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 ~~November~~August 11, ~~2022,~~2023, the registrant had ~~73,033,504~~73,335,110 shares of common stock, $0.0001 par value per share, outstanding.

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Quarterly Report, including statements regarding our future results of operations and financial position, our business strategy, the realization of our order backlog, plans and prospects, existing and prospective products, research and development costs, timing and likelihood of success, market growth, trends, events and the objectives of management for future operations and results, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include:

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report and the information incorporated by reference herein will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.

You should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This Quarterly Report also contains estimates, projections and other information concerning our industry, our business, and the markets for our products, including data regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties.


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	24,847		$	28,397		$	7,909		$	7,412
Accounts receivable		775			731			799			1,233
Grants receivable		4,789			9,172			5,119			3,359
Inventories		18,411			13,503			5,688			6,865
Prepaid expenses and other current assets		5,876			14,203			5,163			4,627
Total current assets		54,698			66,006			24,678			23,496
Property and equipment, net		55,152			58,515			56,927			59,335
Operating lease right-of-use assets		1,627			2,016			1,202			1,520
Intangible assets, net		13,980			15,680			12,280			13,413
Other assets		5,060			4,084			788			5,560
Total assets		130,517		$	146,301		$	95,875		$	103,324
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable, including due to related party of $458 and $147, respectively	$	7,969		$	10,066
Accrued expenses and other current liabilities, including due to related party of $2,540 and $5,664, respectively		12,256			13,660
Accounts payable, including due to related party of $649 and $135, respectively							$	9,052		$	4,131
Accrued expenses and other current liabilities, including due to related party of $2,853 and $2,809, respectively								7,277			10,468
Deferred income		28,895			32,370			26,300			27,793
Operating lease liabilities		578			541			546			597
Convertible promissory notes held at fair value, including due to related party of $20,852 and $27,128, respectively		25,852			27,128
Notes payable		4,249			1,950
Warrant liabilities		—			15,821
Convertible promissory notes, including due to related party of $24,376 and $22,082, respectively								28,327			27,403
Notes payable, including due to related party of $1,960 and $2,007, respectively at December 31, 2022								5,039			7,954
Total current liabilities		79,799			101,536			76,541			78,346
Deferred income		8,150			8,914			9,860			9,544
Operating lease liabilities		1,095			1,519			697			967	��
Notes payable, including due to related party of $14,273 and $16,523, respectively		26,716			35,131
Notes payable, including due to related party of $13,973 and $13,659, respectively								27,266			25,342
Warrant liabilities		590			—			—			130
Earnout liability		3,376			—			—			563
Other long-term liabilities, including due to related party of $1,244 and $2,416, respectively		3,912			5,588
Other long-term liabilities, including due to related party of $0 and $674, respectively								136			898
Total liabilities		123,638			152,688			114,500			115,790
Commitments and contingencies (Note 19)
Commitments and contingencies (Note 18)
Noncontrolling interest		10,474			11,855			12,905			12,590
Legacy Gelesis redeemable convertible preferred stock, $0.0001 par value – zero shares issued and outstanding at September 30, 2022; 51,730,762 shares authorized at December 31, 2021; and 48,566,655 shares issued and outstanding at December 31, 2021		—			311,594
Stockholders’ deficit:
Preferred stock, $0.0001 par value - 250,000,000 shares authorized at September 30, 2022; zero shares issued and outstanding at September 30, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value – 900,000,000 shares authorized at September 30, 2022; 72,983,488 shares issued and outstanding at September 30, 2022; 125,961,571 shares authorized at December 31, 2021; 6,248,192 shares issued and outstanding at December 31, 2021		7			1
Preferred stock, $0.0001 par value - 250,000,000 shares authorized at June 30, 2023 and December 31, 2022; zero shares issued and outstanding at June 30, 2023 and December 31, 2022								—			—
Common stock, $0.0001 par value – 900,000,000 shares authorized at June 30, 2023 and December 31, 2022; 73,335,110 and 73,325,022 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively								7			7
Additional paid-in capital		295,333			(64,549	)		303,686			297,468
Accumulated other comprehensive (loss) income		(810	)		219
Accumulated other comprehensive income								339			104
Accumulated deficit		(298,125	)		(265,507	)		(335,562	)		(322,635	)
Total stockholders’ deficit		(3,595	)		(329,836	)		(31,530	)		(25,056	)
Total liabilities, noncontrolling interest, redeemable convertible preferred stock and stockholders’ deficit	$	130,517		$	146,301		$	95,875		$	103,324

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


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Revenue:
Product revenue, net	$	6,443		$	3,014		$	22,930		$	8,293		$	1,107		$	8,973		$	2,860		$	16,487
Licensing revenue		209			—			209			—
Total revenue, net		6,652			3,014			23,139			8,293			1,107			8,973			2,860			16,487
Operating expenses:
Costs of goods sold, including related party expenses of $266 and $121, respectively, and $926 and $332, respectively		3,616			2,763			13,315			7,584
Selling, general and administrative, including related party expenses of $126 and $124, respectively, and $376 and $369, respectively		17,032			24,725			87,188			50,642
Research and development, including related party expenses of $44 and $52, respectively, and $163 and $182, respectively		3,365			3,238			16,298			13,206
Costs of goods sold, including related party expenses of $44 and $359, respectively, and $115 and $659, respectively														498			4,786			1,735			9,699
Selling, general and administrative, including related party expenses of $127 and $125, respectively, and $255 and $250, respectively														7,456			32,450			15,743			70,156
Research and development, including related party expenses of $61 and $57, respectively, and $120 and $119, respectively														2,582			5,523			6,219			12,933
Amortization of intangible assets		567			567			1,700			1,700			567			566			1,133			1,133
Total operating expenses		24,580			31,293			118,501			73,132			11,103			43,325			24,830			93,921
Loss from operations		(17,928	)		(28,279	)		(95,362	)		(64,839	)		(9,996	)		(34,352	)		(21,970	)		(77,434	)
Change in the fair value of earnout liability		2,814			—			55,495			—			—			18,812			563			52,681
Change in the fair value of convertible promissory notes		(852	)		—			(1,008	)		—			2,672			—			7,631			(156	)
Change in the fair value of warrants		540			(2,231	)		6,624			(9,282	)		—			2,600			130			6,084
Interest expense, net		(164	)		(361	)		(485	)		(949	)		(565	)		(186	)		(1,457	)		(321	)
Other income, net		1,441			141			2,371			1,032			208			613			2,292			930
Loss before income taxes		(14,149	)		(30,730	)		(32,365	)		(74,038	)		(7,681	)		(12,513	)		(12,811	)		(18,216	)
Provision for income taxes		—			—			—			17			—			—			16			—
Net loss		(14,149	)		(30,730	)		(32,365	)		(74,055	)		(7,681	)		(12,513	)		(12,827	)		(18,216	)
Accretion of Legacy Gelesis senior preferred stock to redemption value		—			(23,111	)		(37,934	)		(139,237	)		—			—			—			(37,934	)
Accretion of noncontrolling interest put option to redemption value		(80	)		(95	)		(253	)		(285	)		—			(85	)		—			(173	)
Income allocated to noncontrolling interest holder														—			—			(100	)		—
Net loss attributable to common stockholders	$	(14,229	)	$	(53,936	)	$	(70,552	)	$	(213,577	)	$	(7,681	)	$	(12,598	)	$	(12,927	)	$	(56,323	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.20	)	$	(9.61	)	$	(1.02	)	$	(38.19	)	$	(0.10	)	$	(0.17	)	$	(0.18	)	$	(0.83	)
Weighted average common shares outstanding—basic and diluted		72,772,627			5,615,192			69,349,679			5,592,931			73,334,861			72,423,043			73,329,685			67,609,838

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

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF NONCONTROLLING INTEREST, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ ~~DEFICIT~~EQUITY (DEFICIT)

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


	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2022			2021			2023			2022
Cash flows from operating activities:
Net loss	$	(32,365	)	$	(74,055	)	$	(12,827	)	$	(18,216	)
Adjustments to reconcile net loss to net cash used in operating activities:				.
Amortization of intangible assets		1,700			1,700			1,133			1,133
Reduction in carrying amount of right-of-use assets		343			133			322			265
Depreciation		2,133			591			3,509			1,440
Stock-based compensation		26,539			4,180			4,475			21,965
Issuance of common stock commitment shares		500			—
Gain on sales of common stock		(1	)		—
Unrealized loss on foreign currency transactions		1,305			132			(71	)		672
Non-cash interest (income) expense		(29	)		65			(325	)		(3	)
Gain on CMS amendment		(209	)		—
Loss on One S.r.l. amendment		278			—
Accretion on marketable securities		—			(1	)
Change in the fair value of earnout liability		(55,495	)		—			(563	)		(52,681	)
Change in the fair value of warrants		(6,624	)		9,282			(130	)		(6,084	)
Change in the fair value of convertible promissory notes		1,008			—			(7,631	)		156
Change in fair value of One S.r.l. call option		(808	)		601			(677	)		865
Change in fair value of interest rate swap contract		(758	)		95			—			—
Changes in operating assets and liabilities:
Account receivables		(745	)		618
Accounts receivable								434			(1,473	)
Grants receivable		3,407			(1,145	)		(1,691	)		(1,078	)
Prepaid expenses and other current assets		5,246			(5,981	)		(473	)		5,048
Inventories		(4,928	)		(4,470	)		1,149			(5,258	)
Other assets		229			(5,137	)		4,834			(536	)
Accounts payable		(1,758	)		3,278			4,977			11,486
Accrued expenses and other current liabilities		2,742			16,161			(2,737	)		571
Operating lease liabilities		(341	)		(123	)		(325	)		(263	)
Deferred income		(2,799	)		34,542			(1,372	)		2,300
Other long-term liabilities		(23	)		(6,861	)		(90	)		(81	)
Net cash used in operating activities		(61,453	)		(26,395	)		(8,079	)		(39,772	)
Cash flows from investing activities:
Purchases of property and equipment		(8,473	)		(18,383	)		(242	)		(5,067	)
Maturities of marketable securities		—			24,000
Net cash (used in) provided by investing activities		(8,473	)		5,617
Net cash used in investing activities								(242	)		(5,067	)
Cash flows from financing activities:
Proceeds from Business Combination, net of transaction costs		70,479						—			70,478
Principal repayment of notes payable		(1,342	)		(226	)		(1,585	)		(1,119	)
Repayment of convertible promissory notes		(27,284	)		—			—			(27,284	)
Proceeds from convertible promissory notes		25,000			—
Proceeds from issuance of promissory notes (net of issuance costs of $0 and $207, respectively)		—			5,679
Proceeds from issuance of convertible promissory notes and warrants								10,350			—
Proceeds from exercise of share-based awards								—			110
Proceeds from exercise of warrants		4			10			—			4
Proceeds from exercise of share-based awards		110			9
Proceeds from sales of common stock, net of issuance costs		39			—
Net cash provided by financing activities		67,006			5,472			8,765			42,189
Effect of exchange rates on cash		(630	)		(816	)		53			(406	)
Net decrease in cash		(3,550	)		(16,122	)
Net increase (decrease) in cash								497			(3,056	)
Cash and cash equivalents at beginning of year		28,397			48,144			7,412			28,397
Cash and cash equivalents at end of period	$	24,847		$	32,022		$	7,909		$	25,341
Noncash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expense	$	958		$	2,086		$	181		$	1,027
Deferred financing costs included in accounts payable and accrued expense	$	—		$	564
Recognition of earnout liability	$	58,871		$	—		$	—		$	58,871
Recognition of private placement warrant liability	$	8,140		$	—		$	—		$	8,140
Acquisitions of right-of-use assets under operating leases	$	101		$	190
Supplemental cash flow information:
Interest paid on notes payable	$	233		$	199		$	151		$	181

