GMDAQ Gamida Cell Ltd (PK)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

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

For the transition period from to

Commission file number: 001-38716

GAMIDA CELL LTD.

(Exact Name of Registrant as Specified in its Charter)

(617) 892-9080

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 ☒

The registrant had 154,013,109 ordinary shares outstanding as of May 16, 2024.

TABLE OF CONTENTS

Trademarks and Trade Names

Unless the context requires otherwise, “Gamida,” “Gamida Cell,” “we,” “us,” “our” or the “Company” mean Gamida Cell Ltd. and its wholly-owned subsidiary, Gamida Cell Inc.

Gamida Cell and Omisirge are trademarks of ours that we use in this quarterly report on Form 10-Q, or Quarterly Report. This Quarterly Report also includes trademarks, tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this Quarterly Report appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to our trademark and tradenames. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

GAMIDA CELL LTD. AND ITS SUBSIDIARY

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2024

U.S. DOLLARS IN THOUSANDS

UNAUDITED

INDEX

GAMIDA CELL LTD. AND ITS SUBSIDIARY

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

GAMIDA CELL LTD. AND ITS SUBSIDIARY

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

GAMIDA CELL LTD. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

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

GAMIDA CELL LTD. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

U.S. dollars in thousands (except share and per share data)

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

GAMIDA CELL LTD. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands (except share and per share data)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands (except share and per share data)

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

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

GAMIDA CELL LTD. AND ITS SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023, or Annual Report, which was filed with the Securities and Exchange Commission, or the SEC, on March 27, 2024. The information in this discussion contains forward-looking statements and information 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, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These statements speak only as of their date. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Company Overview

We are a cell therapy pioneer working to turn cells into powerful therapeutics. We apply a proprietary expansion platform leveraging the properties of nicotinamide, or NAM, to allogeneic cell sources including umbilical cord blood-derived cells and natural killer, or NK, cells to create cell therapy candidates, with the potential to redefine standards of care. On April 17, 2023, the U.S. Food and Drug Administration, or FDA, approved our allogeneic cell therapy, Omisirge (omidubicel-onlv), for use in adult and pediatric patients 12 years and older with hematologic malignancies who are planned for umbilical cord blood transplantation following myeloablative conditioning to reduce the time to neutrophil recovery and the incidence of infection.

In the first quarter of 2023, we completed a strategic reprioritization of our business activities to reduce our operating expenses and focus on the commercial launch of Omisirge® (omidubicel-onlv). The results of this reprioritization were a reduction in force of approximately 17% of our workforce, completed in the second quarter of 2023, closure of our Jerusalem research and development facility and termination of work on our preclinical NAM NK pipeline programs. We undertook these reprioritization efforts after unsuccessfully seeking a strategic partnership or other transaction, such as a royalty financing, licensing, collaboration or other similar transaction. We first engaged Moelis & Company LLC in July 2020 to pursue a royalty financing or other similar transaction related to Omisirge. Most recently, in April 2023, we engaged Moelis & Company LLC as our financial advisor and commenced a strategic review process seeking to secure a transaction that would support expanded access to Omisirge for patients and maximize value for our stakeholders. During the course of this recent strategic review process, our board of directors explored a range of alternatives, including an asset sale, merger, financing, licensing, and capital restructuring options. This strategic review process did not yield any viable strategic alternatives.

As a result, on March 26, 2024, we entered into a Restructuring Support Agreement, or the Support Agreement, with certain funds managed by Highbridge Capital Management, LLC, which funds we collectively refer to as Highbridge. These funds hold all of our exchangeable senior notes issued in 2021 and 2022, which together have an aggregate outstanding principal balance as of May 1, 2024 of approximately $79.4 million. These exchangeable senior notes represent substantially all of our outstanding debt. Pursuant to the Support Agreement, we and Highbridge agreed to restructure all of our outstanding equity and debt in a voluntary restructuring proceeding in the District Court of Beersheba, Israel, or the District Court, that is governed by Israeli law, referred to as our restructuring process. In addition, on April 22, 2024, Abigail Jenkins, solely in her capacity as our duly authorized foreign representative, or the Foreign Representative, filed a petition for recognition for relief and for the recognition and enforcement of the District Court’s order approving the debt arrangement in Israel under Chapter 15 of Title 11, or Chapter 15, of the United States Bankruptcy Code, or the Bankruptcy Code, in the United States Bankruptcy Court for the District of Delaware, or the U.S. Court.

