Note 15 - Share-based Compensation

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

15. Share-based Compensation

Harvard Apparatus Regenerative Technology Amended and Restated Equity Incentive Plan

The Company maintains the Amended and Restated Equity Incentive Plan, or the Plan, for the benefit of certain officers, employees, non-employee directors, and other key persons (including consultants and advisory board members). All options and awards granted under the Plan consist of the Company’s shares of common stock. The Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent to satisfy stock option exercises and the vesting of restricted stock units. The vesting period for awards is generally four years and the contractual life is ten years. Canceled and forfeited options and awards are available to be reissued under the Plan.

As of December 31, 2024, the Company’s Plan has 9,098,000 authorized shares to be issued under the Plan. There are 4,629,538 shares available for issuance under the Plan as of December 31, 2024.

Stock option activity under the Plan for the years ended December 31, 2023 and 2024 was as follows:

						Weighted-
				Weighted-		average		Aggregate
				average		contractual		intrinsic value
	Amount			exercise price		life (years)		(in thousands)
Outstanding at January 1, 2023		2,516,924			3.95		7.68		6,917
Granted		2,130,007			5.81
Exercised		(65,264	)		2.29
Canceled / forfeited		(604,378	)		6.13
Outstanding at December 31, 2023		3,977,289			4.64		7.7		5,728
Granted		408,188			3.55
Outstanding at December 31, 2024		4,385,477		$	4.54		6.9	$	1,307
Options exercisable at December 31, 2024		2,907,296		$	4.59		6.7	$	1,135
Options vested or expected to vest at December 31, 2024		4,362,128		$	4.54		6.9	$	1,307

The Company’s outstanding stock options include 993,835 performance-based awards that have vesting provisions subject to the achievement of certain business milestones. Total unrecognized compensation expense for the remaining performance-based awards is approximately $3.3 million. No expense has been recognized for these awards as of December 31, 2024 given that the milestone achievements for these awards have not yet been deemed probable for accounting purposes.

Aggregate intrinsic value for outstanding options for the year ended December 31, 2024 was approximately $1.3 million and calculated as the difference between the Company’s closing stock price of $2.98 per share as of December 31, 2024 and the weighted average exercise price of $4.54. As of December 31, 2024, unrecognized compensation cost related to unvested non-performance-based awards amounted to $2.3 million, which will be recognized over a weighted-average period of 1.4 years.

The weighted average assumptions for valuing the Company’s stock options granted were as follows:

	Year Ended December 31,
	2024			2023
Risk-free interest rate		4.09	%		3.82	%
Expected volatility		117.23	%		125.35	%
Expected term (in years)		5.6			5.8
Expected dividend yield		—	%		—	%

The grant date fair value of stock options is estimated using the Black-Scholes option pricing model that takes into account the fair value of its common stock, the exercise price, the expected life of the option, the expected volatility of its common stock, expected dividends on its common stock, and the risk-free interest rate over the expected life of the option. The risk-free interest rate assumption is based upon observed treasury bill interest rates (risk-free) appropriate for the expected term of the Company’s employee stock options. The computation of expected volatility is based on the historical volatility of the Company’s common stock. The simplified method of estimating expected term was used. The Company has not paid and do not anticipate paying cash dividends on the Company’s shares of common stock; therefore, the expected dividend yield is assumed to be zero.

The weighted average estimated fair value of stock options granted using the Black-Scholes model was $3.01 and $5.12 per share for the years ended December 31, 2024 and 2023, respectively.

The Company also estimated the fair value of non-employee share options using the Black-Scholes option pricing model reflecting the same assumptions as applied to employee and director options in each of the reporting periods, other than the expected life, which is assumed to be the remaining contractual life of the options.

Share-based compensation expense related to the Plan for the years ended December 31, 2024 and 2023 was allocated as follows:

	Years Ended December 31,
	2024		2023
	(in thousands)
Research and development	$	489	$	327
Selling, general and administrative		1,913		3,134
Total stock-based compensation	$	2,402	$	3,461