Equity

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Equity

Equity

Series B Convertible Preferred Stock

The Company has not declared or paid any dividends on the Series B Preferred Stock since issuance. Dividends accumulated but not paid as of June 30, 2023 were $17.2 million. As this amount has not been declared, the Company has not recorded this amount on its unaudited condensed consolidated balance sheet as of June 30, 2023.

Based on accumulated dividends as of June 30, 2023, the Series B Preferred Stock was convertible into an aggregate of 30,445,997 shares of the Company’s common stock as of that date.

Equity Incentive Awards

The Company has issued restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), and performance stock unit awards (“PSUs”, together with RSAs and RSUs, collectively, the “Equity Incentive Awards”) to its employees. The following is summary information for Equity Incentive Awards for the six months ended June 30, 2023.

As of June 30, 2023, there was $31.6 million of unrecognized share-based compensation expense related to the Equity Incentive Awards. This expense is expected to be recognized over a weighted-average period of 2.38 years, which approximates the remaining vesting period of these grants. The table below summarizes activity of unvested Equity Incentive Awards by award type from January 1, 2023 through June 30, 2023.

	RSA			RSU			PSU
	Number of Shares	Weighted-Average Grant Date  Fair Value		Number of Shares	Weighted-Average Grant Date  Fair Value		Number of Shares	Weighted-Average Grant Date  Fair Value
Unvested at January 1, 2023	122,755	$	6.13	4,774,971	$	6.28	241,072	$	4.62
Granted	—	—		3,156,544	4.59		3,689,427	3.72
Vested	—	—		(2,226,180)	6.17		—	—
Forfeited	(62,255)	5.73		(628,833)	6.03		(59,524)	4.62
Unvested at June 30, 2023	60,500	$	6.56	5,076,502	$	5.31	3,870,975	$	3.76

Stock Options

A summary of stock option activity for the six months ended June 30, 2023 is presented below:

	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2023	933,894	$	6.46
Granted	3,600,000	3.70
Exercised	(4,334)	5.84
Vested options expired	(378,133)	5.73
Outstanding at June 30, 2023	4,151,427	4.13		6.40	9,257,661
Exercisable at June 30, 2023	551,427	$	6.96	0.77	$	75,977

As of June 30, 2023, there was $5.9 million of unrecognized share-based compensation expense related to Stock Options. This expense is expected to be recognized over a weighted-average period of 2.29 years.

CEO Performance Grant

On January 27, 2023, the Board of Directors appointed Joseph H. Capper to serve as Chief Executive Officer. The Company entered into a Letter Agreement with Mr. Capper that included, among other things, a grant of 3,300,000 PSUs (the “CEO Performance PSUs”) and a non-qualified stock option (the “CEO Performance Option”, collectively with the CEO

Performance PSUs, the “CEO Performance Grant”) for 3,600,000 shares of the Company’s common stock. In addition to continued employment with the Company, the occurrence and extent of vesting of each component of the CEO Performance Grant is dependent upon the Company’s operating and share price performance: the CEO Performance PSUs vest on the basis of achieved revenue growth, while the CEO Performance Option vests on the basis of share price appreciation.

CEO Performance PSUs

The CEO Performance PSUs vest in a single tranche on the earlier of the filing date of the Company’s 2026 Annual Report on Form 10-K and March 15, 2027. The occurrence and extent of vesting depends on the Company’s compound annual growth rate (“CAGR”) achieved with respect to its revenue growth between the year ended December 31, 2022 and the year ending December 31, 2026. The PSUs may vest with respect to 50% to 200% of the granted number of PSUs, depending on the extent of CAGR achievement. Failure to achieve the CAGR associated with 50% of achievement would result in no vesting.

Management determined the probable level of vesting using internally-developed forecasts for the relevant period representing the Company’s best estimate for revenue, with a factor applied to calculate the highest level of CAGR evaluated to be probable of occurring based on that estimate. The Company recognized $0.4 million and $0.7 million of expense related to the CEO Performance PSUs during the three and six months ended June 30, 2023, respectively.

CEO Performance Option

The CEO Performance Option grants Mr. Capper the right to purchase up to 3,600,000 shares of common stock for $3.70 per share. The CEO Performance Option vests based on the satisfaction of service and market conditions. Mr. Capper may vest in 25% of the CEO Performance Option on each of the first four anniversary dates of the date of grant provided that he remains employed by the Company and provided that specified share price goals are achieved at any point between the date of grant and January 31, 2027. There are three separate share price goals associated with the CEO Performance Option. If specified share price goals are met at one level, one-third of the option may vest, at a second level, a further one-third may vest, and at a third level, the full amount of the option may vest. Satisfaction of the share price goals is based on the average of the closing price of the Company’s common stock during any 20 consecutive trading days through January 31, 2027 exceeding the stipulated share price goal. The CEO Performance Option expires on February 1, 2030.

The Company estimated the fair value of the awards using a Monte Carlo simulation using the following assumptions:

	Assumption
Stock price on grant date	$	3.70
Exercise price	$	3.70
Risk-free interest rate	3.58		%
Expected volatility (annualized)	75.00		%
Dividend yield	—		%
Weighted average grant date fair value	$	1.93

The risk-free interest rate was derived based on the U.S. Treasury Yield curve in effect at the date of grant for maturities of similar periods to the contractual term. The expected volatility was estimated principally based on the Company’s historical daily stock price movements for a term similar in length to the contractual term. The dividend yield was based on the Company’s history of dividends on its common stock. The fair value was determined using an expected term which reflects the anticipated holding and post-vesting behavior pattern, calculated for each individual simulation.

The total grant date fair value of the CEO Performance Option was $7.0 million. The fair value associated with each tranche of the award will be recognized, straight-line, over the associated requisite service period for that tranche, subject to acceleration if the market condition is met prior to the end of the derived service period. Failure to meet the market condition for an award does not result in reversal of previously-recognized expense, so long as the service is provided for the duration of the required service period. The Company recognized $0.7 million and $1.2 million of expense related to the CEO Performance Option during the three and six months ended June 30, 2023, respectively.