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Equity Incentive Plan
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Equity Incentive Plan

Note 8 – Equity incentive plan

On December 19, 2019, the Company adopted the 2019 Incentive Award Plan (the “2019 Plan”) under which eligible employees, officers, directors and consultants of the Company may be granted incentive or non-qualified stock options, restricted stock, restricted stock units, or other stock-based awards, including shares of common stock. Pursuant to the 2019 Plan, the number of shares of Common Stock available for issuance under the 2019 Plan automatically increases on each January 1 (commencing with January 1, 2021) until and including January 1, 2029, by an amount equal to the lesser of: (a) 5% of the shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by our Board of Directors (the “Board”). The Compensation Committee of the Board approved an increase to the share reserve as set out in the 2019 Plan in the amount of 2,416,007 shares in April 2023 and 2,134,227 shares in February 2022, respectively. As of December 31, 2023, 14,176,685 shares of Common Stock were reserved under the 2019 Plan, of which 2,771,329 shares of Common Stock remained available for issuance.

Stock option activity

The following table summarizes the Company’s stock option activity under the 2019 Plan:

Description

 

Options
Outstanding

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Term (Years)

 

 

Aggregate
Intrinsic
Value (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding, December 31, 2021

 

 

5,093,682

 

 

$

8.34

 

 

 

8.4

 

 

$

—

 

Granted

 

 

1,135,850

 

 

 

6.00

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Forfeited

 

 

(273,195

)

 

 

7.51

 

 

 

—

 

 

 

—

 

Expired

 

 

(198,558

)

 

 

8.24

 

 

 

—

 

 

 

—

 

Options outstanding, December 31, 2022

 

 

5,757,779

 

 

$

7.92

 

 

 

7.6

 

 

$

—

 

Granted

 

 

997,796

 

 

 

1.05

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Forfeited

 

 

(35,791

)

 

 

5.07

 

 

 

—

 

 

 

—

 

Expired

 

 

(190,692

)

 

 

8.12

 

 

 

—

 

 

 

—

 

Options outstanding, December 31, 2023

 

 

6,529,092

 

 

$

6.88

 

 

 

7.1

 

 

$

—

 

Options vested and exercisable, December 31, 2023

 

 

4,503,751

 

 

$

8.21

 

 

 

6.4

 

 

$

—

 

Options vested and expected to vest, December 31, 2023

 

 

6,529,092

 

 

$

6.88

 

 

 

7.1

 

 

$

—

 

 

 

(1)
Aggregate intrinsic value (in thousands) represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options.

The following table summarizes additional information on stock option grants and vesting (in thousands):

 

 

 

2019 Plan

 

 

 

Year Ended
December 31, 2023

 

 

Year Ended
December 31, 2022

 

Total fair value of stock options granted

 

$

942

 

 

$

2,898

 

Total fair value of options vested

 

 

1,835

 

 

 

3,306

 

 

Time-based vesting stock options

Time-based vesting stock options generally vest over a three-year period, are subject to graded vesting schedules, and expire ten years from the date of grant or within 90 days of termination. The weighted-average fair value per share of time-based vesting stock options granted by the Company was $1.05 and $2.55 during the years ended December 31, 2023 and 2022, respectively.

For the years ended December 31, 2023, and 2022 the Company recognized $1.9 million and $3.9 million of stock-based compensation expense in connection with time-based stock options, respectively. As of December 31, 2023 and 2022, there was $1.9 million and $2.8 million of unrecognized stock-based compensation expense, respectively, related to unvested time-based stock options that is expected to be recognized over a weighted-average period of 1.53 and 1.84 years, respectively.

