# Celularity Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Celularity Inc](/companies/celu.md) (CIK 1752828)
- Form: 10-Q
- Filed: 2024-12-06
- Accepted by EDGAR: Dec 5, 2024, 19:45 ET
- Period: 2024-09-30
- Accession: 0000950170-24-133799
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1752828/000095017024133799/celu-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1752828/000095017024133799/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $9.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $36.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $3.9m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $7.6m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $3.9m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $13.6m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $12.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $42.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$11.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$29.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$16.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$44.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.73 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$2.05 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.73 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$2.05 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 21,976,339 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 21,756,498 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$8.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $105.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $133.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $14.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $128.8m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $76.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $111.6m | us-gaap:Liabilities |
| Current portion of debt | at 2024-09-30 | $42.6m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2024-09-30 | $17.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 68,522 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 2023 Form 10-K. These risks could cause our actual results to differ materially from any future performance suggested below.*

### Overview

We are a regenerative and cellular medicines company focused on addressing aging related diseases including cancer and degenerative diseases. Our goal is to ensure all individuals have the opportunity to live healthier longer. We develop and market off-the-shelf placental-derived allogeneic advanced biomaterial products including allografts and connective tissue matrices for soft tissue repair and reconstructive procedures in the treatment of degenerative disorders and diseases including those associated with aging. When we are sufficiently capitalized, we plan to resume development of 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 may potentially 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. Our advanced biomaterials business today is comprised primarily of the sale of our Biovance 3L products, directly or through our distribution network. Biovance 3L is a tri-layer 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. We are developing new placental biomaterial products to deepen the biomaterials commercial pipeline. 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.

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, NK cells, MLASCs and exosomes, which have the potential to support multiple therapeutic programs. In 2022, we had active and approved clinical trials under development utilizing CYNK-001, a placental derived unmodified NK cell, for the treatment of acute myeloid leukemia, or AML, a blood cancer, and for glioblastoma multiforme, or GBM, a solid tumor cancer. We also had an active clinical trial utilizing CYNK-101, a genetically modified NK cell, for the treatment of HER2+ Gastric 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, or IPR&D, assets associated with CYNK-001. In the first quarter of 2022, we submitted an IND to investigate CYCART-19, a placental-derived CAR-T cell therapy targeting the cluster of differentiation 19, for the treatment of B-cell malignancies. In late May 2022, we 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 optimal path forward for the CYCART-19 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. 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 350 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

On January 12, 2024, we entered into a securities purchase agreement with an existing investor, Dragasac Limited, or Dragasac, providing for the private placement of (i) 2,141,098 shares of our Class A common stock and (ii) accompanying warrants to purchase up to 535,274 shares of our Class A common stock, or the January 2024 PIPE Warrant, for $2.4898 per share and $1.25 per accompanying January 2024 PIPE Warrant, for an aggregate purchase price of approximately $6.0 million. The closing of the private placement occurred on January 16, 2024. The securities were issued pursuant to an exemption from registration provided for under Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder. Each January 2024 PIPE Warrant has an exercise price of $2.4898 per share, is immediately exercisable, will expire on January 16, 2029 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization.

Pursuant to the terms of the securities purchase agreement, we applied the net proceeds to the payment due to YA II PN, Ltd., or Yorkville, pursuant to the Pre-Paid Advance Agreement dated September 15, 2022, or PPA.

In connection with the execution of the securities purchase agreement, we also entered into an investor rights agreement with Dragasac dated as of January 12, 2024. The investor rights agreement provides Dragasac certain information and audit rights, as well as registration rights with respect to the shares (and shares underlying the January 2024 PIPE Warrant), including both the undertaking to file a registration statement within 45 days of filing of the 2023 Form 10-K, "piggyback” registration rights, as well as the right to request up to three demand rights for underwritten offerings per year; in each case subject to customary "underwriter cutback” language as well as any objections raised by the Securities and Exchange Commission, or SEC, to inclusion of securities. If the initial registration statement is not filed on or prior to May 15, 2024, the investor rights agreement provides for partial liquidating damages equal to 1% of the subscription amount each month, up to a maximum of 6%, plus interest thereon accruing daily at a rate of 18% per annum. We began to accrue partial liquidating damages and interest as of May 22, 2024. As a condition to closing, we entered into an amendment to an amended and restated distribution and manufacturing agreement with an affiliate of Dragasac to add cell therapy products in clinical development, investigational stage and/or in near-term commercial use to the list of products under the scope of the exclusive distribution and manufacturing licenses (including unmodified natural killer cells (such as CYNK-001) for aging and other non-oncology indications, PSC-100, PDA-001, PDA-002, pEXO and APPL-001 for regenerative indications).

