Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-40498

Century Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		84-2040295
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
25 N 38^th Street, 11^th Floor Philadelphia, Pennsylvania (Address of principal executive offices)		19104 (Zip Code)

(267) 817-5790

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	IPSC	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 1, 2024 the registrant had 84,715,961 shares of common stock, $0.0001 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	6
Item 1.	Unaudited Consolidated Financial Statements:	6
	Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	6
	Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024 and 2023 (unaudited)	7
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)	8
	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)	9
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47

PART II.	OTHER INFORMATION	48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		50

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q or the documents incorporated by reference herein regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” “could,” “should,” “potential,” “seek,” “evaluate,” “pursue,” “continue,” “design,” “impact,” “affect,” “forecast,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

●

our ability to raise additional capital to fund our operations and continue the development of our current and future product candidates;

●

the preclinical and early clinical nature of our business and our ability to successfully advance our current and future product candidates through development activities, preclinical studies, and clinical trials;

●

our ability to generate revenue from future product sales and our ability to achieve and maintain profitability;

●

the accuracy of our projections and estimates regarding our expenses, capital requirements, cash utilization, and need for additional financing;

●

our dependence on the success of our lead product candidate, CNTY-101;

●

the novelty of our approach to immuno-oncology and autoimmune treatment of cancer, utilizing iPSC-derived natural killer cells, (“iNK cells”) and iPSC-derived T cells, (“iT cells”) and the challenges we will face due to the novel nature of such technology;

●

the success of competing therapies that are or may become available;

●

our reliance on the maintenance of our collaborative relationship with FUJIFILM Cellular Dynamics Inc., (“FCDI”) for access to key differentiation and reprogramming technology for the manufacturing and development of our product candidates;

●

the initiation, progress, success, cost, and timing of our development activities, preclinical studies and clinical trials;

●

the timing of future investigational new drug, (“IND”) applications and the likelihood of, and our ability to obtain and maintain, regulatory clearance of IND applications for our product candidates;

●

the timing, scope and likelihood of regulatory filings and approvals, including final regulatory approval of our product candidates;

●

our reliance on FCDI to be the exclusive manufacturer of certain product candidates, and our ability to manufacture our own product candidates in the future, and the timing and costs of such manufacturing activities;

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●

our reliance on the maintenance of our collaborative relationship with Bristol-Myers Squibb Company (“Bristol-Myers Squibb”) in connection with the furtherance of our collaboration programs;

●

our ability to achieve the anticipated benefits of our acquisition of Clade Therapeutics, Inc. (“Clade”);

●

the performance of third parties in connection with the development of our product candidates, including third parties conducting our current and future clinical trials as well as third-party suppliers and manufacturers;

●

our ability to attract and retain strategic collaborators with development, regulatory, and commercialization expertise;

●

the public opinion and scrutiny of cell-based therapies and its potential impact on public perception of our company and product candidates;

●

our ability to successfully commercialize our product candidates and develop sales and marketing capabilities, if our product candidates are approved;

●

the size and growth of the potential markets for our product candidates and our ability to serve those markets;

●

regulatory developments and approval pathways in the United States and foreign countries for our product candidates;

●

the potential scope and value of our intellectual property and proprietary rights;

●

our ability, and the ability of our licensors, to obtain, maintain, defend, and enforce intellectual property and proprietary rights protecting our product candidates, and our ability to develop and commercialize our product candidates without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties;

●

our ability to recruit and retain key members of management and other clinical and scientific personnel;

●

the volatility of capital markets and other macroeconomic factors, including due to inflationary pressures, banking instability geopolitical tensions or the outbreak of hostilities or war;

●

the extent to which pandemics, or any other global health crises may impact our business, including development activities, preclinical studies, clinical trials, supply chain and labor force; and

●

developments relating to our competitors and our industry;

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We have based these forward-looking statements largely on our current expectations, estimates, forecasts, and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, the section titled “Risk Factors” set forth in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and the section titled “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We intend the forward-looking statements contained in this Quarterly Report on Form 10-Q to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).

