Share-Based Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

7. Share-Based Compensation

HRGN Amended and Restated Equity Incentive Plan

The Company maintains the Amended and Restated Equity Incentive Plan (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 vesting of the 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.

The Company’s Plan has 5,098,000 authorized shares to be issued under the Plan. There were 1,293,379 shares available for issuance as of June 30, 2023.

The following table summarizes information concerning options outstanding and exercisable:

	Amount			Weighted-average exercise price		Weighted-average contractual life (years)		Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2022		2,516,924		$	3.95		7.68	$	6,917
Granted		1,863,309			6.05
Canceled / forfeited		(593,333	)		6.12
Outstanding at June 30, 2023		3,786,900			4.64		8.06		2,756
Options exercisable		1,998,552			4.65		7.44		1,971
Options vested and expected to vest		3,687,482			4.69		8.06		2,653

The Company’s outstanding stock options include 698,195 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 $2.6 million. No expense has been recognized for these awards as of June 30, 2023 given that the milestone achievements for these awards have not yet been deemed probable for accounting purposes.

Aggregate intrinsic value for outstanding options and exercisable options as of June 30, 2023, was approximately $2.8 million and $2.0 million, respectively, based on the Company’s closing stock price of $3.65 per share as of June 30, 2023. As of June 30, 2023, unrecognized compensation cost related to unvested non-performance-based awards amounted to $4.4 million, which will be recognized over a weighted-average period of 2.69 years.

The Company uses the Black-Scholes option pricing model to value its stock options. The weighted average assumptions for valuing options granted during the six months ended June 30, 2023 and 2022 were as follows:

	Six months ended June 30,
	2023			2022
Risk-free interest rate		3.76	%		2.59	%
Expected volatility		126.16	%		124.51	%
Expected term (in years)		5.9 years			5.5 years
Expected dividend yield		—	%		—	%

The Company recorded share-based compensation expense in the following expense categories of its condensed consolidated statements of operations:

	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Research and development	$	51	$	88	$	113	$	148
Selling, general and administrative		428		189		2,206		364
Total	$	479	$	277	$	2,319	$	512