STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2023

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 7— STOCK-BASED COMPENSATION

At the Company’s special meeting of stockholders held on October 22, 2020, the stockholders approved the 2020 Equity Incentive Plan (as amended, the “2020 Plan”). The aggregate number of additional shares authorized for issuance under the 2020 Plan was increased from 866,667 to 1.3 million at the 2022 annual meeting on March 21, 2022, and by an additional 533,333 shares at the annual meeting on May 22, 2023. The 2020 Plan provides for the grant of incentive stock options (“ISOs”) or non-qualified stock options (“NQSOs”), collectively “stock options”, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, and performance stock units (“PSUs”), and performance shares intended to attract, retain, incentivize, and reward employees, directors or consultants.

Legacy LMC’s 2019 Stock Option Plan (the “2019 Plan”) provided for the grant of stock options to purchase Legacy LMC common stock to officers, employees, directors, and consultants of Legacy LMC. Each Legacy LMC option from the 2019 Plan that was outstanding immediately prior to the Business Combination, whether vested or unvested, was converted into an option under the 2020 Plan to purchase a number of shares of Class A common stock (each such option, an “Exchanged Option”) equal to the product (rounded down to the

nearest whole number) of (i) the number of shares of Legacy LMC common stock subject to such Legacy LMC option immediately prior to the Business Combination and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Legacy LMC option immediately prior to the consummation of the Business Combination, divided by (B) the Exchange Ratio. Except as specifically provided in the Business Combination Agreement, following the Business Combination, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy LMC option immediately prior to the consummation of the Business Combination. All stock option activity was retroactively restated to reflect the exchanged options.

Total stock-based compensation expense for the years ended December 31, 2023, 2022, and 2021, was $7.4 million, $18.8 million, and $18.7 million, respectively. The Company did not grant any awards under its stock plan during 2023. In early 2022, the Company notified employees it would modify awards to accelerate the vesting in conjunction with obtaining full certification and homologation, that enabled us to begin selling the Endurance to customers, so long as it took place prior to December 31, 2022. As a result of the Company achieving the milestone in November 2022, we modified approximately 30 awards covering approximately 93,000 shares of Class A common stock, that resulted in an additional charge of $4.8 million. Our named executive officers did not receive any modifications of their awards. As of December 31, 2023, 2022, and 2021, unrecognized compensation expense was $10.3 million, $33.9 million, and $63.7 million, respectively.

The Severance Agreements the Company has entered into and is expected to enter into with its named executive officers provide that, subject to the confirmation and effectiveness of the Proposed Plan (a) any unvested RSUs and options held by the named executive officers as of the Effective Date of the Proposed Plan will vest in full, (b) PSUs held as of such date by Ms. Leonard and Mr. Kroll will vest in full, while those held by Messrs. Ninivaggi and Hightower will terminate, and (c) vested options will remain exercisable for three months following the named executive officer’s termination dates.

Options

The options are time-based and vest over the defined period in each individual grant agreement. The date at which the options are exercisable is defined in each agreement. The Board establishes the exercise price of the shares subject to an option at the time of the grant, provided, however, that (i) the exercise price of an option shall not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. Options generally become exercisable between one and four years after the date of grant and expire seven to ten years from the date of the grant.

The Company recognizes compensation expense for the shares equal to the fair value of the option at the time of grant. There were no option grants during 2023. The expense is recognized on a straight-line basis over the vesting period of the awards. The weighted-average grant date fair value of stock options granted to employees in 2022, and 2021 was, $18.30 per share, and $86.40 per share, respectively. The estimated fair value of each stock option grant was computed using the following weighted average assumptions:

	December 31,		December 31,		December 31,
	2023		2022		2021
Risk-free interest rate	—	%	2.85	%	0.39	%
Expected term (life) of options (in years)	—		3.11		3.86
Expected dividends	—	%	—	%	—	%
Expected volatility	—	%	77	%	50	%

The risk-free rate of return was based on market yields in effect on the date of each grant for United States Treasury debt securities with a maturity equal to the expected term of the award. The expected dividends are zero as the Company has not historically paid dividends. The expected life of options granted in 2022 was estimated based on historical option exercise data as compared to previous years when the expected term of

the awards granted was assumed to be the contract life of the option. The expected volatility for 2022 and 2021 were estimated by management given Lordstown’s stock volatility.