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

Nature of the Business and Basis of Presentation

Nature of Business

Gelesis Holdings, Inc., or the Company, formerly known as Capstar Special Purpose Acquisition Corp. or “CPSR”, is a ~~commercial stage~~consumer-centered biotherapeutics company incorporated under the laws of the State of Delaware. The Company aims to transform weight management through proprietary ~~biomimetic~~ hydrogel technology, inspired by the compositional and mechanical properties of raw vegetables. Since its inception, the Company has devoted substantially all of its efforts to business planning, licensing technology, research and development, commercial activities, recruiting management and technical staff and raising capital and has financed its operations through the issuance of redeemable convertible preferred and common stock, a license and collaboration agreement, supply and distribution agreements, long-term loans, convertible ~~bridge~~promissory note financings, and government grants.

The Company currently manufactures and markets ~~its first product,~~ Plenity® (the “~~Product~~“Product”), which is based on a proprietary hydrogel technology. ~~Plenity®~~Plenity received a de novo clearance from the ~~FDA~~ United States Food and Drug Administration (the “FDA”) on April 12, 2019 ~~as a Class II medical device~~ to aid in weight management ~~in adults with excess weight or obesity, Body Mass Index (BMI) of 25 to 40 kg/m~~2, when used in conjunction with diet and exercise. In ~~June 2019,~~2020, the Company received ~~approval to market Plenity in Europe through a~~its original Conformité Européenne (CE) ~~mark for~~certificate which allowed Plenity to be marketed as a ~~Class III~~ medical device ~~indicated for weight loss~~ in ~~overweight and obese adults with a Body Mass Index (BMI)~~Europe as well as the rest of ~~25-40 kg/m~~2~~, when used in conjunction with diet and exercise.~~the world where CE mark is acceptable. Plenity ~~which is~~has been commercially available by prescription in the United States ~~became available for first commercial sale in~~since May ~~2020 to a limited number of consumers.~~2020. In October 2020, availability was increased to test commercial interest and consumer experience. Activities associated with a full commercial launch of Plenity in the United States began in late 2021, and in February 2022,January 2023, the Company ~~launched~~made a 510 (k) submission to the ~~first national broad awareness media campaign for the product.~~FDA to switch Plenity from prescription (“Rx”) to over-the-counter (“OTC”).

On July 19, 2021, Gelesis, Inc. (together with its consolidated subsidiaries, “Legacy Gelesis”) entered into a Business Combination Agreement (as amended on November 8, 2021 and December 30, 2021, the “Business Combination Agreement”) with CPSR, a Delaware corporation and special purpose acquisition company, and CPSR Gelesis Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of CPSR (“Merger Sub”). On January 13, 2022, Legacy Gelesis, CPSR, and Merger Sub consummated the business combination (“Business Combination”) pursuant to the terms of the Business Combination Agreement. Pursuant to the Business Combination Agreement, on the closing date, (i) Merger Sub merged with and into Legacy Gelesis (the “Merger”), with Legacy Gelesis as the surviving company in the Merger, and, after giving effect to such Merger, Legacy Gelesis became a wholly-owned subsidiary of CPSR and (ii) CPSR changed its name to “Gelesis Holdings, Inc.” (together with its consolidated subsidiaries, “Gelesis Holdings”). The Business Combination, together with the PIPE Investment and the sale of the Backstop Purchase Shares, generated approximately $105 million in gross proceeds and $70.5 million in net ~~proceeds (See Note 3).~~proceeds. On January 14, 2022, Gelesis Holdings’ common stock and public warrants began trading on the New York Stock Exchange ~~("NYSE"~~(“NYSE”) under the symbols “GLS” and “GLS.W”, respectively. In January 2023, the Company’s public warrants were delisted from the NYSE due to low trading price. As of April 10, 2023, the NYSE Regulation reached a decision to delist the Company’s common stock and subsequently on April 26, 2023, the Company’s common stock was delisted from the NYSE.

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, CPSR has been treated as the ~~"acquired"~~“acquired” company for financial reporting purposes. This determination was primarily based on the Legacy Gelesis’ stockholders comprising a relative majority of the voting power of the combined company, the Legacy Gelesis’ operations prior to the acquisition comprising the only ongoing operations of Gelesis Holdings, the majority of Gelesis Holdings’ board of directors appointment by Legacy Gelesis, and Legacy Gelesis’ senior management comprising the entirety of the senior management of Gelesis Holdings. Accordingly, for accounting purposes, the consolidated financial statements of Gelesis Holdings ~~will~~ represent a continuation of the consolidated financial statements of Legacy Gelesis with the Business Combination being treated as the equivalent of Legacy Gelesis issuing stock for the net assets of CPSR, accompanied by a recapitalization. The net assets of CPSR ~~will be~~are stated at historical costs, with no goodwill or other intangible assets recorded.

~~Going Concern~~Planned Merger

~~The unaudited condensed consolidated financial statements have been prepared on~~On June 12, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with PureTech Health LLC, a ~~going concern basis,~~Delaware limited liability company (“Parent” or “PureTech”) and Caviar Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. The unaudited condensed consolidated financial statements do not include any adjustments relatingsubject to the ~~recoverability~~terms and ~~classification of recorded assets and liabilities that might be necessary should~~conditions set forth therein, the Company ~~be unable to continue~~will merge with and into Merger Sub (the “Merger”) with Merger Sub surviving the Merger as a ~~going concern.~~wholly-owned subsidiary of Parent. Both the Parent and Merger Sub are subsidiaries of PureTech Health PLC, which beneficially owns 16,883,102 shares of Company’s common stock and 259,345,750 shares of the Company’s warrants.

The Merger is conditioned upon i) the Company ~~has~~obtaining a ~~history~~company stockholder approval as defined in the Merger Agreement, ii) the absence of ~~incurring substantial operating losses and has financed~~a bankruptcy or insolvency proceeding or formal corporate action by the Company or its ~~operations primarily~~Subsidiaries to commence any such proceeding, iii) certain conditions related to the Company’s submission to the FDA, including that the Company shall not have

received a “Not Substantially Equivalent” letter or a notice identifying any deficiencies from the ~~issuance~~FDA and with respect to such deficiencies, limitations on the costs and time frame to rectify them, iv) the receipt of ~~equity, promissory notes, government grants,~~ ~~supply~~certain amendments to agreements with certain lenders of the Company to restructure the terms of the applicable debt, and ~~distribution agreements~~v) other customary closing conditions for a transaction of this type. The Company anticipates that at least one or more of these conditions will not be satisfied and ~~collaborations and licensing arrangements. Such operating losses and negative cash flows from operations have continued~~will necessitate a waiver or amendment of the condition by PureTech. If the Merger is completed, each outstanding share of Company Common Stock (other than (i) shares held in the ~~first three quarters~~treasury of ~~2022 and~~ the Company, ~~expects they will continue in~~(ii) shares owned by Parent or any of its direct or indirect subsidiaries (including Merger Sub) immediately before the ~~foreseeable future. Even with proceeds from~~effective time of the Merger, (iii) shares of restricted Company Common Stock issued pursuant to the Business Combination Agreement (the “BCA”), dated as of July 19, 2021, by and among the ~~aggregate proceeds~~Legacy Gelesis and CPSR, as amended and/or otherwise modified, and subject to all of the terms and conditions of the BCA in respect of the “Earn Out Shares” (“Earn Out Shares”) and (iv) shares held by Gelesis Stockholders will be converted automatically into and will thereafter represent only the right to receive $0.05664 in cash (the “Merger Consideration”), without interest and subject to applicable withholding taxes. Upon consummation of the Merger, the Company would become a subsidiary of the Parent and cease to be a publicly traded company.

