Celularity Inc
For the period ended Mar 31, 2024. Filed Oct 16, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed Oct 16, 2024
CELU$0.76+4.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-09-30; filed 2024-01-03.
0000950170-24-000474
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-10-16.
0000950170-24-115082
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 131 previous paragraphs and 106 current paragraphs.
44 unchanged; 30 reworded; 32 added; 51 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (32)
Current report
Private Placement
Current report
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.
Current report
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 ("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. 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).
Current report
2024 Warrant Modifications
Current report
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.
Current report
Senior Secured Bridge Loan
Current report
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.
Current report
Standby Equity Purchase Agreement
Current report
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).
Current report
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.
Current report
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.
Current report
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.
Current report
Forbearance Agreements
Current report
On March 13, 2024,we entered into a second forbearance agreement with RWI ("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.
Current report
On March 13, 2024, we entered into a forbearance agreement with C.V. Starr ("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.
Current report
Short-Term Debt - Other and CEO Promissory Note
Current report
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.
Current report
Failure to comply with Nasdaq Listing Rule 5250(c)(1)
Current report
On April 17, 2024, we informed the Listing Qualifications department of Nasdaq that we failed to timely file the 2023 Form 10-K within the extension period provided by Rule 12b-25. On April 17, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file the 2023 Form 10-K, we no longer complied with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1). On May 21, 2024, we informed the Listing Qualifications department of Nasdaq that we failed to timely file this quarterly report on Form 10-Q for the quarter ended March 31, 2024. On May 21, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file this Form 10-Q, and because at the time we remained delinquent on the 2023 Form 10-K, we were not in compliance with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1). On August 22, 2024, we informed the Listing Qualifications department of Nasdaq that we failed to timely file the quarterly report on Form 10-Q for the quarter ended June 30, 2024, or the Q2 2024 Form 10-Q, due to delays in filing this Form 10-Q. On August 22, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file our Q2 2024 Form 10-Q, and because at the time we remained delinquent on this Form 10-Q, we are not in compliance with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1).
Current report
On September 5, 2024, we submitted a plan to Nasdaq to regain compliance and on September 17, 2024, received notification from Nasdaq that the compliance plan was accepted. Under the plan, Nasdaq granted us an extension until October 14, 2024, to file this Form 10-Q and the Form 10-Q for the quarter ended June 30, 2024. As of the date of this filing, we expect that Nasdaq will provide notification of a delisting determination, which can be appealed to a Nasdaq Hearings Panel. Upon receipt of the written notification, we intend to timely appeal Nasdaq’s determination. There can be no assurance that we will timely file such an appeal, that the Nasdaq Hearings Panel will grant any relief, or that the Company will regain compliance within the compliance period or maintain compliance with the other Nasdaq listing requirements. If relief is not granted by the Nasdaq Hearings Panel or we are unable to regain or maintain compliance, our securities will be delisted from the Nasdaq, which such delisting would have a materially adverse effect on our ability to continue as a going concern.
Current report
As of the issuance date, we had approximately $44.2 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, substantially all of our debt is subject to a forbearance agreement. 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.
Current report
On August 22, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file our Q2 2024 Form 10-Q, and because at the time we remained delinquent on the Q1 2024 Form 10-Q, we are not in compliance with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1). On September 5, 2024, we submitted a plan to Nasdaq to regain compliance and on September 17, 2024, received notification from Nasdaq that the compliance plan was accepted. Under the plan, Nasdaq granted us an extension until October 14, 2024, to file this Form 10-Q and the Form 10-Q for the quarter ended June 30, 2024. As of the date of this filing, we expect that Nasdaq will provide notification of a delisting determination, which can be appealed to a Nasdaq Hearings Panel. Upon receipt of the written notification, we intend to timely appeal Nasdaq’s determination. There can be no assurance that we will timely file such an appeal, that the Nasdaq Hearings Panel will grant any relief, or that the Company will regain compliance within the compliance period or maintain compliance with the other Nasdaq listing requirements. If relief is not granted by the Nasdaq Hearings Panel or we are unable to regain or maintain compliance, our securities will be delisted from the Nasdaq, which such delisting would have a materially adverse effect on our ability to continue as a going concern.
Current 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.
Current report
Net revenues for the three months ended March 31, 2024 were $14.7 million, an increase of $10.7 million, or 273.1% compared to the prior year period. The increase was primarily due to an $11.8 million increase in product sales driven by increased demand for Biovance 3L, partially offset by a $1.0 million decrease in license, royalty and other due to lower distributor sales.
Current report
Cost of revenues for the three months ended March 31, 2024 was $1.6 million, a decrease of $0.4 million, or 18.1% compared to the prior year period. The decrease was primarily driven by lower biomaterial product sales through distributors and to a lesser extent, lower Biobanking collection, processing and storage fees partially offset by higher direct to customer biomaterial product sales. As a percentage of revenues, cost of revenues decreased to 11% for the three months ended March 31, 2024 compared to 51% in the prior year period due to an increase in Biovance 3L sales, which has a higher gross profit margin than other biomaterial products.
Current report
Selling, general and administrative expenses for the three months ended March 31, 2024 were $14.0 million, an increase of $0.1 million, or 0.7% compared to the prior year period. Overall, personnel costs were lower offset by higher outside services expenses.
Current report
Goodwill Impairment
Current report
On January 12, 2024, we entered into a securities purchase agreement with Dragasac Limited, 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.
Current report
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.
Current report
On March 13, 2024, we entered into a Standby Equity Purchase Agreement ("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.
Current report
Net cash used in operations for the three months ended March 31, 2024 was $10.6 million lower than the prior year period, primarily due to higher net revenues, partially offset by an increase in accounts receivable and 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.