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PART I—FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

CENTURY THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	June 30, 2024		December 31, 2023
	(unaudited)
Assets

Current assets
Cash and cash equivalents	$	41,457	$	47,324
Short-term investments		154,945		125,414
Prepaid expenses and other current assets		7,076		4,256
Total current assets		203,478		176,994

Property and equipment, net		69,405		71,705
Operating lease right-of-use assets		28,570		20,376
Restricted cash		2,835		1,979
Long-term investments		73,226		89,096
Goodwill		5,091		—
Intangible assets		33,300		—
Security deposits and non-current assets		541		541
Total assets	$	416,446	$	360,691

Liabilities and stockholders’ equity

Current liabilities
Accounts payable	$	3,358	$	2,741
Accrued expenses and other liabilities		11,095		10,149
Deposit liability		350		584
Deferred revenue, current		4,360		4,372
Total current liabilities		19,163		17,846

Operating lease liability, long term		52,713		46,658
Security deposit, non-current		20		—
Deposit liability, non-current		—		56
Deferred revenue, non-current		109,768		111,381
Contingent consideration liability		9,312		—
Deferred tax liability		3,366		—

Total liabilities		194,342		175,941

Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023		—		—
Common stock, $0.0001 par value, 300,000,000 shares authorized; 84,551,813 and 60,335,701 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		8		6
Additional paid-in capital		937,445		840,407
Accumulated deficit		(715,040)		(655,771)
Accumulated other comprehensive (loss) Income		(309)		108
Total stockholders’ equity		222,104		184,750
Total liabilities and stockholders’ equity	$	416,446	$	360,691

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023

Collaboration revenue	$	771	$	99	$	1,625	$	1,819

Operating expenses
Research and development		27,220		22,727		50,641		47,626
General and administrative		8,306		8,229		17,052		17,131
Impairment of long-lived assets		-		4,220		-		4,220
Total operating expenses		35,526		35,176		67,693		68,977

Loss from operations		(34,755)		(35,077)		(66,068)		(67,158)

Interest expense		—		(136)		-		(540)
Interest income		3,582		3,058		6,820		5,681
Other income (expense)		(12)		(186)		1		(380)
Total other income		3,570		2,736		6,821		4,761
Loss before provision for income taxes		(31,185)		(32,341)		(59,247)		(62,397)
Provision for income taxes		(22)		(950)		(22)		(2,158)
Net loss	$	(31,207)	$	(33,291)	$	(59,269)	$	(64,555)

Net loss per common share Basic and Diluted		(0.38)		(0.56)		(0.82)		(1.10)
Weighted average common shares outstanding Basic and Diluted		82,092,167		59,251,363		72,194,402		58,904,726
Other comprehensive loss
Net loss	$	(31,207)	$	(33,291)	$	(59,269)	$	(64,555)
Unrealized (loss) gain on investments		(102)		59		(453)		1,255
Foreign currency translation gain (loss)		34		9		36		—
Comprehensive loss	$	(31,275)	$	(33,223)	$	(59,686)	$	(63,300)

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)



								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance, December 31, 2023	60,335,701	$	6	$	840,407	$	(655,771)	$	108	$	184,750
Issuance of common stock upon the exercise of stock options and 2021 ESPP	220,647		—		366		—				366
Vesting of restricted stock	24,734		—		—		—				—
Vesting of early exercise stock options	34,900		—		142		—				142
Vesting of restricted stock units	109,108		—		—		—				—
Issuance of common stock upon the exercise of ATM, net of underwriting discounts and commissions and other issuance costs	4,084,502		—		17,829		—				17,829
Unrealized loss on investments	—		—		—		—		(351)		(351)
Foreign currency translation	—		—		—		—		2		2
Stock based compensation	—		—		3,207		—				3,207
Net loss	—		—		—		(28,062)				(28,062)
Balance, March 31, 2024	64,809,592	$	6	$	861,951	$	(683,833)	$	(241)	$	177,883
Issuance of common stock upon the exercise of stock options and 2021 ESPP	100,305		—		103		—		—		103
Vesting of early exercise stock options	27,169		—		141		—		—		141
Issuance of common stock in connection with the transaction	3,741,646				15,154						15,154
Issuance of common stock upon the exercise of PIPE, net of underwriting discounts and commissions and other issuance costs	15,873,011		2		56,593		—		—		56,595
Unrealized loss on investments	—		—		—		—		(102)		(102)
Foreign currency translation	—		—		—		—		34		34
Stock based compensation	—		—		3,503		—		—		3,503
Net loss	—		—		—		(31,207)		—		(31,207)
Balance, June 30, 2024	84,551,723	$	8	$	937,445	$	(715,040)	$	(309)	$	222,104