In connection with entering into the Merger Agreement, and as described in Note 10, on June 12, 2023, the Company received $3.0 million from Parent through the issuance of convertible ~~promissory~~notes. The proceeds from this issuance of convertible notes are intended to provide the necessary funding required for the Company to continue its operations as a stand-alone entity through the consummation of the planned merger. Despite the planned Merger and funding provided by the ~~CMS amendment,~~issuance of convertible notes to Parent, the Company expects its cash on hand as of the date of the

condensed consolidated financial statements and collection of accounts and grants receivable ~~will only be~~are not sufficient to meet the Company’s obligations ~~into the second quarter of 2023, and not~~for at least twelve months beyond the date of issuance of the condensed consolidated financial ~~statements. However,~~statements, and may not be sufficient to continue operations through the ~~extension~~anticipated date of closing the Company's cash runway into the second quarter of 2023 is only achievable with the significant reduction of discretionary spending from prior levels, particularly with respect to the Company's discretionary sales and marketing activities and manufacturing and supply chain functions, and prior to considerations for anyMerger without additional bridge funding. These conditions raise substantial doubt about the Company’s ability to continue as a going ~~concern and may adversely impact the sale of Plenity.~~
concern.

The Company will need to raise additional capital in future periods to fund its operations. The Company will seek to raise necessary funds through a combination of equity issuances, debt financings, strategic collaborations and licensing arrangements, government grants, or other financing mechanisms. The Company’s ability to fund the completion of its ongoing and planned clinical studies, as well as its regulatory and commercial efforts, may be substantially dependent upon whether the Company can obtain sufficient funding at acceptable terms. If adequate sources of funding are not available to the Company, the Company may be required to delay, reduce or eliminate research and development programs, reduce or eliminate commercialization efforts, and reduce its headcount. Additionally, the Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of the full-scope product commercialization in targeted markets, clinical trials and preclinical studies, the impact of the COVID-19 pandemic on the Company’s supply chain and results of operations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and development by competitors of technological innovations.

Summary of Significant Accounting Policies

Basis of Presentation

The ~~Company’s~~unaudited interim condensed consolidated financial statements ~~are~~of the Company included herein have been prepared in accordance with accounting principles generally accepted in the United States ~~of America (“~~("U.S. ~~GAAP”~~GAAP")~~. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles~~ as found in the Accounting Standards Codification ~~(“ASC”~~("ASC") ~~and~~, Accounting Standards ~~Updates (“ASUs”~~Update ("ASU") ~~issued by~~of the Financial Accounting Standards Board ~~(“FASB”~~("FASB") and the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2022 and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 28, 2023.

The ~~Company consolidates those entities where it has~~unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements, and updated, as necessary, in this report. In the opinion of the Company's management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company's financial position as of June 30, 2023, the results of its operations, non-controlling interest, redeemable convertible preferred stock and stockholders' deficit for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023. Such adjustments are of a ~~direct~~normal and ~~indirect controlling financial interest based on either a variable interest model~~recurring nature. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 or ~~voting interest model.~~ for any future period.

The Company’s condensed consolidated financial statements include the accounts of the Company, its two wholly-owned subsidiaries and a variable interest entity (“VIE”), Gelesis S.r.l., in which the Company has a controlling interest and is the primary beneficiary. The noncontrolling interest attributable to the Company’s VIE is presented as a separate component from stockholders’ deficit in the condensed consolidated balance sheets and as a noncontrolling interest in the condensed consolidated statements of noncontrolling interest, redeemable convertible preferred stock and stockholders’ deficit. All intercompany balances and transactions have been eliminated in consolidation. Under the variable interest model, a controlling financial interest is determined based on which entity, if any, has (i) the power to direct the activities of the VIE that most significantly impacts the VIE’s economic performance and (ii) the obligations to absorb losses that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. The consolidation status of a VIE may change as a result of such reassessments. Changes in consolidation status are applied prospectively in accordance with U.S. GAAP.

~~Reclassification of Prior Year Presentation~~

~~Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations or financial position.~~

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. The Company assesses the above estimates on an ongoing basis; however, actual results could materially differ from those estimates.

Subsequent Event(s)

The Company considers events or transactions that occur after the balance sheet date but before the condensed consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company evaluated all events and transactions through the date these condensed consolidated financial statements were filed with the Securities and Exchange Commission (“SEC”) or were available to be issued.

8Business Combination

The Company accounts for its business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in the Company's consolidated financial statements from the date of acquisition.

As discussed in Note 1, on January 13, 2022, the Company consummated the Business Combination pursuant to the Business Combination Agreement with CPSR dated July 19, 2021, as amended on November 8, 2021 and December 30, 2021. The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, CPSR, who was the legal acquirer, was treated as the acquired company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of Gelesis issuing stock for the net assets of CPSR, accompanied by a recapitalization.

Fair Value of Financial Instruments

The guidance in FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or Level 2 to Level 3.

The Company’s earnout liability, private placement warrants, ~~and~~interest rate swaps, call option liability, and convertible promissory notes are recorded at fair value on a recurring basis. The carrying amount of accounts receivable, grants receivable, accounts payable and accrued expenses are considered a reasonable estimate of their fair value, due to the short-term maturity of these instruments. The carrying amount of notes payable is also considered to be a reasonable estimate of the fair value based on the nature of the debt and that the debt bears interest at the prevailing market rate for instruments with similar characteristics. The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above.

Earnout Liability: In connection with the Business Combination, Legacy Gelesis ~~Equityholders~~equity holders received the right to receive additional common stock upon the achievement of certain earnout targets. As the earnout consideration contains a settlement provision that precludes it from being indexed to the Company’s stock, it is classified as a liability held at fair value in accordance ASC 815 and the

instrument is adjusted to fair value at each reporting period. In determining the fair value of the earnout liability at inception and on a recurring basis, the Company utilizes the Monte Carlo simulation value model where the fair value of the earnout is the present value of a distribution of potential outcomes on a daily basis over the term of the earnout period.

Private Placement Warrant Liability: The Private Placement Warrants are recognized as liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities held at fair value and adjusts the instruments to fair value at each reporting period. In determining the fair value of the Private Placement Warrant liability, the Company utilized a modified Monte Carlo simulation value model at inception and on a recurring basis.

One ~~S.r.l.~~Srl Call Option: In connection with the October 2020 amended agreement with One ~~S.r.l.,~~Srl, the Company granted One a contingent call option to buy back the 10% ownership that the Company acquired in the 2019 One Amendment. The One ~~S.r.l.~~Srl call option was recorded as a liability held at fair value at the date of issuance and is remeasured at each subsequent reporting date with changes in fair value recorded in other income (expense) in the accompanying condensed consolidated statements of operations. Fair value is determined using a Black-Scholes option pricing model.

Convertible promissory notes: The convertible promissory notes issued in conjunction with the Company’s bridge financing arrangements from time to time were recognized at fair value at issuance and subsequent changes in fair value were recorded in the accompanying consolidated statements of operations (see Note 12). Fair value of the promissory notes is determined using a multiple scenario-based valuation method. The fair value of the hybrid instrument was determined by calculating the value of the instrument in each scenario “with” the respective conversion feature and “without”. The significant inputs used in estimating the fair value of the convertible promissory notes include the estimated discount rate, expected term, and the outcome probability with respect to each scenario.

Revenue Recognition

Product Revenue

The Company commercializes Plenity in the U.S. markets principally through synergistic partnerships with online pharmacies and telehealth providers, which in turn sell Plenity directly to patients based on prescriptions. Outside the U.S., the Company primarily seeks collaborations with strategic partners to market Plenity and obtain necessary regulatory approvals as necessary.

Product revenue is recognized by the Company in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services when the customer obtains control of the product, which occurs at a point in time, when the product is received by the Company's customers.

Reserves for Variable Consideration

Revenues from product sales are recorded as product revenue at the net sales price (transaction price), which includes estimates of variable consideration that are reimbursable to customers for which reserves are established and which result from (a) shipping charges to end-users, (b) pharmacy dispensing and platform fees, (c) merchant and processing fees, (d) promotional discounts offered by the Company to end-users, and (e) reserves for expected product quality returns. These reserves for contractual adjustments are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than the customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as the Company's historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company's best estimates of the amount of consideration to which the Company is entitled based on the terms of the contract(s). The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results in the future vary from the Company's estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. The Company has no plan to seek government or commercial payor reimbursements in the US or the overseas markets. Therefore, reserves for variable consideration do not contain any components related to government and payor rebates or chargebacks.

Product Returns

The Company generally does not accept customer returns, except for product quality related cases. The Company evaluates quality related returns and adjusts the corresponding product warranty reserves and liabilities at least quarterly and at the end of each reporting period.

Stock-Based Compensation

~~Effective January 1, 2020, the~~The Company accounts for all stock-based compensation awards granted to employees and non-employees in accordance with ASC 718, Compensation – Stock Compensation. The Company’s stock-based compensation ~~consist~~consists primarily of stock options. The

measurement date for share-based awards is the date of grant, and stock-based compensation costs are recognized as expense over the respective requisite service periods, which are typically the vesting period. The fair value of each stock option grant is estimated as of the date of grant using the Black-Scholes option-pricing model that requires management to apply judgment and make estimates, including:

•

exercise price: The exercise price is the fair market value on grant date, which shall mean the closing sale price of common stock, as reported on such market on that date (or if there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations);

•

expected volatility: As the Company was previously a privately-owned company, there is not sufficient historical volatility for the expected term of the options. Therefore, the Company used an average historical share price volatility based on an analysis of reported data for a peer group of comparable companies for which historical information is available. For these analyses, the Company selects companies with comparable characteristics to itself including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of its stock-based awards. The Company intends to consistently apply this process using representative companies until a sufficient amount of historical information regarding the volatility of its own share price becomes available;

•

risk-free interest rate, which is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption;

•

expected term, which is calculated using the simplified method, as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, as the Company has insufficient historical information regarding its stock options to provide a basis for an estimate. Under this approach, the weighted-average expected life is presumed to be

the average of the contractual term of ten years and the weighted-average vesting term of the stock options, taking into consideration multiple vesting tranches;

•

dividend yield, which is zero based on the fact that the Company never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

~~Since the adoption of ASU 2018-07 on January 1, 2020, the~~The measurement date for non-employee awards is the date of grant without changes in the fair value of the award. Stock-based compensation costs for non-employees are recognized as expense over the vesting period. Stock-based compensation expense is classified in the condensed consolidated statements of operations based on the function to which the related services are provided. Forfeitures are recorded as they occur.