#### 2024 Warrant Modifications

On January 12, 2024, in connection with the execution of the securities purchase agreement described above, we agreed to reprice legacy warrants to acquire 652,981 shares of our Class A common stock held by Dragasac that expire upon the earliest to occur of (i) March 16, 2025 or (ii) consummation of a change in control of our company, with a previous exercise price of $67.70 to a new exercise price of $2.4898. On March 13, 2024, in connection with the RWI Forbearance Agreement described below, we agreed to issue RWI a warrant to acquire up to 300,000 shares of common stock, which expires June 20, 2028 and has an exercise price of $5.895 per share. Additionally, on March 13, 2024, in connection with the Starr Forbearance Agreement described below, we agreed to amend the exercise price of the 75,000 March 2023 Loan Warrants expiring March 17, 2028 from $7.10 per share to $5.895 per share (the "Minimum Price" as determined pursuant to Nasdaq 5635(d) on March 13, 2024) and the 50,000 June 2023 Warrants expiring June 20, 2028 from $8.10 per share to $5.895 per share, each of which are held by C.V. Starr.

#### Senior Secured Bridge Loan

On January 12, 2024, we entered into a second amended and restated senior secured loan agreement, or the RWI Second Amended Bridge Loan, with Resorts World Inc Pte Ltd, or RWI, to amend and restate the previously announced senior secured loan agreement with RWI dated as of May 16, 2023, as amended on June 20, 2023, in its entirety. The RWI Second Amended Bridge Loan provided for an additional loan in the aggregate principal amount of $15.0 million net of an original issue discount of $3.75 million, 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 July 16, 2025. In addition, the RWI Second Amended Bridge Loan provides for the issuance of a 5-year immediately exercisable warrant to acquire up to 1,650,000 shares of our Class A common stock, or the Tranche #1 Warrant, and a warrant to acquire up to 1,350,000 shares of our Class A common stock, which will only be exercisable upon the later of (x) stockholder approval for Nasdaq purposes of its exercise price, (y) CFIUS clearance and (z) six months from issuance date, or the Tranche #2 Warrant, and will expire 5 years after it becomes exercisable. The Tranche #1 Warrant and Tranche #2 Warrant were each issued on January 16, 2024, and the Tranche #1 Warrant has an exercise price of $2.4898 per share. The Company closed the RWI Second Amended Bridge Loan and the sale of the Tranche #1 Warrant and Tranche #2 Warrant on January 16, 2024. The Tranche #2 Warrant became exercisable on July 15, 2024 (i.e., six months from the issuance date) and has an exercise price of $2.988.

Pursuant to the terms of the RWI Second Amended Bridge Loan, we were required to apply the proceeds of the additional loan (i) to the payment in full of all outstanding amounts owed to Yorkville under the PPA, (ii) to the payment of invoices of certain critical vendors, (iii) to the first settlement payment owed to Palantir Technologies, Inc., and (iv) for working capital and other purposes pre-approved by RWI. Pursuant to the terms of the RWI Second Amended Bridge Loan, we agreed to customary negative covenants restricting its ability to pay dividends to stockholders, repay or incur other indebtedness other than as permitted, or grant or suffer to exist a security interest in any of our assets, other than as permitted. In addition, we agreed to apply net revenues received through the sale of our products/provision of services in connection with or related to our distribution and manufacturing agreement with Genting Innovation Pte Ltd, a related party, as a prepayment towards the loan. The RWI Second Amended Bridge Loan includes customary events of default.

We also entered into an investor rights agreement with RWI dated as of January 12, 2024. The investor rights agreement provides RWI certain information and audit rights, as well as registration rights with respect to the shares underlying the Tranche #1 Warrant and Tranche #2 Warrant, including both the undertaking to file a registration statement within 45 days of filing of the 2023 Form 10-K, "piggyback” registration rights, as well as the right to request up to three demand rights for underwritten offerings per year; in each case subject to customary "underwriter cutback” language as well as any objections raised by the SEC to inclusion of securities. If the initial registration statement is not filed on or prior to May 15, 2024, the investor rights agreement provides for partial liquidating damages equal to 1% of the purchase price of the Tranche #1 and Tranche #2 Warrants amount each month, up to a maximum of 6%, plus interest thereon accruing daily at a rate of 18% per annum.

