Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒

As of ~~August 4, 2022,~~May 18, 2023, the registrant had ~~142,424,187~~180,530,272 shares of Class A common stock, $0.0001 par value per share, outstanding.

On July 16, 2021, we consummated the previously announced merger pursuant to that certain Merger Agreement and Plan of Reorganization, dated January 8, 2021, or the Merger Agreement, by and among us, our wholly-owned merger subs and Celularity LLC (formerly known as Celularity Inc.), or Legacy Celularity.

Pursuant to the terms of the Merger Agreement, we effected the business combination through the (a) merger of our wholly-owned merger sub with and into Legacy Celularity with Legacy Celularity surviving as our wholly-owned subsidiary and (b) immediately following the first merger and as part of the same overall transaction, the merger of the Legacy Celularity, as surviving corporation of the first merger, with and into a second wholly-owned merger sub, with such second wholly-owned merger sub as the surviving entity of the second merger, which ultimately resulted in Legacy Celularity becoming our wholly-owned direct subsidiary. We refer to these mergers as the “Mergers” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”. On the Closing Date, we changed our name from GX Acquisition Corp. to Celularity Inc.

Unless the context indicates otherwise, references in this quarterly report to the “Company,” “Celularity,” “we,” “us,” “our” and similar terms refer to Celularity Inc. ~~(f/k/a GX Acquisition Corp.)~~ and its consolidated ~~subsidiaries (including Legacy Celularity). References to “GX” refer to the predecessor company prior to the consummation of the Business Combination.~~subsidiaries.

The Celularity logo, Celularity IMPACT, Biovance, Interfyl, Lifebank, CentaFlex and other trademarks or service marks of Celularity Inc. appearing in this quarterly report are the property of Celularity Inc. This quarterly report on Form 10-Q also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing herein are the property of their respective holders

Some of the statements contained ~~within~~in this quarterly report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations,~~Operations", constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, ~~as amended,~~ or the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements relate to our future events, including our anticipated operations, research, development and commercialization activities, clinical trials, operating results and financial ~~condition~~condition. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, statements about:

These forward-looking statements are based on information available as of the date of this quarterly report, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Some factors that could cause actual results to differ include:

For a further discussion of these and other factors that could cause our future results, performance or transactions to differ significantly from those expressed in any forward-looking statement, please see the section titled “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 31, ~~2022, as amended July 15, 2022,~~2023, or the ~~2021~~2022 Form 10-K. Given these risks, you should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Except to the extent required by applicable law, we are under no obligation (and expressly disclaim any such obligation) to update or revise their forward-looking statements whether as a result of new information, future events, or ~~otherwise,~~otherwise.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Condensed Consolidated Statements of ~~Convertible Preferred Stock and~~ Stockholders’ Equity ~~(Deficit)~~ (Unaudited)

	Series A Redeemable Convertible Preferred Stock				Series B Redeemable Convertible Preferred Stock				Series X Redeemable Convertible Preferred Stock				Common Stock					Treasury Stock						Additional Paid-in			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount		Shares			Amount			Capital			Deficit			(Deficit)			Common Stock					Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
																																	Shares			Amount		Capital			Deficit			Income (Loss)			Equity
Balances at December 31, 2022																																		148,921,287		$	15	$	844,373		$	(645,496	)	$	9		$	198,901
Exercise of stock options																																		1,071,000			-		300			-			-			300
Common stock issued pursuant to short-term debt conversion																																		3,656,118			1		3,509			-			(152	)		3,358
Issuance of common stock in PIPE Offering, net of offering expenses																																		9,381,841			1		8,930									8,931
Issuance of common stock for stem-cells to be used in research and development																																		1,694,915			-		1,000									1,000
Vesting of restricted stock units																																		253,390			-		-			-			-			-
Tax withholding on vesting of restricted stock units																																		(81,095	)		-		(53	)		-			-			(53	)
Issuance of common stock under ATM Agreement																																		132,958			-		136			-			-			136
Issuance of warrants on senior secured bridge loan																																		-			-		274			-			-			274
Stock-based compensation expense																																		-			-		3,988			-			-			3,988
Change in fair value of debt due to change in credit risk, net of tax																																		-			-		-			-			2,810			2,810
Net loss																																		-			-		-			(64,017	)		-			(64,017	)
Balances at March 31, 2023																																		165,030,414		$	17	$	862,457		$	(709,513	)	$	2,667		$	155,628

Balances at December 31, 2021		-	$	-		-	$	-		-	$	-		124,307,884		$	12		-		$	-		$	763,087		$	(663,681	)	$	99,418			124,307,884		$	12	$	763,087		$	(663,681	)	$	-		$	99,418
Cumulative effect adjustment ASU 2016-02		-		-		-		-		-		-		-			-		-			-			-			3,996			3,996
Cumulative effect adjustment ASU 2016-02 (1)																																		-			-		-			3,996			-			3,996
Reclassification of previously exercised stock options		-		-		-		-		-		-		131,253			-		-			-			441			-			441			131,253			-		441			-			-			441
Exercise of warrants		-		-		-		-		-		-		13,281,386			2		-			-			46,483			-			46,485			13,281,386			2		46,483			-			-			46,485
Exercise of stock options		-		-		-		-		-		-		10,255			-		-			-			21			-			21			10,255			-		21			-			-			21
Purchase and retirement of common shares		-		-		-		-		-		-		(3,058	)		-		-			-			(11	)		-			(11	)		(3,058	)		-		(11	)		-			-			(11	)
Stock-based compensation expense		-		-		-		-		-		-		-			-		-			-			2,422			-			2,422			-			-		2,422			-			-			2,422
Net loss		-		-		-		-		-		-		-			-		-			-			-			(62,867	)		(62,867	)		-			-		-			(62,867	)		-			(62,867	)
Balances at March 31, 2022		-	$	-		-	$	-		-	$	-		137,727,720		$	14		-		$	-		$	812,443		$	(722,552	)	$	89,905			137,727,720		$	14	$	812,443		$	(722,552	)	$	-		$	89,905
Cumulative effect adjustment ASU 2016-02		-		-		-		-		-		-		-			-		-			-			-			(3	)		(3	)
Issuance of common stock to PIPE investor, net of issuance costs		-		-		-		-		-		-		4,054,055			-		-			-			7,651			-			7,651
Exercise of warrants		-		-		-		-		-		-		304			-		-			-			4			-			4
Exercise of stock options		-		-		-		-		-		-		609,529			-		-			-			313			-			313
Purchase and retirement of common shares		-		-		-		-		-		-		(7,441	)		-		-			-			(75	)		-			(75	)
Stock-based compensation expense		-		-		-		-		-		-		-			-		-			-			4,529			-			4,529
Net income		-		-		-		-		-		-		-			-		-			-			-			47,826			47,826
Balances at June 30, 2022		-	$	-		-	$	-		-	$	-		142,384,167		$	14		-		$	-		$	824,865		$	(674,729	)	$	150,150


Balances at December 31, 2020		29,484,740	$	184,247		41,205,482	$	290,866		11,953,274	$	75,000		18,529,453		$	1		(90,834	)	$	(256	)	$	32,418		$	(563,563	)	$	(531,400	)
Stock-based compensation expense		-		-		-		-		-		-		-			-		-			-			1,009			-			1,009
Net loss		-		-		-		-		-		-		-			-		-			-			-			(81,539	)		(81,539	)
Balances at March 31, 2021		29,484,740	$	184,247		41,205,482	$	290,866		11,953,274	$	75,000		18,529,453		$	1		(90,834	)	$	(256	)	$	33,427		$	(645,102	)	$	(611,930	)
Exercise of stock options		-		-		-		-		-		-		3,712			-		-			-			14			-			14
Stock-based compensation expense		-		-		-		-		-		-		-			-		-			-			28,188			-			28,188
Net loss		-		-		-		-		-		-		-			-		-			-			-			(64,477	)		(64,477	)
Balances at June 30, 2021		29,484,740	$	184,247		41,205,482	$	290,866		11,953,274	$	75,000		18,533,165		$	1		(90,834	)	$	(256	)	$	61,629		$	(709,579	)	$	(648,205	)

(1) Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Summary of Significant Accounting Policies

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The unaudited condensed consolidated financial statements include the accounts of

wholly owned subsidiaries, after elimination of intercompany accounts and transactions. The unaudited condensed consolidated financial information presented herein reflects all financial information that, in the opinion of management, is necessary for a fair statement of consolidated financial position, results of operations and cash flows for the periods presented.

The Company’s condensed consolidated financial statements are prepared in accordance with the U.S. Securities and Exchange Commission’s rules for the presentation of interim financial statements, which permit certain disclosures to be condensed or omitted. These financial statements should be read in conjunction with the Company’s annual financial statements as of and for the year ended December 31, ~~2021.~~2022.

In the opinion of management, the accompanying interim financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of ~~June 30, 2022,~~March 31, 2023, and its results of operations, statement of changes in stockholder’s equity ~~(deficit)~~ and cash flows for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. Operating results for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. The interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual audited financial statements and related notes as of and for the year ended December 31, ~~2021~~2022 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, ~~2022, as amended July 15, 2022,~~2023, (the ~~“2021~~“2022 Form 10-K”).

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, assumptions related to the Company’s goodwill and intangible impairment assessment, the valuation of inventory, of contingent consideration, ~~and contingent stock consideration,~~ short-term debt, determination of incremental borrowing rates, accrual of research and development expenses, and the valuations of stock options and stock warrants. The Company based its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Comprehensive Income (Loss)

~~Leases~~Comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to accumulated other comprehensive income (loss). The Company’s only component of other comprehensive income (loss) is comprised of the portion of the total change in fair value of indebtedness accounted for under the fair value option that is attributable to changes in instrument-specific

~~In accordance with Accounting Standards Update (“ASU”) No. 2016-02,~~ ~~Leases (Topic 842)~~ ~~(“ASU 2016-02” or “ASC 842”),~~credit risk. During the three months ended March 31, 2023, the Company ~~classifies leases at the lease commencement date. At the inception~~recorded instrument-specific credit risk income of ~~an arrangement, the Company determines whether the arrangement is or contains a lease based on the circumstances present. Leases with a term greater than one year will be recognized~~$2,810 and reclassified $152 from accumulated other comprehensive income to other expense on the condensed consolidated ~~balance sheets~~statements of operations upon short-term debt conversion. These amounts have been recorded as ~~right-of-use assets (“ROU”), lease liabilities, and if applicable, long-term lease liabilities. The Company includes renewal options to extend~~a separate component of stockholders’ equity. During the lease in the lease term where it is reasonably certain that it will exercise these options. Lease liabilities and the corresponding ROU are recorded based on the present values of lease payments over the terms. The interest rate implicit in lease contracts is typically not readily determinable. As such,three months ended March 31, 2022, the Company ~~utilizes the appropriate incremental borrowing rates, which are the rates that would be incurred to borrow on~~did not have a collateralized basis, over similar terms, amounts equal to the lease payments in a similar economic environment. Variable payments that do not depend on a rate or index are not included in the lease liability and are recognized as incurred. Lease contracts do not include residual value guarantees nor do they include restrictions orcomponent of other ~~covenants. Certain adjustments to ROUs may be required for items such as initial direct costs~~comprehensive income (loss).

paid, incentives received, or lease prepayments. If significant events, changes in circumstances, or other events indicate that the lease term or other inputs have changed, the Company would reassess lease classification, remeasure the lease liability using revised inputs as of the reassessment date, and adjust the ROU.

The Company has elected the “package of 3” practical expedients permitted under the transition guidance, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. The Company also adopted an accounting policy which provides that leases with an initial term of 12 months or less and no purchase option that the Company is reasonably certain of exercising will not be included within the lease right-of-use assets and lease liabilities on its condensed consolidated balance sheets.

~~Refer to Note 8 for further information.~~

Net ~~Income (Loss)~~Loss per Share

Basic net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted net income (loss) per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as redeemable convertible preferred stock, convertible debt, stock options, restricted stock units and warrants, which would result in the issuance of incremental shares of common stock. However, potential common shares are excluded if their effect is anti-dilutive. For diluted net ~~loss~~income (loss) per share in periods where the Company has a net loss, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive as there was no gain on the change in fair value of the warrants and the warrants are not in the money. For the three months ended June 30, 2022, the Company was in a net income position and calculated the diluted net income per share by dividing the Company’s net income by the dilutive weighted average number of share outstanding during the period, determined using the treasury stock method and the average stock price during the period. A reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share calculations are as follows:anti-dilutive.

Three months ended June 30,

For the six months ended June 30,

2022

2021

2022

2021

Numerator:

Net income (loss)

$
47,826

$
(64,477
)

$
(15,041
)

$
(146,016
)

Denominator:

Weighted average shares outstanding, basic

140,152,245

23,992,184

135,302,472

23,991,129

Weighted average dilutive stock options

11,089,847

-

-

-

Weighted average restricted stock units

69,688

-

-

-

Weighted average dilutive warrants

-

-

-

-

Weighted average shares outstanding, diluted

151,311,780

23,992,184

135,302,472

23,991,129

Net income (loss), basic

$
0.34

$
(2.69
)

$
(0.11
)

$
(6.09
)

Net income (loss), diluted

0.32

(2.69
)

(0.11
)

(6.09
)

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of Class A common stock outstanding, prior to the use of the two-class method, as they would be anti-dilutive:


	For the Three Months Ended March 31,
	2023		2022
Stock options		24,744,009		23,999,206
Restricted stock units		5,814,980		517,616
Warrants		43,590,201		29,404,809
Convertible debt		41,161,480		-
		115,310,670		53,921,631

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2022

2021

2022

2021

Redeemable convertible preferred stock

-

107,525,553

-

107,525,553

Stock options

9,490,717

28,873,482

25,648,358

28,873,482

Restricted stock units

1,597,502

-

2,148,776

-

Warrants

33,458,560

25,775,905

33,458,560

25,775,905

44,546,779

162,174,940

61,255,694

162,174,940

Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources in assessing performance. The Company manages its operations through an evaluation of 3three distinct businesses segments: Cell Therapy,

Degenerative Disease and BioBanking. These segments are presented for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ in Note 14.

Allowance for Credit Losses and Concentrations of Credit Risk

With the adoption of ASU 2016-13 Financial Instruments — Credit Losses, as noted below, the Company recognizes credit losses based on a forward-looking current expected credit losses. The Company makes estimates of expected credit losses based upon its assessment of various factors, including historical collection experience, the age of accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and ~~Significant Customers~~supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and restricted cash. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents or restricted cash and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is subject to credit risk from trade accounts receivable related to both degenerative disease product sales and biobanking services. All trade accounts receivables are a result from product sales and services performed in the United States. As of March 31, 2023, two of the Company's customers comprised 63% of the Company's outstanding gross accounts receivable. As of December 31, ~~2021, one~~2022, three of the ~~Company’s~~Company's customers comprised ~~approximately 47%~~71% of the ~~Company’s total~~Company's outstanding gross accounts receivable. ~~As of June 30, 2022, one of~~During the Company’s customers (Customer A) comprised approximately 60% of Company’s total outstanding accounts receivable. Three customers, one of which is Customer A, provided approximately 53% of the Company’s revenues earned during the sixthree months ended ~~June 30, 2022. No single customer provided 10% or more~~March 31, 2023, the Company had two customers provide for 36% of revenue. During the ~~revenue earned during the six~~three months ended ~~June 30, 2021.~~

In November 2017, the FDA provided guidance that established an updated framework for regulation of Human Cell & Tissue Products (“HCT/P”). The Company’s Interfyl products meet the criteria for minimal manipulation and homologous use as outlined within the applicable guidance and has an official designation from the FDA as an HCT/P product. As a result,March 31, 2022, the Company ~~did not stop selling its Interfyl products when the FDA ended its enforcement discretion on May 31, 2021. However, the Center~~had three customers provide for Medicare and Medicaid Services (“CMS”) began rejecting claims for Interfyl submitted by Customer A. The Company believes that CMS is not distinguishing the Interfyl products from its competitors’ products. While the Company and Customer A continue to work with CMS to resolve the rejected claims, Customer A’s accounts receivable balance is expected to remain outstanding. As67% of ~~June 30, 2022, no reserve was recorded based on the aging of the underlying receivables.~~revenue.

Emerging Growth Company

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act of 1933, as amended, registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as ~~amended “Exchange Act”))~~amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the

requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s condensed consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Reclassifications

~~Recently Adopted Accounting Pronouncements~~

~~On January 1, 2022, the Company adopted ASU 2016-02, which sets out the principles for the recognition, measurement,~~Certain prior period amounts have been reclassified to conform with current year presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today.

The Company adopted ASU 2016-02 utilizing the modified retrospective transition method in the first quarter of fiscal 2022 and did not restate comparative periods. The Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification. Refer to Note 8 for further information on the impact of the adoption of ASU 2016-02 on the Company’s condensed consolidated financial statements.

~~The Company initially recorded ROU assets and lease liabilities of $15,691 and $30,463, respectively,~~ on the condensed consolidated balance ~~sheets.~~ ~~Incremental borrowing rates as~~sheets and condensed consolidated statements of ~~January 1, 2022,~~cash flows between accrued expenses and accrued research and development ("R&D") software to separately present the ~~date the new standard was adopted, were used to calculate the present value of the Company’s lease portfolio as of that date. Leases previously identified as build-to-suit leases were~~

derecognized pursuant to the transition guidance provided for build-to-suit leases in ASC 2016-02. The impact of the derecognition of the build-to-suit lease was a net reduction of $3,993 to accumulated deficit calculated as of January 1, 2022. The standard did not materially impact the consolidated net income (losses) or operating cash flows. ~~During~~Palantir cease-use liability recorded during the three months ended ~~June 30, 2022 an adjustment to the incremental borrowing rate used resulted in revised ROU assets and lease liabilities of $13,001 and $27,723, respectively.~~

~~In May 2021, the FASB issued ASU 2021-04,~~ ~~Earnings Per Share~~ ~~(Topic 260),~~ ~~Debt - Modifications and Extinguishments~~ ~~(Subtopic 470-50),~~ ~~Compensation - Stock Compensation~~ ~~(Topic 718), and~~ ~~Derivatives and Hedging - Contracts in Entity’s Own Equity~~ ~~(Subtopic 815-40):~~ ~~Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options~~ (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity-classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). The Company adopted ASU 2021-04 effective January 1, 2022 and considered this guidance when evaluating the amendment of the Company’s warrants in March ~~2022~~31, 2023 (See Note ~~10.)~~

~~In August 2020, the FASB issued ASU 2020-06, (Subtopic 470-20):~~ ~~Debt — Debt with Conversion and Other Options~~ (“ASU 2020-06”) to address the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 includes amendments to the guidance on convertible instruments and the derivative scope exception9 for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, ASU 2020-06 will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023 (fiscal year 2024 for the Company), including interim periods within those fiscal years with early adoption permitted. ~~The Company adopted ASU2020-06 effective January 1, 2022 and considered this guidance when evaluating the warrants issued in May 2022 (See Note 10)~~further information).

Recently ~~Issued~~Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (“ASU 2016-13”), which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. ASU 2016-13 also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual periods beginning after December 15, 2022 (fiscal year 2023 for the Company), and interim periods within those periods, with early adoption permitted. The Company ~~is currently evaluating~~adoptedASU 2016-13 effective January 1, 2023. The standard did not have a material impact on the ~~impact that the adoption of ASU 2016-13 will have on its~~unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

~~3. Business Combinations~~

~~On July 16, 2021, the Company consummated the previously announced merger pursuant to the Merger Agreement, by and among GX, First Merger Sub, Second Merger Sub and Legacy Celularity (see Note 1).~~

~~Pursuant to the terms of the Merger Agreement,~~There were no recently issued accounting standards not yet adopted which would have a business combination between GX and Legacy Celularity was effected through the (a) merger of First Merger Sub with and into Legacy Celularity with Legacy Celularity surviving as a wholly-owned subsidiary of GX (Legacy Celularity, in its capacity as the surviving corporation of the merger, the “Surviving Corporation”) (the “First Merger”) and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of the Surviving Corporation with and into Second Merger Sub, with Second Merger Sub as the surviving entity of the Second Merger, which ultimately resulted in Legacy Celularity becoming a wholly-owned direct subsidiary of GX (the “Second Merger” and, together with the First Merger, the “Mergers” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”). On the Closing Date, the Company changed its name from GX Acquisition Corp. to Celularity Inc.

Immediately prior to the effective time of the Mergers (the “Effective Time”), each share of preferred stock of Legacy Celularity (the “Legacy Celularity Preferred Stock”) that was issued and outstanding was automatically converted into a number of shares of common stock of Legacy Celularity, par value $0.0001 per share (the “Legacy Celularity Common Stock”) at the then-effective conversion rate as calculated pursuant to the Amended and Restated Certificate of Incorporation of Legacy Celularity, dated March 16, 2020, as amended (the “Legacy Celularity Charter”), such that each converted share of Legacy Celularity Preferred Stock was no longer outstanding and ceased to exist, and each holder of Legacy Celularity Preferred Stock thereafter ceased to have any rights with respect to such securities (the “Legacy Celularity Preferred Stock Conversion”).

~~At the Effective Time, by virtue of the First Merger and without any action~~material effect on the ~~part of GX, First Merger Sub, Legacy Celularity or the holders of any of the following securities:~~Company’s financial statements.

The Business Combination was accounted for as a reverse recapitalization in conformity with accounting principles generally accepted in the United States. Under this method of accounting, GX was treated as the “acquired” company for financial reporting purposes. This determination was primarily based on existing Legacy Celularity stockholders comprising a relative majority of the voting power of the combined company, Legacy Celularity’s operations prior to the acquisition comprising the only ongoing operations of Celularity, the majority of Celularity’s board of directors appointment by Legacy Celularity, and Legacy Celularity’s senior management comprising a majority of the senior management of Celularity. Accordingly, for accounting purposes, the financial statements of the combined entity represented a continuation of the financial statements of Legacy Celularity with the business combination being treated as the equivalent of Legacy Celularity issuing stock for the net assets of GX, accompanied by a recapitalization. The Company recorded the net assets of GX at historical costs, with 0 goodwill or other intangible assets recorded. Operations prior to the business combination are those of Legacy Celularity. Reported shares and earnings (losses) per share available to holders of the Class A Common Stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the business combination (1.00 share of Legacy Celularity for approximately 0.7686 shares of Class A Common Stock).