~~Business Combination and Reverse Recapitalization~~

~~As discussed in Note 1, on January 13, 2022,~~Recently Issued Pronouncements

In March 2023, the ~~Company consummated~~FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements. This update requires leasehold improvements associated with common control leases be amortized by the ~~Business Combination pursuant~~lessee over the useful life of the leasehold improvements to the ~~Business Combination Agreement with CPSR dated July 19, 2021,~~ ~~as amended on November 8, 2021 and December 30, 2021. Concurrently with the execution~~common control group (regardless of the ~~Business Combination Agreement, CPSR entered into subscription agreements~~lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. However, if the lessor obtained the right to control the use of the underlying asset through a lease with ~~certain investors (the “PIPE Investors”). Pursuant to~~another entity not within the ~~subscription agreements,~~same common control group, the ~~PIPE Investors purchased an aggregate~~amortization period may not exceed the amortization period of ~~9,000,000~~ ~~shares of CPSR’s Class A~~the common ~~stock (the “PIPE Investment”) in a private placement at a price of $10.00~~ ~~per share for an aggregate purchase price of $90.0~~ ~~million. The PIPE Investment was consummated in connection~~control group. Further, leasehold improvements associated with the closing. On December 30, 2021, CPSR entered into a backstop agreement (the “Backstop Agreement”) with certain investors (the “Backstop Investors”). Pursuant to the Backstop Agreement, the Backstop Investors purchased an aggregate of ~~744,217~~ ~~shares of CPSR’s Class A~~ common ~~stock (“Backstop Purchase Shares”) in a private placement at a price of $10.00~~ ~~per share for an aggregate purchase price of $7.4~~ ~~million. Additionally, CPSR issued the Backstop Investors~~ ~~1,983,750~~ ~~shares of CPSR Class A common stock as additional consideration. The Backstop Agreement was consummated in connection with the closing.~~

~~The Business Combination was~~control leases be accounted for as a ~~reverse recapitalization~~transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. Those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment. This update is effective for annual periods beginning after December 15, 2023, and early application is permitted. This guidance should be applied either (i) prospectively to all new leasehold improvements recognized on or after the date of initial application; (ii) prospectively to all new and existing leasehold improvements recognized on or after the date of initial application, with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date; or (iii) retrospectively to the beginning of the period in which the entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening balance of retained earnings at the beginning of the earliest period presented in accordance with U.S. GAAP. Under this method of accounting, CPSR, who was the legal acquirer, was treated as the acquired company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of Gelesis issuing stock for the net assets of CPSR, accompanied by a recapitalization.

~~In connection with the Business Combination, aggregate transaction costs of $37.2~~ ~~million were incurred, consisting of underwriting, legal, and other professional fees, of which $22.3~~ ~~million were direct transaction costs incurred by CPSR, $9.5~~ ~~million were assumed liabilities from CPSR, and $5.4~~ ~~million were transaction costs incurred by Legacy Gelesis~~Topic 842. OfThe Company is evaluating the ~~Legacy Gelesis transaction costs, $2.7~~ ~~million was allocated~~potential impact of this update and does not intend to the Earnout Shares and expensed upon the Closing, based on the relative fair value of the Earnout Shares as compared to the other newly issued instruments as part of the Business Combination. The remaining transaction costs were recorded within additional paid-in capital on the accompanying condensed consolidated financial statements.early adopt this update for fiscal year 2023.

The following table summarizes the net proceeds from the Business Combination, as reconciled to the accompanying condensed consolidated statements of noncontrolling interest, redeemable convertible preferred stock and stockholder’s equity (deficit) and the condensed consolidated statements of cash flows:

Amount

Cash - CPSR trust and cash (net of redemptions)
$
7,558

Cash - PIPE Investment

90,000

Cash - Backstop Agreement

7,442

Gross proceeds
$
105,000

Less: transaction costs, advisory fees and liabilities paid

(34,522
)
Net proceeds from the Business Combination
$
70,478

~~Immediately prior to closing of the Business Combination, Legacy Gelesis common stock was split according to the exchange ratio of~~ ~~2.59~~, which was determined pursuant to the Business Combination Agreement and based on Legacy Gelesis’ implied price per share prior to the Business Combination. Upon closing of the Business Combination, holders received shares of common stock of the Company on a one-to-one basis. For periods prior to the Business Combination, in the accompanying condensed consolidated financial statements, the reported share and per share amounts have been retroactively converted (“Retroactive Application of

~~Recapitalization”) by applying the exchange ratio. The consolidated assets, liabilities and results of operations prior to the Business Combination are those of Legacy Gelesis~~

Immediately prior to the closing of the Business Combination, Legacy Gelesis redeemable convertible preferred stock converted into Legacy Gelesis common stock and was subsequently split according to the exchange ratio of ~~2.59. Upon closing of the Business Combination, holders received shares of common stock of the Company on a one-to-one basis.~~

~~Immediately prior to the closing of the Business Combination, Legacy Gelesis stock options and restricted stock units (“RSU”) were split according to the exchange ratio of~~ ~~2.59~~. Upon closing of the Business Combination, holders of Legacy Gelesis stock options received a stock option to purchase shares of the Company’s common stock on a one-to-one basis and holder of Legacy Gelesis RSUs received RSUs of the Company on a one-to-one basis.

Immediately prior to the closing of the Business Combination, Legacy Gelesis redeemable preferred stock warrants were converted into Legacy Gelesis common warrants and were subsequently split according to the exchange ratio of ~~2.59. Upon closing of the Business Combination, holders received rollover common stock warrants of the Company on a one-to-one basis.~~

~~Immediately prior to the closing of the Business Combination, Legacy Gelesis common warrants were split according to the exchange ratio of~~ ~~2.59. Upon closing of the Business Combination, holders received rollover common stock warrants of the Company on a one-to-one basis.~~

~~In addition, each holder of Legacy Gelesis common stock, Legacy Gelesis options and Legacy Gelesis warrants will receive a pro rata portion of up to~~ ~~23,482,845~~ ~~restricted earnout shares of Gelesis Holding’s common stock, which will be issued and vest in equal thirds if the trading price of the Company’s common stock is greater than or equal to $12.50, $15.00~~ ~~and $17.50, respectively, for any twenty (~~20~~) trading days within any thirty (~~30~~)-trading day period on or prior to the date that is~~ ~~five years~~ following the close of the Business Combination and will also vest in connection with any change of control transaction with respect to the Company if the applicable thresholds are met in such change of control transaction during the earnout period (each a “Triggering Event”).

~~The Company determined~~ ~~18,758,241~~ ~~earnout shares are considered a contingent consideration arrangement in accordance with ASC 815, and recorded a liability upon the closing of the Business Combination of $58.9~~ ~~million (see Note 14). The Company determined the remaining~~ ~~4,724,604~~ earnout shares, which pertain to Legacy Gelesis equity awards, are incremental compensation in accordance with ASC 718 and equity classified. The total fair value of incremental compensation cost at the close of Business Combination was $~~14.8~~ million which will be expensed according to the vesting terms of the original underlying equity awards. The total incremental compensation cost, pertaining to Legacy Gelesis equity awards which had previously vested, was $~~11.4~~ ~~million, of which $7.0~~ ~~million and $4.4~~ million was recognized immediately following the close of the Business Combination as expense in selling, general and administrative expense and research and development expense, respectively, in the accompanying condensed consolidated statements of operations.

~~Upon the closing of the Business Combination, the Company assumed~~ ~~13,800,000~~ ~~Public Warrants and~~ ~~7,520,000~~ Private Placement Warrants. The Company determined the Public Warrants qualified as equity instruments in accordance with ASC 815 and reclassified the Public Warrants from liability to equity classification and the carrying value of $~~7.1~~ ~~million was transferred to APIC on the accompanying condensed consolidated balance sheets. The Company determined the Private Placement Warrants met the definition of~~

~~a liability under ASC 815 and recorded a liability reflecting the fair value of the Private Placement Warrants of $8.1~~ ~~million. See Note 13 and Note 15 for further information on the Private Placement and Public Warrants, respectively.~~

4.3.