Current report
We generated $6.2 million of net cash from financing activities for the three months ended March 31, 2024, which consisted of $15.0 million from the RWI second amended and restated senior secured loan agreement entered into on January 12, 2024, $6.0 million from the January 2024 private placement agreement with Dragasac Limited 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 off the Yorkville PPA. For the three months ended March 31, 2023 we generated $12.8 million of net cash in financing activities, which consisted primarily of $9.0 million from the March 2023 private placement agreement with two accredited investors, including our Chairman and Chief Executive Officer, Dr. Robert Hariri, $5.0 million of proceeds from the Starr Bridge Loan, partially offset by $1.6 million of principal repayments on the Yorkville PPA.
Removed paragraphs (51)
Previous report
Private Placement - March 2023
Previous report
We also entered into a registration rights agreement with the purchasers whereby we agreed to register the resale of the shares of our Class A common stock and the shares of our Class A common stock issuable upon exercise of the March 2023 PIPE Warrants as well as the shares issued as payment pursuant to the binding term sheet for a sublicense (described below). We were required to prepare and file a registration statement with the Securities and Exchange Commission, or SEC, within 30 days of the filing of our annual report on Form 10-K for the year ended December 31, 2022, and to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of such review, and in any event, no later than June 30, 2023.
Previous report
In September 2023, we entered into a warrant amendment on the March 2023 PIPE Warrants with the unaffiliated investor to reduce the exercise price from $3.00 per share to $1.00 per share for warrants to purchase 7,296,987 shares of Class A common stock. The warrant amendment was executed as consideration for professional services rendered to us. As a result, we accounted for the transaction in accordance with ASC 718 Stock-Based Compensation based on the calculated incremental fair value attributable to the modified warrant compared to the original warrant immediately prior to the modification and recognized an expense of $402,000 on the condensed consolidated statements of operations for the three and nine months ended September 30, 2023.
Previous report
Senior Secured Bridge Loans
Previous report
In March 2023, we entered into a Loan Agreement with C.V. Starr & Co. Inc., one of our stockholders, or C.V. Starr, providing for a loan in the aggregate principal amount of $5.0 million net of an original issue discount of $100,000, which bears interest at a rate of 12.0% per year, with the first year of interest being paid in kind on the last day of each month, and matures March 17, 2025, or the Starr Bridge Loan, and warrants to acquire up to an aggregate 750,000 shares of our Class A common stock, or the Starr Warrant, at a purchase price of $0.125 per whole share underlying the Starr Warrant (or $93,750). The Starr Warrant has a 5-year term and an exercise price of $0.71 per share. In June 2023, we granted C.V. Starr additional warrants to acquire up to an aggregate 500,000 shares of our Class A common stock which has a 5-year term and an exercise price of $0.81 per share.
Previous report
In May 2023, we entered into a senior secured loan agreement with Resorts World Inc Pte Ltd, or RWI, providing for an initial loan in the aggregate principal amount of $6.0 million net of an original issue discount of $120,000, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures June 14, 2023, or the RWI Bridge Loan. Pursuant to the terms of the RWI Bridge Loan, we are required to apply the net proceeds from the RWI Bridge Loan to the payment due to Yorkville pursuant to that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA. Any other use of proceeds requires prior written approval by RWI. RWI is affiliated with Lim Kok Thay, a member of our board of directors.
Previous report
Pursuant to the terms of the RWI Bridge Loan, as amended, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any of our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five consecutive business days, and includes customary events of default. We entered into a forbearance agreement with RWI in September 2023. We granted RWI a senior security interest in all of our assets, pari passu with C.V. Starr pursuant to the Starr Bridge Loan.
Previous report
During the third quarter of 2023 and as of the issuance date, our cash and cash equivalents continues to be below the $3.0 million minimum liquidity covenant, which per the terms of the loan agreements with RWI and C.V. Starr caused an event of default. Since we are currently in default and its probable that we would not be in compliance with the $3.0 million minimum liquidity covenant at a subsequent measurement date, we reclassified both loans as a current liability reflected as short-term debt - related parties on the condensed consolidated balance sheets as of September 30, 2023.
Previous report
Binding Term Sheet for Sublicense Agreement
Previous report
Concurrent with the entry into the securities purchase agreement for the March 2023 private placement described above; we executed a binding term sheet to negotiate and enter into a sublicense of certain assets from an affiliate of the accredited investor party to the private placement transaction. Pursuant to the binding term sheet, we paid the sublicensor $3.0 million in cash and issued $1.0 million of shares of our Class A common stock (1,694,915 shares based on the closing price on March 17, 2023) as consideration for stem-cells inventory to be used in research and development.
Previous report
Registered Direct Offerings
Previous report
In April 2023, we closed on a registered direct offering of 9,230,770 shares of our Class A common stock together with warrants to purchase up to 9,230,770 shares of our Class A common stock at a combined purchase price of $0.65 per share and accompanying warrant, resulting in total gross proceeds of approximately $6.0 million before deducting placement agent commissions and other estimated offering expenses. The warrants have an exercise price of $0.75, will be exercisable beginning six months after the date of issuance and will expire five years thereafter. We also amended existing warrants to purchase up to an aggregate of 4,054,055 shares at an exercise price of $8.25 per share, with an expiration date of May 20, 2027, held by the same investor, effective upon the closing of the offering to reduce the exercise price to $0.75 per share and extended expiration date to five and one-half years following the closing of the offering. We used the $5.5 million net proceeds from the offering to repay our obligations to Yorkville under that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA.