If the restructuring process is completed as contemplated by the Support Agreement, all outstanding ordinary shares of Gamida Cell Ltd. will be cancelled and each shareholder as of the completion of the restructuring process will be entitled to receive certain contingent value rights, or CVRs, in exchange for such cancelled shares. Gamida Cell Ltd. will continue to exist as a private operating company that is a wholly owned subsidiary of Highbridge, and our business will continue as a going concern. Pursuant to the Support Agreement, as approved by the District Court (subject to the amended terms of the CVRs) on May 8, 2024 and by the U.S. Court on May 15, 2024, the CVRs will be issued pursuant to a contingent value rights agreement, or the CVR Agreement, to be executed in connection with the restructuring process. When issued, the CVRs will entitle the holders to certain cash payments totaling up to $40 million upon the achievement of certain milestones as will be more fully set forth in the CVR Agreement. Pursuant to the Support Agreement, Highbridge will fund the reorganized company following the restructuring process through a secured debt facility of approximately $50 million, comprised of (i) $30 million of cash to be provided as soon as practicable following the completion of the restructuring process; (ii) the remaining principal amount owed under the 2022 Notes; and (iii) the remaining approximately $15 million to be provided by way of delayed draw term loans on terms and conditions to be agreed upon in principle with Highbridge prior to the completion of the restructuring process.

On March 28, 2024, we received a delisting notice from The Nasdaq Stock Market LLC, or Nasdaq, notifying us that our ordinary shares were scheduled for delisting from the Nasdaq Capital Market due to (i) the Restructuring Proceeding and the associated public interest concerns raised by such proceeding; (ii) concerns regarding the residual equity interest of the existing listed securities holders; and (iii) concerns about the Company’s ability to sustain compliance with all requirements for continued listing on Nasdaq. As a result, on April 25, 2024, the Nasdaq Stock Market filed a Form 25 delisting our ordinary shares from Nasdaq and our ordinary shares began trading on the over-the-counter market on April 26, 2024 under the symbol “GMDAQ.” In addition, on May 9, 2024, we filed (i) a post-effective amendment to various outstanding registration statements on Form S-3, which amendment was declared effective by the SEC on May 13, 2023, and (ii) a post-effective amendment to various outstanding registration statements on Form S-8, which amendment became effective immediately upon filing, each to remove and withdraw from registration the shares that were registered but remained unsold thereunder. Immediately following the closing of our restructuring process, which we anticipate will occur on or about May 24, 2024, we intend to file a Form 15 with the SEC to suspend our reporting obligations under the Exchange Act and will no longer be a public reporting company registered with the U.S. Securities and Exchange Commission. Except for the CVRs, we do not anticipate that our shareholders will otherwise receive any distribution or recovery (cash or otherwise) as part of the restructuring process. There is no assurance that we will complete our restructuring process as currently contemplated. If we are unable to complete our restructuring process on our anticipated timeline, we expect that we will enter into involuntary restructuring proceedings in Israeli court and our shareholders will not receive any proceeds from such proceedings.