Fair Value Measurements

~~Liabilities that are~~Assets and liabilities measured at fair value on a recurring basis ~~and the level of the fair value hierarchy utilized to determine such fair values,~~ consisted of the following at ~~September~~June 30, ~~2022~~2023 (in thousands):

Fair Value Measurements

Fair Value

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Asset:

Interest rate swap contract (see Note 12)

$
702

$
—

$
702

$
—

Liabilities:

Convertible promissory notes (see Note 12)

25,852

—

—

25,852

Earnout liability (See Note 14)

3,376

—

—

3,376

Private placement warrant liability (see Note 13)

590

—

—

590

One S.r.l. call option
(see Note 11)

1,244

—

—

1,244

Total liabilities measured at fair value

$
31,062

$
—

$
—

$
31,062


			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset:
Interest rate swap contract (see Note 11)	$	757	$	—	$	757	$	—
Liabilities:
2022 convertible promissory notes (see Note 11)		20,114		—		—		20,114
2023 NPA ̶ Initial Close Note (see Note 11)		3,199		—		—		3,199
One S.r.l. call option (see Note 10)		—		—		—		—
Total liabilities measured at fair value	$	23,313	$	—	$	—	$	23,313

Fair Value Measurements

Fair Value

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Liabilities:

Convertible promissory notes (see Note 12)

$
27,128

$
—

$
—

$
27,128

Legacy Gelesis preferred stock warrants (See Note 13)

15,821

—

—

15,821

One S.r.l. call option
(see Note 11)

2,416

—

—

2,416

Total liabilities measured at fair value

$
45,365

$
—

$
—

$
45,365


			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset:
Interest rate swap contract (see Note 11)	$	800	$	—	$	800	$	—
Liabilities:
2022 promissory notes (see Note 11)		27,403		—		—		27,403
Earnout liability (see Note 13)		563		—		—	$	563
Private placement warrant liability (see Note 12)		130		—		—		130
One S.r.l. call option (see Note 10)		674		—		—		674
Total liabilities measured at fair value	$	28,770	$	—	$	—	$	28,770

The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Convertible Promissory Notes

Legacy Gelesis Redeemable Preferred Stock Warrants Liabilities

One S.r.l. Call Option

Earnout Liability

Private Placement Warrant Liability

Balance at December 31, 2021

$
27,128

$
15,821

$
2,416

$
—

$
—

Assumed upon Business Combination

—

—

—

—

8,140

Recognized upon Business Combination

—

—

—

58,871

—

Issuance of convertible promissory notes

25,000

—

—

—

—

Changes in fair value

1,008

926

(808
)

(55,495
)

(7,550
)
Foreign currency translation adjustment

—

—

(364
)

—

—

Conversion and exchange upon Business Combination

—

(16,747
)

—

—

—

Settlement

(27,284
)

—

—

—

—

Balance at September 30, 2022

$
25,852

$
—

$
1,244

$
3,376

$
590


	Convertible Promissory Notes			One S.r.l. Call Option			Earnout Liability			Private Placement Warrant Liability
Balance at December 31, 2022	$	27,403		$	674		$	563		$	130
Issuance of convertible promissory notes		5,000			—			—			—
Transaction price allocated to warrant issuance		(1,459	)		—			—			—
Changes in fair value		(7,631	)		(678	)		(563	)		(130	)
Foreign currency translation adjustment		—			4			—			—
Balance at June 30, 2023	$	23,313		$	—		$	—		$	—

There were no transfers into or out of level 3 instruments and/or between level 1 and level 2 instruments during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. The fair value of the interest rate swap contract is determined based on quoted price in markets that are not active for which significant inputs are observable either directly or indirectly and thus represents a level 2 measurement. The fair value

measurement of the convertible promissory notes, Legacy Gelesis preferred stock warrant liability, One ~~S.r.l.~~Srl call option liability, earnout liability and private placement warrant liability utilized inputs not observable in the market and thus represents a Level 3 measurement.

5.4.

Product Revenue ~~and~~ Reserve and ~~Allowances~~Allowance

The Company sells the Product principally to a limited number of customers consisting of telemedicine and online pharmacies, that in turn resell the Product to ~~end-user patients and healthcare providers. Patients are required to have a prescription in order to purchase the Product in the United States.~~consumers.

Revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 consisted of the following (in thousands):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2022

2021

2022

2021

Roman Health Pharmacy LLC
$
4,793

$
2,810

$
18,208

$
7,741

GoGoMeds

1,650

204

4,722

434

CMS

—

—

—

118

Total
$
6,443

$
3,014

$
22,930

$
8,293


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Roman Health Pharmacy LLC	$	608	$	6,916	$	1,623	$	13,415
GoGoMeds		496		2,057		1,157		3,072
CMS		—		—		77		—
Other		3		—		3		—
Total	$	1,107	$	8,973	$	2,860	$	16,487

Roman Health Pharmacy LLC ~~("Ro"~~(“Ro”)

~~On June 14, 2022, the Company entered into a Third Amended and Restated Supply and Distribution Agreement~~Net product revenue recognized with Ro, pursuant to which the parties amended their previous agreement that granted Ro exclusive telehealth distributor rights to sell Plenity in the United States in the mail order/online pharmacy channel. Pursuantrespective to the ~~amendment, the Company received~~Ro supply and distribution agreement was $~~15.0~~0.6 million ~~in cash from Ro as a pre-buy commitment to purchase units of Plenity, which was recorded to deferred income upon receipt~~and $1.6 million for the three and six months ended June 30, 2023,and $6.9 million and $13.4 million for the three and six months ended June 30, 2022, respectively, in the accompanying condensed consolidated ~~balance sheets.~~

statements of operations. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company recorded a deferred income balance of $~~27.7~~24.3 million and $~~31.0~~25.9 million, respectively, ~~in current liabilities~~ in the accompanying condensed consolidated balance sheets representing customer prepayment available to be used for future Product purchases with respect to Ro.

GoGoMeds ~~("GGM"~~(“GGM”)

~~At September~~Net product revenue recognized with respect to Specialty Medical Drugstore, LLC, d/b/a/ GoGoMeds, or GGM distribution agreement was $0.5 million and $1.2 million for the three and six months ended June 30, 2023 and $2.1 million and $3.1 million for the three and six months ended June 30, 2022, respectively, in the accompanying condensed consolidated statements of operations. At June 30, 2023 and December 31, ~~2021,~~2022, the Company recorded an accounts receivable balance of $0.8 million and $~~0.8~~1.1 million, respectively, prior to reserves and allowances, ~~(see below),~~ in the accompanying condensed consolidated balance sheets with respect to GGM.

CMS Bridging DMCC ~~("CMS"~~(“CMS”)

~~On August 4, 2022, the Company amended the License, Collaboration and Supply Agreement~~Net product revenue recognized with ~~CMS. Pursuant~~respect to the ~~amendment, the one-time regulatory approval milestone payment of~~CMS licensing and collaboration agreements was $~~5.0~~0.1 million ~~provided~~ for in the ~~original agreement became immediately payable. The discounted one-time regulatory approval milestone, which had a carrying value of $4.2~~ ~~million~~three and $~~4.1~~ ~~million as of August 4, 2022 and December 31, 2021,~~six months ended June 30, 2023, respectively, ~~included in other assets~~ in the accompanying condensed consolidated ~~balance sheets,~~statements of operations. There was ~~fully collected upon execution of the CMS amendment. In addition, the amendment expands the CMS Territory, and the Company also issued~~no product sales to CMS ~~a warrant to purchase up to~~ ~~400,000~~ ~~shares of common stock, par value $0.0001~~ ~~per share, at an exercise price of $0.01~~ ~~per share.~~

~~As a result of the amendment, during~~for the three and six months ended ~~September~~June 30, ~~2022, the Company recognized licensing revenue of $0.2~~ ~~million representing incremental consideration received by the Company for the additional territories granted to CMS in the accompanying condensed consolidated statement of operations, and $0.6~~ million of additional paid-in capital representing the fair value of the common stock warrants in the accompanying condensed consolidated balance sheets. The royalties and other commercial milestones will only be recognized in the periods in which the applicable subsequent sales occur.2022.

Reserves and Allowances

The following table summarizes the activity in the product revenue reserve and ~~allowance~~allowances during the ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~June 30, 2022 (in thousands):

2022

2021

Balance at December 31,

$
82

$
14

Provision related to product sales

1,595

376

Credits and payments made

(1,653
)

(365
)
Balance at September 30,

$
24

$
25


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Balance at beginning of period	$	7		$	238		$	23		$	82
Provision related to product sales		174			619			384			1,193
Credits and payments made		(177	)		(736	)		(403	)		(1,154	)
Balance at end of period	$	4		$	121		$	4		$	121

At ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, product related reserve and allowances comprised solely contractual adjustments owed to the Company’s telehealth and online pharmacy partners, which were netted to accounts receivable in the Company’s condensed consolidated balance sheets for the year. Through ~~September~~June 30, ~~2022,~~2023, there had been no product related reserves or allowances owed to other parties, including the federal and state governments or their agencies.

6.5.

Inventories

Inventories consisted of the following (in thousands):

September 30,

December 31,

2022

2021

Raw materials

$
9,027

$
8,074

Work in process

4,467

2,643

Finished goods

4,917

2,786

Total inventories

$
18,411

$
13,503


	June 30,			December 31,
	2023			2022
Raw materials	$	8,781		$	9,549
Work in process		4,434			4,695
Finished goods		5,395			5,955
Inventories, gross		18,610			20,199
Less: inventory reserves		(12,922	)		(13,334	)
Total inventories	$	5,688		$	6,865

In January 2023, the Company submitted a 510(k) application with the FDA to change the classification of Plenity from prescription only to OTC, which, if cleared by the FDA, would make Plenity available to consumers without the need for a prescription. If Plenity

is approved by the FDA as an OTC weight management aid, a portion of finished goods and raw material inventories with Rx labeling and marking information would become obsolete. Additionally, finished goods and work-in-process inventories with expiration dates ranging between July 2023 and March 2024 are subject to shelf-life limitations.

As of June 30, 2023, the Company estimated that approximately $5.0 million finished goods, $4.3 million work-in-progress and $3.6 million raw material inventories wouldn’t be sold or utilized. Therefore, the Company recorded an aggregate $12.9 million excess and obsolescence inventory reserves as a component of inventories on the accompanying consolidated balance sheet as of June 30, 2023.

7.6.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets ~~consisted~~consist of the following (in thousands):


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Prepaid expenses	$	566	$	982	$	207	$	314
Prepaid insurance		965		55		1,238		268
Prepaid manufacturing expenses		281		2,624
Prepaid contract research costs		173		262		72		189
Research and development tax credit		649		579		498		567
Value added tax receivable		2,411		5,633		825		2,036
Deferred financing costs		—		3,855
Income tax receivable		186		213		208		203
Investment tax credit		645		—		2,115		1,050
Prepaid expenses and other current assets	$	5,876	$	14,203	$	5,163	$	4,627

8.7.

