Celularity Inc Stock Compensation Disclosure
2021 Equity Incentive Plan
In July 2021, the Company’s board of directors adopted, and the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options (“ISOs”) to employees and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants.
The number of shares of Class A Common Stock initially reserved for issuance under the 2021 Plan is . As of December 31, 2024, shares were reserved for issuance and those shares remain available for future grant under the 2021 Plan. The number of shares reserved for issuance will automatically increase on January 1 of each year, for a period of years, from January 1, 2022 through January 1, 2031, by % of the total number of shares of Celularity common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. On January 1, 2025, the number of shares reserved for issuance increased to and those shares remain available for future grant under the 2021 Plan. The shares added to the 2021 Plan on January 1, 2025, remain subject to an effective registration statement on Form S-8. Shares subject to stock awards granted under the 2021 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the 2021 Plan. Additionally, shares issued pursuant to stock awards under the 2021 Plan that are repurchased or forfeited, as well as shares that are reacquired as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under the 2021 Plan.
The 2021 Plan is administered by the Company’s board of directors. The Company’s board of directors, or a duly authorized committee thereof, may delegate to one or more officers the authority to (i) designate employees other than officers to receive specified stock awards and (ii) determine the number of shares to be subject to such stock awards. Subject to the terms of the 2021 Plan, the plan administrator has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under the 2021 Plan. The plan administrator has the power to modify outstanding awards under the 2021 Plan. Subject to the terms of the 2021 Plan and in connection with a corporate transaction or capitalization adjustment, the plan administrator may not reprice or cancel and regrant any award at a lower exercise price, strike price or purchase price or cancel any award with an exercise price, strike price or purchase price in exchange for cash, property or other awards without first obtaining the approval of the Company’s stockholders.
2017 Equity Incentive Plan
The 2017 Equity Incentive Plan (the “2017 Plan”) adopted by Legacy Celularity’s board of directors and approved by Legacy Celularity’s stockholders provided for Legacy Celularity to grant stock options to employees, directors and consultants of Legacy Celularity. In connection with the closing of the merger and effectiveness of the 2021 Plan, no further grants were made under the 2017 Plan.
The total number of stock options that could have been issued under the 2017 Plan was . Shares that expired, forfeited, canceled or otherwise terminated without having been fully exercised were available for future grant under the 2017 Plan.
The 2017 Plan is administered by the Company’s board of directors or, at the discretion of the Company’s board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions were determined at the discretion of Legacy Celularity’s board of directors, or its committee if so delegated, except that the exercise price per share of stock options could not be less than % of the fair market value of the share of common stock on the date of grant and the term of stock option could not be greater than . Stock options granted to employees, officers, members of the board of directors and consultants typically vested over a three or four year period.
Stock Option Valuation
Awards with Service Conditions
The fair value of each option is estimated on the date of grant using a Black-Scholes option pricing model that takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at grant date, expected term, expected stock price volatility, risk-free interest rate, and dividend yield. The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Certain of these inputs are subjective and generally require judgment to determine.
| ● | The expected term of employee stock options with service-based vesting is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of non-employee options is equal to the contractual term or its estimated term based on the underlying agreement. | |
| ● | The expected stock price volatility is based on historical volatilities of comparable public entities within the Company’s industry. | |
| ● | The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the respective expected term or contractual term. | |
| ● | The expected dividend yield is % because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock. |
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | ||||||||
The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2024 and 2023 was $ and $, respectively.
| Options | Weighted Average Exercise Price | Weighted Average Contract Term (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2024 | 2,820,187 | $ | 40.16 | 5.6 | $ | |||||||||||
| Granted | 1,503,394 | 3.26 | ||||||||||||||
| Exercised | (20,744 | ) | 2.80 | |||||||||||||
| Forfeited/Expired | (341,312 | ) | 29.51 | |||||||||||||
| Outstanding at December 31, 2024* | 3,961,525 | $ | 27.27 | 6.4 | $ | 16 | ||||||||||
| Vested and expected to vest at December 31, 2024 | 3,961,525 | $ | 27.27 | 6.4 | $ | 16 | ||||||||||
| Exercisable at December 31, 2024 | 2,586,561 | $ | 37.49 | 4.9 | $ | |||||||||||
| * | Options outstanding at December 31, 2024 under the 2021 Plan and 2017 Plan were and , respectively. Options outstanding at December 31, 2024 under the 2021 Plan include awards with performance conditions (see below). |
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Class A common stock for those options that had exercise prices lower than the fair value of Class A common stock.
