Celularity (CELU) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides Celularity Inc.'s filing details for its Quarterly Report on Form 10-Q, including registrant information and stock listings Registrant Information Celularity Inc. filed its Form 10-Q for Q2 2025, detailing its corporate structure, Nasdaq listings, and outstanding common stock - Celularity Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] Securities Registered Pursuant to Section 12(b) of the Act | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Class A Common Stock, par value $0.0001 per share | CELU | The Nasdaq Stock Market LLC | | Warrants, each exercisable for one share of Class A Common Stock at an exercise price of $115 per share | CELUW | The Nasdaq Stock Market LLC | - As of August 29, 2025, the registrant had 26,691,477 shares of Class A common stock, $0.0001 par value per share, outstanding[4] Special Note Regarding Forward-Looking Statements This section addresses the inherent uncertainties and disclaimers associated with forward-looking statements within the report Forward-Looking Statements Disclaimer The report contains forward-looking statements subject to known and unknown risks, which may cause actual results to differ materially, and the company is not obligated to update them - The report contains forward-looking statements that relate to expectations, beliefs, projections, future plans, strategies, anticipated events, or trends concerning matters that are not historical facts[10] - These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performances, or achievements expressed or implied[10] - The company is under no obligation to update or revise forward-looking statements, except as required by applicable law[15] PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Unaudited Financial Statements This section provides Celularity Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity changes, cash flows, and explanatory notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Assets | | | | Total current assets | $17,263 | $20,561 | | Total noncurrent assets | $103,020 | $112,121 | | Total assets | $120,283 | $132,682 | | Liabilities | | | | Total current liabilities | $69,227 | $53,680 | | Total noncurrent liabilities | $76,063 | $70,165 | | Total liabilities | $145,780 | $123,845 | | Stockholders' (deficit) equity | | | | Total stockholders' (deficit) equity | $(25,497) | $8,837 | | Total liabilities and stockholders' (deficit) equity | $120,283 | $132,682 | - Total assets decreased from $132,682 thousand at December 31, 2024, to $120,283 thousand at June 30, 2025[17] - Total liabilities increased from $123,845 thousand at December 31, 2024, to $145,780 thousand at June 30, 2025[17] - Total stockholders' (deficit) equity shifted from a positive $8,837 thousand to a deficit of $(25,497) thousand[17] Condensed Consolidated Statements of Operations and Comprehensive Loss This section outlines the company's financial performance, reporting net revenues, operating expenses, and net loss for the specified periods Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total net revenues | $5,736 | $12,111 | $17,162 | $26,792 | | Total operating expenses | $21,600 | $22,286 | $43,512 | $44,343 | | Loss from operations | $(15,864) | $(10,175) | $(26,350) | $(17,551) | | Total other (expense) income | $(8,660) | $3,687 | $(17,928) | $(10,950) | | Net loss | $(24,524) | $(6,488) | $(44,278) | $(28,501) | | Net loss per share — basic and diluted | $(1.02) | $(0.30) | $(1.86) | $(1.32) | - Net revenues decreased by 52.6% for the three months ended June 30, 2025, and by 35.9% for the six months ended June 30, 2025, compared to the prior year periods[18] - Net loss significantly increased to $(24,524) thousand for the three months ended June 30, 2025, from $(6,488) thousand in the prior year, and to $(44,278) thousand for the six months ended June 30, 2025, from $(28,501) thousand[18] - Diluted net loss per share worsened to $(1.02) for the three months and $(1.86) for the six months ended June 30, 2025[18] Condensed Consolidated Statements of Changes In Stockholders' (Deficit) Equity This section details the changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' (Deficit) Equity (in thousands) | Item | Balances at January 1, 2025 | Balances at June 30, 2025 | | :----------------------------------- | :-------------------------- | :------------------------ | | Common Stock (Shares) | 22,546,671 | 24,610,151 | | Common Stock (Amount) | $2 | $2 | | Additional Paid-in Capital | $908,523 | $918,529 | | Accumulated Deficit | $(899,683) | $(944,025) | | Accumulated Other Comprehensive Loss | $(5) | $(3) | | Total Stockholders' (Deficit) Equity | $8,837 | $(25,497) | - Total stockholders' (deficit) equity decreased from $8,837 thousand at January 1, 2025, to a deficit of $(25,497) thousand at June 30, 2025, primarily due to a net loss of $(44,278) thousand[19][20] - Additional paid-in capital increased by $10,006 thousand, driven by stock issuances and stock-based compensation[19][20] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the specified periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,992) | $(7,851) | | Net cash provided by investing activities | $0 | $2,105 | | Net cash provided by financing activities | $3,951 | $6,137 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(41) | $391 | | Cash, cash equivalents and restricted cash at