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) shares as of December 31, 2021 and December 31, 2020. 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 and comprehensive loss as follows: Years Ended December 31, 2021 2020 (in thousands) Cost of sales $ 557 $ 137 General and administrative 19,353 3,245 Sales and marketing 27,278 1,583 Research and development 2,655 1,056 Total $ 49,843 $ 6,021 Stock Options The Company issued grants of 2,270,858 and 17,377,292 stock options during the years ended December 31, 2021 and 2020, respectively. The following table summarizes stock option activity under the 2013 Plan and 2021 Plan since December 31, 2020: Options Weighted- Exercise Price Weighted- Remaining Contractual Term (years) Outstanding at December 31, 2020 35,001,146 $ 0.80 7.8 Granted 2,270,858 7.70 — Exercised (6,574,818 ) 0.48 — Cancelled (21,090 ) 1.11 — Forfeited (1,240,777 ) 0.80 — Outstanding at December 31, 2021 29,435,319 $ 1.40 7.5 Exercisable at December 31, 2021 15,202,295 $ 0.71 6.5 Vested or expected to vest at December 31, 2021 29,435,319 $ 1.40 7.5 In determining the estimated fair value of the stock option awards, the Company uses the Black-Scholes option pricing model. The fair value of share option awards was estimated with the following assumptions: As of December 31, 2021 2020 Expected volatility 32% - 34% 55.0% Risk-free interest rate .99% - 1.20% .55% - .68% Expected term (in years) 6.1 6.1 Expected dividend rate 0% 0% As of December 31, 2021, 3,231,432 of the options outstanding are subject to performance-based vesting criteria described below. The total intrinsic value of options exercised in the year December 31, 2021, was approximately $44.2 million. The Company recognized approximately $22.0 million and $3.3 million in stock-based compensation expense related to stock options during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was approximately $21.5 million of total unrecognized compensation cost related to non-vested Restricted Stock Sold Through Issuance of Promissory Note In conjunction with a Partial Recourse Related Party Transactions non-recourse non-recourse 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 December 31, 2021, 3,063,991 shares of Restricted Stock have vested, and none were forfeited. The Company recognized approximately $24.4 million and $2.7 million in stock-based compensation expense related to the Restricted Stock during the years ended December 31, 2021 and 2020, respectively. The expense is presented in the Company’s consolidated statements of operations and comprehensive loss as sales and marketing expense and general and administrative expense, respectively. As of December 31, 2021, there was approximately $15.1 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, one The following table summarizes the RSU activity under the equity incentive plan: RSUs RSU Weighted- Date Fair Value Per Share Balance as of December 30, 2020 Granted 5,041,197 $ 6.33 Vested (37,043 ) 7.61 Forfeited (79,911 ) 7.61 Outstanding at December 31, 2021 4,924,243 $ 6.30 Expected to vest at December 31, 2021 4,924,243 $ 6.30 The Company recognized approximately $3.5 million in stock-based compensation expense related to RSUs during the year ended December 31, 2021. The Company did not recognize any stock-based compensation expense related to RSUs during the year ended December 31, 2020. As of December 31, 2021, there was approximately $27.9 million of total unrecognized compensation cost related to non-vested |