
	Year Ended December 31,
	2021		2020		2019
(in thousands)
Equity-classified awards	$	35,755	$	4,956	$	1,625
Liability-classified awards	6,447		5,161		305
Total stock-based compensation	$	42,202	$	10,117	$	1,930

The following table sets forth the total stock-based compensation cost included in the Company’s consolidated statements of operations and comprehensive income or capitalized to assets for the periods indicated:


	Year Ended December 31,
	2021		2020		2019
(in thousands)
Cost of revenue
Connected machines	$	34	$	7	$	2
Subscriptions	219		31		11
Accessories and materials	—		—		—
Total cost of revenue	253		38		13
Research and development	15,782		3,332		881
Sales and marketing	13,814		4,794		623
General and administrative	8,225		1,320		328
Total stock-based compensation expense	$	38,074	$	9,484	$	1,845
Capitalized for software development costs	$	1,607	$	253	$	85
Capitalized to inventory	$	2,521	$	380	$	—
Total stock-based compensation	$	42,202	$	10,117	$	1,930

As of December 31, 2021, there was $125.8 million of unrecognized stock-based compensation cost related to stock-based awards which is expected to be recognized over a weighted-average period of 3.2 years.

In connection with the Corporate Reorganization, all outstanding awards issued under the Incentive Unit Plan discussed below were modified by exchanging the outstanding awards of Cricut Holdings for awards of the Company. All service based vesting conditions were unaffected by the modification. As described below, the vesting conditions were modified for certain awards which previously had both service and market based vesting conditions.

All vested equity classified awards were settled in shares of the Company’s Class B common stock previously held by Cricut Holdings. Unvested equity classified awards were converted to unvested shares of the Company’s Class B common stock subject to future vesting, or in the case of options were converted into options to purchase the Company’s Class B common stock. All vested liability classified awards converted into either shares of Class B common stock to the extent permitted in each applicable jurisdiction or settled in cash. All unvested liability classified awards converted into restricted stock units (“RSUs”) under the 2021 Equity Incentive Plan that will vest into shares of Class A common stock of Cricut, Inc. to the extent permitted in each applicable jurisdiction or into restricted stock unit equivalents which will be settled in cash upon vesting as described below.

In connection with the Corporate Reorganization and modification, the Company granted options under the 2021 Equity Incentive Plan to certain employees. The number of options was calculated based on the number of outstanding incentive units or incentive unit equivalents prior to the modification and the participation threshold of such awards. The vesting terms of the options are also based on the vesting terms of the original award. Therefore, the Company considered the exchange of the original award for the unvested shares or RSUs plus the options to be a single modification and will recognize the incremental compensation cost of $14.5 million over the vesting term. Of this amount, the Company recognized $5.8 million during the year ended December 31, 2021 including a cumulative adjustment in March 2021 to recognize the incremental compensation cost associated with historical vesting.

As part of the modification of outstanding awards in connection with the Corporate Reorganization, awards issued under the Incentive Unit Plan which included both service and market conditions were modified to remove the market vesting condition and to increase the participation threshold of the award to the price specified in the former market condition. In total, 3.0 million, 3.0 million, 1.0 million and 1.0 million awards which previously had a participation threshold of $2.00, $2.00, $5.00 and $5.00 per share, respectively, were modified to have a participation threshold of $3.00, $4.00, $6.00 and $7.00 per share, respectively. Incremental compensation cost associated with these awards is included in the total incremental compensation cost associated with the issuance of additional options to employees described above as this change was part of a single modification.

In March 2021, the Company’s 2021 Equity Incentive Plan became effective. The 2021 Equity Incentive Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants. As of December 31, 2021, 20,800,000 shares of Class A common stock were reserved for issuance under this plan including shares reserved for previously granted awards discussed below as well as shares reserved for issuance of future awards under the plan.


	Number of RSUs	Weighted- Average Grant Date Fair Value (per share)
Outstanding at December 31, 2020	—	$	—
Granted	5,021,833	$	23.69
Vested	(224,752)	$	20.00
Forfeited/cancelled	(123,250)	$	24.68
Outstanding at December 31, 2021	4,673,831	$	23.84

Options under the 2021 Equity Incentive Plan have a contractual term of 10 years. The exercise price of an incentive stock option and non-qualified stock option shall not be less than 100% of the fair market value of the shares on the date of grant.