end of period | $10,936 | $10,554 | - Net cash used in operating activities decreased from $(7,851) thousand in 2024 to $(3,992) thousand in 2025[23] - Net cash provided by financing activities decreased from $6,137 thousand in 2024 to $3,951 thousand in 2025[23] - Overall cash, cash equivalents, and restricted cash saw a net decrease of $(41) thousand in 2025, compared to an increase of $391 thousand in 2024[23] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements 1. Nature of Business This note describes Celularity Inc.'s core business as a cell therapy and regenerative medicine company, its financial challenges, and going concern uncertainties - Celularity Inc. is a cell therapy and regenerative medicine company focused on aging-related diseases, including cancer and degenerative diseases, headquartered in Florham Park, NJ[28] - The company has incurred significant operating losses and net cash used in operating activities since its inception, with an accumulated deficit of $944,025 thousand as of June 30, 2025[32] - Management has identified substantial doubt about the company's ability to continue as a going concern due to ongoing losses, the need for additional outside capital, and risks related to debt obligations and Nasdaq listing compliance[32][33][39] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the unaudited condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim financial statements, permitting certain disclosures to be condensed or omitted[35][36] - Significant estimates and assumptions include goodwill and intangible asset impairment, incremental borrowing rates, R&D expense accruals, and valuations of inventory, contingent consideration, debt, stock options, and warrants[38] - The company's only component of other comprehensive income (loss) is the portion of the total change in fair value of indebtedness attributable to changes in instrument-specific credit risk[42] - Recently issued accounting pronouncements (ASU 2023-09, ASU 2024-03, and the OBBBA) are being evaluated for their potential impact on financial statements and disclosures[51][52][53][54] 3. Asset Acquisition This note details the acquisition of Sequence LifeScience, Inc.'s Rebound™ product and related intangible assets, including consideration and accounting treatment - On October 9, 2024, Celularity acquired Sequence LifeScience, Inc.'s Rebound™ product and related intangible assets for up to $5,500 thousand, consisting of an upfront cash payment, monthly milestone payments, and a credit[55] - The transaction was accounted for as an asset acquisition, with contingent consideration recorded when resolved. As of June 30, 2025, $2,157 thousand has been accrued for milestone payments[57][55] Rebound Asset Acquisition Consideration and Assets Acquired (in thousands) | Item | Amount | | :---------------------- | :----- | | Cash payment | $1,500 | | Contingent consideration | $650 | | Total consideration | $2,150 | | Inventory acquired | $2,150 | | Total assets acquired | $2,150 | 4. Fair Value of Financial Assets and Liabilities This note describes the company's fair value measurements for financial assets and liabilities, categorizing them into Level 1, 2, or 3 inputs - The company measures certain financial assets and liabilities at fair value, classifying them into Level 1 (quoted prices in active markets), Level 2 (observable inputs), or Level 3 (unobservable inputs)[41][45] Fair Value Measurements of Liabilities as of June 30, 2025 (in thousands) | Liabilities | Level 1 | Level 2 | Level 3 | Total | | :----------------------------------- | :------ | :------ | :------ | :------ | | Acquisition-related contingent consideration obligations | $— | $— | $1,413 | $1,413 | | Contingent stock consideration | $— | $— | $27 | $27 | | Short-term debt - Yorkville convertible note | $— | $— | $2,648 | $2,648 | | Common stock to be issued | $1,010 | $— | $— | $1,010 | | Warrant liability – RWI Bridge Warrants | $— | $— | $5,298 | $5,298 | | Warrant liability - July 2023 Registered Direct Warrants | $— | $— | $1,164 | $1,164 | | Warrant liability - April 2023 Registered Direct Warrants | $— | $— | $1,123 | $1,123 | | Warrant liability - May 2022 PIPE Warrants | $— | $— | $551 | $551 | | Warrant liability - Sponsor Warrants | $— | $— | $7 | $7 | | Warrant liability - Public Warrants | $637 | $— | $— | $637 | | Total | $1,647 | $— | $12,231 | $13,878 | - The fair value of contingent consideration obligations and certain debt and warrant liabilities are determined using Level 3 inputs, relying on unobservable inputs and the company's own assumptions[63][70][75] 5. Inventory This note provides a breakdown of the company's inventory composition, including raw materials, work in progress, and finished goods, along with related reserves Inventory Composition (in thousands) | Inventory Class | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Raw materials | $42 | $42 | | Work in progress | $3,195 | $8,093 | | Finished goods | $10,648 | $11,964 | | Inventory, gross | $13,885 | $20,099 | | Less: inventory reserves | $(2,066) | $(2,103) | | Inventory, net | $11,819 | $17,996 | - Net inventory decreased from $17,996 thousand at December 31, 2024, to $11,819 thousand at June 30, 2025, primarily due to a reduction in work in progress and finished goods[78] - Inventory reserves slightly decreased from $2,103 thousand to $2,066 thousand, with a provision for obsolete inventory