#### Standby Equity Purchase Agreement

On March 13, 2024, we entered into a Standby Equity Purchase Agreement, or the SEPA, with Yorkville. Under the SEPA, we have the right to sell to Yorkville up to $10.0 million of our Class A common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time, over a 36-month period. Sales of our Class A common stock to Yorkville under the SEPA, and the timing of any such sales, are at our option, and we are under no obligation to sell any shares of our Class A common stock to Yorkville under the SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below. Upon the satisfaction of the conditions precedent in the SEPA, which include having a resale shelf for shares of our Class A common stock issued to Yorkville declared effective, we have the right to direct Yorkville to purchase a specified number of shares of our Class A common stock by delivering written notice. Such purchase is referred to as an "Advance.” An Advance may not exceed 100% of the average of the daily trading volume of our Class A common stock on The Nasdaq Capital Market, or Nasdaq, during the five consecutive trading days immediately preceding the written notice. Yorkville will generally purchase shares of our Class A common stock pursuant to an Advance at a price per share equal to 97% of the lowest daily volume weighted average price, or VWAP, on Nasdaq during the three consecutive trading days commencing on the date of the delivery of the written notice (unless we specify a minimum acceptable price or there is no VWAP on the subject trading day).

Upon entry into the SEPA, we issued Yorkville a $3.15 million convertible promissory note for $2.99 million in cash (after a 5% original issue discount), or the Initial Advance. The note bears interest at an annual rate equal to 8% (increased to 18% in the event of default as provided in the note), and matures March 13, 2025. Yorkville may convert the note into shares of our Class A common stock at a price per share equal to $6.3171, provided however, on the earlier of (a) the fifth trading day following the effective date of the resale shelf, or (b) September 13, 2024, the conversion price will be the average VWAP of our Class A common stock on Nasdaq during the five consecutive trading days immediately prior to the conversion price reset date, subject to a floor price of $2.4898 per share. Upon the occurrence and during the continuation of an event of default (as defined in the note), the note (including accrued interest) will become immediately due and payable. The issuance of our Class A common stock upon conversion of the note and otherwise under the SEPA is capped at 19.99% of our outstanding Class A common stock as of March 13, 2024 in order to comply with applicable Nasdaq rules. Further, the note and SEPA include a beneficial ownership blocker for Yorkville such that Yorkville may not be deemed the beneficial owner of more than 4.99% of our Class A common stock.

The SEPA will automatically terminate on the earliest to occur of (i) the first day of the month next following the 36-month anniversary of the date of the SEPA or (ii) the date on which Yorkville shall have made payment for shares of our Class A common stock equal to $10.0 million. We have the right to terminate the SEPA at no cost or penalty upon five trading days’ prior written notice to Yorkville, provided that there are no outstanding advances for which shares of our Class A common stock need to be issued and the convertible note (Initial Advance) has been paid in full. We and Yorkville may also agree to terminate the SEPA by mutual written consent. As consideration for Yorkville’s commitment to purchase the shares of our Class A common stock pursuant to the SEPA, we paid Yorkville a $25 thousand cash due diligence fee and a commitment fee equal to 16,964 shares of our Class A common stock.

In connection with the entry into the SEPA, on March 13, 2024, we entered into a registration rights agreement with Yorkville, pursuant to which we agreed to file with the SEC no later than May 3, 2024, a registration statement for the resale by Yorkville of the shares of our Class A common stock issued under the SEPA (including the commitment fee shares). We agreed to use commercially reasonable efforts to have such registration statement declared effective within 45 days of such filing and to maintain the effectiveness of such registration statement during the 36-month commitment period. We will not have the ability to request any Advances under the SEPA (nor may Yorkville convert the Initial Advance into our Class A common stock) until such resale registration statement is declared effective by the SEC. As of the filing date of this Form 10-Q, we have not filed a registration statement with the SEC. As a result of our failure to file our Annual Report on Form 10-K for the year ended December 31, 2023, by April 30, 2024 (i.e., a deemed Event of Default under the convertible promissory note), we began accruing interest at the default rate of 18% as of May 1, 2024. A further event of default occurred as a result of our failure to file a registration statement with the SEC for the resale by Yorkville of the shares of Class A common stock issuable under the SEPA by May 3, 2024. Because we have not yet filed a registration statement no shares can currently be issued under the SEPA.

