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STOCK-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2024
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | 11. STOCK-BASED COMPENSATION 2020 Equity Incentive Plan In April 2020, the Board of Directors of D-Wave Systems approved the 2020 Equity Incentive Plan (the "2020 Plan") which provides for the grant of qualified ISO and NSO, restricted stock, RSU or other awards to the Company’s employees, officers, directors, advisors, and outside consultants. Following the Merger, awards outstanding under the 2020 Plan will continue to be governed by the 2020 Plan; however, the Company will not grant any further awards under the 2020 Plan. 2022 Equity Incentive Plan In connection with the Merger, the shareholders approved the D-Wave Quantum Inc. 2022 Equity Incentive Plan (the “2022 Plan”) on August 5, 2022, which became effective immediately upon the closing of the Merger. The aggregate number of Common Shares reserved for future issuance under the 2022 Plan was 19,761,523 shares as of December 31, 2024, inclusive of outstanding awards. The number of shares reserved for issuance under the 2022 Plan automatically increases on January 1st of each year for a period of ten years commencing on January 1, 2023 and ending on (and including) January 1, 2032, in an amount equal to 5% of the fully-diluted Common Shares outstanding (as defined by the 2022 Plan) on December 31st of the preceding year; provided, however, that the Board of Directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of Common Shares. An automatic increase on the reserve of 16,570,847 shares became effective on January 1, 2025. While the 2022 Plan allows for the issuance of awards with a service condition, a performance condition, a market condition, or some combination of the three, to date, the Company has only issued awards subject to a service condition. Awards issued under the 2022 Plan have vesting periods ranging from under 1 year to 4 years from the original grant date, and all awards issued to date under the 2022 Plan will expire 10 years from the original grant date. Share-based compensation awards are settled by issuing new shares. Stock option valuation The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model and has used this method during the years ended December 31, 2024 and 2023. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. ⮚Risk-Free Interest Rate. The Company estimates its risk-free interest rate by using the yield on actively traded non-inflation-indexed U.S. treasury securities with contract maturities equal to the expected term. ⮚Expected Term. The expected term of the Company’s options represents the period that the stock-based awards are expected to be outstanding. ⮚Expected Volatility. Given the limited quoted price history for the Common Shares, the expected volatility is based on the Company's historical stock price volatility and that of comparable publicly-traded companies. ⮚Expected Dividend Yield. The Company has not declared or paid dividends to date and does not anticipate declaring dividends. No stock options were granted during the year ended December 31, 2023. The assumptions used to estimate the fair value of stock options granted during the year ended December 31, 2024 are as follows:
|  |  | Year ended December 31,
|  |  | 2024 |  |
Expected dividend yield |  |  | — |  |
Expected volatility |  |  | 103.0% - 107.0% |  |
Expected term (years) |  |  | 5.0 - 6.1 |  |
Risk free interest |  |  | 4.0% - 4.2% |  |
Common stock option activity The following table summarizes the Company’s stock option activity during the periods presented (in thousands except share and per share data):
| Number of options |  | Weighted average exercise price ($) |  | Weighted average remaining contractual term (years) |  | Aggregate intrinsic value ($)
Outstanding as of December 31, 2023* | 10,300,567 |  | 1.73 |  |  | 6.81 |  | — |
Granted | 2,921,082 |  | 1.30 |  |  |  |  |
Exercised | (1,911,119) |  | 0.90 |  |  |  |  |
Forfeited and expired | (325,792) |  | 4.76 |  |  |  |  |
Outstanding as of December 31, 2024 | 10,984,738 |  | 1.67 |  |  | 6.64 |  | 75,270 |
Options exercisable as of December 31, 2024 | 9,145,652 |  | 1.46 |  |  | 6.25 |  | 64,379 |
Options unvested as of December 31, 2024 | 1,839,086 |  | 2.68 |  |  | 8.59 |  | 10,891 |
*As of December 31, 2023, a total of 10,547,844 options had been issued and remained outstanding under the 2020 Plan. The number of options, along with the weighted average exercise price and weighted average remaining contractual term shown in the table above, have been adjusted to the as-converted number of Commons Shares using the Conversion Ratio applied to these 10,547,844 options. During the years ended December 31, 2024 and 2023, the total intrinsic value of options exercised was $6.2 million and $1.7 million, respectively. During the year ended December 31, 2024, the weighted-average grant date fair value of stock options granted was $1.05 per share. No stock options were granted during the year ended December 31, 2023. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Common Shares for those stock options that had exercise prices lower than the fair value of the Common Shares as of December 31, 2024. Restricted stock unit awards The following table summarizes the RSU activity and related information under the 2022 Plan (in thousands except share and per share data):
| Number of RSUs |  | Weighted average Grant Date Fair Value ($)
Unvested as of December 31, 2023 | 7,045,813 |  |  | 3.13 |
Granted | 7,058,265 |  |  | 1.66 |
Forfeited and expired | (553,478) |  |  | 2.14 |
Vested | (4,763,578) |  |  | 2.69 |
Unvested as of December 31, 2024 | 8,787,022 |  |  | 2.25 |
During the years ended December 31, 2024 and 2023, t he total fair value of RSUs vested was $12.8 million and $20.4 million, respectively. Employee Stock Purchase Plan In August 2022, the Company established the 2022 Employee Stock Purchase Plan (the "ESPP"), providing eligible employees of the Company and designated subsidiaries an opportunity to purchase the Company's common shares at discounted rates. An eligible employee is defined as someone who: (i) is regularly employed by the Company or its designated subsidiaries for at least 20 hours per week and more than five months in a calendar year, and (ii) is classified as an employee for tax purposes. Regarding the Non-423 Component, any employee of the Company or its affiliates, as determined by a committee appointed by the Board, is eligible. Management computes compensation expense by combining three components: (i) a 15% discount offered, (ii) a call option on 0.85 share of stock with an exercise price equal to the fair market value, and (iii) a put option on 0.15 share of stock with an exercise price equal to the fair market value. The requisite service period is the six-month purchase period. Any reductions in withholding amounts (or percentages) will be disregarded for compensation cost recognition. If a participant or the plan is terminated, management will reverse any expense accrued for unvested shares. As of December 31, 2024, the maximum number of common shares remaining available to be issued under the ESPP is 10,464,917. During the year ended December 31, 2024, 487,782 shares of common shares were issued under the ESPP, and compensation cost recognized related to the ESPP was $0.3 million. Stock-based compensation expense The following table summarizes the stock-based compensation expense classified in the consolidated statements of operations and comprehensive loss as follows (in thousands):
|  |  | Year Ended December 31,
|  |  |  |  | 2024 |  | 2023 |  |
Cost of revenue |  |  |  |  | $ | 647 |  |  | $ | 1,272 |  |  |
Research and development |  |  |  |  | 5,089 |  | 8,286 |  |
General and administrative |  |  |  |  | 8,166 |  |  | 11,356 |  |  |
Sales and marketing |  |  |  |  | 1,759 |  |  | 1,005 |  |  |
Total stock-based compensation |  |  |  |  | $ | 15,661 |  |  | $ | 21,919 |  |  |
During the years ended December 31, 2024 and 2023, total compensation cost capitalized as part of property and equipment and intangible assets was $0.1 million and zero, respectively. As of December 31, 2024, total unrecognized stock-based compensation cost, net of estimated forfeitures, related to our unvested stock awards was $41.1 million. This amount is based on an estimated future forfeiture rate of 2.7% per year and will be recognized over a weighted-average period of approximately 2.10 years.

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