STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

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 issued to employees on the Company’s condensed statements of operations and comprehensive loss (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	529	$	878	$	1,868	$	878
Research and development	614		278		1,923		2,401
Sales and marketing	209		211		467		526
General and administrative	1,306		1,522		4,280		3,868
Total stock-based compensation	$	2,658	$	2,889	$	8,538	$	7,673

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. Stock awards under the plan may be issued as Incentive Stock Options (“ISO”), Non-statutory Stock Options (“NSO”), Stock Appreciation Rights, and Restricted Stock Awards (“RSU”). Only employees are eligible to receive ISO awards. Employees, directors, and consultants who provide 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) 1,017,333 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, 2024, the number of shares available for issuance under the 2021 Plan was increased by 580,000 shares in accordance with the plan and as approved by the Board. Under the 2021 Plan, the Company is authorized to issue 1,754,000 shares of common stock as of September 30, 2024.

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 1/4th at the end of the first year and then vest 1/16th each quarter over the remaining three years. Grants expire 10 years from the date of grant. All other grants vest quarterly over four years.

As of September 30, 2024, there were 314,846 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 nine months ended September 30, 2024 are as follows (in thousands, except for share, per share, and contractual term data):


	Options Outstanding						RSUs
	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic values ($'000s)		Number of plan shares outstanding	Weighted average grant date fair value per Share
Balances as of December 31, 2023	173,226	$	19.90	6.25	$	1,422	877,365	$	41.81
Options and RSUs granted	—	—					833,145	13.78
Options exercised and RSUs released	(16,119)	5.01					(252,284)	31.07
Options and RSUs forfeited	(4,155)	6.92					(250,822)	26.02
Balances as of September 30, 2024	152,952	$	21.82	5.19	$	120	1,207,404	$	27.97
Options vested and exercisable - December 31, 2023	118,347	$	16.53	5.62	$	1,198
Options vested and exercisable - September 30, 2024	129,288	$	19.81	4.62	$	120

No options were granted during the three and nine months ended September 30, 2024 and 2023.

As of September 30, 2024, there was approximately $22.0 million of unamortized stock-based compensation expense related to unvested stock options and RSUs, which is expected to be recognized over a weighted-average period of 2.66 years.

Employee Stock Purchase Plan

In May 2022, the Company commenced its first offering period under the ESS Tech, Inc. Employee Stock Purchase Plan (“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. Total ESPP expense for the three and nine months ended September 30, 2024 and 2023 was $47 thousand and $0.2 million and $89 thousand and $0.2 million, respectively.