Share-Based Compensation

On April 11, 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011 Plan”), and most recently amended the 2011 Plan on April 10, 2019. The 2011 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock and restricted stock unit awards to eligible participants. Eligible participants are employees, directors and consultants. As of March 30, 2019, there were 9,462,455 shares of common stock authorized for issuance under the 2011 Plan.

The 2011 Plan was amended, restated and re-named the 2018 Equity Incentive Plan (“2018 Plan”), which became effective as of April 30, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. The 2018 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to the Company’s employees, directors, and consultants. The maximum aggregate number of shares that may be issued under the 2018 Plan is 14,482,356 shares of the Company’s common stock. In addition, the number of shares reserved for issuance under the 2018 Plan will be increased automatically on the first day of each fiscal year beginning with the 2020 fiscal year, by a number equal to the least of: (i) 2,144,521 shares; (ii) 4.0% of the shares of common stock outstanding on the last day of the prior fiscal year; or (iii) such number of shares determined by the Company’s Board of Directors.

The 2018 Plan may be amended, suspended or terminated by the Company’s Board of Directors at any time, provided such action does not impair the existing rights of any participant, subject to stockholder approval of any amendment to the 2018 Plan as required by applicable law or listing requirements. Unless sooner terminated by the Company’s Board of Directors, the 2018 Plan will automatically terminate on November 14, 2028.

As of March 30, 2019 and December 31, 2018, there were 4,900,328 and 5,120,293 shares, respectively, issuable under stock options outstanding, 4,504,914 and 4,335,331 shares, respectively, issued for stock option exercises and restricted stock grants, and 57,213 and 6,859 shares, respectively, available for grant under the 2011 Plan.

As of March 30, 2019, there were 4,577,114 shares of common stock reserved for future grant or issuance under the 2018 Plan, from which (i) options to purchase 264,033 shares of common stock were granted on April 3, 2019, having an exercise price of $20.02 per share, (ii) options to purchase (A) 1,000,000 shares of common stock were granted on April 18, 2019, (B) 51,999 shares of common stock were granted on April 29, 2019, and (C) 50,000 shares of common stock were granted on May 1, 2019, in each case to be effective upon and subject to the effectiveness of the registration statement relating to the Company’s IPO and having an exercise price equal to the IPO price of $25.00 per share, and (iii) awards covering 99,433 shares of restricted stock were granted on April 18, 2019 at a purchase price of $0.01 per share and which will be issued upon payment of the purchase price.

Stock Options

No stock option grants were awarded in the three months ended March 30, 2019.

The following table summarizes the Company’s stock option activity during the three months ended March 30, 2019:



	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)⁽¹⁾
Outstanding at December 31, 2018	5,120,293		$	3.13	7.3	$	81,371
Granted	—		$	—	—	$	—
Exercised	(169,583	)	$	2.16	—	$	2,859
Cancelled/Forfeited	(50,382	)	$	4.34	—	$	—
Outstanding at March 30, 2019	4,900,328		$	3.15	7.0	$	80,076
Vested and exercisable at March 30, 2019	2,981,633		$	1.11	5.9	$	54,793
Vested and expected to vest at March 30, 2019	3,967,483		$	2.16	5.9	$	68,759

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(1) Aggregate intrinsic value is calculated as the difference between the value of common stock on the transaction date and the exercise price multiplied by the number of shares issuable under the stock option.

During the three months ended March 30, 2019 and March 31, 2018, the Company recorded in aggregate $0.6 million and $0.2 million, respectively, of share-based compensation expense related to options issued to employees and nonemployees. The share-based compensation is included in cost of goods sold and SG&A expenses in the Company’s condensed statements of operations.

As of March 30, 2019 and December 31, 2018, there was $2.3 million and $2.4 million in unrecognized compensation expense related to nonvested stock option awards which is expected to be recognized over 2.7 years and 2.9 years, respectively.

Restricted Stock to Nonemployees

In October 2018, the Company’s Board of Directors approved the issuance of 135,791 shares of restricted stock with a fair value of $17.03 per share and a purchase price of $0.02 per share to nonemployees serving as the Company’s brand ambassadors. The Company has the right to repurchase the unvested shares upon a voluntary or involuntary termination of a brand ambassador’s service; however, as shares vest monthly over 12 to 24 months, they are being released from the repurchase option (and all such shares will be released from the repurchase option by November 1, 2020).

The following table summarizes the Company’s restricted stock activity during the three months ended March 30, 2019:



	Number of Shares of Restricted Stock		Weighted Average Remaining Contractual Life (Years)	Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2018	100,127		1.6	$	17.03
Granted	—		—	$	—
Vested/Released	(12,946	)	—	$	—
Cancelled/Forfeited	—		—	$	—
Outstanding at March 30, 2019	87,181		1.4	$	17.03

During the three months ended March 30, 2019, the Company recorded in aggregate $0.3 million in share-based compensation expense related to restricted stock issued to nonemployee brand ambassadors, which is included in SG&A expenses in the Company’s condensed statements of operations.

As of March 30, 2019, there was $1.4 million in unrecognized compensation expense related to nonvested restricted stock, which is expected to be recognized over 1.4 years.

In April 2019, the Company’s Board of Directors approved the issuance of 99,433 shares of restricted stock with a fair value of $20.02 per share and a purchase price of $0.02 per share to nonemployees serving as the Company’s brand ambassadors. The Company has the right to repurchase the unvested shares upon a voluntary or involuntary termination of a brand ambassador’s service; however, as shares vest monthly over 24 months, they are being released from the repurchase option (and all such shares will be released from the repurchase option by May 18, 2021).

Employee stock purchase plan

On November 15, 2018, the Company’s Board of Directors adopted its 2018 Employee Stock Purchase Plan (“2018 ESPP”), which was subsequently approved by the Company’s stockholders and became effective on April 30, 2019, the day immediately prior to the effectiveness of the registration statement filed in connection with the IPO. The 2018 ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code (the “Code”) for U.S. employees. In addition, the 2018 ESPP authorizes grants of purchase rights that do not comply with Section 423 of the Code under a separate non-423 component for non-U.S. employees and certain non-U.S. service providers. The Company has reserved 804,195 shares of common stock for issuance under the 2018 ESPP. In addition, the number of shares reserved for issuance under the 2018 ESPP will be increased automatically on the first day of each fiscal year for a period of up to ten years, starting with the 2020 fiscal year, by a number equal to the least of: (i) 536,130 shares; (ii) 1% of the shares of common stock outstanding on the last day of the prior fiscal year; or (iii) such lesser number of shares determined by the Company’s Board of Directors. The 2018 ESPP is expected to be implemented through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s common stock on specified dates during such offerings. The administrator has not yet approved an offering under the 2018 ESPP.