The Company has a 2015 Equity Incentive Plan (the “2015 Plan”), which provided for the grant of share-based compensation to certain officers, directors, employees, consultants, and advisors. Upon the closing of the Business Combination, no further awards were made pursuant to the 2015 Plan and all outstanding Legacy IonQ stock options under the 2015 Plan were assumed by the Company. Such stock options granted under the 2015 Plan will continue to be governed by the terms of the 2015 Plan and the stock option agreements thereunder, until such outstanding options are exercised or until they terminate or expire by their terms. For awards granted under the 2015 Plan, vesting generally occurs over four to five years from the date of grant.

In August 2021, the Company’s board of directors adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which was subsequently approved by the Company’s stockholders in September 2021, and became effective upon the closing of the Business Combination. The 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards (“RSU”), performance awards and other forms of awards to employees, directors, and consultants. The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each year, beginning on January 1, 2022, and continuing through and including January 1, 2031, by 5% of the Fully Diluted Common Stock (as defined in the 2021 Plan) outstanding on December 31 of the preceding year, or a lesser number of shares determined by the Company’s board of directors prior to such increase. As of January 1, 2024, the number of shares reserved for issuance under the 2021 Plan increased by 14,215,808. For awards granted under the 2021 Plan, vesting terms range from one to four years from the date of grant. As of December 31, 2023, the Company had 14,075,832 shares available for grant under the 2021 Plan.

Under both equity incentive plans, all options granted have a contractual term of 10 years.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option.

Expected Volatility—As the Company was privately held until 2021 and there has been limited history of a public market for its common stock prior to closing the Business Combination, the expected volatility is based on the average historical stock price volatility of comparable publicly-traded companies in its industry peer group, financial, and market capitalization data.

Expected Term—The expected term of the Company’s options represents the period that the stock options are expected to be outstanding.

The Company has estimated the expected term of its employee stock option awards using the SAB Topic 14 Simplified Method allowed by the FASB and SEC, for calculating expected term as it has limited historical exercise data to provide a reasonable basis

upon which to otherwise estimate expected term. Certain of the Company’s stock options began vesting prior to the grant date, in which case the Company uses the remaining vesting term at the grant date in the expected term calculation.

Risk-Free Interest Rate—The Company estimates its risk-free interest rate by using the yield on actively traded non-inflation-indexed U.S. treasury securities with contract maturities equal to the expected term.

Dividend Yield—The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero.

Fair Value of Underlying Common Stock—For stock options granted under the 2015 Plan, because the Company’s common stock was not yet publicly traded on the date of grant, the Company estimated the fair value of common stock prior to closing the Business Combination. The board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered included, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of Legacy IonQ’s previously Convertible Redeemable Preferred Stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. For stock options granted under the 2021 Plan, the Company utilizes the closing stock price on the date of grant as the fair value of the common stock underlying such options.

The assumptions used to estimate the fair value of stock options granted are as follows:


	Year Ended December 31,
	2023			2022
Risk-free interest rate		4.09	%		2.60	%
Expected term (in years)		5.50			5.82
Expected volatility		80.63	%		75.82	%
Dividend yield		—	%		—	%

The stock option activity is summarized in the following table:


	Number of Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2022		24,716,270		$	2.19		7.32	$	49.69
Granted		104,020			13.53
Exercised		(1,800,450	)		1.25
Cancelled/ Forfeited		(1,355,463	)		3.23
Outstanding as of December 31, 2023		21,664,377		$	2.26		6.05	$	220.08
Exercisable as of December 31, 2023		14,987,758		$	1.44		5.41	$	164.45
Exercisable and expected to vest as of December 31, 2023		21,664,377		$	2.26		6.05	$	220.08

The following table summarizes additional information on stock option grants, vesting and exercises (in millions, except per share amounts):


	Year Ended December 31,
	2023		2022
Total intrinsic value of options exercised	$	18.6	$	6.7
Aggregate grant-date fair value of options vested	$	15.5	$	9.9
Weighted-average grant date fair value per share for options granted	$	9.38	$	5.58

As of December 31, 2023 and 2022, there were 403,764 and 905,128 shares, respectively, subject to repurchase related to stock options early exercised and unvested. As of December 31, 2023 and 2022, the Company recorded a liability related to these shares subject to repurchase in the amount of $0.8 million and $2.0 million, respectively, in its consolidated balance sheets.

