Stock-Based Compensation | 13. Stock-Based Compensation Stock-Based Compensation Expense Stock-based compensation, measured at the grant date based on the fair value of the award, is typically recognized ratably over the requisite services period, using the straight-line method of expense attribution. The Company recorded stock-based compensation expense in the following categories of its unaudited condensed consolidated statements of operations and balance sheets (in thousands): Three Months Ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Engineering services $ 1,281 $ 546 $ 3,546 $ 1,085 General and administrative costs 1,118 755 3,547 814 BlueWalker 3 Satellite - construction in progress (1) - 6 ( 44 ) 34 Total $ 2,399 $ 1,307 $ 7,049 $ 1,933 (1) For the nine months ended September 30, 2022 stock-based compensation was reversed as a result of forfeiture of options previously provided to a supplier. The Company estimates the fair value of the stock option awards to employees, non-employees and non-employee members of the Board of Directors using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the expected volatility of our stock, (ii) the expected term of the award, (iii) the risk-free interest rate, and (iv) any expected dividends. Due to the lack of company-specific historical and implied volatility data, the Company based the estimate of expected volatility on the estimated and expected volatilities of a representative group of publicly traded companies. For these analyses, the Company selects companies with comparable characteristics including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of the Company’s stock price becomes available. For awards that qualify as “plain-vanilla” options, the Company estimates the expected life of the employee stock options using the “simplified” method, whereby the expected life equals the average of the vesting term and the original contractual term of the option. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company elects to account for forfeitures as they occur rather than apply an estimated forfeiture rate to stock-based payment expense. The fair value of restricted stock units granted to employees, non-employees, and non-employee members of the Board of Directors is based on the fair value of the Company’s stock on the grant date. The Company elects to account for forfeitures as they occur rather than apply an estimated forfeiture rate to stock-based payment expense. AST LLC 2019 Equity Incentive Plan Prior to the Business Combination, under the 2019 Equity Incentive Plan (“AST LLC Incentive Plan”), AST LLC was authorized to issue ordinary shares, as well as options exercisable for ordinary shares, as incentives to its employees, non-employees, and non-employee members of its Board of Directors. The issuance of share options and ordinary shares is administered by the Board of Directors using standardized share option and share subscription agreements. Following the Business Combination, no further grants will be made under the AST LLC Incentive Plan. However, the AST LLC Incentive Plan will continue to govern the terms and conditions of the outstanding awards granted under it. There were two types of options granted under the AST LLC Incentive Plan: (1) service-based options and (2) performance-based options. Service-based options typically vest over a five year service period, with 20 % of the award vesting on the first anniversary of the employee’s commencement date, and the balance thereafter in 48 equal monthly installments. Certain service-based options also provide for accelerated vesting if there is a change in control or other performance condition as defined by the AST LLC Incentive Plan. Performance-based options typically vest on the earliest date that any of the following occurs: (i) AST LLC effects an initial public offering and becomes a reporting company, (ii) AST LLC experiences a change of control, or (iii) other specified performance conditions. Both service-based and performance-based options typically expire no later than 10 years from the date of grant. In connection with the Closing, AST LLC entered into the Fifth Amended and Restated Limited Liability Operating Agreement (the “A&R Operating Agreement”), which, among other things, restructured the capitalization of AST LLC to reclassify all of the existing AST LLC options into AST LLC incentive equity units (the “AST LLC Incentive Equity Units”). In connection with the reclassification of the AST LLC options into AST LLC Incentive Equity Units, the maximum number of AST LLC Incentive Equity Units which may be issued under the AST LLC Incentive Plan were proportionately adjusted to be equal to (a) the share limit under the AST LLC Incentive Plan as of the effective date of the A&R Operating Agreement, multiplied by (b) 14.50149869 (rounded down to the nearest whole number of AST LLC Incentive Equity Units). Additionally, each unexpired and unexercised outstanding AST LLC option, whether vested or unvested, was proportionately adjusted such that (a) each AST LLC option will be exercisable for that number of AST LLC Incentive Equity Units equal to the product determined by multiplying (x) the number of AST LLC options that were issuable upon exercise immediately prior to the Closing by (y) 14.50149869 (rounded down to the nearest whole number of AST LLC Incentive Equity Units) and (b) the per unit exercise price for the AST LLC Incentive Equity Units issuable upon exercise of such AST LLC option shall be equal to the quotient of (x) the exercise price per AST LLC option immediately prior to the Closing divided by (y) 14.50149869 (rounded down to the nearest millionth). Each AST LLC option continues to be subject to the terms of the AST LLC Incentive Plan and the applicable award agreement evidencing such AST LLC option, and is further subject in all regards to the terms and conditions of the A&R Operating Agreement. Additionally, pursuant to the terms of the A&R Operating Agreement, each AST LLC Incentive Equity Unit is redeemable for one share of Class A common stock on the later of the (i) 24-month anniversary of the consummation of the Business Combination