In connection with our restructuring process and in order to attempt to extend our financial resources beyond the second quarter of 2024, we have reduced operating expenses and we are implementing a workforce reduction plan pursuant to which we expect to reduce our workforce as of March 31, 2024 by approximately 25%, with such reductions expected to be complete by the closing of the restructuring process. Affected employees are being offered separation benefits, including severance payments and temporary healthcare coverage assistance, which severance payments are required under applicable law. Each affected employee’s eligibility for the separation benefits is contingent upon such employee’s execution of a separation agreement that includes a general release of claims against us. We estimate that the severance and termination-related costs will be approximately $1.8 million, and we recorded these charges primarily in the first quarter of 2024. Our remaining employees will continue to support the commercialization of Omisirge and complete our restructuring process. The costs that we expect to incur in connection with our restructuring process, including the workforce reduction, are subject to a number of assumptions, and actual results may differ materially from these expectations. We may incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, our restructuring process and the workforce reduction plan. See “Item 1A: Risk Factors – Risks Related to Our Financial Position and Restructuring Process” for additional information.

Our financial statements have been prepared on a going concern basis under which an entity is able to realize its assets and satisfy liabilities in the ordinary course of business. The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable to continue as a going concern. Our audited consolidated financial statements as of and for the year ended December 31, 2023 accompanying our previously filed annual report note that there is substantial doubt about our ability to continue as a going concern, absent sources of additional liquidity. If we are unable to complete our restructuring process as contemplated by the Support Agreement, we will likely enter involuntary restructuring proceedings in Israel and wind down our operations. There would be significant costs associated with such proceedings and wind down, such as separation of employees and termination of contracts, and we could owe certain taxes on any such transaction. If we enter involuntary restructuring proceedings, there will be no cash available for distribution to shareholders after payment of the foregoing expenses.

Components of Results of Operations

Revenue

We currently have one product, Omisirge, which was approved by the FDA in April 2023, and we first recognized revenue from the sale of Omisirge in the third quarter of 2023. In the future, we may generate revenue from a combination of product sales, reimbursements, up-front payments and future collaborations.

Cost of sales

As we transitioned from a development stage company to a commercial stage company with recognized revenue, we began to report cost of sales. Cost of sales are reported using a standard costing approach based on staffed capacity. Many of these costs were previously included in research and development costs as described below.

The direct costs of sales include: materials; testing; shipping; manufacturing; quality assurance and quality control labor; and direct overheads, including manufacturing depreciation.

Royalty expenses, which are a function of the revenue in the period, are also included in cost of sales. As applicable, cost of sales will also recognize the expense for any batch failures incurred in the period.

Excess capacity

Excess capacity costs reflect labor and manufacturing overhead costs incurred, above the amount of these costs absorbed in cost of sales as part of standard costs, which are based on staffed capacity levels, given that the Kiryat Gat facility is staffed to produce the anticipated demand over the course of the coming year.

Research and development expenses, net

Our research and development expenses, net of IIA grants, consist primarily of:

Research and development expenses (net of grants) are recognized in the consolidated statements of comprehensive loss when incurred.

Through March 31, 2024, we have received an aggregate of approximately $37.1 million in grants from the Israeli Innovation Authority, or the IIA, including from the Bereshit Consortium sponsored by the IIA, of which $34.5 million is royalty-bearing grants, and approximately $2.6 million is non-royalty-bearing grants, and all of which was awarded for research and development funding. Our total outstanding obligation to the IIA through March 31, 2024, amounts to approximately $44.0 million. Pursuant to the terms of the royalty-bearing grants, we are obligated to pay the IIA royalties at the rate of between 3.0% to 3.5% on future sales of the developed product, up to a limit of 100% of the amounts of the U.S. dollar-linked grants received, plus annual interest. Pursuant to the latest IIA regulations, grants received from the IIA before June 30, 2017 bear an annual interest rate that applied at the time of the approval of the applicable file and such interest will apply to all the funding received under that approval. Grants received from the IIA after June 30, 2017, bear an annual interest rate based on the 12-month London Interbank Offered Rate, or LIBOR, until December 31, 2023, and, as of January 1, 2024, bear an annual interest rate based on the 12-month Secured Overnight Financing Rate, or the SOFR, or in an alternative publication by the Bank of Israel, with the addition of 0.72%. Grants approved after January 1, 2024, will bear the higher of (i) the 12-month SOFR interest, plus 1% or (ii) a fixed annual interest rate of 4%. The Bereshit Consortium program does not require payments of royalties to the IIA, but all other restrictions under the Innovation Law, such as local manufacturing obligations and know-how transfer limitations, as further detailed hereunder, are applicable to the know how developed by us with the funding received in such consortium program.