The Company recorded stock-based compensation expense relating to option awards with service conditions of $ and $ for the years ended December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, the aggregate intrinsic value was $ and $, respectively, for the stock options exercised. As of December 31, 2024, unrecognized compensation cost for options issued with service conditions was $ and will be recognized over an estimated weighted-average amortization period of years.
Awards with Performance Conditions
In connection with the advisory agreement signed with Robin L. Smith, MD (see Note 20), the Company awarded options under the 2021 Plan to acquire a total of shares with an exercise price of $to Dr. Smith, a former member of the Company’s board of directors. The initial tranche of stock options vested upon execution of the advisory agreement on August 16, 2022. The remaining stock options are subject to vesting upon achievement of certain predefined milestones in relation to the expansion of the degenerative disease business. On November 1, 2022, the second tranche of stock options vested upon achievement of the first milestone. The fair value of the award was determined based on a Black-Scholes option-pricing model. The Company’s grant date fair value assumptions were % expected volatility, % risk-free interest rate, five-year expected term, and % expected dividend yield. The remaining stock options were forfeited on August 16, 2023 upon termination of the advisory agreement. There were no milestones achieved or probable of being achieved and accordingly there was stock-based compensation expense recorded during the year ended December 31, 2023.
Restricted Stock Units
The Company issues restricted stock units (“RSUs”) to employees that generally vest over a four-year period, with % vesting on the anniversary of the grant date, and the remainder vesting in equal annual installments thereafter so that the RSUs are vested in full on the four-year anniversary of the grant date. At times, the board of directors may approve exceptions to the standard RSU vesting terms. Any unvested shares will be forfeited upon termination of services. The fair value of an RSU is equal to the fair market value price of the Company’s common stock on the date of grant. RSU expense is amortized straight-line over the vesting period. There are no RSUs outstanding under the 2017 Plan.
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
| Outstanding at January 1, 2024 | 823,332 | $ | 13.77 | |||||
| Granted | 337,080 | $ | 2.23 | |||||
| Released | (400,996 | ) | $ | 11.58 | ||||
| Forfeited | (99,977 | ) | $ | 13.24 | ||||
| Outstanding at December 31, 2024 | 659,439 | $ | 9.29 | |||||
The Company recorded stock-based compensation expense of $ and $ for the years ended December 31, 2024 and 2023, respectively, related to RSUs. As of December 31, 2024, the total unrecognized expense related to all RSUs was $, which the Company expects to recognize over a weighted-average period of years.
Stock Units with Market Condition Vesting
In July 2023, the Company granted market condition stock unit awards (“MCUs”) under the 2021 Plan to certain members of management. The awards are scheduled to vest over a period of one to three years from the grant date based on continuous employment and specified market conditions based on the Company’s stock price at the time of vest. As of December 31, 2024, of the MCUs were forfeited as a result of the participant’s termination of continuous service. Stock-based compensation expense for the remaining MCUs is being recognized over the requisite service period based on the award’s fair value on the grant date, which was determined based on the Company’s closing stock price on the date of grant of $, further discounted to reflect the effects of the market condition of the award. The Company recorded stock-based compensation expense relating to MCUs of $for the year ended December 31, 2024. Stock-based compensation expense relating to MCUs for the year ended December 31, 2023 was de minimis.
Stock-Based Compensation Expense
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cost of revenues | $ | 450 | $ | 580 | ||||
| Research and development | 1,287 | 1,832 | ||||||
| Selling, general and administrative | 9,832 | 12,605 | ||||||
| $ | 11,569 | $ | 15,017 | |||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.