Celularity (US:CELU)2022-08-08 16:00PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The company presents unaudited financial statements for H1 2022, reporting a $15.0 million net loss and expressing substantial doubt about its ability to continue as a going concern Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $37,996 | $37,240 | | Total current assets | $75,453 | $59,100 | | Total assets | $429,337 | $414,128 | | Total current liabilities | $32,939 | $26,225 | | Total liabilities | $279,187 | $314,710 | | Total stockholders' equity | $150,150 | $99,418 | Condensed Consolidated Statements of Operations Data (in thousands) | Account | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total revenues | $9,711 | $5,857 | | Research and development | $47,022 | $39,901 | | Selling, general and administrative | $32,034 | $36,489 | | Income (loss) from operations | ($37,439) | ($105,006) | | Net income (loss) | ($15,041) | ($146,016) | Condensed Consolidated Statements of Cash Flows Data (in thousands) | Account | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($70,571) | ($43,280) | | Net cash used in investing activities | ($2,894) | ($2,487) | | Net cash provided by (used in) financing activities | $74,214 | ($827) | | Net increase (decrease) in cash | $749 | ($46,594) | - The company has concluded that there is substantial doubt about its ability to continue as a going concern, as it expects its cash and cash equivalents as of June 30, 2022, will only fund operations into the fourth quarter of 20224546 Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's biotechnology business, accounting policies, segment reporting, and key equity transactions including a $30 million PIPE financing - Celularity is a clinical-stage biotechnology company developing off-the-shelf placental-derived allogeneic cell therapies Its key programs include CYCART-19, CYNK-001, CYNK-101, APPL-001, and PDA-002, targeting cancer, infectious, and degenerative diseases3435 - On January 1, 2022, the company adopted the new lease accounting standard (ASU 2016-02), resulting in the initial recording of Right-of-Use (ROU) assets of $15.7 million and lease liabilities of $30.5 million71113 - In May 2022, the company completed a PIPE financing, raising approximately $30 million in gross proceeds through the sale of 4,054,055 shares of Class A Common Stock and accompanying warrants136 - The company operates in three segments: Cell Therapy (R&D), Degenerative Disease (product sales like Biovance and Interfyl), and BioBanking (stem cell storage)63174175 - On July 14, 2022, the company's President, Andrew L Pecora, M.D., notified the board of his decision to resign, effective August 31, 2022192 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, noting increased revenues and a narrowed net loss for H1 2022, while reiterating the going concern issue due to insufficient cash Comparison of Results for the Six Months Ended June 30 (in thousands) | Account | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $9,711 | $5,857 | $3,854 | 65.8% | | Research and development | $47,022 | $39,901 | $7,121 | 17.8% | | Selling, general and administrative | $32,034 | $36,489 | ($4,455) | (12.2)% | | Change in fair value of contingent consideration | ($40,198) | $30,704 | ($70,902) | (230.9)% | | Loss from operations | ($37,439) | ($105,006) | $67,567 | (64.3)% | - The increase in total revenues for the six months ended June 30, 2022, was primarily driven by a $4.1 million increase in license, royalty, and other revenues from increased product sales to distribution partners237 - R&D expenses increased by $7.1 million (17.8%) in the first six months of 2022 compared to 2021, driven by Palantir platform fees, higher personnel costs, and lab supplies to support cell therapy process development240 - The company's cash and cash equivalents of $38.0 million as of June 30, 2022, are not sufficient to fund operations for the next 12 months, leading to substantial doubt about its ability to continue as a going concern203245 - Net cash from financing activities was $74.2 million for the first six months of 2022, primarily from $46.5 million in warrant exercises and $27.5 million from the May 2022 PIPE financing252 Quantitative and Qualitative Disclosures About Market Risk The company states that this item is not applicable - This section is not applicable for the registrant259 Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2022, due to material weaknesses, and is implementing a remediation plan - Management concluded that disclosure controls and procedures were not effective as of the end of the period covered by this report260 - The ineffectiveness is due to previously identified material weaknesses in internal control over financial reporting, including: - Insufficient internal resources with appropriate accounting expertise (Control Environment) - Incorrect assumptions in the calculation of contingent consideration liability - Errors in the calculation of deferred tax assets and liabilities - Incorrect assumptions in the calculation of warrant liabilities260261262 - The company is implementing a remediation plan that includes hiring more accounting staff, formalizing controls, and engaging an outside firm to assist with documenting and implementing the internal control environment263268 PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not party to any legal proceedings that would be reasonably expected to have a material adverse effect on its business - The company states that it is not currently party to any claim or litigation that is expected to have a material adverse effect on its business272 Risk Factors The company states that this item is not applicable - This section is not applicable for the registrant273 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds for this period - None reported275 Defaults Upon Senior Securities The company reports no defaults upon senior securities - None reported277 Mine Safety Disclosures The company states that this item is not applicable - This section is not applicable for the registrant278 Other Information The company reports no other information - None reported280 Exhibits This section lists the exhibits filed with the quarterly report, including the Certificate of Incorporation, Bylaws, various agreements related to a securities purchase, and officer certifications