of $(37) thousand during the six months ended June 30, 2025[78][79] 6. Prepaid Expenses and Other Current Assets This note details the components of prepaid expenses and other current assets, including clinical and insurance expenses Prepaid Expenses and Other Current Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Prepaid clinical expenses | $221 | $221 | | Prepaid insurance expense | $377 | $375 | | Other | $240 | $261 | | Total | $838 | $857 | - Total prepaid expenses and other current assets remained relatively stable, decreasing slightly from $857 thousand at December 31, 2024, to $838 thousand at June 30, 2025[80] 7. Property and Equipment, Net This note presents the company's property and equipment, net of accumulated depreciation and amortization Property and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Property and equipment (gross) | $94,467 | $94,467 | | Less: Accumulated depreciation and amortization | $(35,795) | $(32,867) | | Property and equipment, net | $58,672 | $61,600 | - Net property and equipment decreased from $61,600 thousand at December 31, 2024, to $58,672 thousand at June 30, 2025, primarily due to accumulated depreciation and amortization[81] - Depreciation and amortization expense was $1,462 thousand for the three months and $2,928 thousand for the six months ended June 30, 2025[81] 8. Goodwill and Intangible Assets, Net This note provides information on the company's goodwill and intangible assets, including amortization and impairment considerations - Goodwill remained stable at $7,347 thousand, assigned to the BioBanking reporting unit, with no impairments recognized[82] Intangible Assets, Net (in thousands) | Intangible Asset Class | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Amortizable intangible assets, net | $7,808 | $8,548 | | Non-amortized intangible assets (Acquired IPR&D product rights) | $700 | $700 | | Intangible assets, net | $8,508 | $9,248 | - Net intangible assets decreased from $9,248 thousand to $8,508 thousand, primarily due to amortization expense of $372 thousand for the three months and $740 thousand for the six months ended June 30, 2025[83] 9. Accrued Expenses and Other Current Liabilities This note details the components of accrued expenses and other current liabilities, including clinical trial expenses, professional fees, and compliance fees Accrued Expenses and Other Current Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Accrued clinical trial expense | $189 | $189 | | Accrued professional fees | $691 | $691 | | Accrued wages, bonuses, commissions, and vacation | $6,409 | $5,797 | | Accruals for construction in progress | $124 | $135 | | Accrued interest | $4,602 | $1,798 | | Accrued compliance fee | $19,006 | $10,277 | | Other | $2,348 | $955 | | Total | $33,369 | $19,842 | - Total accrued expenses and other current liabilities increased significantly from $19,842 thousand at December 31, 2024, to $33,369 thousand at June 30, 2025[85] - Key drivers of the increase include accrued interest (+$2,804 thousand) and accrued compliance fees (+$8,729 thousand)[85] 10. Debt This note provides a breakdown of the company's debt, including unaffiliated and related party obligations, and details on specific debt instruments Debt Composition (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Debt - unaffiliated | $2,648 | $2,485 | | Debt - related parties | $40,789 | $39,803 | | Total debt | $43,437 | $42,288 | | Short-term debt - unaffiliated | $2,648 | $2,485 | | Short-term debt - related parties | $4,297 | $3,876 | | Long-term debt - related parties | $36,492 | $35,927 | - Total debt increased from $42,288 thousand at December 31, 2024, to $43,437 thousand at June 30, 2025[86] - The Yorkville Convertible Promissory Note's maturity date was extended multiple times, most recently to October 15, 2025, contingent on timely 10-Q filings[89][90][92] - The company recognized a $5,736 thousand loss on debt extinguishment for the six months ended June 30, 2025, related to the RWI and C.V. Starr binding term sheets, which extended maturity dates and repriced warrants[109][122] 11. Transfers of Financial Assets This note describes the company's merchant cash advance agreements, detailing the transfer of future receivables and their accounting treatment - On April 30, 2025, and May 7, 2025, the Company entered into merchant cash advance (MCA) agreements, transferring rights to $1,485 thousand in future receivables for $891 thousand in upfront cash[124] - The transaction did not meet sale accounting criteria under ASC 860 due to the company's retained significant continuing involvement and control over receivables[125][126] - The proceeds are recorded as a secured borrowing within 'accrued expenses and other current liabilities,' totaling approximately $670 thousand as of June 30, 2025[127] 12. Leases This note outlines the company's accounting for leases, including the recognition of right-of-use assets and lease liabilities - The company recognizes ROU assets and lease liabilities at lease commencement based on the present value of lease payments, using its incremental borrowing rate[129] - Rent expense, including property taxes, was $1,115 thousand for the three months and $2,229 thousand for the six months ended June 30, 2025[129] - As of June 30, 2025, the total operating lease liability was $26,717 thousand, with a weighted-average remaining lease term of 20.8 years and