Previous report
In July 2023, we closed on a securities purchase agreement with an institutional accredited investor, or the Purchase Agreement, providing for the sale and issuance of (i) 8,571,429 shares of its Class A common stock, par value $0.0001 per share, or the Class A common stock, and (ii) accompanying warrants to purchase up to 8,571,429 shares of Class A common stock, at a combined purchase price of $0.35 per share and accompanying warrant, for an aggregate purchase price of approximately $3.0 million. Each warrant has an exercise price of $0.35 per share, is initially exercisable beginning six months following the date of issuance, and will expire five years from the initial exercise date. In connection with the offering described above, we also entered into an amendment to certain existing warrants to purchase up to an aggregate of 8,928,572 shares at an exercise price of $0.75 per share and a termination date of October 10, 2028 (consisting of all of the warrants originally issued in May 2022 and a portion of which were issued in April 2023), pursuant to which, effective upon the closing of the offering, such amended warrants will have a reduced exercise price of $0.35 per share.
Previous report
Private Placement – May 2023
Previous report
In May 2023, we entered into a securities purchase agreement with a group of accredited investors, providing for the private placement of an aggregate (i) 5,813,945 shares of our Class A common stock and (ii) accompanying warrants to purchase up to 5,813,945 shares of Class A common stock, or the May 2023 PIPE Warrants, for $0.52 per share and $0.125 per accompanying May 2023 PIPE Warrant, for an aggregate purchase price of approximately $3.7 million, which private placement closed on May 18, 2023 upon satisfaction of customary closing conditions.
Previous report
Each May 2023 PIPE Warrant has an exercise price of $1.00 per share, is immediately exercisable, will expire on May 18, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization. The May 2023 PIPE Warrants may not be exercised if the aggregate number of shares of Class A common stock beneficially owned by the holder thereof (together with its affiliates) would exceed the specified percentage cap provided therein (which may be adjusted upon 61 days advance notice) immediately after exercise thereof.
Previous report
We also entered into a registration rights agreement with the purchasers whereby we agreed to register the resale of the shares of Class A common stock and the shares of Class A common stock issuable upon exercise of the May 2023 PIPE Warrants. We will be required to prepare and file a registration statement with the SEC within 30 days, and to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of such review, and in any event, no later than July 31, 2023.
Previous report
Regeneron Research Collaboration Services Agreement - August 2023
Previous report
On August 25, 2023, we entered into a multi-year research collaboration services agreement with Regeneron Pharmaceuticals, Inc. or Regeneron, pursuant to which we will support the research effort of Regeneron's allogeneic cell therapy candidates (the Regeneron Services Agreement). The Regeneron Services Agreement’s initial focus is the research on a targeted allogeneic gamma delta chimeric antigen receptor (CAR) T-cell therapy owned by Regeneron designed to enhance proliferation and potency against solid tumors. Payments to us under the Regeneron Services Agreement included a non-refundable up-front payment and payments based upon the achievement of defined milestones according to written statements of work. The Regeneron Services Agreement will expire five years from the effective date and may be terminated immediately by either party for the uncured material breach, bankruptcy, or insolvency of the other party. Regeneron may also terminate for convenience upon 30 days’ written notice.
Previous report
Lease Amendment - September 2023
Previous report
On September 14, 2023, we entered into a lease amendment with the landlord to reduce the amount required to be held under the letter of credit by approximately $4.9 million to a new letter of credit for $9.9 million in exchange for an increase in annual base rent of approximately $400,000 per annum. The new base rental rate commenced in October 2023. The new letter of credit account settled on October 17, 2023, which reduced our restricted cash allowing for funds to be used for general corporate purposes. We also agreed to cooperate with the landlord on a sustainability plan and we received consent for a desk sharing arraignment to support the Regeneron Research and Collaboration Agreement.
Previous report
Cell Therapy – Impairments
Previous report
During the third quarter of 2023, our stock price and market capitalization continued to further decline. We also elected to terminate development of CYCART-19 for B-cell malignancies during the third quarter of 2023, as well as paused development in exosomes. Therefore, we tested for impairment due to these triggering events. Based on the results of the impairment analysis, the carrying value exceeded the fair value on the Cell Therapy reporting unit and we incurred a full goodwill impairment charge for the remaining goodwill balance on the Cell Therapy reporting unit. We also performed a reconciliation of the aggregate fair value of each reporting unit to the market capitalization of the Company. The analysis showed the fair value of the reporting units approximated our market capitalization, indicating an insignificant control premium.
Previous report
Based on the results of the impairment analyses, we recognized a $82.7 and $112.3 million goodwill impairment charge during the three and nine months ended September 30, 2023, respectively, relating to our Cell Therapy reporting unit in our condensed consolidated statements of operations. In addition, we incurred an IPR&D impairment charge of $107.8 million due to discontinuing our Cell Therapy clinical trials during the nine months ended September 30, 2023.
Previous report
Palantir – Cease-Use Costs
Previous report
In May 2021, our subsidiary, Legacy Celularity executed a Master Subscription Agreement with Palantir Technologies, Inc., or Palantir, under which it agreed to pay $40.0 million over five years for access to Palantir’s Foundry platform along with certain professional services. In January 2023, we ceased use of the software and provided a notice of dispute to Palantir on the basis that the software has not performed as promised and that Palantir has failed to provide us with the professional services necessary to successfully implement, integrate and enable the Foundry platform. As a result, in accordance with ASC 420 Exit or Disposal Costs, during the nine months ended September 30, 2023, we recognized the remaining related cease-use costs and liability estimated based on the discounted future cash flows of contract payments for $24.2 million which is included as a component of research and development expense in the condensed consolidated statements of operations. We have both a current and noncurrent liability for accrued research and development software on the condensed consolidated balance sheets for a total liability of $31.5 million and $7.3 million as of September 30, 2023 and December 31, 2022, respectively. For the nine months ended September 30, 2022, we had recorded $6.0 million, which was on a straight-line basis, which was included as a component of research and development expense in our condensed consolidated statements of operations. Palantir has filed to compel arbitration of this dispute. See also Item 1 of Part II of this quarterly report on Form 10-Q.