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Term (Years)	Aggregate Intrinsic Value
					(in thousands)
Outstanding at December 31, 2020	—	$	—
Granted	3,419,359	20.00
Exercised	(13,592)	20.00
Forfeited/cancelled	(145,410)	20.00
Outstanding at December 31, 2021	3,260,357	$	20.00	5.8	$	6,814
Vested and exercisable at December 31, 2021	1,379,702	$	20.00	5.1	$	2,884

For the year ended December 31, 2021, the total intrinsic value of options exercised was $0.1 million. The weighted-average grant date fair value of options granted under the 2021 Equity Incentive Plan during the year ended December 31, 2021 was $8.79 per share based on the following weighted-average assumptions:

In connection with the Corporate Reorganization, certain employees received restricted stock unit equivalents (“RSU equivalents”). Upon vesting, these awards are settled for a cash payment equal to the intrinsic value of the award on the date of the Corporate Reorganization plus the difference between the Company’s stock price on the vesting date less the base price specified at the time of the grant. Due to the cash settlement feature, these awards are liability classified awards and require initial and subsequent measurement at fair value. As of December 31, 2021, the total recognized liability for these awards was $0.9 million which was included in accrued expenses and other current liabilities per the Company’s consolidated balance sheets. A summary of the RSU equivalent activity under the 2021 Equity Incentive Plan is as follows:


	Number of RSU Equivalents	Weighted- Average Base Price		Aggregate Intrinsic Value
				(in thousands)
Outstanding at December 31, 2020	—
Granted	94,304	20.00
Vested	(13,227)	$	20.00	$	436
Outstanding at December 31, 2021	81,077	$	20.00	$	1,231

The weighted-average fair value of RSU equivalents granted under the 2021 Equity Incentive Plan during the year ended December 31, 2021 was $7.57 per share based on the following weighted-average assumptions:

The Company’s unvested Class B common stock resulted from the Corporate Reorganization and is not part of the 2021 Equity Incentive Plan. Activity related to Class B common stock subject to future vesting for the year ended December 31, 2021 is as follows:


	Number of Unvested Shares	Weighted- Average Grant Date Fair Value (per share)
Outstanding at December 31, 2020	—
Granted	14,037,505	$	20.00
Vested	(2,643,782)	$	20.00
Forfeited / Cancelled	(538,864)	$	20.00
Outstanding at December 31, 2021	10,854,859	$	20.00

The Company’s options to purchase Class B common stock resulted from the Corporate Reorganization and are not part of the 2021 Equity Incentive Plan. A summary of the Company stock option activity for the options to purchase shares of Class B common stock is as follows:


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Term (Years)	Aggregate Intrinsic Value
					(in thousands)
Outstanding at December 31, 2020	—
Granted	522,000	$	9.04
Forfeited / Cancelled	(88,000)	$	9.04
Outstanding at December 31, 2021	434,000	$	9.04	3.9	$	5,664
Vested at December 31, 2021	—	$	—	N/A	$	—

In March 2021, the Company’s 2021 Employee Stock Purchase Plan (“2021 ESPP”) became effective. Subject to any limitations contained therein, the 2021 ESPP allows eligible employees to contribute, through payroll deductions, up to 15% of their eligible compensation to purchase the Company’s Class A common stock at a discounted price per share. As of December 31, 2021, 4,000,000 shares of our Class A common stock were available for sale under the 2021 ESPP.

No offerings have been authorized to date by the administrator under the 2021 ESPP. If the administrator authorizes an offering period under the 2021 ESPP, the administrator will establish the duration of offering periods and purchase periods, including the starting and ending dates of offering periods and purchase periods, provided that no offering period may have a duration exceeding 27 months.

The Company’s former parent, Cricut Holdings, authorized an Incentive Unit Compensation Plan (the “IU Plan”) that allowed for issuances of common incentive units (“CIUs”). The participation threshold of the awards granted under the IU Plan was typically equal to the fair market value of Cricut Holdings’ membership units at the date of the grant, except zero strike price incentive unit awards which have no participation threshold. Except as noted below, all awards issued under the IU Plan only had service-based conditions. Per unit amounts in the activity below are based on the value of Cricut Holdings’ units.