Property and Equipment, Net

Property and equipment, net, ~~consisted~~consists of the following (in thousands):


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
Laboratory and manufacturing equipment	$	27,337		$	28,101		$	41,333		$	29,944
Land and buildings		9,695			10,404			8,562			10,673
Leasehold improvements		1,399			1,614			1,553			1,525
Computer equipment and software		512			463			825			811
Capitalized software		232			228			232			232
Construction in process		22,495			22,097			15,687			24,287
Property and equipment – at cost		61,670			62,907			68,192			67,472
Less accumulated depreciation		(6,518	)		(4,392	)		(11,265	)		(8,137	)
Property and equipment – net	$	55,152		$	58,515		$	56,927		$	59,335

The Company owns and operates commercial manufacturing and research and development facilities in Italy, including a 51,000 square foot facility, which the Company expects to further expand to an 88,600 square foot facility, as well as approximately 12 acres of land, where the Company initiated construction ofactivities for an additional 207,000 square foot facility. Both facilities are near the Town of Lecce in the Puglia region of Italy. Property and equipment classified as construction in process at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are related to the development of manufacturing lines that have not yet been placed into service at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Depreciation expense was approximately $~~0.3~~1.5 million and $~~0.2~~3.5 million for the three and six months ended ~~September~~June 30, ~~2022 and 2021, respectively,~~2023 and $~~2.1~~0.4 million and $~~0.6~~1.4 million for the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ respectively.

9.8.

Accrued Expenses

Accrued expenses and other current liabilities ~~consisted~~consist of the following (in thousands):


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Accrued payroll and related benefits	$	2,921	$	1,384	$	1,741	$	1,550
Accrued professional fees and outside contractors (including due to related party of $128 and $60, respectively)		4,482		4,359
Accrued professional fees and outside contractors (including due to related party of $75 and $153, respectively)						560		3,521
Accrued property, plant and equipment additions		481		1,257		182		378
Accrued inventory and manufacturing expense		362		128		71		1,020
Unpaid portion of acquisition of intangible asset and investment in related party (see Note 11)		2,412		5,604
Unpaid portion of One S.r.l. equity acquisition (see Note 10)						2,778		2,656
Tax payables		26		145		548		543
Deferred legal fees		738		738		738		738
Accrued interest		834		45		659		62
Total accrued expenses	$	12,256	$	13,660	$	7,277	$	10,468

~~10.~~9.

Other Long-Term Liabilities

Other long-term liabilities ~~consisted~~consist of the following (in thousands):


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Long-term tax liabilities	$	85	$	182	$	136	$	224
Contingent loss for research and development tax credits		2,583		2,990
One S.r.l. call option (see Note 11)		1,244		2,416
One S.r.l. call option (see Note 10)						—		674
Total other long-term liabilities	$	3,912	$	5,588	$	136	$	898

~~11.~~10.

Significant Agreements

Puglia ~~1 Grant~~Grants

In May 2020, the Company was awarded a grant by the Puglia region of Italy as an incentive to manufacture and carry out research and development activities in Italy (“PIA 1 Grant”)~~. The Company recognized grant income of $0.6~~ ~~million and $0.5~~ ~~million in other income, net, on~~, with the ~~accompanying condensed consolidated statements of operations during~~key underlying activity being the ~~nine months ended September 30, 2022 and 2021, respectively, related to the PIA 1 Grant, of which less than $0.1~~ ~~million and $0.5~~ ~~million was attributable to research and~~ development ~~expenses and investments in facilities and equipment, respectively, during the nine months ended September 30, 2022 and $0.2~~ ~~million was attributable to both research and development expenses and investments in facilities and equipment, respectively, during the nine months ended September 30, 2021. The Company recorded $5.0~~ ~~million and $6.4~~ ~~million of deferred income in the accompanying condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively, of which $0.7~~ ~~million and $0.9~~ ~~million was recorded as a current liability, respectively, as it is expected to be recognized within one year~~ of the ~~date of~~commercial facility to expand production capacity for the ~~accompanying condensed consolidated balance sheets. The Company collected~~ Product.~~zero~~ ~~proceeds from the PIA 1 Grant during the nine months ended September 30, 2022, and recorded a grant receivable of $4.7~~ ~~million and $5.4~~ ~~million in the accompanying condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively.~~

~~Puglia 2 Grant~~

In November 2020, the Company was awarded a second grant by the Puglia region of Italy as an incentive to manufacture and carry out research and development activities in Italy (“PIA 2 Grant”). , with the key underlying activity being the development of a second manufacturing line at the commercial facility to expand production capacity for the Product, and research and development activities targeting new gastrointestinal health indications.

The ~~Company~~following table represents amounts recognized ~~grant income of $1.3~~ ~~million and $1.0~~ ~~million in other income, net,~~ on the ~~accompanying condensed~~ consolidated statements of operations ~~during~~for the ~~nine~~three months ended ~~September~~June 30, 2023 and 2022 ~~and 2021, respectively, related~~in relation to the ~~PIA~~Puglia 1 Grant and Puglia 2 Grant ~~which was attributable to research, development expenses and qualified investments in manufacturing facilities.~~ (in thousands):


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2023			2022		2023		2022
PIA 1 Grant income	$	195		$	204	$	389	$	409
Income attributable to R&D expense		18			18		36		36
Income attributable to investments in facilities and equipment		177			186		353		373
PIA 2 Grant Income	$	56		$	874	$	393	$	1,062
Income attributable to R&D expense (reclassification)		(51	)		874		181		1,062
Income attributable to investments in facilities and equipment		107			—		212		—

The ~~Company has~~following table represents amounts recorded $~~3.2~~ ~~million and $3.7~~ ~~million of deferred income in~~on the ~~accompanying condensed~~ consolidated balance sheets at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, respectively, of which $0.3~~ ~~million~~2022 in relation to the Puglia 1 Grant and $~~0.4~~ million was recorded as a current liability, respectively, as it is expected to be recognized within one year of the date of the accompanying condensed consolidated balance sheets. The Company collected ~~zero~~ ~~proceeds from the PIA~~Puglia 2 Grant ~~during the nine months ended September 30, 2022, and has recorded a grant receivable of $~~(in thousands):~~4.3~~

~~million and $3.6~~ ~~in the accompanying condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022, $4.3~~ ~~million of the PIA2 grant receivable was expected to be collected in more than twelve months and was included in other assets in the accompanying condensed consolidated balance sheets.~~


	June 30,		December 31,
	2023		2022
PIA 1 Grant
Grant receivable	$	—	$	3,237
Deferred income		4,693		5,001
Current portion of deferred income		777		771

PIA 2 Grant
Grant receivable		5,119		122
Long-term grant receivable		—		4,732
Deferred income		3,347		3,502
Current portion of deferred income		427		420

One S.r.l. (“One”) Amended Patent License and Assignment Agreement

In ~~June 2019,~~October 2008 and December 2008, the Company ~~amended~~entered into a patent license and ~~restated an existing~~assignment agreement and master agreement with One, ~~(the “2019 One Amendment”),~~ the original inventor and owner of the Company’s core patents and a related party to the Company (see Notes 1918 and ~~20). Under the~~19), to license and subsequently purchase certain intellectual property to develop hydrogel-based product candidates. The One agreements were subsequently amended and restated ~~master agreement following this transaction, the Company eliminated certain future commercial milestone obligations~~in December 2014 (the “2014 One Amendment”), June 2019 (the “2019 One Amendment”), October 2020 (the “2020 One Amendment”) and ~~received a reduction in the percentage of royalties the Company was required to pay on future net sales. In return,~~August 2022 (the "2022 One received additional consideration consisting of new future milestones upon the commercial success of new medical indications and a contingently issuable warrant for redeemable convertible preferred stock. Additionally, the Company acquired a Amendment").10~~% equity interest in One in exchange for cash consideration.~~

~~The~~In conjunction with the 2019 One Amendment, the Company accounted for the reduction in royalties that the Company is required to pay on future net revenues ~~that resulted from the 2019 One Amendment~~ as an intangible asset under ASC 350, Intangibles – Goodwill and Other, which shall be amortized over its useful life, which was determined to be the earliest expiration of patents related to the underlying intellectual property in November 2028. Additionally, the Company acquired a 10% equity interest in One in exchange for cash consideration. The Company accounted for the acquisition of the 10% equity interest in One under ASC 323, Investments – Equity Method and Joint Ventures.

~~In connection with~~At June 30, 2023 and December 31, 2022, respectively, the ~~acquisition of the~~ 10~~% equity interest in One, the Company made a~~remaining undiscounted payment ~~of $2.9~~ ~~million~~obligations to One shareholders ~~during the nine months ended September 30, 2022. The Company had remaining undiscounted payments of €2.5~~ ~~million and €5.0~~ ~~million due to One at September 30, 2022 and December 31, 2021, respectively (approximately $2.4~~ ~~million and $5.7~~ ~~million due to One at September 30, 2022 and December 31, 2021, respectively). The remaining payments at September 30, 2022~~ were ~~recorded~~included in accrued expenses in the accompanying condensed consolidated balance sheets as it is expected to be settled within the next twelve months. None of the future milestones under the amended and restated master agreement, have been met, or are deemed to be probable of being met, at the transaction date or at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~A summary of the intangible asset activity that resulted from this transaction during the nine months ended September 30, 2022 is as follows (in thousands):~~

Intangible Assets

Intangible asset at relative fair value

$
15,564

Adjustment to record deferred tax liability

5,783

Carrying value of intangible asset at June 2019 acquisition date

21,347

Cumulative amortization expense

(5,667
)
Balance at December 31, 2021

$
15,680

Period amortization expense

(1,700
)
Balance at September 30, 2022

$
13,980

In ~~October~~conjunction with the 2020 One Amendment, the Company ~~further amended the terms of the agreement with One to~~ cancels its obligation to issue a warrant for redeemable convertible preferred stock in the 2019 One Amendment for additional commercial milestone consideration and a warrant to purchase common stock. Additionally, the Company granted One a contingent call option to buy back the 10% ownership that the Company acquired in the 2019 One Amendment at an exercise price of €6.0 million (approximately $~~5.9~~6.6 million at ~~September~~June 30, ~~2022)~~2023). The call option is only exercisable upon (1) a change of control or a deemed liquidation event by the Company, as defined, in the Company’s Restated Certification of Incorporation or (2) the date in which the Company’s current Chief Executive Officer is no longer affiliated with the Company in his capacity as either an executive officer or a member of the board of directors.

