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STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
Stock-based compensation expense is allocated on a departmental basis based on the classification of the award holder. The following table presents the amount of stock-based compensation related to stock-based awards to employees on the Company’s consolidated statements of operations and comprehensive loss during the years ended December 31, 2022 and 2021 (in thousands):
20222021
Research and development$2,856 $2,233 
Sales and marketing456 213 
General and administrative8,577 5,476 
Total stock-based compensation$11,889 $7,922 
2021 Equity Incentive Plan
In October 2021, the Board of Directors of the Company adopted the ESS Tech, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan became effective upon consummation of the Business Combination. The stock awards may be issued as Incentive Stock Options (“ISO”), Non-statutory Stock Options (“NSO”), Stock Appreciation Rights, Restricted Stock Awards, or Restricted Stock Unit Awards. Only employees are eligible to receive ISO awards. Employees, directors, and consultants who are providing continuous service to the Company are eligible to receive stock awards other than ISOs. The number of shares available for issuance under the 2021 Plan will be increased on the first day of each fiscal year beginning with the 2022 fiscal year and ending with the 2031 fiscal year, in an amount equal to the lesser of (i) 15,260,000 Shares, (ii) five percent (5%) of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Company no later than the last day
of the immediately preceding fiscal year. As of January 1, 2023, the number of shares available for issuance under the 2021 Plan was increased by 4,614,640 shares in accordance with the plan and as approved by the Board.
Under the 2021 Plan, the Company is authorized to issue 17,610,000 shares of common stock as of December 31, 2022.
Option prices for incentive stock options are set at the fair market value of the Company’s common stock at the date of grant. The fair market value of RSUs is set at the closing sales price of the Company’s common stock at the date of grant. Employee new hire grants generally cliff vest at the end of the first year and then 1/48th of the original grant over the remaining three years. Grants expire 10 years from the date of grant.
As of December 31, 2022, there were 10,626,299 shares available for future grant under the 2021 Plan.
Stock Options and Restricted Stock Units
Stock option and RSU activity, prices, and values during the years ended December 31, 2022 and 2021 are as follows (in thousands, except for share, per share, and contractual term data):
Options OutstandingRSUs
Number of
shares		Weighted
average
exercise price		Weighted
average
remaining
 contractual
term
(years)		Aggregate
intrinsic
values
($’000s)		Number of plan shares outstandingWeighted average
grant date fair value
per share
Balances at December 31, 2020
5,732,422 $0.30 8.23$4,333 — $— 
Options and RSUs granted1,454,549 1.75 3,392,153 10.69 
Options exercised and RSUs released(2,496,070)0.27 — — 
Options and RSUs forfeited(894,371)0.46 — — 
Balances as of December 31, 2021
3,796,530 $0.83 8.08$40,274 3,392,153 $10.69 
Options and RSUs granted65,717 8.00 5,602,206 4.68 
Options exercised and RSUs released(529,832)4.28 (1,526,784)8.02 
Options and RSUs forfeited(109,306)2.53 (1,120,620)10.46 
Balances as of December 31, 2022
3,223,109 $1.01 7.39$4,583 6,346,955 $6.10 
Options vested and exercisable - December 31, 2021
1,827,374 $0.31 7.20$20,337 
Options vested and exercisable - December 31, 2022
1,947,123 $0.76 7.06$3,244 
The aggregate intrinsic value is the fair market value on the reporting date less the exercise price for each option. The aggregate intrinsic value of the options exercised was $2,107 thousand and $6,244 thousand during the years ended December 31, 2022 and 2021, respectively.
The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes Merton option-pricing model. For options granted during the years ended December 31, 2022 and 2021, respectively, the weighted average estimated fair value using the Black-Scholes Merton option pricing model was $5.23 and $5.63 per option, respectively.
In accordance with ASC 718, the fair value of each option grant has been estimated as of the date of grant using the following weighted average assumptions:
20222021
Risk-free rate1.64 %1.01 %
Expected volatility73.95 %75.14 %
Expected term6 years6 years
Expected dividends— — 
As of December 31, 2022, there was approximately $28,129 thousand of unamortized stock-based compensation cost related to unvested stock options and RSUs, which was expected to be recognized over a weighted average period of 2.81 years.
Employee Stock Purchase Plan
In May 2022, the Company commenced its first offering period under the ESS Tech, Inc. Employee Stock Purchase Plan (the “ESPP”), which assists employees in acquiring a stock ownership interest in the Company. The ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during specified offering periods. No employee may purchase more than $25,000 worth of stock in any calendar year. The price of shares purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. The total ESPP expense for the year ended December 31, 2022 was $270 thousand.