Celularity Inc

Previous 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.

Current wording

We are a regenerative and cellular medicines company focused on addressing aging related diseases including cancer and degenerative diseases. Our goal is to ensure all individuals have the opportunity to live healthier longer. We develop and market off-the-shelf placental-derived allogeneic advanced biomaterial products including allografts and connective tissue matrices for soft tissue repair and reconstructive procedures in the treatment of degenerative disorders and diseases including those associated with aging. When we are sufficiently capitalized, we plan to resume development of a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor, or CAR, natural killer, or NK cells, mesenchymal-like adherent stromal cells, or MLASCs, and exosomes. These therapeutic candidates may potentially target indications across cancer, infectious and degenerative diseases. We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. Our advanced biomaterials business today is comprised primarily of the sale of our Biovance 3L products, directly or through our distribution network. Biovance 3L is a tri-layer decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. We are developing new placental biomaterial products to deepen the biomaterials commercial pipeline. We also plan to leverage our core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties. The initial focus of this new service offering will be to assist development stage cell therapy companies with the development and manufacturing of their therapeutic candidates for clinical trials.

Previous 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.

Current wording

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

Previous wording

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 wording

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

Previous wording

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 wording

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

Previous wording

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 wording

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

Previous wording

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 wording

On August 22, 2024, Nasdaq provided formal notice to us that as a result of our failure to timely file our quarterly reports on Form 10-Q for the periods ended March 31, 2024 (Q1 2024 Form 10-Q) and June 30, 2024 (Q2 2024 Form 10-Q), we were not in compliance with the continued listing requirements under Nasdaq Listing Rule 5250(c)(1). On September 5, 2024, we submitted an updated compliance plan to Nasdaq, and Nasdaq subsequently granted us an extension until October 14, 2024, to file our Q1 2024 Form 10-Q and Q2 2024 Form 10-Q. On October 16, 2024, upon filing the Q1 2024 Form 10-Q, Nasdaq notified us that, as the Q2 2024 Form 10-Q had not been filed, we would be suspended from trading on October 25, 2024, unless we appealed Nasdaq's determination by October 23, 2024. On October 23, 2024, we filed an appeal requesting an oral hearing with a Nasdaq Hearings Panel pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series. On October 25, 2024, Nasdaq notified us that the oral hearing date has been set for December 11, 2024, and that the delisting action has been stayed through November 7, 2024, unless the Nasdaq Hearings Panel grants us an extension of the stay, pending the hearing. There can be no assurance that the Nasdaq Hearings Panel will grant us an extension of the stay, that the appeal will be successful, or that we will maintain compliance with the Nasdaq listing requirements. If relief is not granted by the Nasdaq Hearings Panel or we are unable maintain compliance, our securities will be delisted from the Nasdaq, which such delisting could have a materially adverse effect on our ability to continue as a going concern.

Previous 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.

Current wording

Since inception, we have incurred significant operating losses and cash used in operating activities. For the six months ended June 30, 2024, we incurred a net operating loss of $17.6 million and net cash used in operating activities of $7.9 million. As of June 30, 2024, we had an accumulated deficit of $870.3 million. We expect to continue to incur significant operating losses and use net cash in operations for the foreseeable future.

Previous wording

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 wording

As of the issuance date, we had approximately $44.7 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.

Previous wording

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 wording

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 were 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 the Q1 2024 Form 10-Q and the Q2 2024 Form 10-Q. On October 16, 2024, upon filing the Q1 2024 Form 10-Q, Nasdaq notified us that, as the Q2 2024 Form 10-Q had not been filed, we would be suspended from trading on October 25, 2024 unless we appealed Nasdaq's determination to a Nasdaq Hearings Panel by October 23, 2024. On October 23, 2024, we filed an appeal requesting an oral hearing with a Nasdaq Hearings Panel pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series. On October 25, 2024, Nasdaq notified us that the oral hearing date has been set for December 11, 2024, and that the delisting action has been stayed through November 7, 2024, unless the Nasdaq Hearings Panel grants us an extension of the stay, pending the hearing. There can be no assurance that the Nasdaq Hearings Panel will grant us an extension of the stay, that the appeal will be successful, or that we will maintain compliance with the Nasdaq listing requirements. If relief is not granted by the Nasdaq Hearings Panel or we are unable to maintain compliance, our securities will be delisted from the Nasdaq, which such delisting could have a materially adverse effect on our ability to continue as a going concern.