~~On August 9, 2022, the Company amended the exercise price of the One warrantholders'~~ ~~1,353,062~~ ~~previously issued common stock warrants from $4.26~~ ~~to $1.45, in consideration for deferring payment of the remaining purchase price totaling €2.5~~ ~~million (approximately $2.4~~ ~~million at September 30, 2022) to acquire the~~ 10~~% equity interest in One until March 31, 2023. The Company recognized a loss attributable to the amendment to the Warrant Purchase Agreement of $0.3~~ ~~million during the three months ended September 30, 2022.~~

The One S.r.l. call option was recorded as a liability held at fair value at the date of issuance and is remeasured at each subsequent reporting date with changes in fair value recorded in other income (expense) in the accompanying condensed consolidated statements of operations. Fair value is determined using a Black-Scholes option pricing model. The significant inputs used in estimating the fair value of call option liability include the estimated fair value of the underlying stock price, expected term, risk free interest rate, and expected volatility. The Company determined that the fair value of the One S.r.l. call at June 30, 2023 was de minimis, reflecting the expectations related to the closing of the pending merger described in Note 1. Accordingly, the valuation assumptions as of June 30, 2023 are not presented in the below fair value assumption table due to the assessment of de minimis value.

The following represents a summary of the changes to Company’s One S.r.l. call option liability during the ~~nine~~three and six months ended ~~September~~June 30, 2023 and June 30, 2022 (in thousands):


Balance at December 31, 2021	$	2,416
				For the Three Months Ended June 30,						For the Six Months Ended June 30,
				2023			2022			2023			2022
Balance at Beginning of Period				$	141		$	2,623		$	674		$	2,416
Change in fair value		(808	)		(142	)		607			(678	)		865
Foreign currency translation gain		(364	)		1			(168	)		4			(219	)
Balance at September 30, 2022	$	1,244
Balance at the End of Period				$	—		$	3,062		$	—		$	3,062

1715

The following weighted average assumptions were used to determine the fair value of the One S.r.l. call option liability at ~~September 30, 2022 and~~ December 31, ~~2021:~~2022:


	September 30,			December 31,			December 31,
	2022			2021			2022
Expected term	4.0 years			2.0 years			4.0 years
Expected volatility		75.0	%		62.0	%		86.0	%
Expected dividend yield		0.0	%	0.0%				0.0	%
Risk free interest rate		4.3	%		0.70	%		4.2	%
Estimated fair value of ownership interest	$	2,928		$	6,922		$	1,772
Exercise price of call option	$	5,879		$	6,806		$	6,422

Research Innovation Fund (“RIF”) Financing

In August 2020, ~~the~~ Gelesis S.r.l. entered into a loan and equity agreement with RIF, an investment fund out of the EU, whereby Gelesis S.r.l. received €10.0 million (approximately $~~9.8~~10.9 million at ~~September~~June 30, ~~2022)~~2023) from RIF as an equity investment and €15.0 million (approximately $~~14.7~~16.3 million at ~~September~~June 30, ~~2022)~~2023) as a loan with a fixed interest rate of 6.35% per annum (see Note 12). The equity investment can be called by the Company, beginning in December 2023 and ending in December 2026, by paying the investment plus 15% percent annual interest. If the Company does not exercise this call option, beginning in January 2027 and ending in December 2027, RIF may put the investment to the Company at a cost of the investment amount plus 3.175% percent annual interest. The loan has a termination date of December 31, 2030 and is repayable over 8 years starting 24 months subsequent to its issuance. Any unpaid principal and interest must be repaid upon exercise of the call option by the Company, or subsequent exercise of a put option by RIF. At ~~September~~June 30, ~~2022,~~2023, RIF holds approximately 20% of the equity of Gelesis S.r.l.

The Company recorded ~~accretion of $0.3~~ ~~million and foreign currency translation gain of $1.6~~ ~~million to~~ the following noncontrolling interest ~~during~~components in the ~~nine months ended September 30, 2022. The~~condensed consolidated statements of noncontrolling interest, ~~balance was $~~redeemable convertible preferred stock and stockholders' deficit (in thousands):~~10.5~~


	For the Six Months Ended June 30,
	2023		2022
Balance at beginning of period	$	12,590	$	11,855
Accretion of put option		—		173
Income allocated to noncontrolling interest holder		100		—
Foreign currency translation adjustment		215		(941	)
Balance at the end of period	$	12,905	$	11,087

~~million and $11.9~~ ~~million at September 30, 2022 and December 31, 2021, respectively, in the accompanying condensed consolidated balance sheets.~~

~~12.~~11.

Debt

The Company’s non-convertible debt outstanding at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 is summarized as follows:


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
Italian Economic Development Agency Loan		303			525		$	168		$	331
Intesa Sanpaolo Loan 1		6,709			8,507			6,731			7,094
Intesa Sanpaolo Loan 2		4,899			5,672			4,989			5,352
Horizon 2020 Loan		388			486			360			389
RIF Shareholders Loan		14,698			17,015			16,328			16,055
UniCredit Loan		4,863			5,630			4,042			4,421
Total debt obligation	$	31,860		$	37,835		$	32,618		$	33,642
Unamortized loan discount and issuance costs		(895	)		(754	)		(313	)		(346	)
Total debt obligation carrying amount	$	30,965		$	37,081		$	32,305		$	33,296
Current portion	$	4,249		$	1,950		$	5,039		$	7,954
Long-term portion	$	26,716		$	35,131		$	27,266		$	25,342

~~2021 Bridge Financing~~Future maturities with respect to non-convertible debt outstanding at June 30, 2023 are as follows (in thousands):

~~On December 13, 2021, the Company issued convertible promissory notes to related parties in the principal amount of $27.0~~ ~~million (see Note 20). At December 31, 2021, the outstanding balance was $27.1~~ million, recorded at fair value in the accompanying condensed consolidated balance sheets. On January 19, 2022 the Company settled the convertible promissory notes in cash for principal plus accrued interest in the aggregate amount of $~~27.3~~ ~~million. During the nine months ended September 30, 2022, the Company recognized a loss of $0.2~~ ~~million with respect to the change in fair value of the convertible promissory notes on the accompanying condensed consolidated statements of operations.~~16


	At June 30, 2023
2023		3,016
2024		7,806
2025		5,390
2026		4,050
2027		4,032
More than 5 years		8,324
Total maturities	$	32,618

2022 Promissory Notes

~~On July 25, 2022 and August 4,~~In the third quarter of 2022, the Company issued three term promissory notes in the aggregate principal amount of $25.0 million to existing investor CMS, and existing investors and related parties PureTech Health LLC and SSD2 LLC, for an aggregate cash ~~purchase price~~proceeds of $25.0 million. Each of the 2022 promissory notes is unsecured and bears interest at a rate of 15% per annum. Each promissory note matures on the earlier of (a) December 31, 2023 or (b) five (5) business days following a qualified financing. Upon a payment default under any promissory note that has not been cured after five days (i) the Company will be required to issue certain

warrants to the holders as defined by the promissory note agreements and (ii) the holders will have the option to convert outstanding principal and accrued interest into a number of shares of Gelesis common stock as defined by the promissory note agreements.

At ~~September~~June 30, 2023 and December 31, 2022, the aggregate outstanding balance of the 2022 promissory notes was $~~25.9~~22.6 million and $27.4 million recorded at fair value inon the accompanying condensed consolidated balance ~~sheets.~~sheet. During the three and six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized a ~~loss~~fair value gain of $~~0.8~~2.5 million ~~with respect~~and $7.3 million relating to ~~the change in the fair value of~~ the 2022 promissory notes.

~~The Company applied the provisions of ASC 815-15,~~ ~~Embedded Derivatives,~~ ~~elected to account for the convertible promissory notes at fair value, and to not bifurcate the embedded derivative~~. The fair value of the promissory notes is determined using a multiple scenario-based valuation method. The fair value of the hybrid instrument was determined by calculating the value of the instrument in each scenario “with” the respective conversion feature and “without”. The significant inputs used in estimating the fair value of the convertible promissory notes include the estimated discount rate, expected term, and the outcome probability with respect to each scenario.

The following assumptions were used to determine the fair value of the 2022 ~~convertible~~ promissory notes at ~~September~~June 30, 2023 and December 31, 2022:


	June 30, 2023			December 31, 2022
Expected term	6 months			1 year
Weighted average discount rate		123.7	%		26.0	%
Probability of repayment after qualified financing		—			50.0	%
Probability of holder electing conversion option		—			50.0	%
Probability of a business combination		90.0	%		—
Probability of Company default		10.0	%		—

2023 Senior Secured Note and Warrant Purchase Agreement (the “2023 NPA — Initial Close”)


	~~At September 30, 2022~~
~~Expected term~~	~~1.25~~ ~~years~~
~~Weighted average discount rate~~		~~26.0~~	%
~~Probability of repayment after qualified financing~~		~~50.0~~	%
~~Probability of holder electing conversion option~~		~~50.0~~	%

~~In November 2019,~~On February 21, 2023, the Company entered into a Note and Warrant Purchase Agreement with PureTech (the “2023 NPA”), pursuant to which the Company issued a short-term convertible senior secured note (the “Initial Close Note”) in the aggregate principal amount of $5.0 million and warrants to purchase 23,688,047 shares of the Company’s common stock at an exercise price of $0.2744 (”Initial Warrant”). The Initial Close Note bears interest at a rate ~~swap ("IRS"~~of 12% per annum, and its original maturity date was July 31, 2023. The Notes issued pursuant to the 2023 NPA are secured by a first-priority lien on substantially all assets of the Company, including without limitation, intellectual property, regulatory filings and product approvals, clearances and trademarks worldwide (other than the equity interests in, and assets held by, Gelesis, S.r.l.) ~~contract~~and a pledge of 100% of PureTech’s equity in the Company.