								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance, December 31, 2022	58,473,660	$	6	$	824,292	$	(519,098)	$	(2,462)	$	302,738
Issuance of common stock upon the exercise of stock options	452,102		—		448		—		—		448
Vesting of restricted stock	95,877		—		—		—		—		—
Vesting of early exercise stock options	85,145		—		269		—		—		269
Unrealized gain on investments	—		—		—		—		1,196		1,196
Foreign currency translation	—		—		—		—		(9)		(9)
Stock based compensation	—		—		3,797		—		—		3,797
Net loss	—		—		—		(31,264)		—		(31,264)
Balance, March 31, 2023	59,106,784	$	6	$	828,806	$	(550,362)	$	(1,275)	$	277,175
Issuance of common stock upon the exercise of stock options	118,567		—		125		—		—		125
Vesting of restricted stock	—		—		—		—		—		—
Vesting of early exercise stock options	83,645		—		209		—		—		209
Unrealized gain on investments	—		—		—		—		59		59
Foreign currency translation	—		—		—		—		9		9
Stock based compensation	—		—		3,285		—		—		3,285
Net loss	—		—		—		(33,291)		—		(33,291)
Balance, June 30, 2023	59,308,996	$	6	$	832,425	$	(583,653)	$	(1,207)	$	247,571

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Six Months Ended		Six Months Ended
	June 30, 2024		June 30, 2023

Cash flows from operating activities
Net loss	$	(59,269)	$	(64,555)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6,688		6,142
Amortization of deferred financing cost		—		94
Non-cash operating lease expense (benefit)		(136)		(1,563)
Stock based compensation		6,710		7,082
Impairment		—		4,220
Amortization/accretion of investments		(2,458)		—
Change in fair value of contingent liabilities		(782)
Change in operating assets and liabilities:
Escrow deposit		—		220
Prepaid expenses and other assets		(2,122)		(268)
Operating lease liability		140		6,723
Deferred revenue		(1,625)		(1,819)
Accounts payable		(1,189)		(3,468)
Accrued expenses and other liabilities		(3,557)		(1,277)
Non-current security deposit		20		—
Net cash used in operating activities		(57,580)		(48,469)

Cash flows from investing activities
Acquisition of property and equipment		(804)		(9,491)
Acquisition of fixed maturity securities, available for sale		(88,947)		(141,843)
Sale of fixed maturity securities, available for sale		77,036		189,646
Acquisition of Clade Therapeutics, Inc., net of cash acquired		(9,608)		—
Net cash (used in) provided by investing activities		(22,323)		38,312

Cash flows from financing activities

Proceeds from issuance of common stock and ESPP		470		572
Payments on long term debt		—		(10,241)
Proceeds from ATM, net of issuance costs		17,829		—
Proceeds from PIPE, net of issuance costs		56,593		—
Net cash (used in) provided by financing activities		74,892		(9,669)

Net (decrease) increase in cash, cash equivalents, and restricted cash		(5,011)		(19,826)

Cash, cash equivalents and restricted cash, beginning of period		49,303		86,244

Cash, cash equivalents and restricted cash, end of period	$	44,292	$	66,418

Supplemental disclosure of cash and non-cash operating activities:
Cash paid for interest	$	—	$	586
Cash paid for income tax	$	191	$	911

Supplemental disclosure of non-cash investing and financing activities:
Stock issued in connection with the Acquisition	$	15,154	$	—
Purchase of property and equipment, accrued and unpaid	$	—		1,639
Landlord paid leasehold improvements	$	934	$	—

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except share and per share amounts)

Note 1—Organization and description of the business

Century Therapeutics, Inc. (the “Company”) is an innovative biotechnology company developing transformative allogeneic cell therapies to create products for the treatment of both solid tumor and hematological malignancies and autoimmune diseases with significant unmet medical need. Since inception, the Company has devoted substantially all of its time and efforts to performing research and development activities, building infrastructure and raising capital. The Company is incorporated in the state of Delaware.

