Celularity Inc: Form 10-Q for the period ended Mar 31, 2026

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 our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, or the 2025 Form 10-K. The following discussion contains forward-looking statements, including statements regarding our business strategy, development programs, manufacturing activities, strategic transactions and anticipated financial performance. See “Special Note Regarding Forward-Looking Statements.” These statements involve risks and uncertainties, including those discussed in this report and under “Part I—Item 1A. Risk Factors” in the 2025 Form 10-K, that could cause our actual results to differ materially from those expressed or implied by these forward-looking statements..

Overview

We are a longevity-focused regenerative and cellular medicine company developing and manufacturing placenta-derived cellular therapy candidates intended to address age-related diseases, tissue degeneration and declines in human function. Our business combines cellular therapy research and development, manufacturing capabilities, biobanking services and participation in the commercialization and supply of placental-derived biomaterial products through licensing and other contractual arrangements. Our strategy is to concentrate resources on our cellular therapy platform and manufacturing infrastructure while pursuing opportunities to generate revenue from third-party manufacturing services, biobanking and our retained biomaterials activities.

Business Realignment

Our business has evolved from the broader development and direct commercialization model historically associated with our cellular therapy, biomaterials and biobanking activities. In March 2026, we entered into agreements with NexGel, Inc., or NexGel, providing for the transfer of certain commercial and other assets associated with our biomaterials portfolio and an exclusive license to develop and commercialize specified products, subject to territorial and other contractual limitations. We subsequently completed the transaction in April 2026. The transaction shifted responsibility for specified biomaterials commercialization and development activities to NexGel while preserving certain contractual rights and opportunities for future economic participation.

Our biomaterials portfolio has included Biovance®, Biovance® 3L, Biovance® 3L Ocular, Interfyl®, CentaFlex® and Rebound™, which are placental-derived allografts and connective tissue matrices developed for surgical, wound care and related applications. Our continuing activities with respect to these products depend on the applicable product rights, territories and manufacturing, supply, licensing and distribution arrangements. Accordingly, our historical biomaterials product sales and operating expenses may not be indicative of our results following the transaction and related organizational changes.

In connection with this realignment, we reduced personnel and other expenditures associated with certain commercial and product development functions. These actions are intended to reduce operating costs and concentrate investment on our cellular therapy programs and manufacturing capabilities. The extent to which we realize these benefits will depend on our execution, the performance of our counterparties and our ongoing contractual obligations.

Cellular Therapy Platform and Development Strategy

Our cellular therapy strategy is based on the potential of cells derived from the postpartum placenta to address biological processes associated with age-related disease, including chronic inflammation, impaired tissue repair and immune dysfunction. Our objective is to develop therapies that may extend healthspan, which we define as the period of life spent in good health and with preserved function.

Aging is associated with progressive changes in tissue structure, regenerative capacity and immune function. Cellular senescence, stem cell exhaustion and chronic inflammation are among the biological processes implicated in these changes. We believe placenta-derived cells may offer opportunities to modulate certain of these processes. However, the ability of our product candidates to produce clinically meaningful benefits must be established through appropriate studies.

Our development priorities include cenplacel-L, a placenta-derived mesenchymal-like adherent stromal cell, product candidate. We are pursuing its potential application in diabetic foot ulcers and evaluating development opportunities in age-related frailty and other degenerative conditions. Our broader platform also includes placenta-derived natural killer, or NK, cells, including CYNK-001, which we are evaluating for potential applications involving immune function and the clearance of senescent cells. The advancement, timing and scope of individual programs depend on available funding, regulatory requirements, scientific and clinical results, and strategic priorities.

Our cellular therapy candidates are investigational and have not been approved by the U.S. Food and Drug Administration. Their safety and effectiveness for the proposed indications have not been established. We also evaluate opportunities involving physician access and collaborations in jurisdictions with potentially applicable treatment pathways, subject to federal, state and foreign legal and regulatory requirements. These activities do not constitute regulatory approval or establish the safety or effectiveness of our candidates.

Manufacturing and Third-Party Services

Our Celularity IMPACT (IMmunomodulatory Placenta-derived Allogeneic Cellular Therapy) platform integrates the sourcing of postpartum placentas from donors who have provided informed consent with cell isolation, expansion, characterization, cryopreservation and manufacturing. Our infrastructure includes our purpose-built, approximately 147,215-square-foot facility in Florham Park, New Jersey, which supports our cellular therapy programs and other manufacturing and biobanking activities.

