# Celularity Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Celularity Inc](/companies/celu.md) (CIK 1752828)
- Form: 10-Q
- Filed: 2024-01-03
- Accepted by EDGAR: Jan 2, 2024, 21:12 ET
- Period: 2023-09-30
- Accession: 0000950170-24-000474
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1752828/000095017024000474/celu-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1752828/000095017024000474/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $3.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $10.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $184.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $4.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $5.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $30.7m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $10.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $37.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$99.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$205.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$93.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$205.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.50 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.50 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.19 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 188,317,262 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 173,536,134 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$34.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $468.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $273.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $16.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $157.2m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $84.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $126.9m | us-gaap:Liabilities |
| Short-term borrowings | at 2023-09-30 | $14.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $30.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 71,250 characters.

*You should read the following discussion of our financial condition and results of operations together with the unaudited interim condensed consolidated financial statements and the notes thereto included elsewhere in this report and other financial information included in this report. The following discussion may contain predictions, estimates and other forward-looking statements. See “Special Note Regarding Forward-Looking Statements.” These forward-looking statements involve a number of risks and uncertainties, including those discussed in this report and under “Part I — Item 1A. Risk Factors” in the 2022 Form 10-K. These risks could cause our actual results to differ materially from any future performance suggested below.*

### Overview

We are a biotechnology company leading the next evolution in cellular medicine by developing off-the-shelf placental-derived allogeneic cell therapies for the treatment of cancer and immune and infectious diseases. We are developing a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor, or CAR, natural killer, or NK cells, mesenchymal-like adherent stromal cells, or MLASCs, and exosomes. These therapeutic candidates target indications across cancer, infectious and degenerative diseases. We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. We also actively develop and market biomaterial products derived from the placenta. Prior to 2023, we marketed those products domestically primarily serving the orthopedic and wound care markets. We now intend to market placental biomaterials outside of the United States with an initial focus on markets in the Middle East and North Africa. Our biomaterials business today is comprised primarily of the sale of our Biovance and Interfyl products, directly or through our distribution network. Biovance is decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Interfyl is human connective tissue matrix derived from the placenta of a healthy, full-term pregnancy. It is used by a variety of medical specialists to fill soft tissue deficits resulting from wounds, trauma, or surgery. We are developing new placental biomaterial products to deepen the commercial pipeline beyond Biovance and Interfyl. We also plan to leverage our core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties. The initial focus of this new service offering will be to assist development stage cell therapy companies with the development and manufacturing of their therapeutic candidates for clinical trials. In January 2023, we announced reprioritization of efforts, which resulted in a reduction of approximately one-third of our workforce as of March 2023. We are no longer actively recruiting into our clinical programs.

Our Celularity IMPACT platform capitalizes on the benefits of placenta-derived cells to target multiple diseases, and provides seamless integration, from bio sourcing through manufacturing cryopreserved and packaged allogeneic cells, in our purpose-built U.S.-based 147,215 square foot facility. We believe the use of placental-derived cells, sourced from the placentas of full-term healthy informed consent donors, has potential inherent advantages, from a scientific and an economic perspective. First, relative to adult-derived cells, placental-derived cells demonstrate greater stemness, meaning the ability to expand and persist. Second, placental-derived cells are immunologically naïve, meaning the cells have never been exposed to a specific antigen, and suggesting the potential for less toxicity and for low or no graft-versus-host disease, or GvHD, in transplant. Third, our placental-derived cells are allogeneic, meaning they are intended for use in any patient, as compared to autologous cells, which are derived from an individual patient for that patient’s sole use. We believe this is a key difference that will enable readily available off-the-shelf treatments that can be delivered faster, more reliably, at greater scale and to more patients.

From a single source material, the postpartum human placenta, we derive four allogeneic cell or extracellular vesicle types: T cells, genetically modified NK cells, MLASCs and exosomes, which have the potential to support multiple therapeutic programs. CYCART-19 is a placental-derived CAR-T cell therapy, previously in development for the treatment of B-cell malignancies, initially targeting the cluster of differentiation 19, or CD19, receptor, the construct and related CARs for which are in-licensed from Sorrento. In the first quarter of 2022, we submitted an IND to investigate CYCART-19 for treatment of B-cell malignancies and in late May 2022, received formal written communication from FDA requesting additional information before we could proceed with the Phase 1/2 clinical trial. After assessing the status of the IND to determine an optional path forward for the program, we elected to terminate development of CYCART-19 for B-cell malignancies during the third quarter of 2023. We may continue pre-clinical development of other T-cell candidates. CYNK-001 is a placental-derived unmodified NK cell. In 2022, we had active and approved clinical trials under development for the treatment of acute myeloid leukemia, or AML, a blood cancer, and for glioblastoma multiforme, or GBM, a solid tumor cancer. Due to a need to prioritize corporate resources, in January 2023 we announced our intention to cease recruitment in the GBM and the HER2+ gastric trials. In addition, in April 2023, we announced based on the preliminary results of the phase 1 trial data of CYNK-001, the AML trial would be closed to further enrollment and completed follow up. We are not actively investigating CYNK-001 for any indication. During the second quarter of 2023, we fully impaired the in-process research and development ("IPR&D") assets associated with CYNK-001. APPL-001 is a placenta-derived MLASC being developed for the treatment of Crohn’s disease, and other degenerative diseases. Due to an internal alignment of corporate resources, we paused development in exosomes to focus on other priorities.

Our Celularity IMPACT manufacturing process is a seamless, fully integrated process designed to optimize speed and scalability from the sourcing of placentas from full-term healthy informed consent donors through the use of proprietary processing methods, cell selection, product-specific chemistry, manufacturing and controls, or CMC, advanced cell manufacturing and cryopreservation. The result is a suite of allogeneic inventory-ready, on demand placental-derived cell therapy products. We also operate and manage a commercial biobanking business that includes the collection, processing and cryogenic storage of certain birth byproducts for third-parties.

Our current science is the product of the cumulative background and effort over two decades of our seasoned and experienced management team. We have our roots in Anthrogenesis Corporation, or Anthrogenesis, a company founded under the name Lifebank in 1998 by Robert J. Hariri, M.D., Ph.D., our founder and Chief Executive Officer, and acquired in 2002 by Celgene Corporation, or Celgene. The team continued to hone their expertise in the field of placental-derived technology at Celgene through August 2017, when we acquired Anthrogenesis. We have a robust global intellectual property portfolio comprised of over 1,500 patents and patent applications protecting our Celularity IMPACT platform, our processes, technologies and current key cell therapy programs. We believe this know-how, expertise and intellectual property will drive the rapid development and, if approved, commercialization of these potentially lifesaving therapies for patients with unmet medical needs.