a weighted-average discount rate of 14.24%[133] 13. Commitments and Contingencies This note details the company's contingent consideration obligations and ongoing legal proceedings, including various lawsuits and regulatory inquiries - The company has contingent consideration obligations of $1,413 thousand related to the Anthrogenesis and HLI CT acquisitions, based on regulatory and commercial milestones[134] - Legal proceedings include a Civil Investigative Demand under the False Claims Act, a complaint against Evolution Biologyx for unpaid invoices, and lawsuits from TargetCW, Hackensack Meridian, and Clinical Resource Network for alleged breaches of contract and unpaid services[139][140][141][142][143] - The company has accrued $350 thousand for the TargetCW judgment, $668 thousand for Hackensack Meridian, and $176 thousand for Clinical Resource Network[141][142][143] 14. Equity This note provides information on the company's equity structure, including common stock, preferred stock, and outstanding warrants - As of June 30, 2025, the company had 24,610,151 shares of Class A common stock outstanding, with 730,000,000 shares authorized[144] - The company has no outstanding preferred stock and its board can issue preferred stock without stockholder approval, potentially affecting voting power and control[151] - The company entered into a June 2025 PIPE offering for 739,286 shares of Class A common stock at $1.40 per share, generating $1,010 thousand in proceeds recorded as 'Common stock to be issued' as of June 30, 2025[166] Outstanding Warrants as of June 30, 2025 | Warrant Type | Number of shares | Exercise price | Expiration date | | :----------------------------------- | :--------------- | :------------- | :-------------- | | Public Warrants | 1,437,447 | $115.00 | July 16, 2026 | | Sponsor Warrants | 849,999 | $115.00 | July 16, 2026 | | May 2022 PIPE Warrants | 405,405 | $3.50 | October 10, 2028 | | March 2023 PIPE Warrants | 208,485 | $30.00 | March 27, 2028 | | March 2023 PIPE Warrants (repriced) | 729,698 | $2.50 | June 30, 2030 | | March 2023 Loan Warrants | 75,000 | $1.69 | March 17, 2028 | | April 2023 Registered Direct Warrants | 435,625 | $7.50 | October 10, 2028 | | April 2023 Registered Direct Warrants (repriced) | 487,451 | $3.50 | October 10, 2028 | | May 2023 PIPE Warrants (repriced) | 581,394 | $2.50 | June 30, 2030 | | June 2023 Warrants | 50,000 | $1.69 | June 20, 2028 | | June 2023 Loan Warrants | 300,000 | $8.10 | June 20, 2028 | | July 2023 Registered Direct Warrants | 857,142 | $3.50 | January 31, 2029 | | January 2024 Bridge Loan - Tranche 1 Warrants | 1,650,000 | $2.49 | January 16, 2029 | | January 2024 Bridge Loan - Tranche 2 Warrants | 1,350,000 | $2.99 | July 15, 2029 | | March 2024 RWI Forbearance Warrants | 300,000 | $5.90 | June 20, 2028 | | November 2024 Purchaser Warrants | 263,156 | $2.85 | Nov 25, 2029 - Dec 3, 2029 | | November 2024 Placement Agent Warrants | 52,500 | $3.56 | Nov 25, 2029 - Dec 3, 2029 | | February 2025 Binding Term Sheet Warrants | 100,000 | $1.69 | February 11, 2030 | | Faithstone Strategic Advisory | 1,500,000 | $6.67 | May 19, 2030 | | Total | 11,633,302 | | | 15. Stock-Based Compensation This note details the company's stock-based compensation plans, including stock option activity and related expenses - The 2021 Equity Incentive Plan initially reserved 2,091,528 shares, with 1,041,018 shares remaining available for future grants as of June 30, 2025[180] Stock Option Activity (Service Conditions) | Item | Options | Weighted Average Exercise Price | | :----------------------------------- | :-------- | :------------------------------ | | Outstanding at January 1, 2025 | 3,961,525 | $27.27 | | Granted | 216,336 | $1.89 | | Forfeited | (28,269) | $11.88 | | Outstanding at June 30, 2025 | 4,149,592 | $26.05 | | Exercisable at June 30, 2025 | 2,714,917 | $37.24 | Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $76 | $89 | $139 | $195 | | Research and development | $197 | $345 | $386 | $721 | | Selling, general and administrative | $2,175 | $2,556 | $4,560 | $5,040 | | Total | $2,448 | $2,990 | $5,085 | $5,956 | - Total stock-based compensation expense decreased from $2,990 thousand for the three months ended June 30, 2024, to $2,448 thousand for the same period in 2025, and from $5,956 thousand to $5,085 thousand for the six-month periods[201] 16. Revenue Recognition This note disaggregates the company's net revenues by product and service type and details changes in deferred revenue from contract liabilities Disaggregated Revenue by Product and Services (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product sales, net | $2,379 | $9,963 | $11,397 | $22,806 | | Processing and storage fees, net | $1,275 | $1,278 | $2,683 | $2,565 | | License, royalty and other | $2,082 | $870 | $3,082 | $1,421 | | Net revenues | $5,736 | $12,111 | $17,162 | $26,792 | - Net revenues decreased by 52.6% for the three months and 35.9% for the six months ended June 30, 2025, primarily due to a significant drop in product sales[202] - License, royalty and other revenue increased substantially, by 139.3% for the three months and 116.9% for the six months ended June 30, 2025[202] Changes in Deferred Revenue from Contract Liabilities (in thousands) | Item | 2025 | | :----------------------------------- | :----- | | Balance at January 1 | $6,255 | | Deferral of revenue | $2,939 | | Recognition of unearned