Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

v3.22.2
Stock Based Compensation
6 Months Ended
Jun. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Stock Based Compensation

Note 13. Stock-Based Compensation

The Company uses stock-based compensation awards to incentivize employees and other individuals who render services to the Company by providing opportunities to acquire stock in the Company. In August 2013, the Company adopted the Company's 2013 Stock Plan, as amended from time to time (the "2013 Stock Plan"). In November 2021, the Company adopted the Company's 2021 Incentive Award Plan (the "2021 Equity Plan"). The 2013 Stock Plan was terminated in connection with the effectiveness of the 2021 Equity Plan, and the Company ceased making any further awards under the 2013 Stock Plan. Outstanding awards granted under the 2013 Stock Plan remained outstanding, subject to the terms of the 2013 Stock Plan and applicable award agreements.

The Company’s 2021 Equity Plan provides for the grant of equity awards, including non-statutory or incentive stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs") and stock appreciation rights to the Company's and its subsidiaries' employees and the Company's directors and consultants. The total number of shares of common stock initially reserved for issuance pursuant to future awards under the 2021 Equity Plan was 1,314,321 shares plus any shares as of the effective date of the 2021 Equity Plan that were (i) available for issuance under the 2013 Stock Plan or (ii) subject to an award under the 2013 Stock Plan that, on or after the effective date of the 2021 Equity Plan, expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, to the extent of such forfeiture, expiration or cash settlement. In addition, shares delivered to the Company to satisfy the applicable exercise or purchase price of an award under the 2021 Equity Plan or the 2013 Stock Plan and/or to satisfy any applicable tax withholding obligations will become or again be available for award grants under the 2021 Equity Plan. On January 1 of each year, shares available for issuance under the 2021 Equity Plan may be increased pursuant to its terms.


The Compensation Committee of the Company’s Board of Directors administers the 2021 Equity Plan, selects the individuals to whom equity awards will be granted, determines the type of equity award and number of shares to be granted and sets the terms of the awards.

Incentive stock options and non-statutory stock options granted pursuant to the terms of the 2021 Equity Plan cannot be granted with an exercise price of less than 100% of the fair market value of the underlying Company stock on the date of the grant (110% if the incentive stock option is issued to an individual that owns more than 10% of the Company’s outstanding voting stock). The term of the options granted under the 2021 Equity Plans cannot be greater than 10 years (five years for incentive stock options granted to an individual that owns more than 10% of the Company’s outstanding voting). Options granted generally vest as to 25% of the award on the one-year anniversary of the date of grant with the remaining balance vesting equally on a quarterly basis over the subsequent three years, subject to continued service through the applicable vesting date.

Except for RSUs granted under the Amended and Restated Director Compensation Program ("Director Compensation Program") described below, RSUs granted generally vest as to 25% of the award on the one-year anniversary of the date of grant with the remaining balance vesting equally on a quarterly basis over the subsequent three years, subject to continued service through the applicable vesting date. Options and RSUs granted under the 2021 Equity Plan accelerate for certain participants upon a change in control, as defined in the 2021 Equity Plan.

In addition, the Company's Board of Directors has adopted the Amended and Restated Non-Employee Director Compensation Program, under which the Company's non-employee directors are eligible to receive initial and annual RSU awards under the 2021 Equity Plan. Annual RSU grants granted pursuant to the Amended and Restated Director Compensation Program vest 100% on the earlier of (i) the one-year anniversary of the grant date or (ii) the date of the Company's next annual meeting of stockholders following the grant date, subject to continued service through the applicable vesting date. In addition, the vesting of grants under the Director Compensation Program will accelerate upon certain changes in control of the Company. Compensation under the Director Compensation Program is subject to the limit on non-employee director compensation set forth in the 2021 Equity Plan, which provides that the sum of any cash compensation and the aggregate grant date fair value of all awards granted to a non-employee director as compensation for services as a non-employee director with respect to any fiscal year of the Company shall not exceed $500,000.


Stock Options

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model for incentive stock options granted to employees and on the reporting date for non-employees. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company estimates expected volatility based on historical and implied volatility data of comparable companies. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. There were no options granted during the six months ended June 30, 2022.

The following table summarizes the key valuation assumptions for options granted for the period presented:

 

 

 

Six Months Ended June 30,

 

 

2021

Risk free interest rates

 

0.98% – 1.11%

Expected term (in years)

 

5.53 – 6.12

Dividend yield

 

Expected volatility

 

36.91% - 37.10%

Fair value

 

$1.84 - $2.00

 

The following table summarizes stock option activity under the Company’s stock-based compensation plans for the period presented:

 

 

 

Number of Shares

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Life
(in Years)

 

 

Aggregate
Intrinsic
Value (in thousands)

 

Outstanding as of December 31, 2021

 

 

563,613

 

 

$

3.71

 

 

 

7.61

 

 

$

871

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(111,573

)

 

 

4.49

 

 

 

 

 

 

 

Expired

 

 

(48,290

)

 

 

3.39

 

 

 

 

 

 

 

Outstanding as of June 30, 2022

 

 

403,750

 

 

 

3.53

 

 

 

6.03

 

 

 

40,151

 

Vested and exercisable as of June 30, 2022

 

 

297,923

 

 

$

3.04

 

 

 

5.11

 

 

$

38,885

 

 

The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying stock option awards and the estimated fair value of the Company’s common stock on the date of exercise. Total unvested and unexercised shares under options as of June 30, 2022 and December 31, 2021, totaled 105,827 and 327,405, respectively.

