Stock-Based Incentive Compensation Plans

2018 Equity Incentive Plan

In October 2018, the Company adopted the 2018 Equity Incentive Plan (the "2018 EIP"). The number of shares of common stock reserved for issuance under the 2018 EIP will automatically increase on January 1 of each year, beginning January 1, 2019, and continuing through and including January 1, 2028, by 5% of the total number of shares of the Company's capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company's Board of Directors. On January 1, 2019, the total number of shares of common stock reserved for issuance increased by 1,222,538 shares. The Company filed a Registration Statement on Form S-8 on March 22, 2019 to register these additional shares reserved for issuance under the 2018 EIP. As of September 30, 2019, a total of 2,569,444 shares of common stock are available for future grants under the 2018 EIP.

Stock Options

The table below summarizes the stock option activity for the nine months ended September 30, 2019:



	Number of Shares		Weighted- Average Exercise Price
Outstanding as of December 31, 2018	2,641,198		$4.27
Granted	638,983		20.89
Exercised	(359,200	)	3.29
Canceled and forfeited	(96,496	)	9.36
Outstanding as of September 30, 2019	2,824,485		7.98

As of September 30, 2019, there was $6.3 million of unrecognized compensation cost related to stock options granted. These costs are expected to be recognized over a period of approximately 2.7 years.

The table below summarizes the weighted average grant date fair value per share and the assumptions used to estimate the grant date fair value of the stock options granted during the respective periods using the Black-Scholes option-pricing model:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Weighted average grant date fair value per share	$5.43			$3.48			$9.78			$2.47
Expected term (years)	5.0	to	7.0	5.3	to	7.0	5.0	to	7.0	5.0	to	7.0
Expected volatility	46.62%	to	47.25%	41.00%	to	44.00%	41.68%	to	47.25%	41.00%	to	46.00%
Risk-free interest rate	1.32%	to	1.39%	2.74%	to	2.80%	1.32%	to	2.59%	2.35%	to	2.93%
Dividend yield	—%			—%			—%			—%

Early Exercise of Unvested Stock Options

Early exercises of stock options are subject to a right of repurchase by the Company of any unvested shares. The repurchase rights lapse over the original vesting period of the options. The Company accounts for the cash received in consideration for the early exercised options as a liability included in accrued liabilities, which is then reclassified to stockholders’ equity as the options vest. As of September 30, 2019 and December 31, 2018, the Company had a total of 29,268 and 74,019 shares of common stock, respectively, subject to repurchase under the 2008 Stock Option Plan and $0.1 million and $0.3 million, respectively, of associated liabilities for the repurchase.

Restricted Stock Units

The table below summarizes restricted stock units activity for the nine months ended September 30, 2019:



	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2018	53,436		$11.69
Granted	607,585		20.30
Vested	(65,435	)	20.74
Canceled and forfeited	(30,156)		19.45
Outstanding as of September 30, 2019	565,430		19.48

As of September 30, 2019, there was a total unrecognized compensation cost of $8.9 million related to the restricted stock units granted. These costs are expected to be recognized over a period of approximately 3.3 years.

Employee Stock Purchase Plan

Under the Company's 2018 Employee Stock Purchase Plan (the "ESPP") adopted in October 2018, the Company allows eligible employees to purchase shares of the Company's common stock through payroll deductions at the price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each six month offering period. There were 515,307 shares of common stock originally reserved for issuance under the ESPP. On March 22, 2019, the Company filed a Registration Statement on Form S-8 to register 244,507 additional shares of common stock for issuance under the ESPP. As of September 30, 2019 and December 31, 2018, total accumulated ESPP related employee payroll deductions amounted to $0.7 million and $0.4 million, respectively, which were included within accrued compensation and related expenses in the consolidated balance sheets. For the three and nine months ended September 30, 2019, the Company recognized $0.2 million and $0.6 million, respectively, of stock-based compensation expense related to ESPP. As of September 30, 2019, the unrecognized compensation cost for the ESPP was $0.1 million.

The Company estimated the fair value of ESPP purchase rights during the offer period which commenced in May 2019 and ends in November 2019, using a Black-Scholes option pricing model with the following assumptions:



		Nine Months Ended
		September 30, 2019
Expected term (years)		0.50
Expected volatility		58.35%
Risk-free interest rate		2.49%
Dividend yield		—%

Stock-Based Compensation

The table below presents the detail of stock-based compensation expense amounts included in the condensed consolidated statements of operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(in thousands)
Cost of goods sold	$	57	$	5	$	163	$	17
Sales and marketing	807		110		2,481		350
Research and development	144		30		364		101
General and administrative	903		183		2,588		613
	$	1,911	$	328	$	5,596	$	1,081