Celularity Inc: Form 10-Q for the period ended Sep 30, 2025

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 2024 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. 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.

We are working toward a set of milestones with respect to off-the-shelf placental-derived allogeneic biomaterial product candidates and cell therapy product candidates, respectively. With respect to our biomaterial product candidate pipeline, we expect to submit a 510(k) application for our Celularity Tendon Wrap, or CTW, in the fourth quarter of 2025. We expect to advance the development of our FUSE Bone Void Filler, or FUSE, with the objective of a 510(k) filing in the second half of 2026, and to advance the development of our Celularity Placental Matrix, or CPM, with the objective of a 510(k) filing in the second half of 2027. Recently, a number of states have enacted legislation to expand access to stem cell and other cell therapies which have not yet received FDA approval, including a new Florida law that went into effect on July 1, 2025, allowing Florida physicians to administer stem cell treatments for wound care, pain management and orthopedics purposes, subject to certain requirements and limitations. We are actively assessing opportunities in Florida and elsewhere to supply our MLASCs cell therapy product candidates PDA 001 and PDA 002 to physicians for use in accordance with state law. Additionally, when we are sufficiently capitalized, we plan to complete our safety and efficacy assessment to determine progress to a Phase III clinical trial of, respectively, our MLASCs cell therapy product candidate PDA 001 in Crohn’s disease and our MLASCs cell therapy product candidate PDA 002 in DFU.

Our Celularity IMPACT manufacturing platform 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. A biobank is an organized collection of biological human material, and its associated information stored for future retrieval and use in research, regenerative medicine, and innovation. We provide a fee-based biobanking service to expectant parents who contract with us to collect, process, cryogenically preserve and store certain biomaterial, including umbilical cord blood and placenta derived cells and tissue. We receive a one-time fee for the collection, processing, and cryogenic preservation of the biomaterials, and a storage fee to maintain the biomaterials in our biobank payable annually generally over a period of 18 to 25 years. We intend to explore opportunities to diversify our biobanking business, including adult cell banking.

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 290 patents and patent applications protecting our Celularity IMPACT platform, our processes, technologies and cell therapy programs that we are actively developing on our own or seeking to out-license or to find a collaboration partner to develop. We believe this know-how, expertise and intellectual property will drive the rapid development and, if approved, the commercialization of these potentially lifesaving therapies for patients with unmet medical needs.

Recent Developments

On April 30, 2025 and May 7, 2025, we entered into multiple merchant cash advance (“MCA”) agreements with Genesis Equity Group Funding LLC (“GEG”) under which we transferred the rights to specified future receivables of an aggregate Purchase Amount of approximately $1.5 million in exchange for aggregate upfront cash proceeds of approximately $0.9 million, until the Purchased Amount is fully collected. On August 15, 2025, we entered into an additional merchant cash advance agreement (the “Second MCA”) with GEG under which we transferred the rights to specified future receivables of an aggregate approximate $2.5 million (the “Second Purchased Amount”) in exchange for aggregate upfront cash proceeds of approximately $1.5 million, net of fees. The proceeds from the Second MCA were used to repay the First MCA and for working capital needs.

On June 23, 2025, we entered into a Securities Purchase Agreement for a private placement of 739,284 shares of Class A common stock at $1.40 per share, resulting in gross proceeds of approximately $1.0 million. In conjunction with the offering, we agreed to modify certain existing warrants held by the investors, reducing the exercise price to $2.50 and extending the expiration date to June 30, 2030. The proceeds are intended for working capital and general corporate purposes.

On June 25, 2025, we amended the conversion price of certain unsecured senior convertible notes to $1.60 per share. In connection with the amendment, the notes, including $670 of principal and accrued interest, were automatically converted into 490,632 shares of our Class A common stock.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company analyzed the impact of the OBBBA and the OBBBA did not have a material impact on the consolidated financial statements of the Company as of and for the nine months ended September 30, 2025.