Principles of Consolidation

The consolidated financial statements include the consolidated financial position and consolidated results of operations of the Company and the Company’s subsidiaries, Century Therapeutics Canada ULC (“Century Canada”), Clade Therapeutics (“Clade”) and Gadeta B.V. (“Gadeta”). All intercompany balances and transactions have been eliminated in consolidation.

Liquidity

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited operating history and its prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in the biotechnology and pharmaceutical industries. These risks include, but are not limited to, the uncertainty of availability of additional financing and the uncertainty of achieving future profitability.

Since inception, the Company has incurred net losses and negative cash flows from operations. During the three and six months ended June 30, 2024, the Company incurred a net loss of $31,207 and $59,269, respectively. During the six months ended June 30, 2024, the Company used $57,580 of cash in operations. Cash and cash equivalents and investments were $269,628 at June 30, 2024. Management expects to incur additional losses in the future to fund its operations and conduct product research and preclinical and clinical development and recognizes the need to raise additional capital to fully implement its business plan. The Company believes it has adequate cash and financial resources to operate for at least the next 12 months from the date of issuance of these consolidated financial statements.

Note 2—Summary of significant accounting policies and basis of presentation

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the interim period reporting requirements of Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of June 30, 2024, and the consolidated statements of operations and comprehensive loss, consolidated statements of changes in stockholders’ equity, and the consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 are unaudited, but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for any interim period are not necessarily indicative of results for the year ending December 31, 2024 or for any other subsequent interim period. The consolidated balance sheet at December 31, 2023 has been derived from the Company’s audited consolidated financial statements.

Certain prior year information has been reclassified to conform to the fiscal year 2024 presentation.

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Segment information

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions on how to allocate resources and assess performance. The Company views its operations and manages the business as one operating segment.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Estimates and assumptions are primarily made in relation to the valuations supporting stock compensation, the estimation of the incremental borrowing rate for operating leases, intangible assets acquired in business combinations and standalone selling prices of performance obligations in collaboration agreements. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

Concentration of credit risk and other risks and uncertainties

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist of cash, cash equivalents, U.S. Treasury bills and bonds, as well as corporate bonds. Cash and cash equivalents, as well as short and long-term investments include a checking account and asset management accounts held by a limited number of financial institutions. At times, such deposits may be in excess of insured limits. As of June 30, 2024 and December 31, 2023, the Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, uncertainty of market acceptance of its products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships, and dependence on key individuals.

Products developed by the Company require clearances from the U.S. Food and Drug Administration (the “FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance the Company’s future products will receive the necessary clearances. If the Company was denied clearance, clearance was delayed, or if the Company was unable to maintain clearance, it could have a material adverse impact on the Company.

Fair value of financial instruments

The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1

Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

Level 2

Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active;

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Level 3

Inputs are unobservable in which there is little or no market data available, which require the reporting entity to develop its own assumptions that are unobservable.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Cash and cash equivalents

Management considers all highly liquid investments with an insignificant interest rate risk and original maturities of three months or less to be cash equivalents.

Restricted cash

As of June 30, 2024 and December 31, 2023, the Company had $2,835 and $1,979, respectively in cash on deposit to secure certain lease commitments. Restricted cash is recorded separately in the Company’s consolidated balance sheets.