We believe postpartum placentas provide a scalable source of cells with biological properties that may support the development of allogeneic therapies. Allogeneic therapies use donor-derived cells and are intended for use in multiple recipients, potentially enabling inventory-based, off-the-shelf supply. The suitability, tolerability and clinical performance of each candidate depend on its characteristics, manufacturing process, route of administration and intended use.

In addition to supporting our internal programs, we pursue revenue-generating opportunities to provide manufacturing and related technical services to third parties. Depending on the engagement, these services may include cell processing and expansion, production, analytical testing, cryopreservation, storage and related support. We also undertake biomaterials manufacturing and supply activities under applicable contractual arrangements. These activities are intended to utilize our existing infrastructure and expertise, although their contribution to revenue and operating results depends on customer demand, capacity utilization, contractual terms and our ability to meet applicable specifications and delivery requirements.

Biobanking

We continue to operate our biobanking business primarily under the LifebankUSA brand, providing collection, processing and storage services for umbilical cord and placental blood and tissue for potential future use. This business provides service revenue and supports our broader expertise in biological material processing, cryopreservation and long-term storage. We are also evaluating opportunities to expand cell banking services in support of our longevity-focused strategy. The potential future use of banked materials depends on their suitability and the availability of appropriate therapies and regulatory pathways.

Our ability to advance our development programs, expand manufacturing services and realize the anticipated benefits of our business realignment remains dependent on access to capital, effective management of our operating expenses, regulatory developments and the performance of our commercial and strategic counterparties.

Going Concern

We have determined there are conditions that raise substantial doubt about our ability to continue as a going concern within one year from the date these financial statements were issued. We have minimal cash on hand, do not generate sufficient cash from operations to operate the business for the next twelve months, and may not be able to continue as a going concern. We have historically funded operations through sales of products and services and equity and debt securities financings from both public and private investors. There is no assurance that such cash flows will continue in the future or that we will achieve cash positive operations.

We have generally not been profitable and since our inception, we have incurred significant operating losses and used net cash for operating activities. During the three months ended March 31, 2026, we recorded net income of $874. Net cash provided by operating activities was $1,447 for the three months ended March 31, 2026, which included $12,159 of proceeds from the sale of New Jersey net operating loss carryforwards; excluding those proceeds, operating activities used net cash. As of March 31, 2026, we have an accumulated deficit of $990,609 and have a working capital deficit of $64,282. We restructured operations in the first months of 2026 and believe increased sales are required to achieve break even operating cash flows in the next 6 to 12 months, however there is no assurance this will be achieved and significant operating losses and net cash uses for operations may continue for the foreseeable future. We will need to secure additional financing however there is no assurance that financing can be raised or at acceptable terms. These factors indicate we may be unable to meet our obligations as they become due over the next 12 months, or sooner, and continue as a going concern.

On May 27, 2026, we received a notice from Nasdaq Stock Market LLC indicating that we are not in compliance with the timely filing requirement under Nasdaq Listing Rule 5250(c)(1) due to our failure to timely file its Form 10-Q for the period ended March 31, 2026. On July 23, 2026, Nasdaq notified the Company of its failure to maintain a sufficient minimum bid price. We intend to regain compliance; however, there can be no assurance that we will be able to do so within any applicable period or that our securities will continue to be listed on Nasdaq.

In the event we are unable to secure additional outside capital to fund our obligations when they become due over the next 12 months beyond the filing date, which includes the funds needed to repay our outstanding debt, 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 the 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 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 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, BioBanking and Degenerative Disease. 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. Therapies being researched are unproven and in various phases of development. All of the cell therapy programs fall into the Cell Therapy segment. Degenerative Disease produces, sells and licenses products used in surgical and wound care markets, such as Biovance, Biovance 3L, Interfyl, CentaFlex and Rebound. We sell products in this segment using independent sales representatives as well as distributors. We intend to develop 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 condensed consolidated financial statements included in this quarterly report on Form 10-Q.

Corporate Information

Our principal executive offices are located at 170 Park Avenue, Florham Park, New Jersey 07932, and our telephone number is (908) 768-2170.

