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STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

NOTE 10 — STOCK-BASED COMPENSATION

On December 9, 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) was approved, replacing the 2019 Equity Incentive Plan. The 2020 Plan provides for the issuance of up to 1,000,000 shares of the Company’s common stock to the Company’s employees, non-employee directors, consultants and advisors. Awards under the 2020 Plan can be granted in the form of stock options, stock appreciation rights, restricted stock, stock units, other stock-based awards and cash incentive awards. Outstanding awards issued under previous equity incentive plans will continue to be governed by their respective terms until exercised, expired or otherwise terminated or canceled, but no further equity awards will be made under those plans.

The following table summarizes the stock-based compensation expense recorded for the years ended December 31, 2021 and 2020:


	Year ended December 31,
(in thousands)	2021		2020
Stock Options	$	634	$	300
RSUs		6,509		3,789
Unrestricted Shares of Common Stock		473		49
Total	$	7,616	$	4,138

As of December 31, 2021, the outstanding unrecognized stock-based compensation expense related to options and restricted stock units (“RSUs”) was $859,000 and $7,449,000, respectively, which may be recognized through August 2025, subject to achievement of service,

performance, and market conditions. As of December 31, 2021, there was no remaining unamortized stock-based compensation expense related to warrants.

Stock Options

Options granted under our equity incentive plans generally have terms of five years, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant.

The following table summarizes the stock option activity for the years ended December 31, 2021 and 2020:


				Weighted		Intrinsic
		Weighted		Average		Value
	Number of	Average		Remaining		of
	Options	Exercise Price		Term	Exercisable	Options
Outstanding at December 31, 2019	965,043	$	3.70	3.01	759,631	$	1,666,000
Granted	220,267		12.31	5.00
Exercised	(433,180)		2.07
Forfeited/Expired	(235,219)		7.00
Outstanding at December 31, 2020	516,911	$	7.24	2.70	294,894	$	9,610,000
Granted	39,186		24.78	4.93
Exercised	(268,836)		3.73
Forfeited/Expired	(95,921)		12.88
Outstanding at December 31, 2021	191,340	$	12.94	3.96	83,070	$	71,000
Exercisable as of December 31, 2021	83,070	$	9.78	3.90		$	44,000

The 2021 and 2020 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:


	2021		2020
Expected life	3.25 years		3.16 years
Risk-free interest rate	0.34	%	0.19	%
Weighted average volatility factor	100.60	%	107.28	%
Dividend yield	—		—

Restricted Stock Units

We issue RSUs to employees, officers, directors, and consultants of the Company. The restrictions on time-based RSUs generally lapse over a one- to three-year term of continuous service from the date of grant.

The following table summarizes the RSU activity for year ended December 31, 2021:


		Weighted
		Average
	Number of	Grant Date
	RSUs	Fair Value		Vested	Unvested
Restricted stock units outstanding as of December 31, 2020	958,378	$	11.57	285,108	673,270
Granted	648,226		19.44
Settled	(283,568)		15.24
Forfeited/Canceled	(289,796)		19.92
Restricted stock units outstanding at December 31, 2021	1,033,240	$	13.10	340,539	692,701

In the third quarter of 2020, we granted 260,000 RSUs with performance-based and market-based conditions to our Chief Executive Officer (“CEO”). The performance condition for 105,000 of such RSUs is based on the achievement of Monthly Recurring Revenue

(“MRR”) targets. For the years ended December 31, 2021 and 2020, we recorded $471,000 and $314,000, respectively, in stock-based compensation expense associated with 55,000 RSUs, the performance target for which achievement during the requisite period was deemed probable. The Company will continue to reassess the probability of achieving the performance conditions in future periods and record the appropriate expense if necessary. The market condition for the remaining 155,000 RSUs in the award is based on the Company’s stock price targets. The Company used a Monte Carlo simulation to determine the grant-date fair value for the market-based RSUs. The weighted-average assumptions used in the Monte-Carlo simulation were as follows: 5- year historical volatility of 136.52%, 5-year risk-free rate of 0.26%, and a performance period of 5 years. For the years ended December 31, 2021 and 2020, we recorded $1,141,000 and $1,506,000, respectively, in stock-based compensation expense related to these market-based RSUs.

In the first quarter of 2021, we granted 100,000 RSUs with performance-based and market-based conditions to our CEO. The performance condition for 50,000 of such RSUs is based on the achievement of an MRR targets. The market condition for the remaining 50,000 RSUs in the award is based on a target for the Company’s stock price. The Company used a Monte Carlo simulation to determine the grant-date fair value for the market-based RSUs. The weighted-average assumptions used in the Monte-Carlo simulation were as follows: 5-year historical volatility of 116.95%, 5-year risk-free rate of 0.79%, and a performance period of 5 years. In the fourth quarter for 2021, all 100,000 RSUs were cancelled for no consideration to replenish the shares available under the 2020 Plan for additional awards to Company employees. In connection with the award cancellation, we accelerated the stock compensation expense associated with the 50,000 market-based RSUs and recognized its full grant date fair value of $1,311,000 as stock-based compensation expense in the year ended December 31, 2021.

Warrants

The following table summarizes the warrant activity for the years ended December 31, 2021 and 2020:


				Weighted	Intrinsic
		Weighted		Average	Value
	Number of	Average		Remaining	of
	Warrants	Exercise Price		Term	Warrants
Outstanding at December 31, 2019	424,708	$	5.31	0.82	$	189,000
Exercised	(321,467)		4.77
Forfeited/Expired	(22,188)		9.59
Outstanding at December 31, 2020	81,053		6.25	0.94		1,587,000
Exercised	(38,880)		6.25
Forfeited/Expired	(12,000)		6.25
Outstanding at December 31, 2021	30,173	$	6.25	0.71	$	23,000

In the third quarter of 2020, the Company received $880,000 in cash in connection with the exercise of 146,667 stock warrants by a related party. Refer to Note 8 – Related Party Transactions for additional information on these warrants.