#### Forbearance Agreements

On March 13, 2024,we entered into a second forbearance agreement with RWI, or RWI 2nd Forbearance Agreement. Under the RWI 2nd Forbearance Agreement, (i) RWI agreed not to exercise its rights and remedies upon the occurrence of any default under the RWI Second Bridge Loan until our obligations in respect of the Yorkville convertible promissory note have been indefeasibly paid in full or March 13, 2025, whichever occurs first, (ii) RWI consented to our incurrence of indebtedness under the Yorkville convertible promissory note, (iii) RWI consented to cash payments required to be made under the SEPA and the Yorkville convertible promissory note, (iv) we agreed to increase the interest rate on the loan outstanding under the RWI Loan Agreement by 100 basis points, or from 12.5% to 13.5% per annum, and (v) we agreed to issue RWI a warrant to acquire up to 300,000 shares of Class A common stock, which expires June 20, 2028 and has an exercise price of $5.895 per share. Due to our failure to make certain interest payments when due, we began accruing interest on the loan at the default rate of 16.5% as of August 5, 2024.

On March 13, 2024, we entered into a forbearance agreement with C.V. Starr, or Starr Forbearance Agreement, with respect to the Starr Bridge Loan. Under the Starr Forbearance Agreement, (i) C.V. Starr agreed not to exercise its rights and remedies upon the occurrence of any default under the Starr Bridge Loan until our obligations in respect of the Yorkville convertible promissory note have been indefeasibly paid in full, (ii) C.V. Starr consented to our incurrence of indebtedness under the Yorkville convertible promissory note, (iii) C.V. Starr consented to cash payments required to be made under the SEPA and the Yorkville convertible promissory note, (iv) we agreed to increase the interest rate on the loan outstanding under the Starr Bridge Loan by 100 basis points and (v) we agreed to amend the exercise price of (x) that certain warrant to acquire 75,000 shares of our Class A common stock for $7.10 per share, expiring March 17, 2028, and (y) that certain warrant to acquire 50,000 shares of Class A common stock for $8.10 per share expiring June 20, 2028, each of which are held by C.V. Starr, such that the exercise price of each such warrant in (x) and (y) is $5.895 per share. In addition, the interest rate of the Starr Bridge Loan was increased to 13% per annum. Due to our failure to make certain interest payments when due, we began accruing interest on the Starr Bridge Loan at the default rate of 16% as of April 5, 2024.

#### Short-Term Debt - Other and CEO Promissory Note

The maturity date of the August 21, 2023, loan agreement with Dr. Robert Hariri, our CEO and two unaffiliated lenders, was extended to December 31, 2024. Additionally, on September 30, 2024, Dr. Robert Hariri assumed the full loan in exchange for repayment of the other lender’s respective principal loan amount, plus accrued interest.

#### Failure to comply with Nasdaq Listing Rule 5250(c)(1)

As a result of our failure to timely file our quarterly reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024, we no longer complied with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1). We had regained compliance with the Nasdaq listing requirements upon filing our Form 10-Q for the period ended June 30, 2024 on November 7, 2024. On November 21, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file our quarterly report on Form 10-Q for the period ended September 30, 2024, we were not in compliance with the continued listing requirements under Nasdaq Listing Rule 5250(c)(1). We have 60 days to submit a plan to Nasdaq to regain compliance with the continued listing requirements. If Nasdaq accepts our plan, it may grant an exception of up to 180 days from the filing's due date, or May 13, 2025, to regain compliance. There can be no assurance that Nasdaq will grant us an extension or that we will maintain compliance with the Nasdaq listing requirements. If we are unable to regain compliance, our securities will be delisted from the Nasdaq, which such delisting could have a materially adverse effect on our ability to continue as a going concern.

### 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 unaudited condensed 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 could result in impairment of goodwill or long-lived assets in a future period.

As of the date the accompanying unaudited condensed 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 operating losses and cash used in operating activities. For the nine months ended September 30, 2024, we incurred a net operating loss of $29.1 million and net cash used in operating activities of $8.0 million. As of September 30, 2024, we had an accumulated deficit of $886.4 million. We expect to continue to incur significant operating losses and use net cash in operations for the foreseeable future.
- 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, additional outside capital sufficient to fund operations for the next 12 months has not 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.
- As of the issuance date, we had approximately $46.1 million of debt outstanding, all of which is currently due or due within one year of the issuance date. As disclosed in Note 7 to the accompanying unaudited condensed consolidated financial statements, a substantial portion of our debt is subject to forbearance agreements. In the event the terms of the forbearance agreements are not met and/or the outstanding borrowings are not repaid, the lenders may, at their discretion, exercise all of their rights and remedies under the loan agreements which may include, among other things, seizing our assets and/or forcing us into liquidation.
- As a result of our failure to timely file our quarterly reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024, we no longer complied with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1). We had regained compliance with the Nasdaq listing requirements upon filing our Form 10-Q for the period ended June 30, 2024 on November 7, 2024. On November 21, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file our quarterly report on Form 10-Q for the period ended September 30, 2024, we were not in compliance with the continued listing requirements under Nasdaq Listing Rule 5250(c)(1). We have 60 days to submit a plan to Nasdaq to regain compliance with the continued listing requirements. If Nasdaq accepts our plan, it may grant an exception of up to 180 days from the filing's due date, or May 13, 2025, to regain compliance. There can be no assurance that Nasdaq will grant us an extension or that we will maintain compliance with the Nasdaq listing requirements. If we are unable to regain compliance, our securities will be delisted from the Nasdaq, which such delisting could have a materially adverse effect on our ability to continue as a going concern.
- In the event we are unable to secure additional outside capital to fund our obligations when they become due, including repayment of our outstanding debt, over the next 12 months beyond the issuance date, 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 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 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 using independent sales representatives as well as 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 accompanying unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

