(8)  Equity-based Compensation

The following table summarizes the amount of stock-based compensation included in the consolidated statements of operations:

(a) Stock Options

In July 2020, the Company adopted the 2020 Equity Incentive Plan (the Incentive Plan), which authorized the Company to grant up to 4,300,000 shares of common stock to eligible employees, directors, and consultants to the Company in the form of stock options, restricted stock units, and other various equity awards, including any shares subject to stock options or other awards granted under the Company’s prior stock option plan that expire or terminate for any reason (other than being exercised in full) or are cancelled in accordance with the terms of the prior stock option plan. The Incentive Plan also includes an annual evergreen increase, and the amount, terms of grants, and exercisability provisions are determined by the board of directors. The term of an award may be up to 10 years and options generally vest over four years, with one quarter of an award vesting one year after grant and the remainder vesting on a monthly basis over three years. As of May 31, 2021, there was a total of 6,420,829 shares of common stock authorized for issuance under the Incentive Plan, of which 5,835,827 were available for future grants.

The following is a summary of stock option activity under the Option Plan and Incentive Plan:

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For the three months ended May 31, 2021, the Company recognized $2,114 in compensation expense related to stock options. As of May 31, 2021, approximately $21,889 of unrecognized compensation expense related to our stock options is expected to be recognized over a weighted average period of 2.4 years. The aggregate intrinsic value of stock options exercised was $8,774 and $2,094 for the three months ended May 31, 2021 and 2020, respectively.    

The weighted average grant date fair value of stock options granted during the three months ended May 31, 2021 was $27.88.

(b)  Restricted Stock Units

The Company issued 327,065 time-based restricted stock units during the three months ended May 31, 2021 of which 120,760 were replacement awards issued in connection with the acquisition of 2nd.MD (Note 4). These time-based restricted stock units are generally subject to a four-year vesting period, with one quarter of an award vesting one year after the vesting commencement date and the remainder vesting ratably on a monthly basis over the subsequent three years. The following is a summary of activity for the three months ended May 31, 2021:

For the three months ended May 31, 2021, the Company recognized $1,630 in restricted stock unit compensation expense, including $532 related to the replacement awards, with $19,461 remaining of total unrecognized compensation costs related to these awards as of May 31, 2021. The total unrecognized costs are expected to be recognized over a weighted-average term of 3.0 years. The weighted average grant date fair value of restricted stock units granted during the three months ended May 31, 2021 was $45.23.

In connection with the acquisition of 2nd.MD (Note 4), several 2nd.MD individuals entered into agreements with the Company whereby these individuals are eligible to receive an aggregate of 608,332 shares that require continued employment with the Company. These shares are excluded from the above table. Included in the 608,332 shares are 281,531 shares that are also contingent upon the achievement of the contingent consideration milestones. These shares are considered compensatory in the post business combination periods due to the additional service requirement for these individuals. These shares will vest 50% on the first anniversary of the acquisition date and 50% on the second anniversary of acquisition date. As of May 31, 2021, there were 608,332 unvested shares outstanding with a grant date fair value of

$46.56 per share. The Company recognized stock-based compensation expense of $3,540 during the three months ended May 31, 2021. The unamortized compensation expense of $24,783 will be recognized over a weighted average remaining period of 1.8 years.

(c)  Employee Stock Purchase Plan

In July 2020, the Board of Directors adopted the Company’s 2020 Employee Stock Purchase Plan (the ESPP), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO. The total shares of common stock initially reserved under the ESPP is limited to 1,100,000 shares. On March 1, 2021, there was an automatic annual increase, which increased the total available common shares to 1,656,991.

Under the ESPP, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the compensation committee. Eligible employees may purchase the Company’s common stock at 85% of the lower of the fair market value of the Company’s common stock on the first day of the offering period or on the last day of the offering period. Eligible employees may contribute up to 15% of their eligible compensation. Under the ESPP, a participant may not accrue rights to purchase more than $25,000 worth of the Company’s common stock for each calendar year in which such right is outstanding.

Employees who elect to participate in the ESPP commence payroll withholdings that accumulate through the end of the respective period. In accordance with the guidance in ASC 718-50 – Compensation – Stock Compensation, the ability to purchase shares of the Company’s common stock for 85% of the lower of the price on the first day of the offering period or the last day of the offering period (i.e. the purchase date) represents an option and, therefore, the ESPP is a compensatory plan under this guidance. Accordingly, share-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black Scholes option-pricing model and is recognized over the withholding period. The Company recognized share-based compensation expense of $391 during the three months ended May 31, 2021 related to the ESPP.

During the three months ended May 31, 2021, employees who elected to participate in the ESPP purchased a total of 50,516 shares of common stock, resulting in cash proceeds to the Company of $1,948. An additional $194 has been withheld via employee payroll deductions who have opted to participate in the next stock purchase plan period ending November 2021.