Century Therapeutics, Inc. Stock Compensation Disclosure

Note 15—Stock-based compensation

On June 17, 2021, the Company adopted the Century Therapeutics, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”) which superseded the 2018 Incentive Plan and from that date forward all issuances of incentive awards will be governed by the 2021 Incentive Plan.

The 2021 Incentive Plan provides for the Company to sell or issue common stock or restricted common stock, restricted stock units (“RSUs”), or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the board of directors, and consultants of the Company under terms and provisions established by the board of directors. Under the terms of the 2021 Incentive Plan, options may be granted at an exercise price not less than fair market value.

Upon adoption of the 2021 Incentive Plan, the Company was authorized to issue 5,481,735 shares of Common Stock under the 2021 Incentive Plan (which represents 5,640,711 shares of Common Stock initially available for grant under the 2021 Incentive Plan less 158,976 shares of Common Stock reserved for issuance upon the exercise of previously granted stock options that remain outstanding under the 2018 Incentive Plan). The number of shares of common stock initially reserved for issuance under the 2021 Incentive Plan shall be increased, upon approval by the board of directors, on January 1, 2022 and each January 1 thereafter, in an amount equal to the least of, (i) five percent (5%) of the outstanding common stock on the immediately preceding December 31, or (ii) such number of common stock determined by the board of directors no later than the immediately preceding December 31. For 2023, the 2021 Incentive Plan reserved shares were increased under clause (i) by 2,954,788 shares, effective as of January 1, 2023. For 2024, the 2021 Incentive Plan reserved shares were increased under clause (i) by 3,025,220 shares, effective as of January 1, 2024. As of December 31, 2024, there were 3,691,145 shares available for issuance under the 2021 Incentive Plan. In January 2025, common shares reserved for issuance under the 2021 Incentive Plan increased by 4,291,821 shares.

The Company’s stock-based awards are subject to service-based vesting conditions. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Stock awards granted typically vest over a four-year period but may be granted with different vesting terms. The Company may also issue awards with performance-based vesting conditions. For performance-based awards, the Company would reassess at each reporting date whether achievement of the performance condition is probable and accrue compensation expense if and when the achievement of the performance condition is probable. During the quarter ended June 30, 2023, the Company issued performance based RSUs that represent a contingent right to receive one share of the Company’s common stock. The RSUs shall vest 50% on November 1, 2023, with the remaining 50% vesting upon the earlier of: (i) November 1, 2024; and (ii) satisfaction of certain performance criteria. The Company is currently recording expense for these RSUs on the straight-line basis. All remaining performance-based RSUs vested on November 1, 2024.

During the quarter ended December 31, 2024, the Company issued performance-based RSUs that represent a contingent right to receive one share of the Company’s common stock. The RSUs shall vest (i) 50% upon the achievement of both the Company’s entrance into a business development collaboration with a minimum upfront payment of at least $50 million (the “BD Milestone”) and the Company’s stock price equal or exceeding the stock price target as of any date during the period beginning three months prior to and ending 12 months following the achievement of the BD Milestone; and (ii) 50% of the RSUs shall vest upon achievement of both clearance by the FDA of an investigational new drug application relating to ab T cells (the “IND Milestone”) and the Company’s stock price equal or exceeding the stock price target as of any date during the period beginning three months prior to and ending 12 months following achievement of the IND Milestone. The Company will not recognize expense related to these performance-based RSUs until they are probable of being achieved.

The Company recognizes the costs of the stock-based payments as the employees vest in the awards.

As of December 31, 2024, the Company had reserved shares of common stock for issuance as follows:

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The shares of Common Stock available under the 2021 Incentive Plan as of December 31, 2024 are as follows:

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Stock Options

The following table summarizes stock option activity for the year ended December 31, 2024:

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The weighted average grant date fair value of awards for options granted during the period ended December 31, 2024 was $3.62. As of December 31, 2024, there was $16,145 of total unrecognized compensation expense related to unvested stock options with time-based vesting terms, which is expected to be recognized

over a weighted average period of 2.55 years. The aggregate intrinsic value of options vested and exercisable as of December 31, 2024 and 2023 is calculated based on the difference between the exercise price and the fair value of our common stock. The intrinsic value of options exercised in 2024 and 2023 was $923 and $2,923, respectively.

The Company estimates the fair value of its option awards to employees and directors using Black-Scholes, which requires inputs and subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of substantial company-specific historical and implied volatility data of its common stock, the Company has based its estimate of expected volatility on the historical volatility of a group of similar public companies. Starting in June of 2023 the Company had sufficient historical information regarding stock trading history, and started to use the Company’s own stock volatility. The Company has never paid dividends and does not expect to in the foreseeable future. The expected term of the options granted to employees is derived from the “simplified” method as described in Staff Accounting Bulletin 107 relating to stock-based compensation. The risk-free interest rates for periods within expected term of the option are based on the U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company will account for actual forfeitures as they occur.

The weighted-average assumptions used to calculate the fair value of stock options granted are as follows:

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Stock-based compensation expense recorded under ASC 718 related to stock options granted and common stock issued under the 2021 Employee Stock Purchase Plan were allocated to research and development and general and administrative expense as follows:

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Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows:

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Pursuant to certain stock purchase agreements containing vesting and other provisions, the Company has the right to repurchase unvested shares.

Restricted Stock Units

The following table summarizes restricted stock activity for the year ended December 31, 2024:

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As of December 31, 2024, there was $4,331 of total unrecognized compensation expense related to the unvested restricted stock with time-based vesting terms, which is expected to be recognized over a weighted average period of 2.32 years.

Restricted Stock Awards

The following table summarizes restricted stock activity as of December 31, 2024:

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As of December 30, 2023, there was $311 of total unrecognized compensation expense related to the unvested restricted stock with time-based vesting terms, which is expected to be recognized over a weighted average period of 0.22 years. All restricted stock vests over a four-year period.

Early-Exercise of Unvested Equity Awards

Certain equity award holders early exercised unvested equity awards. The cash received upon early exercise of options of $82 and $640 was recorded as a deposit liability on the Company’s balance sheet as of December 31, 2024 and 2023, respectively.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan was adopted by the board of directors in May 2021, a total of 564,071 shares of common stock were initially reserved for issuance under this plan, which shall be increased, upon approval of the board of directors, on January 1, 2022 and each January 1 thereafter, to the lesser of (i) on percent (1%) of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (ii) an amount determined by the board of directors no later than the last day of the immediately preceding fiscal year. For 2022, the ESPP reserved shares were increased under the clause (i) by 550,055 shares, effective as of January 1, 2022. For 2023 and 2024, the board waived the annual increase to the shares reserved under the ESPP. As of December 31, 2024, there were 845,312 shares available for issuance, under the ESPP.