The RSU activity is summarized in the following table:


	Number of RSUs			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)		Aggregate Fair Value (in millions)
Outstanding as of December 31, 2022		9,320,045		$	7.02		3.21	$	65.38
Granted		11,072,072			9.97
Vested		(4,466,894	)		7.89
Forfeited		(817,688	)		7.42
Outstanding as of December 31, 2023		15,107,535		$	8.90		2.98	$	134.42
Expected to vest after December 31, 2023		15,066,535		$	8.89		2.98	$	133.89

During the years ended December 31, 2023 and 2022, the Company released 566,389 and 81,134 RSUs, respectively, related to the settlement of an accrued bonus liability.

During the year ended December 31, 2023, the Company granted performance-based restricted stock unit awards (“PSU”) to certain officers and employees, which vest over approximately four years. The target number of PSUs granted was 4,641,564. The number of shares that can be earned will range from 0% to 300% of the target number of shares, based on the Company's achievement of certain financial and technical goals, as well as a stock price hurdle requirement for a portion of the awards. In the event that the stock price hurdle is not met at the time the PSUs vest, the maximum PSU opportunity shall be limited to target (100%) performance. The number of PSUs expected to vest and for which compensation cost has been recognized is based on the number of awards that the Company believes are probable of vesting as of December 31, 2023. No PSUs were granted during the year ended December 31, 2022.

For the portion of the PSUs subject to the stock price hurdle, the fair value was determined using a Monte Carlo simulation model. The Monte Carlo simulation model requires estimates of highly subjective assumptions, which affect the fair value of each PSU.

Contractual Term—The Company utilizes the remaining performance period on the date of grant as the contractual term, which represents the period that the PSUs are expected to be outstanding.

Dividend Yield—The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero.

Fair Value of Underlying Common Stock—The Company utilizes the closing stock price on the date of grant as the fair value of the common stock underlying such PSUs in the Monte Carlo simulation model.

The assumptions used to estimate the fair value of PSUs subject to the stock price hurdle are as follows:


	Year Ended December 31,
	2023			2022
Risk-free interest rate		4.59	%		—	%
Contractual term (in years)		3.37			—
Expected volatility		80.00	%		—	%
Dividend yield		—	%		—	%

The PSU activity is summarized in the following table, based on awards at target:


	Number of PSUs			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)		Aggregate Fair Value (in millions)
Outstanding as of December 31, 2022		—		$	—		—	$	—
Granted		4,641,564			15.74
Forfeited		(333,731	)		15.56
Outstanding as of December 31, 2023		4,307,833		$	15.75		3.17	$	67.86
Expected to vest after December 31, 2023(1)		6,461,750		$	15.06		3.17	$	97.34

(1)

Represents the number of PSUs expected to vest, which may exceed the target number of shares, based on the Company's probability assessment of expected performance during the performance period.

Total stock-based compensation expense for stock option awards, RSUs and PSUs, which are included in the consolidated financial statements, is as follows (in thousands):


	Year Ended December 31,
	2023		2022
Cost of revenue	$	2,819	$	902
Research and development		40,103		13,472
Sales and marketing		6,762		1,298
General and administrative		20,059		15,784
Stock-based compensation, net of amounts capitalized	$	69,743	$	31,456
Capitalized stock-based compensation—Intangibles and fixed assets		4,702		1,741
Total stock-based compensation	$	74,445	$	33,197

A summary of the Company's remaining unrecognized compensation expense and the weighted-average remaining amortization period as of December 31, 2023, related to its non-vested stock option awards, RSUs and PSUs is presented below (in millions, except time period amounts):


	Unrecognized Expense		Weighted- Average Amortization Period (Years)
Restricted stock units	$	122.8		3.1
Performance-based restricted stock units		87.0		3.2
Stock options		26.5		2.2

In August 2021, the Company’s board of directors adopted the Employee Stock Purchase Plan (the “ESPP”), which was subsequently approved by the Company’s stockholders in September 2021, and became effective upon the closing of the Business Combination. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S.

Internal Revenue Code of 1986, as amended (the “Code”). The number of shares of common stock initially reserved for issuance under the ESPP was 5,354,000 shares. The ESPP provides for an annual increase on January 1 of each year, beginning on January 1, 2022, and continuing through and including January 1, 2031, equal to the lesser of (i) 1% of the fully diluted shares of common stock outstanding on the last day of the prior fiscal year, (ii) 10,708,000 shares, or (iii) a lesser number of shares determined by the Company’s board of directors prior to such increase. The board of directors elected not to approve the annual increase of ESPP shares on January 1, 2024.

Under the terms of the ESPP, eligible employees can elect to acquire shares of the Company’s common stock through periodic payroll deductions during a series of offering periods. Purchases under the ESPP are affected on the last business day of each offering period at a 15% discount to the lower of closing price on that day or the closing price on the first day of the offering period. As of December 31, 2023, no shares of common stock had been issued under the ESPP and no offering period had been set by the board of directors.