Stock Incentive Plan

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock Incentive Plan

8. Stock Incentive Plan

The Company adopted an incentive plan (the “2020 Omnibus Incentive Plan”) on September 22, 2020, to provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to Company employees, employees of the Company’s affiliates, non-employee directors and certain consultants and advisors. As of March 31, 2023, the Company is authorized to award 1,124,160 shares under the 2020 Omnibus Incentive Plan. Previously, the Company had adopted its 2018 Equity Incentive Plan and 2016 Stock Incentive Plan (together with the 2020 Omnibus Incentive Plan, the “Stock Incentive Plans”), under which the Company had issued stock options and restricted stock units. Following the effective date of the 2020 Omnibus Incentive Plan, no additional awards may be made under the 2018 Equity Incentive Plan or 2016 Stock Incentive Plan. The Stock Incentive Plans were established to provide eligible individuals with an incentive to contribute to the Company’s success and to operate and manage the Company’s business in a manner that will provide for its long-term growth and profitability and that will benefit the Company’s shareholders and other stakeholders, including employees and customers. The Stock Incentive Plans are also intended to provide a means of recruiting, rewarding, and retaining key personnel.

Stock Options

The Stock Incentive Plans prescribe various terms and conditions for the award of options and the total number of shares authorized for this purpose. For options, the strike price is equal to the fair market value of the Company’s stock price at the date of grant. Generally, options become exercisable based on years of service and vesting schedules, and expire after (i) a period of ten years from the date of grant, (ii) three months following the date of termination of employment from the Company, (iii) one year following the date of termination from the Company by reason of death or disability, (iv) the date of termination of employment for cause, or (v) the fifth anniversary of the date of the grant if it is held by a 10 percent or greater stockholder.

The following tables summarize the Company’s stock option activity:

	Options Activity			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance at January 1, 2023		921,657		$	6.86		8.00	$	—
Granted		—			—
Exercised/released		—			—
Cancelled/forfeited		(24,164	)	$	9.99
Balance at March 31, 2023		897,493		$	6.78		7.74	$	—
Exercisable at March 31, 2023		318,041		$	8.72		5.43	$	—

	Options Activity			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance at January 1, 2022		747,800		$	11.51		6.57	$	1,143,013
Granted		216,660		$	3.99
Exercised/released		(1,750	)	$	8.14
Cancelled/forfeited		(74,317	)	$	17.96
Balance at March 31, 2022		888,393		$	10.97		7.10	$	283,924
Exercisable at March 31, 2022		531,278		$	8.73		5.84	$	283,924

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option-pricing model. ASC 718, “Compensation- Stock Compensation” (“ASC 718”), requires the use of the fair-value-based method for measuring the value of stock-based compensation. For the three months ended March 31, 2023 there were no stock options granted. The estimated fair value of each grant of stock options awarded during the three months ended March 31, 2022 was determined using the following assumptions:

•Expected Volatility. The expected volatility is based on the volatility of the historical stock prices of identified peer companies.

•Expected Term. Due to the lack of a public market for the trading of shares of the Company’s common stock prior to the Company’s initial public offering that closed on September 25, 2020, and the lack of sufficient Company-specific historical data, the expected term of employee stock options is determined using the “simplified” method, as prescribed in SEC Staff Accounting Bulletin No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

•Risk-free Interest Rate. The risk-free interest rate is based on the interest rate payable on the United States Treasury yield curve in effect at the time of grant for a period that is commensurate with the assumed expected term.

•Dividend Yield. The dividend yield is 0% because the Company has never paid, and for the foreseeable future does not expect to pay, dividends on its shares of common stock.

The inputs and assumptions used to estimate the fair value of share-based payment awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different inputs and assumptions, the Company’s share-based compensation expense could be materially different for future awards.