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

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 through research and development activities. We incur expenses for research scientist personnel, specialized chemicals and reagents used to conduct biologic research, expenses for third party testing and validation and various overhead expenses including rent and facility maintenance expenses. Basic research, research collaborations involving partners and research designed to enable successful regulatory submissions are 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.

Selling, 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. The magnitude and timing of our selling, general and administrative costs 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.

Results of Operations

32

Product sales were $0.9 million in the three months ended March 31, 2026, compared to $9.0 million in 2025, a decrease of $8.2 million, or 90.4%, mainly driven by lower Biovance 3L and Rebound product sales and in part by changes in customer purchasing behavior due to the insurance reimbursement environment. Ongoing developments and delays in the rollout of coverage guidance from Medicare Administrative Contractors (MACs), the regional entities responsible for administering Medicare claims and issuing coverage determinations, particularly with respect to skin substitute grafts, created ambiguity around which products would ultimately qualify for reimbursement and under what criteria. As a result, providers and distributors appear to have adopted a more cautious approach to inventory and utilization, including deferring purchases or limiting order volumes.

Revenues from BioBanking services were $1.3 million in 2026 compared to $1.4 million in 2025, a decrease of $0.2 million, or 11.2%.

Revenues from license, royalty and other were $1.7 million in 2026 compared to $1.0 million in 2025, an increase of $0.7 million or 73.0%, including $0.2 million recognized on the Biocellgraft arrangement.

Cost of revenues from product sales were $0.2 million in 2026 compared to $2.5 million in 2025, a decrease of $2.3 million or 93.1%. The decrease was driven by lower product sales volume. Further, cost of revenues from product sales in 2025 included a write-off of capitalized bulk material costs that did not recur in 2026.

Cost of Services revenues increased $13, or 6.2%, in 2026 compared to 2025.

Cost of License, royalty and other revenues increased $0.2 million in 2026 compared to 2025.

Research and Development Expenses

Research and development expenses were $3.0 million in 2026, a decrease of $0.7 million, or 19.7%, compared to 2025. The decrease was primarily due to a $0.3 million decrease in salaries and payroll taxes, a $0.2 million decrease in information technology costs, a $0.1 million decrease in allocated quality control costs and a $0.1 million decrease in allocated facilities costs, offset primarily by a $0.1 million increase in allocated quality assurance costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $9.2 million compared to $14.3 million in 2025, a decrease of $5.1 million. The decrease was primarily due to a $2.7 million decrease in independent sales representative compensation on lower sales, a $1.2 million decrease in stock-based compensation, a $0.4 million decrease in bad debt expense, a $0.3 million decrease in salaries, benefits and payroll taxes reflecting a reduction in headcount in the first quarter of 2026, and a $0.2 million decrease in legal expense, offset primarily by a $0.7 million increase in consulting fees.

Other Income (Expense)

(in thousands)

33

Total other income was $11.0 million in 2026 compared to total other expense of $9.3 million in 2025, a favorable swing of $20.3 million. The change was primarily due to $12.2 million of proceeds from the sale of New Jersey net operating loss carryforwards recorded in other income, and the absence of the $5.7 million loss on debt extinguishment recognized in 2025. Interest expense also decreased from $2.4 million to $0.4 million.

Liquidity and Capital Resources

As of March 31, 2026, we had cash and cash equivalents of $0.4 million, an accumulated deficit of $990.6 million, and a working capital deficit of $64.3 million. Our primary sources of cash are from financing activities and from products, services and licensing sales. We use this cash to fund our operations and satisfy our debt obligations.

Our current cash resources are not sufficient to fund our operations for a period of 12 months beyond the filing date and we are actively pursuing additional sources of capital and strategic sales partnerships to improve our liquidity and financial position, including transactions designed to monetize assets, reduce indebtedness and transition to a more capital-efficient operating model. While our ability to secure additional financing is subject to market conditions and other factors, these uncertainties raise substantial doubt about our ability to continue as a going concern.

We are evaluating and pursuing commercialization of certain investigational cellular therapies, including cenplacel-L, in jurisdictions that permit the use of such products outside of traditional regulatory approval pathways, subject to applicable local laws and regulations. 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.

