12.    Stock-based Compensation

At our Business Combination on December 21, 2020, the Legacy Canoo 2018 Equity Plan was converted to the Company’s 2018 Equity Plan with the Legacy Canoo ordinary shares authorized for issuance pursuant to previously issued awards converted at the Exchange Ratio of 1.239434862 to the Company’s Common Stock and the exercise price per share option and purchase price per restricted shares decreased proportionately by the same conversion ratio. See additional discussion on the retroactive application of recapitalization in Note 2 of the notes to the accompany financial statements.

In 2019, the Company increased the number of shares of the Company’s Common Stock reserved for issuance under the 2018 Equity Plan from 7,064,779 shares to 15,281,513 shares. In 2020, the 2018 Equity Plan was amended to increase the number of shares reserved for issuance to a new total of 18,162,573 shares reserved for issuance.

On December 21, 2020, the stockholders of the Company approved the 2020 Equity Incentive Plan (the”2020 Equity Plan”) in a special meeting, authorizing 26,898,554 common shares to be reserved for issuance of stock options, restricted stock units awards and other stock awards. As of December 31, 2020, no stock options, restricted stock unit awards and other stock awards were granted under the 2020 Equity Plan.

Stock Options

All employees are eligible to be granted options to purchase shares of our Common Stock under the Company’s equity plans. All options granted will expire ten years from their date of issuance. Stock options granted generally vest 25% on the one-year anniversary of the date when vesting starts with the remaining balance vesting equally on a monthly basis over the subsequent 3 years. New shares are issued from authorized shares of Common Stock upon the exercise of stock options. There were no performance-based stock options granted during the years ended December 31, 2020 and 2019.

All our stock options were issued under the Legacy Canoo 2018 Equity Plan. The fair values of stock options granted under the Legacy Canoo 2018 Equity Plan were estimated at the date of grant using the Black-Scholes option pricing model and the following weighted average valuation assumptions:

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The following table summarizes the activity of the Company’s stock options for the year ended December 31, 2020 (in thousands, except weighted-average exercise price and weighted-average remaining contractual life):

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Under the Legacy Canoo 2018 Equity Plan, employees may exercise stock options prior to vesting. The Company has the right to repurchase any unvested (but issued) shares upon termination of service of an employee at the original exercise price. The consideration received for the early exercise of an option is considered to be a deposit and the related amount is recorded as a liability. The liability is reclassified into additional paid-in capital as the award vests. The liability related to unvested stock options early exercised was $0.2 million and $0.1 million as of December 31, 2020 and 2019, respectively. The shares issued upon early exercise of stock options are considered issued and outstanding shares of our Common Stock.

Of the stock options exercised during the twelve months ended December 31, 2020, 421,097 shares were unvested. As of December 31, 2020, of the total 235,753,437 shares of Common Stock issued and outstanding, 5,279,906 shares issued upon early exercise of stock options were unvested.

As of December 31, 2020, of the total 324,298 stock options outstanding, 203,177 shares were unvested. The Company expects substantially all of these share options to vest over the subsequent 3 years.

The intrinsic value of stock options exercised during the year ended December 31, 2020 and 2019 was $0.1 million and $3.3 million, respectively. This intrinsic value represents the difference between the fair market value of the Company’s shares of Common Stock on the date of exercise and the exercise price of each option

The total grant date fair value of stock options granted during the years ended December 31, 2020 and 2019, was approximately $0.1 million and $3.5 million, respectively. The weighted average grant date fair value per share of stock options granted during the years ended December 31, 2020 and 2019 was $0.44 and $0.39, respectively.

Stock-based compensation expense related to stock options was approximately $0.9 million during the year ended December 31, 2020, of which $0.7 million is included in research and development expenses and $0.2 million is reflected within selling, general and administrative expenses in the consolidated statements of operations. Stock-based compensation expense related to stock options was approximately $0.3 million during the year ended December 31, 2019, of which $0.1 million is included in research and development expenses and $0.2 million is included in selling, general and administrative expenses in the consolidated statements of operations.

Total unrecognized compensation cost related to unvested stock options at December 31, 2020 and 2019 is approximately $2.0 million and $3.2 million, respectively. As of December 31, 2020 and 2019, the weighted average period over which the unrecognized compensation cost is expected to be recognized was approximately 1.7 and 2.8 years, respectively.

Restricted Stock Awards

The Company’s restricted stock awards (“RSAs”) consists of the following:

Restricted Shares

From November 4, 2018 to May 6, 2019, the Legacy Canoo sold restricted shares totaling 30,188,011 shares (as converted to Common Stock) to the founders, which include certain investors, for a converted purchase price of $0.008 per share (the “Founder Restricted Shares”), with the following vesting conditions: 12.5% vest when the Legacy Canoo achieves $100 million in cumulative funding from inception (which condition was satisfied December 18, 2018, accordingly this portion of the 2019 awards was vested upon issuance); 37.5% vest ratably over a period of thirty-six months from December 18, 2018; and 50% vest on the date the Company starts commercial production of its first vehicle (“SOP”), which the Company determined was not probable of being met as of December 31, 2020.