revenue | $(2,822) | | Balance at June 30 | $6,372 | 17. License and Distribution Agreements This note outlines the company's various license and distribution agreements, including those for Rebound™, Regeneron, and Genting - The company acquired exclusive rights to market, sell, and distribute Rebound™ in the U.S. through an Independent Distributor Agreement with Sequence LifeScience, Inc., which transitioned to an asset purchase[204] - The multi-year research collaboration services agreement with Regeneron Pharmaceuticals, Inc. was terminated by Regeneron on August 6, 2025, leading to the recognition of the remaining $637 thousand deferred revenue in Q3 2025[206][208] - The Genting Agreement was amended to include manufacturing rights, expanded territories, and distribution/manufacturing rights for cell therapy products, but no revenue has been recognized under it as of June 30, 2025[213] 18. Segment Information This note provides financial information disaggregated by the company's three business segments: Cell Therapy, Degenerative Disease, and BioBanking - The company operates through three distinct business segments: Cell Therapy, Degenerative Disease, and BioBanking[217][218] - Cell Therapy focuses on researching and developing unproven therapies, Degenerative Disease produces and sells products for surgical and wound care, and BioBanking collects and stores stem cells[218] Segment Net Revenues (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cell Therapy | $759 | $0 | $1,023 | $0 | | BioBanking | $1,275 | $1,278 | $2,683 | $2,565 | | Degenerative Disease | $3,702 | $10,833 | $13,456 | $24,227 | | Other | $0 | $0 | $0 | $0 | | Total Net Revenues | $5,736 | $12,111 | $17,162 | $26,792 | - Degenerative Disease segment revenues significantly decreased, while Cell Therapy generated revenue in 2025 compared to none in 2024[220][221][222] 19. Related Party Transactions This note discloses transactions and arrangements with related parties, including the CEO, investors, and affiliated entities - Dr. Robert Hariri, CEO, temporarily reduced his salary, with $1,604 thousand deferred as of June 30, 2025, and his loans to the company were extended to December 31, 2025[223][225] - C.V. Starr, an investor, provided a $5,000 thousand loan to the company[227] - Alexandra Hariri, daughter of the CEO, is employed as Executive Director, Corporate Strategy & Business Development, with an annual base salary of $265 thousand[228] - The company entered into a Technology Services Agreement with Fountain Life Management LLC, a related party through Dr. Hariri and Peter Diamandis, for processing and storing mononuclear cells[229] 20. Subsequent Events This note reports significant events that occurred after the reporting period, including private placements, promissory notes, and asset purchase agreements - On July 14, 2025, the company secured $2,000 thousand gross proceeds from a private placement of Class A common stock and warrants[230] - On July 21, 2025, a promissory note for $6,812 thousand was issued to Lim Kok Thay (later assigned to Celeniv Pte. Ltd.), along with warrants, with proceeds used to settle the C.V. Starr loan[231] - On August 13, 2025, the company entered an Asset Purchase Agreement with Celeniv Pte. Ltd. to sell intellectual property for $33,812 thousand, using proceeds to satisfy RWI Bridge Loans and the July 21, 2025 promissory note[232] - On August 15, 2025, an additional merchant cash advance agreement was entered into for $1,485 thousand in upfront cash, to repay existing MCA and for working capital[235] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Celularity Inc.'s financial condition, operational results, business model, recent developments, and significant challenges, including liquidity and going concern uncertainties Overview This section provides a high-level description of Celularity's business, focusing on its regenerative medicine, advanced biomaterials, and biobanking operations - Celularity is a regenerative and cellular medicines company focused on aging-related diseases, developing off-the-shelf placental-derived allogeneic advanced biomaterial products and cell therapy candidates[237] - The company's advanced biomaterials business primarily sells Biovance 3L products, with plans to submit 510(k) applications for Celularity Tendon Wrap (CTW) in H2 2025, FUSE Bone Void Filler in H2 2026, and Celularity Placental Matrix (CPM) in H2 2027[237][238] - Celularity also operates a commercial biobanking business under the LifebankUSA brand, offering collection, processing, and cryogenic storage of umbilical cord and placental blood and tissue[239] Recent Developments This section highlights key events and transactions impacting the company's financial position and operations, including financing activities and regulatory updates - The company entered into multiple merchant cash advance (MCA) agreements, transferring rights to $1,485 thousand in future receivables for $891 thousand in upfront cash[241] - The maturity date of the Convertible Promissory Note with YA II PN, Ltd. was extended to August 15, 2025, and further to October 15, 2025, contingent on timely 10-Q filings[242] - Nasdaq issued a delisting notice due to the company's failure to timely file its 10-Q, but granted an exception until August 31, 2025, to regain compliance[243] - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, with provisions effective