We expect to finance our cash needs through equity offerings, debt financings or other capital sources, and from commercial sales of our biomaterials products, and from sales collaborations, licenses and other similar arrangements for our cellular therapeutics and these sales activities must increase to achieve positive cash flows form operations. We continue to explore licensing and collaboration arrangements for our cellular therapeutics as well as distribution arrangements for our degenerative disease business. We may be unable to raise additional funds or enter such other arrangements when needed. Failure to raise needed cash will have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

We expect to incur substantial expenses in the foreseeable future for 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.

Inflation has not significantly impacted on our business, however, sustained increases in inflation or interest rates could affect the broader economy and, in turn, impact our cash flows.

Cash Flows

(in thousands)

34

Operating Activities

Cash provided by operating activities was $1.4 million in 2026 compared to cash used of $3.0 million in 2025. The change was driven by the receipt of proceeds of $12,159 from the sale of New Jersey net operating loss carryforwards, offset in part by lower revenue.

Investing Activities

We made no investing cash expenditures in 2026 and none in 2025.

Financing Activities

In 2026 we used cash of $7.3 million in financing activities compared to $2.3 million provided in 2025. During 2026 our financing activities consisted of $7.0 million of repayments of short-term unaffiliated debt and a $0.3 million redemption of preferred stock.

In 2025, our financing activities included $2.5 million of proceeds from the issuance of common stock to Dragasac in connection with a warrant inducement agreement, offset by $42 of repayments on related party notes and $98 of tax withholding on the vesting of restricted stock units.

Recent Developments

In December 2025 we entered into agreements with an investor providing financing through senior secured and convertible notes. We issued a Senior Secured Non-Convertible Promissory Note of $7.0 million (the “Senior Note”) and a warrant to purchase up to 2,448,917 shares of our Class A common stock (the “Senior Note Warrant”). On February 13, 2026, we repaid in full the outstanding principal and accrued interest under the Senior Note. We also issued a Secured Convertible Promissory Note of $3.0 million and a warrant to purchase up to 1,258,740 shares of our Class A common stock (the “Convertible Note Warrant”). The Senior Note Warrant and the Convertible Note Warrant are both exercisable commencing on June 19, 2026 through December 19, 2030 at a price of $2.00 per share.

On April 17, 2026, Helena delivered to us a notice of event of default (the “Helena Default Notice”) under the Helena Note. In the Helena Default Notice, Helena asserted that one or more events of default had occurred under the Helena Note, including among other things, our failure to comply with the reporting requirements of the Securities Exchange Act of 1934, as amended, including becoming delinquent in its filings. We believe the asserted default arose from our failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Under the Helena Note, if an event of default is not cured within the applicable cure period, which is five business days for this type of asserted default, Helena may declare due and payable the “Mandatory Default Amount,” which is equal to 115% of the outstanding principal amount, accrued interest and all other amounts owing under the Helena Note. In addition, following an event of default, any outstanding principal balance accrues interest at a rate of 15% per annum, compounded annually. On May 21, 2026, we entered into a settlement agreement with Helena to resolve certain existing claims and restructure obligations under our existing transaction documents. Under the settlement agreement, we agreed to make an initial payment of $500,000 and five monthly installment payments of $100,000 each, assign rights under a $2.5 million portion of the NexGel promissory note described below, and amend the existing security agreement. Helena’s release of claims was conditioned on our satisfaction of specified release conditions. We did not timely make the installment payments due on July 21 and August 21, 2026. On August 25, 2026, we paid Helena $200,000, bringing our aggregate cash payments under the settlement agreement to $800,000. Helena has asserted that the missed payments constitute defaults and that it is entitled to exercise conversion rights under the Helena Note. We dispute Helena’s asserted entitlement to the conversion amount it has demanded. We are engaged in discussions to resolve the matter.

On March 6, 2026, we entered into an Asset Purchase and Exclusive License Agreement (the “NexGel Agreement”) with NexGel, Inc. (“NexGel”), pursuant to which we agreed to transfer certain commercial and other assets and granted NexGel an exclusive, transferable and sublicensable license to develop and commercialize certain products within our degenerative disease business. The licensed products include certain biomaterial products and pipeline programs that are part of our advanced biomaterials platform and are subject to underlying rights licensed from Celeniv Pte. Ltd. Under the agreement, as originally executed, we were entitled to an initial payment of $15 million due by April 15, 2026, additional milestone payments of up to $20 million upon the achievement of specified milestones, and royalties on certain development-stage products. The initial consideration and certain other terms were subsequently modified as described below.