The Company’s former parent, Cricut Holdings, granted CIUs to employees of the Company. These awards vested 25% annually over four years of service. The Company’s former parent also granted a performance-based incentive unit, which is discussed later. These awards are collectively referred to as equity classified incentive units. Once vested, all equity classified incentive units remained outstanding until the liquidation of Cricut Holdings or until repurchased by Cricut Holdings. Upon the liquidation of Cricut Holdings all outstanding awards were settled or modified as described above.


	Equity Incentive Units	Weighted- Average Participation Threshold		Aggregate Intrinsic Value
				(in thousands)
Outstanding at December 31, 2020	93,371,324	$	0.97	$	600,316
Granted	1,548,223	$	—
Exercised	—	$	—
Forfeited	(82,500)	$	1.29
Cancelled upon Corporate Reorganization	(94,837,047)	$	0.95
Outstanding at December 31, 2021	—	$	—	$	—
Vested at December 31, 2021	—	$	—	$	—


	Number of Awards	Weighted- Average Grant Date Fair Value Per Unit
Unvested at December 31, 2020	37,116,025	$	0.74
Granted	1,548,223	$	9.06
Vested	(7,123,673)	$	0.40
Forfeited	(82,500)	$	0.79
Cancelled upon Corporate Reorganization	(31,458,075)	$	1.23
Unvested at December 31, 2021	—	$	—

The weighted-average grant date fair value of equity classified incentive units granted during the years ended December 31, 2021, 2020 and 2019 was $9.06, $1.27 and $0.28, respectively. The total intrinsic value of equity classified incentive units exercised during the years ended December 31, 2021, 2020 and 2019 was nil, $2.8 million and $0.3 million, respectively. The total fair value of equity classified incentive units vested during the years ended December 31, 2021, 2020 and 2019 was $3.2 million, $3.1 million and $0.4 million, respectively.

The grant date fair value of CIUs granted during the year ended December 31, 2021 was equal to the estimated fair value of Cricut Holdings’ common unit on the date of the grant as all CIUs had no participation threshold. The fair value of CIUs granted during the years ended December 31, 2020 and 2019 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	Year Ended December 31,
	2020			2019

Fair value of common unit	$	2.77		$	0.80
Expected life (in years)	3.2			3.5
Expected volatility	50.0		%	42.9		%
Risk-free rate	0.6		%	2.3		%
Expected dividend yield	—		%	—		%

During the year ended December 31, 2020, the Company issued service and market-based incentive units to an employee under the Plan. The recipient was awarded three million incentive equity units comprised of three distinct tranches each containing one million units. The first tranche was subject to service conditions wherein vesting of the award is ratable over four years. The second and third tranches were subject to the same service vesting conditions as tranche one; however, they were also subject to a market vesting condition wherein the fair value of the Cricut Holdings common units was required to exceed a determined price threshold for two consecutive board meetings or for 100 out of 120 consecutive trading days if the Company became public traded. In the absence of a public trading market, the fair value of a common unit was derived through a valuation technique allowed under ASC 718. The determined price thresholds were $6.00 and $7.00 for the second and third tranches, respectively.

In the event of a change in control, all unvested units immediately vest subject to the recipient being employed through the date of the event and any applicable price thresholds being met at the time of the change in control. In the event the recipient was terminated for cause, all incentive units, whether unvested or vested are immediately forfeited.

The incentive units represented a net profits interest and only pay out upon the occurrence of a liquidation event such as a change in control transaction. In addition, the units did not participate until the sum of distributions and capital appreciation of the common units from the date of grant of the incentive units equaled $5.00 per unit.

On the date of grant, the Company determined the fair value of this award to be $2.3 million based upon a Monte Carlo Simulation. The significant assumptions used in the Monte Carlo Simulation were as follows:


Fair value of common unit	$	2.95
Participation Threshold	$	5.00
Expected volatility		51.12	%
Risk-free rate		0.24	%
Timing of liquidity event		2 - 6 years
Fair value thresholds	$	6.00 - 7.00
Likelihood of termination		10.0	%

As described above, in connection with the Corporate Reorganization, these incentive equity units were modified to remove the market vesting condition and to increase the participation threshold to the applicable fair value threshold. The modified awards were then converted into shares of the Company’s class B common stock subject to the same service vesting conditions.

