The Company’s 2017 Equity Incentive Plan (the “2017 Plan”), as amended in February 2018, allowed the grant of options, restricted stock awards, stock appreciation rights and restricted stock units. No options granted under the 2017 Plan are exercisable after 10 years from the date of grant, and option awards generally vest over a four-year period.

The 2017 Plan was terminated in connection with the adoption of the Company's 2021 Equity Incentive Plan (the "2021 Plan"). Any awards granted under the 2017 Plan that remained outstanding as of the Closing Date and were converted into awards with respect to the Company’s Class A common stock in connection with the consummation of the Business Combination continue to be subject to the terms of the 2017 Plan and applicable award agreements, except for a modification of the repurchase provision, which is discussed further below.

On July 22, 2021, in connection with the Business Combination, the 2021 Plan became effective and 32,734,983 authorized shares of Class A common stock were reserved for issuance thereunder. This Plan will be administered by the Compensation Committee of the Company’s Board of Directors, including determination of the vesting, exercisability and payment of the awards to be granted under this Plan. No awards granted under the 2021 Plan are exercisable after 10 years from the date of grant, and the awards granted under the 2021 Plan generally vest over a four-year period on a graded vesting basis.

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) became effective in connection with the Business Combination. The 2021 ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. On each January 1 of each of 2022 through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the 2021 Plan may be increased automatically by the number of shares equal to one percent (1%) of the total number of shares of all classes of common stock issued and outstanding immediately preceding December 31. The Company did not make any grants of purchase rights under the 2021 ESPP during the quarter ended March 31, 2022. A total of 7,229,799 shares of Class A common stock have been reserved for future issuance under the 2021 ESPP.

Under the 2017 Plan, the Company had a call option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement (the “2017 Plan Call Option”). The options granted under the 2017 plan were accounted for as liability awards due to the 2017 Plan Call Option. The Company had a history of repurchase practice and the intention to repurchase the vested options. Therefore, the fair value of the liability awards was remeasured at each reporting period until the stockholder bears the risks and rewards of equity ownership for a reasonable period of time, which the Company concludes is at least six months.

Upon consummation of the Business Combination, the Company’s Board of Directors waived the Company’s right under the 2017 Plan Call Option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement. As such, the Company modified the liability awards to equity awards and reclassified the modification date fair value of the awards to stockholders’ equity in the condensed consolidated financial statements as of July 22, 2021.

The following summarizes the stock option activity, which reflects the conversion of the options granted under the 2017 Plan into awards with respect to the Company Class A common stock in connection with the consummation of the Business Combination (in thousands, except share and per share amounts):


	Stock Options Outstanding	Weighted Average Exercise Price
Balance at December 31, 2021	30,905,543	$	1.24
Options granted	851,884	$	3.37
Options exercised	(2,108,502)	$	0.32
Options forfeited or canceled	(759,629)	$	2.98

Balance at March 31, 2022	28,889,296	$	1.33
Options exercisable at March 31, 2022	21,620,867	$	0.54

As of March 31, 2022, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $22.1 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.5 years.

The fair value of the stock option awards for the period ended March 31, 2022, and March 31, 2021 were estimated using the Black-Scholes option pricing model with the following assumptions:


	Three Months ended March 31,
	2022	2021
Expected volatility	65.20% - 67.60%	68.50%- 75.60%
Expected term (in years)	5.48-6.06	0.50- 1.75
Risk-free interest rate	1.65%-1.70%	0.05%- 0.16%
Dividend yield	—	—
Fair value of Class A common stock	$3.29-$3.45	$4.57- $12.51

The Company estimated a volatility factor for the Company’s options based on analysis of historical share prices of a peer group of public companies. The Company did not rely on the volatility of the Company’s Class A common stock because its limited trading history. The Company estimated the expected term of options granted using the “simplified method,” which is the mid-point between the vesting date and the ending date of the contractual term. The Company did not rely on the historical holding periods of the Company’s options due to the limited availability of exercise data. The Company used a risk-free interest rate based on the U.S. Treasury yield curve in effect for bonds with maturities consistent with the expected term of the option.

The Company issued time-based RSUs to employees under the 2021 Plan. The RSUs automatically convert to shares of Class A common stock on a one-for-one basis as the awards vest. The Company measures the value of RSUs at fair value based on the closing price of the underlying Class A common stock on the grant date. The RSUs granted generally vest over a four year vesting period from the grant date, however, the Company also granted certain RSUs during the three

months ended December 31, 2021, which were vesting beginning 12 months from the grant date and vesting immediately on the grant date. The following table summarizes the activity related to the Company's time-based RSUs:


	Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value Per Unit
Balance at December 31, 2021	12,589,558	$7.64
Restricted Stock Units granted	762,190	$3.48
Restricted Stock Units vested	(398,369)	$7.63
Restricted Stock Units forfeited	(830,620)	$7.62

Balance at March 31, 2022	12,122,759	$7.38

As of March 31, 2022, unrecognized stock-based compensation cost related to the unvested portion of the Company’s RSUs was $60.2 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.6 years.

The grant date fair value determined for Triggering Event I, II and III was $1.82, $1.39 and $0.94 per unit, respectively. Any re-allocated RSUs due to the Sema4 Legacy option holders’ forfeiture activities during the three months ended March 31, 2022 were accounted for as new grants and the fair value determined for Triggering Event I, II and III was $0.29, $0.21 and $0.12 per unit, respectively. Based on the grant date fair value, the Company expects to record total expense related to the earn-out RSU awards of $2.7 million without considering the impact of the Sema4 Legacy option holders’ forfeiture activities. The Company expects to recognize the stock-compensation cost over the longer of the derived service period or service period.

The Company historically granted SAR to one employee and one consultant with exercise condition of a liquidation event. As a result of the Business Combination, settlement of the outstanding vested SARs in exchange for a cash payment and to cancel the outstanding unvested SARs was agreed upon and an expense of $3.8 million related to the vested SAR was recognized by the Company. There were no outstanding SARs as of March 31, 2022.

During the three months ended March 31, 2022, the Company recorded a reversal of stock-based compensation of $5.2 million due to forfeiture activities upon employee terminations. Stock-based compensation expense for all awards granted and outstanding is included within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three months ended March 31,
	2022		2021
Cost of services	$	1,381	$	18,475
Research and development	4,341		38,187
Selling and marketing	2,825		18,688
General and administrative	9,012		89,612
Total stock-based compensation expense	$	17,559	$	164,962