Previous report
On December 21, 2023, we entered into a settlement and release agreement pursuant to the JAMS arbitration proceeding asserting claims for declaratory relief and breach of contract relating to the Palantir Master Subscription Agreement. Both parties agreed to dismiss the arbitration proceeding and dispute and provide for mutual releases upon satisfaction of our settlement payment obligation. We agreed to pay Palantir a total settlement payment of $3,500 with $1,500 to be paid by January 2, 2024, and the remaining $2,000 to be paid by March 21, 2024. As of the issuance date no payments have been made. In the event of a material breach or default by the breaching party, and a failure to cure the breach within five business days, liquidated damages amount of $250 shall be incurred.
Previous report
Middle East Distribution
Previous report
We continue to work with our distribution partners to enable sales of our biomaterial products in the Middle East. The commercialization of our biomaterial products is subject to local regulatory approval, and we are actively working with our partners to obtain such approvals from health authorities in the Kingdom of Saudi Arabia and the United Arab Emirates. As of the date of this quarterly report on Form 10-Q, we have not received the requisite local regulatory approvals and have not generated any revenue from sales of our biomaterial products in these territories.
Previous report
Government Regulation
Previous report
In August 2023, the FDA conducted an inspection at our Florham Park, New Jersey manufacturing facility. The FDA issued a Form FDA 483, which is a list of inspectional observations provided at the conclusion of the inspection, relating to our Interfyl and CentaFlex human tissue-based biomaterial products. Specifically, the FDA issued a Form 483 consisting of 7 observations that generally pertain to FDA’s current good manufacturing practices (“cGMP”) regulations for drug and biologic products. We provided a timely response to the FDA regarding each observation asserting that the subject products are not drug or biologic products subject to the drug and biologic cGMP regulations, rather these products are solely subject to FDA’s current good tissue practices (“cGTP”) regulations and, thus, the Form 483 observations were not applicable. The FDA had no observations regarding our compliance with cGTP regulations. We remain committed to resolving the FDA’s concerns; however, it is not possible to predict the outcome or timing of a resolution at this time. There can be no assurance that the FDA will be satisfied with our responses to the Form 483 inspectional observations, nor any assurance as to the timeframe that may be required for us to adequately address the FDA’s concerns.
Previous report
We had approximately $17.0 million of principal borrowings outstanding under a financing arrangement referred to as the PPA with a private investor, Yorkville, as of September 30, 2023. We entered into to a letter agreement with Yorkville in September 2023 to extend the maturity date of the outstanding note to December 31, 2023. As part of the agreement to extend the maturity date of the note, we were required to pay Yorkville $2.0 million on or prior to October 5, 2023. We also agreed to pay an additional $500,000 on or before October 31, 2023. We were not able to make the required payments. There is no assurance that we will have sufficient liquidity to make the payments required by the agreement. If we fail to secure a waiver from Yorkville and fail to pay the remaining repayment amount currently due, Yorkville could deem such non-payment an event of default under the PPA. If Yorkville deems such non-payment an event of default, Yorkville may, at its discretion, exercise its rights and remedies as provided in the PPA which may include, among others, accelerating the repayment of the total principal due under the PPA (approximately $17.0 million as of September 30, 2023 and as of the issuance date), plus accrued and unpaid interest and the 5% premium, and/or force us to seek protection under the provision of the U.S. Bankruptcy Code. We were unable to repay the outstanding note balance as of the December 31, 2023 maturity date. As of the issuance date, Yorkville has not provided notification to us that an event of default has occurred under the terms of the PPA.
Previous report
During the third quarter of 2023 and as of the issuance date, our cash and cash equivalents continues to be below the $3.0 million minimum liquidity covenant, which per the terms of the RWI and C.V. Starr loan agreements caused an event of default. We are actively pursuing additional capital for working capital and general corporate purposes. As part of these efforts, we intend to raise sufficient capital to cure any breach of our contractual covenants within the cure periods set forth in the respective agreements. In the event we are unable to cure such breaches during the prescribed cure period, we will seek waivers from the secured lenders. We did seek waivers from both lenders and entered into a forbearance agreement with RWI in September 2023. However, since we are currently in default and its' probable that we would not be in compliance with the $3.0 million minimum liquidity covenant at a subsequent measurement date, we reclassified both loans as a current liability reflected as short-term debt - related parties on the condensed consolidated balance sheets as of September 30, 2023. If we cannot secure a waiver from the secured lenders, the lenders may declare the outstanding principal of the loans due and payable, which may force us to seek protection under the provisions of the U.S. Bankruptcy Code.
Previous report
On March 14, 2023, we received a notice from the Nasdaq notifying us that we no longer comply with the minimum bid price requirement for continued listing on the Nasdaq Capital Market because the closing bid price for our Class A common stock has fallen below $1.00 per share for the last 30 consecutive business days. We had a period of 180 calendar days, or until September 11, 2023, to regain compliance with the minimum bid price requirement. On September 12, 2023, we obtained a second period of 180 calendar days, or until March 11, 2024, to regain compliance based on us meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. We intend to actively monitor the closing bid price of our Class A common stock and will evaluate available options to regain compliance with the minimum bid requirement. However, we can provide no assurance that we will be able to regain compliance with the minimum bid requirement during the second 180-day compliance period, or maintain compliance with the other Nasdaq listing requirements. In the event we are unable to regain or maintain compliance with the Nasdaq listing requirements, the liquidity of our publicly traded securities will be adversely affected and our ability to secure additional outside capital through public markets will be adversely affected. If we choose to implement a reverse stock split, it must be completed no later than 10 business days prior to March 11, 2024 to timely regain compliance. If it appears to Nasdaq that we will not be able to cure the deficiency, or is otherwise not eligible, Nasdaq will provide notification that our common stock will be subject to delisting.
Previous report
In October 2018, we acquired CariCord Inc., or CariCord, a family cord blood bank established by ClinImmune Labs University of Colorado Cord Blood Bank and the Regents of the University of Colorado, a body corporate, for and on behalf of the University of Colorado School of Medicine.