The Company’s former parent, Cricut Holdings, granted employees of the Company options to purchase zero strike price incentive units. These options generally vested on a cliff basis upon completion of the service period specified for each award. All outstanding options of Cricut Holdings were exchanged for options to purchase class B common stock of Cricut Inc. in connection with the Corporate Reorganization. A summary of option activity for the year ended December 31, 2021 is as follows:


	Number of Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value
				(in thousands)
Outstanding at December 31, 2020	1,140,000	$	4.52	$	3,283
Granted	27,027	$	7.40
Exercised	(27,027)	$	7.40	$	52
Forfeited	(84,000)	$	4.52
Cancelled upon Corporate Reorganization	(1,056,000)	$	4.52
Outstanding at December 31, 2021	—	$	—	$	—
Vested at December 31, 2021	—	$	—	$	—


	Year Ended December 31,
	2021			2020

Fair value of common unit	$	8.99		$	6.24
Expected life (in years)	5.0			3.5
Expected volatility	50.9		%	52.5		%
Risk-free rate	0.6		%	0.3		%
Expected dividend yield	—		%	—		%

The Company’s former parent issued incentive unit equivalents (phantom units) to various employees under the Incentive Unit Plan. The incentive unit equivalents paid out upon the occurrence of a liquidation event such as a change in control transaction. In addition, the units did not participate until the sum of distributions and capital appreciation of the common units from the date of grant of the incentive units equaled a specified participation threshold per unit. The incentive unit equivalents did not represent any kind of legal equity interest in the Company or

the former parent Company and required cash settlement. Accordingly, the incentive unit equivalent awards were accounted for as liability classified awards and required initial and subsequent measurement at fair value.

Initially, during the year ended December 31, 2020, these awards generally vested 12.5% annually for each of the first four years of service and 50% after the fifth year of service. Following the amendment of these awards in January 2020, these awards vested 25% annually over four years of service. All liability classified incentive units had indefinite contract terms and, once vested, remained outstanding until liquidation of Cricut Holdings or until repurchased by Cricut Holdings. Upon the liquidation of Cricut Holdings all outstanding awards were settled or modified as described above.


	Liability Incentive Equivalents	Weighted- Average Participation Threshold		Aggregate Intrinsic Value
				(in thousands)
Outstanding at December 31, 2020	2,851,516	$	2.13	$	15,017
Granted	320,000
Forfeited	(4,000)
Cancelled upon Corporate Reorganization	(3,167,516)	$	1.92
Outstanding at December 31, 2021	—	$	—	$	—
Exercisable at December 31, 2021	—	$	—	$	—
Vested and expected to vest at December 31, 2021	—	$	—	$	—


	Number of Awards	Weighted- Average Grant Date Fair Value Per Unit
Unvested at December 31, 2020	2,851,516	$	1.74
Granted	320,000	$	8.19
Forfeited	(4,000)	$	6.58
Cancelled upon Corporate Reorganization	(3,167,516)	$	2.39
Unvested at December 31, 2021	—	$	—

The Company estimated the fair value of liability classified incentive units at each reporting period using the Monte Carlo Simulation. The significant assumptions used in the Monte Carlo Simulation for the periods indicated were as follows:


	Year Ended December 31,
	2020			2019

Fair value of common units	$	7.40		$	1.85
Expected life (in years)	0.3 - 5 years			3 - 5 years
Expected Volatility	51.1		%	40.2		%
Risk-free rate	0.2		%	1.6		%
Expected dividend yield	—		%	—		%
Likelihood of termination	10.0		%	10.0		%

For the year end December 31, 2021, the Company estimated the fair value of liability classified incentive unit equivalents upon the modification or settlement as part of the Corporate Reorganization based on the estimated fair value of the awards received to settle the liability. The cumulative adjustment upon settlement or modification is included in stock-based compensation related to liability awards above.

Liability classified incentive unit equivalents were included in accrued expenses and other current liabilities per the Company’s consolidated balance sheets and the rollforward of this liability is as follows (in thousands):


(in thousands)
Balance at December 31, 2018	$	25
Stock-based compensation during year	305
Purchased unit equivalents during year	30
Balance at December 31, 2019	$	360
Stock-based compensation during year	5,161
Purchased unit equivalents during year	181
Balance at December 31, 2020	$	5,702
Stock-based compensation during period	6,041
Settlement or modification of awards	(11,743)
Balance at December 31, 2021	$	—