On July 14, 2025, we entered into a Securities Purchase Agreement with an institutional investor for the private placement of 1,230,769 shares of Class A common stock and accompanying warrants to purchase an equal number of shares. The purchase price was $1.63 per share and warrant, with gross proceeds of approximately $2.0 million. The warrants are exercisable at $1.50 per share for a term of two years. The net proceeds are to be used for working capital and general corporate purposes.

On July 21, 2025, we issued a promissory note in the aggregate principal amount of $6.8 million to Lim Kok Thay, a former Director of the Company. In addition, Mr. Thay received a warrant to purchase 3,700,000 shares of Class A common stock. The warrant is exercisable at $2.53 per share for five years from the date of issuance. The July 21, 2025 promissory note bears interest at 2% per annum and has a maturity date of March 21, 2026. The promissory note was subsequently assigned by Mr. Thay to Celeniv Pte. Ltd. (“Celeniv”). The Company agreed with Mr. Thay that a portion of the net proceeds from the issuance of the promissory note will be used to fully settle the principal and all accrued interest of the loan from C.V. Starr & Co. pursuant to the loan agreement between us and Starr dated March 17, 2023. On July 29, 2025, we paid C.V. Starr $5.9 million in satisfaction of the outstanding principal and interest owed under the C.V. Starr & Co loan. As a result, we recognized a gain from the forgiveness of accrued interest of approximately $1.0 million.

On August 5, 2025, we entered into a Series Seed Preferred Stock Purchase Agreement with Defeye, Inc. (“Issuer”) for the issuance of 7,198,630 shares of the Issuer’s Series Seed-2 Preferred Stock (“Preferred Stock”), in exchange for $2.89 million of product purchase credits pursuant to a supply and distribution agreement between us and the Issuer.

On August 13, 2025, we entered into an asset purchase agreement (the “APA”) with Celeniv Pte. Ltd (“Celeniv”). Concurrently with the APA, two of our lenders agreed to assign their note payables to Celeniv. Pursuant to the APA, we agreed to sell Celeniv certain purchased intellectual property in exchange for the assignment of our obligations due under the three note payables. Collectively, the assigned note payables had a principal value of approximately $33.8 million and accrued interest of $4.1 million immediately prior to the assignment of their obligations.

In connection with the APA, we entered into a License Agreement with Celeniv, granting us an exclusive, worldwide, royalty-bearing license under certain intellectual property. We will pay Celeniv a royalty in an amount equal to a low double digit percentage of the purchase price payable in quarterly installments commencing on the one year anniversary through the earlier of (A) the closing of the Asset Purchase (as defined below) and (B) the fifth anniversary of the License Agreement (including the Negotiation Period).

Pursuant to the License Agreement, we have the option (the “Option”) to purchase from Celeniv all (and not any part) of Celeniv’s right, title and interest in the Licensed Technology (as defined in the License Agreement) and Licensed Marks (“Asset Purchase”). The Option shall be in effect for a period of five years beginning August 13, 2025 (the “Option Period”). The purchase price for the Asset Purchase shall be as follows: (i) if the Option is exercised on or prior to August 13, 2026, the purchase price shall be a mid-eight digit amount (the “Option Purchase Price”) and (ii) if the Option is exercised after August 13, 2026, the purchase price shall be the Option Purchase Price, plus an amount equal to a low double digit percentage of the Purchase Price, plus the amount of any Quarterly Payments (and penalty interest if any) accrued but unpaid through the date of the closing. If we do not exercise the Option before the end of the Option Period, the Option shall lapse, and the Term of the License Agreement shall automatically extend for 90 days (the “Negotiation Period”). If the Option is exercised during the Option Period, the Term of the License Agreement shall be extended through the closing of the Asset Purchase.

During the three months ended September 30, 2025 the holder of a convertible promissory note issued by us elected to convert the promissory note into common stock. As a result, principal of $2,000 and accrued interest of $255 was converted and we issued the holder 1,525,008 shares of common stock.