### Acquisitions and Divestitures

Our current operations reflect the following strategic acquisitions that we have made since formation.

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.

### 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 condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

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.

On December 11, 2023, we entered into a license agreement with BioCellgraft, Inc. whereby we granted an exclusive license to BioCellgraft, with the right to sublicense, to develop and commercialize certain licensed products to the dental market in the United States over an initial four year term, which license agreement will automatically renew for an additional two years unless either party provides written notice of termination. BioCellgraft agreed to pay us total license fees of $5.0 million over a two year period. Upon execution of the agreement, we received an initial $0.3 million payment towards the first year of the two year period.

### Components of Operating Results

### Net revenues

Net revenues include: (i) sales of biomaterial products, including Biovance, Biovance 3L, ReboundTM, Interfyl, and CentaFlex of which our direct sales are included in Product Sales 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 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 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. 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 Note 9, "Contingent Consideration Related to Business Combinations” 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, 2024 to September 30, 2023

| Revenues: | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Product sales, net | $3,393 | $1,684 | $1,709 | 101.5% |
| Services | 1,292 | 1,427 | (135) | (9.5)% |
| License, royalty and other | 4,611 | 675 | 3,936 | 583.1% |
| Total net revenues | 9,296 | 3,786 | 5,510 | 145.5% |
| Operating expenses: |  |  |  |  |
| Cost of revenues (excluding amortization of acquired intangible assets) |  |  |  |  |
| Product sales | 547 | 557 | (10) | (1.8)% |
| Services | 238 | 398 | (160) | (40.2)% |
| License, royalty and other | 3,098 | 2,647 | 451 | 17.0% |
| Research and development | 3,915 | 5,182 | (1,267) | (24.5)% |
| Software cease-use costs | — | 243 | (243) | (100.0)% |
| Selling, general and administrative | 12,650 | 10,748 | 1,902 | 17.7% |
| Goodwill impairment | — | 82,714 | (82,714) | (100.0)% |
| Amortization of acquired intangible assets | 375 | 553 | (178) | (32.2)% |
| Total operating expenses | 20,823 | 103,042 | (82,219) | (79.8)% |
| Loss from operations | $(11,527) | $(99,256) | $(87,729) | (88.4)% |

#### Net Revenues and Cost of Revenues

Net revenues for the three months ended September 30, 2024 were $9.3 million, an increase of $5.5 million, or 145.5% compared to the prior year period. The increase was primarily due to a $3.9 million increase in license, royalty and other driven mainly by Rebound distributor sales and a $1.7 million increase in product sales driven by higher sales of Biovance 3L and Rebound direct to customer sales. We acquired Rebound on October 9, 2024 through an asset purchase agreement with Sequence LifeScience, Inc. (“Sequence”). Prior to consummating the asset purchase agreement, on August 23, 2024, we entered into an exclusive distribution agreement with Sequence intended to allow the parties to cooperatively market Rebound while finalizing the asset purchase agreement. For more information about the Rebound asset purchase agreement see Note 16, "Subsequent Events" in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Cost of revenues for the three months ended September 30, 2024 was $3.9 million, an increase of $0.3 million, or 7.8% compared to the prior year period. The increase was primarily due to a $0.5 million increase in license, royalty and other costs driven by costs for Rebound distributor sales partially offset by a reserve for obsolescence recorded during the three months ended September 30, 2023. As a percentage of revenues, cost of revenues decreased to 42% for the three months ended September 30, 2024, compared to 95% in the prior year period. Included in the prior year period within cost for license, royalty and other was a provision for obsolescence of $2.0 million. Excluding this charge, cost of revenues was 43% for the three months ended September 30, 2023.

