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Stock-based Compensation | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-based Compensation | Stock-based Compensation Prior to the Business Combination, Legacy Luminar maintained the 2015 Stock Plan (the “2015 Plan”) under which incentive stock options, non-qualified stock options and restricted stock were granted to employees, directors and non-employee consultants. In connection with the Business Combination, the Company assumed the 2015 Plan upon the closing. The Company terminated the 2015 Plan, provided that the outstanding awards previously granted under the 2015 Plan continue to remain outstanding under the 2015 Plan. In December 2020, the Company’s Board adopted and the Company’s stockholders approved the 2020 Equity Incentive Plan (the “2020 EIP”). The 2020 EIP became effective upon the closing of the Business Combination. Under the 2020 EIP, as of December 31, 2021, the Company was authorized to issue a maximum number of 36,588,278 shares of Class A common stock. The Company granted 14,130,298 restricted stock units in the year ended December 31, 2021. No grants were made in 2020 under the 2020 EIP. Stock Options Under the terms of the 2015 Plan, incentive stock options had an exercise price at or above the fair market value of the stock on the date of the grant, while non-qualified stock options were permitted to be granted below fair market value of the stock on the date of grant. Stock options granted have service-based vesting conditions only. The service-based vesting conditions vary, though typically, stock options vest over four years with 25% of stock options vesting on the first anniversary of the grant and the remaining 75% vesting monthly over the remaining 36 months. Option holders have a 10-year period to exercise the options before they expire. Forfeitures are recognized in the period of occurrence. No stock options were granted by the Company in 2021. The fair value of stock option awards in 2020 and 2019 was determined on the grant date using the Black-Scholes valuation model based on the following assumptions:
| 2020 |  | 2019
Expected term (years) (1) | 5.96 – 6.02 |  | 5.27 – 6.02
Current stock value | $1.67 – $5.64 |  | $1.28 – $1.67
Expected volatility (2) | 49.3% – 51.9% |  | 44.6% – 49.3%
Risk-free interest rate (3) | 0.4% – 1.8% |  | 1.6% – 1.9%
Dividend yield (4) | 0 | % |  | 0 | %
(1)The expected term is the length of time the grant is expected to be outstanding before it is exercised or terminated. This number is calculated as the midpoint between the vesting term and the original contractual term (contractual period to exercise). If the option contains graded vesting, then the vesting term would be based on the vesting pattern. (2)Volatility, or the standard deviation of annualized returns, was calculated based on comparable companies’ reported volatilities. (3)Risk free rate was obtained from US treasury notes for the expected terms noted as of the valuation date. (4)The Company has assumed a dividend yield of zero as it has no plans to declare dividends in the foreseeable future. Prior to December 2, 2020, given the absence of a public trading market, the Board considered numerous objective and subjective factors to determine the fair value of the Company’s Common Stock at each meeting at which awards were approved. These factors included, but were not limited to, (i) contemporaneous third-party valuations of Common Stock; (ii) the rights and preferences of Series A and Series X Preferred Stock relative to Common Stock; (iii) the lack of marketability of Common Stock; (iv) developments in the business; and (v) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions. The Company’s stock option activity for the year ended December 31, 2021 was as follows:
| Number of Stock Options |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value (In Thousands)
Outstanding as of December 31, 2020 | 16,188,071 |  |  | $ | 1.67 |  |  |  |  |
Exercised | (3,522,299) |  |  | 1.68 |  |  |  |  |
Cancelled/Forfeited | (1,158,129) |  |  | 1.67 |  |  |  |  |
Outstanding as of December 31, 2021 | 11,507,643 |  |  | 1.72 |  |  | 7.86 |  | $ | 176,893 |
Vested and exercisable as of December 31, 2021 | 4,720,601 |  |  | 1.71 |  |  | 7.50 |  | $ | 71,742 |
Vested and expected to vest as of December 31, 2021 | 11,507,643 |  |  | 1.72 |  |  | 7.86 |  | $ | 176,893 |