For the three months ended March 31, 2022, the grant-date fair value of stock options was estimated at the time of grant using the following weighted-average inputs and assumptions in the Black-Scholes option pricing model:

	Three Months Ended March 31,
		2022
Weighted-average expected volatility			52.05	%
Weighted-average expected term (years)			6.25
Weighted-average expected risk-free interest rate			1.71	%
Dividend yield			—
Weighted-average fair value of options granted		$	3.99

Restricted Stock Units

The following tables summarize the Company’s RSU activity:

	Number of RSUs			Weighted Average Grant Date Fair Value (per share)		Weighted Average Remaining Vesting Term (years)		Aggregate Fair Value
Balance at January 1, 2023		504,420		$	4.22		2.94	$	2,127,734
Granted		—			—
Exercised/released		(13,146	)	$	11.30
Cancelled/forfeited		(16,279	)	$	5.98
Balance at March 31, 2023		474,995		$	3.96		2.67	$	1,881,278

	Number of RSUs			Weighted Average Grant Date Fair Value (per share)		Weighted Average Remaining Vesting Term (years)		Aggregate Fair Value
Balance at January 1, 2022		90,630		$	32.91		2.17	$	2,982,931
Granted		135,777		$	8.36
Exercised/released		(5,473	)	$	43.02
Cancelled/forfeited		(14,253	)	$	36.79
Balance at March 31, 2022		206,681		$	16.25		3.01	$	3,358,749

The Company estimates the fair value of each restricted stock unit using the fair value of the Company’s stock on the date of grant.

Market-Based Stock Units

The following tables summarize the Company’s market-based stock unit ("MSU") activity:

	Number of MSUs			Weighted Average Grant Date Fair Value (per share)		Weighted Average Remaining Vesting Term (years)		Aggregate Fair Value
Balance at January 1, 2023		31,083		$	43.53		0.60	$	1,353,043
Granted		—			—
Exercised/released		—			—
Cancelled/forfeited		(9,769	)	$	43.53
Balance at March 31, 2023		21,314		$	43.53		0.42	$	927,798

	Number of MSUs			Weighted Average Grant Date Fair Value (per share)		Weighted Average Remaining Vesting Term (years)		Aggregate Fair Value
Balance at January 1, 2022		160,301		$	43.53		1.20	$	6,977,903
Granted		—			—
Exercised/released		—			—
Cancelled/forfeited		(76,821	)	$	43.53
Balance at March 31, 2022		83,480		$	43.53		0.96	$	3,633,884

These MSUs vest upon the 30-day weighted average stock price reaching or exceeding established targets, after reaching certain time targets. We estimate the grant-date fair value of the MSUs using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rate of return and dividend yield. Expected volatility within the index are derived using historical volatility of a selected peer group over a period equal to the length of the performance period. We base the risk-free rate of return on the yield of a zero-coupon U.S. Treasury bond with a maturity equal to the performance period and assume a 0% dividend rate. Compensation expense for these MSUs is recognized over the requisite service period regardless of whether the market conditions are satisfied.

Employee Stock Purchase Plan

On September 25, 2020, the Company established an Employee Stock Purchase Plan (“ESPP”) which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under this plan have a duration of six months. On the exercise date, the participant may acquire a maximum of 650 shares per participant, per offering period, at the lower of 85% of the market value of a share of our common stock on the enrollment date or the exercise date. Participants may terminate their interest in a given offering or a given exercise period by withdrawing all of their accumulated payroll deductions at any time prior to the end of the offering period. The fair value of the estimated number of shares to be issued under each offering is determined using a component valuation model. This plan was terminated in the fourth quarter of 2022.

Stock-Based Compensation

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. The following tables summarize the Company’s stock-based compensation recorded as a result of applying the provisions of ASC 718 to equity awards:

	Three months ended March 31, 2023			Unrecognized compensation cost related to non-vested awards as of March 31, 2023		Weighted-average remaining vesting period as of March 31, 2023 (years)
Stock options	$	61,488		$	988,272		2.92
RSUs		158,715			1,450,692		2.89
MSUs		(72,568	)		33,615		0.84
Total stock-based compensation	$	147,635		$	2,472,579		2.88

	Three months ended March 31, 2022			Unrecognized compensation cost related to non-vested awards as of December 31, 2022		Weighted-average remaining vesting period as of December 31, 2022 (years)
Stock options	$	106,449		$	1,173,758		3.24
RSUs		363,338			1,707,145		2.91
MSUs		(464,462	)		71,059		1.09
ESPP		5,471			—		—
Total stock-based compensation	$	10,796		$	2,951,962		3.07

During the three months ended March 31, 2023 and 2022, there were forfeitures of MSU awards of certain members of executive leadership of $91,563 and $883,324 representing discrete reversals of stock compensation expense to the periods.