#### Research and Development Expenses

Research and development expenses for the three months ended September 30, 2024 were $3.9 million, a decrease of $1.3 million, or 24.5% compared to the prior year period. The decrease was mainly due to lower personnel costs and other outside services resulting from discontinuing certain clinical trials of our cell therapy candidates.

#### Software Cease-Use Costs

Software cease-use costs were $0.2 million for the three months ended September 30, 2023, which reflected the recognition of the remaining contract value associated with the Palantir platform that we terminated. We subsequently reached a settlement with Palantir and as a result, no software cease-use costs were incurred in the current year period. See Note 9, "Commitments and Contingencies" 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 three months ended September 30, 2024 were $12.7 million, an increase of $1.9 million, or 17.7% compared to the prior year period. The increase was primarily due to higher selling expenses driven by an increase in biomaterial sales.

#### Goodwill Impairment

There were no goodwill impairments for the three months ended September 30, 2024, compared to a charge of $82.7 million in the prior year period resulting from a decline in future revenue projections in the Cell Therapy business driven by discontinuation of clinical trials and changes in our strategy and pipeline.

#### Other Income (Expense)

|  | Three Months Ended September 30, 2024 | 2023 | Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $77 | $23 | $54 | 234.8% |
| Interest expense | (1,752) | (971) | (781) | 80.4% |
| Change in fair value of warrant liabilities | 714 | 5,187 | (4,473) | (86.2)% |
| Change in fair value of debt | (708) | 2,003 | (2,711) | (135.3)% |
| Other expense, net | (2,902) | (862) | (2,040) | 236.7% |
| Total other (expense) income | $(4,571) | $5,380 | $(9,951) | (185.0)% |

For the three months ended September 30, 2024, total other expense was $4.6 million compared to total other income of $5.4 million in the prior year period. The change of $10.0 million was primarily related to changes in the fair value of warrant liabilities of $4.5 million, change in the fair value of debt of $2.7 million and an increase in other expenses, net of $2.0 million. The change in fair value of warrant liability for the three months ended September 30, 2023, was $5.2 million of income mainly due to decreases in the price of our Class A common stock during the quarter ended September 30, 2023 (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). The change in fair value of debt for the three months ended September 30, 2023, was $2.0 million of income and reflects changes in fair value of the September 15, 2022 Yorkville Pre-Paid Advance Agreement, or Yorkville PPA, which we elected to account for at fair value. The Yorkville PPA was subsequently repaid in full on January 17, 2024. Other expense, net for the three months ended September 30, 20 24, was $2.9 million and included a loss of $2.5 million related to an accrual for liquidated damages resulting from our failure to satisfy certain public information conditions pursuant to the securities purchase agreement dated May 18, 2022.

### Comparison of Nine Months Ended September 30, 2024 to September 30, 2023

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Product sales, net | $26,199 | $3,633 | $22,566 | 621.1% |
| Services | 3,857 | 4,062 | (205) | (5.0)% |
| License, royalty and other | 6,032 | 2,964 | 3,068 | 103.5% |
| Total net revenues | 36,088 | 10,659 | 25,429 | 238.6% |
| Operating expenses: |  |  |  |  |
| Cost of revenues (excluding amortization of acquired intangible assets) |  |  |  |  |
| Product sales | 2,888 | 1,486 | 1,402 | 94.3% |
| Services | 952 | 1,355 | (403) | (29.7)% |
| License, royalty and other | 3,806 | 3,566 | 240 | 6.7% |
| Research and development | 13,558 | 30,737 | (17,179) | (55.9)% |
| Software cease-use costs | — | 24,161 | (24,161) | (100.0)% |
| Selling, general and administrative | 42,585 | 37,508 | 5,077 | 13.5% |
| Change in fair value of contingent consideration liability | — | (104,339) | 104,339 | 100.0% |
| Goodwill impairment | — | 112,347 | (112,347) | (100.0)% |
| IPR&D impairment | — | 107,800 | (107,800) | (100.0)% |
| Amortization of acquired intangible assets | 1,377 | 1,640 | (263) | (16.0)% |
| Total operating expenses | 65,166 | 216,261 | (151,095) | (69.9)% |
| Loss from operations | $(29,078) | $(205,602) | $(176,524) | (85.9)% |