from 2025 to 2027, and the company is assessing its impact on financial statements[245] - Subsequent events include a $2,000 thousand private placement, a $6,812 thousand promissory note to Lim Kok Thay (assigned to Celeniv Pte. Ltd.) used to settle the C.V. Starr loan, and an Asset Purchase Agreement with Celeniv Pte. Ltd. to sell IP for $33,812 thousand to satisfy RWI Bridge Loans and the July 21, 2025 promissory note[246][247][248] Going Concern This section addresses the company's ability to continue operations, citing significant losses, capital needs, and the risk of Nasdaq delisting - The company has incurred significant operating losses and net cash outflows from operations since inception, with an accumulated deficit of $944.0 million as of June 30, 2025[253] - Substantial doubt exists about the company's ability to continue as a going concern due to the need for additional outside capital, current debt obligations of $6.3 million, and the risk of Nasdaq delisting[253][254] - Failure to secure additional funding may force the company to delay, limit, or terminate operations, reduce workforce, discontinue commercialization efforts, liquidate assets, or seek bankruptcy protection[254] Business Segments This section describes the company's operational structure across its Cell Therapy, Degenerative Disease, and BioBanking segments - The company manages operations through three segments: Cell Therapy (research and development of cellular therapies), Degenerative Disease (surgical and wound care products like Biovance, Biovance 3L, Interfyl, CentaFlex), and BioBanking (stem cell collection and storage)[256] - The Cell Therapy segment has not generated revenue from product sales to date, as its programs are unproven and in various development phases[256] Acquisitions and Divestitures This section outlines the company's significant acquisitions, including HLI Cellular Therapeutics, Anthrogenesis, and Sequence LifeScience's Rebound™ product - Key acquisitions include HLI Cellular Therapeutics, LLC (LifebankUSA and biomaterial assets like Biovance and Interfyl) in May 2017, and Anthrogenesis (pre-clinical and clinical stage cellular therapeutic assets) in August 2017[258][259] - On October 9, 2024, the company acquired Sequence LifeScience, Inc.'s Rebound™ product and related intangible assets for up to $5.5 million, with $2.2 million accrued for milestone payments as of June 30, 2025[260] Licensing Agreements This section details the company's various licensing agreements, including those with Celgene, CVR, Regeneron, and BioCellgraft - The Celgene License grants Celgene a royalty-free, fully-paid up, non-exclusive license to certain intellectual property for pre-clinical research and commercial exploitation of CAR/T-cell/NK cell products[262] - The CVR Agreement entitles holders to $50.0 million in regulatory milestones and $125.0 million in commercial milestones, plus mid-teen percentage royalties on net sales for certain therapeutic programs; no payments have been made to date[263] - The Regeneron Services Agreement, under which $1.3 million was received and $688 thousand recognized in 2024, was terminated by Regeneron on August 6, 2025, with the remaining $637 thousand deferred revenue to be recognized in Q3 2025[264] - A license agreement with BioCellgraft, Inc. grants exclusive rights to develop and commercialize licensed products in the dental market for $5.0 million over two years, with an initial $0.3 million payment received[265] Components of Operating Results This section defines the key elements contributing to the company's operating results, including net revenues, cost of revenues, and various expenses - Net revenues include sales of biomaterial products (Biovance, Biovance 3L, Rebound, Interfyl, CentaFlex) and fees for umbilical cord/placental blood and tissue collection, processing, and storage[266] - Cost of revenues covers labor, material, and overhead for biobanking and degenerative disease segments, including procurement, processing, and storage costs[267] - Research and development expenses are primarily for basic scientific research, pre-clinical studies, clinical development of NK cell programs, and related personnel and facility costs[268] - Selling, general and administrative expenses include personnel costs (salaries, bonuses, stock compensation, benefits) for executive management, finance, legal, HR, and IT, with expected near-term decreases due to reprioritization efforts[269] - Changes in the fair value of acquisition-related contingent consideration are remeasured each reporting period, impacting operating results based on revenue estimates, regulatory/commercial milestone probabilities, and royalty obligations[270] Results of Operations This section analyzes the company's financial performance by comparing key revenue and expense items across different reporting periods Comparison of Three Months Ended June 30, 2025 to June 30, 2024 This section compares the company's financial performance for the three months ended June 30, 2025, against the same period in 2024 Net Revenues and Operating Expenses (Three Months Ended June 30, in thousands) | Item | 2025 | 2024 | Change | Percent Change | | :----------------------------------- | :----- | :----- | :----- | :------------- | | Net revenues | $5,736 | $12,111 | $(6,375) | (52.6)% | | Cost of revenues (excluding amortization) | $5,242 | $2,123 | $3,119 | 