Lightning eMotors, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

2021 Equity Incentive Plan

In connection with the Business Combination, the stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides the Company the ability to grant incentive stock options, non-qualified stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance units, performance shares, cash-based awards and other stock-based awards. The purpose of the 2021 Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons for performing services and by motivating such persons to

contribute to the growth and profitability of the Company and its subsidiaries. As of September 30, 2022, there were 17,794,239 shares reserved and 13,270,515 shares available for grant under the 2021 Plan.

Prior Lightning Systems 2019 Equity Incentive Plan

The legacy Lightning Systems 2019 Equity Incentive Plan (“2019 Plan”) provided for the grant of incentive stock options, non-qualified stock options, and other awards. As a result of the Business Combination, the 2019 Plan was superseded by the 2021 Plan; therefore, no further awards will be granted under the 2019 Plan. In connection with the Business Combination, awards outstanding were converted into an option exercisable for common stock of the Company based on the Exchange Ratio. As of September 30, 2022, there were 2,330,137 stock options previously granted and unexercised under the 2019 Plan, which remain subject to the terms and conditions of the 2019 Plan.

Compensation Expense

To date, the Company has issued stock option and restricted stock unit (“RSU”) awards. The Company recognizes stock-based compensation expense based on the fair value of the awards issued at the date of grant and amortized on a straight-line basis as the employee renders services over the requisite service period. Forfeitures are accounted for as they occur by reversing the expense previously recognized for non-vested awards that were forfeited during the period. The following table presents the stock-based compensation related to stock option and RSU awards for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Stock options expense
Cost of revenues	$	3	$	14	$	13	$	27
Research and development	5		15		24		37
Selling, general and administrative	239		335		623		496
Total stock options expense	$	247	$	364	$	660	$	560
Restricted stock units expense
Cost of revenues	$	98	$	—	$	205	$	—
Research and development	44		—		123		—
Selling, general and administrative	1,081		985		2,890		985
Total restricted stock units expense	$	1,223	$	985	$	3,218	$	985
Total stock-based compensation	$	1,470	$	1,349	$	3,878	$	1,545

The estimated unrecognized expense for stock options and RSUs not vested as of September 30, 2022, which will be recognized over the remaining requisite service period, is as follows:


Stock options unrecognized expense	$	2,537
Stock options weighted-average remaining requisite service period (in years)	2.2
Restricted stock units unrecognized expense	$	12,575
Restricted stock units weighted-average remaining requisite service period (in years)	2.6

Stock Option Awards

Stock option awards are issued to employees with an exercise price equal to the estimated fair market value per share at the date of grant and a term of 10 years. Stock option awards generally vest over 4 years. It is the Company’s policy to issue

new shares upon option exercise. Changes in the Company’s stock options for the nine months ended September 30, 2022 are presented in the table below.


	Number of Options	Weighted Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)		Weighted Average Remaining Life (in years)
Outstanding at January 1, 2022	3,209,517	$	1.66
Granted	520,834	3.92
Exercised	(363,823)	0.32
Forfeited	(61,436)	1.56
Expired	(7,061)	4.24
Outstanding at September 30, 2022	3,298,031	2.16		$	2,771	7.4
Vested and exercisable at September 30, 2022	1,409,707	1.11		1,610		6.0

Changes in the status of the Company’s non-vested stock option awards for the nine months ended September 30, 2022 are presented in the table below.


	Non-vested Shares Under Option	Weighted Average Grant Date Fair Value per Share
Non-vested at January 1, 2022	2,137,050	$	1.21
Granted	520,834	2.33
Vested	(708,124)	1.08
Forfeited	(61,436)	0.92
Non-vested at September 30, 2022	1,888,324	1.54

The aggregate intrinsic value of options exercised were $113 and $4,109 during the three months ended September 30, 2022 and 2021, respectively, and $1,275 and $8,060 during the nine months ended September 30, 2022 and 2021, respectively.

A Black-Scholes option pricing model with the following assumptions was utilized to determine the fair value of options granted during the nine months ended September 30, 2022.


			Nine Months Ended September 30,
			2022
Expected volatility			61.0%
Dividend yield			0%
Risk-free interest rate			2.95%
Expected term (in years)			6.25

The expected volatility was derived from the volatility of historical stock prices of similar publicly traded companies. The dividend yield represents the Company’s anticipated cash dividend over the expected term of the stock options. The risk-free interest rate is based on the U.S. Treasury yield curve rates with maturities consistent with the expected term of the related stock options. The expected term represents the period of time that the Company anticipates the stock options to be outstanding based on historical experience and future expectations.

Restricted Stock Unit Awards

The Company grants RSU awards to employees that generally vest over 3 years. RSU awards are valued based on the closing market price of the Company’s common stock on the grant date.


	Number of RSUs	Weighted Average Grant Date Fair Value per Share
Outstanding at January 1, 2022	935,148	$	7.59
Granted	2,687,523	3.91
Released	(307,410)	7.10
Forfeited	(142,570)	5.79
Outstanding at September 30, 2022	3,172,691	4.60

Other Employee Benefits - 401(k) Savings Plan

The Company has an employee-directed 401(k) savings plan (the “401(k) Plan”) for all eligible employees over the age of 21. Under the 401(k) Plan, employees may make voluntary contributions based on a percentage of their pretax income, subject to statutory limitations. The Company matches 100% for the first 3% of each employee’s contribution and 50% for the next 2% of each employee’s contribution. The Company’s cash contributions are fully vested upon the date of match. The Company made matching cash contributions of $213 and $106 for the three months ended September 30, 2022 and 2021, respectively, and $578 and $323 for the nine months ended September 30, 2022 and 2021, respectively.