In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984, which will also continue to apply to us following the repayment in full of the amounts due to the IIA. The Innovation Law restricts our ability to manufacture products and transfer technologies outside of Israel, and may impair our ability to enter into agreements that involve IIA-funded products or know-how without the approval of the IIA. Any approval, if given, will generally be subject to additional financial obligations by us. Failure to comply with the requirements under the Innovation Law may subject us to mandatory repayment of grants received by us, together with interest and penalties, as well as expose us to criminal proceedings.

Pursuant to the IIA’s licensing rules, or the Licensing Rules, a grant recipient may enter into licensing arrangements or grant other rights in know-how developed under IIA programs outside of Israel, subject to the prior consent of the IIA and payment of license fees, calculated in accordance with the Licensing Rules. The amount of the license fees is based on various factors, including the consideration received by the licensor in connection with the license, and shall not exceed six times the amount of the grants received by the grant recipient (plus accrued interest) for the applicable know-how being licensed. In certain cases, such as when the license consideration includes nonmonetary compensation or when a “special relationship” exists between the licensor and licensee (e.g., when a party controls the other party or is the other party’s exclusive distributor), or when the agreed upon consideration does not reflect, in the IIA’s opinion, the market value of the license, the IIA may base the value of the transaction on an economic assessment that it obtains for such purpose.

Selling, general and administrative (SG&A) expenses

General and administrative expenses consist primarily of personnel costs, including share-based compensation, related to directors, executive, finance, and administrative functions, facility costs and external professional service costs, including legal, accounting and audit services and other consulting fees. Other significant expenses are related to audit, legal, regulatory and tax-related services, director and officer insurance premiums, executive compensation, and other customary costs associated with being a public company.

Financial expenses, net

Financial expenses, net, include our financing expenses from the 2022 Notes and 2021 Notes, the fair value impact on our warrants and 2022 Notes, and financing expenses relating to the issuance of warrants, after deducting financing income from deposits.

Analysis of Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023:

Net revenue

Net revenue, first recognized in the third quarter of 2023, consisted of three units of Omisirge being delivered to transplant centers, net of revenue deductions.

Cost of sales

Cost of sales, first recognized in the third quarter of 2023, consists of direct costs, batch failure and royalty expenses described above. In the first quarter we recognized expenses relating to two batch failures.

Excess capacity

Excess capacity was $2.7 million in the period ended March 31, 2024, compared to zero expenses in the period ended March 31, 2023. The $2.7 million increase is due to the labor and manufacturing overhead costs incurred, above the amount of these costs absorbed in cost of sales as part of standard costs, because our facility was staffed to produce Omisirge that was not sold during the first quarter of 2024. In the period ending March 31, 2023, there was no excess capacity and no cost of sales because Omisirge had not yet received marketing approval from the FDA.

Research and development expenses, net

Research and development expenses, net, decreased by approximately $5.9 million to $2.9 million in the three months ended March 31, 2024 from $8.9 million in the three months ended March 31, 2023. The decrease was attributable mainly to the change in reporting of $4.2 million, moving indirect manufacturing, quality related expenses and medical affairs expenses to selling, general and administrative expenses (SG&A) and direct manufacturing and quality expenses to cost of sales, a $2.0 million decrease associated with the discontinuation of development of our engineered NK cell therapy pipeline, a $0.3 million in decreased spending associated with the Phase 3 clinical trial of Omisirge, including a decrease in payments for manufacturing services, partially offset by workforce reduction expenses of $0.5 million and a decrease of $0.4 million in IIA income.