and (ii) six-month anniversary from the vesting date. As a result of the Business Combination, there was no incremental compensation cost and the terms of the outstanding awards, including fair value, vesting conditions and classification, were unchanged. As of September 30, 2022, AST LLC was authorized to issue a total of 12,812,959 ordinary shares under a reserve set aside for equity awards. As of September 30, 2022, there were 10,976,360 AST LLC options outstanding under the AST LLC Incentive Plan. Following the Business Combination on April 6, 2021, no further equity award grants were made under the AST LLC Incentive Plan. The following table summarizes AST LLC’s option activity for the nine months ended September 30, 2022: Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Outstanding at December 31, 2021 12,359,322 $ 0.83 1.39 Granted - - Exercised ( 590,471 ) 0.09 Cancelled or forfeited ( 792,491 ) 1.24 Outstanding at September 30, 2022 10,976,360 $ 0.84 0.77 Options exercisable as of September 30, 2022 7,894,163 $ 0.49 0.68 Vested and expected to vest at September 30, 2022 10,976,360 $ 0.84 0.77 The following table summarizes the Company’s unvested option activity for the nine months ended September 30, 2022: Number of Shares Weighted-Average Grant Date Fair Value Unvested at December 31, 2021 5,188,990 $ 0.64 Granted - - Vested ( 1,361,859 ) 0.42 Forfeited ( 744,934 ) 0.52 Unvested at September 30, 2022 3,082,197 $ 0.77 There were no stock options granted durin g the nine months ended September 30, 2022. The weighted-average grant-date fair value per share of stock options granted during the nine months ended September 30, 2021 was $ 4.15 . As of September 30, 2022, total unrecognized compensation expense related to the unvested stock options was $ 1.9 million , which is expected to be recognized over a weighted average period of 0.8 years. SpaceMobile 2020 Incentive Award Plan In connection with the Business Combination, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”). Awards may be made under the 2020 Plan covering an aggregate number of Class A common stock shares equal to 10,800,000 . Any shares distributed pursuant to an award may consist, in whole or in part, of authorized and unissued common stock, treasury common stock or common stock purchased on the open market. The 2020 Plan provides for the grant of stock options, restricted stock, dividend equivalents, restricted stock units, incentive unit awards, stock appreciation rights, and other stock or cash-based awards. Each incentive unit issued pursuant to an award, if any, shall count as one share for purposes of calculating the aggregate number of shares available for issuance under the 2020 Plan. Two types of equity awards have been granted under the 2020 Plan: service-based and performance-based (1) options and (2) restricted stock units. Service-based options typically vest over a four-year service period with 25 % of the award vesting on the first anniversary of the employee’s commencement date, and the balance thereafter in 36 equal monthly installments. Service-based restricted stock units typically vest over a four year service period with 25% of the award vesting on each anniversary of the employee’s vesting commencement date. Performance-based restricted stock units typically vest on the earliest date that any of the following occurs: (i) the Company attains an incremental capital investment, or (ii) other specified performance conditions. Options typically expire no later than 10 years from the date of grant. Stock Options As of September 30, 2022 , there were 3,495,860 service-based options outstanding under the 2020 Plan. The following table summarizes the Company’s option activity under the 2020 Plan for the nine months ended September 30, 2022: Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Outstanding at December 31, 2021 1,889,115 $ 10.35 3.36 Granted 1,751,550 10.00 Exercised - - Cancelled or forfeited ( 144,805 ) 9.78 Outstanding at September 30, 2022 3,495,860 $ 10.20 3.01 Options exercisable as of September 30, 2022 621,543 $ 10.00 2.28 Vested and expected to vest at September 30, 2022 3,495,860 $ 10.20 3.01 The following table summarizes the Company’s unvested option activity for the period ended September 30, 2022: Number of Shares Weighted-Average Grant Date Fair Value Unvested at December 31, 2021 1,803,344 $ 4.41 Granted 1,751,550 4.01 Vested ( 535,772 ) 4.31 Forfeited ( 144,805 ) 4.14 Unvested at September 30, 2022 2,874,317 $ 4.20 The weighted-average grant-date fair value per share of stock options granted during the nine months ended September 30, 2022 and the nine months ended September 30, 2021 was $ 4.01 and $ 4.14 , respectively. A s of September 30, 2022, total unrecognized compensation expense related to the unvested stock options was $ 12.0 million , which is expected to be recognized over a weighted average period of 3.0 years. Restricted Stock Units As of September 30, 2022, there were 3,160,282 restricted stock units outstanding under the 2020 Plan. The following table summarizes the Company’s unvested restricted stock unit activity for the nine months ended September 30, 2022: Number of Shares Weighted-Average Grant Date Fair Value Unvested at December 31, 2021 1,686,031 $ 10.14 Granted 1,885,586 9.84 Vested ( 335,835 ) 10.15 Forfeited ( 75,500 ) 9.27 Unvested at September 30, 2022 3,160,282 $ 9.98 As of September 30, 2022, total unrecognized compensation expense related to the unvested restricted stock units was $ 16.9 million , which is expected to be recognized over a weighted average period of 2.1 years. SpaceMobile 2020 Employee Stock Purchase Plan In connection with the Business Combination, the Company adopted the 2020 Employee Stock Purchase Plan (the “ESPP”). The aggregate number of common stock shares that may be issued pursuant to rights granted under the ESPP is 2,000,000 shares. If any right granted under the ESPP shall for any reason terminate without having been exercised, the shares not purchased under such right shall again become available for issuance under the ESPP. As of September 30, 2022, the Company had not issued any awards under this plan. |