Previous report
In September 2020, we entered into a license and transfer agreement, or the Sorrento Agreement, with Sorrento. Henry Ji, Ph.D., a former member of the board of directors of our wholly-owned subsidiary, which we refer to as Legacy Celularity, currently serves as President and Chief Executive Officer of Sorrento. Sorrento was also a significant stockholder of our company and invested in the July 2021 private investment in public equity financing concurrent with the closing of the business combination among our company and Legacy Celularity. Pursuant to the Sorrento Agreement, we obtained a worldwide license for the CD19 CAR construct that forms the basis of the genetic modification for CYCART-19.
Previous report
Net revenues for the three months ended September 30, 2023 was $3.8 million, a decrease of $0.3 million, or 8.4% compared to the prior year period. The decrease was primarily due to decreased license, royalty and other revenues due to loss of business with Evolution, a former distribution partner offset by higher product sales.
Previous report
Cost of revenues for the three months ended September 30, 2023 was $3.6 million, a decrease of $3.6 million, or 50.1% compared to the prior year period. The decrease was primarily due to the recognition of previously deferred inventory material costs variances of $4.5 million in license, royalty and other cost of revenues for the three months ended September 30, 2022 as a result of a change in production plans related to lower degenerative disease sales than previously forecasted in the prior period offset by a reserve for obsolescence recorded during the three months ended September 30, 2023.
Previous report
Selling, general and administrative expenses for the three months ended September 30, 2023 were $10.7 million, a decrease of $4.2 million, or 27.9% compared to the prior year period. The primary reason for the decrease was driven by lower personnel costs and lower consulting expenses resulting from our March 2023 reduction in force.
Previous report
Goodwill and IPR&D Impairments
Showing the first 40 of 51 passages. Open the source sections for the rest.
Reworded paragraphs (30)
Previous wording
We are a biotechnology company leading the next evolution in cellular medicine by developing off-the-shelf placental-derived allogeneic cell therapies for the treatment of cancer and immune and infectious diseases. We are developing a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor, or CAR, natural killer, or NK cells, mesenchymal-like adherent stromal cells, or MLASCs, and exosomes. These therapeutic candidates target indications across cancer, infectious and degenerative diseases. We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. We also actively develop and market biomaterial products derived from the placenta. Prior to 2023, we marketed those products domestically primarily serving the orthopedic and wound care markets. We now intend to market placental biomaterials outside of the United States with an initial focus on markets in the Middle East and North Africa. Our biomaterials business today is comprised primarily of the sale of our Biovance and Interfyl products, directly or through our distribution network. Biovance is decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Interfyl is human connective tissue matrix derived from the placenta of a healthy, full-term pregnancy. It is used by a variety of medical specialists to fill soft tissue deficits resulting from wounds, trauma, or surgery. We are developing new placental biomaterial products to deepen the commercial pipeline beyond Biovance and Interfyl. We also plan to leverage our core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties. The initial focus of this new service offering will be to assist development stage cell therapy companies with the development and manufacturing of their therapeutic candidates for clinical trials. In January 2023, we announced reprioritization of efforts, which resulted in a reduction of approximately one-third of our workforce as of March 2023. We are no longer actively recruiting into our clinical programs.
Current wording
We are a cell therapy and regenerative medicine 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.
Previous wording
From a single source material, the postpartum human placenta, we derive four allogeneic cell or extracellular vesicle types: T cells, genetically modified NK cells, MLASCs and exosomes, which have the potential to support multiple therapeutic programs. CYCART-19 is a placental-derived CAR-T cell therapy, previously in development for the treatment of B-cell malignancies, initially targeting the cluster of differentiation 19, or CD19, receptor, the construct and related CARs for which are in-licensed from Sorrento. In the first quarter of 2022, we submitted an IND to investigate CYCART-19 for treatment of B-cell malignancies and in late May 2022, received formal written communication from FDA requesting additional information before we could proceed with the Phase 1/2 clinical trial. After assessing the status of the IND to determine an optional path forward for the program, we elected to terminate development of CYCART-19 for B-cell malignancies during the third quarter of 2023. We may continue pre-clinical development of other T-cell candidates. CYNK-001 is a placental-derived unmodified NK cell. In 2022, we had active and approved clinical trials under development for the treatment of acute myeloid leukemia, or AML, a blood cancer, and for glioblastoma multiforme, or GBM, a solid tumor cancer. Due to a need to prioritize corporate resources, in January 2023 we announced our intention to cease recruitment in the GBM and the HER2+ gastric trials. In addition, in April 2023, we announced based on the preliminary results of the phase 1 trial data of CYNK-001, the AML trial would be closed to further enrollment and completed follow up. We are not actively investigating CYNK-001 for any indication. During the second quarter of 2023, we fully impaired the in-process research and development ("IPR&D") assets associated with CYNK-001. APPL-001 is a placenta-derived MLASC being developed for the treatment of Crohn’s disease, and other degenerative diseases. Due to an internal alignment of corporate resources, we paused development in exosomes to focus on other priorities.
Current wording
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.
Previous wording
Our current science is the product of the cumulative background and effort over two decades of our seasoned and experienced management team. We have our roots in Anthrogenesis Corporation, or Anthrogenesis, a company founded under the name Lifebank in 1998 by Robert J. Hariri, M.D., Ph.D., our founder and Chief Executive Officer, and acquired in 2002 by Celgene Corporation, or Celgene. The team continued to hone their expertise in the field of placental-derived technology at Celgene through August 2017, when we acquired Anthrogenesis. We have a robust global intellectual property portfolio comprised of over 1,500 patents and patent applications protecting our Celularity IMPACT platform, our processes, technologies and current key cell therapy programs. We believe this know-how, expertise and intellectual property will drive the rapid development and, if approved, commercialization of these potentially lifesaving therapies for patients with unmet medical needs.