Selling, general and administrative expenses

Our selling, general and administrative expenses increased by approximately $8.7 million to $19.5 million in the three months ended March 31, 2024, from $10.7 million in the three months ended March 31, 2023. The increase was attributable mainly to increased costs relating to the RSA singed March 27, 2024 of $6.2 million, accrued expenses of $1.4 million related to the RIF announced on March 27, 2024, the change in reporting, including supply chain expenses of $2.0 million including personnel costs and other indirect supply chain, quality expenses and medical affairs expenses, and an increase in General and administrative expenses of $0.7 million, offset by Sales and marketing expenses decrease by approximately $1.7 million due to launch readiness activities for Omisirge in Q1 2023 that were not incurred in the current period.

Financial income, net

Financial income, net, were $5.2 million of income in the three months ended March 31, 2024, compared to $1.4 million of expenses in the three months ended March 31, 2023. The $6.6 million change in financial income was primarily due to $3.0 million of income related to the valuation of warrants liability, and $3.0 million decrease of valuation of our secured convertible senior notes issued in December 2022.

Critical Accounting Policies and Estimates

We have been devoting substantially all of our efforts to support the commercialization of Omisirge and in pursuit of a strategic transaction. In the course of such activities and our research and development activities, we have sustained operating losses and we expect such losses to continue in the foreseeable future. Our accumulated deficit as of March 31, 2024 was $499.8 million and negative cash flows from operating activities during the year ended March 31, 2024 was $23.0 million. We were unsuccessful in our efforts to seek a strategic transaction and as a result, we are undertaking our restructuring process. Based on our assessment of our financial position at the date of issuance of our consolidated financial statements for the quarter ended March 31, 2024, we believe that our existing capital resources will not be adequate to satisfy our expected liquidity requirements through the end of the second quarter of 2024.

While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere in this quarterly report on Form 10-Q, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (i) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (ii) changes in the estimate could have a material impact on our financial condition or results of operations.

Convertible notes

On December 12, 2022, we entered into a Loan and Security Agreement, pursuant to which Gamida Cell Inc. issued $25.0 million in aggregate principal amount in a convertible senior note, or the 2022 Note. The 2022 Note bears interest of 7.5% which will be paid on a quarterly basis and monthly principal installment payments. The 2022 Note are exchangeable, at the option of the lenders, into ordinary shares at an exchange rate of 0.52356 ordinary shares per $1.00 principal amount, together with a make-whole premium equal to all accrued and unpaid and remaining coupons due through the maturity date. The exchange rate is subject to adjustment in the event of ordinary share dividends, reclassifications and certain other fundamental transactions affecting the ordinary shares.

We have elected the fair value option to measure the 2022 Note upon issuance, in accordance with ASC 825-10. Under the fair value option, the 2022 Note is measured at fair value each period with changes in fair value reported in the statements of operations. According to ASC 825-10, changes in fair value that are caused by changes in the instrument-specific credit risk will be presented separately in other comprehensive income (loss).

Share-based compensation

We account for share-based compensation in accordance with ASC No. 718 “Compensation - Stock Compensation,” or ASC No. 718, which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the award is recognized as an expense over the requisite service periods, which is the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service. We selected the binominal option-pricing model as the most appropriate fair value method for our option awards. The fair value of restricted shares, is based on the closing market value of the underlying shares at the date of grant. Since our initial public offering, the fair value of our ordinary shares has been determined based on the closing price of our ordinary shares on the Nasdaq Global Market. We recognize forfeitures of equity-based awards as they occur.

