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Stock-based Compensation | 6 Months Ended
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Jun. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-based Compensation | Stock-based Compensation At Closing, the 2021 Long-Term Incentive Plan, (the “2021 Plan”), and the 2021 Employee Stock Purchase Plan, (the “ESPP”), became effective. Under the 2021 Plan, the Company can grant non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance awards and other forms of awards. Under the ESPP, when and if implemented, eligible employees will be permitted to purchase shares of the Company’s Common Stock at the lower of 85% of the closing trading price per share of the Company’s Common Stock on the first day of the offering or 85% of the closing trading price per share on the exercise date, which will occur on the last day of each offering. The 2021 Plan and ESPP provide that on January 1 of each year commencing January 1, 2022, the 2021 Plan and the ESPP reserve will automatically increase in an amount equal to the lesser of (a) 5% and 1%, respectively, of the number of shares of the Company’s Common Stock outstanding on December 31 of the preceding year and (b) a number of shares of Common Stock determined by the Company’s board of directors. The Company’s board of directors determined that there would be no automatic increase in the number of shares reserved under the 2021 Plan on either January 1, 2022 or January 1, 2023. The 2021 Plan share reserve automatically increased on January 1, 2024 by 5,183,686, which was equivalent to 5% of the number of shares of the Company’s Common Stock outstanding on December 31, 2023. Since the inception of the ESPP, the Company’s board of directors has determined that there would be no automatic increase in the number of shares reserved under the ESPP. As of June 30, 2024, 5,809,549 and 1,030,033 shares of Common Stock were available under the 2021 Plan and ESPP, respectively. Prior to the Closing, Legacy Humacyte had two equity incentive plans, the 2015 Omnibus Incentive Plan, as amended (the “2015 Plan”), and the 2005 Stock Option Plan (the “2005 Plan”). As a result of the Merger, no further awards will be granted under either the 2015 Plan or the 2005 Plan. All awards previously granted and outstanding as of the effective date of the Merger were adjusted to reflect the impact of the Merger as set forth in the Merger Agreement, but otherwise remain in effect pursuant to their original terms. The shares underlying any award granted under the 2021 Plan or the 2015 Plan that are forfeited, cancelled or reacquired by the Company prior to vesting, that expire or that are paid out in cash rather than shares will become available for grant and issuance under the 2021 Plan. As of June 30, 2024, 8,652,958, 3,867,045 and 1,652 shares of Common Stock remain reserved for outstanding options issued under the 2021 Plan, the 2015 Plan and the 2005 Plan, respectively. The Company has sufficient authorized and unissued shares to issue Common Stock in satisfaction of any outstanding awards and any awards available for grant under the 2021 Plan. The Company’s stock option plans allow for the grant of awards that the Company believes aid in aligning the interests of award recipients with those of its stockholders. The Company’s board of directors or compensation committee determines the specific terms of equity incentive grants, including the exercise price per share and vesting period for option awards. Option awards are granted with an exercise price equal to the fair market value of the Company’s Common Stock at the date of grant. The Company has granted options that include either a service-based or performance-based vesting condition, or both, and a 10-year contractual term. The service-based vesting condition for the plans is generally satisfied over 36 to 48 months from the date of grant. The performance-based vesting conditions are satisfied upon the attainment of certain product development milestones. The Company recognizes stock-based compensation expense based on the grant date fair value of the awards measured using the Black-Scholes option pricing model. Compensation expense related to awards with service-based vesting conditions is recognized on a straight-line basis over the requisite service period. Option valuation models, including the Black-Scholes option-pricing model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, the expected term of the award, and the fair value of the underlying Common Stock on the date of grant. Forfeitures are accounted for as they occur. Compensation expense related to awards with performance-based vesting conditions is recognized over the requisite service period using the accelerated attribution method to the extent achievement of the performance-based condition is probable. The Company does not recognize compensation expense related to awards with performance-based vesting conditions until it is probable that the performance-based vesting condition will be achieved. Forfeitures are accounted for as they occur. Option awards under the Company’s option plans generally provide for accelerated vesting of the unvested portions of any option award in the event of an involuntary termination, as such term is defined in the relevant stock option agreement, of a grantee’s employment during the period that commences 30 days prior to the effective date of a corporate transaction and that ends 12 months following the effective date of such transaction. Additionally, the Company’s board of directors may, in its sole discretion, accelerate the vesting of any unvested stock options in the event of a corporate transaction. The Company estimated the fair value of the stock options on the date of grant using the following assumptions in the Black-Scholes option-pricing model:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Estimated dividend yield | 0 | % |  | 0 | % |  | 0 | % |  | 0 | %
Expected share price volatility (weighted average and range, if applicable) | 91.6% (91.6% to 91.6%) |  | 88.9% (88.8% to 88.9%) |  | 91.5% (90.8% to 91.6%) |  | 88.8% (88.6% to 88.9%
Risk-free interest rate (weighted average and range, if applicable) | 4.31% (4.24% to 4.41%) |  | 3.86% (3.86% to 3.87%) |  | 4.28% (4.07% to 4.41%) |  | 3.78% (3.58% to 3.87%)
Expected term of options (in years) | 6.25 |  | 6.25 |  | 6.25 |  | 6.25
•Fair Value of Common Stock. The fair value of the Common Stock has been determined based on the closing price of the shares on Nasdaq. •Expected Term. The expected term represents the period that stock options are expected to be outstanding. The Company calculated the expected term using the simplified method for options, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term. •Expected Volatility. The expected volatility was determined based on a blended approach using the historical share volatility of the Company’s Common Stock and that of several publicly traded peer companies over a period of time equal to the expected term of the options, as the Company has a limited trading history. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies. •Risk-Free Interest Rate. The risk-free interest rate was based on the yields of U.S. Treasury zero-coupon securities with maturities similar in duration to the expected term of the options. •Expected Dividend Yield. The Company has not paid dividends on its Common Stock nor does it expect to pay dividends in the foreseeable future. Accordingly, the Company has estimated the dividend yield to be zero. The following table shows a summary of stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
($ in thousands) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Research and development |  | $ | 729 |  |  | $ | 480 |  |  | $ | 1,475 |  |  | $ | 901 |
General and administrative |  | 708 |  |  | 1,361 |  |  | 1,416 |  |  | 2,749 |
Total |  | $ | 1,437 |  |  | $ | 1,841 |  |  | $ | 2,891 |  |  | $ | 3,650 |
As of June 30, 2024, unrecognized stock-based compensation cost for options was $20.4 million and is expected to be recognized over a weighted-average period of 3.0 years. A summary of option activity under the Company’s stock option plans during the six months ended June 30, 2024 is presented below:
| Number of Shares |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2023 | 11,919,421 |  |  | $ | 4.64 |  |  | 8.3 |  | $ | 383 |
Granted | 1,184,550 |  |  | $ | 6.61 |  |  |  |  |
Exercised | (263,960) |  |  | $ | 2.99 |  |  |  |  |
Forfeited | (318,356) |  |  | $ | 3.78 |  |  |  |  |
Options outstanding at June 30, 2024 | 12,521,655 |  |  | $ | 4.89 |  |  | 8.1 |  | $ | 15,242 |
Vested and exercisable, June 30, 2024 | 4,418,097 |  |  | $ | 7.21 |  |  | 5.9 |  | $ | 2,446 |
Vested and expected to vest, June 30, 2024 | 12,521,655 |  |  | $ | 4.89 |  |  | 8.1 |  | $ | 15,242 |

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