45

#### Net Revenues and Cost of Revenues

Net revenues for the nine months ended September 30, 2024 were $36.1 million, an increase of $25.4 million, or 238.6% compared to the prior year period. The increase was primarily due to a $22.6 million increase in product sales driven mainly by increased sales of Biovance 3L and a $3.1 million increase in license, royalty and other driven by Rebound distributor sales, which we started selling in the third quarter of 2024 through an exclusive distribution agreement with Sequence. On October 9, 2024, we acquired Rebound in an asset purchase agreement with Sequence. For more information about the Rebound asset purchase agreement, see Note 16, "Subsequent Events" in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Cost of revenues for the nine months ended September 30, 2024 was $7.6 million, an increase of $1.2 million, or 19.3% compared to the prior year period. The increase was primarily due to a $1.4 million increase in product sales costs driven by higher Biovance 3L direct to customer sales. As a percentage of revenues, cost of revenues decreased to 21% for the nine months ended September 30, 2024 compared to 60% in the prior year period due to an increase in Biovance 3L sales, which has a higher gross profit margin than other biomaterial products.

#### Research and Development Expenses

Research and development expenses for the nine months ended September 30, 2024 were $13.6 million, a decrease of $17.2 million, or 55.9% compared to the prior year period. The decrease was primarily due to $3.4 million lower personnel costs resulting from our March 2023 reduction in force, $9.1 million lower outside services driven by lower clinical trial costs as a result of discontinuing certain clinical trials of our cell therapy candidates and $3.8 million of lower technical operation allocated costs.

#### Software Cease-Use Costs

Software cease-use costs were $24.2 million for the nine months ended September 30, 2023, which reflected the recognition of the remaining contract value associated with the Palantir platform that we terminated. We subsequently reached a settlement with Palantir and as a result, no software cease-use costs were incurred in the current period. See Note 9, "Commitments and Contingencies" 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, 2024 were $42.6 million, an increase of $5.1 million, or 13.5%, compared to the prior year period. The increase was primarily due to higher selling expenses driven by an increase in biomaterial sales.

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

In 2023, we discontinued our Cell Therapy clinical trials and as a result, during the nine months ended September 30, 2023, we recorded a decrease in the fair value of the contingent consideration liability of $104.3 million driven by changes in market-based assumptions and underlying projections. Changes in the contingent consideration liability market-based assumptions and underlying projections were de minimums in the current year period. Consequently, there was no change in the fair value of contingent consideration liability for the nine months ended September 30, 2024. 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.

#### Goodwill and IPR&D Impairments

There were no impairment charges for the nine months ended September 30, 2024. Goodwill and IPR&D impairment charges for the nine months ended September 30, 2023 were $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.

#### Other Income (Expense)

|  | Nine Months Ended September 30, 2024 | 2023 | Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $254 | $205 | $49 | 23.9% |
| Interest expense | (4,452) | (2,352) | (2,100) | 89.3% |
| Change in fair value of warrant liabilities | (1,156) | 6,788 | (7,944) | (117.0)% |
| Change in fair value of debt | (694) | (354) | (340) | 96.0% |
| Loss on debt extinguishment | (3,908) | — | (3,908) | 100.0% |
| Other expense, net | (5,565) | (4,527) | (1,038) | 22.9% |
| Total other expense | $(15,521) | $(240) | $(15,281) | 6367.1% |

46

For the nine months ended September 30, 2024, total other expense was $15.5 million compared to $0.2 million in the prior year period. The increase was primarily related to changes in the fair value of warrant liabilities of $7.9 million, loss on debt extinguishment of $3.9 million, an increase in interest expense of $2.1 million and an increase in other expense, net of $1.0 million. Change in fair value of warrant liability for the nine months ended September 30, 2023, was $6.8 million of income mainly due to decreases in the price of our Class A common stock during the prior year period (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). Included in the nine months ended September 30, 2024 was a $3.9 million loss on debt extinguishment recorded in connection with the January 12, 2024 RWI Second Amended Bridge Loan (for more information about the RWI Second Amended Bridge Loan refer to Note 7, “Debt” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q). The $2.1 million increase in interest expense was primarily driven by interest on the January 12, 2024, RWI Second Amended Bridge Loan.

### Liquidity and Capital Resources

As of September 30, 2024, we had $0.1 million of unrestricted cash and cash equivalents and an accumulated deficit of $886.4 million. Our primary use of our capital resources is funding our operating expenses, which consist primarily of funding selling, general and administrative expenses, and to a lesser extent, the research and development of our cellular therapeutic candidates.

On January 12, 2024, we entered into a securities purchase agreement with Dragasac, providing for the private placement of (i) 2,141,098 shares of our Class A common stock for $2.4898 per share and (ii) accompanying warrants to purchase up to 535,274 shares of Class A common stock for $1.25 per warrant. Total proceeds from the financing were approximately $6.0 million. Additionally, on January 12, 2024, we entered into the RWI Second Amended Bridge Loan, which provided for an additional loan in the aggregate principal amount of $15.0 million net of an original issue discount of $3.75 million.

