Share-Based Compensation

6 Months Ended

Jun. 30, 2024

Share-Based Compensation

Share-Based Compensation

(11) Share-Based Compensation

2013 Equity Incentive Plan

In 2013, the Company adopted the 2013 Equity Incentive Plan ( the “2013 Plan”) which provided for the grant of qualified incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), restricted stock, restricted stock units (“RSUs”) or other awards to the Company’s employees, officers, directors, advisors, and outside consultants. After the Business Combination became effective on March 2, 2022, no additional awards were issued under the 2013 Plan. Awards outstanding under the 2013 Plan will continue to be governed by such plan; however, the Company will not grant any further awards under the 2013 Plan.

2022 Equity Incentive Plan

In connection with the Business Combination (Note 2), the shareholders approved the Rigetti Computing, Inc. 2022 Equity Incentive Plan (the “2022 Plan”) which provides for the grant of ISOs, NSOs, stock appreciation rights, restricted stock awards, RSUs, performance awards and other forms of awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. As of June 30, 2024, there were 26,393,563 shares of common stock reserved for issuance under the 2022 Plan, of which 11,193,260 shares remain available for future issuance. The number of shares reserved for issuance under the 2022 Plan will automatically increase on January 1st of each year for a period of nine years commencing on January 1, 2023 and ending on (and including) January 1, 2032, in an amount equal to 5% of the total number of shares of common stock of all classes outstanding on a fully diluted basis on December 31 of the preceding year; provided, however, that the board of directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of Common Stock. Accordingly, as of January 1, 2024, the number of shares of common stock reserved for issuance under the “2022 Plan” increased by 9,119,816 shares.

Stock Option Activity

The following is a summary of stock option activity during the six months ended June 30, 2024:

		Weighted		Weighted-
		Average		Average	Aggregate
		Exercise		Contractual	Intrinsic
	Options Outstanding	Price Per Share		Life (in years)	Value
Outstanding, December 31, 2023	7,049,290	$	$ 0.82	8.23	$	2,017
Granted	1,605,070		1.51
Exercised	(249,531)		0.27		$	311
Forfeited and expired	(22,015)		0.27
Outstanding and expected to vest, June 30, 2024	8,382,814		0.97	8.22		2,238
Exercisable, June 30, 2024	3,377,648	$	0.57	6.75	$	1,895

The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2024 and 2023 was $1.51 and $0.55 per share, respectively. The intrinsic value of an option is the amount by which the market price of the underlying common stock exceeds the option’s exercise price. The intrinsic value of stock options exercised during the six months ended June 30, 2024 and 2023 was $0.3 million and $1.4 million, respectively.

The Company received proceeds from stock option exercises of $0.1 million and $0.9 million during the six months ended June 30, 2024 and 2023, respectively.

Stock-based compensation expense related to stock options granted to employees was $0.5 million and $0.9 million for the three and six months ended June 30, 2024, respectively. Stock-based compensation expense related to stock options granted to employees was $0.4 million and $0.8 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, the unrecognized compensation expense related to unvested stock options was $4.8 million, which is expected to be recognized over a weighted-average period of 2.71 years.

Fair Value of Stock Option Grants

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the table below. Expected volatility for the Company’s Common Stock was determined based on a blended average of the historical volatility of the Company’s Common Stock, a peer group of similar public companies and the implied volatility from the Company’s traded warrants. The Company has not been public for a sufficient length of time to derive expected volatility solely from trading in its common stock. The expected term of stock options granted was calculated using the simplified method, which represents the average of the contractual term and the weighted-average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term.

The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free rate is based upon the U.S. Treasury yield curve in effect at the time of grant for the period equivalent to the expected term of the stock option. In determining the exercise prices for stock options granted, the Company’s board of directors has utilized the fair value of the Common Stock as of the grant date.

Before the Business Combination, the fair value of the Common Stock had been determined by the board of directors at each award grant date based upon a variety of factors, including the results obtained from an independent third-party valuation, the Company’s financial position and historical financial performance, the status of technological developments within the Company, the composition and ability of the current engineering and management team, an evaluation or benchmark of the Company’s competition, the current business climate in the marketplace, the illiquid nature of the Company’s common stock, arm’s-length sales of the Company’s capital stock, the effect of the rights and preferences of the preferred shareholders, and the prospects of a liquidity event, among others. All of the Company’s outstanding stock options have a time-based vesting condition ranging from 1-5 years, except that 500,000 stock options granted in 2022 have a market-based vesting condition.

The range of valuation assumptions used as inputs to the Black-Scholes option-pricing model to value stock options granted during the six months ended June 30, 2024 were as follows:

	Time-based Stock Option
Valuation Assumptions	Grants
Strike price	$0.98 - $2.03
Annual volatility (%)	113% - 130%
Risk- free rate (%)	4.24% - 4.45%
Expected term (years)	5.50 - 6.02

RSUs

The following is a summary of RSU activity during the six months ended June 30, 2024:

		Weighted Average
		Grant Date Fair
	Shares	Value
Non-vested at December 31, 2023	11,517,422	$	2.20
Granted	1,567,515		1.46
Forfeited	(683,416)		1.71
Vested	(2,800,719)		2.50
Non-vested at June 30, 2024	9,600,802	$	$ 2.04

The aggregate fair value of outstanding RSUs based on the closing share price of the Company’s common stock at June 30, 2024, was $10.3 million. The total fair value of RSUs that vested during the six months ended June 30, 2024 and 2023, based on the closing price of the Company’s common stock on the vesting date, was $3.5 million and $1.4 million, respectively.

Fair Value of RSUs Awards

During the six months ended June 30, 2024, the Company issued 1,567,515 time-based RSUs. The time-based RSUs vest over periods ranging from 1-4 years and require continuous employment.

During the six months ended June 30, 2023, the Company issued 1,603,371 time-based RSUs and 3,850,000 market-based RSUs. The time-based RSUs vest over periods ranging from 1-4 years and require continuous employment. The market-based RSUs vest only if certain share price thresholds are achieved and require continuous employment. Based upon the terms of such awards, 50% of the shares vest if the Company’s Common Stock trades at or above $2.00 per share, and the other 50% of the shares vest if the Company’s Common Stock trades at or above $4.00 per share, for 20 out of 30 trading days through the fifth anniversary of the grant date.

The fair value of the Company’s time-based RSUs was calculated based on the fair market value of the Company’s common stock on the date of grant. The fair value of the Company’s market-based RSUs was calculated using a Monte Carlo simulation model at the date of grant. The weighted-average grant date fair value for RSUs granted in the six months ended June 30, 2024 and 2023 was $1.46 and $0.56 per RSU, respectively.

Stock-based compensation expense related to RSUs granted to employees was $2.8 million and $5.5 million for the three and six months ended June 30, 2024, respectively. Stock-based compensation expense related to RSUs granted to employees was $3.0 million and $4.3 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, the unrecognized compensation expense related to unvested RSUs was $15.3 million, which is expected to be recognized over a weighted-average period of 1.60 years.

Summarized Stock-Based Compensation Expenses

The table below summarizes total stock-based compensation expenses for the three and six months ended June 30, 2024 and 2023, respectively (in thousands):

:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Research and development	$	2,262	$	2,375	$	4,189	$	3,902
Selling, general and administrative expenses		1,025		980		2,089		1,156
Total stock-based compensation expenses	$	3,287	$	3,355	$	6,278	$	5,058