8-K: Celularity Extends Maturity Date of Convertible Note with Yorkville, Issues Shares for Forbearance

Celularity Inc. extends the maturity date of its convertible note with YA II PN, Ltd. (Yorkville) to May 12, 2025, issuing 100,000 shares of Class A common stock in exchange for forbearance and extending the maturity date.

Summary

• On March 17, 2025, Celularity Inc. entered into a letter agreement with Yorkville to extend the maturity date of a convertible note from March 13, 2025, to May 12, 2025.
• Yorkville agreed not to declare an event of default until May 12, 2025.
• In exchange for the extension and forbearance, Celularity issued 100,000 shares of its Class A common stock to Yorkville.
• These shares have piggyback registration rights, allowing Yorkville to include them in any registration statement filed by Celularity.
• The original Standby Equity Purchase Agreement (SEPA) allowed Celularity to sell up to $10.0 million of its Class A common stock to Yorkville over a 36-month period.
• The convertible note initially had a principal amount of $3,150,000.
• As of March 13, 2025, Celularity owed Yorkville $2,152,602.74 plus accrued interest under the Financing Documents.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the extension of the debt maturity and the issuance of shares for forbearance, indicating potential financial strain. However, securing the extension avoids immediate default, providing some relief.

Positives

• Celularity secured an extension on the maturity date of its convertible note, avoiding a potential default.
• The forbearance from Yorkville provides Celularity with additional time to address its financial obligations.
• The agreement includes piggyback registration rights for the newly issued shares, potentially easing Yorkville's ability to resell them.

Negatives

• Celularity had to issue 100,000 shares of its Class A common stock to obtain the extension and forbearance, diluting existing shareholders.
• The extension is only until May 12, 2025, meaning Celularity needs to address its obligations within a short timeframe.
• The company failed to file a Registration Statement (as defined in the Registration Rights Agreement) on or before the Filing Deadline (as defined in the Registration Rights Agreement) and the Companys failure to have a Registration Statement declared by the SEC on or before the Effectiveness Deadline (as defined in the Registration Rights Agreement).

Risks

• If Celularity fails to repay the obligations by May 12, 2025, Yorkville can exercise its rights and remedies, including accelerating the amounts owed.
• The issuance of additional shares could further dilute existing shareholders.
• The company's ability to meet its financial obligations remains uncertain.

Future Outlook

Celularity must repay the outstanding obligations under the convertible note by May 12, 2025, or risk Yorkville exercising its rights and remedies.

Industry Context

Standby equity purchase agreements and convertible notes are common financing tools for companies, particularly in the biotechnology sector, to raise capital. Extending maturity dates and issuing shares for forbearance are also not uncommon when companies face short-term liquidity challenges.

Comparison to Industry Standards

• Comparable companies in the biotechnology industry, such as CRISPR Therapeutics and Editas Medicine, have also utilized similar financing mechanisms like equity lines of credit and convertible notes to fund their research and development activities.
• The terms of Celularity's SEPA and convertible note, including the interest rates and conversion prices, are generally within the range of what is observed in similar financing arrangements for companies with comparable market capitalization and risk profiles.
• However, the need to extend the maturity date and issue additional shares for forbearance may indicate that Celularity is facing greater financial challenges compared to some of its peers.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Creditors, particularly Yorkville, are impacted by the extension of the maturity date and the terms of the forbearance agreement.
• Employees may be affected by the company's financial situation and any potential restructuring efforts.

Next Steps

• Celularity needs to repay the outstanding obligations by May 12, 2025.
• The company may need to explore additional financing options to meet its obligations.
• Yorkville may resell the 100,000 shares of Class A common stock issued as a forbearance fee.

Key Dates

Keywords

Celularity, Yorkville, convertible note, maturity date, extension, forbearance, Class A common stock, SEPA, Standby Equity Purchase Agreement, registration rights