The board of directors of Aterian Group, Inc., a subsidiary of the Company (“AGI”), adopted, and AGI’s stockholders approved, the Mohawk Group, Inc. 2014 Equity Incentive Plan on June 11, 2014. On March 1, 2017, AGI’s board of directors adopted, and AGI’s stockholders approved, an amendment and restatement of the 2014 Equity Incentive Plan (as amended, the “Aterian 2014 Plan”). As of June 30, 2021, 60,509 shares were reserved for awards available for future issuance under the Aterian 2014 Plan.

The Company’s board of directors adopted the Aterian, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) on October 11, 2018. The 2018 Plan was approved by its stockholders on May 24, 2019. As of June 30, 2021, 341,397 shares were reserved for awards available for future issuance under the 2018 Plan.

Options granted to date under the Aterian 2014 Plan and the 2018 Plan generally vest either: (i) over a four-year period with 25% of the shares underlying the options vesting on the first anniversary of the vesting commencement date with the remaining 75% of the shares vesting on a pro-rata basis over the succeeding thirty-six months, subject to continued service with the Company through each vesting date, or (ii) over a three-year period with 33 1/3% of the shares underlying the options vesting on the first anniversary of the vesting commencement date with the remaining 66 2/3% of the shares vesting on a pro-rata basis over the succeeding twenty-four months, subject to continued service with the Company through each vesting date. Options granted are generally exercisable for up to 10 years subject to continued service with the Company.

The Company’s board of directors adopted the Aterian, Inc. 2019 Equity Plan (the “2019 Equity Plan”) on March 20, 2019. The 2019 Equity Plan was approved by its stockholders on May 24, 2019. As of June 30, 2021, no shares were reserved for future issuance. Shares of restricted common stock granted under the 2019 Equity Plan initially vested in substantially equal installments on the 6th, 12th, 18th and 24th monthly anniversary of the closing of the Company’s initial public offering (“IPO”). The Company and the 2019 Equity Plan participants subsequently agreed to extend (i) the vesting date for the first installment of shares of restricted common stock under the 2019 Equity Plan to March 13, 2020, (ii) the vesting date for the second installment of shares of restricted common stock to December 15, 2020, (iii) the vesting date for the third installment of shares of restricted common stock to either January 18, 2021 or March 10, 2021, and (iv) the vesting date for the fourth installment of shares of restricted common stock to July 1, 2021 or December 14, 2021. Awards granted under the 2019 Equity Plan and not previously forfeited upon termination of service carry dividend and voting rights applicable to the Company’s common stock, irrespective of any vesting requirement. Under ASC Topic 718, the Company treats each award in substance as multiple awards as a result of the graded vesting and the fact that there is more than one requisite service period. Upon the prerequisite service period becoming probable, the day of the IPO, the Company recorded a cumulative catch up expense and the remaining expense will be recorded under graded vesting. In the event the service of a participant in the 2019 Equity Plan (each, a “Participant”) is terminated due to an “involuntary termination”, then all of such Participant’s unvested shares of restricted common stock shall vest on the date of such involuntary termination unless, within three business days of such termination (1) the Company’s board of directors unanimously determines that such vesting shall not occur and (2) the remaining Participants holding restricted share awards covering at least 70% of the shares of restricted common stock issued and outstanding under the 2019 Equity Plan determine that such vesting shall not occur. In the event of a forfeiture, voluntary or involuntary, of shares of restricted common stock granted under the 2019 Equity Plan, such shares are automatically reallocated to the remaining Participants in proportion to the number of shares of restricted common stock covered by outstanding awards that each such Participant holds.

The following is a summary of stock option activity during the six months ended June 30, 2021:

	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balance—January 1, 2021		1,570,728		$	9.09		7.71	$	12,756
Options granted		—		$	—		—	$	—
Options exercised		(978,495	)	$	9.01		—	$	—
Options cancelled		(29,705	)	$	9.23		—	$	—
Balance—June 30, 2021		562,528		$	9.21		7.31	$	3,049
Exercisable as of June 30, 2021		467,528		$	9.12		7.26	$	2,574
Vested and expected to vest as of June 30, 2021		562,528		$	9.21		7.31	$	3,049

As of June 30, 2021, the total unrecognized compensation expense related to unvested options was $1.5 million, which the Company expects to recognize over an estimated weighted average period of 0.35 years.

A summary of restricted stock award activity within the Company’s equity plans and changes for the six months ended June 30, 2021 is as follows:

Restricted Stock Awards	Shares			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2021		3,259,389		$	13.51
Granted		1,895,642		$	16.15
Vested		(1,460,312	)	$	15.68
Forfeited		(258,971	)	$	13.53
Nonvested at June 30, 2021		3,435,748		$	13.88

On March 12, 2020, 371,320 shares of restricted common stock were forfeited and treated as a cancellation with remaining unrecognized expense for the unvested awards recognized on the date of cancellation. The Company did not reverse previously recognized compensation expenses as a result of these cancellations.

As of June 30, 2020, the total unrecognized compensation expense related to unvested shares of restricted common stock was $9.1 million, which the Company expects to recognize over an estimated weighted-average period of 0.90 years. As of June 30, 2021, the total unrecognized compensation expense related to unvested shares of restricted common stock was $33.9 million, which the Company expects to recognize over an estimated weighted-average period of 1.63 years.

Stock-based compensation expense is allocated based on the cost center to which the award holder belongs. The following table summarizes the total stock-based compensation expense by function, including expense related to consultants, for the three and six months ended June 30, 2020 and 2021:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2021		2020		2021
	(in thousands)					(in thousands)
Sales and distribution expenses	$	(579	)	$	1,569	$	1,013	$	2,524
Research and development expenses		1,179			1,221		2,452		2,104
General and administrative expenses		4,571			2,072		9,145		7,132
Total stock-based compensation expense	$	5,171		$	4,862	$	12,610	$	11,760