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Equity Incentive Plan

6 Months Ended

Jun. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Note 6 – Equity incentive plan

On December 19, 2019, the Company adopted the 2019 Incentive Award Plan (the “2019 Plan”) under which eligible employees, officers, directors and consultants of the Company may be granted incentive or non-qualified stock options, restricted stock, restricted stock units, or other stock-based awards, including shares of Common Stock. Pursuant to the 2019 Plan, the number of shares of Common Stock available for issuance under the 2019 Plan automatically increases on each January 1 (commencing with January 1, 2021) until and including January 1, 2029, by an amount equal to the lesser of: (a) 5% of the shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by our Board of Directors (the “Board”). The Compensation Committee of the Board did not increase the share reserve under the 2019 Plan in 2020. As of June 30, 2021, 9,626,451 shares of common stock, $0.0001 par value per share (the “Common Stock”) were reserved under the 2019 Plan, of which 4,396,212 shares of Common Stock remained available for issuance.

Stock option activity

The following table summarizes the Company’s stock option activity under the 2019 Plan:

Description	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (1)
Options Outstanding, December 31, 2020		4,260,753		$	8.46		9.0	$	54
Granted		1,277,771			8.02
Exercised		(4,676	)		8.00
Forfeited		(285,592	)		8.25
Expired		(18,017	)		8.00
Options Outstanding, June 30, 2021		5,230,239		$	8.36		8.8	$	5

Options Vested and Exercisable, June 30, 2021		1,330,862		$	8.38		8.4	$	-
Options Vested and Expected to Vest, June 30, 2021		5,230,239		$	8.36		8.8	$	5

(1)	Aggregate intrinsic value represents the difference between the estimated fair value of the underlying Common Stock (as defined below) and the exercise price of outstanding in-the-money options.

The following table summarizes additional information on stock option grants and vesting (in thousands):

	2019 Plan
	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
Total fair value of stock options granted	$	2,293	$	8,766
Total fair value of options vested		252		-

Time-based vesting stock options

Time-based vesting stock options generally vest over a three-year period, are subject to graded vesting schedules, and expire 10 years from the date of grant or within 90 days of termination. The weighted-average fair value per share of time-based vesting stock options granted by us was $1.79, and $2.21, during the six months ended June 30, 2021 and 2020, respectively.

For the three months ended June 30, 2021, and 2020 the Company recognized $1.0 million and $0.8 million of stock-based compensation expense, respectively, in connection with time-based vesting stock options. For the six months ended June 30, 2021 and 2020, the Company recognized $2.0 million and $1.6 million of stock-based compensation expense, respectively, in connection with time-based stock options. As of June 30, 2021, there was $6.0 million of unrecognized stock-based compensation expense related to unvested time-based vesting stock options that are expected to be recognized over a weighted-average period of 1.84 years.

Stock Option Valuation

The Company used valuation models to value both time and performance-based vesting stock options granted during the six months ended June 30, 2021 and 2020. The following table summarizes the assumptions used in the valuation models to determine the fair value of stock options granted to employees and non-employee directors:

	Six Months Ended June 30, 2021	Six Months Ended June 30, 2020
Expected volatility	44.06% - 44.61%	37.63% - 40.98%
Expected term (in years)	6.0	6.0
Dividend yield	0.00%	0.00%
Risk-free interest rate	0.70% - 1.00%	1.43% - 0.45%

A discussion of management’s methodology for developing each of the assumptions used in the valuation model follows:

•

Expected volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses an estimated volatility based on the historical and implied volatilities of share prices of comparable companies.

•

Expected term – This is the period that the options granted are expected to remain unexercised. For options granted during the three and six months ended June 30, 2021 and 2020, the Company derived the expected life of the option based on the average midpoint between vesting and the contractual term as there is little exercise history.

•

Dividend yield – The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

•

Risk-free interest rate – This is the U.S. Treasury rate for securities with similar terms that most closely resembles the expected life of the option.

Stock-based award activity

During the six months ended June 30, 2021 the Company granted 90,324 restricted stock units (“RSUs”) to certain non-employee directors. Each non-employee director receives an initial RSU grant on the date of their election or appointment to the Board and a subsequent annual RSU grant during their continued service as a non-employee director, subject to three and one-year vesting periods, respectively. Accordingly, the Company recognizes the grant-date fair value of the stock awards, ratably over the vesting period. During the three months ended June 30, 2021 and 2020, the Company recognized $0.2 million and an immaterial amount as stock-based compensation expense related to these grants, respectively. During the six months ended June 30, 2021 and 2020, the Company recognized $0.4 million and an immaterial amount as stock-based compensation expense related to these grants, respectively.

Stock-based compensation expense

Stock-based compensation expense is included in the Company’s Consolidated Statements of Comprehensive Loss within the following line items (in thousands):

	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
Cost of revenues	$	348	$	326	$	690	$	681
General and administrative		410		261		806		491
Research and development		72		67		136		140
Sales and marketing		188		160		364		327
Total	$	1,018	$	814	$	1,996	$	1,639

Performance –based restricted stock units

The Company granted RSUs to certain employees and non-employee directors which are subject to certain vesting criteria. The RSUs become eligible to begin vesting upon a liquidity event (as defined in the award agreements governing the RSUs). The amount and timing of the vesting of the RSUs depends on the type and timing of the liquidity event as it relates to the Closing Date. Generally, a portion of the RSUs will first vest upon the occurrence of the liquidity event and the remainder will vest in installments thereafter, provided that if the liquidity event occurs after the third anniversary of the Closing Date, all RSUs will vest immediately upon the liquidity event. The vesting of the RSUs held by a grantee is generally subject to his or her continued employment with the Company.

RSU activity

The following table summarizes the Company’s RSU activity:

Description	RSUs Outstanding
Balance at December 31, 2020		1,290,432
Granted		434,538
Vested		(103,622	)
Forfeited		(81,656	)
Expired		-
Balance at June 30, 2021		1,539,692

The Company determined the achievement of the liquidity event was not probable and therefore no expense was recorded during the three and six months ended June 30, 2021 and 2020.