### Recent Developments

#### Private Placement - March 2023

In March 2023, we closed a private placement of (i) 9,381,841 shares of our Class A common stock, and (ii) accompanying warrants to purchase up to 9,381,841 shares of our Class A common stock, or the March 2023 PIPE Warrants, for $0.8343 per share and $0.125 per accompanying March 2023 PIPE Warrant, for an aggregate purchase price of approximately $9.0 million (of which Dr. Hariri subscribed for $2.0 million) pursuant to that certain securities purchase agreement dated March 20, 2023 with two accredited investors, including our Chairman and Chief Executive Officer, Dr. Robert Hariri. Each March 2023 PIPE Warrant has an exercise price of $3.00 per share, is immediately exercisable, will expire on March 27, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization.

We also entered into a registration rights agreement with the purchasers whereby we agreed to register the resale of the shares of our Class A common stock and the shares of our Class A common stock issuable upon exercise of the March 2023 PIPE Warrants as well as the shares issued as payment pursuant to the binding term sheet for a sublicense (described below). We were required to prepare and file a registration statement with the Securities and Exchange Commission, or SEC, within 30 days of the filing of our annual report on Form 10-K for the year ended December 31, 2022, and to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of such review, and in any event, no later than June 30, 2023.

In September 2023, we entered into a warrant amendment on the March 2023 PIPE Warrants with the unaffiliated investor to reduce the exercise price from $3.00 per share to $1.00 per share for warrants to purchase 7,296,987 shares of Class A common stock. The warrant amendment was executed as consideration for professional services rendered to us. As a result, we accounted for the transaction in accordance with *ASC 718 Stock-Based Compensation* based on the calculated incremental fair value attributable to the modified warrant compared to the original warrant immediately prior to the modification and recognized an expense of $402,000 on the condensed consolidated statements of operations for the three and nine months ended September 30, 2023.

#### Senior Secured Bridge Loans

In March 2023, we entered into a Loan Agreement with C.V. Starr & Co. Inc., one of our stockholders, or C.V. Starr, providing for a loan in the aggregate principal amount of $5.0 million net of an original issue discount of $100,000, which bears interest at a rate of 12.0% per year, with the first year of interest being paid in kind on the last day of each month, and matures March 17, 2025, or the Starr Bridge Loan, and warrants to acquire up to an aggregate 750,000 shares of our Class A common stock, or the Starr Warrant, at a purchase price of $0.125 per whole share underlying the Starr Warrant (or $93,750). The Starr Warrant has a 5-year term and an exercise price of $0.71 per share. In June 2023, we granted C.V. Starr additional warrants to acquire up to an aggregate 500,000 shares of our Class A common stock which has a 5-year term and an exercise price of $0.81 per share.

Pursuant to the terms of the Starr Bridge Loan, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five consecutive business days. In addition to the negative covenants in the Starr Bridge Loan, the Starr Bridge Loan include customary events of default. Pursuant to the terms of the Starr Bridge Loan, we granted Starr a senior security interest in all of our assets.

In May 2023, we entered into a senior secured loan agreement with Resorts World Inc Pte Ltd, or RWI, providing for an initial loan in the aggregate principal amount of $6.0 million net of an original issue discount of $120,000, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures June 14, 2023, or the RWI Bridge Loan. Pursuant to the terms of the RWI Bridge Loan, we are required to apply the net proceeds from the RWI Bridge Loan to the payment due to Yorkville pursuant to that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA. Any other use of proceeds requires prior written approval by RWI. RWI is affiliated with Lim Kok Thay, a member of our board of directors.

In June 2023, we entered into an amended and restated senior secured loan agreement, or the Amended Loan, with RWI, to amend and restate the previously announced senior secured loan agreement with RWI, or the Initial Loan, in its entirety. The Amended Loan provided for an additional loan in the aggregate principal amount of $6.0 million net of an original issue discount of $678,000, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures March 17, 2025. The Amended Loan extended the maturity date of the Initial Loan to March 17, 2025. In addition, the Amended Loan provided for the issuance of warrants to acquire up to an aggregate of 3,000,000 shares of Celularity’s Class A common stock, or the RWI Warrant, at a purchase price of $0.125 per whole share underlying the RWI Warrant (or an aggregate purchase price of $375,000). The RWI Warrant has a 5-year term and an exercise price of $0.81 per share. Pursuant to the terms of the Amended Loan, Celularity was required to apply the net proceeds to the payments due under the Yorkville PPA.

Pursuant to the terms of the RWI Bridge Loan, as amended, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any of our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five consecutive business days, and includes customary events of default. We entered into a forbearance agreement with RWI in September 2023. We granted RWI a senior security interest in all of our assets, pari passu with C.V. Starr pursuant to the Starr Bridge Loan.

During the third quarter of 2023 and as of the issuance date, our cash and cash equivalents continues to be below the $3.0 million minimum liquidity covenant, which per the terms of the loan agreements with RWI and C.V. Starr caused an event of default. Since we are currently in default and its probable that we would not be in compliance with the $3.0 million minimum liquidity covenant at a subsequent measurement date, we reclassified both loans as a current liability reflected as short-term debt - related parties on the condensed consolidated balance sheets as of September 30, 2023.

#### Binding Term Sheet for Sublicense Agreement

Concurrent with the entry into the securities purchase agreement for the March 2023 private placement described above; we executed a binding term sheet to negotiate and enter into a sublicense of certain assets from an affiliate of the accredited investor party to the private placement transaction. Pursuant to the binding term sheet, we paid the sublicensor $3.0 million in cash and issued $1.0 million of shares of our Class A common stock (1,694,915 shares based on the closing price on March 17, 2023) as consideration for stem-cells inventory to be used in research and development.

#### Registered Direct Offerings

In April 2023, we closed on a registered direct offering of 9,230,770 shares of our Class A common stock together with warrants to purchase up to 9,230,770 shares of our Class A common stock at a combined purchase price of $0.65 per share and accompanying warrant, resulting in total gross proceeds of approximately $6.0 million before deducting placement agent commissions and other estimated offering expenses. The warrants have an exercise price of $0.75, will be exercisable beginning six months after the date of issuance and will expire five years thereafter. We also amended existing warrants to purchase up to an aggregate of 4,054,055 shares at an exercise price of $8.25 per share, with an expiration date of May 20, 2027, held by the same investor, effective upon the closing of the offering to reduce the exercise price to $0.75 per share and extended expiration date to five and one-half years following the closing of the offering. We used the $5.5 million net proceeds from the offering to repay our obligations to Yorkville under that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA.