On April 14, 2026, the Company entered into a Settlement Agreement and Mutual General Release (the “SLS Settlement Agreement”) with Sequence LifeScience, Inc. (“SLS”) to resolve certain disputes arising under the parties’ prior asset purchase and supply agreements. Pursuant to the SLS Settlement Agreement, and subject to the closing of our previously announced transaction with NexGel (the “NexGel Transaction”), we agreed to provide consideration to SLS, including (i) the grant of a sublicense to certain intellectual property and related assets, (ii) the return of certain product inventory, (iii) the assignment of a portion of future milestone payments payable to us in connection with the NexGel Transaction, (iv) the assignment of a portion of the convertible promissory note to be received from NexGel, and (v) certain manufacturing rights. The SLS Settlement Agreement was expressly contingent upon the closing of the NexGel Transaction. The NexGel Transaction closed on April 17, 2026.

In March 2026 and as amended in April 2026, the Company sold NexGel, Inc. an exclusive, transferable and sublicensable license to develop and commercialize certain degenerative disease products in exchange for $13.3 million. NexGel paid the Company $4.8 million cash at closing, $0.6 million cash in the 2nd quarter of 2026, which was contingent on the Company filing its 2025 Report on Form 10-K, NexGel assumed the obligation to pay sales commissions of $2.9 million earned by and owed to certain Celularity employees, and NexGel issued Celularity a $5.0 million 18-month convertible note which, subject to certain conditions, is convertible into NexGel common stock. The note was subsequently split into two notes of $2.5 million each, one of which was assigned to Helena Global Investment Opportunities, Ltd as partial satisfaction of amounts due Helena and one of which was assigned to Sequence LifeSciences, Inc. as partial satisfaction of amounts due Sequence, see Subsequent Events.

The NexGel license agreement entitles the Company to earn up to $20.0 million in milestone payments, with the first milestone payment of $2.5 million due to the Company upon the earlier of NexGel achieving $25.0 million in net sales or 15 months, provided that net sales of at least $15.0 million have been achieved.

In April 2026, we implemented certain organizational changes in connection with its ongoing strategic realignment and previously announced the sale of certain biomaterials assets and out-license of specified products. On April 9, 2026, we terminated the employment of John R. Haines, our Senior Executive Vice President, Global Manager and Chief Administrative Officer, without cause. Mr. Haines’ final day of employment was May 8, 2026. On April 13, 2026, Stephen A. Brigido, our President, Degenerative Diseases, resigned from his position, with an effective date of separation of April 15, 2026. These leadership changes reflect the Company’s continued focus on aligning our organizational structure and resources with its core cell therapy platform and strategic priorities.

On May 27, 2026, we received a notice from Nasdaq Stock Market LLC indicating that it is not in compliance with the timely filing requirement under Nasdaq Listing Rule 5250(c)(1) due to its failure to timely file its Form 10-Q for the period ended March 31, 2026. On June 9, 2026, we received written notice from Nasdaq indicating that our market value of listed securities had been below the $35.0 million minimum required by Nasdaq Listing Rule 5550(b)(2) for 30 consecutive business days. Under Nasdaq Listing Rule 5810(c)(3)(C), we were provided 180 calendar days, or until December 7, 2026, to regain compliance. To regain compliance, our market value of listed securities must equal or exceed $35.0 million for at least 10 consecutive business days during that period, subject to Nasdaq’s discretion to require a longer period. On August 21, 2026, we received an additional notice indicating that we remained delinquent in filing that report and had not timely filed our Form 10-Q for the period ended June 30, 2026. Nasdaq requested and we submitted a plan to regain compliance. Any exception granted by Nasdaq would be limited to a maximum of 180 calendar days from the prescribed due date of the initial delinquent filing, or November 16, 2026. We intend to regain compliance; however, there can be no assurance that it will be able to do so within any applicable period or that its securities will continue to be listed on Nasdaq.