147.0% | | Research and development | $3,352 | $3,800 | $(448) | (11.8)% | | Selling, general and administrative | $12,634 | $15,907 | $(3,273) | (20.6)% | | Amortization of acquired intangible assets | $372 | $456 | $(84) | (18.4)% | | Total operating expense | $21,600 | $22,286 | $(686) | (3.1)% | | Loss from operations | $(15,864) | $(10,175) | $(5,689) | 55.9% | - Net revenues decreased by $6.4 million (52.6%) due to lower Biovance 3L sales, partially offset by higher Rebound sales and Contract Development & Manufacturing revenue[272] - Cost of revenues increased by $3.1 million (147%), including a $1.8 million write-off of capitalized bulk material costs and a $1.2 million milestone accrual for Rebound™[273][274] - Selling, general and administrative expenses decreased by $3.3 million (20.6%), mainly due to a $4.1 million decrease in sales rep fees, partially offset by a $1.3 million increase in professional fees[275] - Total other expense increased significantly to $8.7 million from $3.7 million, primarily due to an $8.3 million change in fair value of warrant liabilities and a $1.0 million increase from changes in fair value of debt[276] Comparison of Six Months Ended June 30, 2025 to June 30, 2024 This section compares the company's financial performance for the six months ended June 30, 2025, against the same period in 2024 Net Revenues and Operating Expenses (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | Change | Percent Change | | :----------------------------------- | :----- | :----- | :----- | :------------- | | Net revenues | $17,162 | $26,792 | $(9,630) | (35.9)% | | Cost of revenues (excluding amortization) | $8,796 | $3,763 | $5,033 | 133.7% | | Research and development | $7,080 | $9,643 | $(2,563) | (26.6)% | | Selling, general and administrative | $26,896 | $29,935 | $(3,039) | (10.2)% | | Amortization of acquired intangible assets | $740 | $1,002 | $(262) | (26.1)% | | Total operating expense | $43,512 | $44,343 | $(831) | (1.9)% | | Loss from operations | $(26,350) | $(17,551) | $(8,799) | 50.1% | - Net revenues decreased by $9.6 million (36%) primarily due to an $11.4 million decrease in product sales, mainly from lower Biovance 3L sales[278] - Cost of revenues increased by $5.0 million (134%), including a $2.5 million write-off of capitalized bulk material costs and a $1.5 million milestone payment for Rebound™[279] - Research and development expenses decreased by $2.6 million (26.6%), driven by a $2.1 million decrease in lab supplies and a $0.9 million decrease in personnel costs[280] - Total other expense increased to $18.0 million from $11.0 million, primarily due to a $3.2 million increase in other expense (Armistice PIF fees), a $1.8 million increase in loss on debt extinguishment, and a $1.7 million increase in interest expense[282] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations, including cash position and future funding needs - As of June 30, 2025, the company had $0.9 million in unrestricted cash and cash equivalents and an accumulated deficit of $943.9 million[283] - The company has insufficient unrestricted cash and no additional outside capital secured to fund operations for 12 months beyond the issuance date, raising substantial doubt about its going concern ability[286] - Future funding is expected through equity offerings, debt financings, or other capital sources, including biomaterials sales and potential collaborations for cellular therapeutic candidates[287] - Failure to raise capital could force delays, limitations, or termination of operations, workforce reductions, discontinuation of commercialization efforts, asset liquidation, or bankruptcy[288] Cash Flows This section analyzes the company's cash generation and usage from operating, investing, and financing activities Summary of Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :----------------------------------- | :----- | :----- | :----- | | Operating activities | $(3,992) | $(7,851) | $3,859 | | Investing activities | $0 | $2,105 | $(2,105) | | Financing activities | $3,951 | $6,137 | $(2,186) | | Net change in cash, cash equivalents and restricted cash | $(41) | $391 | $(432) | - Net cash used in operating activities decreased by $3.9 million, primarily due to lower working capital partially offset by lower revenue[292] - Net cash provided by financing activities was $4.0 million, including $2.5 million from common stock issuance for a warrant inducement, $1.0 million from a PIPE transaction, and $0.9 million from merchant cash advances[294] Critical Accounting Policies This section confirms that there have been no significant changes to the company's critical accounting policies during the reporting period - There have been no significant changes in critical accounting policies during the three months ended June 30, 2025, compared to those disclosed in the 2024 Form 10-K[296] Recent Accounting Pronouncements This section directs readers to detailed information regarding recently issued accounting pronouncements and their potential impact - Information about recent accounting pronouncements, their adoption timing, and potential impact is detailed in Note 2 to the unaudited condensed consolidated financial statements[297] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reporting period - The company has no applicable quantitative and qualitative disclosures about market risk for this reporting