In July 2023, we closed on a securities purchase agreement with an institutional accredited investor, or the Purchase Agreement, providing for the sale and issuance of (i) 8,571,429 shares of its Class A common stock, par value $0.0001 per share, or the Class A common stock, and (ii) accompanying warrants to purchase up to 8,571,429 shares of Class A common stock, at a combined purchase price of $0.35 per share and accompanying warrant, for an aggregate purchase price of approximately $3.0 million. Each warrant has an exercise price of $0.35 per share, is initially exercisable beginning six months following the date of issuance, and will expire five years from the initial exercise date. In connection with the offering described above, we also entered into an amendment to certain existing warrants to purchase up to an aggregate of 8,928,572 shares at an exercise price of $0.75 per share and a termination date of October 10, 2028 (consisting of all of the warrants originally issued in May 2022 and a portion of which were issued in April 2023), pursuant to which, effective upon the closing of the offering, such amended warrants will have a reduced exercise price of $0.35 per share.

#### Private Placement – May 2023

In May 2023, we entered into a securities purchase agreement with a group of accredited investors, providing for the private placement of an aggregate (i) 5,813,945 shares of our Class A common stock and (ii) accompanying warrants to purchase up to 5,813,945 shares of Class A common stock, or the May 2023 PIPE Warrants, for $0.52 per share and $0.125 per accompanying May 2023 PIPE Warrant, for an aggregate purchase price of approximately $3.7 million, which private placement closed on May 18, 2023 upon satisfaction of customary closing conditions.

Each May 2023 PIPE Warrant has an exercise price of $1.00 per share, is immediately exercisable, will expire on May 18, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization. The May 2023 PIPE Warrants may not be exercised if the aggregate number of shares of Class A common stock beneficially owned by the holder thereof (together with its affiliates) would exceed the specified percentage cap provided therein (which may be adjusted upon 61 days advance notice) immediately after exercise thereof.

We also entered into a registration rights agreement with the purchasers whereby we agreed to register the resale of the shares of Class A common stock and the shares of Class A common stock issuable upon exercise of the May 2023 PIPE Warrants. We will be required to prepare and file a registration statement with the SEC within 30 days, and to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of such review, and in any event, no later than July 31, 2023.

#### Regeneron Research Collaboration Services Agreement - August 2023

On August 25, 2023, we entered into a multi-year research collaboration services agreement with Regeneron Pharmaceuticals, Inc. or Regeneron, pursuant to which we will support the research effort of Regeneron's allogeneic cell therapy candidates (the Regeneron Services Agreement). The Regeneron Services Agreement’s initial focus is the research on a targeted allogeneic gamma delta chimeric antigen receptor (CAR) T-cell therapy owned by Regeneron designed to enhance proliferation and potency against solid tumors. Payments to us under the Regeneron Services Agreement included a non-refundable up-front payment and payments based upon the achievement of defined milestones according to written statements of work. The Regeneron Services Agreement will expire five years from the effective date and may be terminated immediately by either party for the uncured material breach, bankruptcy, or insolvency of the other party. Regeneron may also terminate for convenience upon 30 days’ written notice.

#### Lease Amendment - September 2023

On September 14, 2023, we entered into a lease amendment with the landlord to reduce the amount required to be held under the letter of credit by approximately $4.9 million to a new letter of credit for $9.9 million in exchange for an increase in annual base rent of approximately $400,000 per annum. The new base rental rate commenced in October 2023. The new letter of credit account settled on October 17, 2023, which reduced our restricted cash allowing for funds to be used for general corporate purposes. We also agreed to cooperate with the landlord on a sustainability plan and we received consent for a desk sharing arraignment to support the Regeneron Research and Collaboration Agreement.

#### Cell Therapy – Impairments

During the third quarter of 2023, our stock price and market capitalization continued to further decline. We also elected to terminate development of CYCART-19 for B-cell malignancies during the third quarter of 2023, as well as paused development in exosomes. Therefore, we tested for impairment due to these triggering events. Based on the results of the impairment analysis, the carrying value exceeded the fair value on the Cell Therapy reporting unit and we incurred a full goodwill impairment charge for the remaining goodwill balance on the Cell Therapy reporting unit. We also performed a reconciliation of the aggregate fair value of each reporting unit to the market capitalization of the Company. The analysis showed the fair value of the reporting units approximated our market capitalization, indicating an insignificant control premium.

Based on the results of the impairment analyses, we recognized a $82.7 and $112.3 million goodwill impairment charge during the three and nine months ended September 30, 2023, respectively, relating to our Cell Therapy reporting unit in our condensed consolidated statements of operations. In addition, we incurred an IPR&D impairment charge of $107.8 million due to discontinuing our Cell Therapy clinical trials during the nine months ended September 30, 2023.

#### Palantir – Cease-Use Costs

In May 2021, our subsidiary, Legacy Celularity executed a Master Subscription Agreement with Palantir Technologies, Inc., or Palantir, under which it agreed to pay $40.0 million over five years for access to Palantir’s Foundry platform along with certain professional services. In January 2023, we ceased use of the software and provided a notice of dispute to Palantir on the basis that the software has not performed as promised and that Palantir has failed to provide us with the professional services necessary to successfully implement, integrate and enable the Foundry platform. As a result, in accordance with *ASC 420 Exit or Disposal Costs,* during the nine months ended September 30, 2023, we recognized the remaining related cease-use costs and liability estimated based on the discounted future cash flows of contract payments for $24.2 million which is included as a component of research and development expense in the condensed consolidated statements of operations. We have both a current and noncurrent liability for accrued research and development software on the condensed consolidated balance sheets for a total liability of $31.5 million and $7.3 million as of September 30, 2023 and December 31, 2022, respectively. For the nine months ended September 30, 2022, we had recorded $6.0 million, which was on a straight-line basis, which was included as a component of research and development expense in our condensed consolidated statements of operations. Palantir has filed to compel arbitration of this dispute. See also Item 1 of Part II of this quarterly report on Form 10-Q.

On December 21, 2023, we entered into a settlement and release agreement pursuant to the JAMS arbitration proceeding asserting claims for declaratory relief and breach of contract relating to the Palantir Master Subscription Agreement. Both parties agreed to dismiss the arbitration proceeding and dispute and provide for mutual releases upon satisfaction of our settlement payment obligation. We agreed to pay Palantir a total settlement payment of $3,500 with $1,500 to be paid by January 2, 2024, and the remaining $2,000 to be paid by March 21, 2024. As of the issuance date no payments have been made. In the event of a material breach or default by the breaching party, and a failure to cure the breach within five business days, liquidated damages amount of $250 shall be incurred.

#### Middle East Distribution

We continue to work with our distribution partners to enable sales of our biomaterial products in the Middle East. The commercialization of our biomaterial products is subject to local regulatory approval, and we are actively working with our partners to obtain such approvals from health authorities in the Kingdom of Saudi Arabia and the United Arab Emirates. As of the date of this quarterly report on Form 10-Q, we have not received the requisite local regulatory approvals and have not generated any revenue from sales of our biomaterial products in these territories.