The weighted-average grant date fair value per share of options granted during the year ended December 31, 2020 and 2019 was $0.98 and $0.68, respectively. The total fair value of options that vested during the year ended December 31, 2021, 2020 and 2019 was $7.1 million, $1.4 million and $0.2 million, respectively. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021 was $67.1 million. The intrinsic value is calculated as the difference between the exercise price and the fair value of the common stock on the exercise date. As of December 31, 2021, the Company had $6.3 million of unrecognized stock-based compensation expense related to stock options. This cost is expected to be recognized over a weighted-average period of 1.07 years. Restricted Stock Awards Prior to June 30, 2019, the Company granted restricted stock awards (“RSAs”) to employees. Recipients purchased the restricted stock on the grant date and the Company has the right to repurchase the restricted shares at the same price recipients paid to obtain those shares. The restrictions lapse solely based on continued service, and generally lapse over 4 years —25% on the first anniversary of the date of issuance, and the remaining 75% monthly over the remaining 36 months. At the grant date of the award, recipients of restricted stock are granted voting rights and receive dividends on unvested shares. No restricted stock awards have been granted after June 30, 2019. The Company’s RSAs activity for the year ended December 31, 2021 was as follows:
| Shares |  | Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2020 | 1,815,891 |  |  | 1.15 |
Forfeited | (101,716) |  |  | 1.12 |
Vested | (1,047,877) |  |  | 0.97 |
Outstanding as of December 31, 2021 | 666,298 |  |  | 1.21 |
The total fair value of restricted stock awards vested during the year ended December 31, 2021, 2020 and 2019 was $1.0 million, $2.2 million and $2.5 million, respectively. As of December 31, 2021, the Company had $0.7 million of unrecognized stock-based compensation expense related to restricted stock awards. This cost is expected to be recognized over a weighted-average period of 0.53 years. Restricted Stock Units To date, the Company has granted restricted stock units (“RSUs”) under the 2020 EIP. Each RSU granted under the 2020 EIP represents a right to receive one share of the Company’s Class A common stock when the RSU vests. RSUs generally vest over a period up to six years. The fair value of RSU is equal to the fair value of the Company’s common stock on the date of grant. The Company’s RSUs activity for the year ended December 31, 2021 was as follows:
| Shares |  | Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2020 | — |  |  | — |
Granted | 14,130,298 |  |  | 19.52 |
Forfeited | (430,168) |  |  | 20.35 |
Vested | (1,717,098) |  |  | 19.08 |
Outstanding as of December 31, 2021 | 11,983,032 |  |  | 19.56 |
The total fair value of RSUs vested during the year ended December 31, 2021 was $32.8 million. As of December 31, 2021, the Company had $203.5 million of unrecognized stock-based compensation expense related to RSUs. This cost is expected to be recognized over a weighted-average period of 1.83 years. Fixed Value Equity Awards The Company issues fixed value equity awards to certain employees as a part of their compensation package. These awards are issued as RSUs out of the 2020 EIP and are accounted for as liability classified awards under ASC 718 — Stock Compensation. Fixed value equity awards granted have service-based conditions only and vest quarterly over a period of four years. These awards represent a fixed dollar amount settled in a variable number of shares determined at each vesting period. For the year ended December 31, 2021, the Company recorded $3.8 million in stock-based compensation expense related to these awards. OptoGration Awards As discussed in Note 3, as part of the OptoGration acquisition, the Company owes up to $22.0 million of post combination compensation related to certain service and performance conditions. As of December 31, 2021, it is probable that the conditions will be met, and as a result, the Company recorded $6.1 million in stock-based compensation expense. Compensation expense Stock-based compensation expense by type of award was as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Equity Classified Awards: |  |  |  |  |
Stock options | $ | 5,137 |  |  | $ | 3,179 |  |  | $ | 240 |
RSAs | 1,682 |  |  | 5,532 |  |  | 2,462 |
RSUs | 60,191 |  |  | — |  |  | — |
Liability Classified Awards: |  |  |  |  |
Fixed value equity awards | 3,826 |  |  | — |  |  | — |
OptoGration awards | 6,114 |  |  | — |  |  | — |
Patent awards | 734 |  |  | — |  |  | — |
Total | $ | 77,684 |  |  | $ | 8,711 |  |  | $ | 2,702 |
Stock-based compensation expense by function was as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Cost of sales | $ | 6,422 |  |  | $ | 309 |  |  | $ | 92 |
Research and development | 20,216 |  |  | 2,098 |  |  | 914 |
Sales and marketing | 4,546 |  |  | 414 |  |  | 163 |
General and administrative | 46,500 |  |  | 5,890 |  |  | 1,533 |
Total | $ | 77,684 |  |  | $ | 8,711 |  |  | $ | 2,702 |

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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