of grant using the Black-Scholes option pricing model and the weighted average assumptions in the table below:

	Three months ended
	March 31, 2023
Expected dividend yield	—
Expected volatility	73.6	%
Risk‑free interest rate	4.04	%
Expected term (in years)	6.26

Restricted Stock Units

The Company has issued service-based and performance-based restricted stock units (“RSUs”). During the three months ended March 31, 2023, the Company granted 295,650 service-based awards at a weighted average grant-date fair value of $10.77 per RSU. Vesting of the service-based RSUs is based on the terms in each award agreement and is generally over four years. During the three months ended March 31, 2023, the Company granted 225,208 performance-based RSUs at a weighted average grant-date fair value of $11.09 per RSU. Vesting of these performance-based RSUs is subject to continued service through 2026 and the achievement of certain performance milestones for fiscal year 2026. The amount of RSUs that will vest can range from 0% to 110% of the original number of RSUs granted. Expense for the performance-based RSUs is not recognized until the performance conditions are deemed probable of achievement. The Company did not record any expense related to the performance-based RSUs during the three months ended March 31, 2023.

The following table summarizes RSUs for the Plan:

	Number of
	shares
Unvested balance at January 1, 2023	311,991
Granted	520,858
Vested	(78,666)
Canceled/forfeited	(2,075)
Outstanding at March 31, 2023	752,108

Included in outstanding RSUs at March 31, 2023, were 17,350 RSUs granted outside of the Plan. These grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq listing rule 5635(c)(4). The aggregate intrinsic value of RSUs outstanding was $8.0 million at March 31, 2023. The total unrecognized compensation expense at March 31, 2023 related to RSUs was $5.1 million, which is expected to be recognized in expense over a weighted-average period of approximately 3.4 years.