Previous wording

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

Current wording

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

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 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. 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

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).

Current wording

There was no change in the fair value of contingent consideration liability for the three months ended June 30, 2024, compared to a charge of $85.4 million in the prior year period. We discontinued our Cell Therapy clinical trials during 2023. Consequently, there was a de minimus change in the fair value of contingent consideration liability in the current year period. During the three months ended June 30, 2023, changes in market-based assumptions and underlying projections resulted in a decrease to 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

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 wording

Net revenues for the six months ended June 30, 2024 were $26.8 million, an increase of $19.9 million, or 289.8% compared to the prior year period. The increase was primarily due to a $20.9 million increase in product sales driven by increased demand for Biovance 3L, partially offset by a $0.9 million decrease in license, royalty and other due to lower distributor sales.

Previous wording

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 wording

Cost of revenues for the six months ended June 30, 2024 was $3.8 million, an increase of $1.0 million, or 34.2% compared to the prior year period. The increase was primarily due to a $1.4 million increase in product sales costs driven by increased Biovance 3L direct to customer sales, partially offset by lower costs for biomaterial product sales through distributors and Biobanking collection, processing and storage fees. As a percentage of revenues, cost of revenues decreased to 14% for the six months ended June 30, 2024 compared to 41% in the prior year period due to an increase in Biovance 3L sales, which has a higher gross profit margin than other biomaterial products.

Previous 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.

Current wording

Research and development expenses for the six months ended June 30, 2024 were $9.6 million, a decrease of $15.9 million, or 62.3% compared to the prior year period. The decrease was primarily due to $3.1 million lower personnel costs resulting from our March 2023 reduction in force, $3.7 million lower clinical trial costs as a result of discontinuing certain clinical trials of our cell therapy candidates, $5.6 million lower allocated indirect overhead costs 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.

Previous 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.

Current wording

There were no software cease-use costs for the six months ended June 30, 2024, compared to $23.9 million in the prior year period, which reflected 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

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.

Current wording

There were no impairment charges for the six months ended June 30, 2024. Goodwill and IPR&D impairment charges for the six months ended June 30, 2023 were $29.6 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.

Previous 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).

Current wording

For the six months ended June 30, 2024, other expense increased by $5.3 million compared to the prior year period. The increase was primarily related to a $3.5 million change in the fair value of the warrant liabilities (see Note 3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q). Included in the six months ended June 30, 2024 was a $3.9 million loss on debt extinguishment recorded in connection with the January 12, 2024 RWI Second Amended Bridge Loan (for more information about the RWI Second Amended Bridge Loan refer to Note 7, “Debt” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q). Included in the six months ended June 30, 2023, was expense of $2.4 million for changes in fair value of debt related to the Yorkville PPA, which we elected to account for at fair value. The Yorkville PPA was subsequently repaid in full on January 17, 2024.

Previous 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.

Current wording

As of June 30, 2024, we had $0.5 million of unrestricted cash and cash equivalents and an accumulated deficit of $870.3 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

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 wording

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

Previous wording

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 wording

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

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

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 wording

Net cash used in operations for the six months ended June 30, 2024 was $18.2 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.

Previous 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.

Current wording

We received $2.1 million and used $3.2 million of net cash in investing activities for the six months ended June 30, 2024 and 2023, respectively. Net cash provided by investing activities for the six months ended June 30, 2024 included the $2.2 million settlement of the convertible note receivable from Sanuwave, offset by $0.1 million of capital expenditures. Net cash used in investing activities for the six months ended June 30, 2023, included $0.2 million of capital expenditures and $3.0 million used to acquire in-process research and development.

Previous wording

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.

Current wording

Net cash provided by financing activities was $6.1 million for the six months ended June 30, 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 and $3.0 million, net from the March 13, 2024 convertible promissory note issued to Yorkville, partially offset by $17.4 million for the payment in full of the Yorkville PPA. For the six months ended June 30, 2023 we generated $18.4 million of net cash from financing activities, which consisted primarily of $12.4 million from the March 2023 and May 2023 private placements, $5.0 million of proceeds from the Starr Bridge Loan, $12.8 million of proceeds from the RWI Loans, $6.0 million from the April 2023 registered direct offering, offset by principal repayments on the Yorkville PPA of $16.8 million and $1.4 million of issuance costs.

Previous 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.

Current wording

There have been no significant changes in our critical accounting policies during the six months ended June 30, 2024 as compared with those previously disclosed in the 2023 Form 10-K.