Stock Option Valuation

The Company used valuation models to value the time-based vesting stock options granted during 2023 and 2022. The following table summarizes the assumptions used in the valuation models to determine the fair value of awards granted to employees and non-employee directors under the 2019 Plan:

 

 

Year Ended
December 31, 2023

 

Year Ended
December 31, 2022

Expected volatility

 

41.26%

 

42.78 - 42.90%

Expected term (in years)

 

6.0

 

6.0

Dividend yield

 

0%

 

0%

Risk free interest rate

 

3.61%

 

1.0 - 1.62%

A discussion of management’s methodology for developing each of the assumptions used in the valuation model follows:

•
Expected volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses an estimated volatility based on the historical and implied volatilities of comparable companies.
•
Expected term – This is the period that the options granted are expected to remain unexercised. For options granted during the years ended December 31, 2023 and 2022, the Company derived the expected life of the option based on the average midpoint between vesting and the contractual term as there is little exercise history.
•
Dividend yield – The Company has never declared or paid dividends and have no plans to do so in the foreseeable future.
•
Risk-free interest rate – This is the U.S. Treasury rate for securities with similar terms that most closely resembles the expected life of the option.
•
Forfeiture rate - Forfeitures are included in compensation cost as they occur.

Stock-based compensation expense

Stock-based compensation expense is included in the Consolidated Statements of Comprehensive Loss within the following line items (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

Cost of revenues

 

$

917

 

 

$

1,640

 

General and administrative

 

 

1,727

 

 

 

2,088

 

Research and development

 

 

373

 

 

 

584

 

Sales and marketing

 

 

348

 

 

 

824

 

Total

 

$

3,365

 

 

$

5,136

 

 

Restricted stock units

Periodically, the Company granted RSUs to certain employees which are subject to certain vesting criteria. These RSUs become eligible to begin vesting upon a liquidity event (as defined in the award agreements governing the RSUs). The amount and timing of the vesting of the RSUs depends on the type and timing of the liquidity event as it relates to the Closing Date. Generally, a portion of the RSUs were scheduled to first vest upon the occurrence of the liquidity event and the remainder were scheduled to vest in up to three annual installments thereafter. Because no liquidity event occurred before the third anniversary of the Closing Date, all RSUs are scheduled to vest immediately upon a future liquidity event.

 

The Company determined the achievement of the liquidity event was not probable and therefore no expense has been recorded related to the performance-based awards that vest solely upon a liquidity event.

 

Performance based restricted stock units

During 2023 and 2022, the Company granted 369,056 and 463,000 performance based RSUs to certain employees, respectively, 50% of which vest based on the achievement of annual consolidated revenue targets and 50% of which vest based on the achievement of certain annual Nebula revenue targets. These units will vest over three annual installments based on the achievement of the annual consolidated revenue and Nebula revenue performance conditions and are not subject to any liquidity event vesting condition. In the event that the performance conditions are not met in the first or second year, all units granted will vest in the third year if the cumulative performance conditions are met at that time. The grant of awards with performance conditions supports the Company’s goal of aligning executive incentives with long-term stockholder value and ensuring that executive officers have a continuing stake in the long-term success of the Company.

 

The Company determined the three-year achievement of the overall Company revenue and Nebula revenue targets was probable and incurred $0.9 million and $0.7 million of stock-based compensation expense for the years-ended December 31, 2023 and 2022, respectively, for the performance based RSUs.

 

The vesting of the RSUs held by a grantee is generally subject to his or her continued employment with the Company.

 

During the year ended December 31, 2023, the Company’s Board of Directors approved the vesting of 73,726 performance-based RSUs previously granted to certain employees. The shares issued upon the vesting of the RSUs were distributed to the employees during the second quarter.

Time-based restricted stock units

During the years ended December 31, 2023 and 2022, the Company granted to certain non-employee directors 338,349 and 100,000 stock awards, respectively. These stock awards were issued to non-employee directors in satisfaction of their annual retainer payments and vest over a one-year or three-year period. Accordingly, the Company recognized the grant-date fair value of the restricted stock units of $0.7 million as stock-based compensation expense for each of the years ended years ended December 31, 2023 and 2022, respectively.

 

The following table summarizes the Company’s RSU activity for performance based RSUs awarded to employees and for time-based RSUs granted to non-employee directors under the 2019 Plan:

Description

 

RSUs
Outstanding

 

Outstanding at December 31, 2022

 

1,876,669

 

Granted

 

792,000

 

Vested

 

 

(190,059

)

Forfeited

 

(49,321

)

Expired

 

—

 

Outstanding at December 31, 2023

 

2,429,289