Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Stockholders Equity Note [Abstract]

Stockholders' Equity

Note 10. Stockholders’ Equity

As of September 30, 2021 and December 31, 2020, 1,350,000,000 shares, $0.0001 par value per share are authorized, of which, 1,000,000,000 shares are designated as Class A Common Stock, 250,000,000 shares are designated as Class B Common Stock, and 100,000,000 shares are designated as Preferred Stock.

Common Stock

Holders of the common stock are entitled to dividends when, as, and if, declared by the Board, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. As of September 30, 2021, the Company had not declared any dividends. The holder of each share of Class A Common Stock is entitled to one vote, and the holder of each share of Class B Common Stock is entitled to ten votes.

In March 2021, the Company completed an underwritten public offering of shares of its Class A Common Stock and issued 11,960,000 shares for an aggregate purchase price of $462.9 million, net of issuance costs of $15.5 million (the “March 2021 Public Offering”).

Legacy QuantumScape Series F Convertible Preferred Stock

In May 2020 and September 2020, Legacy QuantumScape and VGA entered into a Series F Preferred Stock Purchase Agreement and related agreements and amendments thereto, and in August 2020, Legacy QuantumScape and several new and existing investors entered into Series F Preferred Stock Purchase Agreements and related agreements thereto, pursuant to which Legacy QuantumScape agreed to sell, and VGA and other investors agreed to purchase, up to an aggregate 14,684,843 shares of Legacy QuantumScape Series F Preferred Stock at $26.4218 per share for an aggregate purchase price of $388 million (together with the Series F Closing Agreement below, the “Series F Preferred Stock Purchase Agreements”). The Series F Preferred Stock Purchase Agreement with VGA, as amended, contains provisions pursuant to which, if the relevant closing of such Series F Preferred Stock Purchase Agreement (in whole or in part) occurred only after effectiveness of the Business Combination, VGA agreed to purchase, and Kensington agreed to issue, instead of the relevant number of shares of Series F Preferred Stock to be purchased at such closing, such number of shares of Class A Common Stock as would have been issued in the Business Combination in exchange for such shares of Legacy QuantumScape Series F Preferred Stock if they had been outstanding prior to the Business Combination.

Pursuant to the terms of the Series F Preferred Stock Purchase Agreements, Legacy QuantumScape issued 7,115,335 shares of Series F Preferred Stock for an aggregate purchase price of $188.0 million, net of issuance costs of $11.5 million, concurrent with the closing of the Business Combination, and the Company issued 15,221,334 shares of Class A Common Stock to VGA for $100.0 million on December 1, 2020. On March 30, 2021, the Company, Legacy QuantumScape, and VGA entered into a Series F Closing Agreement for the Company to issue to VGA an additional 15,221,334 shares of Class A Common Stock for $100.0 million based on the Company’s achievement of the specified technical milestone. The Company received the $100.0 million on April 28, 2021 pursuant to this technical milestone achievement and issued the additional 15,221,334 shares of Class A Common Stock. This represented the second and final closing pursuant to the Series F Preferred Stock Purchase Agreements.

The Company concluded that the firm commitment to issue the tranche shares to VGA and the other investors met the definition of a freestanding financial instrument (as described in Note 5). Prior to the Business Combination, as the underlying convertible preferred shares of the outstanding tranche liabilities were redeemable outside the control of the Company, the fair value of the tranche liabilities was reported on the Legacy QuantumScape’s balance sheets as a long-term liability, and the change in fair value of $347.1 million was recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2020. Upon consummation of the Business Combination, the tranche liabilities were reclassified to additional paid-in capital. Therefore, there was no further adjustment to the fair value of the liability subsequent to the year ended December 31, 2020.

Equity Incentive Plans

Prior to the Business Combination, the Company maintained its 2010 Equity Incentive Plan (the “2010 Plan”), under which the Company granted options and restricted share units to purchase or directly issue shares of common stock to employees, directors, and non-employees.

Upon the Closing, awards under the 2010 Plan were converted at the Exchange Ratio and assumed into the 2020 Equity Incentive Award Plan (the “2020 Plan”, and together with the 2010 Plan, the “Plans”). The 2020 Plan permits the granting of awards in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted shares, restricted share units and performance awards to employees, directors, and non-employees.

As of September 30, 2021, 41,500,000 shares of Class A Common Stock are authorized for issuance pursuant to awards under the 2020 Plan, plus any shares of Class A Common Stock subject to stock options, restricted stock units or other awards that were assumed in the Business Combination and terminate as a result of being unexercised or are forfeited or repurchased by the Company, with the maximum number of shares to be added to the 2020 Plan equal to 69,846,580 shares of Class A Common Stock.

Options may be granted at a price per share not less than 100% of the fair market value at the date of grant. If the option is granted to a 10% stockholder, then the purchase or exercise price per share shall not be less than 110% of the fair market value per share of the common stock on the grant date. Options granted generally vest over a period of four years and have ten-year contractual terms.

Stock Options

Stock option activity under the Plans is as follows:

	Number of Shares Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Intrinsic value (in thousands)
Balance as of December 31, 2020		55,316,336		$	1.62		5.77
Cancelled and forfeited		(366,724	)		2.34		—
Exercised		(11,772,597	)		0.96		—
Balance as of September 30, 2021		43,177,015		$	1.79		5.55	$	982,290
Vested and exercisable as of September 30, 2021		34,924,317		$	1.43		4.94	$	807,099

There were no options granted during the nine months ended September 30, 2021. Options with a fair value of $19.6 million, $5.08 per share, were granted during the nine months ended September 30, 2020.

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2021 and 2020 was $355.0 million and $1.6 million, respectively.

Additional information regarding options outstanding as of September 30, 2021, is as follows:

Range of Exercise Price per Share	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$0.11 - $0.64		5,044,249	$	0.55		1.37
$1.05 - $1.35		23,686,669		1.27		4.93
$2.38		11,801,379		2.38		7.82
$6.23		2,644,718		6.23		8.93
		43,177,015	$	1.79		5.55

Stock-based compensation expense is based on the grant-date fair value. The Company recognizes compensation expense for all stock-based awards on a straight-line basis over the requisite service period of the awards, which is generally the option vesting term of four years.

As of September 30, 2021, the Company had stock-based compensation of $15.2 million related to unvested stock options not yet recognized that are expected to be recognized over an estimated weighted average period of 2.5 years.

Restricted Stock Units

Restricted stock unit activity under the Plans are as follows:

	Number of Restricted Stock Units			Weighted Average grant date fair value
Balance as of December 31, 2020		13,913,076		$	8.94
Granted		1,458,371			31.72
Vested		(3,997,984	)		5.38
Forfeited		(375,472	)		8.86
Balance as of September 30, 2021		10,997,991		$	13.26

The fair value of restricted stock units which vested during the nine months ended September 30, 2021 was $156.3 million. No restricted stock units vested during the nine months ended September 30, 2020.

As of September 30, 2021, unrecognized compensation costs related to restricted stock units granted were $130.5 million and are expected to be recognized over a weighted average period of 3.1 years.

Total stock-based compensation expense recognized in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for all equity awards is as follows (amounts in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	7,489	$	2,826	$	20,490	$	5,542
General and administrative		5,238		2,045		15,520		3,711
Total stock-based compensation expense	$	12,727	$	4,871	$	36,010	$	9,253