#### Government Regulation

In August 2023, the FDA conducted an inspection at our Florham Park, New Jersey manufacturing facility. The FDA issued a Form FDA 483, which is a list of inspectional observations provided at the conclusion of the inspection, relating to our Interfyl and CentaFlex human tissue-based biomaterial products. Specifically, the FDA issued a Form 483 consisting of 7 observations that generally pertain to FDA’s current good manufacturing practices (“cGMP”) regulations for drug and biologic products. We provided a timely response to the FDA regarding each observation asserting that the subject products are not drug or biologic products subject to the drug and biologic cGMP regulations, rather these products are solely subject to FDA’s current good tissue practices (“cGTP”) regulations and, thus, the Form 483 observations were not applicable. The FDA had no observations regarding our compliance with cGTP regulations. We remain committed to resolving the FDA’s concerns; however, it is not possible to predict the outcome or timing of a resolution at this time. There can be no assurance that the FDA will be satisfied with our responses to the Form 483 inspectional observations, nor any assurance as to the timeframe that may be required for us to adequately address the FDA’s concerns.

### Going Concern

In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, we evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

As an emerging clinical-stage biotechnology company, we are subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since our inception, substantially all of management’s efforts have been devoted to making investments in research and development including basic scientific research into placentally-derived allogeneic cells, pre-clinical studies to support our current and future clinical programs in cellular therapeutics, and clinical development of our cell programs as well as facilities and selling, general and administrative expenses that support our core business operations (collectively the “investments”), all at the expense of our short-term profitability. We have historically funded these investments through limited revenues generated from our biobanking and degenerative disease businesses and issuances of equity and debt securities to public and private investors (these issuances are collectively referred to as “outside capital”). Notwithstanding these efforts, management can provide no assurance that our research and development and commercialization efforts will be successfully completed, or that adequate protection of our intellectual property will be adequately maintained. Even if these efforts are successful, it is uncertain when, if ever, we will generate significant sales or operate in a profitable manner to sustain our operations without needing to continue to rely on outside capital. Continued decline in our share price, further discontinuation of clinical trials, and other changes in the business or market conditions could result in a material impairment of our long-lived assets in a future period.

As of the date the accompanying consolidated financial statements were issued, or the issuance date, management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40:

- Since inception, we have incurred significant losses and net cash used in operating activities. For the nine months ended September 30, 2023, we incurred a net loss of $205.8 million and net cash used in operating activities of $34.3 million. As of September 30, 2023, we had an accumulated deficit of $851.3 million. We expect to continue to incur significant losses and use net cash for operations for the foreseeable future.
- As of the issuance date, we had approximately $0.3 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations for a period of 12 months beyond the issuance date.
- We expect to incur substantial expenditures to fund our investments for the foreseeable future. In order to fund these investments, we will need to secure additional sources of outside capital. While we are actively seeking to secure additional outside capital (and have historically been able to successfully secure such capital), as of the issuance date, no additional outside capital has been secured or was deemed probable of being secured. In addition, management can provide no assurance that we will be able to secure additional outside capital in the future or on terms that are acceptable to us. Absent

an ability to secure additional outside capital in the very near term, we will be unable to meet our obligations as they become due over the next 12 months beyond the issuance date.

- We had approximately $17.0 million of principal borrowings outstanding under a financing arrangement referred to as the PPA with a private investor, Yorkville, as of September 30, 2023. We entered into to a letter agreement with Yorkville in September 2023 to extend the maturity date of the outstanding note to December 31, 2023. As part of the agreement to extend the maturity date of the note, we were required to pay Yorkville $2.0 million on or prior to October 5, 2023. We also agreed to pay an additional $500,000 on or before October 31, 2023. We were not able to make the required payments. There is no assurance that we will have sufficient liquidity to make the payments required by the agreement. If we fail to secure a waiver from Yorkville and fail to pay the remaining repayment amount currently due, Yorkville could deem such non-payment an event of default under the PPA. If Yorkville deems such non-payment an event of default, Yorkville may, at its discretion, exercise its rights and remedies as provided in the PPA which may include, among others, accelerating the repayment of the total principal due under the PPA (approximately $17.0 million as of September 30, 2023 and as of the issuance date), plus accrued and unpaid interest and the 5% premium, and/or force us to seek protection under the provision of the U.S. Bankruptcy Code. We were unable to repay the outstanding note balance as of the December 31, 2023 maturity date. As of the issuance date, Yorkville has not provided notification to us that an event of default has occurred under the terms of the PPA.
- During the third quarter of 2023 and as of the issuance date, our cash and cash equivalents continues to be below the $3.0 million minimum liquidity covenant, which per the terms of the RWI and C.V. Starr loan agreements caused an event of default. We are actively pursuing additional capital for working capital and general corporate purposes. As part of these efforts, we intend to raise sufficient capital to cure any breach of our contractual covenants within the cure periods set forth in the respective agreements. In the event we are unable to cure such breaches during the prescribed cure period, we will seek waivers from the secured lenders. We did seek waivers from both lenders and entered into a forbearance agreement with RWI in September 2023. However, since we are currently in default and its' probable that we would not be in compliance with the $3.0 million minimum liquidity covenant at a subsequent measurement date, we reclassified both loans as a current liability reflected as short-term debt - related parties on the condensed consolidated balance sheets as of September 30, 2023. If we cannot secure a waiver from the secured lenders, the lenders may declare the outstanding principal of the loans due and payable, which may force us to seek protection under the provisions of the U.S. Bankruptcy Code.
- On March 14, 2023, we received a notice from the Nasdaq notifying us that we no longer comply with the minimum bid price requirement for continued listing on the Nasdaq Capital Market because the closing bid price for our Class A common stock has fallen below $1.00 per share for the last 30 consecutive business days. We had a period of 180 calendar days, or until September 11, 2023, to regain compliance with the minimum bid price requirement. On September 12, 2023, we obtained a second period of 180 calendar days, or until March 11, 2024, to regain compliance based on us meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. We intend to actively monitor the closing bid price of our Class A common stock and will evaluate available options to regain compliance with the minimum bid requirement. However, we can provide no assurance that we will be able to regain compliance with the minimum bid requirement during the second 180-day compliance period, or maintain compliance with the other Nasdaq listing requirements. In the event we are unable to regain or maintain compliance with the Nasdaq listing requirements, the liquidity of our publicly traded securities will be adversely affected and our ability to secure additional outside capital through public markets will be adversely affected. If we choose to implement a reverse stock split, it must be completed no later than 10 business days prior to March 11, 2024 to timely regain compliance. If it appears to Nasdaq that we will not be able to cure the deficiency, or is otherwise not eligible, Nasdaq will provide notification that our common stock will be subject to delisting.
- In the event we are unable to secure additional outside capital to fund our obligations when they become due over the next 12 months beyond the issuance date, which includes the funds needed to repay the outstanding principal on the PPA (plus unpaid accrued interest and the 5% premium) that has become due and will become fully due in December 2023, and/or obtain a waiver to defer the remaining repayment amount currently due to Yorkville, and/or regain compliance with the Nasdaq listing requirements, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of our operations, a sale of certain of our assets, a sale of our entire company to strategic or financial investors, and/or allowing us to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.

