Employee Equity-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

NOTE 13. EMPLOYEE EQUITY-BASED COMPENSATION

The following table summarizes option activity under the Company's equity-based compensation plans for the nine months ended September 30, 2022:


	Number of Shares	Weighted Average Exercise Price per Share
Options outstanding January 1, 2022	7,192,540	$	13.89
Granted	140,000	3.05
Forfeited	(204,232)	12.49
Exercised	(6,105)	1.04
Expired	(1,457,019)	10.33
Options outstanding September 30, 2022	5,665,184	$	14.60

No stock options were granted during the three months ended September 30, 2022 and 2021.

The following table shows summary information for outstanding options and options that are exercisable (vested) as of September 30, 2022:


	Options Outstanding		Options Exercisable
Number of options	5,665,184		4,422,595
Weighted average remaining contractual term (in years)	5.54		5.04
Weighted average exercise price	$	14.60	$	15.32
Weighted average fair value	$	9.10	$	9.44
Aggregate intrinsic value (in thousands)	$	—	$	—

The following table summarizes RSU and restricted stock award activity for the nine months ended September 30, 2022:


	Number of Shares	Weighted Average Grant Date Fair Value per Share
Outstanding January 1, 2022	2,090,182	$	10.77
Granted	4,107,083	1.55
Forfeited	(451,703)	8.68
Released	(1,127,017)	3.43
Outstanding September 30, 2022	4,618,545	$	4.57

The table below summarizes equity-based compensation expense for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of sales	$	167	$	82	$	570	$	257
Research and development	151		266		1,052		4,340
Sales, general and administrative	911		3,281		6,557		14,461
	$	1,229	$	3,629	$	8,179	$	19,058

The table below summarizes share-based compensation cost capitalized to inventory for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost capitalized to inventory	$	69	$	77	$	186	$	319

As of September 30, 2022, unrecognized equity-based compensation expense related to unvested stock options and unvested RSUs was $2.3 million and $7.8 million, respectively. This is expected to be recognized over the years 2022 through 2027.

Included in the above-noted stock options outstanding and stock compensation expense are performance-based stock options which vest only upon the achievement of certain targets. Performance-based stock options are generally granted at-the-money, contingently vest over a period of 1 to 2 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These options were valued in the same manner as the time-based options, with the assumption that performance goals will be achieved. The inputs for expected volatility, expected dividends, and risk-free rate used in estimating those options’ fair value are the same as the time-based options issued under the Company's equity incentive plans. The expected term for performance-based stock options is 5 to 7 years. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

During 2020, the Company granted 105,000 performance-based stock options. Of these performance-based stock options, performance obligations had been met for 90,000 options which became exercisable in a prior period. Of these performance-based stock options, 90,000 options expired during the nine months ended September 30, 2022. No performance-based stock options were outstanding as of September 30, 2022.

The table below summarizes share-based compensation cost in connection with performance-based stock options for the nine months ended September 30, 2022 and 2021 (in thousands):


	Nine Months Ended September 30,
	2022		2021
Performance-based stock option expense	$	—	$	230

Included in the above-noted RSU and restricted stock award outstanding amounts are performance-based RSUs which vest only upon the achievement of certain targets. Performance-based RSUs contingently vest over a period of 1 to 3 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These units were valued in the same manner as other RSUs, based on the published closing market price on the day before the grant date. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

During 2020, the Company granted performance-based RSUs of which 165,974 were outstanding as of September 30, 2022. No changes occurred during the nine months ended September 30, 2022.

During 2021, the Company granted performance-based RSUs of which 111,806 were outstanding as of September 30, 2022. No changes occurred during the nine months ended September 30, 2022.

The table below summarizes share-based compensation cost in connection with performance-based RSUs for the nine months ended September 30, 2022 and 2021 (in thousands):


	Nine Months Ended September 30,
	2022		2021
Performance-based RSU expense	$	—	$	818