Current wording
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.
Previous wording
In March 2023, we closed a private placement of (i) 9,381,841 shares of our Class A common stock, and (ii) accompanying warrants to purchase up to 9,381,841 shares of our Class A common stock, or the March 2023 PIPE Warrants, for $0.8343 per share and $0.125 per accompanying March 2023 PIPE Warrant, for an aggregate purchase price of approximately $9.0 million (of which Dr. Hariri subscribed for $2.0 million) pursuant to that certain securities purchase agreement dated March 20, 2023 with two accredited investors, including our Chairman and Chief Executive Officer, Dr. Robert Hariri. Each March 2023 PIPE Warrant has an exercise price of $3.00 per share, is immediately exercisable, will expire on March 27, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization.
Current wording
On January 12, 2024, we entered into a securities purchase agreement with an existing investor, Dragasac Limited ("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.
Previous wording
In June 2023, we entered into an amended and restated senior secured loan agreement, or the Amended Loan, with RWI, to amend and restate the previously announced senior secured loan agreement with RWI, or the Initial Loan, in its entirety. The Amended Loan provided for an additional loan in the aggregate principal amount of $6.0 million net of an original issue discount of $678,000, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures March 17, 2025. The Amended Loan extended the maturity date of the Initial Loan to March 17, 2025. In addition, the Amended Loan provided for the issuance of warrants to acquire up to an aggregate of 3,000,000 shares of Celularity’s Class A common stock, or the RWI Warrant, at a purchase price of $0.125 per whole share underlying the RWI Warrant (or an aggregate purchase price of $375,000). The RWI Warrant has a 5-year term and an exercise price of $0.81 per share. Pursuant to the terms of the Amended Loan, Celularity was required to apply the net proceeds to the payments due under the Yorkville PPA.
Current wording
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, and the Tranche #2 Warrant will have an exercise price equal to "Minimum Price” (as determined pursuant to Nasdaq 5635(d)) on the date it becomes exercisable. We closed the RWI Second Amended Bridge Loan and the sale and purchase of the Tranche #1 Warrant and Tranche #2 Warrant on January 16, 2024. The Tranche #2 Warrant initial exercise date was determined to be July 17, 2024 (i.e., six months from the issuance date) and the exercise price was set at $3.076 based on the 5-day trailing average stock price.
Previous wording
Pursuant to the terms of the Starr Bridge Loan, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five consecutive business days. In addition to the negative covenants in the Starr Bridge Loan, the Starr Bridge Loan include customary events of default. Pursuant to the terms of the Starr Bridge Loan, we granted Starr a senior security interest in all of our assets.
Current wording
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.
Previous wording
In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, we evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Current wording
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.
Previous wording
As an emerging clinical-stage biotechnology company, we are subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since our inception, substantially all of management’s efforts have been devoted to making investments in research and development including basic scientific research into placentally-derived allogeneic cells, pre-clinical studies to support our current and future clinical programs in cellular therapeutics, and clinical development of our cell programs as well as facilities and selling, general and administrative expenses that support our core business operations (collectively the “investments”), all at the expense of our short-term profitability. We have historically funded these investments through limited revenues generated from our biobanking and degenerative disease businesses and issuances of equity and debt securities to public and private investors (these issuances are collectively referred to as “outside capital”). Notwithstanding these efforts, management can provide no assurance that our research and development and commercialization efforts will be successfully completed, or that adequate protection of our intellectual property will be adequately maintained. Even if these efforts are successful, it is uncertain when, if ever, we will generate significant sales or operate in a profitable manner to sustain our operations without needing to continue to rely on outside capital. Continued decline in our share price, further discontinuation of clinical trials, and other changes in the business or market conditions could result in a material impairment of our long-lived assets in a future period.
Current wording
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.
Previous wording
As of the date the accompanying consolidated financial statements were issued, or the issuance date, management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40:
Current wording
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:
Previous wording
Since inception, we have incurred significant losses and net cash used in operating activities. For the nine months ended September 30, 2023, we incurred a net loss of $205.8 million and net cash used in operating activities of $34.3 million. As of September 30, 2023, we had an accumulated deficit of $851.3 million. We expect to continue to incur significant losses and use net cash for operations for the foreseeable future.
Current wording
Since inception, we have incurred significant operating losses and cash used in operating activities. For the three months ended March 31, 2024, we incurred a net operating loss of $7.4 million and cash used in operating activities of $4.4 million. As of March 31, 2024, we had an accumulated deficit of $863.8 million. We expect to continue to incur significant operating losses and use net cash in operations for the foreseeable future.
Previous wording
In the event we are unable to secure additional outside capital to fund our obligations when they become due over the next 12 months beyond the issuance date, which includes the funds needed to repay the outstanding principal on the PPA (plus unpaid accrued interest and the 5% premium) that has become due and will become fully due in December 2023, and/or obtain a waiver to defer the remaining repayment amount currently due to Yorkville, and/or regain compliance with the Nasdaq listing requirements, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of our operations, a sale of certain of our assets, a sale of our entire company to strategic or financial investors, and/or allowing us to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.
Current wording
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.
Previous wording
These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates that we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying unaudited interim condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
Current wording
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.
Previous wording
We manage our operations through an evaluation of three distinct business segments: Cell Therapy, Degenerative Disease, and BioBanking. The reportable segments were determined based on the distinct nature of the activities performed by each segment. Cell Therapy broadly refers to cellular therapies we are researching and developing, which are unproven and in various phases of development. All of the cell therapy programs fall into the Cell Therapy segment. We have no approved cell therapy product and have not generated revenue from the sale of cellular therapies to date. Degenerative Disease produces, sells and licenses products used in surgical and wound care markets, such as Biovance, Biovance 3L, Interfyl and CentaFlex. We sell products in this segment both using our own sales force as well as independent distributors. We are developing additional tissue-based products for the Degenerative Disease segment. BioBanking collects stem cells from umbilical cords and placentas and provides storage of such cells on behalf of individuals for future use. We operate in the biobanking business primarily under the LifebankUSA brand. For more information about our reportable business segments refer to Note 14, “Segment Information” of our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.
