Stock-Based Compensation

9 Months Ended

Sep. 30, 2025

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

17. Stock-Based Compensation

2021 Equity Incentive Plan

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 2,091,528. As of September 30, 2025, 977,790 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 4.0% of the total number of shares of Celularity common 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.

2017 Equity Incentive Plan

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 merger 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 3,234,204. 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.

Stock Option Valuation

Awards with Service Conditions

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 require judgment to determine.

● The expected term of employee stock options with service-based vesting is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of non-employee options is equal to the contractual term, or its estimated term based on the underlying agreement.

● The expected stock price volatility was previously estimated using the historical volatilities of a peer group of comparable public companies. Beginning with the current period, the Company estimates expected volatility based solely on the historical volatility of its common stock.

● The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the respective expected term or contractual term.

● The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.

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 nine months ended September 30, 2025 and 2024:

	Nine Months Ended September 30, 2025			Nine Months Ended September 30, 2024
Risk-free interest rate		4.0	%		4.5	%
Expected term (in years)		6.0			5.5
Expected volatility		104.9	%		110.8	%
Expected dividend yield		0	%		0	%

The weighted average grant-date fair value per share of stock options granted during the nine months ending September 30, 2025 and 2024 were $1.95 and $3.10, 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
Outstanding at January 1, 2025		3,961,525		$	27.27		6.4		—
Granted		306,336			2.11		—		—
Exercised		(38,430	)		2.80		—		—
Forfeited		(502,743	)		18.86		—		—
Outstanding at September 30, 2025*		3,726,688		$	26.66		6.7	$	26.40
Exercisable at September 30, 2025		2,405,501		$	39.02		5.4	$	—

* Options outstanding at September 30, 2025, under the 2021 Plan and 2017 Plan were 2,818,710 and 952,978, respectively. Options outstanding at September 30, 2025 under the 2021 Plan include 45,000 awards with performance conditions (see below).

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

The Company recorded stock-based compensation expense relating to option awards with service conditions of $1,196 and $4,654 for the three and nine months ended September 30, 2025, respectively. The Company recorded stock-based compensation expense relating to option awards with service conditions of $2,077 and $6,306 for the three and nine months ended September 30, 2024, respectively. As of September 30, 2025, unrecognized compensation cost for options issued with service conditions was $2,873 and will be recognized over an estimated weighted-average amortization period of 1.69 years.

Awards with Performance Conditions

In connection with the advisory agreement signed with Robin L. Smith, MD, the Company awarded options under the 2021 Plan to acquire a total of 105,000 shares with an exercise price of $29.90 to Dr. Smith, a former member of the Company’s board of directors. The initial tranche of 25,000 stock options vested upon execution of the advisory agreement on August 16, 2022. The remaining 80,000 stock options were subject to vesting upon achievement of certain predefined milestones in relation to the expansion of the degenerative disease business. On November 1, 2022, the second tranche of 20,000 stock options vested upon achievement of the first milestone. The remaining 60,000 stock options were forfeited on August 16, 2023, upon termination of the advisory agreement.

Strategic Advisory Agreement

On May 19, 2025, the Company entered into a twelve-month strategic advisory agreement with a consulting firm (the “Consultant”), under which the Consultant was engaged to provide business development and strategic advisory services. The Consultant is an independent contractor and may be terminated by the Company upon 30 days’ notice.

As consideration for the services, the Company issued 50,000 shares of common stock upon execution of the agreement. These shares carry piggyback registration rights in connection with any future registration of Company securities. In addition, the Company issued warrants to purchase an aggregate of 1,500,000 shares of the Company’s common stock, subject to the following terms and vesting conditions:

Tranche		Shares		Exercise Price		Vesting Conditions
	1		600,000	$	3.00	50,000 warrants vest monthly from Feb 1, 2025, with the first 50,000 warrants vesting immediately upon execution.
	2		200,000	$	5.00	Vest upon the closing of a specified transaction.
	3		200,000	$	6.00	Vest upon the closing of the same transaction.
	4		500,000	$	12.00	Vest ratably over 12 months from May 19, 2025.
			1,500,000

The Company accounts for share-based compensation in accordance with ASC 718. The fair value of the restricted shares issued upon execution was measured using the market price of the Company’s common stock on the grant date. For warrants subject only to the passage of time (Tranches 1 and 4), compensation expense is recognized over the applicable vesting periods. For Tranches 2 and 3, vesting is contingent upon the successful closing of a strategic transaction. As of the filing date, management has determined that the closing of such a transaction is not yet probable. Therefore, no compensation expense has been recognized for Tranches 2 and 3. The Company will begin recognizing the expense for these tranches once achievement of the vesting condition becomes probable, measured at the grant-date fair value when that determination is made. During the three and nine months ended September 30, 2025, a total of $471 and $788, respectively, was included in compensation expense within selling, general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss.

The measurement of fair value of the warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $2.17, exercise price of $3.00 and $12.00, term of five years, volatility of 106%, risk-free rate of 4.07%, and expected dividend rate of 0%). The grant date fair value of the warrants was estimated to be $2,158 on issuance. The expected stock price volatility was previously estimated using the historical volatilities of a peer group of comparable public companies. Beginning with the current period, the Company estimates expected volatility based solely on the historical volatility of its common stock.

In addition, the Consultant is entitled to receive a success fee payable in cash (unless mutually agreed for all or part to be paid in shares) based on the net proceeds from the closing of a strategic transaction. As of the filing date, the transaction has not closed, and management has concluded it is not probable that the strategic transaction will occur. Accordingly, no liability or expense has been recorded for this contingent success fee under ASC 450. The Company will recognize the fee when the closing becomes probable, and the amount can be reasonably estimated.

Restricted Stock Units

The Company issues restricted stock units (“RSUs”) to employees that generally vest over a four-year period, with 25.0% vesting on the anniversary of the grant date, and the remainder vesting in equal annual installments thereafter so that the RSUs are vested in full on the four-year anniversary of the grant date. At times, the board of directors may approve exceptions to the standard RSU vesting terms. 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. There are no RSUs outstanding under the 2017 Plan.

The following table summarizes activity related to RSU stock-based payment awards under the 2021 Plan:

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2025		659,439		$	9.29
Granted		125,154		$	2.04
Released		(264,479	)	$	10.81
Forfeited/Expired		(31,953	)	$	11.68
Outstanding at September 30, 2025		488,161		$	6.36

The Company recorded stock-based compensation expense of $829 and $595 for the three months ended September 30, 2025, and 2024, respectively, related to RSUs. For the nine months ending September 30, 2025 and 2024, stock-based compensation expense relating to RSUs was $2,448 and $2,322, respectively . As of September 30, 2025, the total unrecognized expense related to all RSUs was $1,571, which the Company expects to recognize over a weighted-average period of 0.64 years.

Stock Units with Market Condition Vesting

In July 2023, the Company granted 174,500 market condition stock unit awards (“MCUs”) under the 2021 Plan to certain members of management. The awards are scheduled to vest over a period of one to three years from the grant date based on continuous employment and specified market conditions based on the Company’s stock price at the time of vest. As of September 30, 2025, 145,833 of the MCUs were forfeited as a result of the participant’s termination of continuous service. Stock-based compensation expense for the remaining 28,667 MCUs is being recognized over the requisite service period based on the award’s fair value on the grant date.

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Cost of revenues	$	69	$	90	$	208	$	285
Research and development		188		182		574		903
Selling, general and administrative		1,784		2,400		6,344		7,440
	$	2,041	$	2,672	$	7,126	$	8,628