The following provides a reconciliation of the Company’s cash, cash equivalents, and restricted cash as reported in the consolidated balance sheets to the amounts reported in the consolidated statements of cash flows:


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	41,457	$	47,324
Restricted cash		2,835		1,979
Cash, cash equivalents, and restricted cash	$	44,292	$	49,303

Investments

The Company invests in fixed maturity securities including U.S. Treasury bills and bonds as well as corporate bonds. The investments are classified as available-for-sale and reported at fair value. Unrealized gains or losses are determined by comparing the fair market value of the securities with their cost or amortized cost. Realized gains and losses on investments are recorded on the trade date and are included in the statement of operations. Unrealized gains and losses on investments are recorded in other comprehensive loss on the consolidated statements of operations and comprehensive loss. The cost of securities sold is based on the specified identification method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest method over the remaining term of the security. Securities with an original maturity date greater than three months that mature within one year of the balance sheet date are classified as short-term, while investments with a maturity date greater than one year are classified as long-term.

Property and equipment, net

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally five years. Leasehold improvements are amortized over the shorter of the asset’s useful life or the remaining term of the lease. Construction in progress includes direct cost related to the construction of leasehold improvements and is stated at original cost. Such costs are not depreciated until the asset is completed and placed into service. Once the asset is placed into service, these capitalized costs will be allocated to leasehold improvements and will be depreciated over the shorter of the asset’s useful life or the remaining term of the lease. Computer software and equipment includes implementation costs for cloud-based software and network equipment.

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Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred. When property is retired or otherwise disposed of, the costs and accumulated depreciation are removed from the respective accounts, with any resulting gain or loss recognized concurrently.

Research and development expenses

Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, stock compensation, materials, supplies, rent, depreciation on and maintenance of research equipment with alternative future use, and the cost of services provided by outside contractors. All costs associated with research and development are expensed as incurred.

Clinical trial costs are a component of research and development expenses. The Company expenses costs for its clinical trial activities performed by third parties, including clinical research organizations and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements. The Company uses information it receives from internal personnel and outside service providers to estimate the clinical trial costs incurred.

Stock-based compensation

Employees, consultants and members of the Board of Directors of the Company have received stock options and restricted stock of the Company. The Company recognizes the cost of the stock-based compensation incurred as its employees and board members vest in the awards. The Company accounts for stock-based compensation arrangements in accordance with provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation. ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model (“Black Scholes”) to determine the fair value of options granted. The Company’s stock-based awards are subject to service-based vesting conditions and performance-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. For performance-based awards, the Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable.

Black Scholes requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. The historical volatility is calculated based on a period of time commensurate with expected term assumption. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. Forfeitures are recognized as they occur.

Foreign currency translation

The reporting currency of the Company is the U.S. dollar. The functional currency of Century Canada is the Canadian dollar. The functional currency of Gadeta is the Euro. Assets and liabilities of Century Canada and Gadeta are translated into U.S. dollars based on exchange rates at the end of each reporting period. Expenses are translated at average exchange rates during the reporting period. Gains and losses arising from the translation of assets and liabilities are included as a component of accumulated other comprehensive loss or income on the Company’s consolidated balance sheets. Gains and losses resulting from foreign currency transactions are reflected within the Company’s consolidated statements of operations

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and comprehensive loss. The Company has not utilized any foreign currency hedging strategies to mitigate the effect of its foreign currency exposure.

Intercompany payables and receivables are considered to be long-term in nature and any change in balance due to foreign currency fluctuation is included as a component of the Company’s consolidated comprehensive loss and accumulated other comprehensive loss within the Company’s consolidated balance sheets.

Basic and diluted net loss per common shares

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period. The Company computes diluted net loss per common share by dividing the net loss applicable to common shareholders by the sum of the weighted-average number of common shares outstanding during the period plus the potential dilutive effects of its warrants, restricted stock and stock options to purchase common shares, but such items are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during periods of net loss, there were no differences between the Company’s basic and diluted net loss per common share for the three and six months ended June 30, 2024 and 2023.

