Stock-Based Compensation | 10. STOCK-BASED COMPENSATION In 2013, the Company adopted the Berkshire Grey, Inc. 2013 Stock Option and Stock Purchase Plan (the “2013 Plan”) under which the Company may grant incentive stock options, nonqualified stock options, restricted stock, unrestricted stock, restricted stock units, performance awards, or other awards that are convertible into or based on company stock. The maximum number of shares that may be issued under the Plan was 58,863,225 (as converted for the effect of the Merger). On July 20, 2021, at a special general meeting of the shareholders of RAAC, the 2021 Stock Option and Incentive Plan for Berkshire Grey, Inc. (the “2021 Plan”) was approved reserving an initial limit of 19,887,747 of the Company’s Class A common stock for issuance under the 2021 Plan. All equity awards of Legacy Berkshire Grey that were issued under the 2013 Plan were converted into comparable equity awards that are settled or exercisable for shares of the Company’s Class A common stock. Each stock option granted under the 2013 Plan was converted into an option to purchase the Company’s Class A common stock based on an exchange ratio of 5.87585 . Following effective date of the 2021 Plan, no additional awards shall be issued under the 2013 Plan. Stock-based compensation expense recognized for all stock-based awards is reported in the Company’s consolidated statements of operations as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) (in thousands) Cost of sales $ 445 $ 109 $ 1,137 $ 179 General and administrative ( 3,337 ) 13,096 58 13,953 Sales and marketing 1,717 451 ( 6,870 ) 28,411 Research and development 1,673 283 4,695 884 Total $ 498 $ 13,939 $ ( 980 ) $ 43,427 See Restricted Stock Sold Through Issuance of Promissory Note below for more information regarding the fair value of liability classified awards which increased sales and marketing stock-based compensation expense for the three months ended September 30, 2022, by approximately $ 1.1 million and reduced stock-based compensation expense for the nine months ended September 30, 2022, by $ 8.9 million. It was determined the vesting conditions of performance-based stock options were unlikely to be achieved prior to expiration which resulted in the reversal of general and administrative stock-based compensation expense for the three and nine months ended September 30, 2022, of $ 4.2 million. Stock Options The Company issued grants of 1,102,098 and 1,513,031 stock options during the nine months ended September 30, 2022 and 2021, respectively. 10. STOCK-BASED COMPENSATION (cont.) The following table summarizes stock option activity under the 2013 Plan and 2021 Plan for the nine months ended September 30, 2022: Options Weighted- Weighted- Outstanding at December 31, 2021 29,435,319 $ 1.40 7.8 Granted 1,102,098 2.95 — Exercised ( 3,656,668 ) 0.74 — Cancelled ( 247,775 ) 7.40 — Forfeited ( 2,828,422 ) 3.95 — Outstanding at September 30, 2022 23,804,552 $ 1.21 7.0 Exercisable at September 30, 2022 15,127,731 $ 0.87 6.0 Vested or expected to vest at September 30, 2022 23,804,552 $ 1.21 7.0 As of September 30, 2022 , 2,938,357 of the Options outstanding are subject to performance-based vesting criteria. The total intrinsic value of options exercised in the nine months ended September 30, 2022 , was approximately $ 7.4 million. The Company recognized approximately ($ 3.1 ) million and $ 1.1 million in stock-based compensation expense related to stock options during the three and nine months ended September 30, 2022, respectively. The reversal of expense recognized during the three months ended September 30, 2022, was due to a revised estimate for the achievement of performance-based metrics. The Company recognized approximately $ 14.2 million and $ 16.5 million in stock-based compensation expense related to stock options during the three and nine months ended September 30, 2021, respectively. As of September 30, 2022 , there was approximately $ 17.0 million of total unrecognized compensation cost related to non-vested stock options. The total unrecognized compensation cost will be adjusted for future forfeitures as they occur. As of September 30, 2022 , the Company expects to recognize its remaining stock-based compensation expense over a weighted-average period of 2.8 years. Restricted Stock Sold Through Issuance of Promissory Note In conjunction with a Partial Recourse Promissory Note