The board of directors of MGI, a subsidiary of the Company adopted, and MGI’s stockholders approved, the Mohawk Group, Inc. 2014 Equity Incentive Plan on June 11, 2014. On March 1, 2017, MGI’s board of directors adopted, and MGI’s stockholders approved, an amendment and restatement of the 2014 Equity Incentive Plan (as amended, the “Mohawk 2014 Plan”). As of September 30, 2019, options to purchase an aggregate of 366,790 shares of the Company’s common stock were outstanding and 2,608 shares were reserved for awards available for future issuance under the Mohawk 2014 Plan.

The Company’s board of directors adopted the Mohawk Group Holdings, Inc. 2018 Equity Incentive Plan (the “Mohawk 2018 Plan”) on October 11, 2018. The Mohawk 2018 Plan was approved by its stockholders on May 24, 2019. As of September 30, 2019, 149,957 shares subject to restricted stock awards and options to purchase 1,530,823 shares of the Company’s common stock were outstanding and 27,366 shares were reserved for awards available for future issuance under the Mohawk 2018 Plan.

Options granted to date under the Mohawk 2014 Plan and the Mohawk 2018 Plan generally vest either: (i) over a four-year period with 25% of the shares underlying the options vesting on the first anniversary of the vesting commencement date with the remaining 75% of the shares vesting on a pro-rata basis over the succeeding thirty-six months, subject to continued service with the Company through each vesting date, or (ii) over a three-year period with 33 1/3% of the shares underlying the options vesting on the first anniversary of the vesting commencement date with the remaining 66 2/3% of the shares vesting on a pro-rata basis over the succeeding twenty-four months, subject to continued service with the Company through each vesting date. Options granted are generally exercisable for up to 10 years subject to continued service with the Company.

The Company’s board of directors adopted the Mohawk Group Holdings, Inc. 2019 Equity Plan (the “2019 Equity Plan”) on March 20, 2019. The 2019 Equity Plan was approved by its stockholders on May 24, 2019. As of September 30, 2019, an aggregate of 2,426,025 shares of restricted common stock were outstanding, with no shares reserved for future issuance. Restricted shares granted under the 2019 Equity Plan shall vest in substantially equal installments on the 6th, 12th, 18th and 24th monthly anniversary of the closing of the IPO. Awards granted under the 2019 Equity Plan and not previously forfeited upon termination of service carry dividend and voting rights applicable to the Company’s common stock, irrespective of any vesting requirement. Under ASC Topic 718, following the IPO, the Company records stock-based compensation expense related to grants made under the 2019 Equity Plan over the vesting period of the restricted shares.

The following is a summary of stock options activity during the nine months ended September 30, 2019:

	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balance—January 1, 2019		1,867,747		$	9.01	9.64		$	19,573,295
Options granted		195,975		$	9.49
Options exercised		(487	)	$	4.14			$	1,630
Options cancelled		(165,622	)	$	8.76
Balance—September 30, 2019		1,897,613		$	9.10		9.02	$	498,451
Exercisable as of September 30, 2019		218,096		$	6.31		7.55	$	359,753
Vested and expected to vest as of September 30, 2019		1,954,263		$	9.13		8.75	$	498,451

The weighted-average grant date fair value of options granted during the nine months ended September 30, 2019 was $5.67. There were no grants during the nine months ended September 30, 2018. As of September 30, 2019, the total unrecognized compensation expense related to unvested options was $13.7 million, which the Company expects to recognize over an estimated weighted average period of 2.26 years.

The following are weighted-average assumptions used in the Black-Scholes option-pricing model to determine grant fair value:

	September 30, 2018			September 30, 2019
	Weighted- Average			Weighted- Average
Expected term (in years)		0.00			5.77
Volatility		0.00	%		66.72	%
Risk-free interest rate		0.00	%		1.76	%
Dividend Yield		0.000			0.000

A summary of restricted stock activity within the Company’s equity plans and changes for the nine months ended September 30, 2019, is as follows:

Restricted Stock Awards	Shares			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2019		—		$	—
Granted		2,645,123		$	18.89
Vested		—		$	—
Forfeited		(69,141	)	$	19.50
Nonvested at September 30, 2019		2,575,982		$	18.87

Stock-based compensation expense for restricted shares granted was $6.2 million and $7.4 million for the three and nine months ended September 30, 2019, respectively. No restricted shares vested during the nine months ended September 30, 2019.

The weighted-average grant date fair value of restricted shares granted during the nine months ended September 30, 2019 was $18.89 As of September 30, 2019, the total unrecognized compensation expense related to unvested restricted shares was $41.3 million , which the Company expects to recognize over an estimated weighted-average period of 1.75 years.

The table above includes 149,957 of restricted shares that have been granted under the Mohawk 2018 Plan and included in the shares outstanding under that plan and carry dividend or voting rights applicable to the Company’s common shares.

Stock-based compensation expense is allocated based on the cost center to which the award holder belongs. The following table summarizes the total stock-based compensation expense by function for the three and nine months ended September 30, 2018 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2019		2018		2019
	(in thousands)				(in thousands)
Sales and distribution expenses		5		1,617		11		2,533
Research and development expenses		8		1,327		21		1,878
General and administrative expenses		128		4,772		450		7,424
Total stock-based compensation expense	$	141	$	7,716	$	482	$	11,835