The total fair value of shares under options vested and unexercised as of June 30, 2022 and December 31, 2021 was $0.5 million and $1.2 million, respectively. Total unrecognized compensation cost related to unvested stock options as of June 30, 2022 is $1.1 million and is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock Units

A summary of restricted stock unit activity for the period presented is as follows:

 

 

 

Number of Shares

 

 

Weighted-Average Grant Date Fair Value

 

Restricted stock units outstanding at December 31, 2021

 

 

56,900

 

 

$

13.00

 

Granted

 

 

1,072,297

 

 

 

5.13

 

Canceled

 

 

(201,486

)

 

 

12.61

 

Vested and released

 

 

(68,447

)

 

 

7.24

 

Restricted stock units outstanding at June 30, 2022

 

 

859,264

 

 

 

4.62

 

At June 30, 2022, there was $3.6 million of total unrecognized stock-based compensation cost related to these RSUs which is expected to be recognized over a weighted-average period of 2.5 years.

Stock-Based Compensation Expense

Total stock-based compensation expense was $0.6 million and $0.1 million, for the three months ended June 30, 2022 and 2021, respectively, and $1.4 million and $0.2 million for the six months ended June 30, 2022 and 2021, respectively, and is recognized as a personnel expense in the unaudited condensed consolidated statement of operations.

Common Stock Subject to Repurchase

The 2013 Stock Plan allowed for the early exercise of stock options for certain individuals, as determined by the Board of Directors. Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability. Upon termination of service, the Company may, in its discretion, repurchase unvested shares acquired through early exercise of stock options at a price equal to the additional stock-based compensation expense price per share paid upon the exercise of such options. The Company includes unvested shares subject to repurchase in the number of shares of common stock outstanding on the unaudited condensed consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit).

During the year ended December 31, 2021, options to purchase 1,055,964 shares of common stock were exercised early. The Company had a liability of $1.2 million and $1.8 million as of June 30, 2022 and December 31, 2021, respectively, related to early exercises of stock options, which is recorded as an early exercise stock option liability in the condensed consolidated balance sheets. The liability is reclassified into stockholders’ equity (deficit) as the awards vest.

At June 30, 2022, 323,475 shares of common stock subject to repurchase related to stock options early exercised and unvested were outstanding.

In June 2019, the Company granted performance-based stock option awards to purchase a total of 375,000 shares of common stock to certain executive employees. These awards vest and become exercisable immediately prior to the consummation of a qualifying corporate transaction based on the achievement of certain enterprise valuation goals in connection with the corporate transaction. These vesting events were not determined to be probable of occurring as of June 30, 2022 and were never determined to be probable of occurring in the past. As such, the Company has not recognized any compensation costs related to the awards as of June 30, 2022. Until the performance condition is considered probable of being met, if at all, the Company will not recognize stock-based compensation expense. If the assessment of the probability of the performance condition being met changes, the net impact of the change in estimate would be recognized in the period of change.

These awards were early exercised in May 2021, and therefore, are recorded within the early exercise stock option liability in the Company's condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively. The awards will remain classified within the early exercise stock option liability until the sooner of the date the performance condition be met or the award cancellation date.

Employee Promissory Notes

In February, April and May 2021, the Company entered into full recourse promissory notes with its CEO, General Counsel, President, CFO, and COO related to stock option exercises for a total of 915,721 shares, 200,606 shares, 715,500 shares, 127,296 shares, and 125,000 shares, respectively. Prior to their forgiveness, the notes issued in February and April accrued interest at 2.25% per annum and the notes issued in May accrued interest at 4.07% per annum, compounding annually. The promissory notes were prepayable at any time at the option of the employee and were payable at the earlier of: (i) the date of any sale, transfer or other disposition of all or any portion of the purchased shares, (ii) five years from the date of the promissory note, or (iii) the latest date repayment must be made to prevent a violation of Section 13(k) of the Securities Exchange Act of 1934.

In September 2021, the Company's Board of Directors approved the forgiveness of all outstanding principal and accrued interest for each of the promissory notes.

 

Employee Stock Purchase Plan

Eligible employees qualify to receive the grant of rights to purchase common stock under the Company's 2021 Employee Stock Purchase Plan ("2021 ESPP"). Eligible employees are those that do not own stock possessing 5% or more of the total combined voting power or value of all common stock of the Company, a parent or a subsidiary. Under the 2021 ESPP, the Company is authorized to issue up to 262,864 shares of its common stock, of which none have been issued as of June 30, 2022. On January 1st of each year, shares available for issuance under the 2021 ESPP Plan may be increased pursuant to its terms. There is no financial impact of this plan for the three or six months ended June 30, 2022.