These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates that we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying unaudited interim condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

### Business Segments

We manage our operations through an evaluation of three distinct business segments: Cell Therapy, Degenerative Disease, and BioBanking. The reportable segments were determined based on the distinct nature of the activities performed by each segment. Cell Therapy broadly refers to cellular therapies we are researching and developing, which are unproven and in various phases of development. All of the cell therapy programs fall into the Cell Therapy segment. We have no approved cell therapy product and have not generated revenue from the sale of cellular therapies to date. Degenerative Disease produces, sells and licenses products used in surgical and wound care markets, such as Biovance, Biovance 3L, Interfyl and CentaFlex. We sell products in this segment both using our own sales force as well as independent distributors. We are developing additional tissue-based products for the Degenerative Disease segment. BioBanking collects stem cells from umbilical cords and placentas and provides storage of such cells on behalf of individuals for future use. We operate in the biobanking business primarily under the LifebankUSA brand. For more information about our reportable business segments refer to Note 14, “Segment Information” of our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

### Acquisitions and Divestitures

Our current operations reflect strategic acquisitions and divestitures that we have made since formation. Additional details regarding the following acquisitions can be found in Note 1, “Nature of Business” to our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

In May 2017, we acquired HLI Cellular Therapeutics, LLC, or HLI CT, from Human Longevity Inc. HLI CT operated LifebankUSA, a private umbilical cord blood stem cell and cord tissue bank that offers parents the option to collect, process and cryogenically preserve newborn umbilical cord blood stem cells and cord tissue units. The HLI CT acquisition also provided us with rights to a portfolio of biomaterial assets, including Biovance and Interfyl. At the time of the HLI CT acquisition, Biovance and Interfyl were subject to an exclusive distribution arrangement with Alliqua Biomedical, Inc., or Alliqua. In May 2018, we acquired certain assets from Alliqua, including Alliqua’s biologic wound care business, which included the marketing and distribution rights to Biovance and Interfyl.

In August 2017, we acquired Anthrogenesis, a wholly-owned subsidiary of Celgene. The Anthrogenesis acquisition included a portfolio of pre-clinical and clinical stage assets, including key cellular therapeutic assets that we continue to develop. The Anthrogenesis acquisition gives us access to Anthrogenesis’ proprietary technologies and processes for the recovery of large quantities of high-potential stem cells and cellular therapeutic products derived from postpartum human placentas, each an Anthrogenesis Product. As part of the Anthrogenesis acquisition, some of the inventors of the Anthrogenesis Products and other key members of the Anthrogenesis Product development team joined us.

In October 2018, we acquired CariCord Inc., or CariCord, a family cord blood bank established by ClinImmune Labs University of Colorado Cord Blood Bank and the Regents of the University of Colorado, a body corporate, for and on behalf of the University of Colorado School of Medicine.

### Licensing Agreements

In the ordinary course of business, we license intellectual property and other rights from third parties and have also out-licensed our intellectual property and other rights, including in connection with our acquisitions and divestitures, described above. Additional details regarding our licensing agreements can be found in Note 13, “License and Distribution Agreements” to our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

In September 2020, we entered into a license and transfer agreement, or the Sorrento Agreement, with Sorrento. Henry Ji, Ph.D., a former member of the board of directors of our wholly-owned subsidiary, which we refer to as Legacy Celularity, currently serves as President and Chief Executive Officer of Sorrento. Sorrento was also a significant stockholder of our company and invested in the July 2021 private investment in public equity financing concurrent with the closing of the business combination among our company and Legacy Celularity. Pursuant to the Sorrento Agreement, we obtained a worldwide license for the CD19 CAR construct that forms the basis of the genetic modification for CYCART-19.

In August 2017, in connection with the Anthrogenesis acquisition, we entered into a license agreement, or the Celgene License, with Celgene, which has since been acquired by Bristol Meyers Squibb. Pursuant to the Celgene License, we granted Celgene a worldwide, royalty-free, fully-paid up, non-exclusive license, without the right to grant sublicenses (other than to its affiliates), under Anthrogenesis’ intellectual property in existence as of the date of the Celgene License or as developed by Celgene in connection with any transition services activities related to the merger for non-commercial pre-clinical research purposes, as well as to develop, manufacture, commercialize and fully exploit products and services that relate to the construction of any CAR, the modification of any T-cell or NK cell to express such a CAR, and/or the use of such CARs or T-cells or NK cells for any purpose, which commercial license is sublicensable. Either party may terminate the Celgene License upon an uncured material breach of the agreement by the other party or insolvency of the other party.

In August 2017, Legacy Celularity also issued shares of its Series X Preferred Stock to Celgene as merger consideration and entered into a contingent value rights agreement, or the CVR Agreement, with Celgene pursuant to which Legacy Celularity issued one contingent value right or CVR, in respect of each share of Legacy Celularity Series X Preferred Stock issued to Celgene in connection with the Anthrogenesis acquisition. The CVR Agreement entitles the holders of the CVRs to an aggregate amount, on a per program basis, of $50.0 million in regulatory milestones and an aggregate $125.0 million in commercial milestone payments with respect to certain of our investigational therapeutic programs. In addition, with respect to each such program and calendar year, the CVR holders will be entitled to receive a royalty equal to a mid-teen percentage of the annual net sales for such program’s therapeutics from the date of the first commercial sale of such program’s therapeutic in a particular country until the latest to occur of the expiration of the last to expire of any valid patent claim covering such program therapeutic in such country, the expiration of marketing exclusivity with respect to such therapeutic in such country, and August 2027 (i.e., the tenth anniversary of the closing of the acquisition of Anthrogenesis). No payments under the CVR Agreement have been made to date. We estimate the liability associated with the CVR quarterly. Changes to that liability include but are not limited to changes in our clinical programs, assumptions about the commercial value of those programs and the time value of money.

### Components of Operating Results

### Net revenues

Net revenues include: (i) sales of biomaterial products, including Biovance, Biovance 3L, Interfyl, and CentaFlex of which our direct sales are included in Product Sales and Rentals while sales through our network of distribution partners are included in License, royalty and other; and (ii) the collection, processing and storage of umbilical cord and placental blood and tissue after full-term pregnancies, collectively, Services.

