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Stock-Benefit Plans and Equity Transactions | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Benefit Plans and Equity Transactions | 10. Stock-Benefit Plans and Equity Transactions Stock-Based Compensation The Company has stock-based compensation plans under which it grants stock options, restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs") to officers, directors and third parties. Total stock-based compensation for the periods presented are as follows (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Cost of sales |  | $ | 1,439 |  |  | $ | 2,369 |  |  | $ | 2,476 |  |  | $ | 24,601 |
Research and development |  |  | 7,207 |  |  |  | 6,790 |  |  |  | 17,137 |  |  |  | 9,587 |
Sales, general and administrative |  |  | 8,816 |  |  |  | 10,914 |  |  |  | 32,131 |  |  |  | 26,541 |
Total |  | $ | 17,462 |  |  | $ | 20,073 |  |  | $ | 51,744 |  |  | $ | 60,729 |
As of September 30, 2024, there was $59.9 million of unrecognized compensation expense for RSUs and PRSUs to be recognized over a weighted average period of 1.67 years. The Company has entered into Development Service Agreements for the development of a wide variety of potential products and intellectual property. Under these agreements, future royalty payments for product and/or intellectual property rights may be paid in either cash or restricted shares of the Company’s common stock at the election of the developer, depending on the terms of the agreement. Certain of these agreements were amended to remove the cash royalty option and require settlement in restricted shares of the Company’s common stock. During the three and nine months ended September 30, 2024 and 2023, the vesting conditions of certain of these awards were deemed probable. Stock-based compensation associated with these awards is included in cost of sales and research and development expense on the condensed consolidated statements of operations. Restricted Stock Units and Performance Based Restricted Stock Units Awards The Company issued approximately 1,113,000 and 4,190,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three and nine months ended September 30, 2024, respectively. The Company issued approximately 789,000 and 5,714,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three and nine months ended September 30, 2023, respectively. Employee Stock Purchase Plan Employees are eligible to participate in the Employee Stock Purchase Plan ("ESPP") approved by its shareholders. During the three months ended September 30, 2024 and 2023, there were no shares issued under the ESPP. During the nine months ended September 30, 2024 and 2023, there were approximately 251,000 shares and 247,000 shares, respectively, issued under the ESPP. The Company estimates the fair value of shares issued to employees under the ESPP using the Black-Scholes option-pricing model. The assumptions used to estimate the fair value of stock options granted and stock purchase rights under the ESPP are as follows:
|  | Three and Nine Months Ended |
|  | September 30, |
|  | 2024 |  |  | 2023 |
Risk-free interest rate |  | 5.40% - 5.41% |  |  | 4.54% - 5.41% |
Expected dividend yield |  |  | — |  |  |  | — |
Expected term (years) |  |  | 0.50 |  |  | 0.41 - 0.60 |
Volatility |  | 54.47% - 58.41% |  |  | 40.87% - 62.77% |
Warrants Outstanding Squadron Medical Warrants In connection with debt financing entered into with Squadron Medical Finance Solutions, LLC ("Squadron Medical") in 2018, and amended in 2019 and 2020, the Company issued common stock warrants to Squadron Medical and a participant lender (the “Squadron Medical Warrants”). The Squadron Medical Warrants expire in May 2027 and are exercisable by cash exercise. No Squadron Medical Warrants have been exercised as of September 30, 2024. Executive Warrants The Company issued warrants to its Chairman and Chief Executive Officer (the “Executive Warrants”). The Executive Warrants had a five-year term and are exercisable by cash or cashless exercise. In October 2022, the term was extended to seven years and in May 2024, the term was extended to nine years. No Executive Warrants have been exercised as of September 30, 2024. A summary of all outstanding warrants for common stock as of September 30, 2024, are as follows (in thousands, except for strike price data):
|  | Number of Warrants |  |  | Strike Price |  | Expiration
2018 Squadron Medical Warrants |  |  | 845 |  |  | $ | 3.15 |  | May 2027
2019 Squadron Medical Warrants |  |  | 4,839 |  |  | $ | 2.17 |  | May 2027
2020 Squadron Medical Warrants |  |  | 1,076 |  |  | $ | 4.88 |  | May 2027
Executive Warrants |  |  | 1,327 |  |  | $ | 5.00 |  | December 2026
Other(1) |  |  | 116 |  |  | $ | 10.62 |  | Various through June 2026
Total |  |  | 8,203 |  |  |  |  |
(1) Weighted-average strike price. All outstanding warrants were deemed to qualify for equity classification under authoritative accounting guidance. Offer to Purchase Warrant Pursuant to an order entered by the Delaware Chancery Court on September 27, 2024, the Company is required to offer to L-5 Healthcare Partners, LLC (“L-5”), a stockholder of the Company, the right to purchase from the Company a warrant to purchase up to 1,133,160 shares of the Company’s common stock at an exercise price of $2.17 per share (the “Warrant”). The purchase price of the Warrant would be $1.98 per share, or a total purchase price of approximately $2.2 million. The Warrant would expire on June 21, 2026. The Company is required to offer to sell the Warrant to L-5 on or before November 4, 2024 and L-5 will have five business days following such offer to purchase the Warrant. If L-5 fails to purchase the Warrant within such five-business day period, the offer will expire. If L-5 timely elects to purchase the Warrant and subsequently exercises the Warrant in full prior to its expiration, then the full consideration to be received by the Company for the sale of the Warrant and the issuance of the shares of common stock upon its exercise will be approximately $4.7 million, resulting in a per share purchase price of $4.15 per share of common stock if the Warrant purchased and is exercised in full.

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