Net proceeds from this transaction totaled $108,786. These proceeds were comprised of $5,386 held in GX’s trust account, $83,400 received from the completion of a concurrent private investment in public equity financing (“July 2021 PIPE Financing”) and $20,000 received from an investment by Palantir Technologies, Inc. (“Palantir”). The Company incurred $21,658 in transaction costs relating to the merger with GX of which $10,795 were satisfied by the issuance of Class A Common Stock, which has been offset against additional paid-in capital in the condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit).

Pursuant to the terms of the Merger Agreement, the existing stockholders of Legacy Celularity exchanged their interests for shares of Class A Common Stock. In addition, GX had previously issued public warrants and private placement warrants (collectively, the “GX Warrants”) as part of the Units in its IPO in May 2019. None of the terms of the GX Warrants were modified as a result of the Business Combination. On the date of the Business Combination, the Company recorded a liability related to the GX Warrants of $59,202, with an offsetting entry to additional paid-in capital. During the period ended June 30, 2022, the fair value of the GX Warrants decreased to $23,427, resulting in an expense reduction of $30,482 and $9,550 in the condensed consolidated statements of operations for the three and six months ended June 30, 2022.

Upon consummation of the Business Combination, Legacy Celularity warrants qualified for equity classification. As a result, the transaction date fair value of the Legacy Celularity warrants of $96,398 was reclassified from warrant liability to additional paid-in capital (see Note 4).

Immediately following the Business Combination, there were 122,487,174 shares of Class A Common Stock with a par value of $0.0001 issued and outstanding, options to purchase an aggregate of 21,723,273 shares of Class A Common Stock and 42,686,195 warrants outstanding to purchase shares of Class A Common Stock.

On the Closing Date, certain significant stockholders of Legacy Celularity or their affiliates (including Sorrento Therapeutics, Inc. (“Sorrento”), Starr International Investments Ltd. and Dragasac Limited, an indirect wholly owned subsidiary of Genting Berhad, collectively, the “Subscribers”) purchased from Celularity an aggregate of 8,340,000 shares of Class A Common Stock (the “July 2021 PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $83,400, pursuant to separate subscription agreements dated January 8, 2021 (collectively, the “Subscription Agreements”). Pursuant to the Subscription Agreements, the Company agreed to provide the Subscribers with certain registration rights with respect to the July 2021 PIPE Shares.

Pursuant to the subscription agreement entered into by GX with Palantir on May 5, 2021, Palantir purchased 2,000,000 shares of Class A Common Stock at a price of $10.00 per share and an aggregate purchase price of $20,000, upon closing of the Business Combination and closing of the July 2021 PIPE financing.

During the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021,~~2022, there were 0no transfers between Level 1, Level 2 and Level 3.

The Company’s cash equivalents consisted of a money market funds. The money market fund was valued using inputs observable in active markets for similar securities, which represents a Level 1 measurement in the fair value hierarchy.

The carrying values of accounts receivable, ~~and~~ accounts payable, deferred revenue and other current liabilities approximate fair value in the accompanying condensed consolidated financial statements due to the short-term nature of those instruments. The Company believes that the carrying value of its long-term debt approximates fair value because the stated terms of this debt is consistent with current market rates.

The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs and is based on a probability-weighted income approach. The measurement is based upon unobservable inputs supported by little or no market activity based on the Company’s own assumptions.

The fair value of the liability to make potential future milestone and earn-out payments was estimated by the Company at each reporting date based, in part, on the results of a third-party valuation using a ~~discounted cash flow analysis~~probability-weighted expected return method ("PWERM") for the regulatory milestones and a real options technique for commercial and royalty milestones based on various estimates and assumptions, including the probability of achieving specified events, discount rates, and the period of time until earn-out payments are payable and the conditions triggering the milestone payments are met. The actual settlement of contingent consideration could differ from current estimates based on the actual occurrence of these specified events.

At each reporting date, the Company revalues the contingent consideration obligation to estimated fair value and records changes in fair value as income or expense in the Company’s condensed consolidated statements of operations. Changes in the fair value of the contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of revenue

estimates and changes in probability assumptions with respect to the likelihood of achieving the various contingent consideration obligations. The Company has classified all of the contingent consideration as a long-term liability in the condensed consolidated balance sheets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. See Note 9, “Commitment and Contingencies”, for more information on contingent consideration.

The warrant liability at ~~June 30, 2022~~March 31, 2023 is composed of the fair value of warrants to purchase shares of Company Class A ~~Common Stock.~~common stock, par value $0.0001 per share ("Class A common stock" or "common stock"). The ~~private placement~~liability classified warrants ~~assumed upon the Business Combination (the “Sponsor Warrants”) and the May 2022 PIPE Warrants (see Note 10)~~ were recorded at their respective Closing Date fair values based on a Black-Scholes option pricing model that utilizes inputs for: (i) value of the underlying asset, (ii) the exercise price, (iii) the risk-free rate, (iv) the volatility of the underlying asset, (v) the dividend yield of the underlying asset and (vi) maturity. The Black-Scholes option pricing model’s primary unobservable input utilized in determining the fair value of the ~~Sponsor Warrants and May 2022 Pipe Warrants~~liability classified warrants is the expected volatility of the Class A ~~Common Stock.~~common stock. Prior to the Mergers, Legacy Celularity was historically a private company and lacks sufficient company-specific historical and implied volatility information for its stock. Therefore, it estimates50% of its expected stock price volatility based on the historical volatility of publicly traded peer ~~companies.~~companies and 50% based on the Company's historical volatility. Inputs to the ~~Black-Sholes~~Black-Scholes option pricing model for the warrants are updated each reporting period to reflect fair value. The public warrants assumed upon the Business Combination (the “Public Warrants”) were recorded at the closing date fair value based on the close price of such warrants. Each subsequent reporting period, the Public Warrants are marked-to-market based on the period-end close price.

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the fair value of the warrant liabilities was ~~$23,427~~$1,863 and ~~$25,962,~~$3,598, respectively. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the estimated remaining term of the warrants.

Balance as of December 31, 2020	$	76,640
Gain recognized in earnings from change in fair value		(13,482	)
Warrant liability assumed at Closing Date (Sponsor Warrants)		34,764
Warrant liability assumed at Closing Date (Public Warrants)		24,438
Reclassification of Legacy Celularity Warrants to equity		(96,398	)
Balance as of December 31, 2021	$	25,962

Balance as of December 31, 2021	$	25,962		$	25,962
May 2022 PIPE warrant issuance		19,745			19,745
Gain recognized in earnings from change in fair value		(22,280	)		(42,109	)
Balance as of June 30, 2022	$	23,427
Balance as of December 31, 2022				$	3,598

Balance as of December 31, 2022				$	3,598
Gain recognized in earnings from change in fair value					(1,735	)
Balance as of March 31, 2023				$	1,863

The fair value of the ~~Public Warrants was $8,337 and $12,362~~liability classified warrants are as of June 30, 2022 and December 31, 2021, respectively, based on the publicly stated closing price. The fair value of the Sponsor Warrants was $8,075 and $13,600 as of June 30, 2022 and December 31, 2021, respectively. The fair value of the May 2022 PIPE Warrants was $7,015 as of June 30, 2022.follows:


	March 31, 2023		December 31, 2022
Public Warrants	$	862	$	1,006
Sponsor Warrants		510		1,190
May 2022 PIPE Warrants		491		1,402
Total	$	1,863	$	3,598

The convertible note receivable was received in connection with the disposition of the UltraMIST/MIST business in 2020. At any time on or after January 1, 2021, at the sole discretion of the Company, amounts outstanding under the convertible note receivable (including accrued interest) may be converted into Sanuwave common stock at a defined rate. The convertible promissory note was to be paid on or before August 6, 2021, however, remains outstanding in full at ~~June 30, 2022.~~March 31, 2023. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company utilized Level 3 inputs on a probability weighted model based on outcomes of a default, repayment and conversion

of the note. The measurement is based upon unobservable inputs supported by little or no market activity based on the Company’s own assumptions. The fair value of the convertible note receivable was $2,115 and $2,514 as of March 31, 2023 and December 31, 2022, respectively.

The contingent stock consideration liability at ~~June 30, 2022,~~March 31, 2023, is comprised of the fair value of potential future issuance of Class A ~~Common Stock~~ common stock to CariCord participating shareholders pursuant to a settlement agreement signed during the year ended December 31, ~~2021 (see Note 9).~~ 2021. The fair value measurement of the contingent stock consideration obligation is determined using Level 3 inputs and is based on a ~~probability-weighted expected return methodology (“PWERM”).~~PWERM. The measurement is largely based upon unobservable inputs supported by little or no market activity based on the Company’s own assumptions.~~As of December 31, 2021, the applicable procurement targets were not probable of being achieved.~~

The following table presents a reconciliation of the contingent stock consideration obligation measured on a recurring basis using Level 3 inputs as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


	Balance as of December 31, 2021		Net transfers in to (out of) Level 3		Purchases, settlements and other net		Fair value adjustments		Balance as of June 30, 2022		Balance as of December 31, 2022		Net transfers in to (out of) Level 3		Purchases, settlements and other net		Fair value adjustments			Balance as of March 31, 2023
Liabilities:
Contingent stock consideration	$	-	$	—	$	—	$	611	$	611	$	186	$	—	$	—	$	(110	)	$	76


	Balance as of December 31, 2021		Net transfers in to (out of) Level 3		Purchases, settlements and other net		Fair value adjustments		Balance as of December 31, 2022
Liabilities:
Contingent stock consideration	$	-	$	—	$	—	$	186	$	186

The fair value of the liability to issue future shares of Class A ~~Common Stock~~common stock was estimated by the Company at each reporting date based on the results of a third-party valuation using a PWERM based on various inputs and assumptions, including the Company’s common share price, discount rates, and the probability of achieving specified future operational targets. The actual settlement of

contingent stock consideration could differ from current estimates based on the actual achievement of these specified targets and movements in the Company’s common share price.

At each reporting date, the Company revalues the contingent stock consideration obligation to estimated fair value and records changes in fair value as income or expense in the Company’s condensed consolidated statements of operations. Changes in the fair value of the contingent stock consideration obligation may result from changes in discount rates, changes in the Company’s common share price, and changes in probability assumptions with respect to the likelihood of achieving specified operational targets. The Company has classified all of the contingent stock consideration as a ~~long-term~~current liability in the condensed consolidated balance sheets as of ~~June 30,~~March 31, 2023 and December 31, 2022. ~~See Note 9, “Commitments and Contingencies”, for more information on contingent stock consideration.~~

The Company elected the fair value option to account for the financial instrument with Yorkville signed on September 15, 2022 (see Note 7). During the three months ended March 31, 2023, the Company applied a different valuation model for Yorkville given the movement in the Company's share price falling below the floor price and triggering of debt repayments. The estimate of the fairvalue was determined using a scenario analysis which incorporates various repayment and conversion scenarios and corresponding probabilities. The significant inputs to the scenario (PWERM) analysis used to determine the value of each scenario prior to weighting included the following (i) term between 0.25 to 0.46 years (ii) risk-free rate ranging between 4.85% to 4.92% and (iii) interest coupon rate from 6% to 15%. The estimate of the fair value as of December 31, 2022 was determined using a binomial lattice model. The fair value measurement of the debt is determined using Level 3 inputs and assumptions unobservable in the market. Changes in the fair value of debt that is accounted for at fair value, inclusive of related accrued interest expense, are presented as gains or losses in the accompanying condensed consolidated statements of operations and comprehensive income (loss) under change in fair value of debt. The portion of total changes in fair value of debt attributable to changes in instrument-specific credit risk are determined through specific measurement of periodic changes in the discount rate assumption exclusive of base market changes and are presented as a component of accumulated comprehensive income in the accompanying condensed balance sheets. The actual settlement of the short-term debt could differ from current estimates based on the timing of when and if Yorkville elects to convert amounts into common shares, potential cash repayment by the Company prior to maturity, and movements in the Company’s common share price.

The following table provides a roll-forward of the aggregate fair values of the Company’s Yorkville debt for which fair values are determined using Level 3 inputs:


Liabilities:
Balance as of December 31, 2022	$	37,603
Conversion of debt into common shares		(3,510	)
Principal repayments		(1,618	)
Fair value adjustment through earnings		1,280
Fair value adjustment through accumulated other comprehensive income		(2,810	)
Balance as of March 31, 2023	$	30,945

Inventory

The Company’s major classes of inventories were as follows:


	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Raw materials	$	9,018		$	2,359		$	7,784		$	7,719
Work in progress		10,074			5,902			14,951			12,381
Finished goods		8,074			4,057			8,473			9,256
Inventory, gross		27,166			12,318			31,208			29,356
Less: inventory reserves		(203	)		(48	)		(1,138	)		(1,099	)
Inventory, net		26,963			12,270			30,070			28,257
Balance Sheet Classification:
Inventory		24,663			9,549			5,484			5,308
Inventory, net of current portion		2,300			2,721			24,586			22,949
	$	26,963		$	12,270		$	30,070		$	28,257

Inventory, net of current portion includes inventory expected to remain ~~on hand~~on-hand beyond one year ~~in both periods.~~from each balance sheet date presented.

Property and Equipment, Net

Property and equipment, net consisted of the following:

June 30, 2022

December 31, 2021

Building (1)

$
-

$
12,513

Leasehold improvement (2)

70,620

71,468

Laboratory and production equipment

13,229

11,395

Machinery, equipment and fixtures

8,295

7,974

Construction in progress

2,752

2,054

Property and equipment

94,896

105,404

Less: Accumulated depreciation and amortization (3)

(17,356
)

(14,779
)
Property and equipment, net

$
77,540

$
90,625


	March 31, 2023			December 31, 2022
Leasehold improvement	$	70,113		$	70,113
Laboratory and production equipment		14,433			14,433
Machinery, equipment and fixtures		7,780			7,780
Construction in progress		3,883			3,660
Property and equipment		96,209			95,986
Less: Accumulated depreciation and amortization		(22,153	)		(20,331	)
Property and equipment, net	$	74,056		$	75,655

~~(1)~~

~~Includes $12,513 at December 31, 2021 under financing lease resulting from a failed sale leaseback (see Note 8).~~

~~(2)~~

~~Includes $70,959 at December 31, 2021, respectively, under financing lease resulting from a failed sale leaseback (see Note 8).~~

~~(3)~~

~~Includes $5,971 at December 31, 2021, respectively, under financing lease resulting from a failed sale leaseback (see Note 8).~~

~~For~~Depreciation and amortization expense was $1,822 and $1,743 for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, depreciation and amortization expense was $1,773 and $1,385,~~ respectively. ~~For the six months ended June 30, 2022 and 2021, depreciation and amortization expense was $3,516 and $2,780, respectively.~~

Goodwill and Intangible Assets, Net

During the three months ended March 31, 2023, the Company experienced a sustained decline in its stock price resulting in its market capitalization being less than the carrying value of its combined reporting units. The Company concluded the sustained decline in its stock price and decision to discontinue certain Cell Therapy clinical trials were triggering events during the quarter and performed a quantitative impairment test on goodwill and acquired IPR&D assets. Based on the results of the impairment analysis, the Company recognized a $29,633 goodwill impairment charge for the three months ended March 31, 2023, relating to the Cell Therapy reporting unit in its condensed consolidated statements of operations. During the three months ended March 31, 2022, no goodwill impairment was recognized.

The carrying values of goodwill assigned to the Company’s ~~operating segments~~reporting units are as ~~follows~~:follows:

June 30, 2022

December 31, 2021

Cell Therapy

$
112,347

$
112,347

Degenerative Disease

3,610

3,610

Biobanking

7,347

7,347

$
123,304

$
123,304



	Cell Therapy			Biobanking		Degenerative Disease		Total
Balance at December 31, 2022	$	112,347		$	7,347	$	-	$	119,694
Impairment(1)		(29,633	)		-		-		(29,633	)
Balance at March 31, 2023	$	82,714		$	7,347	$	-	$	90,061

(1)As of March 31, 2023 and December 31, 2022, the accumulated goodwill impairment for the Degenerative Disease reporting unit was $3,610 and for Cell Therapy the accumulated goodwill impairment was $29,633 and $0 as of March 31, 2023 and December 31, 2022, respectively.

Intangible Assets, Net

Intangible assets, net consisted of the following:

June 30, 2022

December 31, 2021

Estimated
Useful Lives
Amortizable intangible assets:

Developed technology

$
16,810

$
16,810

11-16 years
Customer relationships

2,413

2,413

10 years
Trade names & trademarks

570

570

10-13 years
Reacquired rights

4,200

4,200

6 years

23,993

23,993

Less: Accumulated amortization

Developed technology

(5,957
)

(5,376
)

Customer relationships

(1,302
)

(1,170
)

Trade names & trademarks

(247
)

(220
)

Reacquired rights

(2,887
)

(2,540
)

(10,393
)

(9,306
)

Amortizable intangible assets, net

13,600

14,687

Non-amortized intangible assets

Acquired IPR&D product rights

108,500

108,500

indefinite

$
122,100

$
123,187


	March 31, 2023			December 31, 2022			Estimated Useful Lives
Amortizable intangible assets:
Developed technology	$	16,810		$	16,810		11-16 years
Customer relationships		2,413			2,413		10 years
Trade names & trademarks		570			570		10-13 years
Reacquired rights		4,200			4,200		6 years
		23,993			23,993
Less: Accumulated amortization
Developed technology		(6,839	)		(6,549	)
Customer relationships		(1,501	)		(1,435	)
Trade names & trademarks		(288	)		(275	)
Reacquired rights		(3,412	)		(3,240	)
		(12,040	)		(11,499	)
Amortizable intangible assets, net		11,953			12,494

Non-amortized intangible assets
Acquired IPR&D product rights		108,500			108,500		indefinite
	$	120,453		$	120,994

For the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ amortization expense for intangible assets was ~~$546~~$541 and ~~$546,~~$541, respectively. ~~For the six months ended June 30, 2022 and 2021, amortization expense for intangible assets was $1,087 and $1,087, respectively.~~

~~NaN~~No impairment charges were recorded ~~for the three and six months ended June 30, 2022 and 2021.~~

8.	~~Leases~~

~~Lease Agreements~~

~~As discussed in Note 2,~~ on January 1, 2022, the Company adopted ASU 2016-06 issued by the FASB related to leases that outlines a comprehensive lease accounting model and supersedes the prior lease guidance. The Company adopted this guidance using the modified retrospective approach and elected the optional transition method. As a result, comparative prior periods in the Company’s condensed consolidated financial statements are not adjustedintangible assets for ~~the impacts of the new standard.~~

Adoption of ASU 2016-02 resulted in the initial recording of additional net lease assets and lease liabilities of approximately $15,691 and $30,463, respectively, as of January 1, 2022. Incremental borrowing rates as of January 1, 2022, the date the new standard was adopted, were used to calculate the present value of the Company’s lease portfolio as of that date. Leases previously identified as build-to-suit leases were derecognized pursuant to the transition guidance provided for build-to-suit leases in ASU 2016-02. The impact of the derecognition of the build-to-suit lease was a net reduction of $3,993 to accumulated deficit calculated as of January 1, 2022. The standard did not materially impact the consolidated net losses or operating cash flows. During the three months ended ~~June 30,~~March 31, 2023 and 2022.

Debt

Short-Term Debt - Yorkville

On September 15, 2022, the Company entered into a Pre-Paid Advance Agreement (the “PPA”) with YA II PN, Ltd. ("Yorkville"), pursuant to which the Company may request advances of up to $40,000 in cash from Yorkville (or such greater amount that the parties may mutually agree) (each, a “Pre-Paid Advance”) over an ~~adjustment~~18-month period, with an aggregate limitation of $150,000. Pre-Paid Advances are issued at a 2% discount, bear interest at an annual rate equal to 6% (increased to 15% in the event of default as described in the PPA) and may be offset by the issuance of shares of common stock, at Yorkville’s option, at a price per share calculated pursuant to the ~~incremental borrowing~~PPA, which in no event will be less than $0.75 per share. The issuance of the shares under the PPA is subject to certain limitations, including that the aggregate number of shares of common stock issued pursuant to the PPA cannot exceed 19.9% of the Company’s outstanding stock as of September 15, 2022, as well as a beneficial ownership limitation of 4.99%. Further, Yorkville agreed not to purchase any shares of common stock for 60 days following entry into the PPA, nor may Yorkville purchase more than $6,000 of shares of common stock during a 30-day period, in each case at a price per share less than the Fixed Price, as defined in the PPA. In the event the daily volume weighted average price ("VWAP") of the Class A common stock is below $0.75 (the "floor price") for any five of seven consecutive trading days, the Company will pay Yorkville a monthly cash payment of $6,000, plus any accrued and unpaid interest along with a 5.0% redemption premium until such time as the daily VWAP for five consecutive trading days immediately prior to the due date of the next monthly payment is at least 10% greater than $0.75. On February 22, 2023, Yorkville provided notice to the Company that a "triggering event" under the terms of the PPA occurred on February 21, 2023 and approximately $6,500 was due to Yorkville consisting of principal, accrued interest, and payment premium of 5% of the principal amount being paid (collectively the “repayment amount”). On March 24, 2023, the Company paid $1,950 of the repayment amount owed to Yorkville towards the first trigger payment. Refer to Note 16 for additional information regarding subsequent events.

In connection with the entry into the PPA, the Company received the initial Pre-Paid Advance of $40,000 gross or $39,200 net of discount. Each Pre-Paid Advance has a maturity of 12 months. Further Pre-Paid Advances will be based upon the mutual agreement of the parties. Direct costs and fees related to the PPA were recognized in earnings. At issuance, the Company concluded that certain features of the PPA would be considered a derivative that would require bifurcation. In lieu of bifurcation, the Company elected the fair value option for this financial instrument and will record changes in fair value within the statements of operations and comprehensive income (loss) at the end of each reporting period. Under the fair value option, upon derecognition the Company will include in net income the cumulative amount of the gain or loss on the debt that resulted from changes in instrument-specific credit risk.

During the first quarter of 2023, Yorkville elected to convert $3,000 of principal and $224 of accrued interest into 3,656,118 shares of common stock and $152 was recognized in earnings from changes in instrument-specific credit risk. As of March 31, 2023, the fair

value of the debt was $30,945 and the principal balance was $32,382. As of December 31, 2022, the fair value of the debt was $37,603 and the principal balance was $37,000. Refer to Note 3 for additional details regarding the fair value measurement.