### Cost of revenues

Cost of revenues consists of labor, material and overhead costs associated with our two existing commercial business segments, biobanking and degenerative disease. Biobanking costs include the cost of storage and transportation kits for newly banked materials as well as tank and facility overhead costs for cord blood and other units in storage. Degenerative disease costs include costs associated with procuring placentas, qualifying the placental material and processing the placental tissue into a marketable product. Costs in the degenerative disease segment include labor and overhead costs associated with the production of the Biovance, Biovance 3L, Interfyl and CentaFlex product lines. Cost of revenues associated with direct sales are part of Product Sales and Rentals while cost of revenues associated with sales through our network of distribution partners are included in License, royalty and other.

### Research and development expense

Our research and development expenses primarily relate to basic scientific research into placentally derived allogeneic cells, pre-clinical studies to support our current and future clinical programs in cellular medicine, clinical development of our NK cell programs and facilities, depreciation and other direct and allocated expenses incurred as a result of research and development activities. We incur expenses for third party CROs, that assist in running clinical trials, clinical trial supply costs, personnel expenses for research scientists, specialized chemicals and reagents used to conduct biologic research, expense for third party testing and validation and various overhead expenses including rent and facility maintenance expense. Basic research, research collaborations involving partners and research designed to enable successful regulatory submissions is critical to our current and future success in cell therapy. As a result of our reprioritization efforts, we anticipate that our research and development expenditures will decrease in the near term. The amount of our research and development expenditures will depend on numerous factors, including the timing of clinical trials, preliminary evidence of efficacy in clinical trials and the number of indications that we choose to pursue.

### General and administrative expense

Selling, general and administrative expense consists primarily of personnel costs including salaries, bonuses, stock compensation and benefits for specialized staff that support our core business operations. Executive management, finance, legal, human resources and information technology are key components of selling, general and administrative expense and those expenses are recognized when incurred. We expect that as a result of our reprioritization efforts, we will see a decrease in our selling, general and administrative costs in the near term. The magnitude and timing of our selling, general and administrative costs will depend on the progress of clinical trials, commercialization efforts for any approved therapies including the release of new products within the degenerative disease portfolio, changes in the regulatory environment or staffing needs to support our business strategy.

### Change in fair value of contingent consideration liability

Because the acquisitions of Anthrogenesis from Celgene and HLI CT were accounted for as business combinations, we recognized acquisition-related contingent consideration on the balance sheets in accordance with the acquisition method of accounting. See “— Acquisitions and Divestitures” for more information. The fair value of contingent consideration liability is determined based on a probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the likelihood of achieving regulatory and commercial milestone obligations and royalty obligations. The fair value of acquisition related contingent consideration is remeasured each reporting period with changes in fair value recorded in the condensed consolidated statements of operations. Changes in contingent consideration fair value estimates result in an increase or decrease in our contingent consideration obligation and a corresponding charge or reduction to operating results. Key elements of the contingent consideration are regulatory milestone payments, sales milestone payments and royalty payments. Regulatory payments are due on regulatory approval of certain cell types in the United States and the European Union. Regulatory milestone payments are one time but are due prior to any potential commercial success of a cell type in a specific indication. Royalty payments are a percentage of net sales. Sales milestone payments are due when certain aggregate sales thresholds have been met. Management must use substantial judgment in evaluating the value of the contingent consideration. Estimates used by management include but are not limited to: (i) the number and type of clinical programs that we are likely to pursue based on the quality of our preclinical data, (ii) the time required to conduct clinical trials, (iii) the odds of regulatory success in those trials, (iv) the potential number of patients treatable for the indications in which we are successful and (v) the pricing of treatments that achieve commercial status. All of these areas involve substantial judgment on the part of management and are inherently uncertain.

### Results of Operations

### Comparison of Three Months Ended September 30, 2023 to September 30, 2022

| Net revenues | Three Months Ended September 30, 2023 | September 30, 2022 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Product sales and rentals | $1,684 | $1,041 | $643 | 61.8% |
| Services | 1,427 | 1,405 | 22 | 1.6% |
| License, royalty and other | 675 | 1,689 | (1,014) | (60.0)% |
| Total revenues | 3,786 | 4,135 | (349) | (8.4)% |
| Operating expenses: |  |  |  |  |
| Cost of revenues (excluding amortization of acquired intangible assets) |  |  |  |  |
| Product sales and rentals | 557 | 812 | (255) | (31.4)% |
| Services | 398 | 899 | (501) | (55.7)% |
| License, royalty and other | 2,647 | 5,502 | (2,855) | (51.9)% |
| Research and development | 5,182 | 20,351 | (15,169) | (74.5)% |
| Software cease-use costs | 243 | — | 243 | 100.0% |
| Selling, general and administrative | 10,748 | 14,907 | (4,159) | (27.9)% |
| Change in fair value of contingent consideration liability | — | (33,243) | 33,243 | (100.0)% |
| Goodwill impairment | 82,714 | — | 82,714 | 100.0% |
| Amortization of acquired intangible assets | 553 | 553 | — | — |
| Total operating expenses | 103,042 | 9,781 | 93,261 | 953.5% |
| Loss from operations | $(99,256) | $(5,646) | $(93,610) | 1658.0% |

#### Net Revenues and Cost of Revenues

Net revenues for the three months ended September 30, 2023 was $3.8 million, a decrease of $0.3 million, or 8.4% compared to the prior year period. The decrease was primarily due to decreased license, royalty and other revenues due to loss of business with Evolution, a former distribution partner offset by higher product sales.

Cost of revenues for the three months ended September 30, 2023 was $3.6 million, a decrease of $3.6 million, or 50.1% compared to the prior year period. The decrease was primarily due to the recognition of previously deferred inventory material costs variances of $4.5 million in license, royalty and other cost of revenues for the three months ended September 30, 2022 as a result of a change in production plans related to lower degenerative disease sales than previously forecasted in the prior period offset by a reserve for obsolescence recorded during the three months ended September 30, 2023.

#### Research and Development Expenses

Research and development expenses for the three months ended September 30, 2023 were $5.2 million, a decrease of $15.2 million, or 74.5% compared to the prior year period. The decrease was primarily due to lower personnel costs resulting from our March 2023 reduction in force, the Palantir platform fees captured in software cease-use costs in the current period, lower clinical trial costs and lab supplies as we determined to discontinue certain clinical trials of our cell therapy candidates, as well as lower allocated costs as compared to the prior period.

#### Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2023 were $10.7 million, a decrease of $4.2 million, or 27.9% compared to the prior year period. The primary reason for the decrease was driven by lower personnel costs and lower consulting expenses resulting from our March 2023 reduction in force.