Known Trends, Events and Uncertainties

We are subject to risks and uncertainties as a result of adverse geopolitical and macroeconomic events, including the ongoing conflict between Israel and Hamas, an Islamist terrorist group that controls the Gaza Strip, and uncertain market conditions, including higher inflation and supply chain disruptions, which could have a material impact on our business and financial results. The current scope of the conflict involving Israel is proximate to our sole cell therapy manufacturing facility at Kiryat Gat, which creates uncertainty about our ability to continue to produce Omisirge either because of an attack on or near our facility or because certain of our personnel may be called for military service or otherwise unable to reach the facility. In addition, the conflict involving Israel may impact the flow of air travel into and out of Ben Gurion Airport in Tel Aviv, which would adversely impact our ability to import starting materials into Israel to manufacture Omisirge and our ability to export Omisirge manufactured for a given patient.

Recent Accounting Pronouncements

See note 2 of the accompanying unaudited consolidated financial statements for the three months ended March 31, 2024 for a discussion of recent accounting pronouncements.

Internal Control over Financial Reporting

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, could have a material adverse effect on our business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting, which could have a material adverse effect on the price of our ordinary shares. Pursuant to Section 404 and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, our management is required to report on the effectiveness of our internal control over financial reporting. We have completed the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal controls. Based on this process, our management concluded that our internal controls over financial reporting were effective as of March 31, 2024.

Liquidity and Capital Resources

Liquidity

Since our inception, we have incurred losses and negative cash flows from our operations. For the quarters ended March 31, 2024 and March 31, 2023, we incurred a net loss of $19.9 million and $21.0 million, respectively, and net cash of $23.0 million and $22.3 million, respectively, was used in our operating activities. As of March 31, 2024 and March 31, 2023 we had negative working capital of $(61.3) million and $29.3 million, respectively, and an accumulated deficit of $499.8 million and $479.8 million, respectively. Our principal sources of liquidity as of March 31, 2024 and March 31, 2023 consisted of cash and cash equivalents of $24.8 million and $46.6 million, respectively.

At-the-Market Ordinary Shares Offering

On June 5, 2023, we entered into an Amended and Restated Open Market Sale Agreement^SM, or the Sales Agreement, under which we have the option to offer and sell our ordinary shares having an aggregate gross sales price of up to $50.0 million from time to time through Jefferies LLC. Pursuant to the Sales Agreement and upon delivery of notice by the Company, Jefferies may sell our ordinary shares under an “at the market offering.” During the quarter ended March 31, 2024, we sold 9,362,420 ordinary shares for gross proceeds of $3.1 million, resulting in net proceeds of $3.0 million after deducting sales commissions and offering expenses of $0.1 million. On May 9, 2024, by filing the post-effective amendment to the registration statement on Form S-3 (Registration No. 333-275579), we terminated the offerings of the securities under the Sales Agreement.

Highbridge Financings

On February 16, 2021, Gamida Cell Inc. sold $75 million of the 2021 Notes to certain funds managed by Highbridge Capital Management, LLC, which funds were accredited investors and qualified institutional buyers. The notes were sold at 100% of the principal amount thereof, are senior unsecured obligations of ours and will accrue interest at a rate of 5.875% per year and are governed by an indenture. Subject to certain limitations, the holders of the notes can elect to exchange the notes for our ordinary shares at an initial exchange rate of 56.3063 shares per $1,000 principal amount of notes (equivalent to an exchange price of $17.76 per share). The sale was made in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act. In connection with our restructuring process, all of the $75 million outstanding principal amount (plus accrued and unpaid interest, fees and expenses) under the 2021 Notes will be exchanged for all of the equity interests to be issued to Highbridge in the newly reorganized company.