Current wording
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.
Previous wording
Our current operations reflect strategic acquisitions and divestitures that we have made since formation. Additional details regarding the following acquisitions can be found in Note 1, “Nature of Business” to our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.
Current wording
Our current operations reflect the following strategic acquisitions that we have made since formation.
Previous wording
In the ordinary course of business, we license intellectual property and other rights from third parties and have also out-licensed our intellectual property and other rights, including in connection with our acquisitions and divestitures, described above. Additional details regarding our licensing agreements can be found in Note 13, “License and Distribution Agreements” to our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.
Current wording
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.
Previous wording
Net revenues include: (i) sales of biomaterial products, including Biovance, Biovance 3L, Interfyl, and CentaFlex of which our direct sales are included in Product Sales and Rentals while sales through our network of distribution partners are included in License, royalty and other; and (ii) the collection, processing and storage of umbilical cord and placental blood and tissue after full-term pregnancies, collectively, Services.
Current wording
Net revenues include: (i) sales of biomaterial products, including Biovance, Biovance 3L, Interfyl, and CentaFlex of which our direct sales are included in Product Sales 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.
Previous wording
Our research and development expenses primarily relate to basic scientific research into placentally derived allogeneic cells, pre-clinical studies to support our current and future clinical programs in cellular medicine, clinical development of our NK cell programs and facilities, depreciation and other direct and allocated expenses incurred as a result of research and development activities. We incur expenses for third party CROs, that assist in running clinical trials, clinical trial supply costs, personnel expenses for research scientists, specialized chemicals and reagents used to conduct biologic research, expense for third party testing and validation and various overhead expenses including rent and facility maintenance expense. Basic research, research collaborations involving partners and research designed to enable successful regulatory submissions is critical to our current and future success in cell therapy. As a result of our reprioritization efforts, we anticipate that our research and development expenditures will decrease in the near term. The amount of our research and development expenditures will depend on numerous factors, including the timing of clinical trials, preliminary evidence of efficacy in clinical trials and the number of indications that we choose to pursue.
Current wording
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. As a result of our reprioritization efforts, we anticipate that our research and development expenditures will decrease in the near term. The amount of our research and development expenditures will depend on numerous factors, including the timing of clinical trials, preliminary evidence of efficacy in clinical trials and the number of indications that we choose to pursue.
Previous wording
Because the acquisitions of Anthrogenesis from Celgene and HLI CT were accounted for as business combinations, we recognized acquisition-related contingent consideration on the balance sheets in accordance with the acquisition method of accounting. See “— Acquisitions and Divestitures” for more information. The fair value of contingent consideration liability is determined based on a probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the likelihood of achieving regulatory and commercial milestone obligations and royalty obligations. The fair value of acquisition related contingent consideration is remeasured each reporting period with changes in fair value recorded in the condensed consolidated statements of operations. Changes in contingent consideration fair value estimates result in an increase or decrease in our contingent consideration obligation and a corresponding charge or reduction to operating results. Key elements of the contingent consideration are regulatory milestone payments, sales milestone payments and royalty payments. Regulatory payments are due on regulatory approval of certain cell types in the United States and the European Union. Regulatory milestone payments are one time but are due prior to any potential commercial success of a cell type in a specific indication. Royalty payments are a percentage of net sales. Sales milestone payments are due when certain aggregate sales thresholds have been met. Management must use substantial judgment in evaluating the value of the contingent consideration. Estimates used by management include but are not limited to: (i) the number and type of clinical programs that we are likely to pursue based on the quality of our preclinical data, (ii) the time required to conduct clinical trials, (iii) the odds of regulatory success in those trials, (iv) the potential number of patients treatable for the indications in which we are successful and (v) the pricing of treatments that achieve commercial status. All of these areas involve substantial judgment on the part of management and are inherently uncertain.
Current wording
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.
Previous wording
Research and development expenses for the three months ended September 30, 2023 were $5.2 million, a decrease of $15.2 million, or 74.5% compared to the prior year period. The decrease was primarily due to lower personnel costs resulting from our March 2023 reduction in force, the Palantir platform fees captured in software cease-use costs in the current period, lower clinical trial costs and lab supplies as we determined to discontinue certain clinical trials of our cell therapy candidates, as well as lower allocated costs as compared to the prior period.
Current wording
Research and development expenses for the three months ended March 31, 2024 were $5.8 million, a decrease of $11.1 million, or 65.5% compared to the prior year period. The decrease was primarily due to lower personnel costs resulting from our March 2023 reduction in force, lower clinical trial costs as a result of discontinuing certain clinical trials of our cell therapy candidates and the inclusion of $3.0 million of acquired IPR&D expense in the prior year period associated with an option fee paid to Pulthera, LLC for stem-cells inventory to be used in research and development, partially offset by $1.4 million higher lab supply expenses in the current year period.
Previous wording
Software cease-use costs for the nine months ended September 30, 2023 was $24.2 million compared to $0 for the prior period due to the recognition of the remaining contract value associated with the Palantir platform fees. See Note 9 to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for additional information related to the Palantir agreement.
Current wording
Software cease-use costs for the three months ended March 31, 2024 were zero, compared to $23.7 million in the prior year period, which reflects the recognition of the remaining contract value associated with the Palantir platform fees in connection with our cease of use of the platform. We subsequently reached a settlement with Palantir and 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.