Collaboration revenue

The Company may enter into collaboration and licensing agreements with strategic partners for research and development, manufacturing, and commercialization of its product candidates. Payments under these arrangements may include non-refundable, upfront fees; reimbursement of certain costs; customer option fees for additional goods or services; payments upon the achievement of development, regulatory, and commercial milestones; sales of product at certain agreed-upon amounts; and royalties on product sales.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, (“ASC 606”). This standard applies to all contracts with customers. When an agreement falls under the scope of other standards, such as ASC Topic 808, Collaborative Arrangements, or (“ASC 808”), the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. Revenue recognized by analogizing to ASC 606 is recorded as collaboration revenue on the statements of operations.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under a collaboration agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations on a relative stand-alone selling price basis; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

As part of the accounting for these arrangements, the Company must use its judgment to determine the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price. The estimation of the stand-alone selling price may include such estimates as forecasted revenues and costs, development timelines, discount rates, and probabilities of regulatory and commercial success. The Company also applies significant judgment when evaluating whether contractual obligations represent distinct performance obligations, allocating transaction price to performance obligations within a contract, determining when performance obligations have been met, assessing the recognition and future reversal of variable consideration and determining and applying appropriate methods of measuring progress for performance obligations satisfied over time. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, current. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, non-current.

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If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights or options to acquire additional goods or services for free or at a discount. If the customer options are not determined to represent a material right, no transaction price is allocated to these options and the Company will account for these options at that time they are exercised. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement.

The obligations under the Company’s collaboration agreements may include research and development services to be performed by the Company for or on behalf of the customer. Amounts allocated to these performance obligations are recognized as the Company performs these obligations, and revenue is measured based on an inputs method of costs incurred to date of budgeted costs. Under certain circumstances, the Company may be reimbursed for certain expenses incurred under the research and development services.

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the statements of operations in the period of adjustment.

Acquisition-Related Contingent Consideration

Acquisition-related contingent consideration consists of our future obligations owed to shareholders of Clade and Gadeta and includes contingent milestone payments, earn out considerations, and indemnification obligations. Acquisition-related contingent consideration was recorded on the acquisition date at the estimated fair value of the obligations, in accordance with the acquisition method of accounting. The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 fair value measurement. The fair value of the acquisition-related contingent considerations are remeasured each reporting period, with changes in fair value recorded in the consolidated statements of operations and comprehensive loss with general and administrative expense.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the fair value of purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Acquisition related costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date.

When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. The Company utilizes commonly accepted valuation techniques, such as the income approach in establishing the fair value of intangible assets. See “Note 3 – Business combination” for additional detail.

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Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. Goodwill is not amortized but is tested for impairment at least annually. The Company reviews goodwill for impairment annually in the fourth quarter and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be less than its carrying amount (a triggering event). The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350, Intangibles – Goodwill and Other. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative goodwill impairment test is unnecessary and goodwill is considered to be unimpaired. However, if based on the qualitative assessment the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will proceed with performing the quantitative goodwill impairment test. In performing the quantitative goodwill impairment test, the Company determines the fair value of its reporting unit and compares it to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit exceeds its fair value, the Company records an impairment loss equal to the difference. For the three and six months ended June 30, 2024 there were no impairment charges.

Indefinite-lived intangibles are carried at the initially recorded fair value less any recognized impairment. Indefinite-lived intangibles are tested at least annually for impairment. Impairment assessments are conducted more frequently if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, or a significant change in the marketplace, including changes in the size of the market for the Company’s products. In performing the impairment test, the Company estimates the fair value of the indefinite-lived intangible asset and compares it to the carrying value. If they carrying value exceeds the estimated fair value, the Company records an impairment loss for the difference. For the three and six months ended June 30, 2024, there were no impairment charges. For further discussion of identified intangible assets, see “Note 3 – Business Combination”.

Recent accounting pronouncements

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires entities to provide additional information in their tax rate reconciliation and additional disclosures about income taxes paid by jurisdiction. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted. The guidance should be applied prospectively, but entities have the option to apply it retrospectively for each period presented. The Company is currently evaluating the impact of adopting this new accounting guidance.

In November 2023, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on the financial statements and disclosures.

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Note 3 – Business combination

On April 11, 2024, the Company acquired 100% of Clade, a privately-held biotechnology company focused on discovering and delivering engineerable, off-the-shelf, scalable, and consistent stem cell-based medicines, with a focus on iPSC-derived αβ T cells. The acquisition brings us novel technology enhancing our efforts on Allo-Evasion^TM – and a newly expanded pipeline incorporating three additional preclinical-stage programs from Clade’s αβ iT platform spanning across cancer and autoimmune diseases. The results of Clade’s operations have been included in the consolidated financial statements since that date. A total of 3,741,646 common shares were issued to the Clade shareholders on the date of close, which were valued based on the closing price of common stock on that date.