issued in October 2019 (See Note 8, " Related Party Transactions "), the Company also entered into a Restricted Stock Award Agreement with an executive officer (the “RSA Agreement”). Pursuant to the RSA Agreement, the Company granted 7,003,261 shares of common stock (the “Restricted Stock”) at a purchase price of $ 1.42 per share. The Restricted Stock was purchased by the executive officer with the proceeds from the Promissory Note. As the underlying Restricted Shares are not allocated to the recourse and non-recourse portions of the Promissory Note, the entire note was treated as non-recourse and the shares are treated as options for accounting purposes. On February 23, 2021, the Company entered into a Stock Repurchase Agreement with the aforementioned executive officer. In the Stock Repurchase Agreement, the Company's Board of Directors authorized the repurchase of 1,023,825 vested shares of common stock from the executive officer which will repay, in full, all the outstanding principal and accrued interest under the Promissory Note. At the Closing Date, all outstanding principal and accrued interest under the Promissory Note was repaid and the note was retired. The RSA Agreement contains a Repurchase Option, which causes the shares to be classified as a liability. The Repurchase Option expires six months after the shares’ respective vesting date, at which point the shares will be reclassified as equity at the fair value on such date and no further compensation cost is recognized. A portion of the awards are subject to performance-based vesting conditions based primarily on financial performance of the Company and a portion are only subject to time and service-based vesting conditions over a four-year period. The Company will remeasure the fair value of the award using the exchange traded price of Class A common stock at each reporting period until settlement. The Company recognizes compensation cost over the requisite service period with an offsetting credit to a share-based liability. The underlying shares of Restricted Stock are not considered outstanding until the vesting conditions have been achieved. As of September 30, 2022 , 3,720,564 shares of Restricted Stock have vested, and none were forfeited. As a result of fluctuations in the Company's stock price, during the three and nine months ended September 30, 2022, the change in fair value of the Repurchase Option resulted in an expense of $ 1.1 million and a benefit of $ 8.8 million, respectively, and the benefit is recorded as a reduction to total stock-based compensation expense. The Company recognized a benefit of $ 0.3 million and an expense of $ 26.8 million in stock-based compensation expense related to the Restricted Stock during the three and nine months ended September 30, 2021, respectively. The expense is presented in the Company’s consolidated statements of operations as sales and marketing expense. As of September 30, 2022 , there was approximately $ 3.0 million of total unrecognized compensation cost related to the Restricted Stock. Restricted Stock Units ("RSUs") Under the 2021 Plan, RSUs may be granted to employees, non-employees, and consultants. The RSUs vest ratably over a period ranging from one to four years and are subject to the participant’s continuing service to the Company over that period. Until vested, RSUs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding. The following table summarizes the restricted stock unit activity under the equity incentive plan: RSUs Weighted-Average Grant Date Fair Value Per Share Balance as of December 31, 2021 4,924,243 $ 6.30 Granted 12,500,419 2.83 Vested ( 765,070 ) 7.56 Forfeited ( 1,985,132 ) 5.18 Outstanding at September 30, 2022 14,674,460 $ 3.43 Vested or expected to vest at September 30, 2022 14,674,460 $ 3.43 The Company recognized approximately $ 2.6 million and $ 6.7 million in stock-based compensation expense related to RSUs during the three months and nine months ended September 30, 2022, respectively. The Company recognized $ 0.1 million in stock-based compensation expense related to RSUs during the three and nine months ended September 30, 2021. As of September 30, 2022, there was approximately $ 46.3 million of total unrecognized compensation cost related to non-vested RSUs. As of September 30, 2022, the Company expects to recognize its remaining stock-based compensation expense over a weighted-average period of 3.5 years. |