On June 3, 2026, we entered into a letter agreement with DefEYE, Inc. (“DefEYE”) resolving a dispute following our May 7, 2026 notice asserting nonpayment of approximately $1.34 million in outstanding invoices. The agreement terminates the availability of the product purchase credit provided under the August 5, 2025 Fourth Amendment to the Supply Agreement, which previously governed our relationship with DefEYE, for product invoiced after May 6, 2026 and requires DefEYE to pay for subsequent purchases under the applicable contractual terms. As a transition accommodation, we agreed to provide a one-time 20% discount on the next $1.5 million of eligible purchases, payable on net 30-day terms, and returned 3,910,706 shares of DefEYE Series Seed-2 Preferred Stock, satisfying the related condition to effectiveness. The agreement also establishes a framework for secondary manufacturing of specified shortfalls, while preserving our position as primary manufacturer and providing us fees on secondary manufacturing purchases. See Note 22 - Subsequent Events for additional information.

On June 29, 2026, we entered into a loan agreement with the Barach Family Trust providing for a $1.0 million secured loan. The loan bears interest at 4% per annum, with a default interest rate of 18% per annum, and matures upon the earlier of 30 days after issuance or the completion of a subsequent transaction meeting the repayment threshold specified in the agreement. In a September 1, 2026 letter, the lender’s counsel asserted that an event of default had occurred, the applicable forbearance had expired and default interest at 18% per annum applied beginning August 5, 2026. The letter reserved the lender’s rights but did not demand immediate repayment of principal.

On July 28, 2026, we delivered a notice of default to BioCellgraft relating to unpaid license fee installments of $250,000 each due on March 31 and June 30, 2026 under our December 1, 2025 license agreement. We suspended performance under the applicable agreements and engaged in discussions regarding a potential resolution.

On August 5, 2026, we terminated the employment of Rick Gonzalez, our Chief Commercial Officer, effective immediately. On September 1, 2026, counsel for Mr. Gonzalez sent us a letter claiming compensation totaling $632,480 for alleged unpaid wages, bonuses and benefits arising from his employment and termination. Mr. Gonzalez’s employment terms were set forth in an offer letter, rather than an employment agreement. We are attempting to reach an amicable resolution

On September 23, 2026, the Company entered into a Securities Purchase Agreement providing for the issuance of senior secured convertible notes and warrants for aggregate gross proceeds of up to approximately $25.0 million. On September 24, 2026, the Company completed the initial closing under the agreement, resulting in aggregate gross proceeds of approximately $11.0 million. Additional proceeds are subject to the terms and conditions of the Securities Purchase Agreement.

Critical Accounting Policies

Our significant accounting policies are summarized in Note 2, “Summary of Significant Accounting Policies,” included in our consolidated financial statements included elsewhere in this report on Form 10-Q.

Evaluation of Disclosure Controls and Procedures

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

Management, with the participation of our Principal Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026 and concluded, consistent with prior reporting periods, that these controls and procedures were not effective due to material weaknesses in internal control over financial reporting for complicated financial transactions causing the Company file quarterly and annual reports late.

Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. An internal control material weakness is a significant deficiency, or aggregation of deficiencies, that does not reduce to a relatively low level the risk that material misstatements in financial statements will be prevented or detected on a timely basis by employees in the normal course of their work. An internal control significant deficiency, or aggregation of deficiencies, is one that could result in a misstatement of the financial statements that is more than inconsequential. In making its assessment of internal control over financial reporting Management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).

Material Weakness in Internal Control Over Financial Reporting

We previously disclosed material weaknesses in our internal control over financial reporting. Specifically, we had insufficient resources with the appropriate knowledge and expertise to design, implement, and operate effective internal controls over our financial reporting process that contributed to other material weaknesses within our system of internal control over financial reporting at the control activity level. In addition, we failed to timely file quarterly reports on Form 10-Q for quarters within the year ended December 31, 2025 and the first quarter of 2026, and the report on Form 10-K for the year ended December 31, 2025. As a result, we have identified the following material weaknesses as of March 31, 2026:

Remediation Plans

Company Financial Management led by the Chief Financial Officer will participate in all strategic transactions and access if these transactions yield complicated financial accounting and reporting issues. Internal resources will then be charged with evaluating if the Company has the necessary expertise to account for and report on the transactions in a timely manner. If not, outside expert resources will be contracted to assist in a timely manner to ensure timely quarterly and annual report filings. The Super User Access available to certain finance and accounting personnel was removed in the 2nd quarter of 2026 and limited to appropriate Information Technology personnel.

Changes in Internal Control over Financial Reporting

For the quarter ended March 31, 2026 there have been no changes in our internal control over financial reporting, except as noted above.

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, 2025 filed with the SEC on April 30, 2026.