Going Concern

In accordance with Generally Accepted Accounting Principles, “GAAP,” 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 used net cash from operations. For the nine months ending September 30, 2025, we incurred an operating loss of $39.3 million and used net cash outflows in operations of $8.2 million. As of September 30, 2025, we had an accumulated deficit of $967.1 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, 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 the 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.
• 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 20, “Segment Information” of our accompanying unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Acquisitions and Divestitures

On October 9, 2024, we entered into an asset purchase agreement with Sequence LifeScience, Inc. (“Sequence”) to acquire Sequence’s Rebound™ full thickness placental-derived allograft matrix product and certain related intangible assets. Rebound adds to our portfolio of placental-derived advanced biomaterial products. We will pay aggregate consideration for the assets of up to $5.5 million, which consists of (i) an upfront cash payment of $1.0 million (ii) an aggregate of up to $4.0 million in monthly milestone payments, and (iii) a credit of $0.5 million for the previous payment made by us to Sequence pursuant to a letter of intent between us and Sequence dated August 16, 2024. Pursuant to the terms of the asset purchase agreement, the milestones are calculated based on 20% of net sales collected by us from our customers during the preceding calendar month, commencing the first full month after the closing of the transaction. Transaction costs incurred with in connection with the Rebound asset acquisition were de minimis. As of September 30, 2025, we have accrued a total of $3.0 million for milestone payments due Sequence based on cumulative net sales collected from customers.

Licensing Agreements

In the ordinary course of business, we license intellectual property and other rights from third parties and have also outlicensed 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 19, “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 August 25, 2023, we entered into a multi-year research collaboration services agreement with Regeneron Pharmaceuticals, Inc. (“Regeneron”), pursuant to which we support the research effort of Regeneron’s allogeneic cell therapy candidates (the “Regeneron Services Agreement”). We received payments totaling $1.3 million under the Regeneron Services Agreement, of which $688 was recognized in revenue during the fourth quarter of 2024 based on achievement of defined milestones. On August 6, 2025, Regeneron provided us with notice of termination of the agreement. Accordingly, the remaining $637 was recognized in revenue during the third quarter of 2025. For additional information about the Regeneron Service Agreement, refer to Note 19, of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this report.

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 15, “Commitments and Contingencies” 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, 2025 to September 30, 2024

Net Revenues and Cost of Revenues

Net revenues for the three months ending September 30, 2025 were $5.3 million, a decrease of $4.0 million, or 43.2%, compared to the prior year period. The decrease was primarily due to a $2.5 million decrease in product sales, driven mainly by lower Biovance 3L sales and lower Rebound sales.

Cost of revenues for the three months ending September 30, 2025, was $3.9 million, an increase of less than $0.1 million, or 0.5%, compared to the prior year period. Included in product sales costs for the three months ended September 30, 2025 was a $1.4 million write-off of capitalized bulk material costs.

Research and Development Expenses

Research and development expenses for the three months ended September 30, 2025 were $4.6 million, an increase of $0.7 million, or 17.4%, compared to the prior year period. The increase was primarily due to a $0.4 million increase in personnel costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ending September 30, 2025 were $9.3 million, a decrease of $3.3 million, or 26.4%, compared to the prior year period. The decrease was primarily due to a $2.4 million decrease in commission expense, a $0.7 million decrease in facilities expense and a $0.6 million decrease in stock compensation, offset primarily by a $0.7 million increase in professional fees.

Other Income (Expense)

For the three months ending September 30, 2025, total other expense was $10.2 million compared to $4.6 million in the prior year period. The increase was primarily due to an increase in the loss on issuance of convertible note with warrants of $2.3 million and the $5.0 million increase in the change in fair value of warrant liabilities, offset primarily by the decrease in other expense, net of $2.1 million.

Comparison of Nine Months Ended September 30, 2025 to September 30, 2024

Net Revenues and Cost of Revenues

Net revenues for the nine months ended September 30, 2025 were $22.4 million, a decrease of $13.6 million, or 37.8%, compared to the prior year period. The decrease was primarily due to a $13.9 million decrease in product sales driven mainly by lower Biovance 3L sales and lower Rebound sales.