On December 12, 2022, we and our wholly owned subsidiary, Gamida Cell Inc., entered into the Loan Agreement, pursuant to which Gamida Cell Inc. borrowed an aggregate principal amount of $25.0 million through the issuance and sale of the 2022 Note to a fund managed by Highbridge Capital Management, LLC. The 2022 Note is exchangeable, at the option of the lenders, into our ordinary shares at an exchange rate of 0.52356 ordinary shares per $1.00 principal amount, together with a make-whole premium equal to all accrued and unpaid and remaining coupons due through the maturity date. The exchange rate is subject to adjustment in the event of ordinary share dividends, reclassifications and certain other fundamental transactions affecting the ordinary shares. We have fully and unconditionally guaranteed the obligations of Gamida Cell Inc. under the Loan Agreement and the 2021 Note and the obligations are secured by substantially all of our and our subsidiary’s assets. The 2022 Note will mature on December 12, 2024, unless earlier repurchased, redeemed or exchanged in accordance with the terms, and bear interest at the annual rate of 7.50%, payable on a quarterly basis, with the interest rate increasing to 12.00% at any time upon any event of default under the Loan Agreement or certain failures to register the resale of the ordinary shares issuable pursuant to the Note. As part of our restructuring process, we expect that Highbridge will provide a new secured debt facility on completion of the restructuring that will include the remaining principal amount under the 2022 Note.

The indenture governing the 2021 Note and Loan Agreement both contain customary representations and warranties and covenants, including a $20.0 million minimum liquidity covenant and certain negative covenants restricting dispositions, changes in business and business locations, mergers and acquisitions, indebtedness, issuances of preferred stock, liens, collateral accounts, restricted payments, transactions with affiliates, compliance with laws, and issuances of capital stock. Most of these restrictions are subject to certain minimum thresholds and exceptions. Certain of the negative covenants terminate with respect to the Loan Agreement when less than $5.0 million of principal amount is outstanding under the 2022 Notes.

Capital Resources

Overview

Through March 31, 2024, we have financed our operations primarily through private placements and public offerings of equity securities, the 2021 Note, the 2022 Note and through the grants received from the IIA. We have also entered into an Amended & Restated Open Market Sale Agreement^SM with Jefferies LLC under which we have the option to offer and sell our ordinary shares having an aggregate gross sales price of up to $50.0 million from time to time under an “at the market offering” through Jefferies LLC, or our ATM facility. During the three months ended March 31, 2024, we sold 9,362,420 ordinary shares for net proceeds of $3.0 million, after deducting sales commissions under our ATM facility. In addition, on April 19, 2023, we entered into an underwritten public offering of 17,500,000 ordinary shares and 17,500,000 accompanying warrants at a public offering price of $1.30 per ordinary share and accompanying warrant with Piper Sandler & Co., for net proceeds of $21.1 million, after deducting underwriting discounts and commissions and estimated offering expenses. We believe our capital resources are insufficient to support our ongoing operations, and we have initiated a restructuring process that we expect to be completed by the end of the second quarter of 2024.

Cash flows

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

Net cash used in operating activities

The cash used in operating activities during the aforementioned periods resulted primarily from our net losses incurred during such periods, as adjusted for non-cash charges and measurements and changes in components of working capital. Adjustments to net losses for non-cash items consisted mainly of share-based compensation, as well as the fair value impacts on our warrants liability and on the 2022 convertible note.

Net cash used in operating activities was $23.0 million during the three months ended March 31, 2024, compared to $22.3 million used in operating activities during the three months ended March 31, 2024. The $0.7 million increase in operating cash used was attributable primarily costs associated with our strategic review and restructuring processes.

Net cash used in investing activities was $0.1 million during the three months ended March 31, 2024, compared to $0.8 million provided by investing activities during the three months ended March 31, 2023. The $0.7 million decrease is primarily related to a decrease of purchases of property, plant, and equipment in the current period.

Net cash provided by financing activities was $1.3 million during the three months ended March 31, 2024, compared to $5.2 million during the three months ended March 31, 2023. The $3.9 million decrease is related to a decrease in net proceeds from the sale of shares through the ATM facility in the current period and $1.7 million used on principal payments for the 2022 convertible note.