Long-Term Debt – Senior Secured Bridge Loan

On March 17, 2023, the Company entered into a loan agreement (the "Starr Bridge Loan") with C.V. Starr & Co., Inc. (“C.V. Starr”), a stockholder of the Company, for an aggregate principal amount of $5,000 net of an original issue discount of $100. The loan bears interest at a rate ~~used~~equal to 12.0% per year, with the first year of interest being paid in kind on the last day of each month, and matures on March 17, 2025. In addition, the parties entered into a warrant agreement to acquire up to an aggregate 750,000 shares of Class A common stock ("Starr Warrant"), at a purchase price of $0.125 per whole share underlying the Starr Warrant or $94. The Starr Warrant has a five-year term and an exercise price of $0.71 per share. The Company applied the guidance for this transaction in accordance with ASC 470-20, Debt with Conversion and Other Options and ASC 815, Derivatives and Hedging. The net proceeds of the Starr Bridge Loan and Starr Warrants were recorded at fair value, which resulted in ~~revised net lease~~a discount on the Starr Warrants of $180 based on the difference between the proceeds and fair value of the Starr Warrants. The fair value of the Starr Warrants was determined using a Black-Scholes option pricing model. The Starr Warrants met the requirements for a derivative scope exception under ASC 815-10-15-74(a) for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity. The carrying amount of the Starr Bridge Loan was deemed to approximate fair value. The original issue discount and warrant discount are amortized over the term of the Starr Bridge Loan. As of March 31, 2023, the carrying value of long-term debt is $4,745 on the condensed consolidated balance sheets.

Under the terms of the Starr Bridge Loan, the Company agreed to customary negative covenants restricting its ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any of the Company’s assets, other than as permitted, or hold cash and ~~lease liabilities~~cash equivalents less than $3,000 for more than five consecutive business days. In addition to the negative covenants in the Starr Bridge Loan, the Starr Bridge Loan includes customary events of ~~$13,001~~default and ~~$27,723, respectively.~~the Company granted C.V. Starr a senior security interest in all of its assets.

Leases

Lease Agreements

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date to determine the appropriate discount rate by multiple asset classes. Variable lease payments that are not based on an index or that result from changes to an index subsequent to the initial measurement of the corresponding lease liability are not included in the measurement of lease ROU assets or liabilities and instead are recognized in earnings in the period in which the obligation for those payments is incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise any such options. Lease expense is recognized on a straight‐line basis over the expected lease term. Rent expense was ~~$1,923~~$984 and ~~$765 for the six months ended June 30, 2022 and 2021, respectively. Rent expense was $940 and $473~~$983 for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

On March 13, 2019, Legacy Celularity entered into a lease agreement for a 147,215 square foot facility consisting of office, manufacturing and laboratory space in Florham Park, New Jersey, which expires in ~~2036.~~2036. The Company has the option to renew the term of the lease for two additional five-year terms so long as the lease is then in full force and effect. The lease term commenced on March 1, 2020 subject to an abatement of the fixed rent for the first 13 months following the lease commencement date. The initial monthly base rent is approximately ~~$230~~$230 and will increase annually. The Company is obligated to pay real estate taxes and costs related to the premises, including costs of operations, maintenance, repair, replacement and management of the new leased premises. In connection with entering into this lease agreement, Legacy Celularity issued a letter of credit of ~~$14,722~~$14,722 which is classified as restricted cash (non-current) on the condensed consolidated balance sheets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The lease agreement allows for a landlord provided tenant improvement allowance of ~~$14,722~~$14,722 to be applied to the costs of the construction of the leasehold improvements.

~~The Company is not the legal owner of the leased space. However, in accordance with ASC 840,~~ ~~Leases~~, the Company was deemed to be the owner of the leased space, including the building shell, during the construction period because of the Company’s expected level of direct financial and operational involvement in the substantial tenant improvement. ~~As discussed in Note 2, leases previously identified as build-to-suit leases were derecognized pursuant to the transition guidance provided for build-to-suit leases in ASU 2016-02.~~

~~The impact of the adoption of ASC 842 is as follows:~~17

Balance as of December 31, 2021

Adjustments due to adoption of ASC 842

Balance as of January 1, 2022

Assets

Property and equipment, net

$
90,625

$
(12,421
)

$
78,204

Operating lease right-of-use-assets

-

13,001

13,001

Liabilities

Current lease liabilities - operating

-

-

-

Current portion of financing obligation

3,051

(3,051
)

-

Noncurrent lease liabilities - operating

-

27,723

27,723

Financing obligations

28,085

(28,085
)

-

Stockholders' equity

Accumulated deficit

(663,681
)

3,993

(659,688
)

The components of the Company’s lease costs are classified on its condensed consolidated statements of operations as follows:


	Three Months Ended March 31,		Three Months Ended March 31,
	2023		2022
Operating lease cost	$	760	$	760
Variable lease cost		304		325
Total operating lease cost	$	1,064	$	1,085
Short term lease cost	$	-	$	46

Three Months Ended June 30,

Six Months Ended June 30,

2022

2022

Operating lease cost

$
759

1,519

Variable lease cost

367

692

Total operating lease cost

$
1,126

$
2,211

Short term lease cost

$
34

$
80

The table below shows the cash and non-cash activity related to the Company’s lease liabilities during the period:

Six Months Ended June 30,

2022

Cash paid related to lease liabilities:

Operating cash flows from operating leases

$
1,417

Non-cash lease liability activity:

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

$
-


	Three Months Ended March 31,		Three Months Ended March 31,
	2023		2022
Cash paid related to lease liabilities:
Operating cash flows from operating leases	$	715	$	708

Non-cash lease liability activity:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	-	$	-

As of ~~June 30, 2022,~~March 31, 2023, the maturities of the Company’s operating lease liabilities were as follows:

2022 (remaining six months)	$	1,416
2023		2,895

2023 (remaining nine months)				$	2,181
2024		2,969			2,969
2025		3,042			3,042
2026		3,116			3,116
2027		3,190			3,190
Thereafter		70,342			70,341
Total lease payments		86,970			84,839
Less imputed interest		(59,120	)		(56,790	)
Total	$	27,850		$	28,049

As of ~~June 30, 2022,~~March 31, 2023, the weighted average remaining lease term of the Company’s operating ~~leases~~lease was ~~23.7~~23.0 years, and the weighted average discount rate used to determine the lease liability for the operating ~~leases~~lease was ~~11.12%~~11.12%.

In connection with ~~Legacy Celularity’s~~the Company’s acquisition of HLI Cellular Therapeutics, LLC and Anthrogenesis, the Company has agreed to pay future consideration to the sellers upon the achievement of certain regulatory and commercial milestones. As a result, the Company recorded ~~$192,024~~$87,013 and ~~$232,222~~$105,945 as contingent consideration as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Due to the contingent nature of these milestone and royalty payments, there is a high degree of management estimates that determine the fair value of the contingent consideration. See Note 43 for further discussion.

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of ~~June 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022.

On May 5, 2021, Legacy Celularity executed a Master Subscription Agreement with Palantir under which it will pay ~~$40,000~~$40,000 over five years for access to Palantir’s Foundry platform along with certain professional services. The Company ~~utilizes~~intended to utilize Palantir’s Foundry platform to secure deeper insights into data obtained from the Company’s discovery and process development, as well as manufacturing and biorepository operations. ~~During the third quarter of 2021,~~In January 2023, the Company ~~paid its first annual fee~~ceased use of ~~$6,000.~~the software and provided a notice of dispute to Palantir on the basis that the software has not performed as promised and that Palantir has failed to provide the Company with the professional services necessary to successfully implement, integrate and enable the Foundry platform. As a result, in accordance with ASC 420 Exit or Disposal Costs, during the three months ended March 31, 2023, the Company recognized the remaining related cease-use costs and liability estimated based on the discounted future cash flows of contract payments for $23,675 which is included as software cease-use costs in the condensed consolidated statements of operations. The Company has both a current and noncurrent liability for accrued R&D software on the condensed consolidated balance sheets for a total liability of $31,008 and $7,333 as of March 31, 2023 and December 31, 2022, respectively. For the ~~six~~three months ended ~~June 30,~~March 31, 2022, the Company ~~has~~ recorded ~~costs of $4,000~~$2,000, which was on a straight-line basis, ~~related to this agreement,~~ which was included as a component of research and development expense in the condensed consolidated statements of operations. Palantir has filed to compel arbitration of this dispute. See further discussion below.

In December 2021, the Company entered into a license agreement (“Sirion License”) with Sirion Biotech GmbH (“Sirion”). Under the Sirion License, Sirion granted the Company a license related to patent rights and know-how associated with poloxamers (“Licensed Product”). As part of the Sirion License, the Company paid Sirion ~~$136~~$136 as an upfront fee, a ~~$113~~$113 annual maintenance fee and may owe up to ~~$5,099~~$5,099 related to clinical and regulatory milestones for each Licensed Product during the term. The Company also agreed to pay Sirion low-single digit royalties on net sales on a Licensed Product-by-Licensed Product and country-by-country basis and until the later of: (i) expiration of the last to expire valid claim of the patents covering such Licensed Product, and (ii) 10 years after

first Commercial Sale of a Licensed Product. In addition, the Sirion License is subject to termination rights including for termination for material breach and by the Company for convenience upon 30 days written notice. During the three months ended March 31, 2023, no milestones have been achieved.

At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.

On ~~March 24,~~April 20, 2023, Palantir Technologies Inc. ("Palantir"), commenced an arbitration with JAMS Arbitration asserting claims for declaratory relief and breach of contract relating to the May 5, 2021 ~~CTH Biosourcing~~Master Service Agreement (the "Palantir MSA"), seeking damages in an amount equal to the full value of the contract. The Company has responded to the arbitration demand and asserted counterclaims for breach of contract, breach of warranty, fraudulent inducement, violation of California’s Unfair Competition Law, amongst others, in relation to the Palantir MSA. While the Company believes that Palantir’s claims are without merit and intends to vigorously defend against those claims, there can be no assurance as to the outcome of the arbitration.

On April 17, 2023, the Company filed a ~~petition~~complaint against Evolution Biologyx, LLC, Saleem S. Saab, individually, and ~~request for disclosure~~Encyte, LLC (collectively, “Evolution”) in the United States District Court for the District of ~~Travis County, Texas seeking declaratory relief challenging Legacy Celularity’s for-cause termination~~New Jersey to recover unpaid invoice amounts for the sale of ~~a Tissue Procurement Agreement (“TPA”). During~~its biomaterial products in the ~~fourth quarter~~amount of approximately $2.35 million, plus interest. In September 2021, the Company ~~entered into~~executed a ~~tri-party settlement (the “Settlement Agreement”)~~distribution agreement with ~~CTH and the CariCord~~ ~~participating shareholders, as interested parties, in which~~Evolution, whereupon Evolution purchased biomaterial products from the Company ~~agreed~~for sale through Evolution’s distribution channels. The Company fulfilled Evolution’s orders and otherwise performed each of its obligations under the distribution agreement. Despite attempts to ~~amend~~recover the ~~TPA in exchange for a full release~~outstanding invoices and Evolution’s promise to pay, Evolution has refused to pay any of ~~all~~the invoices and has materially breached its obligations under the distribution agreement. The Company’s complaint asserts claims ~~underlying~~of breach of contract and fraudulent inducement, amongst others. The Company intends to vigorously pursue the ~~aforementioned litigation. In addition,~~matter to recover the ~~Company issued743,771 shares of Class A Common Stock~~outstanding payments owed by Evolution, as well as interest and reasonable attorney's fees, but there can be no assurance as to the ~~CariCord participating shareholders, with an estimated fair value~~outcome of ~~$5,333 in exchange for~~the litigation.

Pursuant to the Settlement Agreement, the CariCord participating shareholders are entitled to receive up to an additional 371,885 shares of Class A Common Stock if certain procurement targets are met by CTHCivil Investigative Demand (the “Demand”) under the ~~TPA during a specified period of two years~~False Claims Act, 31 U.S.C. § 3729, dated August 14, 2022, from the ~~effective date~~U.S. Attorney’s Office for the Eastern District of Pennsylvania. The Demand requests documents and information relating to claims submitted to Medicare, Medicaid, or other federal insurers for services or procedures involving injectable human tissue therapy products derived from amniotic fluid or birth tissue and includes Interfyl. The Company is cooperating with the Settlement Agreement. As of December 31, 2021, these procurement targets were not probable of being achieved. As of June 30, 2022, the Company considered it probable that certain procurement targets would be met under the Settlement Agreement, resulting in a liability with an estimated fair value of $611 (see Note 4). ~~Due to changes in the Company’s common share price~~request and ~~the contingent nature of these procurement targets, the Company cannot predict the amount of such potential issuances.~~is

engaged in an ongoing dialogue with the Assistant U.S. Attorneys handling the Demand. The matter is still in preliminary stages and there is uncertainty as to whether the Demand will result in any liability.

10.

Equity

Common Stock

As of ~~June 30,~~March 31, 2023 and December 31, 2022, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 730,000,000 shares of ~~$0.0001~~$0.0001 par value Class A ~~Common Stock.~~common stock.

Voting Power

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of the Company’s directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders.

Dividends

Holders of Class A ~~Common Stock~~common stock will be entitled to receive such dividends, if any, as may be declared from time to time by the Company’s board of directors in its discretion out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically.

Liquidation, Dissolution and Winding Up

In the event of the Company’s voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the common stock will be entitled to receive an equal amount per share of all of the Company’s assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied.

Preemptive or Other Rights

The Company’s stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to common stock.

Election of Directors

The Company’s board of directors is divided into three classes, Class I, Class II and Class III, with only one class of directors being elected in each year and each class serving a three-year term, except with respect to the election of directors at the special meeting held in connection with the merger with GX, Class I directors are elected to an initial one-year term (and three-year terms subsequently), the Class II directors are elected to an initial two-year term (and three-year terms subsequently) and the Class III directors are elected to an initial three-year term (and three-year terms subsequently). There is no cumulative voting with respect to the election of directors, with the result that the holders of more than ~~50%~~50% of the shares voted for the election of directors can elect all of the directors.

Preferred Stock

The Company’s ~~Certificate~~certificate of ~~Incorporation~~incorporation authorized 10,000,000 shares of preferred stock and provides that shares of preferred stock may be issued from time to time in one or more series. The Company’s board of directors is authorized to fix the voting rights, if any, designations, powers and preferences, the relative, participating, optional or other special rights, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series of preferred stock. The Company’s board of directors is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of common stock and could have anti-takeover effects. The ability of the Company’s board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of Celularity or the removal of existing management. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company does 0tnot have any outstanding preferred stock.

May 2022 PIPE

On May 18, 2022, the Company entered into a securities purchase agreement with an institutional accredited investor providing for the private placement of (i) 4,054,055 shares of Class A ~~Common Stock~~common stock and (ii) accompanying warrants to purchase up to 4,054,055 shares of Class A ~~Common Stock~~common stock (the “May 2022 PIPE Warrants”), for ~~$7.40~~$7.40 per share and accompanying warrant, or an aggregate purchase price of approximately ~~$30,000~~$30,000 gross, or ~~$27,396~~$27,396 net of related costs of ~~$2,604~~$2,604 which were recorded as a reduction to additional paid-in-capital. The net proceeds were allocated to the warrant liability as noted below with the remainder of ~~$7,651~~$7,651 recorded in additional paid-in capital. Each warrant has an exercise price of ~~$8.25~~$8.25 per share, is immediately exercisable, will expire on May 20,

2027 ~~(five~~ (five years from the date of issuance) (the “May 2022 PIPE Financing”). The closing of the May 2022 PIPE Financing occurred on May 20, ~~2022.~~2022. In the event of certain fundamental transactions involving the Company, the holders of May 2022 PIPE Warrants may require the Company to make a payment based on a Black-Scholes valuation, using specified inputs that are not considered indexed to the Company’s stock in accordance with ASC 815. Therefore, the Company accounted for the Warrants as liabilities and were recorded at the Closing Date fair value ~~$19,745~~$19,745 which was based on a Black-Scholes option pricing model. The remainder of the proceeds were allocated to the Class A common stock issued and recorded as a component of equity. Refer to Note 16 for additional information regarding subsequent events.

ATM Agreement

On September 8, 2022, the Company entered into an At-the-Market Sales Agreement (the “ATM Agreement”) with BTIG, LLC, Oppenheimer & Co. Inc. and B. Riley Securities, Inc., acting as sales agents and/or principals, pursuant to which the Company may offer and sell, from time to time in its sole discretion, shares of its common stock, having an aggregate offering price of up to $150,000, subject to certain limitations as set forth in the ATM Agreement. The Company is not obligated to make any sales of shares under the ATM Agreement.

Any shares offered and sold in the at-the-market offering will be issued pursuant to the Company’s effective shelf registration statement on Form S-3 and the related prospectus supplement. Under the ATM Agreement, the sales agents may sell shares of common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. The Company will pay the sales agents a commission rate of up to 3% of the gross sales proceeds of any shares sold and has agreed to provide the sales agents with customary indemnification, contribution and reimbursement rights. The ATM Agreement contains customary representations and warranties and conditions to the placements of the shares pursuant thereto.

During the three months ended March 31, 2023, the Company received gross and net proceeds of $141 and $136, respectively, from the sale of 132,958 shares of its common stock at an average price of $1.06 per share under the ATM Agreement.

March 2023 PIPE

On March 20, 2023, the Company entered into a securities purchase agreement with two accredited investors, including its Chairman and Chief Executive Officer, Dr. Robert Hariri, providing for the private placement of (i) 9,381,841 shares of its Class A common stock, and (ii) accompanying warrants to purchase up to 9,381,841 shares of Class A common stock (the "March 2023 PIPE Warrants"), for $0.8343 per share and $0.125 per accompanying March 2023 PIPE Warrant, for an aggregate purchase price of $9,000 (of which Dr. Hariri subscribed for $2,000). The closing of the private placement occurred on March 27, 2023. Each March 2023 PIPE Warrant has an exercise price of $3.00 per share, is immediately exercisable, will expire on March 27, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting the Company's capitalization. The March 2023 PIPE Warrants may not be exercised if the aggregate number of shares of Class A common stock beneficially owned by the holder thereof (together with its affiliates) would exceed the specified percentage cap provided therein (which may be adjusted upon 61 days advance notice) immediately after exercise thereof.

The Company accounted for the March 2023 PIPE Warrants and common stock as a single non-arm's length transaction. The Company applied the guidance for this transaction in accordance with ASU 2020-06, (Subtopic 470-20): Debt - Debt with Conversion and Other Options,ASC 815 Derivatives and Hedging, and ASC 480 Distinguishing Liabilities from Equity. Accordingly, the net proceeds were allocated between common stock and the March 2023 PIPE warrants at their respective fair value, which resulted in a net premium of $1,650 based on the difference between the proceeds and fair value of the common stock and March 2023 PIPE warrants, which was recorded as additional paid in capital. The fair value of the March 2023 PIPE Warrants was determined using a Black-Scholes option pricing model and the common stock based on closing date share price. The Company evaluated the March 2023 PIPE warrants under ASC 815 and determined that they did not require liability classification and met the requirements for a derivative scope exception under ASC 815-10-15-74(a) for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity. The warrants were recorded in additional paid-in capital within stockholders' equity on the condensed consolidated balance sheets.

Warrants

On March 1, 2022, Celularity and certain of the related party investors amended and restated the investors’ respective Legacy Celularity Warrants (the “A&R Warrants”) to (i) reduce the exercise price per share from ~~$7.53~~$7.53 per share to ~~$3.50~~$3.50 per share, subject to adjustment as set forth in the A&R Warrants, (ii) remove the transfer restrictions set forth in the A&R Warrants, and (iii) make other changes reflecting the impact of the business combination. In conjunction with the amendment, those investors exercised 13,281,386 of the A&R Warrants in exchange for 13,281,386 shares of Class A ~~Common Stock~~common stock for gross proceeds of ~~$46,485.~~$46,485. The Company accounted for the amendment as a cost to issue equity with the incremental fair value of ~~$15,985~~$15,985 related to the amendment recognized as an offset to the proceeds received. However, because these were equity classified warrants, the net impact to the condensed consolidatedstatements of ~~convertible preferred stock and~~ stockholders’ equity ~~(deficit)~~ was zero.

As of ~~June 30, 2022,~~March 31, 2023, the Company had ~~33,458,560~~43,590,201 outstanding warrants to purchase Class A ~~Common Stock.~~common stock. A summary of the warrants is as follows:


	Number of shares		Exercise price			Expiration date	Number of shares		Exercise price			Expiration date
Dragasac Warrant		6,529,818	$	6.77	*	March 16, 2025		6,529,818	$	6.77	*	March 16, 2025
Public Warrants		14,374,688	$	11.50		July 16, 2026		14,374,488	$	11.50		July 16, 2026
Sponsor Warrants		8,499,999	$	11.50		July 16, 2026		8,499,999	$	11.50		July 16, 2026
May 2022 PIPE Warrants		4,054,055	$	8.25		May 20, 2027		4,054,055	$	8.25	**	May 20, 2027
March 2023 PIPE Warrants								9,381,841	$	3.00		March 27, 2028
March 2023 Loan Warrants								750,000	$	0.71		March 17, 2028
		33,458,560						43,590,201

* The exercise price is the lessor of ~~$6.77~~$6.77 per share or ~~80%~~80% of either (i) the value attributed to one share of Legacy Celularity Series B Preferred Stock upon consummation of a change in control or the closing of a strategic transaction or (ii) the price at which one share of common stock is sold to the public market in an initial public offering.

~~The Company may call the Public Warrants for redemption (excluding the Sponsor Warrants), in whole and not in part, at a price of $0.01 per warrant:~~

** •

~~at any time while the Public Warrants are exercisable,~~

•

~~upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder,~~

•

if, and only if, there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing

The Sponsor Warrants are identical to the Public Warrants underlying the units sold in GX’s initial public offering, except that the Sponsor Warrants and the common shares issuable upon the exercise of the Sponsor Warrants were not transferable, assignable or salable until after the completion of the Business Combination, subject to certain limited exceptions. Additionally, the Sponsor Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Sponsor Warrants are held by someone other than the initial purchasers or their permitted transferees, the Sponsor Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The exercise price was amended to $0.75 effective April 10, 2023 in connection with the registered direct offering. The expiration date was also amended to be five and one-half years following the closing of the offering or October 10, 2028. Refer to Note 16 for additional information regarding subsequent events.

Delaware Section 205 Proceeding

On July 14, 2021, Celularity, then operating as GX Acquisition Corp. (“Pre-Merger Company”), held a special meeting of stockholders (the “Special Meeting”) to approve certain matters related to the business combination between the Pre-Merger Company and Celularity Operations, Inc. (“Legacy Celularity”), including a proposal to adopt a certificate of amendment to the Pre-Merger Company’s amended and restated certificate of incorporation (the “Pre-Merger Charter”) to increase the number of authorized shares of its common stock from 110,000,000 to 730,000,000 (the "Increase Amendment”). The Increase Amendment received approval from the holders of a majority of the Pre-Merger Company’s outstanding shares of Class A ~~Common Stock issuable upon exercise~~common stock and Class B common stock, voting together as a single class, that were outstanding as of the ~~Public Warrants~~record date for such Special Meeting. Following the Special Meeting, the business combination closed, the Pre-Merger Company changed its name to “Celularity Inc.” and ~~Sponsor Warrants may be adjusted~~ the Pre-Merger Charter, as amended to give effect to the Authorized Share Amendment (the “New Charter”), became effective.

A recent decision by the Court of Chancery of the State of Delaware (the “Court”) in ~~certain circumstances including in~~Garfield v. Boxed, Inc., 2022 WL 17959766 (Del. Ch. Dec. 27, 2022), created uncertainty as to whether Section 242(b)(2) of the ~~event~~Delaware General Corporation Law (“DGCL”) would have required the Celularity to seek and obtain a vote of a ~~share dividend, or recapitalization, reorganization, merger or consolidation.~~

~~Additionally, in no event will~~majority of the Company be required to net cash settle the Public Warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and numbershares of Class A common ~~shares issuable upon exercise~~stock to approve the Increase Amendment to the Pre-Merger Charter. Thus, to resolve any potential uncertainty, on March 14, 2023, Celularity filed a petition (the “Petition”) in the Court under Section 205 of the ~~Public Warrants may be adjusted~~DGCL seeking validation and a declaration of effectiveness of the New Charter and actions taken in ~~certain circumstances~~reliance thereon, including the Increase Amendment and the shares issued pursuant thereto, captioned In re Celularity, Inc., C.A. No. 2023-0317-LWW (Del. Ch.) (the “Section 205 Action”). Section 205 of the DGCL permits the Court, in its discretion, to ratify and validate potentially validate corporate acts and stock after considering a variety of factors.

On March 29, 2023, the Court of Chancery held a hearing in the ~~event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. The Public Warrants~~Section 205 Action and ~~Sponsor Warrants are liability classified~~orally granted the Petition, and, later that same day, the Court issued an order in the Section 205 Action, in which it validated and declared effective the Increase Amendment and the ~~changes~~Certificate of Incorporation as of 10:00 a.m. (EDT) on July 16, 2021, and all shares of capital stock of the Company issued in ~~their fair value are recognized~~reliance on the ~~condensed consolidated statements~~effectiveness of ~~operations. See Note 4 for further details.~~the Increase Amendment and the Certificate of Incorporation as of the date and time of the original issuance of such shares. The Courts order has addressed and eliminated the uncertainty created by the Garfield Court’s decision.

11.

Stock-Based Compensation

2021 Equity Incentive Plan

In July 2021, the Company’s board of directors adopted, and the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options (“ISOs”) to employees and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants.

The number of shares of Class A ~~Common Stock~~common stock initially reserved for issuance under the 2021 Plan is ~~20,915,283.~~20,915,283. As of ~~June 30, 2022, 9,619,846~~March 31, 2023, 17,548,731 shares remain available for future grant under the 2021 Plan. The number of shares reserved for issuance will automatically increase on January 1 of each year, for a period of 10 years, from January 1, 2022 through January 1, 2031, by 4%4% of the total number of shares of Celularity capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. Shares subject to stock awards granted under the 2021 Plan that

expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the 2021 Plan. Additionally, shares issued pursuant to stock awards under the 2021 Plan that are repurchased or forfeited, as well as shares that are reacquired as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under the 2021 Plan.

The 2021 Plan is administered by the Company’s board of directors. The Company’s board of directors, or a duly authorized committee thereof, may delegate to one or more officers the authority to (i) designate employees other than officers to receive specified stock awards and (ii) determine the number of shares to be subject to such stock awards. Subject to the terms of the 2021 Plan, the plan administrator has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under the 2021 Plan. The plan administrator has the power to modify outstanding awards under the 2021 Plan. Subject to the terms of the 2021 Plan and in connection with a corporate transaction or capitalization adjustment, the plan administrator may not reprice or cancel and regrant any award at a lower exercise price, strike price or purchase price or cancel any award with an exercise price, strike price or purchase price in exchange for cash, property or other awards without first obtaining the approval of the Company’s stockholders.

2017 Equity Incentive Plan

The 2017 Equity Incentive Plan (the “2017 Plan”) adopted by Legacy Celularity’s board of directors and approved by Legacy Celularity’s stockholders provided for Legacy Celularity to grant stock options to employees, directors and consultants of Legacy Celularity. In connection with the closing of the Business Combination and effectiveness of the 2021 Plan, no further grants will be made under the 2017 Plan.

The total number of stock options that could have been issued under the 2017 Plan was ~~32,342,049.~~32,342,049. Shares that expired, forfeited, canceled or otherwise terminated without having been fully exercised were available for future grant under the 2017 Plan.

The 2017 Plan is administered by the Company’s board of directors or, at the discretion of the Company’s board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions were determined at the discretion of Legacy Celularity’s board of directors, or its committee if so delegated, except that the exercise price per share of stock options could not be less than ~~100%~~100% of the fair market value of the share of common stock on the date of grant and the term of stock option could not be greater than ten ~~years.~~years. Stock options granted to employees, officers, members of the board of directors and consultants typically vested over a three or four year period.

Stock Option Valuation

Awards with Service Conditions

The fair value of each option is estimated on the date of grant using a Black-Scholes option pricing model that takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at grant date, expected term, expected stock price volatility, risk-free interest rate, and dividend yield. The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Certain of these inputs are subjective and generally ~~required~~require judgment to determine.

•

The expected term of employee stock options with service-based vesting is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of non-employee options is equal to the contractual term or estimated term based on the underlying agreement.

•

The expected stock price volatility is based on historical volatilities of comparable public entities within the Company’s industry.

•

The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the respective expected term or contractual term.

•

The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.

•

~~The expected stock price volatility is based on historical volatilities of comparable public entities within the Company’s industry.~~

•

~~The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock~~.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022:

~~Risk-free interest rate~~

Three Months Ended

~~2.5~~

March 31, 2023

March 31, 2022

Risk-free interest rate

N/A

1.8

Expected term (in years)

~~6.0~~

N/A

6.0

Expected volatility

N/A

76.5

~~77.0~~

Expected dividend yield

N/A

—

The weighted average grant-date fair value per share of stock options granted during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, was $0and ~~year ended December 31, 2021 was $6.23 and $4.13,~~$3.39, respectively.

The following table summarizes option activity with service conditions under the 2021 Plan and the 2017 Plan:


	Options			Weighted Average Exercise Price		Weighted Average Contract Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2023		25,059,409		$	4.90		6.1	$	7,851
Granted		—			—
Exercised		(1,071,000	)		0.28
Forfeited		(294,400	)		8.58
Outstanding at March 31, 2023		23,694,009		$	5.06		5.8	$	2,277
Vested and expected to vest March 31, 2023		23,694,009		$	5.06		5.8	$	2,277
Exercisable at March 31, 2023		19,589,188		$	4.43		5.3	$	2,277

Options

Weighted
average
exercise
price

Weighted
average
contract term (years)

Aggregate
intrinsic
value

Balance at January 1, 2022

24,064,586

$
4.23

7.4

$
56,525

Granted

2,435,662

$
9.18

Exercised

(619,784
)

$
0.57

Forfeited

(232,106
)

$
6.30

Outstanding at June 30, 2022

25,648,358

$
4.77

6.58

$
28,099

Vested and expected to vest June 30, 2022

25,648,358

$
4.77

6.58

$
28,099

Exercisable at June 30, 2022

19,756,174

$
3.66

5.80

$
28,099

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of Class A ~~Common Stock~~common stock for those options that had exercise prices lower than the fair value of Class A ~~Common Stock.~~common stock.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, the aggregate intrinsic value was ~~$5,360~~$482 for the stock options exercised.

The Company recorded stock-based compensation expense relating to option awards with service conditions of ~~$2,754~~$2,412 and ~~$4,322~~$1,568 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, respectively.As of ~~June 30, 2022,~~March 31, 2023, unrecognized compensation cost for options issued with service conditions was ~~$28,652,~~$20,250 and will be recognized over an estimated weighted-average amortization period of ~~6.58 years~~2.32. years.

Awards with ~~Market~~Performance Conditions

~~The~~In connection with the advisory agreement signed with Robin L. Smith, MD (see Note 15), the Company awarded options to acquire a total of ~~2,469,282~~1,050,000 shares with an exercise price of ~~$6.32~~$2.99 to Dr. Smith, a member of the Company’s board of directors. The initial tranche of 250,000 stock options vested upon execution of the advisory agreement on August 16, 2022. The remaining 800,000 stock options are subject to vesting upon achievement of certain predefined milestones in relation to the expansion of the degenerative disease business. On November 1, 2022, the second tranche of 200,000 stock options vested upon achievement of the first milestone. The fair value of the award was determined based on a Black-Scholes option-pricing model. The Company's grant date fair value assumptions were 79.9% expected volatility, 2.95% risk-free interest rate, 5 year expected term, and 0% expected dividend yield. There were no milestones achieved and accordingly there was no stock-based compensation recorded during the three months ended March 31, 2023 and 2022. As of March 31, 2023, the remaining unrecognized compensation cost was $1,175, and will be recognized upon probable achievement of the milestones.

Awards with Market Conditions

In September 2021, the Company awarded options to acquire a total of 2,469,282 shares with an exercise price of $6.32 to the Company’s former President in connection with the commencement of his employment. The grant was comprised of four equal tranches, ~~which award will~~ and would vest in up to five equal installments in respect of achieving certain share price targets between the third and fourth anniversary of the effective date, subject to his continued employment with the Company. The fair value of the President’s award was determined based upon a Monte Carlo simulation valuation model. The Company’s assumptions for expected volatility and closing price were 75.0% and $6.32, respectively. The aggregate estimated fair value of the President’s award was $7,013, which is expected to be recognized over a weighted-average period of four years. The Company recognized $437 ~~and $869~~in share-based expense related to the President’s award for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, there was $5,778 of unrecognized compensation costs that the Company plans to recognize over the weighted average period of 3.3 years.

~~As noted in further detail in Note 16, the~~ Company’s President resigned effective August 31, 2022, ~~which may impact~~and the President’s ~~Award.~~award was terminated at such time, all previously recognized stock-based compensation expense was reversed, and a consulting agreement was signed thereafter, refer to Note 15 for further details. The Company recognized $432 in stock-based compensation for the three months ended March 31, 2022.

Restricted Stock Units

The Company issues restricted stock units (“RSUs”) to employees that generally vest over a ~~two-year~~ four-yearperiod, with ~~50%~~25% vesting on the anniversary of ~~awards~~the grant date, and the remainder vesting ~~after 1 year and then~~in equal annual installments thereafter so that vested in full on the ~~remaining 50%~~

four-year anniversary of the grant date. At times, the board of directors may approve exceptions to the standard RSU vesting ~~after 2 years.~~terms. Any unvested shares will be forfeited upon termination of services. The fair value of an RSU is equal to the fair market value price of the Company’s common stock on the date of grant. RSU expense is amortized straight-line over the vesting period.

The following table summarizes activity related to RSU stock-based payment awards:

Number of shares

Weighted
average
grant date fair value

Outstanding at December 31, 2021

474,700

$
7.20

Granted

1,710,123

$
8.88

Forfeited

(36,047
)

$
7.67

Outstanding at June 30, 2022

2,148,776

$
8.53


	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2023		2,274,029		$	7.34
Granted		4,094,900		$	0.70
Vested		(253,390	)	$	8.38
Forfeited		(300,559	)	$	6.83
Outstanding at March 31, 2023		5,814,980		$	2.64

The Company recorded stock-based compensation expense of ~~$1,340~~$1,576 and ~~$1,760~~$420 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, respectively, related to RSUs. As of ~~June 30, 2022,~~March 31, 2023, the total unrecognized expense related to all RSUs was ~~$16,390,~~$12,634, which the Company expects to recognize over a weighted-average period of ~~1.94~~1.67 years.

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations:


	For the Three Months Ended March 31,
	2023		2022
Cost of revenues	$	164	$	37
Research and development		558		248
Selling, general and administrative		3,266		2,137
	$	3,988	$	2,422

Three months ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Cost of revenue

$
131

$
16

$
168

$
32

Research and development

741

7,316

989

7,663

Selling, general and administrative

3,657

20,856

5,794

21,502

$
4,529

$
28,188

$
6,951

$
29,197

12.

Revenue Recognition

The following table provides information about disaggregated revenue by product and services:


	Three Months Ended March 31,
	2023		2022
Product sales and rentals, net	$	1,043	$	651
Processing and storage fees, net		1,357		1,283
License, royalty and other		1,535		4,001
Net revenue	$	3,935	$	5,935

Three months ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Product sales and rentals, net

$
1,228

$
1,045

$
1,879

$
1,885

Processing and storage fees, net

1,373

1,597

2,656

2,861

License, royalty and other

1,175

555

5,176

1,111

Net revenue

$
3,776

$
3,197

$
9,711

$
5,857

The following table provides changes in deferred revenue from contract liabilities:

2022

2021

Balance at January 1

$
4,067

$
12,449

Deferral of revenue*

2,397

2,280

Recognition of unearned revenue*

(2,235
)

(3,567
)
Balance at June 30

$
4,229

$
11,162


	2023			2022
Balance at January 1	$	4,492		$	4,067
Deferral of revenue*		1,195			1,649
Recognition of unearned revenue		(1,163	)		(1,610	)
Balance at March 31	$	4,524		$	4,106

* ~~2022 deferral~~Deferral of revenue resulted from payments received in advance of performance under the biobanking services storage contracts that are recognized as revenue under the contract as performance is completed.

13.

License and ~~processing services and storage services.~~

Revenue from process fees is recognized at the point in time of the successful completion of processing. Revenue from storage services is recognized ratably over the contractual storage period. The portion of the 18- and 25-year contract storage periods that are being recognized over the contractual storage period are included in Deferred revenue in the condensed consolidated balance sheets and is classified as current if the Company expects to recognize the related revenue over the next 12 months from the balance sheet date.

The Company uses list prices to recognize revenue. Promotional discounts and other various incentives are estimated using the expected value method and are recognized in the same period the underlying revenue transaction is recognized.

~~Product sales and rentals and license, royalty and other revenues~~

The Company’s direct sales of degenerative disease products are included in product sales and rentals while sales through the Company’s network of distribution partners are included in license, royalty and other revenues.

The Company recognizes revenue for the sale of its Biovance ®, Interfyl ®, Biovance 3L ® and Centaflex ® products when the customer obtains control of the Company’s product based on the contractual shipping terms of a contract. Variable consideration (such as rebates, discounts and other deductions) is estimated using the expected value method and are recognized as revenue when the Company transfer control to the customers. In addition, the Company offers volume-based discounts, rebates and prompt pay discounts and other various incentives which are estimated under the expected value method and recognized as a reduction in revenue in the same period the underlying revenue transaction is recognized.

Under the license agreement with Sanuwave which acquired certain assets comprising its MIST ® /UltraMIST ® business, the Company received a quarterly license fee and a defined royalty on each product sold. The six months ended June 30, 2021, included the recognition of the quarterly license fee in license, royalty and other revenues. During the third quarter of 2021, the license agreement with Sanuwave was terminated due to an uncured material breach.

Distribution Agreements

~~13.~~

~~License and Distribution Agreements~~

Sorrento Therapeutics, Inc. License and Transfer Agreement

The Company and Sorrento Therapeutics, Inc. (“Sorrento”), a related party, are party to a License and Transfer Agreement for the exclusive worldwide license to CD19 CAR-T constructs for use in placenta-derived cells and/or cord blood-derived cells for the treatment of any disease or disorder (the “2020 Sorrento License Agreement”). The Company retains the right to sublicense the rights granted under the agreement with Sorrento’s prior written consent. As consideration for the license, the Company is obligated to pay Sorrento a royalty equal to low single-digit percentage of net sales (as defined within the agreement) and a royalty equal to low double-digit percentage of all sublicensing revenues (as defined within the agreement). The 2020 Sorrento License Agreement will remain in effect until terminated by either the Company or Sorrento for uncured material breach upon 90 days written notice or, after the first anniversary of the effective date of the 2020 Sorrento License Agreement, by the Company for convenience upon six months’ written notice to Sorrento.

The Company and Sorrento are actively negotiating a new supply agreement related to the 2020 Sorrento License Agreement. The 2020 Sorrento Term Sheet details certain aspects of this supply agreement, including pricing terms on material and/or licensed product supplied under the 2020 Sorrento License Agreement. The Company did 0tnot incur incentive payments related to the 2020 Sorrento Term Sheet.

Genting Innovation PTE LTD Distribution Agreement

On May 4, 2018, concurrently with Dragasac’s equity investment in Legacy Celularity, Legacy Celularity entered into a distribution agreement with Genting Innovation PTE LTD (“Genting”), a related party, pursuant to which Genting was granted supply and distribution rights to certain Company products in select Asia markets (the “Genting Agreement”). The Genting Agreement grants Genting limited distribution rights to the Company’s then-current portfolio of degenerative disease products and provides for the automatic rights to future products developed by or on behalf of the Company.

The term of the Genting Agreement was renewed on January 31, ~~2022,~~2023, and automatically renews for successive 12-month terms unless Genting provides written notice of its intention not to renew at least three months prior to a renewal term or the Genting Agreement is otherwise terminated by either party for cause.

Genting and Dragasac are both direct subsidiaries of Genting Berhad, a public limited liability company incorporated and domiciled in Malaysia.

Celgene Corporation License Agreement

The Company is party to a license agreement with Celgene (the “Celgene Agreement”) pursuant to which the Company granted Celgene two separate licenses to certain intellectual property. The Celgene Agreement grants Celgene a royalty-free, fully-paid up, worldwide, non-exclusive license to the certain intellectual property (“IP”) for pre-clinical research purposes in all fields and a royalty-free, fully-paid up, worldwide license, with the right to grant sublicenses, for the development, manufacture, commercialization and exploitation of products in the field of the construction of any CAR, the modification of any T-lymphocyte or NK cell to express such a CAR, and/or the use of such CARs or T-lymphocytes or NK cells for any purpose, including prophylactic, diagnostic, and/or therapeutic uses thereof. The Celgene Agreement will remain in effect until its termination by either party for cause.

~~Exclusive Supply~~Pulthera, LLC Binding Term Sheet

Concurrent with the entry into the securities purchase agreement for the private placement described in Note 10 above, the Company executed a binding term sheet to negotiate and ~~Distribution Agreements~~

~~On May 7, 2021, Legacy Celularity entered~~enter into a sublicense agreement of certain assets from an affiliate of Pulthera, LLC (the "sublicensor"). Pursuant to the binding term sheet, the Company paid sublicensor $~~six-year~~3,000 ~~supply~~ option fee in cash and ~~distribution agreement with Arthrex, Inc. (“Arthrex”) whereby Arthrex would receive exclusive rights~~issued $1,000 of shares of its Class A common stock (1,694,915 shares based on the closing price on March 17, 2023) as consideration for stem-cells inventory to ~~distribute~~be used in research and ~~commercialize~~development. The option fee paid by the ~~Company’s placental-derived biomaterial products for orthopedics and sports medicine~~Company will be applied towards an initial license fee as outlined in the ~~United States.~~ sublicense agreement. The Company is required to use diligent and reasonable efforts to develop and obtain regulatory approval to market at least one licensed product contingent upon a firm written commitment to provide further financing to the Company. The $3,000

~~Under~~option fee was recorded as acquired IPR&D expense included in research and development expense on the ~~Arthrex Supply and Distribution Agreement, the Company and Arthrex will establish a joint steering committee to oversee commercialization activities~~condensed consolidated statements of ~~the products. Membership of the joint steering committee will be comprised of an equal number of employees of each respective party.~~

~~On September 1, 2021, the Company entered into a~~ ~~three-year~~ ~~supply and distribution agreement with Evolution Biologyx, LLC (“Evolution”) that includes an exclusive Interfyl license~~operations for the ~~distribution and commercialization within~~three months ended March 31, 2023, as the United States within any medical specialty where Interfyl is administered in an in-office or in-patient setting and is reimbursed through Medicare Part B or any successor, equivalent or similar category established by the Center for Medicare Services or other government authority, except in the medical specialty of orthopedic surgery excluding trauma or spine applications in the medical specialty or orthopedic or neurologic surgery (the “Evolution Supply and Distribution Agreement”). The Evolution Supply and Distribution Agreement will automatically renew for terms of acquired IPR&D had no alternative future use.~~two-year~~ periods unless either party gives notice of non-renewal at least 12 months in advance of the current term. Per the terms of the Evolution Supply and Distribution Agreement, Evolution will forfeit its exclusive license if it fails to purchase a minimum dollar amount of product.

14.

Segment Information

The Company regularly reviews its segments and the approach used by management to evaluate performance and allocate resources. ~~Prior to the third quarter of 2020, Legacy Celularity managed operations as 1 segment.~~ The Company manages its operations through an evaluation of 3three distinct business segments: Cell Therapy, Degenerative

Disease, and BioBanking. ~~This change was prompted by certain organizational and personnel changes.~~ The chief operating decision maker uses the revenues and earnings (losses) of the operating segments, among other factors, for performance evaluation and resource allocation among these segments.

The reportable segments were determined based on the distinct nature of the activities performed by each segment. Cell Therapy broadly refers to therapies the Company is researching and developing. Therapies being researched are unproven and in various phases of development. Degenerative Disease produces, sells and licenses products used in surgical and wound care markets. Biobanking collects stem cells from umbilical cords and placentas and provides storage of such cells on behalf of individuals for future use.

The Company manages its assets on a total company basis, not by operating segment. Therefore, the chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, asset information is not reported by operating segment. Total assets were ~~$429,337~~$362,416 and ~~$414,128~~$401,066 as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~,2022, respectively.

Financial information by segment for the three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ is as follows:


	Three Months Ended March 31, 2023
	Cell Therapy			BioBanking		Degenerative Disease			Other				Total
Net sales	$	-		$	1,357	$	2,578		$	-			$	3,935
Gross profit		-			885		1,047			-				1,932
Direct expenses		40,162			344		3,009			11,155				54,670
Segment contribution	$	(40,162	)	$	541	$	(1,962	)		(11,155	)			(52,738	)
Indirect expenses										11,132		(a)		11,132
Loss from operations													$	(63,870	)

(a) Components of other
Change in fair value of contingent consideration liability										(18,932	)
Change in fair value of contingent stock consideration										(110	)
Goodwill impairment										29,633
Amortization										541
Total other									$	11,132


	Three Months Ended March 31, 2022
	Cell Therapy			BioBanking			Degenerative Disease		Other				Total
Net sales	$	-		$	1,283		$	4,652	$	-			$	5,935
Gross profit		-			335			1,574		-				1,909
Direct expenses		21,213			626			1,459		13,270				36,568
Segment contribution		(21,213	)		(291	)		115		(13,270	)			(34,659	)
Indirect expenses										6,955		(b)		6,955
Loss from operations													$	(41,614	)

(b) Components of other
Change in fair value of contingent consideration liability										4,849
Change in fair value of contingent stock consideration										1,565
Amortization										541
Total other									$	6,955

15.