Previous wording
The change in fair value of contingent consideration liability for the three months ended September 30, 2023 was $0, an increase of $33.2 million, or 100% compared to the period year period. The increase resulted from a change in market-based assumptions as we discontinued our Cell Therapy clinical trials during 2023 (for more information about changes in the fair value of contingent consideration liability refer to Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).
Current wording
The change in fair value of contingent consideration liability for the three months ended March 31, 2024 was zero, compared to $18.9 million in the prior year period. We discontinued our Cell Therapy clinical trials during 2023. Consequently, there were no changes in the fair value of contingent consideration liability in the current year period. During the three months ended March 31, 2023, changes in market-based assumptions and underlying projections resulted in a decrease of $18.9 million in the fair value of the contingent consideration liability (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).
Previous wording
Goodwill and IPR&D impairment charges for the three months ended September 30, 2023 was $82.7 million and $0, respectively, due to the decline in future revenue projections in the Cell Therapy business driven by discontinuation of clinical trials and changes in our strategy and pipeline (see Note 6, “Goodwill and Intangible Assets” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).
Current wording
Goodwill impairment for the three months ended March 31, 2024 and 2023 was zero and $29.6 million, respectively. The goodwill impairment during the prior year period was 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.
Previous wording
For the three months ended September 30, 2023, other income (expense) decreased by $5.0 million compared to the prior year period. The decrease was primarily related to a change in the fair value of the warrant liabilities due to the decrease in the price of our Class A common stock (see Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).
Current wording
For the three months ended March 31, 2024, other expense increased by $14.5 million compared to the prior year period. The increase was primarily related to a change in the fair value of the warrant liabilities due to the decrease in the price of our Class A common stock (see Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q). Also, there was a $3.9 million loss on debt extinguishment that was recorded in other expense 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).
Previous wording
As of September 30, 2023, we had $0.3 million of cash and cash equivalents and an accumulated deficit of $851.3 million. Our primary use of our capital resources is funding our operating expenses, which consist primarily of funding the research and development of our cellular therapeutic candidates, and to a lesser extent, selling, general and administrative expenses.
Current wording
As of March 31, 2024, we had $1.9 million of cash and cash equivalents and an accumulated deficit of $863.8 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.
Previous wording
As of the issuance date, we had approximately $0.3 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations and insufficient available cash to make the required Yorkville cash repayments, for a period of 12 months beyond the issuance date. These uncertainties raise substantial doubt about our ability to continue as a going concern. Refer to the Going Concern section above for further details.
Current wording
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.
Previous wording
To date, we have not had any cellular therapeutics approved for sale and have not generated any revenues from the sale of our cellular therapeutics. We generate limited revenues from our biobanking and degenerative disease businesses. We do not expect to generate any revenues from cellular therapeutic product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to therapeutic sales, marketing, manufacturing and distribution as our current commercialization efforts are limited to our biobanking and degenerative disease businesses. As a result, until such time, if ever, as we can generate substantial revenue from therapeutics and sales of our biomaterials products, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements, including drawdowns under the At-The-Market Sales Agreement, dated as of September 8, 2022, by and between us and BTIG, LLC, Oppenheimer & Co. Inc. and B. Riley Securities, Inc., or the ATM Program, and we continue to explore licensing and collaboration arrangements for our cellular therapeutics as well as distribution arrangements for our degenerative disease business including our distribution agreements with CH Trade Group, Tamer and AD Ports to support expansion abroad. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. Failure to obtain this necessary capital or address our liquidity needs may force us to delay, limit or terminate our operations, make further reductions in our workforce, discontinue our commercialization efforts for our biomaterials products as well as other clinical trial programs, liquidate all or a portion of our assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.
Current wording
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.
Previous wording
We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our cellular therapeutic candidates, expansion of our degenerative disease business and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our therapeutic candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our cellular therapeutic candidates, if approved, and biomaterials products we may require substantial additional funding in the future.
Current wording
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.
Previous wording
The following table summarizes our cash flows for the nine months ended September 30, 2023 and 2022:
Current wording
The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:
Previous wording
We used $3.5 million and $4.5 million of net cash in investing activities for the nine months ended September 30, 2023 and 2022, respectively, which consisted of capital expenditures in each period and $3.0 million used to acquire IPR&D for the nine months ended September 30, 2023.
Current wording
We used $0.0 million and $3.2 million of net cash in investing activities for the three months ended March 31, 2024 and 2023, respectively. Net cash used in investing activities for the three months ended March 31, 2023, included $0.2 million of capital expenditures and $3.0 million used to acquire in-process research and development.
Previous wording
There have been no significant changes in our critical accounting policies during the nine months ended September 30, 2023 as compared with those previously disclosed in the 2022 Form 10-K.
Current wording
There have been no significant changes in our critical accounting policies during the three months ended March 31, 2024 as compared with those previously disclosed in the 2023 Form 10-K.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
As of the issuance date, we had approximately $0.3 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations for a period of 12 months beyond the issuance date.
Previous report — wording carried elsewhere
Comparison of Nine Months Ended September 30, 2023 to September 30, 2022
Previous report — wording carried elsewhere
Net Revenues and Cost of Revenues
Previous report — wording carried elsewhere
Goodwill and IPR&D impairment charges for the nine months ended September 30, 2023 was $112.3 million and $107.8 million, respectively, due to the decline in future revenue projections in the Cell Therapy business driven by discontinuation of clinical trials and changes in our strategy and pipeline (see Note 6, “Goodwill and Intangible Assets” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).
Previous report — wording carried elsewhere
Change in Fair Value of Contingent Consideration Liability
Previous report — wording carried elsewhere
For the nine months ended September 30, 2023, other income (expense), net decreased by $33.1 million compared to the prior year period. The decrease was primarily related to a change in the fair value of the warrant liabilities due to the decrease in the price of our Class A common stock (see Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).