period[298] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures, concluding they were not effective due to identified material weaknesses in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section reports management's conclusion that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting and the inability to timely file the 10-Q and 2024 Form 10-K[300] - Identified material weaknesses include failures in control environment (insufficient qualified resources), risk assessment, control activities, information and communication, and monitoring[301] - Remediation efforts include hiring additional accounting personnel, formalizing roles and review responsibilities, designing procedures for business changes, implementing formal financial close processes, and engaging an outside firm for internal control documentation and design[302] Changes in Internal Control over Financial Reporting This section confirms that no material changes in internal control over financial reporting occurred during the quarter, apart from ongoing remediation efforts - No changes in internal controls over financial reporting occurred during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting, other than the ongoing implementation of remediation measures[304] PART II. OTHER INFORMATION This section covers various non-financial disclosures, including legal proceedings, risk factors, equity sales, and exhibit listings Item 1. Legal Proceedings This section outlines the various legal proceedings Celularity Inc. is involved in, including a Civil Investigative Demand, a lawsuit against Evolution Biologyx for unpaid invoices, and complaints from TargetCW, Hackensack Meridian Health, and Clinical Resource Network for alleged breaches of contract and unpaid services - The company received a Civil Investigative Demand under the False Claims Act from the U.S. Attorney's Office, requesting documents related to claims submitted to federal insurers for human tissue therapy products, including Interfyl[307] - Celularity Inc. filed a complaint against Evolution Biologyx, LLC to recover approximately $2,350 thousand in unpaid invoices for biomaterial products, with Evolution filing a counterclaim for alleged breach of contract and fraud[308] - The company defaulted on payments to TCWGlobal, resulting in a court judgment of $350 thousand, and has accrued $668 thousand for Hackensack Meridian Health and $176 thousand for Clinical Resource Network for unpaid services[309][310][311] Item 1A. Risk Factors This section refers readers to the comprehensive discussion of risks and uncertainties affecting the company's operations and financial results, as detailed in its Annual Report on Form 10-K for the year ended December 31, 2024 - The company's operations and financial results are subject to various risks and uncertainties, as described in Part I, Item 1A, 'Risk Factors' in its Annual Report on Form 10-K for the year ended December 31, 2024[312] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the unregistered sales of Class A common stock by Celularity Inc. during the reporting period, including issuances to a former employee, consultants for services, and holders of unsecured senior convertible notes upon conversion - On January 3, 2025, 21,739 shares of Class A common stock were issued to a former employee as part of a settlement agreement[313] - On May 19, 2025, 50,000 shares of Class A common stock were issued to a consultant for business development and strategic advisory services[314] - On June 25, 2025, 490,632 shares of Class A common stock were issued to holders of unsecured senior convertible notes upon automatic conversion following an amendment to the conversion price[316] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the fiscal quarter covered by this report[317] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[318] Item 5. Other Information This section confirms that no directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading plans during the fiscal quarter - None of the company's directors or officers adopted or terminated a Rule 10b5-1 trading plan or arrangement or a non-Rule 10b5-1 trading plan or arrangement during the fiscal quarter covered by this report[319] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including various agreements, warrants, certifications, and XBRL-related documents, many of which are incorporated by reference from previous SEC filings - The report includes exhibits such as Securities Purchase Agreements, Warrant Adjustment Agreements, Amended and Restated Warrants, Promissory Notes, and various certifications (e.g., 31.1, 31.2, 32.1, 32.2)[320][324] - Many exhibits are incorporated by reference from previous current reports on Form 8-K[320] - XBRL (eXtensible Business Reporting Language) documents are included for inline data formatting[324] SIGNATURES This section contains the official attestations and signatures of the company's principal executive and financial officers for the Form 10-Q filing Report Signatures The report is duly signed on behalf of Celularity Inc. by Robert J. Hariri, M.D., Ph.D., Chief Executive Officer (Principal Executive Officer), and Joseph C. DosSantos, Acting Chief Financial Officer (Principal Financial and Accounting Officer), both dated August 29, 2025 - The report was signed by Robert J. Hariri, M.D., Ph.D., Chief Executive Officer, and Joseph C. DosSantos, Acting Chief Financial Officer, on August 29, 2025[327]