On December 18, 2020, Legacy Canoo approved an amendment to change the SOP vesting goal of all eligible Founder Restricted Shares held by internal executives to time-based vesting with a merger trigger, which was satisfied on December 21, 2020. The investor-held Founder Restricted Shares’ SOP vesting goal was not amended. The amended time-based vesting of the SOP portion has a cliff vesting of 25% on March 18, 2020 with the remaining shares vesting over 36 months thereafter. The amendment was accounted for as a grant modification with a new fair value estimated on the amendment date replacing the original grant date fair value, resulting in an incremental fair value of $105.3 million, $77.7 million of which was recognized in December of 2020 representing the recognition of a cumulative stock compensation expenses of such amended SOP shares from March 2020 through December 2020.

The Company has an irrevocable, exclusive option to repurchase all or any portion of the unvested Founder Restricted Shares at the converted original per share purchase price for the shares upon termination or the cessation of services provided by the stockholder.

Restricted Stock Units

In August 2020, the Legacy Canoo approved 8,027,473 RSUs to certain employees and consultants of the Company, of which 4,285,026 RSUs were determined to have an established grant date in accordance with ASC 718, Stock Compensation. Each RSU represents a contingent right to receive one share of the Company’s Common Stock. None of the RSUs were eligible to vest before the successful consummation of the Business Combination. Accordingly, no stock compensation expense was recognized prior to the Business Combination on December 21, 2020. The company recognized a cumulative stock compensation expense of $3.5 million related to the RSUs in December 2020. As of December 31, 2020, the grant date fair value of the unvested RSUs was approximately $11.7 million.

The fair value of our RSUs is based on the fair value of the Legacy Canoo’s ordinary shares on the date of grant. As there is no public market for the Legacy Canoo’s ordinary shares, the Legacy Canoo’s board of directors, with the assistance of a third-party valuation specialist, determined the fair value of the Legacy Canoo’s ordinary shares at the time of the grant of RSUs by considering information available at the time of grant. The valuations were consistent with the guidance and methods outlined in the AICPA Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

On November 25, 2020, the Legacy Canoo withdrew authorization for an aggregate of 2,503,011 RSUs previously approved but not yet granted to certain employees of the Legacy Canoo. Out of the remaining 1,239,435 RSUs previously approved but not yet granted to a certain consultant, Legacy Canoo cancelled 240,441 RSUs and accelerated the vesting of 998,994 RSUs with a merger trigger and an employment condition. The fair value of the 998,994 RSUs was estimated at $18.0 million at the grant date of December 15, 2020. Stock compensation expense of $18.0 million was not recognized until January 2021 when the consultant became an employee of the Company.

On November 25, 2020, Legacy Canoo authorized for issuance 1,003,828 RSUs and 1,003,828 performance stock units (“PSUs”) to Mr. Aquila in exchange for his advisory services rendered to the Company and in contemplation of his appointment to the role of Executive Chairman of the Company. Each RSU represents a contingent right to receive one

share of the Company’s Common Stock, and are subject to ongoing service-based vesting conditions over a three-year term. Each PSU represents a contingent right to receive one share of the Company’s Common Stock and would vest upon the achievement of certain stock price performance of the Company. The fair value of the 1,003,828 RSUs and 1,003,828 PSUs was estimated at $19.4 million and $15.6 million, respectively. The Company recognized $1.0 million of stock-based compensation expense in December 2020 related to these RSUs and PSU’s.

The activity for our restricted stock awards in the year ended December 31, 2020 was as follows (in thousands, except weighted-average grant-date fair value amounts):

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The weighted average fair value per RSA issued during the years ended December 31, 2020 and 2019 was $10.67 and $0.20, respectively. The total fair value of RSAs issued during the years ended December 31, 2020 and 2019, were $92.4 million and $1.8 million, respectively.

For the year ended December 31, 2020, the Company recognized stock compensation expense of $83.4 million for restricted stock awards vested, of which $58.7 million was included in research and development expenses and $24.7 million was included in selling, general and administrative expenses in the consolidated statement of operations. For the year ended December 31, 2019, the Company recognized stock compensation expenses of $1.5 million for restricted shares vested, of which $0.6 million was included in research and development expenses and $0.9 million was included in selling, general and administrative expenses in the consolidated statements of operations. Unrecognized compensation cost related to the RSAs as of December 31, 2020 was approximately $116.9 million, of which $92.3 million was expected to be recognized in 2021, $20.5 million was expected to be recognized in 2022, $3.7 million was expected to be recognized in 2023, and the remaining $0.4 million was expected to be recognized in 2024.