The activities of stock options are summarized as follows:

(in thousands except for per option values and years)

		Weighted Average					Aggregate
	Number of	Exercise		Weighted Average			Intrinsic Value
	Options	Price		Term (Years)			($000's)
Outstanding, December 31, 2020	358	$	26.85		9.0	$	—
Granted	370		220.80
Exercised	(237)		26.85
Forfeited	(41)		338.85
Outstanding, December 31, 2021	450	$	158.40		5.18	$	—
Granted	159		39.75
Exercised	(73)		26.85
Forfeited	(44)		234.15
Expired	(97)		247.05
Outstanding, December 31, 2022	395	$	106.80		7.44	$	—
Granted	—		—
Exercised	—		—
Forfeited	(95)		109.81
Expired	(39)		190.92
Outstanding, December 31, 2023	261	$	93.04		5.62	$	—
Exercisable, December 31, 2023	167	$	83.84		4.81	$	—

*The aggregate intrinsic value is calculated as the difference between the market value of our Class A common stock as of December 31, 2023, and the respective exercise prices of the options. The market value as of December 31, 2023, was $1.20 per share, which is the closing sale price of our Class A common stock on December 31, 2023, as reported by the OTC Market.

Further details of our exercisable stock options and stock options outstanding are summarized as follows:

(in thousands except for per exercise prices and years)

				Options Outstanding		Options Exercisable
				Weighted Average	Weighted Average		Weighted Average
Range of			Options	Remaining	Exercise	Options	Exercise
Exercise Prices			Outstanding	Contractual Term	Price	Exercisable	Price
$24.60	—	$26.55	6,444	2.89	$25.29	4,222	$25.66
$26.85	—	$26.85	32,860	3.69	$26.85	32,860	$26.85
$33.75	—	$35.85	23,843	3.46	$35.30	23,644	$35.29
$51.75	—	$51.75	44,387	4.30	$51.75	22,057	$51.75
$61.65	—	$81.75	18,949	7.08	$76.52	13,203	$76.40
$82.65	—	$82.65	46,666	7.65	$82.65	31,112	$82.65
$85.35	—	$85.35	36,846	7.86	$85.35	24,562	$85.35
$87.75	—	$154.65	3,504	1.23	$129.58	3,304	$128.06
$171.15	—	$171.15	33,333	7.45	$171.15	0	$0.00
$243.30	—	$401.55	13,586	1.18	$400.05	12,421	$399.91
$24.60		$401.55	260,418	5.62	$93.04	167,385	$83.84

RSUs

We calculate the grant date fair value of RSUs using the closing sale price of our Class A common stock on the grant date, as reported by the Nasdaq Global Select Market. The fair value of the unvested RSUs is recognized on a straight-line basis over the respective requisite service period.

The activities of RSUs are summarized as follows:

(in thousands except for fair values)

			Weighted Average
			Grant Date		Aggregate
	Shares		Fair Value		Intrinsic Value
Outstanding, December 31, 2021		417	$	139.50	$	313,665
Awarded		304		31.80
Released		(262)		143.25
Forfeited		(112)		137.85
Outstanding, December 31, 2022		347	$	43.05	$	—
Awarded		10		3.80
Released		(33)		44.23
Forfeited		(131)		29.63
Outstanding, December 31, 2023		193	$	50.09	$	231,308

*The aggregate intrinsic value is calculated using the market value of our Class A common stock as of December 31, 2023. The market value as of December 31, 2023, was $1.20 per share, which was the closing sale price of our Class A common stock on December 31, 2023, as reported by the Nasdaq Global Select Market.