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 20,915,283. As of June 30, 2022, 9,619,846 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 10 years, from January 1, 2022 through January 1, 2031, by 4% of the total number of shares of Celularity capital 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. 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.

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 Business Combination and effectiveness of the 2021 Plan, no further grants will be made under the 2017 Plan.

The total number of stock options that could have been issued under the 2017 Plan was 32,342,049. 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 100% 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 ten years. Stock options granted to employees, officers, members of the board of directors and consultants typically vested over a three or four year period.

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 required judgment to determine.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted during the six months ended June 30, 2022:

Risk-free interest rate	2.5	%
Expected term (in years)	6.0
Expected volatility	77.0	%
Expected dividend yield	0	%

The weighted average grant-date fair value per share of stock options granted during the six months ended June 30, 2022 and year ended December 31, 2021 was $6.23 and $4.13, respectively.

The following table summarizes option activity with service conditions under the 2021 Plan and the 2017 Plan:

	Options			Weighted average exercise price		Weighted average contract term (years)		Aggregate intrinsic value
Balance at January 1, 2022		24,064,586		$	4.23		7.4	$	56,525
Granted		2,435,662		$	9.18
Exercised		(619,784	)	$	0.57
Forfeited		(232,106	)	$	6.30
Outstanding at June 30, 2022		25,648,358		$	4.77	6.58		$	28,099
Vested and expected to vest June 30, 2022		25,648,358		$	4.77	6.58		$	28,099
Exercisable at June 30, 2022		19,756,174		$	3.66		5.80	$	28,099

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of Class A Common Stock for those options that had exercise prices lower than the fair value of Class A Common Stock.

During the six months ended June 30, 2022, the aggregate intrinsic value was $5,360 for the stock options exercised.

The Company recorded stock-based compensation expense of $2,754 and $4,322 for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, unrecognized compensation cost for options issued with service conditions was $28,652, and will be recognized over an estimated weighted-average amortization period of 6.58 years.

The Company awarded options to acquire a total of 2,469,282 shares with an exercise price of $6.32 to the Company’s President in connection with the commencement of his employment. The grant was comprised of four equal tranches, which award will vest in up to five equal installments in respect of achieving certain share price targets between the third and fourth anniversary of the effective date, subject to his continued employment with the Company. The fair value of the President’s award was determined based upon a Monte Carlo simulation valuation model. The Company’s assumptions for expected volatility and closing price were 75.0% and $6.32, respectively. The aggregate estimated fair value of the President’s award was $7,013, which is expected to be recognized over a weighted-average period of four years. The Company recognized $437 and $869 in share-based expense related to the President’s award for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, there was $5,778 of unrecognized compensation costs that the Company plans to recognize over the weighted average period of 3.3 years.

As noted in further detail in Note 16, the Company’s President resigned effective August 31, 2022, which may impact the President’s Award.

The Company issues restricted stock units (“RSUs”) to employees that generally vest over a two-year period with 50% of awards vesting after 1 year and then the remaining 50% vesting after 2 years. 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.

The following table summarizes activity related to RSU stock-based payment awards:

	Number of shares			Weighted average grant date fair value
Outstanding at December 31, 2021		474,700		$	7.20
Granted		1,710,123		$	8.88
Forfeited		(36,047	)	$	7.67
Outstanding at June 30, 2022		2,148,776		$	8.53

The Company recorded stock-based compensation expense of $1,340 and $1,760 for the three and six months ended June 30, 2022, respectively, related to RSUs. As of June 30, 2022, the total unrecognized expense related to all RSUs was $16,390, which the Company expects to recognize over a weighted-average period of 1.94 years.

The Company recorded stock-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,
	2022		2021		2022		2021
Cost of revenue	$	131	$	16	$	168	$	32
Research and development		741		7,316		989		7,663
Selling, general and administrative		3,657		20,856		5,794		21,502
	$	4,529	$	28,188	$	6,951	$	29,197