#### Goodwill and IPR&D Impairments

Goodwill and IPR&D impairment charges for the three months ended September 30, 2023 was $82.7 million and $0, respectively, due to the decline in future revenue projections in the Cell Therapy business driven by discontinuation of clinical trials and changes in our strategy and pipeline (see Note 6, “Goodwill and Intangible Assets” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

#### Change in Fair Value of Contingent Consideration Liability

The change in fair value of contingent consideration liability for the three months ended September 30, 2023 was $0, an increase of $33.2 million, or 100% compared to the period year period. The increase resulted from a change in market-based assumptions as we discontinued our Cell Therapy clinical trials during 2023 (for more information about changes in the fair value of contingent consideration liability refer to Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

#### Other Income (Expense)

|  | Three Months Ended September 30, 2023 | September 30, 2022 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $23 | $108 | $(85) | (78.7)% |
| Interest expense | (971) | — | (971) | (100.0)% |
| Change in fair value of warrant liabilities | 5,187 | 9,333 | (4,146) | (44.4)% |
| Change in fair value of debt | 2,003 | (291) | 2,294 | 788.3% |
| Other, net | (862) | 1,278 | (2,140) | (167.4)% |
| Total other income (expense) | $5,380 | $10,428 | $(5,048) | (48.4)% |

For the three months ended September 30, 2023, other income (expense) decreased by $5.0 million compared to the prior year period. The decrease was primarily related to a change in the fair value of the warrant liabilities due to the decrease in the price of our Class A common stock (see Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

### Comparison of Nine Months Ended September 30, 2023 to September 30, 2022

| Net revenues | Nine Months Ended September 30, 2023 | September 30, 2022 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Product sales and rentals | $3,633 | $2,920 | $713 | 24.4% |
| Services | 4,062 | 4,061 | 1 | 0.0% |
| License, royalty and other | 2,964 | 6,865 | (3,901) | (56.8)% |
| Total revenues | 10,659 | 13,846 | (3,187) | (23.0)% |
| Operating expenses: |  |  |  |  |
| Cost of revenues (excluding amortization of acquired intangible assets) |  |  |  |  |
| Product sales and rentals | 1,486 | 1,711 | (225) | (13.2)% |
| Services | 1,355 | 3,112 | (1,757) | (56.5)% |
| License, royalty and other | 3,566 | 9,595 | (6,029) | (62.8)% |
| Research and development | 30,737 | 67,373 | (36,636) | (54.4)% |
| Software cease-use costs | 24,161 | — | 24,161 | 100.0% |
| Selling, general and administrative | 37,508 | 46,941 | (9,433) | (20.1)% |
| Change in fair value of contingent consideration liability | (104,339) | (73,441) | (30,898) | 42.1% |
| Goodwill impairment | 112,347 | — | 112,347 | 100.0% |
| IPR&D impairment | 107,800 | — | 107,800 | 100.0% |
| Amortization of acquired intangible assets | 1,640 | 1,640 | — | — |
| Total operating expenses | 216,261 | 56,931 | 159,330 | 279.9% |
| Loss from operations | $(205,602) | $(43,085) | $(162,517) | 377.2% |

#### Net Revenues and Cost of Revenues

Net revenues for the nine months ended September 30, 2023 was $10.7 million, a decrease of $3.2 million, or 23% compared to the prior year period. The decrease was primarily due to a $3.9 million decrease in license, royalty and other revenues due to loss of business with Evolution, a former distribution partner offset by an increase in product sales.

Cost of revenues for the nine months ended September 30, 2023 was $6.4 million, a decrease of $8.0 million, or 55.6% compared to the prior year period. The decrease was primarily due to the recognition of previously deferred inventory material costs variances of $4.5 million in license, royalty and other cost of revenues for the prior year period as well as a decrease in license, royalty and other revenues.

#### Research and Development Expenses

Research and development expenses for the nine months ended September 30, 2023 were $30.7 million, a decrease of $36.6 million, or 54.4% compared to the prior year period. The decrease was primarily due to the Palantir platform fees captured in software cease-use costs in the current period, as well as lower personnel costs, lower clinical trial costs, lab supplies, and lower allocated costs as compared to the prior period reflecting our March 2023 reduction in force and decision to discontinue clinical trials of our cell therapy candidates.

#### Goodwill and IPR&D Impairments

Goodwill and IPR&D impairment charges for the nine months ended September 30, 2023 was $112.3 million and $107.8 million, respectively, due to the decline in future revenue projections in the Cell Therapy business driven by discontinuation of clinical trials and changes in our strategy and pipeline (see Note 6, “Goodwill and Intangible Assets” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

#### Software Cease-Use Costs

Software cease-use costs for the nine months ended September 30, 2023 was $24.2 million compared to $0 for the prior period due to the recognition of the remaining contract value associated with the Palantir platform fees. See Note 9 to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for additional information related to the Palantir agreement.

#### Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2023 were $37.5 million, a decrease of $9.4 million, or 20.1% compared to the prior year period. The decrease was primarily due to lower personnel costs and consulting expenses resulting from our March 2023 reduction in force.

#### Change in Fair Value of Contingent Consideration Liability

Change in fair value of contingent consideration liability for the nine months ended September 30, 2023 was $104.3 million, a decrease of $30.9 million, or 42.1% compared to the prior year period. The decrease resulted from a change in market-based assumptions as we discontinued our Cell Therapy clinical trials during 2023 (for more information about changes in the fair value of contingent consideration liability refer to Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

#### Other Income (Expense)

|  | Nine Months Ended September 30, 2023 | September 30, 2022 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $205 | $155 | $50 | 32.3% |
| Interest expense | (2,352) | — | (2,352) | (100.0)% |
| Change in fair value of warrant liabilities | 6,788 | 31,613 | (24,825) | (78.5)% |
| Change in fair value of debt | (354) | (291) | (63) | (21.6)% |
| Other, net | (4,527) | 1,366 | (5,893) | (431.4)% |
| Total other income (expense) | $(240) | $32,843 | $(33,083) | (100.7)% |

For the nine months ended September 30, 2023, other income (expense), net decreased by $33.1 million compared to the prior year period. The decrease was primarily related to a change in the fair value of the warrant liabilities due to the decrease in the price of our Class A common stock (see Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

### Liquidity and Capital Resources

As of September 30, 2023, we had $0.3 million of cash and cash equivalents and an accumulated deficit of $851.3 million. Our primary use of our capital resources is funding our operating expenses, which consist primarily of funding the research and development of our cellular therapeutic candidates, and to a lesser extent, selling, general and administrative expenses.

As of the issuance date, we had approximately $0.3 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations and insufficient available cash to make the required Yorkville cash repayments, for a period of 12 months beyond the issuance date. These uncertainties raise substantial doubt about our ability to continue as a going concern. Refer to the *Going Concern* section above for further details.