Related Party Transactions

Amended and Restated Employment Agreement with Dr. Robert Hariri

Three Months Ended June 30, 2022

Cell
Therapy

BioBanking

Degenerative
Disease

Other

Total

Net sales

$
-

$
1,373

$
2,403

$
-

$
3,776

Gross profit

-

108

489

-

597

Direct expenses

24,820

256

3,179

13,622

41,877

Segment contribution

$
(24,820
)

$
(148
)

$
(2,690
)

(13,622
)

(41,280
)
Indirect expenses

(45,455
)
(a)

(45,455
)
Income from operations

$
4,175

(a) Components of other

Change in fair value of contingent consideration liability

(45,047
)

Change in fair value of contingent stock consideration

(954
)

Amortization

546

Total other

$
(45,455
)

Three Months Ended June 30, 2021

Cell
Therapy

BioBanking

Degenerative
Disease

Other

Total

Net sales

$
-

$
1,597

$
1,600

$
-

$
3,197

Gross profit

-

1,029

728

-

1,757

Direct expenses

22,105

742

2,150

26,777

51,774

Segment contribution

$
(22,105
)

$
287

$
(1,422
)

(26,777
)

(50,017
)
Indirect expenses

10,594

(b)

10,594

Loss from operations

$
(60,611
)

(b) Components of other

Change in fair value of contingent consideration liability

10,048

Amortization

546

Total other

$
10,594

~~Financial information by segment for~~On January 25, 2023, in order to address the ~~six months ended June 30, 2022~~Company's current working capital requirements, Robert Hariri, M.D., Ph.D., the Company's Chairman and ~~2021 is as follows:~~

Six Months Ended June 30, 2022

Cell
Therapy

BioBanking

Degenerative
Disease

Other

Total

Net sales

$
-

$
2,656

$
7,055

$
-

$
9,711

Gross profit

-

443

2,063

-

2,506

Direct expenses

46,033

882

4,638

26,892

78,445

Segment contribution

$
(46,033
)

$
(439
)

$
(2,575
)

(26,892
)

(75,939
)
Indirect expenses

(38,500
)
(c)

(38,500
)
Loss from operations

$
(37,439
)

(c) Components of other

Change in fair value of contingent consideration liability

(40,198
)

Change in fair value of contingent stock consideration

611

Amortization

1,087

Total other

$
(38,500
)

Six Months Ended June 30, 2021

Cell
Therapy

BioBanking

Degenerative
Disease

Other

Total

Net sales

$
-

$
2,861

$
2,996

$
-

$
5,857

Gross profit

-

1,569

1,606

-

3,175

Direct expenses

38,392

994

4,164

32,840

76,390

Segment contribution

$
(38,392
)

$
575

$
(2,558
)

(32,840
)

(73,215
)
Indirect expenses

31,791

(d)

31,791

Loss from operations

$
(105,006
)

(d) Components of other

Change in fair value of contingent consideration liability

30,704

Amortization

1,087

Total other

$
31,791

Chief Executive Officer, agreed to temporarily reduce payment of his salary pursuant to his employment agreement to minimum wage level with the remaining salary deferred until December 31, 2023. As of March 31, 2023, $215 was recorded to accrued expenses on the condensed consolidated balance sheets.~~15.~~

~~Related Party Transactions~~

Consulting Agreement with Dr. Andrew Pecora

On August 31, 2022, Dr. Pecora resigned as the Company’s President, and subsequently entered into a consulting agreement with the Company dated September ~~1, 2017, Legacy Celularity~~21, 2022, to receive a $10 monthly fee for an initial six-month term and will be automatically renewed for one additional six- month term if either party does not provide notice of non-renewal. Simultaneously, the Company entered into a scientific and clinical advisor agreement (the “SAB Agreement”) ~~with Dr. Andrew Pecora, a member~~, effective as of ~~Legacy Celularity’s board of directors, for the provision of consulting and advisory services. The SAB Agreement was superseded by a new SAB Agreement executed by Legacy Celularity on February~~September 1, ~~2019.~~

On April 13, 2020, Legacy Celularity executed the First Amendment of the SAB Agreement with Dr. Pecora. The term of the First Amendment was six months. It provided for the payment of $20 per month and the issuance of a stock option to purchase 153,718 shares of Legacy Celularity’s common stock. This consideration was in addition to consideration defined in prior agreements. Upon the execution of the agreement, 76,859 of the options were vested. The remaining 76,859 options were vested upon Dr. Pecora’s achievement of a performance objective.

~~On October 15, 2020, Legacy Celularity executed the Second Amendment to the SAB Agreement with Dr. Pecora. Under the Second Amendment,~~2022, whereby Dr. Pecora agreed to ~~provide Legacy Celularity~~serve as co-chair of the Company’s scientific and clinical advisory board for a $10 monthly fee and a one-time grant of RSUs having a value of $125 on the grant date and will vest equally over four years. The SAB Agreement has a one-year term and may be renewed for

successive one-year terms upon mutual agreement of both parties. The consulting agreement was early terminated effective January 14, 2023. Dr. Pecora continues to serve on the Company’s scientific and clinical advisory board. The Company paid Dr. Pecora SAB fees of $10 for the three months ended March 31, 2023, and $20 was recorded to accrued expenses on the condensed consolidated balance sheets as of March 31, 2023.

Advisory Agreement with ~~strategic advice on clinical development operations and strategy and assist in establishing~~Robin L. Smith MD

On August 16, 2022, the Company entered into an advisory agreement with Robin L. Smith, MD, a ~~long-range clinical development plan. Compensation under~~member of the ~~arrangement includes: (i) cash consideration~~Company’s board of ~~$20~~directors, to receive $20 per month ~~(ii)~~for advisory fees, an equity grant for a total amount of 1,050,000 stock options with the initial tranche of 250,000 stock options vesting upon execution of the advisory agreement and the remaining shares subject to vesting upon achievement of certain predefined milestones. The agreement also provides for a one-time cash bonus of ~~$50~~$1,500 upon consummation of a merger, combination, consolidation or similar transaction involving Legacy Celularity in relation to a transaction with GX, (iii) a non-qualified stock option to purchase 153,718 shares of Legacy Celularity’s common stock. This non-qualified stock option was granted during the ~~second quarter of 2021. The original expiration~~successful achievement of the ~~Second Amendment~~trigger event, as defined in the agreement. The Company paid advisory fees of $20 for the three months ended March 31, 2023, and $40 was ~~January~~recorded to accrued expenses on the condensed consolidated balance sheets as of March 31, 2021. On January 31, 2021, the Company executed the amended and restated second amendment to the SAB Agreement which extended the term of the Second Amendment to September 30, 2021, unless earlier terminated by the Company for cause.2023.

Pursuant to the SAB Agreements, the Company paid Dr. Pecora $240 for the six months ended June 30, 2021. On September 15, 2021, the Company hired Dr. Pecora to serve as President. Upon hiring Dr. Pecora, the SAB Agreement was terminated.

~~CURA Foundation~~

During the six months ended June 30, 2022 and 2021, the Company made 0 contributions to the CURA Foundation in support of the International Vatican. Dr. Robin L. Smith serves on the Company’s board of directors, previously served on the board of directors of Legacy Celularity and is the president and chairperson of the board of the CURA Foundation.

COTA, Inc

In November 2020, Legacy Celularity and COTA, Inc. (“COTA”) entered into an Order Schedule (the “Order Schedule No. 2”), to the Master Data License Agreement between Legacy Celularity and COTA, dated October 29, 2018, pursuant to which COTA will provide the licensed data in connection with AML patients. The COTA Order Schedule No. 2 will terminate on the one-year anniversary following the final licensed data deliverable described therein. Andrew Pecora, M.D., Celularity’s former President, is the Founder and Chairman of the Board of COTA and Dr. Robin L. Smith, a member of the Company’s ~~Board,~~board of directors, is an investor in COTA. The Company ~~paid~~did not make any payments to COTA ~~$0 and $149~~ for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022.

Cryoport Systems, Inc

During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company made payments totaling ~~$35~~$30 and ~~$32,~~$20, respectively to Cryoport Systems, Inc (“Cryoport”) for transportation of cryopreserved materials. The Company’s Chief Executive Officer and director, Dr. Robert Hariri, M.D, Ph.D., has served on Cryoport’s board of directors since September 2015.

C.V. Starr Loan

On March 17, 2023 the Company entered into a $5,000 loan agreement with C.V. Starr. C.V. Starr is an investor in the Company, holding 750,000 warrants to purchase Class A common stock and 7,640,693 shares of Class A common stock as of March 31, 2023.

Sorrento Therapeutics, Inc.

In September 2020, the Company entered into the 2020 Sorrento Agreement, with Sorrento. Henry Ji, Ph.D., a member of Legacy Celularity’s board of directors, currently serves as President and Chief Executive Officer of Sorrento. Sorrento is also a significant stockholder of the Company and invested in the July 2021 ~~PIPE Financing.~~private investment in public equity financing. During the ~~six~~three months ended ~~June 30, 2022 and 2021,~~March 31, 2023, the Company made payments totaling ~~$1,821~~$0 and ~~$0, respectively,~~$1,821 was owed to Sorrento as of March 31, 2022, which was paid on April 8, 2022 for supply of products pursuant to the supply agreement.

16.

Subsequent Events

~~For its condensed consolidated financial statements as of June 30, 2022, the~~The Company has evaluated subsequent events ~~through August 9, 2022, the date on which these financial statements were issued,~~ and there are no items requiring ~~additional~~ disclosure except the following:

Cell Therapy Clinical Trial Update

On April 27, 2023, the Company announced preliminary results from its Phase 1 trial of CYNK-001, its investigational unmodified NK cell therapy in development for the treatment of R/R AML and MRD positive AML. Based on preliminary analysis of the Phase 1 trial data made available to the Company in April 2023, this trial will now be closed to further enrollment. As a result, the Company expects to incur a full impairment charge on its CYNK-001 IPR&D asset for $89,100 and will be evaluating the potential impact for any further goodwill impairment on the Cell Therapy reporting unit, as well as analyzing the potential impact for any impairment for any other long-lived assets for the quarter ended June 30, 2023.

Yorkville Pre-Paid Advance

In April 2023, the Company and Yorkville agreed that Yorkville would not accelerate any amounts outstanding under the PPA provided that (i) the Company pays the remaining balance on the first trigger payment of approximately $4,600 within two business days of closing a financing transaction, but in any event no later than April 14, 2023; and (ii) the Company pays in full the payment due on the second trigger payment of approximately $6,500 within two business days of closing a financing transaction, but in any event no later than May 14, 2023. As noted below, in April 2023, the Company used the net proceeds from the registered direct offering to pay

in full the remaining balance on the first trigger payment and approximately $900 was applied towards the second trigger payment. Further, in May 2023 as discussed below, the Company used the net proceeds from the RWI Bridge Loan (as defined below) to repay the remaining balance on the second trigger payment in full for approximately $5,600.

The Company also agreed to include a proposal in its definitive proxy statement filed on May 1, 2023 with the SEC, seeking stockholder approval for the issuance of more than 20% of its pre-transaction Class A common stock outstanding at a price below the minimum price pursuant to the PPA. Further, absent prior written consent from Yorkville, the Company agreed it will not increase the size or amount borrowed under the C.V. Starr loan facility nor will not incur other borrowings or liens of any kind as long as any amounts are due and remain outstanding to Yorkville until paid in full. The Company agreed that all obligations due and owing to Yorkville will become secured obligations upon any violation under the PPA. Default interest rate of 15% will apply from March 30, 2023, until such date Yorkville is paid in full for the balance of both the first and second trigger payments. Interest shall accrue at the regular rate following payment of the obligations cited above if the price of the Company's stock trades sufficiently above the floor price such that no triggering event is in effect at the time of the full repayment. The Company is also seeking stockholder approval to lower the floor price at which shares may be sold to Yorkville pursuant to the PPA to $0.50. Refer to the Going Concern disclosure in Note 1 for further details.

Registered Direct Offering

On April 10, 2023, the Company closed on a registered direct offering of 9,230,770 shares of its Class A common stock together with warrants to purchase up to 9,230,770 shares of its Class A common stock at a combined purchase price of $0.65 per share and accompanying warrant, resulting in total gross proceeds of approximately $6,000 before deducting placement agent commissions and other estimated offering expenses. The warrants have an exercise price of $0.75, will be exercisable beginning six months after the date of issuance and will expire five years thereafter. The Company also amended existing warrants to purchase up to an aggregate of 4,054,055 shares at an exercise price of $8.25 per share, with an expiration date of May 20, 2027, held by the same investor, effective upon the closing of the offering, to reduce the exercise price to $0.75 per share and extended expiration date to five and one-half years following the closing of the offering. The Company used the $5,500 net proceeds from the offering to repay its obligations to Yorkville under the PPA.

RWI Senior Secured Bridge Loan

On May 16, 2023, with written consent provided by Yorkville, the Company entered into a senior secured loan agreement ("RWI Bridge Loan") with Resorts World Inc Pte Ltd, ("RWI") providing for a loan in the aggregate principal amount of $6,000 net of an original issue discount of $120, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures June 14, 2023. Pursuant to the terms of the RWI Bridge Loan, the Company is required to apply the net proceeds from the RWI Bridge Loan to the payment due to Yorkville pursuant to that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA. Any other use of proceeds requires prior written approval by RWI. RWI is affiliated with Lim Kok Thay, a member of the Company's board of directors.

Pursuant to the terms of the RWI Bridge Loan, the Company agreed to customary negative covenants restricting its ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any of its assets, other than as permitted, or hold cash and cash equivalents less than $3,000 for more than five consecutive business days. In addition to the negative covenants in the RWI Bridge Loan, the RWI Bridge Loan includes customary events of default. Pursuant to the terms of the RWI Bridge Loan, the Company granted RWI a senior security interest in all of its assets, pari passu with C.V. Starr pursuant to the Starr Bridge Loan (see Note 7).

Officer Departure

On May 16, 2023, Bradley Glover, Ph.D., Executive Vice President ~~Resignation~~

~~On July 14, 2022, Andrew L. Pecora, M.D., F.A.C.P., the Company’s President,~~and Chief Operating Officer and principal operating officer, notified the ~~board of directors~~Company of his decision to resign ~~as President~~from his role effective as of ~~August~~May 31, ~~2022.~~ 2023 to pursue another opportunity. Dr. Glover’s decision to resign was not due to any disagreement with the Company on any matter, or relating to its operations, policies, or practices.

May 2023 Private Placement

On May 17, 2023, the Company entered into a securities purchase agreement with a group of accredited investors, providing for the private placement of an aggregate (i) 5,813,945 shares of its Class A common stock and (ii) accompanying warrants to purchase up to 5,813,945 shares of Class A common stock (the “May 2023 PIPE Warrants”), for $0.52 per share and $0.125 per accompanying May 2023 PIPE Warrant, for an aggregate purchase price of approximately $3,700, which private placement closed on May 18, 2023 upon satisfaction of customary closing conditions.

beneficially owned by the holder thereof (together with its affiliates) would exceed the specified percentage cap provided therein (which may be adjusted upon 61 days advance notice) immediately after exercise thereof.

The Company ~~expects to enter~~also entered into a ~~consulting~~registration rights agreement with ~~Dr. Pecora~~the purchasers whereby ~~Dr. Pecora~~it agreed to register the resale of the shares of Class A common stock and the shares of Class A common stock issuable upon exercise of the May 2023 PIPE Warrants. The Company will ~~continue~~be required to ~~assist Celularity during~~prepare and file a ~~transition period~~registration statement with the SEC, within 30 days, and ~~also serve as co-Chair~~to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of ~~Celularity’s Scientific Advisory Board.~~ such review, and in any event, no later than July 31, 2023.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.

You should read the following discussion of our financial condition and results of operations together with the unaudited interim condensed consolidated financial statements and the notes thereto included elsewhere in this report and other financial information included in this report. The following discussion may contain predictions, estimates and other forward-looking statements. See “Special Note Regarding Forward-Looking Statements.”These forward-looking statements involve a number of risks and uncertainties, including those discussed in this report and under “Part I — Item 1A. Risk Factors” in the ~~2021~~2022 Form 10-K. These risks could cause our actual results to differ materially from any future performance suggested below.

Overview

We are a ~~clinical-stage~~ biotechnology company leading the next evolution in cellular medicine by developing off-the-shelf placental-derived allogeneic cell therapies for the treatment of cancer and immune and infectious diseases. We are developing a pipeline of off-the-shelf placental-derived ~~allogenic~~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 ~~mesenchymal-like ASCs.~~exosomes. These therapeutic candidates target indications across cancer, infectious and degenerative diseases. We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. We ~~currently have three active clinical trials~~also actively develop and market biomaterial products derived from the placenta. Prior to 2023, we marketed those products domestically primarily serving the orthopedic and wound care markets. We now intend to ~~work~~market placental biomaterials outside of the United States with an initial focus on markets in the Middle East and North Africa. Our biomaterials business today is comprised primarily of the sale of our Biovance and Interfyl products, directly or through our distribution network. Biovance is decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Interfyl is human connective tissue matrix derived from the placenta of a healthy, full-term pregnancy. It is used by a variety of medical specialists to fill soft tissue deficits resulting from wounds, trauma, or surgery. We are developing new placental biomaterial products to deepen the commercial pipeline beyond Biovance and Interfyl. We also plan to leverage our core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties. The initial focus of this new service offering will be to assist development stage cell therapy companies with the ~~FDA to resolve its questions on an IND~~development and manufacturing of their therapeutic candidates for clinical trials. In January 2023, we ~~submitted~~announced reprioritization of efforts, which resulted in ~~the first quarter~~a reduction of ~~2022 before commencing an additional clinical trial.~~ approximately one-third of our workforce as of March 2023.

Our Celularity IMPACT platform capitalizes on the benefits of placenta-derived cells to target multiple diseases, and provides seamless integration, from bio sourcing through manufacturing cryopreserved and packaged allogeneic cells, in our purpose-built U.S.-based 147,215 square foot facility. We believe the use of placental-derived cells, sourced from the placentas of full-term healthy informed consent donors, has potential inherent advantages, from a scientific and an economic perspective. First, relative to adult-derived cells, placental-derived cells demonstrate greater stemness, meaning the ability to expand and persist. Second, placental-derived cells are immunologically naïve, meaning the cells have never been exposed to a specific antigen, and suggesting the potential for less toxicity and for low or no graft-versus-host disease, or GvHD, in transplant. Third, our placental-derived cells are allogeneic, meaning they are intended for use in any patient, as compared to autologous cells, which are derived from an individual patient for that patient’s sole use. We believe this is a key difference that will enable readily available off-the-shelf treatments that can be delivered faster, more reliably, at greater scale and to more patients.

From a single source material, the postpartum human placenta, we derive ~~four~~five allogeneic cell or extracellular vesicle types: T cells, unmodified NK cells, genetically modified NK cells, MLASCs and ~~ASCs,~~exosomes, which are used in ~~five~~seven key cell therapeutic programs—CYCART-19, CYCART-201, CYNK-001, ~~CYNK-101,~~CYNK-301, CYNK-302, APPL-001, and ~~PDA-002—that in turn are focused on six initial indications.~~pEXO-001. CYCART-19 is a placental-derived CAR-T cell therapy, in development for the treatment of B-cell malignancies, initially targeting the cluster of differentiation 19, or CD19, receptor, the construct and related CARs for which are in-licensed from Sorrento. WeIn the first quarter of 2022, we submitted an IND to investigate CYCART-19 for treatment of B-cell malignancies and in late May 2022, received formal written communication from FDA requesting additional information before we can proceed with the planned Phase 1/2 clinical trial. We ~~plan to work~~are in the process of working with the FDA in an effort to resolve its questions as promptly as possible. We expect to commence the trial, ~~upon clearance~~if the IND is cleared by FDA, and sufficient funding is available, in second half of the IND. CYNK-001 is a placental-derived unmodified NK cell in development for the treatment of AML, a blood cancer, and for GBM, a solid tumor cancer. CYNK-001 is currently in Phase 1 trial for AML and a Phase 1/2a trial for GBM, respectively. CYNK-101 is2023. We also expect to progress CYCART-201, our genetically modified ~~version of~~T-cell expressing CD16 with a ~~placental-derived NK-cell. We initiated a Phase 1 trial of CYNK-101 in patients with HER2+ gastric and gastroesophageal cancers during the fourth quarter. CYNK-101 will be evaluated~~T-cell receptor, or TCR, knockout in combination with monoclonal antibodies, or mAbs, in non-Hodgkin's lymphoma, or NHL, and in solid tumors. CYNK-001 is a placental-derived unmodified NK cell. In 2022, we had active and approved clinical trials under development for the treatment of acute myeloid leukemia, or AML, a blood cancer, and for glioblastoma multiforme, or GBM, a solid tumor cancer. We will also advance CYNK-301 as our next generation CAR-NK that has the potential to ~~target~~overcome some of the challenges faced by NK therapies in treating relapse refractory AML, or rrAML. Due to a need to prioritize corporate resources, in January 2023 we announced our intention to cease recruitment in the GBM and the HER2+ ~~(traztuzumab) and PDl-1 (pembrolizumab).~~gastric trials. In addition, in April 2023, we announced based on the preliminary results of the phase 1 trial data of CYNK-001, the AML trial will be closed to further enrollment. We will however, continue to advance our solid tumor research programs. CYNK-302 is a next generation CAR-NK being developed in solid tumors with an initial focus on non-small cell lung cancer, or NSCLC, an area of continued

high unmet need. APPL-001 is a placenta-derived ~~ASC~~MLASC being developed for the treatment of Crohn’s disease, aand other degenerative ~~disease. PDA-002~~diseases. pExo-001 is a placenta-derived ~~ASC~~exosome being developed for the treatment of ~~facioscapulohumeral muscular dystrophy, or FSHD.~~osteoarthritis.