Funding Requirements

Although it is difficult to predict future liquidity requirements, we believe that our current total existing funds will not be sufficient to support our ongoing operating activities, including the restructuring process, through the end of the second quarter of 2024. These conditions raise substantial doubt about our ability to continue as a going concern, and we have undertaken our restructuring process to maximize value for our stakeholders. If we complete our restructuring process as currently contemplated, by the end of the second quarter of 2024, we will exist as a private operating company that is a wholly owned subsidiary of Highbridge. If we are unable to complete our restructuring process by the end of the second quarter of 2024, we will likely enter involuntary restructuring proceedings in Israel.

For more information as to the risks associated with our operational needs, see “Item 1A: Risk Factors – Risks Related to Our Financial Position and Restructuring Process.”

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures, as such term is defined in Rule 13a under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2024 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 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 us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Our management, with participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2024 to provide reasonable assurance that the information required to be disclosed by us in this Quarterly Report was (a) reported within the time periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive, financial and accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2024 based on the framework in Internal Control-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 2024.

Attestation Report of the Registered Public Accounting Firm

Because we are a non-accelerated filer, this Quarterly Report on Form 10-Q does not include an attestation report of our registered public accounting firm.

Cybersecurity

For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part II. Item 1A. Risk Factor in this Quarterly Report on Form 10-Q, including “—If our information technology systems or those third parties upon which we rely or our data, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.”

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Internal Controls

In designing and evaluating the disclosure controls and procedures, management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. 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. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become party to litigation or other legal proceedings that we consider to be part of the ordinary course of business.

On March 27, 2024, pursuant to Part 10 to the Israeli Restructuring and Financial Rehabilitation Law, 2018, Gamida Cell Ltd. filed a voluntary proceeding for restructuring in the District Court of Beersheba, Israel, or the Restructuring Proceeding, to restructure our outstanding debt and equity, or the Debt Arrangement. On May 8, 2024, the District Court entered a judgment in the Restructuring Proceeding, which, among other things, (i) approved the Debt Arrangement and the other terms and conditions of the Company’s restructuring as set forth in the Restructuring Support Agreement, dated March 26, 2024, among Gamida Cell Ltd., Gamida Cell Inc., and certain funds managed by Highbridge Capital Management LLC, such funds, collectively referred to herein as Highbridge. The District Court’s approval was subject to an amendment of section 5.3 of the Debt Arrangement improving the terms of the contingent value rights, or CVRs, in accordance with the District Court expert’s recommendation; and it rejected all of the requests and claims made by certain shareholders of the Company.

On April 22, 2024, Abigail Jenkins, solely in her capacity as a duly authorized foreign representative, or the Foreign Representative, of Gamida Cell Ltd. filed a petition for recognition for relief under Chapter 15 of Title 11, or Chapter 15, of the Bankruptcy Code in the U.S. Court. The Foreign Representative sought recognition of the Debt Arrangement commenced under Israel’s Bankruptcy and Economic Rehabilitation Law, 5778-2018 and Economic Rehabilitation Regulations, 5779-2019 pending before the District Court in Beersheba, or the Israeli Court, Case No. 63461-03-24, as (i) a foreign main proceeding or, (ii) in the alternative, a foreign nonmain proceeding. The Foreign Representative additionally sought recognition and enforcement of the Israeli Court’s order approving the Debt Arrangement in Israel. On May 15, 2024, the U.S. Court issued two orders: (i) granting recognition of the Israeli Restructuring Proceeding as the foreign main proceeding on a final basis and (ii) recognizing and enforcing the Israeli Court’s order approving the Debt Arrangement in the territorial jurisdiction of the United States.

Item 1A. Risk Factors.

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, in addition to the other information set forth in this Quarterly Report, including the consolidated financial statements and the related notes included elsewhere in this Quarterly Report, before purchasing our ordinary shares. If any of the following risks actually occurs, our business, financial condition, cash flows and results of operations could be negatively impacted. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Summary of Selected Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to, the following: