Stock-based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

In January 2019, the Company’s Board of Directors adopted the 2019 Stock Incentive Plan (the “Plan”). A total of 2,000,000 shares of common stock were authorized and reserved for issuance under the Plan in the form of incentive or nonqualified stock options and stock awards. A committee appointed by the Board of Directors of the Company determines the terms and conditions of each grant under the Plan. Employees, directors, and consultants are eligible to receive stock options and stock awards under the Plan. The aggregate number of shares available under the Plan and the number of shares subject to outstanding options may be increased or decreased by the Plan administrator to reflect any changes in the outstanding common stock by reason of any recapitalization, reorganization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock or similar transaction.

The exercise price of incentive stock options may not be less than the fair market value of the common stock at the date of grant. The exercise price of incentive stock options granted to individuals that own greater than 10% of the voting stock may not be less than 110% of the fair market value of the common stock at the date of grant.

The term of each incentive and nonqualified option is based upon conditions as determined by the option agreement; however, the term can be no more than ten years from the date of the grant. In the case of an incentive stock option granted to an optionee who, at the time the option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the term of the option will be a shorter term as provided in the option agreement, but not more than five years from the date of the grant.

As of September 30, 2022, a total of 1,308,183 shares of common stock was available for further award grants under the Plan. For the three months ended September 30, 2022 and 2021, the Company recognized a total of $598,000 and $830,000 in stock-based compensation expense, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized a total of $1,774,000 and $1,060,000 in stock-based compensation expense, respectively. The restricted stock units and stock options granted prior to April 15, 2021 were subjected to vesting conditions contingent upon the closing of an initial public offering of the Company. Such awards began vesting on April 15, 2021 when the Company completed its initial public

offering. The Company recognizes stock-based compensation over the vesting period, which is generally 3 years for both the restricted stock units and stock options.

Stock Options

A summary of the Company’s stock option activity under the Plan for the period ended September 30, 2022 is as follows:

	Number of Options	Weighted- Average Exercise Price	Weighted- Average Remaining Contract Life (In Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2021	435,000	$18.76		$	—
Granted	50,000	16.53
Exercised	(5,000)	10.00
Canceled/forfeited	(50,000)	18.86
Outstanding at September 30, 2022	430,000	$18.59	9.1	$	—
Expected to vest at September 30, 2022	430,000	$18.59	9.1	$	—
Exercisable at September 30, 2022	—	—	—	$	—

The weighted-average grant date fair-value of the stock options granted for the nine months ended September 30, 2022 was $16.53 per share. At September 30, 2022, total remaining stock-based compensation expense for unvested stock options is approximately $1,001,000. The cost is expected to be recognized over a weighted-average period of 1.6 years.

The aggregate intrinsic value is calculated by subtracting the exercise price of the option from the closing price of the Company’s common stock on September 30, 2022, multiplied by the number of shares per each option.

The assumptions that were used to calculate the grant date fair value of the Company’s stock option grants for the nine months ended September 30, 2022 were as follows:

	Nine Months Ended September 30, 2022
Risk-free interest rate	1.70	%
Expected term (years)	6.25 years
Volatility	30	%
Dividend yield	0.40	%

Restricted Stock

The Company issued restricted stock units to employees of the Company. The following table summarizes the unvested restricted stock units for the period ended September 30, 2022:

	Number of Shares Outstanding	Weighted Average Grant Date Fair Value
Unvested at December 31, 2021	159,000	$	11.08
Granted	9,900	16.69
Forfeited	(7,000)	17.90
Unvested at September 30, 2022	161,900	$	11.12

At September 30, 2022, total remaining stock-based compensation expense for unvested restricted stock units is approximately $478,000. The cost is expected to be recognized over a weighted-average period of 1.0 year.