Our Celularity IMPACT manufacturing process is a seamless, fully integrated process designed to optimize speed and scalability from the sourcing of placentas from full-term healthy informed consent donors through the use of proprietary processing methods, cell selection, product-specific chemistry, manufacturing and controls, or CMC, advanced cell manufacturing and cryopreservation. The result is a suite of allogeneic inventory-ready, on demand placental-derived cell therapy products. ~~In addition, we have non-core legacy operations~~We also operate and manage a commercial biobanking business that ~~are complementary to our work in placenta-derived cell therapeutics, including biobanking operations that include~~includes the collection, processing and cryogenic storage of certain birth byproducts for ~~third-parties, and our degenerative disease business consists of the manufacture and sale of our Biovance and Interfyl products, directly and through our third-party distribution agreement. See “—~~ ~~Commercial Businesses~~third-parties.~~” for more information regarding these operations.~~

Our current science is the product of the cumulative background and effort over two decades of our seasoned and experienced management team. We have our roots in Anthrogenesis Corporation, or Anthrogenesis, a company founded under the name Lifebank in 1998 by Robert J. Hariri, M.D., Ph.D., our founder and Chief Executive Officer, and acquired in 2002 by Celgene Corporation, or Celgene. The team continued to hone their expertise in the field of placental-derived technology at Celgene through August 2017, when we acquired Anthrogenesis. We have a robust global intellectual property portfolio comprised of over 1,500 patents and patent applications protecting our Celularity IMPACT platform, our processes, technologies and current key cell therapy programs. We believe this know-how, expertise and intellectual property will drive

the rapid development and, if approved, commercialization of these potentially lifesaving therapies for patients with unmet medical needs.

Recent Developments

Private Placement - March 2023

In March 2023, we closed a private placement of (i) 9,381,841 shares of our Class A common stock, and (ii) accompanying warrants to purchase up to 9,381,841 shares of our Class A common stock, or the March 2023 PIPE Warrants, for $0.8343 per share and $0.125 per accompanying March 2023 PIPE Warrant, for an aggregate purchase price of approximately $9.0 million (of which Dr. Hariri subscribed for $2.0 million) pursuant to that certain securities purchase agreement dated March 20, 2023 with two accredited investors, including our Chairman and Chief Executive Officer, Dr. Robert Hariri. Each March 2023 PIPE Warrant has an exercise price of $3.00 per share, is immediately exercisable, will expire on March 27, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization.

We also entered into a registration rights agreement with the purchasers whereby we agreed to register the resale of the shares of our Class A common stock and the shares of our Class A common stock issuable upon exercise of the March 2023 PIPE Warrants as well as the shares issued as payment pursuant to the binding term sheet for a sublicense (described below). We were required to prepare and file a registration statement with the Securities and Exchange Commission, or SEC, within 30 days of the filing of our annual report on Form 10-K for the year ended December 31, 2022, and to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of such review, and in any event, no later than June 30, 2023.

Senior Secured Bridge Loans

In March 2023, we entered into a Loan Agreement with C.V. Starr & Co. Inc., one of our stockholders, or C.V. Starr, providing for a loan in the aggregate principal amount of $5.0 million net of an original issue discount of $100,000, which bears interest at a rate of 12.0% per year, with the first year of interest being paid in kind on the last day of each month, and matures March 17, 2025, or the Starr Bridge Loan, and warrants to acquire up to an aggregate 750,000 shares of our Class A common stock, or the Starr Warrant, at a purchase price of $0.125 per whole share underlying the Starr Warrant (or $93,750). The Starr Warrant has a 5-year term and an exercise price of $0.71 per share.

Pursuant to the terms of the Starr Bridge Loan, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five consecutive business days. In addition to the negative covenants in the Starr Bridge Loan, the Starr Bridge Loan include customary events of default. Pursuant to the terms of the Starr Bridge Loan, we granted Starr a senior security interest in all of our assets.

In May 2023, we entered into a senior secured loan agreement with Resorts World Inc Pte Ltd, or RWI, providing for a loan in the aggregate principal amount of $6.0 million net of an original issue discount of $120,000, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures June 14, 2023, or the RWI Bridge Loan. Pursuant to the terms of the RWI Bridge Loan, we are required to apply the net proceeds from the RWI Bridge Loan to the payment due to Yorkville pursuant to that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA. Any other use of proceeds requires prior written approval by RWI. RWI is affiliated with Lim Kok Thay, a member of our board of directors.

Pursuant to the terms of the RWI Bridge Loan, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any of our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five

consecutive business days. In addition to the negative covenants in the RWI Bridge Loan, the RWI Bridge Loan includes customary events of default. Pursuant to the terms of the RWI Bridge Loan, we granted RWI a senior security interest in all of our assets, pari passu with C.V. Starr pursuant to the Starr Bridge Loan.

Binding Term Sheet for Sublicense Agreement

Concurrent with the entry into the securities purchase agreement for the March 2023 private placement described above; we executed a binding term sheet to negotiate and enter into a sublicense of certain assets from an affiliate of the accredited investor party to the private placement transaction. Pursuant to the binding term sheet, we paid the sublicensor $3.0 million in cash and issued $1.0 million of shares of our Class A common stock (1,694,915 shares based on the closing price on March 17, 2023) as consideration for stem-cells inventory to be used in research and development.

Registered Direct Offering

In April 2023, we closed on a registered direct offering of 9,230,770 shares of our Class A common stock together with warrants to purchase up to 9,230,770 shares of our Class A common stock at a combined purchase price of $0.65 per share and accompanying warrant, resulting in total gross proceeds of approximately $6.0 million before deducting placement agent commissions and other estimated offering expenses. The warrants have an exercise price of $0.75, will be exercisable beginning six months after the date of issuance and will expire five years thereafter. We also amended existing warrants to purchase up to an aggregate of 4,054,055 shares at an exercise price of $8.25 per share, with an expiration date of May 20, 2027, held by the same investor, effective upon the closing of the offering to reduce the exercise price to $0.75 per share and extended expiration date to five and one-half years following the closing of the offering. We used the $5.5 million net proceeds from the offering to repay our obligations to Yorkville under that certain pre-paid advance agreement dated September 15, 2022, as amended, or the PPA.

Private Placement – May 2023

In May 2023, we entered into a securities purchase agreement with a group of accredited investors, providing for the private placement of an aggregate (i) 5,813,945 shares of our Class A common stock and (ii) accompanying warrants to purchase up to 5,813,945 shares of Class A common stock, or the May 2023 PIPE Warrants, for $0.52 per share and $0.125 per accompanying May 2023 PIPE Warrant, for an aggregate purchase price of approximately $3.7 million, which private placement closed on May 18, 2023 upon satisfaction of customary closing conditions.

Each May 2023 PIPE Warrant has an exercise price of $1.00 per share, is immediately exercisable, will expire on May 18, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization. The May 2023 PIPE Warrants may not be exercised if the aggregate number of shares of Class A common stock beneficially owned by the holder thereof (together with its affiliates) would exceed the specified percentage cap provided therein (which may be adjusted upon 61 days advance notice) immediately after exercise thereof.

We also entered into a registration rights agreement with the purchasers whereby we agreed to register the resale of the shares of Class A common stock and the shares of Class A common stock issuable upon exercise of the May 2023 PIPE Warrants. We will be required to prepare and file a registration statement with the SEC within 30 days, and to use commercially reasonable efforts to have the registration statement declared effective within 45 days if there is no review by the SEC, and within 90 days in the event of such review, and in any event, no later than July 31, 2023.

Cell Therapy – Goodwill Impairment

During the three months ended March 31, 2023, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units. We concluded the sustained decline in its stock price and decision to discontinue certain Cell Therapy clinical trials were triggering events during the quarter and we performed a quantitative impairment test on goodwill and acquired in-process research and development (IPR&D) assets. Based on the results of the impairment analysis, we recognized a $29.6 million goodwill impairment charge for the three months ended March 31, 2023, relating to our Cell Therapy reporting unit in our condensed consolidated statements of operations.

Palantir – Cease-Use Costs

In May 2021, our subsidiary, Legacy Celularity executed a Master Subscription Agreement with Palantir Technologies, Inc., or Palantir, under which it agreed to pay $40.0 million over five years for access to Palantir’s Foundry platform along with certain professional services. In January 2023, we ceased use of the software and provided a notice of dispute to Palantir on the basis that the software has not performed as promised and that Palantir has failed to provide us with the professional services necessary to successfully implement, integrate and enable the Foundry platform. As a result, in accordance with ASC 420 Exit or Disposal Costs, during the three months ended March 31, 2023, we recognized the remaining related cease-use costs and liability estimated based on the discounted future cash flows of contract payments for $23.7 million which is included as a component of research and development expense in the condensed consolidated statements of operations. We have both a current and noncurrent liability for accrued research and development software on the condensed consolidated balance sheets for a total liability of $31.0 million and $7.3 million as of March 31, 2023 and December 31, 2022, respectively. For the three months ended March 31, 2022, we had recorded $2.0 million, which was on a

straight-line basis, which was included as a component of research and development expense in our condensed consolidated statements of operations. Palantir has filed to compel arbitration of this dispute. See also Item 1 of Part II of this quarterly report on Form 10-Q.

Going Concern

In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, we evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

As an emerging clinical-stage biotechnology company, we are subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since our inception, substantially all of management’s efforts have been devoted to making investments in research and development including basic scientific research into placentally-derived allogeneic cells, pre-clinical studies to support our current and future clinical programs in cellular therapeutics, and clinical development of our cell programs as well as facilities and selling, general and administrative expenses that support our core business operations (collectively the “investments”), all at the expense of our short-term profitability. We have historically funded these investments through limited revenues generated from our biobanking and degenerative disease businesses and issuances of equity and debt securities to public and private investors (these issuances are collectively referred to as “outside capital”). Notwithstanding these efforts, management can provide no assurance that our research and development and commercialization efforts will be successfully completed, or that adequate protection of our intellectual property will be adequately maintained. Even if these efforts are successful, it is uncertain when, if ever, we will generate significant sales or operate in a profitable manner to sustain our operations without needing to continue to rely on outside capital. Continued decline in our share price could result in impairment of goodwill or long-lived assets in a future period.

As of the date the accompanying consolidated financial statements were issued, or the issuance date, management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40:

•

Since inception, we have ~~had~~incurred significant operating ~~losses. We had~~losses and cash used in operating activities. For the three months ended March 31, 2023, we incurred a net operating loss of ~~$15.0~~$63.9 million and ~~$100.1 million for the six months ended June 30, 2022 and year ended December~~cash used in operating activities of $15.0 million. As of March 31, ~~2021, respectively. We~~2023, we had an accumulated deficit of $674.7 million at June 30, 2022. Our primary use of cash is to fund operations, which consist primarily of research and development expenses, and to a lesser extent, selling, general and administrative expenses. Cash used to fund operating expenses is impacted by the timing of when it pays these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.$709.5 million. We expect to continue to incur significant operating losses and use net ~~losses~~cash in operations for the foreseeable ~~future, and expect our research and development expenses, selling, general and administrative expenses, and capital expenditures will continue to increase. In particular,~~future.

•

As of the issuance date, we ~~expect our expenses and losses to increase as we continue development~~had approximately $5.7 million of and seek regulatory approvals for, our therapeutic candidates, and begin to commercialize any approved therapeutics, as well as hire additional personnel, develop commercial infrastructure for therapeutics, pay fees to outside consultants, lawyers and accountants, and incur increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs. Our net losses may fluctuate significantly depending on the timing of our clinical trials and our expenditures on other research and development activities.

~~Based upon our current operating plan, we do not believe that our existing~~unrestricted cash and cash equivalents ~~as of June 30, 2022 will be sufficient~~available to fund our ~~operating expenses~~operations and no available additional sources of outside capital ~~expenditure requirements through~~to sustain our operations for a period of 12 months beyond the issuance date.

•

We expect to incur substantial expenditures to fund our investments for the foreseeable future. In order to fund these investments, we will need to secure additional sources of outside capital. While we are actively seeking to secure additional outside capital (and have historically been able to successfully secure such capital), as of the issuance date, no additional outside capital has been secured or was deemed probable of being secured. In addition, management can provide no assurance that we will be able to secure additional outside capital in the future or on terms that are acceptable to us. Absent an ability to secure additional outside capital in the very near term, we will be unable to meet our obligations as they become due over the next 12 ~~months. To date, we have not had any cellular therapeutics approved for sale and have not generated any revenues from~~months beyond the sale of our cellular therapeutics. We generate limited revenues from our biobanking and degenerative disease businesses. We do not expect to generate any revenues from cellular therapeutic product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our therapeutic candidates,issuance date.

•

In connection with clinical data received in April 2023, we expect to incur ~~significant commercialization expenses related~~a full impairment charge on our CYNK-001 IPR&D asset for $89.1 million and will be evaluating the potential impact on any further goodwill impairment on our Cell Therapy reporting unit as well as analyzing the potential impact for any impairment for any other long-lived assets for the quarter ended June 30, 2023.

•

We had approximately $32.4 million of borrowings outstanding under a financing arrangement referred to ~~therapeutic sales, marketing, manufacturing~~as the PPA with a private investor, Yorkville, as of March 31, 2023. These borrowings are scheduled to mature in September 2023 absent Yorkville’s election to convert some or all of the borrowings into shares of our Class A common stock. On February 22, 2023, Yorkville provided notice to us that a “triggering event” had occurred, we are now required to make repayments of $6.0 million per month plus a payment premium of 5% of the principal amount being paid and ~~distribution~~all outstanding accrued and unpaid interest (collectively the “repayment amount”). On March 24, 2023, we paid approximately $2.0 million of the repayment amount owed to Yorkville. On April 10, 2023, we paid approximately $5.5 million from the net proceeds from the registered direct to repay Yorkville the remaining balance on the first trigger payment and partial payment towards the second for $900,000. In April 2023, we and Yorkville agreed to defer the remaining second repayment amount owed of approximately $5.6 million to May 14, 2023. On May 16, 2023, we repaid the $5.6 million remaining balance due on the second trigger payment from the net proceeds from the RWI Bridge Loan. We owe Yorkville a third trigger payment of approximately $6.6 million as ~~our current commercialization efforts~~of the issuance date. If we fail to secure a waiver from Yorkville and fails to pay the remaining repayment amount currently due, Yorkville could deem such non-payment an event of default under the PPA. If Yorkville deems such non-payment an event of default, Yorkville may, at its discretion, exercise its rights and remedies as provided in the PPA which may include, among others, accelerating the repayment of the total principal due under the PPA

(approximately $32.4 million as of March 31, 2023 or approximately $21.8 million as of issuance date), plus accrued and unpaid interest and the 5% premium, and/or force us to seek protection under the provisions of the U.S. Bankruptcy Code. We are ~~limited~~also seeking stockholder approval to our biobanking and degenerative disease businesses. As a result, until such time, if ever, as we can generate substantial revenue from therapeutics, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, welower the floor price at which shares may be ~~unable~~sold to ~~raise additional funds or enter into such other arrangements when needed~~Yorkville pursuant to the PPA to $0.50.

•

On March 14, 2023, we received a notice from the Nasdaq notifying us that we no longer comply with the minimum bid price requirement for continued listing on ~~favorable terms or at all. Any failure to raise capital as and when needed could~~the Nasdaq Capital Market because the closing bid price for our Class A common stock has fallen below $1.00 per share for the last 30 consecutive business days. We have a ~~negative impact on~~period of 180 calendar days, or until September 11, 2023, to regain compliance with the minimum bid price requirement. We intend to actively monitor the closing bid price of our ~~financial condition~~Class A common stock and ~~on our ability~~will evaluate available options to ~~pursue our business plans and strategies. If~~regain compliance with the minimum bid requirement. However, management can provide no assurance that we will be able to regain compliance with the minimum bid requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance, or maintain compliance with the other Nasdaq listing requirements. In the event we are unable to ~~raise~~regain or maintain compliance with the Nasdaq listing requirements, the liquidity of our publicly traded securities will be adversely affected and our ability to secure additional outside capital through public markets will be adversely affected.

•

In the event we are unable to secure additional outside capital to fund our obligations when they become due over the next 12 months beyond the issuance date, which includes the funds needed to repay the outstanding principal on the PPA (plus unpaid accrued interest and the 5% premium) that has become due and will ~~need~~become fully due in September 2023, and/or obtain a waiver to ~~delay, reduce~~ defer the remaining repayment amount currently due to Yorkville, and/or ~~terminate planned activities~~regain compliance with the Nasdaq listing requirements, management will be required to ~~reduce costs.~~

~~COVID-19 Pandemic~~

The COVID-19 pandemic resulted in increased unemployment, commodity and stock market volatility during the acute phase of the epidemic. Increases in vaccination rates and lower levels of reported cases suggest that the worst part of the pandemicseek other strategic alternatives, which may ~~have passed. Should~~include, among others, a new or mutated variant arise that results in further measures to combat its spread, there could be an adverse material impact to our financial condition, operating results, and timing and amounts of cash flows.

Although we were able to operate continuously throughout 2020, 2021 and thus far in 2022, we implemented “work from home” policies as needed following local health recommendations for non-essential employees and employees whose roles are able to be performed remotely. Management of remote workers can present special challenges and productivity may not be as high for remote workers. Because certain elementssignificant curtailment of our operations, ~~(such~~a sale of certain of our assets, a sale of our entire company to strategic or financial investors, and/or allowing us to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.

These uncertainties raise substantial doubt about our ability to continue as ~~processing placental tissue, certain biological assays, translational research and storage of cord blood) cannot be performed remotely,~~a going concern. The accompanying consolidated financial statements have been prepared on the basis that we instituted controls and protocols including mandatory temperature checking, symptom assessment forms, incremental cleaning and sanitization of common surfaces to mitigate risks to employees. Although we have not experienced any material disruption to date, there can be no assurance that our mitigation measures will continue to operate as a going concern, which contemplates that we will be ~~effective~~able to realize assets and ~~that there will not be a disruption to an important element of our business~~settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

~~Due~~COVID-19 Pandemic and Other Uncertainties

While the impact of COVID-19 has largely subsided, the residual effect of COVID-19 and its variants, as well as new risks emerging from geopolitical conflict, inflation, bank failures and the threat of a recession continue to ~~a broad decline in~~cause economic ~~activity~~instability and ~~restrictions on physical access~~could affect our ability to ~~certain medical facilities, we did experience a decrease in~~operate our business. During 2022 and the ~~net revenues~~first quarter of ~~our degenerative disease business due to the pandemic. As for clinical trials,~~2023, we did not ~~cancel or postpone enrollment solely due~~experience any significant impact to ~~the risks~~operations as a result of COVID-19. However, enrollment in the clinical trial evaluating CYNK-001 for AML experienced some delays in the first half of 2020 and in mid 2021 as sites assessed their safety protocols and experienced high volumes of COVID-19 patients. We had a year-over-year increase in research and development expenses in 2021 notwithstanding the enrollment delays.such uncertainties.

The extent to which COVID-19 or any other health epidemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have a material adverse effect on our business, results of operations, financial condition, and prospects.

Business Segments

We manage our operations through an evaluation of three distinct business segments: Cell Therapy, Degenerative Disease, and BioBanking. The reportable segments were determined based on the distinct nature of the activities performed by each segment. Cell Therapy broadly refers to cellular therapies we are researching and developing, which are unproven and in various phases of

development. All of the cell therapy programs fall into the Cell Therapy segment. We have no approved cell therapy product and have not generated revenue from the sale of cellular therapies to date. Degenerative Disease produces, sells and licenses products used in surgical and wound care markets, such as Biovance, Biovance 3L, Interfyl and ~~Interfyl.~~CentaFlex. We sell products in this segment both using our own sales force as well as independent distributors. We are developing additional tissue-based products for the Degenerative Disease segment. BioBanking collects stem cells from umbilical cords and placentas and provides storage of such cells on behalf of individuals for future use. We operate in the biobanking business primarily under the LifebankUSA brand. For more information about our reportable business segments refer to Note 14, “Segment ~~Reporting”~~Information” of our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Acquisitions and Divestitures

Our current operations reflect strategic acquisitions and ~~divestures~~divestitures that we have made since formation. Additional details regarding the following acquisitions can be found in Note 1, “Nature of Business” to our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

In May 2017, we acquired HLI Cellular Therapeutics, LLC, or HLI CT, from Human Longevity Inc.~~, or Human Longevity.~~ HLI CT operated LifebankUSA, a private umbilical cord blood stem cell and cord tissue bank that offers parents the option to collect, process and cryogenically preserve newborn umbilical cord blood stem cells and cord tissue units. The HLI CT acquisition also provided us with rights to a portfolio of biomaterial assets, including Biovance and Interfyl. At the time of the HLI CT acquisition, Biovance and Interfyl

were subject to an exclusive distribution arrangement with Alliqua Biomedical, Inc., or Alliqua. In May 2018, we acquired certain assets from Alliqua, including Alliqua’s biologic wound care business, which included the marketing and distribution rights to Biovance and Interfyl.

In August 2017, we acquired Anthrogenesis, a wholly-owned subsidiary of Celgene. The Anthrogenesis acquisition included a portfolio of pre-clinical and clinical stage assets, including key cellular therapeutic assets that we continue to develop. The Anthrogenesis acquisition gives us access to Anthrogenesis’ proprietary technologies and processes for the recovery of large quantities of high-potential stem cells and cellular therapeutic products derived from postpartum human placentas, each an Anthrogenesis Product. As part of the Anthrogenesis acquisition, some of the inventors of the Anthrogenesis Products and other key members of the Anthrogenesis Product development team joined us.

In October 2018, we acquired CariCord Inc., or CariCord, a family cord blood bank established by ClinImmune Labs University of Colorado Cord Blood Bank and the Regents of the University of Colorado, a body corporate, for and on behalf of the University of Colorado School of Medicine.

Licensing Agreements

In the ordinary course of business, we license intellectual property and other rights from third parties and have also out-licensed our intellectual property and other rights, including in connection with our acquisitions and divestitures, described above. Additional details regarding our licensing agreements can be found in Note 13, “License and Distribution Agreements” to our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

In September 2020, we entered into a license and transfer agreement, or the Sorrento Agreement, with Sorrento. Henry Ji, Ph.D., a former member of ~~Legacy Celularity’s~~the board of directors of our wholly-owned subsidiary, which we refer to as Legacy Celularity, currently serves as President and Chief Executive Officer of Sorrento. Sorrento is also a significant stockholder of our company and invested in the July 2021 ~~PIPE Financing~~private investment in public equity financing concurrent with the closing of the ~~Business Combination.~~business combination among our company and Legacy Celularity. Pursuant to the Sorrento Agreement, we obtained a worldwide license for the CD19 CAR construct that forms the basis of the genetic modification for CYCART-19. We are currently in the process of negotiating a supply agreement with Sorrento for the manufacturing and supply of the CD19 CAR construct licensed from Sorrento.

In August 2017, in connection with the Anthrogenesis acquisition, we entered into a license agreement, or the Celgene License, with Celgene, which has since been acquired by Bristol Meyers Squibb. Pursuant to the Celgene License, we granted Celgene a worldwide, royalty-free, fully-paid up, non-exclusive license, without the right to grant sublicenses (other than to its affiliates), under Anthrogenesis’ intellectual property in existence as of the date of the Celgene License or as developed by Celgene in connection with any transition services activities related to the merger for non-commercial pre-clinical research purposes, as well as to develop, manufacture, commercialize and fully exploit products and services that relate to the construction of any CAR, the modification of any T-cell or NK cell to express such a CAR, and/or the use of such CARs or T-cells or NK cells for any purpose, which commercial license is sublicensable. Either party may terminate the Celgene License upon an uncured material breach of the agreement by the other party or insolvency of the other party.

In August 2017, Legacy Celularity also issued shares of its Series X Preferred Stock to Celgene as merger consideration and entered into a contingent value rights agreement, or the CVR Agreement, with Celgene pursuant to which Legacy Celularity issued one contingent value right or CVR, in respect of each share of Legacy Celularity Series X Preferred Stock issued to Celgene in connection with the Anthrogenesis acquisition. The CVR Agreement entitles the holders of the CVRs to an aggregate amount, on a per program basis, of $50 million in

regulatory milestones and an aggregate $125 million in commercial milestone payments with respect to certain of our investigational therapeutic programs. In addition, with respect to each such program and calendar year, the CVR holders will be entitled to receive a royalty equal to a mid-teen percentage of the annual net sales for such program’s therapeutics from the date of the first commercial sale of such program’s therapeutic in a particular country until the latest to occur of the expiration of the last to expire of any valid patent claim covering such program therapeutic in such country, the expiration of marketing exclusivity with respect to such therapeutic in such country, and August 2027 (i.e., the tenth anniversary of the closing of the acquisition of Anthrogenesis). No payments under the CVR Agreement have been made to date. We estimate the liability associated with the CVR quarterly. Changes to that liability include but are not limited to changes in our clinical programs, assumptions about the commercial value of those programs and the time value of money.

Components of Operating Results

Net revenues

Net revenues include: (i) sales of ~~human cells, tissues and cellular and tissue-based~~biomaterial products, ~~or HCT/P’s,~~ including Biovance, Biovance 3L, Interfyl, and ~~MIST/UltraMIST Therapy System equipment and single-use applicators~~CentaFlex of which our direct sales are included in Product Sales and Rentals while sales through our network of distribution partners are included in License, ~~Royalty~~

royalty and ~~Other;~~other; and (ii) the collection, processing and storage of umbilical cord and placental blood and tissue after full-term pregnancies, collectively, ~~Services; and, (iii) license fees and royalties received under the license agreement with Sanuwave through the third quarter of 2021 included in License, Royalty and Other.~~Services.

Cost of revenues

Cost of revenues consists of labor, material and overhead costs associated with our two existing commercial business segments, biobanking and degenerative disease. Biobanking costs include the cost of storage and transportation kits for newly banked materials as well as tank and facility overhead costs for cord blood and other units in storage. Degenerative disease costs include costs associated with procuring placentas, qualifying the placental material and processing the placental tissue into a marketable product. Costs in the degenerative disease segment include labor and overhead costs associated with the production of the Biovance, Biovance 3L, Interfyl and ~~Interfyl~~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 costs reflect expenses incurred related to our distribution agreements.~~ other.

Research and development expense

Our research and development expenses primarily relate to basic scientific research into placentally derived allogeneic cells, pre-clinical studies to support our current and future clinical programs in cellular medicine, clinical development of our NK cell programs and facilities, depreciation and other direct and allocated expenses incurred as a result of research and development activities. We incur expenses for third party CROs, that assist in running clinical trials, clinical trial supply costs, personnel expenses for research scientists, specialized chemicals and reagents used to conduct biologic research, expense for third party testing and validation and various overhead expenses including rent and facility maintenance expense. Basic research, research collaborations involving partners and research designed to enable successful regulatory submissions is critical to our current and future success in cell therapy. WeAs a result of our reprioritization efforts, we anticipate that our research and development expenditures will ~~increase as we engage~~decrease in further clinical trials, investigate incremental CAR constructs for our allogeneic T-cell and NK cell platforms and conduct further pre-clinical studies on CYNK-101 in conjunction with various antibody candidates.the near term. The amount of ~~increase~~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.

General and administrative expense

~~General~~Selling, general and administrative expense consists primarily of personnel costs including salaries, bonuses, stock compensation and benefits for specialized staff that support our core business operations. Executive management, finance, legal, human resources and information technology are key components of selling, general and administrative expense and those expenses are recognized when incurred. We expect that as a result of our reprioritization efforts, we ~~engage~~will see a decrease in ~~more clinical trials and potentially prepares for commercialization of any approved therapies that~~ our selling, general and administrative costs ~~will increase over time.~~in the near term. The magnitude and timing of ~~any increase in~~our selling, general and administrative ~~expense~~costs will depend on the progress of clinical trials, commercialization efforts for any approved therapies including the release of new products within the degenerative disease portfolio, changes in the regulatory environment or ~~incremental~~ staffing needs to support ~~the growth of the~~our business ~~as well as any incremental expenses associated with being a public company~~.strategy.

Change in fair value of contingent consideration liability

Because the acquisitions of Anthrogenesis from Celgene and HLI CT ~~from Human Longevity~~ were accounted for as business combinations, we recognized acquisition-related contingent consideration on the balance sheets in accordance with the acquisition method of accounting. See “— Acquisitions and Divestitures” for more information. The fair value of contingent consideration liability is determined based on a probability-weighted income approach derived from revenue estimates and a probability assessment with

respect to the likelihood of achieving regulatory and commercial milestone obligations and royalty obligations. The fair value of acquisition related contingent consideration is remeasured each reporting period with changes in fair value recorded in the condensed consolidated statements of operations. Changes in contingent consideration fair value estimates result in an increase or decrease in our contingent consideration obligation and a corresponding charge or reduction to operating results. Key elements of the contingent consideration are regulatory milestone payments, sales milestone payments and royalty payments. Regulatory payments are due on regulatory approval of certain cell types in the United States and the European Union. Regulatory milestone payments are one time but are due prior to any potential commercial success of a cell type in a specific indication. Royalty payments are a percentage of net sales. Sales milestone payments are due when certain aggregate sales thresholds have been met. Management must use substantial ~~judgement~~judgment in evaluating the value of the contingent consideration. Estimates used by management include but are not limited to: (i) the number and type of clinical programs that we are likely to pursue based on the quality of our preclinical data, (ii) the time required to conduct clinical trials, (iii) the odds of regulatory success in those trials, (iv) the potential number of patients treatable for the indications in which we are successful and (v) the pricing of treatments that achieve commercial status. All of these areas involve substantial ~~judgement~~judgment on the part of management and are inherently uncertain.

Results of Operations

Comparison of Three Months Ended ~~June 30,~~March 31, 2023 to March 31, 2022 ~~to June 30, 2021~~

	Three Months Ended									Percent
	June 30, 2022			June 30, 2021			Increase (Decrease)			Increase (Decrease)			Three Months Ended March 31,									Percent
Net revenues
													2023			2022			Increase (Decrease)			Increase (Decrease)
Net revenues:
Product sales and rentals	$	1,228		$	1,045		$	183			17.5	%	$	1,043		$	651			392			60.2	%
Services		1,373			1,597			(224	)		(14.0	)%		1,357			1,283			74			5.8	%
License, royalty and other		1,175			555			620			111.7	%		1,535			4,001			(2,466	)		(61.6	)%
Total revenues		3,776			3,197			579			18.1	%		3,935			5,935			(2,000	)		(33.7	)%
Operating expenses:
Cost of revenues (excluding amortization of acquired intangible assets)
Product sales and rentals		425			869			(444	)		(51.1	)%		722			474			248			52.3	%
Services		1,265			571			694			121.5	%		472			948			(476	)		(50.2	)%
License, royalty and other		1,489			—			1,489			100.0	%		809			2,604			(1,795	)		(68.9	)%
Research and development		25,349			22,911			2,438			10.6	%		16,951			21,673			(4,722	)		(21.8	)%
Software cease-use costs														23,675			—			23,675			100.0	%
Selling, general and administrative		15,574			28,863			(13,289	)		(46.0	)%		13,934			16,460			(2,526	)		(15.3	)%
Change in fair value of contingent consideration liability		(45,047	)		10,048			(55,095	)		(548.3	)%		(18,932	)		4,849			(23,781	)		(490.4	)%
Goodwill impairment														29,633			—			29,633			100.0	%
Amortization of acquired intangible assets		546			546			—			—			541			541			-			—	%
Total operating expenses		(399	)		63,808			(64,207	)		(100.6	)%
Income (loss) from operations	$	4,175		$	(60,611	)	$	64,786			(106.9	)%
Total operating expense														67,805			47,549			20,256			42.6	%
Loss from operations													$	(63,870	)	$	(41,614	)	$	(22,256	)		53.5	%

Net Revenues and Cost of Revenues

Net revenues for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$3.8~~$3.9 million, ~~an increase~~a decrease of ~~$0.6~~$2.0 million, or ~~18.1%~~33.7% compared to the prior year period. The ~~increase~~decrease was primarily ~~driven by~~ ~~an increase of $0.6~~due to $2.5 million decrease in license, royalty and other revenues driven by ~~increased~~decreased product sales to distribution partners.

Cost of revenues for the three months ended ~~June 30, 2022~~March 31, 2023 was $3.2 million, an increase of $1.7 million, or 120.8% compared to the prior year period. The increase was primarily driven by higher sales to distribution partners corresponding to our increase in license, royalty and other revenues in addition to higher cost resulting from product mix as well as increased material and labor costs.

~~Research and Development Expenses~~

~~Research and development expenses for the three months ended June 30, 2022 were $25.3 million, an increase of $2.4 million, or 10.6% compared to the prior year period. The increase was driven by~~ higher clinical trial costs and higher personnel costs as we continue to enroll new cohorts in both arms of the Phase 1 AML study for CYNK-001 and continue advancing the Phase 1 portion of a Phase 1/2a clinical trial in advanced HER2+ gastric cancer for CYNK-101.

~~Selling, General and Administrative Expenses~~

~~Selling, general and administrative expenses for the three months ended June 30, 2022 were $15.6~~$2.0 million, a decrease of ~~$13.3~~$2.0 million, or ~~46%~~50.2% compared to the prior year period. The decrease was primarily driven by lower sales to our distribution partners corresponding to our decrease in license, royalty and other revenues.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2023 were $17.0 million, a decrease of $4.7 million, or 21.8% compared to the prior year period. The decrease was primarily due to a reduction in ~~stock-based compensation expense of $24.3 million related to~~allocated costs from the prior ~~year awards granted to our board of directors and senior management~~ ~~offset by a $5.0 million~~

~~increase in expenses allocated to research and development,~~ ~~higher personnel costs of $4.0 million, insurance costs of $1.4 million~~period as well as ~~professional services~~lower lab supplies and personnel costs ~~to support operations~~partially offset by $3.0 million purchase of ~~a public company.~~acquired IPR&D with no alternative future use expensed during the three months ended March 31, 2023.

Software Cease-Use Costs

Software cease-use costs for the three months ended March 31, 2023 was $23.7 million compared to $0 for the prior period due to the recognition of the remaining contract value associated with the Palantir platform fees. See Note 9 to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for additional information related to the Palantir agreement.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2023 were $13.9 million, a decrease of $2.5 million, or 15.3% compared to the prior year period. The primary reason for the decrease was driven by lower personnel costs and lower consulting expenses.

Change in Fair Value of Contingent Consideration Liability

The change in fair value of contingent consideration liability for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$(45.0)~~$18.9 million, a decrease of ~~$55.1~~$23.8 million, or ~~548.3%~~490.4% compared to the period year period. The decrease resulted from a change in market-based assumptions (for more information about changes in the fair value of contingent consideration liability refer to Note 4,3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

Other Income (Expense)


	Three Months Ended								Percent			For the Three Months Ended March 31,									Percent
	June 30, 2022		June 30, 2021			Increase (Decrease)			Increase (Decrease)			2023			2022			Increase (Decrease)			Increase (Decrease)
Interest income	$	41	$	129		$	(88	)		(68.2	)%	$	116		$	6		$	110			1833.3	%
Interest expense		—		(817	)		817			(100.0	)%		(277	)		—			(277	)		100.0	%
Change in fair value of warrant liabilities		43,212		(1,174	)		44,386			(3780.8	)%		1,735			(20,932	)		22,667			(108.3	)%
Other, net		415		(2,004	)		2,419			(120.7	)%
Change in fair value of debt													(1,280	)		—			(1,280	)		100.0	%
Other expense, net													(441	)		(327	)		(114	)		34.9	%
Total other income (expense)	$	43,668	$	(3,866	)	$	47,534			(1229.5	)%	$	(147	)	$	(21,253	)	$	21,106			(99.3	)%

For the three months ended ~~June 30, 2022,~~March 31, 2023, other income (expense)~~, net~~ increased by ~~$47.5~~$21.1 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 4,3, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

~~Comparison of Six Months Ended June 30, 2022 to June 30, 2021~~

Six Months Ended

Percent

June 30, 2022

June 30, 2021

Increase
(Decrease)

Increase
(Decrease)

Net revenues

Product sales and rentals

$
1,879

$
1,885

$
(6
)

(0.3
)%
Services

2,656

2,861

(205
)

(7.2
)%
License, royalty and other

5,176

1,111

4,065

365.9
%
Total revenues

9,711

5,857

3,854

65.8
%
Operating expenses:

Cost of goods sold (excluding amortization of acquired
intangible assets)

Product sales and rentals

899

1,387

(488
)

(35.2
)%
Services

2,213

1,295

918

70.9
%
License, royalty and other

4,093

—

4,093

—

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 liability

(40,198
)

30,704

(70,902
)

(230.9
)%
Amortization of acquired intangible assets

1,087

1,087

—

—

Total operating expenses

47,150

110,863

(63,713
)

(57.5
)%
Loss from operations

$
(37,439
)

$
(105,006
)

$
67,567

(64.3
)%

~~Net Revenues and Cost of Revenues~~

~~Net revenues for the six months ended June 30, 2022 was $9.7 million, an increase of $3.9 million, or 65.8% compared to the prior year period. The increase was primarily driven by an~~ ~~increase of $4.1 million in license, royalty and other revenues driven by increased product sales to distribution partners.~~

~~Cost of revenues for the six months ended June 30, 2022 was $7.2 million, an increase of $4.5 million, or 168.6% compared to the prior year period. The increase was primarily driven by~~ higher sales to distribution partners corresponding to our increase in license, royalty and other revenues in addition to higher cost resulting from product mix as well as increased material and labor costs.

~~Research and Development Expenses~~

Research and development expenses for the six months ended June 30, 2022 were $47.0 million, an increase of $7.1 million, or 17.8% compared to the prior year period. The increase was primarily driven by ~~the Palantir platform fees, higher personnel costs and laboratory supplies to support cell therapy process development.~~

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses for the six months ended June 30, 2022 were $32.0 million, a decrease of $4.5 million, or 12.2% compared to the prior year period. The decrease was primarily driven by a reduction in ~~stock-based compensation expense of $22.8 million related to prior year awards granted to our board of directors and senior management~~ ~~a portion of which was allocated to research and development expense offset by~~ ~~higher personnel, professional services and, insurance costs to support operations of a public company.~~

~~Change in Fair Value of Contingent Consideration Liability~~

Change in fair value of contingent consideration liability for the six months ended June 30, 2022 was $(40.2) million, a decrease of $70.9 million, or 230.9% compared to the prior year period. The decrease resulted from a change in market-based assumptions (for more information about changes in the fair value of contingent consideration liability refer to Note 4, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

~~Other Income (Expense)~~

Six Months Ended

Percent

June 30, 2022

June 30, 2021

Increase
(Decrease)

Increase
(Decrease)

Interest income

$
47

$
269

$
(222
)

(82.5
)%

Interest expense

—

(1,569
)

1,569

(100.0
)%

Change in fair value of warrant liabilities

22,280

(37,679
)

59,959

(159.1
)%

Other expense, net

88

(2,031
)

2,119

(104.3
)%

Total other income (expense)

$
22,415

$
(41,010
)

$
63,425

(154.7
)%

For the six months ended June 30, 2022, other income (expense), net increased by $63.4 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 common stock (see Note 4, “Fair Value of Financial Assets and Liabilities” in our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

Liquidity and Capital Resources

Since inception through June 30, 2022, Legacy Celularity funded its operations primarily through the sale of convertible preferred stock, sale of common stock and via the Business Combination and has raised aggregate net cash proceeds of $510.4 million. As of ~~June 30, 2022,~~March 31, 2023, we had ~~$38.0~~$8.5 million of cash and cash equivalents and an accumulated deficit of ~~$674.7~~$709.5 million. Our primary use of our capital resources is funding our operating expenses, which consist primarily of funding the research and development of our cellular therapeutic candidates, and to a lesser extent, selling, general and administrative expenses.

~~Based upon our current operating plan,~~As of the issuance date, we ~~do not believe that our existing~~had approximately $5.7 million of unrestricted cash and cash equivalents ~~as of June 30, 2022, will be sufficient~~available to fund our ~~operating expenses~~operations and no available additional sources of outside capital ~~expenditure requirements through the next~~to sustain our operations for a period of 12 months. We believe our existing cash and cash equivalents as of June 30, 2022 will fund us into the fourth quarter of 2022. We have based this estimate on a number of assumptions regarding our development programs and commercial operations that may prove to be wrong, and we could utilize our cash and cash equivalents sooner than we expect. We are seeking additional funding throughmonths beyond the issuance of equity, convertible or debt securities through private placements or public offerings or through the exercise of existing convertible securities. We may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or the rights of our stockholders. Alternatively, we may have to reduce spend by postponing certain of our development activities. Based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and need todate. These uncertainties raise ~~additional capital to finance our future operations, we have concluded that there is~~ substantial doubt about our ability to continue as a going concern. Refer to the Going Concern section above for further details.

To date, we have not had any cellular therapeutics approved for sale and have not generated any revenues from the sale of our cellular therapeutics. We generate limited revenues from our biobanking and degenerative disease businesses. We do not expect to generate any revenues from cellular therapeutic product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to therapeutic sales, marketing, manufacturing and distribution as our current commercialization efforts are limited to our biobanking and degenerative disease businesses. As a result, until such time, if ever, as we can generate substantial revenue from therapeutics and sales of our biomaterials products, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements, including drawdowns under the At-The-Market Sales Agreement, dated as of September 8, 2022, by and between us and BTIG, LLC, Oppenheimer & Co. Inc. and B. Riley Securities, Inc., or the ATM Program, and we continue to explore licensing and collaboration arrangements for our cellular therapeutics as well as distribution arrangements for our degenerative disease business including our distribution agreements with CH Trade Group, Tamer and AD Ports to support expansion abroad. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. Failure to obtain this necessary capital or address our liquidity needs may force us to delay, limit or terminate our operations, make further reductions in our workforce, discontinue our commercialization efforts for our biomaterials products as well as other clinical trial programs, liquidate all or a portion of our assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our cellular therapeutic candidates, expansion of our degenerative disease business and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our therapeutic candidates, as well as to build the sales, marketing and distribution infrastructure that we believe

will be necessary to commercialize our cellular therapeutic candidates, if approved, and biomaterials products we may require substantial additional funding in the future.

To date, inflation has not had a significant impact on our business. However, any significant increase in inflation and interest rates could have a significant effect on the economy in general and, thereby, could affect our future operating results.

Cash Flows

The following table summarizes our cash flows for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

	Six Months Ended
	June 30, 2022			June 30, 2021			Change			For the Three Months Ended March 31,
Cash provided by (used in)
										2023			2022			Change
Cash (used in)/provided by
Operating activities	$	(70,571	)	$	(43,280	)	$	(27,291	)	$	(14,995	)	$	(34,253	)	$	19,258
Investing activities		(2,894	)		(2,487	)		(407	)		(3,209	)		(1,454	)		(1,755	)
Financing activities		74,214			(827	)		75,041			12,759			46,495			(33,736	)
Net change in cash, cash equivalents and restricted cash	$	749		$	(46,594	)	$	47,343		$	(5,445	)	$	10,788		$	(16,233	)

Operating Activities

Net cash used in operations for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was ~~$27.3~~$19.3 million ~~higher~~lower than the prior year period, primarily due to ~~lower~~ ~~net loss adjusted~~adjustments for non-cash ~~items.~~items and recognition of the Palantir cease-use liability (see Note 9).

Investing Activities

We used ~~$2.9~~$3.2 million and ~~$2.4~~$1.5 million of net cash in investing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~respectively, which consisted of capital expenditures in each period ~~offset by $0.3~~and $3.0 million ~~in gross proceeds from promissory note in~~used to acquire in-process research and development for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2023.

Financing Activities

We generated ~~$74.2~~$12.8 million of net cash from financing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2023, which consisted of $9.0 million from the March 2023 private placement, $5.0 million of proceeds from the Starr Bridge Loan, partially offset by $1.6 million of principal repayments on the Yorkville PPA. For the three months ended March 31, 2022 we generated $46.5 million of net cash in financing activities, which consisted primarily of $46.5 million in cash proceeds from the exercise of warrants to acquire 13,281,386 shares of our Class A Common Stock and $27.5 million in cash proceeds from the May 2022 PIPE financing. For the six months ended June 30, 2021 we used $0.8 million of net cash in financing activities, which consisted primarily of payments related to the July 2021 PIPE Financing that closed concurrent with the Business Combination offset by proceeds from short term borrowing – related party.common stock.

Critical Accounting Estimates

Our significant accounting policies are summarized in Note 2, “Summary of Significant Accounting Policies,” included within the Notes to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q and in Note 2 to our audited annual financial statements included in the ~~2021~~2022 Form 10-K.

~~During the six months ended June 30, 2022, there was an addition to~~There have been no significant changes in our critical accounting ~~estimates~~policies during the three months ended March 31, 2023 as compared with those previously disclosed in the ~~2021~~2022 Form 10-K as a result of the implementation of Accounting Standards Update 2016-02. We cannot readily determine the interest rate implicit in the lease, therefore, we use our incremental borrowing rate or IBR to measure lease liabilities. The IBR is the rate of interest that we would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use or ROU asset in a similar economic environment. The IBR therefore reflects what we ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. We estimate the IBR using observable inputs (such as market interest rates) when available and are required to make certain entity and asset-specific estimates. The IBR used in the calculation of the present value of lease payments in calculating lease liabilities and the corresponding ROU requires the use of significant judgment by management.10-K.

