; ForgeRock, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-based Compensation

v3.21.2
Stock-based Compensation
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
Stock-based Compensation Stock-based Compensation
2021 Equity Incentive Plan

In September 2021, the Company’s board of directors adopted and the stockholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to 2012 Equity Incentive Plan (the “2012 Plan”) with the purpose of granting stock-based awards to employees, directors, officers and consultants, including stock options, restricted stock awards and restricted stock units (RSUs). A total of 7,276,000 shares of Class A common stock were initially available for issuance under the 2021 Plan. The Company’s compensation committee administers the 2021 Plan. In addition, the shares reserved for issuance under the 2021 Plan will also include a number of shares of Class A common stock equal to the number of shares of Class B common stock subject to awards granted under the 2012 Plan that, on or after the termination of the 2012 Plan, expire or otherwise terminate without having been exercised in full or are forfeited to or repurchased by the Company (provided that the maximum number of shares that may be added to the 2021 Plan pursuant to this sentence is 14,913,309 shares). The number of shares of the Company’s Class A common stock available for issuance under the 2021 Plan is subject to an annual increase on the first day of each fiscal year beginning on January 1, 2022, equal to the lesser of: (i) 8,085,000 shares; (ii) 5% of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding year; or (iii) such other amount as the Company’s board of directors may determine.

2012 Equity Incentive Plan

The 2012 Plan (the Prior Plan), which was recently amended in March 2021, was terminated in September 2021, in connection with the adoption of The Company’s 2021 Plan, and stock-based awards are no longer granted under the Prior Plan. However, the Prior Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.

The Company’s 2012 Plan permitted the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”) and stock appreciation rights. As of September 30, 2021, the Company has not issued any stock appreciation rights. The Company issued 240,000 and 111,111 RSUs in 2016 and 2018, respectively. The vesting terms included time, performance and the occurrence of liquidity event. Upon the Company’s IPO, a liquidity event which occurred in September, 2021, stock-based compensation expense of $0.9 million was recognized for the RSUs.
A summary of the Company’s stock-based compensation expense as recognized on the condensed consolidated statements of operations is presented in thousands below:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Cost of revenue $ 26  $ 35  $ 193  $ 112 
Research and development 564  167  1,058  1,084 
Sales and marketing 1,078  619  2,046  1,539 
General and administrative 1,441  583  3,099  2,215 
Total stock-based compensation $ 3,109  $ 1,404  $ 6,396  $ 4,950 
The following table summarizes the activity of the Plan:
Number of
Awards
Outstanding
Weighted-
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term (Years)
Average
Intrinsic
Value (in
thousands)
Balance at December 31, 2020
15,465,671  $ 3.08  6.2 $ 73,155 
Options granted 2,443,785  14.30 
Options exercised (1,900,043) 1.71 
Options forfeited (583,753) 4.40 
Balance at September 30, 2021
15,425,660  4.98  6.64 $ 523,749 
As of September 30, 2021:
Vested and exercisable 9,059,341  $ 2.70  5.2 $ 328,256 
The following assumptions were used to estimate the fair value of stock options granted during the three and nine months ended September 30, 2021:
Three Months Ended
September 30, 2021
Nine Months Ended
September 30, 2021
Volatility 50.2  % 50.7  %
Expected term (in years) 6.03 6.04
Risk-free interest rate 0.95  % 0.89  %
Expected dividends % %
Weighted-average grant date fair value $ 11.60 $ 8.85
As of September 30, 2021, there was $28.7 million of unrecognized compensation expense related to non-vested stock-based compensation arrangements granted under the Plan. That expense is expected to be recognized over a weighted-average period of 3.24 years.

2021 Employee Stock Purchase Plan
In September 2021, the Company’s board of directors adopted and the stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective prior to the completion of the IPO, and established with an initial reserve of 1,617,000 shares of common stock. The 2021 ESPP provides for annual increases in the number of shares available for issuance on the first day of each year equal to the lesser of: (i) 1,617,000 shares; (ii) 1% of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding year; or (iii) such other amount determined by the plan administrator. As of September 30, 2021, no shares had been granted under the 2021 ESPP.
Except for the initial offering period, the ESPP provides for a 12-month offering period beginning November 15 and May 15 of each year, and each offering period will consist of two six-month purchase periods. The initial offering period began on October 1, 2021 and will end on November 15, 2022. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date, or (2) the fair market value of its common stock on the purchase date