Quarterly report pursuant to Section 13 or 15(d)

Stockholders??? Deficit

v3.22.1
Stockholders’ Deficit
 3 Months Ended
Mar. 31, 2022
Equity [Abstract]  
Stockholders’ Equity Stockholders’ Equity
Stock-Based Compensation Expense
Stock-based compensation expense, consisting of service-based expense related to the equity incentive plan, including expense from stock options and restricted stock units, and the employee stock purchase plan was classified as follows in the accompanying condensed consolidated statements of operations for each of the periods presented (in thousands):
Three Months Ended March 31,
2022 2021
Cost of revenue $ 148  $ 69 
Sales and marketing 662  132 
Research and development 552  396 
General and administrative 2,063  1,227 
Total $ 3,425  $ 1,824 
For the three months ended March 31, 2022 and 2021, there were no secondary stock transactions that resulted in stock-based compensation expense.
Equity Incentive Plan
During 2016, the Company adopted the 2015 Equity Incentive Plan (the “2015 EIP”) under which common stock options could be issued for employee awards and the Company began issuing stock options under this plan in 2016.
In November 2021 in connection with the IPO, the Company adopted the 2021 Equity Incentive Plan (the “2021 EIP”) under which the Company could issue stock options or restricted stock units (RSUs) as awards. Upon adoption of the 2021 EIP, the 2015 EIP plan was terminated. All options issued and outstanding or available for issuance under the 2015 EIP were absorbed into the 2021 EIP. Along with the absorbed 2015 EIP options, the Company reserved an additional 9,000,000 shares of common stock for future issuance under the 2021 EIP, with scheduled annual increases to the reserve for amounts to be determined by the Board, subject to a maximum amount. In the first quarter of 2022, the board reserved an additional 3.2 million common shares for future issuance under the 2021 EIP.
These 2015 and 2021 plans are collectively referred to herein as the “EIP”. Stock-based compensation expense related to the EIP was $3.4 million and $1.8 million for the three months ended March 31, 2022 and 2021
Stock options
Most options have a four-year vesting schedule with a one-year cliff and are classified as incentive stock options (ISOs). Some options have been granted in lieu of bonuses and have expedited two- or three-year vesting schedules. All awards vest based on service conditions.
Options with accelerated vesting clauses, should there be a change in Company control, were 3,605,233 and 2,628,528 as of March 31, 2022 and March 31, 2021, respectively.
Unrecognized stock-based compensation expense as of March 31, 2022 and March 31, 2021 was $29.1 million and $26.7 million, respectively. Stock-based compensation expense is recognized on a straight-line basis over the remaining weighted-average vesting periods. As of March 31, 2022 and March 31, 2021 the weighted-average vesting periods approximated 2.72 years and 3.48 years, respectively.
Stock option activity was as follows for the three months ended March 31, 2022 :
Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value
(in thousands)
Outstanding as of December 31, 2021 7,574,136  $ 8.60  8.35 $ 52,257 
Exercisable as of December 31, 2021 2,719,252  $ 3.44  7.03 $ 31,929 
Granted —  — 
Exercised (564,083) $ 1.65 
Forfeited and expired (380,947) $ 12.07 
Outstanding as of March 31, 2022 6,629,106  $ 8.99  7.81 $ 8,815 
Exercisable as of March 31, 2022 2,665,039  $ 5.45  6.30 $ 6,975 
The aggregate intrinsic value of options exercised was $3.8 million for the three months ended March 31, 2022. The intrinsic value represents the excess of the estimated fair value of the Company's common stock on the date of exercise over the exercise price of each option.
Stock-based compensation expense is measured at the grant date based on the estimated fair value of the award. The fair value of the awards is fixed at grant date and amortized over the remaining service period. The Company uses the Black-Scholes model to estimate the value of its stock options issued under the EIP. Prior to the Company’s IPO, the common stock fair values used in the models were based on the most recent 409(a) valuation as of the option grant date. Management reviews option grants and determines whether further valuation adjustments are appropriate based on recent company performance and/or changes in market conditions. The volatility assumed in the estimate was based on publicly traded companies in the same industry and considers the expected term calculated by the Company. The expected term of the options was derived from a simplified method which estimates the term based on an averaging of the vesting period and contractual term of the option grant. The risk-free rate utilized was the average of the five- and seven-year U.S. Treasury yield as the estimated expected term for options approximates 6 years. The Company has no plans to declare dividends in the foreseeable future.
Restricted Stock Units
Restricted stock units (“RSUs”) granted under the Plan vest and settle upon the satisfaction of a service-based condition. The service based condition for these awards is generally satisfied over three or four years. 171,075 RSUs have a four-year vesting schedule with 25% cliff vesting one year from grant date and the remaining 75% vesting monthly over the remaining three years. The remaining RSUs that have been issued have a three-year vesting schedule with 33% vesting one year from grant date and the remaining 67% vesting quarterly over the remaining two years.
As of March 31, 2022, there was $21.6 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 3.0 years.
Restricted Stock Unit activity was as follows for the three months ended March 31, 2022:
Number of Shares Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2021 171,075  $ 18.50 
Granted 3,183,398  6.24
Vested (593) 9.08
Canceled (33,911) 16.02
Outstanding as of March 31, 2022 3,319,969  $ 6.77 
Repurchase of Common Shares
No share repurchases took place during the three months ended March 31, 2022 and 2021.