Recent Accounting Pronouncements

See Note 2 to our unaudited condensed consolidated financial statements included herein and Note 2 to our audited annual financial statements for the year ended December 31, ~~2021~~2022 included in the ~~2021~~2022 Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition ofand results of operations.

JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our

financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered in this quarterly report Form 10-Q. Based on that evaluation, management concluded that the disclosure controls and procedures were not effective, at the reasonable assurance level, as of the end of the period covered by this quarterly report on Form 10-Q, as a result of the material weaknesses in internal control over financial reporting discussed below.

We previously identified the following material weaknesses in our internal control over financial reporting:

Control Environment: We had insufficient internal resources with appropriate accounting and finance knowledge and expertise to design, implement, document and operate effective internal controls around our financial reporting process.

ii.

Accounting for Contingent Consideration: Our calculation of the contingent consideration liability contained inconsistent and / or incorrect assumptions resulting in identified audit adjustments.

iii.

Accounting for Deferred Taxes: Our calculation of deferred tax assets and deferred tax liabilities contained errors resulting in identified audit adjustments.

iv.

Accounting for Warrants: Our calculation of warrant liabilities contained inconsistent and / or incorrect assumptions resulting in identified audit adjustments.

~~Control Environment~~: We had insufficient internal resources with appropriate accounting and finance knowledge and expertise to design, implement, document and operate effective internal controls around our financial reporting process.

~~ii.~~

~~Accounting for Contingent Consideration: Our calculation of the contingent consideration liability contained inconsistent and / or incorrect assumptions resulting in identified audit adjustments.~~

~~iii.~~

~~Accounting for Deferred Taxes: Our calculation of deferred tax assets and deferred tax liabilities contained errors resulting in identified audit adjustments.~~

~~iv.~~

~~Accounting for Warrants: Our calculation of warrant liabilities contained inconsistent and / or incorrect assumptions resulting in identified audit adjustments.~~

We are currently implementing our remediation plan to address the material weaknesses identified above. Such measures include:

•

Hiring additional accounting personnel to ensure timely reporting of significant matters.

•

Designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing formalized controls.

•

Designing and implementing procedures to identify and evaluate changes in our business and the impact on our internal controls.

•

Designing and implementing formal processes, policies and procedures supporting our financial close process.

•

Engaging an outside firm to assist with the documentation, design and implementation of our internal control environment.

•

~~Hiring additional accounting personnel to ensure timely reporting of significant matters.~~

•

~~Designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing formalized controls.~~

•

~~Designing and implementing procedures to identify and evaluate changes in our business and the impact on our internal controls.~~

•

~~Designing and implementing formal processes, policies and procedures supporting our financial close process.~~

•

~~Consolidating all recurring valuation models under one service provider.~~

•

~~Engaging an outside firm to assist with the documentation, design and implementation of our internal control environment.~~

Changes in Internal Control over Financial Reporting

Other than in connection with executing upon the continued implementation of the remediation measures referenced above, there were no changes in our internal controls over financial reporting that occurred during our ~~second~~first fiscal quarter ended ~~June 30, 2022~~March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may ~~be subject to various~~become involved in litigation or other legal ~~proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty,~~proceedings. Except as set forth below, we doare not ~~believe we are~~currently a party to any ~~claim~~litigation or ~~litigation the outcome of which, if determined adversely to us, would individually or~~legal proceedings that, in the ~~aggregate be reasonably expected~~opinion of our management, are likely to have a material adverse effect on our business. Regardless of ~~the~~ outcome, litigation can have an adverse ~~effect on us~~impact because of defense and settlement costs, diversion of management resources and other factors.

Arbitration Demand from Palantir Technologies Inc.

On April 20, 2023, Palantir Technologies Inc., or Palantir, commenced an arbitration with JAMS Arbitration asserting claims for declaratory relief and breach of contract relating to the May 5, 2021 Master Service Agreement, or the Palantir MSA, seeking damages in an amount equal to the full value of the contract. The Company has responded to the arbitration demand and asserted counterclaims for breach of contract, breach of warranty, fraudulent inducement, violation of California’s Unfair Competition Law, amongst others, in relation to the Palantir MSA. While the Company believes that Palantir’s claims are without merit and intends to vigorously defend against those claims, there can be no assurance as to the outcome of the arbitration.

Celularity Inc. v. Evolution Biologyx, LLC, et al.

On April 17, 2023, we filed a complaint against Evolution Biologyx, LLC, Saleem S. Saab, individually, and Encyte, LLC (collectively, Evolution) in the United States District Court for the District of New Jersey to recover unpaid invoice amounts for the sale of our biomaterial products in the amount of approximately $2.35 million, plus interest. In September 2021, we executed a distribution agreement with Evolution, whereupon Evolution purchased biomaterial products from us for sale through Evolution’s distribution channels. We fulfilled Evolution’s orders and otherwise performed each of our obligations under the distribution agreement. Despite attempts to recover the outstanding invoices and Evolution’s promise to pay, Evolution has refused to pay any of the invoices and has materially breached its obligations under the distribution agreement. Our complaint asserts claims of breach of contract and fraudulent inducement, amongst others. We intend to vigorously pursue the matter to recover the outstanding payments owed by Evolution, as well as interest and reasonable attorney's fees, but there can be no assurance as to the outcome of the litigation.

Item 1A. Risk Factors.

~~Not applicable.~~Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of the Company ((incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed with the Commission on July 22, 2021).
3.2		Amended and Restated Bylaws of the Company ((incorporated by reference to Exhibit 3.2 to the current report on Form 8-K, filed with the Commission on July 22, 2021).
10.1		Securities Purchase Agreement dated ~~May 18, 2022, between Celularity Inc. and the purchaser thereto~~ ~~(incorporated~~as of March 20, 2023 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the Commission on ~~May 20, 2022)~~March 23, 2023).


10.2		Form of PIPE Warrant ~~(incorporated~~(incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, filed with the Commission on ~~May 20, 2022)~~March 23, 2023).
10.3		Form of Registration Rights Agreement ~~dated May 18, 2022, between Celularity Inc. and the holder party thereto~~ ~~(incorporated~~(incorporated by reference to Exhibit 10.3 to the current report on Form 8-K, filed with the Commission on ~~May 20, 2022)~~March 23, 2023).
10.4#		Amendment to the Employment Agreement, as of January 25, 2023, by and between Celularity Inc. and Robert J. Hariri (incorporated by reference to Exhibit 10.14 to the annual report on Form 10-K, filed with the Commission on March 31, 2023).
~~10.4~~10.5		~~Placement Agency~~Secured Loan Agreement, dated ~~May 18, 2022, between~~as of March 17, 2023, among Celularity Inc. and the ~~placement agent~~ ~~(incorporated~~lender party thereto (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K, filed with the Commission on ~~May 20, 2022)~~March 23, 2023).
10.6		Form of Starr Warrant issued on March 17, 2023 (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K, filed with the Commission on March 23, 2023).
31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		The cover page for the Company’s quarterly report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

# Indicates a management contract or any compensatory plan, contract or arrangement.

* The certifications attached as Exhibits 32.1 and 32.2 accompanying this report are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Celularity Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this report, irrespective of any general incorporation language contained in such filing.

SIGNATURES

The certifications attached as Exhibits 32.1 and 32.2 accompanying this report are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Celularity Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this report, irrespective of any general incorporation language contained in such filing.

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CELULARITY INC.

Date: ~~August 9, 2022~~May 22, 2023	By:	/s/ Robert J. Hariri
		Robert J. Hariri, M.D., Ph.D.
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~August 9, 2022~~May 22, 2023	By:	/s/ David C. Beers
		David C. Beers
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

4244


Delaware	83-1702591
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
170 Park Ave, Florham Park, NJ (Address of principal executive offices)	07932 (Zip Code)


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 $11.50 per share	CELUW	The Nasdaq Stock Market LLC


	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022

Assets
Current assets:
Cash and cash equivalents	$	37,996		$	37,240		$	8,532		$	13,966
Accounts receivable, net of allowance of $275 and $272 as of June 30, 2022 and December 31, 2021, respectively		3,933			2,745
Accounts receivable, net of allowance of $2,350 and $1,789 as of March 31, 2023 and December 31, 2022, respectively								3,050			4,452
Notes receivable		2,700			2,488			2,115			2,514
Inventory		24,663			9,549			5,484			5,308
Prepaid expenses and other current assets		6,161			7,078			5,823			7,262
Total current assets		75,453			59,100			25,004			33,502
Property and equipment, net		77,540			90,625			74,056			75,655
Goodwill		123,304			123,304			90,061			119,694
Intangible assets, net		122,100			123,187			120,453			120,994
Right-of-use assets - operating leases		13,027			-			13,079			13,060
Restricted cash		14,829			14,836			14,825			14,836
Inventory, net of current portion		2,300			2,721			24,586			22,949
Other long-term assets		784			355			352			376
Total assets	$	429,337		$	414,128		$	362,416		$	401,066
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	10,226		$	9,317		$	8,755		$	5,810
Accrued expenses and other current liabilities		20,482			11,661			9,559			9,069
Current portion of financing obligation		-			3,051
Accrued R&D software								15,000			7,333
Short-term debt ($30,945 at fair value and $32,382 unpaid principal balance at March 31, 2023)								30,945			37,603
Deferred revenue		2,231			2,196			2,199			2,273
Total current liabilities		32,939			26,225			66,458			62,088
Deferred revenue, net of current portion		1,998			1,871			2,325			2,219
Acquisition-related contingent consideration		192,024			232,222			87,013			105,945
Noncurrent lease liabilities - operating		27,850			-			28,049			27,985
Financing obligations		-			28,085
Noncurrent accrued R&D software								16,008			-
Long-term debt								4,745			-
Warrant liabilities		23,427			25,962			1,863			3,598
Deferred income tax liabilities		10			10			9			9
Other liabilities		939			335			318			321
Total liabilities		279,187			314,710			206,788			202,165
Commitments and Contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, NaN issued and outstanding at June 30, 2022 and December 31, 2021		-			-
Common Stock, $0.0001 par value, 730,000,000 shares authorized, 142,384,167 issued and outstanding as of June 30, 2022; 730,000,000 shares authorized, 124,307,884 issued and outstanding as of December 31, 2021		14			12
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding at March 31, 2023 and December 31, 2022								-			-
Common Stock, $0.0001 par value, 730,000,000 shares authorized, 165,030,414 issued and outstanding as of March 31, 2023; 730,000,000 shares authorized, 148,921,187 issued and outstanding as of December 31, 2022								17			15
Additional paid-in capital		824,865			763,087			862,457			844,373
Accumulated other comprehensive income								2,667			9
Accumulated deficit		(674,729	)		(663,681	)		(709,513	)		(645,496	)
Total stockholders’ equity		150,150			99,418			155,628			198,901
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	429,337		$	414,128
Total liabilities and stockholders’ equity							$	362,416		$	401,066


	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Face value	$	4,000		$	4,000		$	4,000		$	4,000
Coupon rate	12% - 17%			12% - 17%			12% - 17%			12% - 17%
Stock price	$	0.08		$	0.17		$	0.04		$	0.02
Term (years)	.51 - 3.45			.7 - 3.19			.76 - 3.45			1.01 - 3.45
Risk-free interest rate		2.52	%		0.29	%		4.79	%		4.73	%
Volatility	n/a			n/a			n/a			n/a


	December 31, 2022
Common share price	$	1.29
Credit spread		13.71	%
Dividend yield		0	%
Term (years)		0.71
Risk-free interest rate		4.75	%
Volatility		45.0	%
Discount yield		18.46	%


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements ~~(Unaudited)~~	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of ~~Convertible Preferred Stock and~~ Stockholders’ Equity ~~(Deficit)~~	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3031
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3841
Item 4.	Controls and Procedures	3841
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4042
Item 1A.	Risk Factors	4042
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4042
Item 3.	Defaults Upon Senior Securities	4042
Item 4.	Mine Safety Disclosures	4042
Item 5.	Other Information	4042
Item 6.	Exhibits	4042
Signatures		4244


	Three months ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Net revenues
Product sales and rentals	$	1,228		$	1,045		$	1,879		$	1,885		$	1,043		$	651
Services		1,373			1,597			2,656			2,861			1,357			1,283
License, royalty and other		1,175			555			5,176			1,111			1,535			4,001
Total revenues		3,776			3,197			9,711			5,857			3,935			5,935
Operating expenses
Cost of revenues (excluding amortization of acquired intangible assets)
Product sales and rentals		425			869			899			1,387			722			474
Services		1,265			571			2,213			1,295			472			948
Licenses, royalties and other		1,489			-			4,093			-
License, royalty and other														809			2,604
Research and development		25,349			22,911			47,022			39,901			16,951			21,673
Software cease-use costs														23,675			-
Selling, general and administrative		15,574			28,863			32,034			36,489			13,934			16,460
Change in fair value of contingent consideration liability		(45,047	)		10,048			(40,198	)		30,704			(18,932	)		4,849
Goodwill impairment														29,633			-
Amortization of acquired intangible assets		546			546			1,087			1,087			541			541
Total operating expenses		(399	)		63,808			47,150			110,863			67,805			47,549
Income (loss) from operations		4,175			(60,611	)		(37,439	)		(105,006	)
Loss from operations														(63,870	)		(41,614	)
Other income (expense):
Interest income		41			129			47			269			116			6
Interest expense		-			(817	)		-			(1,569	)		(277	)		-
Change in fair value of warrant liabilities		43,212			(1,174	)		22,280			(37,679	)		1,735			(20,932	)
Change in fair value of debt														(1,280	)		-
Other expense, net		415			(2,004	)		88			(2,031	)		(441	)		(327	)
Total other income (expense)		43,668			(3,866	)		22,415			(41,010	)		(147	)		(21,253	)
Income (loss) before income taxes		47,843			(64,477	)		(15,024	)		(146,016	)
Income tax expense		17			-			17			-
Net income (loss)	$	47,826		$	(64,477	)	$	(15,041	)	$	(146,016	)
Loss before income taxes														(64,017	)		(62,867	)
Income tax expense (benefit)														-			-
Net loss													$	(64,017	)	$	(62,867	)
Change in fair value of debt due to change in credit risk, net of tax														2,658			-
Other comprehensive income														2,658			-
Comprehensive loss													$	(61,359	)	$	(62,867	)
Share information:
Net income (loss) per share - basic	$	0.34		$	(2.69	)	$	(0.11	)	$	(6.09	)
Weighted average shares outstanding - basic		140,152,245			23,992,184			135,302,472			23,991,129
Net income (loss) per share - diluted	$	0.32		$	(2.69	)	$	(0.11	)	$	(6.09	)
Weighted average shares outstanding - diluted		151,311,780			23,992,184			135,302,472			23,991,129
Net loss per share - basic and diluted													$	(0.41	)	$	(0.48	)
Weighted average shares outstanding - basic and diluted														155,365,048			130,398,811

	Three months ended June 30,					For the six months ended June 30,
	2022		2021			2022			2021
Numerator:
Net income (loss)	$	47,826	$	(64,477	)	$	(15,041	)	$	(146,016	)
Denominator:
Weighted average shares outstanding, basic		140,152,245		23,992,184			135,302,472			23,991,129
Weighted average dilutive stock options		11,089,847		-			-			-
Weighted average restricted stock units		69,688		-			-			-
Weighted average dilutive warrants		-		-			-			-
Weighted average shares outstanding, diluted		151,311,780		23,992,184			135,302,472			23,991,129

Net income (loss), basic	$	0.34	$	(2.69	)	$	(0.11	)	$	(6.09	)
Net income (loss), diluted		0.32		(2.69	)		(0.11	)		(6.09	)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Redeemable convertible preferred stock		-		107,525,553		-		107,525,553
Stock options		9,490,717		28,873,482		25,648,358		28,873,482
Restricted stock units		1,597,502		-		2,148,776		-
Warrants		33,458,560		25,775,905		33,458,560		25,775,905
		44,546,779		162,174,940		61,255,694		162,174,940


	Fair Value Measurements as of June 30, 2022								Fair Value Measurements as of March 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents - money market funds	$	37,024	$	—	$	—	$	37,024	$	7,554	$	—	$	—	$	7,554
Convertible note receivable		—		—		2,700		2,700		—		—		2,115		2,115
	$	37,024	$	—	$	2,700	$	39,724	$	7,554	$	—	$	2,115	$	9,669

Liabilities:
Acquisition-related contingent consideration obligations									$	—	$	—	$	87,013	$	87,013
Contingent stock consideration	$	—	$	—	$	611	$	611		—		—		76		76
Acquisition-related contingent consideration obligations		—		—		192,024		192,024
Short-term debt - Yorkville										—		—		30,945		30,945
Warrant liability - May 2022 PIPE Warrants		—		—		7,015		7,015		—		—		491		491
Warrant liability - Sponsor Warrants		—		—		8,075		8,075		—		—		510		510
Warrant liability - Public Warrants		8,337		—		—		8,337		862		—		—		862
	$	8,337	$	—	$	207,725	$	216,062	$	862	$	—	$	119,035	$	119,897


	Fair Value Measurements as of December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents - money market funds	$	12,174	$	—	$	—	$	12,174
Convertible note receivable		—		—		2,514		2,514
	$	12,174	$	—	$	2,514	$	14,688

Liabilities:
Acquisition-related contingent consideration obligations	$	—	$	—	$	105,945	$	105,945
Contingent stock consideration		—		—		186		186
Short-term debt - Yorkville		—		—		37,603		37,603
Warrant liability - May 2022 PIPE Warrants		—		—		1,402		1,402
Warrant liability - Sponsor Warrants		—		—		1,190		1,190
Warrant liability - Public Warrants		1,006		—		—		1,006
	$	1,006	$	—	$	146,326	$	147,332

	June 30, 2022
Common share price	$	3.40
Exercise price	$	8.25
Dividend yield		0	%
Term (years)		4.9
Risk-free interest rate		3.01	%
Volatility		84.0	%

	June 30, 2022			December 31, 2021
Building (1)	$	-		$	12,513
Leasehold improvement (2)		70,620			71,468
Laboratory and production equipment		13,229			11,395
Machinery, equipment and fixtures		8,295			7,974
Construction in progress		2,752			2,054
Property and equipment		94,896			105,404
Less: Accumulated depreciation and amortization (3)		(17,356	)		(14,779	)
Property and equipment, net	$	77,540		$	90,625

	Balance as of December 31, 2021			Adjustments due to adoption of ASC 842			Balance as of January 1, 2022
Assets
Property and equipment, net	$	90,625		$	(12,421	)	$	78,204
Operating lease right-of-use-assets		-			13,001			13,001
Liabilities
Current lease liabilities - operating		-			-			-
Current portion of financing obligation		3,051			(3,051	)		-
Noncurrent lease liabilities - operating		-			27,723			27,723
Financing obligations		28,085			(28,085	)		-
Stockholders' equity
Accumulated deficit		(663,681	)		3,993			(659,688	)

	Options			Weighted average exercise price		Weighted average contract term (years)		Aggregate intrinsic value
Balance at January 1, 2022		24,064,586		$	4.23		7.4	$	56,525
Granted		2,435,662		$	9.18
Exercised		(619,784	)	$	0.57
Forfeited		(232,106	)	$	6.30
Outstanding at June 30, 2022		25,648,358		$	4.77	6.58		$	28,099
Vested and expected to vest June 30, 2022		25,648,358		$	4.77	6.58		$	28,099
Exercisable at June 30, 2022		19,756,174		$	3.66		5.80	$	28,099

	Number of shares			Weighted average grant date fair value
Outstanding at December 31, 2021		474,700		$	7.20
Granted		1,710,123		$	8.88
Forfeited		(36,047	)	$	7.67
Outstanding at June 30, 2022		2,148,776		$	8.53

	Three Months Ended June 30, 2022
	Cell Therapy			BioBanking			Degenerative Disease			Other				Total
Net sales	$	-		$	1,373		$	2,403		$	-			$	3,776
Gross profit		-			108			489			-				597
Direct expenses		24,820			256			3,179			13,622				41,877
Segment contribution	$	(24,820	)	$	(148	)	$	(2,690	)		(13,622	)			(41,280	)
Indirect expenses											(45,455	)	(a)		(45,455	)
Income from operations														$	4,175

(a) Components of other
Change in fair value of contingent consideration liability											(45,047	)
Change in fair value of contingent stock consideration											(954	)
Amortization											546
Total other										$	(45,455	)

	Three Months Ended June 30, 2021
	Cell Therapy			BioBanking		Degenerative Disease			Other				Total
Net sales	$	-		$	1,597	$	1,600		$	-			$	3,197
Gross profit		-			1,029		728			-				1,757
Direct expenses		22,105			742		2,150			26,777				51,774
Segment contribution	$	(22,105	)	$	287	$	(1,422	)		(26,777	)			(50,017	)
Indirect expenses										10,594		(b)		10,594
Loss from operations													$	(60,611	)

(b) Components of other
Change in fair value of contingent consideration liability										10,048
Amortization										546
Total other									$	10,594

	Six Months Ended June 30, 2022
	Cell Therapy			BioBanking			Degenerative Disease			Other				Total
Net sales	$	-		$	2,656		$	7,055		$	-			$	9,711
Gross profit		-			443			2,063			-				2,506
Direct expenses		46,033			882			4,638			26,892				78,445
Segment contribution	$	(46,033	)	$	(439	)	$	(2,575	)		(26,892	)			(75,939	)
Indirect expenses											(38,500	)	(c)		(38,500	)
Loss from operations														$	(37,439	)

(c) Components of other
Change in fair value of contingent consideration liability											(40,198	)
Change in fair value of contingent stock consideration											611
Amortization											1,087
Total other										$	(38,500	)

	Six Months Ended June 30, 2021
	Cell Therapy			BioBanking		Degenerative Disease			Other				Total
Net sales	$	-		$	2,861	$	2,996		$	-			$	5,857
Gross profit		-			1,569		1,606			-				3,175
Direct expenses		38,392			994		4,164			32,840				76,390
Segment contribution	$	(38,392	)	$	575	$	(2,558	)		(32,840	)			(73,215	)
Indirect expenses										31,791		(d)		31,791
Loss from operations													$	(105,006	)

(d) Components of other
Change in fair value of contingent consideration liability										30,704
Amortization										1,087
Total other									$	31,791

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company