Contingent consideration was estimated at fair value on the date of the close and consists of both additional stock consideration (“Holdback Shares”) as well as a contingent milestone payment of $10 million (“Clade Milestone”). The Holdback Shares total up to 793,687 shares of common stock consideration which will be issued and delivered to the sellers on the eighteen-month anniversary of the Closing Date, subject to potential reduction based on indemnification claims favoring the Company, if any. This contingent consideration was recorded at fair value as of the closing date, based on the closing stock price on that date, adjusted for a discount for lack of marketability, and totaled $2.6 million. Contingent consideration also includes the Clade Milestone, which consists of one potential clinical development milestone payment of $10 million, which may be paid in cash, shares, or a combination thereof, upon the achievement of the milestone. The fair value of this contingent consideration was estimated based on the probability of milestone achievement, and an estimated discount rate, and totaled $7.1 million.

The Company recognized $895 of acquisition-related costs during the period ended June 30, 2024, which were expensed as incurred in the consolidated statement of operations.

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The following table summarizes the provisional fair values of the assets acquired and liabilities assumed at the date of the acquisition:


Consideration transferred:
Cash consideration	$	14,854
Fair value of common stock (3,741,646 at closing price of $4.05)		15,154
Contingent consideration		9,722
Total consideration transferred	$	39,730

Assets acquired:
Cash and restricted cash	$	5,246
Prepaid expenses and other assets		400
Property and equipment		2,652
Right-of-use operating lease		8,065
In-process research and development ("IPR&D")		33,300
Goodwill		5,091
Total assets acquired	$	54,754

Liabilities assumed:
Accounts payable	$	868
Accrued expenses and other current liabilities		2,353
Lease liabilities - operating lease		8,065
Contingent consideration		372
Deferred tax liability		3,366
Total liabilities assumed	$	15,024

Net assets acquired	$	39,730

The amounts above represent the Company's provisional fair value estimates related to the acquisition as of April 11, 2024 and are subject to subsequent adjustments as additional information is obtained during the applicable measurement period. The primary areas of estimates that are not yet finalized include the valuation of the identifiable intangible assets and income taxes. The purchase price was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their acquisition date estimated fair values. The identifiable intangible assets consist of IPR&D which were assigned fair values of $33,300 million. The fair value of the IPR&D was estimated using the multi-period excess earnings method, which the Company estimates future cash flows attributable to the technology and applies a probability of success and a discount rate of 16.4%.

These nonrecurring fair value measurements are Level 3 measurements within the fair value hierarchy.

Goodwill represents the excess of the purchase price over the net identifiable tangible and intangible assets acquired. The Company believes the goodwill related to the acquisition was attributable to the expected synergies, value of the assembled workforce as well as the collective experience of the management team with regards to its operations. The goodwill is not expected to be tax deductible.

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Results for six months ended June 30, 2024, included a net loss of $2,113 from Clade. The following table presents unaudited supplemental pro forma financial information as if the Clade acquisition had occurred on January 1, 2023.


		Three Months Ended	Three Months Ended	Six Months Ended	Six Months Ended
		June 30, 2024	June 30, 2023	June 30, 2024	June 30, 2023
Revenue	$	771	99	1,625	1,819
Net loss		(33,189)	(34,136)	(71,797)	(75,769)

The pro forma financial information presented above has been prepared by combining the Company’s historical results and the historical results of Clade and adjusting those results to eliminate historical transaction costs and to reflect the effects of the acquisition as if they occurred on January 1, 2023. These results do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated above, or that may result in the future, and do not reflect potential synergies or additional costs following the acquisition.

Note 4—Financial instruments and fair value measurements

The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2024 by level within the fair value hierarchy:


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	32,183		—		—	$	32,183
U.S. Treasury		—		43,568		—		43,568
Corporate bonds		—		184,603		—		184,603
Total	$	32,183	$

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IPSC Century Therapeutics Inc