To date, we have not had any cellular therapeutics approved for sale and have not generated any revenues from the sale of our cellular therapeutics. We generate limited revenues from our biobanking and degenerative disease businesses. We do not expect to generate any revenues from cellular therapeutic product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to therapeutic sales, marketing, manufacturing and distribution as our current commercialization efforts are limited to our biobanking and degenerative disease businesses. As a result, until such time, if ever, as we can generate substantial revenue from therapeutics and sales of our biomaterials products, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements, including drawdowns under the At-The-Market Sales Agreement, dated as of September 8, 2022, by and between us and BTIG, LLC, Oppenheimer & Co. Inc. and B. Riley Securities, Inc., or the ATM Program, and we continue to explore licensing and collaboration arrangements for our cellular therapeutics as well as distribution arrangements for our degenerative disease business including our distribution agreements with CH Trade Group, Tamer and AD Ports to support expansion abroad. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. Failure to obtain this necessary capital or address our liquidity needs may force us to delay, limit or terminate our operations, make further reductions in our workforce, discontinue our commercialization efforts for our biomaterials products as well as other clinical trial programs, liquidate all or a portion of our assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our cellular therapeutic candidates, expansion of our degenerative disease business and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our therapeutic candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our cellular therapeutic candidates, if approved, and biomaterials products we may require substantial additional funding in the future.

To date, inflation has not had a significant impact on our business. However, any significant increase in inflation and interest rates could have a significant effect on the economy in general and, thereby, could affect our future operating results.

### Cash Flows

The following table summarizes our cash flows for the nine months ended September 30, 2023 and 2022:

| Cash provided by (used in) | Nine Months Ended September 30, 2023 | September 30, 2022 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $(34,344) | $(108,291) | $73,947 |
| Investing activities | (3,468) | (4,457) | 989 |
| Financing activities | 24,108 | 118,153 | (94,045) |
| Net change in cash, cash equivalents and restricted cash | $(13,704) | $5,405 | $(19,109) |

#### Operating Activities

Net cash used in operations for the nine months ended September 30, 2023 was $73.9 million lower than the prior year period, primarily due to lower inventory spend, adjustments for non-cash items such as impairments, and recognition of the Palantir cease-use liability (See Note 9).

#### Investing Activities

We used $3.5 million and $4.5 million of net cash in investing activities for the nine months ended September 30, 2023 and 2022, respectively, which consisted of capital expenditures in each period and $3.0 million used to acquire IPR&D for the nine months ended September 30, 2023.

#### Financing Activities

We generated $24.1 million of net cash provided by financing activities for the nine months ended September 30, 2023, which consisted primarily of $12.8 million from the March 2023 and May 2023 private placements, $5.0 million of proceeds from the Starr Bridge Loan, $12.4 million of proceeds from the RWI Loans, $3.0 million of other short-term debt proceeds, $9.0 million from the April and July 2023 registered direct offerings, offset by principal repayments on the Yorkville PPA of $16.8 million and $1.5 million of issuance costs. For the nine months ended September 30, 2022 we generated $118.2 million of net cash provided by financing activities, which consisted primarily of $46.5 million in cash proceeds from the exercise of warrants to acquire 13,281,386 shares of our Class A common stock, $27.4 million in cash proceeds from the May 2022 PIPE financing, $39.2 million in cash proceeds from the Yorkville pre-paid advance agreement, and $4.4 million in cash proceeds from the sale of common stock in the ATM offering.

### Critical Accounting Estimates

Our significant accounting policies are summarized in Note 2, “Summary of Significant Accounting Policies,” included within the Notes to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q and in Note 2 to our audited annual financial statements included in the 2022 Form 10-K.

There have been no significant changes in our critical accounting policies during the nine months ended September 30, 2023 as compared with those previously disclosed in the 2022 Form 10-K.

### Recent Accounting Pronouncements

See Note 2 to our unaudited condensed consolidated financial statements included herein and Note 2 to our audited annual financial statements for the year ended December 31, 2022 included in the 2022 Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.

### JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

## Controls and procedures

As filed, 5,583 characters.

#### Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act or the Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. Based on that evaluation, management concluded that such disclosure controls and procedures were not effective, at the reasonable assurance level, as of September 30, 2023, as a result of the material weaknesses in internal control over financial reporting discussed below.

#### Material Weaknesses in Internal Control over Financial Reporting

In our most recently filed Form 10-K, we previously disclosed material weaknesses in our internal control over financial reporting as of December 31, 2022. Specifically, we had insufficient resources with the appropriate knowledge and expertise to design, implement, and operate effective internal controls over our financial reporting process that contributed to other material weaknesses within our system of internal control over financial reporting at the control activity level.

During the current quarter, we identified additional deficiencies that individually and in the aggregate represent material weaknesses in our internal control over financial reporting. Specifically, we continued to experience losses of resources with the appropriate knowledge and expertise that contributed to additional material weaknesses within the risk assessment, information and communication, and monitoring components of internal control. As a result, we have identified the following material weaknesses as of September 30, 2023:

i. *Control Environment*: We failed to demonstrate a commitment to attract, develop, and retain competent and sufficient qualified resources with an appropriate level of knowledge, experience, and training in certain areas around our financial reporting process.

ii. *Risk Assessment:* We failed to design and implement certain risk assessment activities related to identifying and analyzing risks to achieve objectives and identifying and assessing changes in the business that could impact our system of internal controls.

iii.*Control Activities:* We failed to design and implement certain control activities that address relevant risks and retain sufficient evidence of the performance of control activities.

iv. *Information and Communication:* We failed to design and implement certain information and communication activities related to obtaining or generating and using relevant quality information to support the functioning of internal control.

v. *Monitoring:* We failed to design and implement certain monitoring activities to ascertain whether the components of internal control are present and functioning.

#### Plans for Remediation of Material Weaknesses

We are currently implementing our remediation plan to address the material weaknesses identified above. Such measures include:

- Hiring additional accounting personnel to ensure timely reporting of significant matters.
- Designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing formalized controls to operate at a level of precision to identify all potentially material errors.
- Designing and implementing procedures to identify and evaluate changes in our business and the impact on our internal controls in order to plan and perform more timely and thorough monitoring activities and risk assessment analyses.
- Designing and implementing formal processes, policies and procedures supporting our financial close process.
- Engaging an outside firm to assist with the documentation, design and implementation of our internal control environment.

Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2023 and beyond, as necessary. We will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

#### Changes in Internal Control over Financial Reporting

Except for the identified material weaknesses described above and related remediation efforts to date, there have been no changes in our internal control over financial reporting that occurred during our third fiscal quarter ended September 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 254 characters.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 31, 2023.

Filed Jan 3, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-000474. Last ingested by Listed: Oct 29, 2026, 09:26 ET. No prices; not investment advice.