Pursuant to the terms of the January 12, 2024 security purchase agreement with Dragasac and the RWI Second Amended Bridge Loan, we were required to apply the aggregate proceeds to: (i) payment in full of all outstanding amounts owed Yorkville under the September 15, 2022 PPA, (ii) payment of invoices of certain critical vendors, (iii) the first settlement payment owed to Palantir, and (iv) for working capital and other purposes pre-approved by RWI.

On March 13, 2024, we entered into a Standby Equity Purchase Agreement, or SEPA, with Yorkville. Upon entry into the SEPA, we issued Yorkville a $3.15 million convertible promissory note for $2.99 million in cash (after a 5% original issue discount). Refer to the *Standby Equity Purchase Agreement* section above for further details. Proceeds from the note were used for working capital purposes, including payment of invoices of certain critical vendors.

As of the issuance date, we had insufficient 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. 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 and we are not actively developing any cellular therapeutics in our pipeline given our liquidity. 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 sufficient revenues to fund operations, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including commercial sales of our biomaterials products, as well as potentially collaborations, licenses and other similar arrangements for our cellular therapeutic candidates. We continue to explore licensing and collaboration arrangements for our cellular therapeutics as well as distribution arrangements for our degenerative disease business. 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 expansion of our degenerative disease business and ongoing internal research and development programs. We will require substantial additional funding in the future to build the sales, marketing and distribution infrastructure that will be necessary to commercialize our biomaterials products.

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, 2024 and 2023:

| Cash (used in)/provided by | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $(7,995) | $(34,344) | $26,349 |
| Investing activities | 2,070 | (3,468) | 5,538 |
| Financing activities | 6,058 | 24,108 | (18,050) |
| Net change in cash, cash equivalents and restricted cash | $133 | $(13,704) | $13,837 |

#### Operating Activities

Net cash used in operations for the nine months ended September 30, 2024 was $26.3 million lower than the prior year period, primarily due to higher net revenues, partially offset by an increase in accounts receivable, lower operating expenses mainly due to our March 2023 reduction in force and lower clinical trial costs from discontinuation of certain clinical trials of our cell therapy candidates and increases in accounts payable and accrued expenses.

#### Investing Activities

We received $2.1 million and used $3.5 million of net cash in investing activities for the nine months ended September 30, 2024 and 2023, respectively. Net cash provided by investing activities for the nine months ended September 30, 2024 included the $2.2 million settlement of the convertible note receivable from Sanuwave, offset by $0.1 million of capital expenditures. Net cash used in investing activities for the nine months ended September 30, 2023, included $0.5 million of capital expenditures and $3.0 million used to acquire in-process research and development.

#### Financing Activities

Net cash provided by financing activities was $6.1 million for the nine months ended September 30, 2024, which consisted of $15.0 million from the RWI Second Amended Bridge Loan entered into on January 12, 2024, $6.0 million from the January 2024 private placement with Dragasac and $3.0 million, net from the March 13, 2024 convertible promissory note issued to Yorkville, partially offset by $17.4 million for the payment in full of the Yorkville PPA. For the nine months ended September 30, 2023, we generated $24.1 million of net cash from financing activities 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.

### Critical Accounting Policies

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 2023 Form 10-K.

There have been no significant changes in our critical accounting policies during the nine months ended September 30, 2024 as compared with those previously disclosed in the 2023 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, 2023 included in the 2023 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, 5,554 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, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange 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 a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

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 the end of the period covered in this quarterly report on Form 10-Q. Based on that evaluation, management concluded that the disclosure controls and procedures were not effective, at the reasonable assurance level, as of the end of the period covered by this quarterly report on Form 10-Q, as a result of the material weaknesses in internal control over financial reporting discussed below as well as our inability to timely file this quarterly report on Form 10-Q, as well as our annual report on Form 10-K for the year ended December 31, 2023, which had not been filed until July 30, 2024.

We previously identified the following material weaknesses in our internal control over financial reporting:

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.

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 2024 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

Other than in connection with executing upon the continued implementation of the remediation measures referenced above, there were no changes in our internal controls over financial reporting that occurred during our fiscal quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 253 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, 2023 filed with the SEC on July 30, 2024.

Filed Dec 6, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-133799. Last ingested by Listed: Oct 29, 2026, 09:26 ET. No prices; not investment advice.