Cost of revenues for the nine months ending September 30, 2025 was $12.7 million, an increase of $5.1 million, or 66.1%, compared to the prior year period. Included in the increased cost of revenues was a $3.9 million write-off of capitalized bulk material costs and $2.4 million milestone payment for Rebound™, which compressed margins and explains the counter-intuitive mix of lower revenue but higher cost of revenues. These increases were offset by a $1.6 million decrease in distribution costs for Rebound™.

Research and Development Expenses

Research and development expenses for the nine months ending September 30, 2025 were $11.7 million, a decrease of $1.9 million, or 13.9%, compared to the prior year period. The decrease was primarily due to a $2.2 million decrease in lab supplies expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ending September 30, 2025 were $36.2 million, a decrease of $6.4 million, or 15.0%, compared to the prior year period. The decrease was primarily due to $5.8 million decrease in sales rep fees and a $1.1 million decrease in stock-based compensation, offset primarily by a $1.5 million increase in professional fees.

Other Income (Expense)

For the nine months ended September 30, 2025, total other expense was $28.1 million compared to $15.5 million in the prior year period. The increase was primarily due to a $4.1 million increase in the change in fair value of warrant liabilities, a $2.3 million increase in the loss on issuance of convertible note with warrants, a $2.4 million increase in loss on debt extinguishment and an increase in interest expense of $1.4 million.

Liquidity and Capital Resources

As of September 30, 2025, we had $0.1 million of unrestricted cash and cash equivalents and an accumulated deficit of $967.1 million. Our primary sources of cash are revenues generated through our biomaterials and biobanking commercial businesses, as well as financing activities. Our capital resources are primarily used to fund our operating expenses, including: selling, general and administrative costs to operate our commercial businesses; costs to maintain our GMP manufacturing and research and development facility; and, costs related to development of our advanced biomaterial and cell therapy product candidates, along with cash used for debt repayment.

On January 24, 2025, we agreed with the holder of warrants dated January 16, 2024 to purchase 535,274 shares of Class A common stock (the “2024 Warrant”) and warrants dated January 9, 2020, as amended, to purchase 652,981 shares of Class A common stock (the “2020 Warrant” and together with the 2024 Warrants, the “Warrants”) to amend the exercise price of the Warrants to $2.07 per share from $2.49 per share. The holder agreed to exercise the Warrants for gross proceeds to us of approximately $2.46 million.

On January 29, 2025, Dr. Robert Hariri, our CEO, extended the maturity date of his outstanding loans from December 31, 2024 to December 31, 2025.

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 revenue 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, 2025, and 2024:

Operating Activities

Net cash used in operations for the nine months ended September 30, 2025 was $0.2 million higher than the prior year period, primarily due to lower cash flows generated by revenue and partially offset by an increase in the cash flows generated by our operating assets and liabilities.

Investing Activities

Net cash provided by investing activities was $0 during the nine months ending September 30, 2025, compared to net cash used in investing activities of $2.1 million during the nine months ending September 30, 2024.

Financing Activities

Net cash provided by financing activities was $7.4 million for the nine months ended September 30, 2025, which included $2.5 million from the issuance of common stock to Dragasac as consideration for a warrant inducement agreement whereby we amended the exercise price on an aggregate of 1,188,255 warrants to $2.07 per share from $2.49 per share; in exchange Dragasac agreed to exercise the Warrants for gross proceeds to us of approximately $2.5 million. Net cash provided by financing activities for the nine months ended September 30, 2025 also included cash flows of $6.8 million from the proceeds from a related party note and warrants, $1.0 million from the sale of common stock in a private placement, $2.0 million from the sale of common stock and warrants in a private placement, and $2.3 million of proceeds from merchant cash advance offset primarily by $1.1 million of repayment of merchant cash advance and $5.9 million in the repayment of related party notes.

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 2024 Form 10-K.

There have been no significant changes in our critical accounting policies during the three months ending September 30, 2025 as compared with those previously disclosed in the 2024 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, 2024 included in the 2024 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.

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, 2024, which had not been filed until May 8, 2025.

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

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 the remainder of 2025 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, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2024 filed with the SEC on May 8, 2025.