The Initial Warrant issued pursuant to the 2023 NPA are indexed to the Company's own stock and met the derivative scope exception provided by ASC 810-0-15-74, therefore were recorded as change in additional paid-in-capital. Accordingly, the total 2023 NPA Initial Close proceeds of $5.0 million was allocated between the senior secured note and the warrants based on the relative respective fair value as of February 21, 2023. The Company determined that the allocated fair value of the warrants and the related deferred financing costs were $1.5 million and $0.2 million, respectively, based on the following Black-Scholes inputs as of February 21, 2023:


Market price of common stock	$	0.28
Expected volatility		160	%
Expected term (in years)		0.24
Risk-free interest rate		4.9	%
Expected dividend yield		—

Accordingly, the allocated fair value of the Initial Close Note and the related deferred financing costs were $3.5 million and $0.4 million, respectively, as of February 21, 2023. The Company elected the fair value accounting option to account for the 2023 NPA Initial Close Note for the initial and subsequent measurements, and expensed the allocated deferred financing costs as non-cash

interest expense due to the immaterial amount. The following assumptions were used to determine the fair value of the Initial Close Note at June 30, 2023 and the original issuance date of February 21, 2023:


	June 30, 2023			February 21, 2023
Expected term	0.75 year			0.4 year
Weighted average discount rate		113.8	%		26.9	%
Probability of repayment after qualified financing		—			—
Probability of holder electing conversion upon a business combination		90.0	%		50.0	%
Probability of Company default		10.0	%		40.0	%
Probability of holder electing conversion option upon other default events		—			10.0	%

Amendment No. 1 to the 2023 NPA : On May 1, 2023, the Company and PureTech entered into an Amendment No.1 to the 2023 NPA (the “Amendment No. 1”), under which PureTech waived certain conditions and received (i) the convertible note in the aggregate principal amount of $2.0 million (the “Second Close Note”) and (ii) additional warrants to purchase up to 192,307,692 shares of the Company’s common stock at an exercise price of $0.0182 (the “Second Close Warrant”). Pursuant to the Amendment No. 1, the conversion of the Notes and the exercise of the Warrants pursuant to the NPA are no longer subject to the approval of the Company’s stockholders.

Limited Waiver to the 2023 NPA and Amendment No. 2 to the 2023 NPA: On May 26, 2023, the Company and PureTech entered into a Limited Waiver to the 2023 NPA (the “Waiver”), pursuant to which the PureTech waived certain conditions with ~~Intesa Sanpaolo S.p.A. concurrently~~respect to the Company’s issuance of $350,000 aggregate principal amount of convertible note (the “Amendment No. 2”). Pursuant to the Amendment No. 2 and the Waiver, the Company issued to PureTech Additional Notes with par value of $350,000 (the “Third Close Note”) and additional warrants to purchase up to 43,133,803 shares of the Company’s common stock at an exercise price of $0.0142 (the “Third Close Warrants”), for an aggregate cash purchase price of $350,000.

Bridge Note: In connection with the execution of the ~~Intesa Sanpaolo loan~~Merger Agreement described in Note 1, ~~agreement. The IRS contract covered~~on June 12, 2023, the ~~same period as~~Company issued $3.0 million convertible note (the “Bridge Note”, or the ~~underlying Intesa Sanpaolo loan 1 and expires on~~ “Forth Close” of the 2023 NPA) to PureTech for a cash price of $~~October 31, 2029~~3.0. million. No concurrent warrant was issued to PureTech in connection with the Bridge Note.

~~Fair value~~Amendment No. 3 and Extension of Maturity Date of the ~~interest rate swap contract is determined~~2023 NPA Notes: On June 28, 2023, the Company and PureTech entered into Amendment No. 3 to the 2023 NPA (“Amendment No. 3”), pursuant to which maturity date of all Notes issued pursuant to the 2023 NPA was extended to March 31, 2024.

Cash proceeds received as well as issuance costs incurred from the Second and Third Close were allocated between the respective Notes and Warrants based on ~~quoted price in markets that are not active for which significant inputs are observable either directly or indirectly~~their relative fair market values as of the closing date of May 1, 2023 and ~~thus represents a level 2 measurement.~~

~~The Company reported a~~May 26, 2023, respectively. Based on the fair value analyses performed by an independent valuation firm, as of May 1, 2023, the Second Close Note and Warrant had an allocated price of $~~0.7~~1.6 million ~~for~~and $0.4 million, respectively. As of May 26, 2023, the ~~IRS contract included other assets at September 30, 2022,~~Third Close Note and Warrant had an allocated price of $0.3 million and less than $0.1 million, ~~included~~respectively. On June 12, 2023, the Bridge Note was issued at par value without any concurrent warrants. These Notes issued at Additional Close are recorded at their respective amortized costs.

At June 30, 2023, the aggregate carrying amount of the 2023 NPA Notes was $8.2 million, of which the Initial Close Note with principal amount of $5.0 million was recorded at fair value in ~~other long-term liabilities~~the amount of $3.2 million, and the Additional Close Notes with aggregate principal amount of $5.35 million was recorded at ~~December 31, 2021 in~~amortized cost of $5.0 million on the accompanying condensed consolidated balance ~~sheets. Net~~sheet. The Company recognized a fair market gain ~~attributable to the change in fair value~~ of ~~the IRS contract was~~ $~~0.8~~0.2 million ~~for the nine months ended September 30, 2022. Net loss attributable to the change in fair value of the IRS contract was~~and $~~0.1~~0.3 million, ~~for the nine months ended September 30, 2021.~~non-cash interest expense and amortization of issuance costs of $

~~13.~~12.

Warrant Liabilities

The following represents a summary of the warrant liabilities activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Series A-4
Warrants

Private Placement Warrants

Total

Balance at December 31, 2021

$
15,821

$
—

$
15,821

Assumed upon Business Combination

—

8,140

8,140

Changes in fair value

926

(7,550
)

(6,624
)
Conversion and exchange upon Business Combination

(16,747
)

—

(16,747
)
Balance at September 30, 2022

$
—

$
590

$
590


	Private Placement Warrants
Balance at December 31, 2022	$	130
Changes in fair value		(130	)
Balance at June 30, 2023	$	—

At ~~September~~June 30, ~~2022,~~2023, there were 7,520,000 Private Placement Warrants outstanding exercisable at $11.50 per share for common stock at the same terms as the Public Warrants. However, the warrants will not be redeemable by the Company for cash so long as they are held by the initial stockholders or their permitted transferees. The initial purchasers of the Private Placement Warrants, or

their permitted transferees, also have the option to exercise the Private Placement Warrants on a cashless basis. If Private Placement Warrants are held by holders other than the initial purchasers thereof or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.

The warrants were initially recorded at fair value with subsequent changes in fair value being recorded in the accompanying condensed consolidated statements of operations. The warrants at issuance and at ~~September~~June 30, ~~2022,~~2023, were valued utilizing a modified Monte Carlo Simulation value model and significant unobservable Level 3 inputs.

The following weighted-average assumptions were used to determine the fair value of the Private Placement Warrant liability at ~~September 30,~~December 31, 2022:


	Private Placement Warrants			Private Placement Warrants
Expected term	4.3 years			4.0 years
Expected volatility		66.0	%		86.0	%
Expected dividend yield		0.0	%		0.0	%
Risk free interest rate		4.0	%		4.0	%
Price of Gelesis Common Stock	$	1.08		$	0.29
Exercise price of warrants	$	11.50		$	11.50

~~In connection with~~The Company was notified by the ~~Business Combination, Legacy Gelesis redeemable preferred~~NYSE Regulation in March 2023 that Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization over a consecutive 30 trading day period of at least $15.0 million. The NYSE reached its determination and publicly announced that the GLS common stock ~~warrants~~had been suspended from trading effective April 10, 2023. The Company’s common stock under the ticker symbol of GLS or GLSH were ~~reclassified from liability treatment~~subsequently traded on the OTC markets ranging between $0.01 and $0.05 per share. As a result, the fair value of outstanding warrant liabilities was determined to ~~equity treatment pursuant to the terms~~be immaterial as of ~~their exchange (see Note 15).~~June 30, 2023.

~~14.~~13.

Earnout Liability

The following represents a summary of the earnout liability activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Earnout Liability

Balance at December 31, 2021
$
—

Recognized upon Business Combination

58,871

Changes in fair value

(55,495
)
Balance at September 30, 2022
$
3,376


	Earnout Liability
Balance at December 31, 2022	$	563
Changes in fair value		(563	)
Balance at June 30, 2023	$	—

At Business Combination close and at ~~September~~June 30, ~~2022,~~2023, there were 18,758,241 earnout shares ~~underlying the liability, which were~~ unissued and unvested. At ~~September~~June 30, ~~2022,~~2023, none of the triggering events had been met.

The earnout liability was initially recorded at fair value with subsequent changes in fair value being recorded in the accompanying condensed consolidated statements of operations. The earnout liability at issuance and at ~~September 30,~~December 31, 2022, were valued utilizing a Monte Carlo Simulation and significant unobservable Level 3 inputs.

The following weighted-average assumptions were used to determine the fair value of the earnout liability at ~~September~~December 31, 2022:


	December 31, 2022
Expected term	4.0 years
Expected volatility		86.0	%
Expected dividend yield		0.0	%
Risk free interest rate		4.0	%
Price of Gelesis Common Stock	$	0.29

The Company's common stock under the ticker symbol of GLS or GLSH were suspended from trading on the NYSE effective April 10, 2023 and subsequently traded on the OTC markets ranging between $0.01 and $0.05 per share. Therefore, the fair value of outstanding earnout liabilities was determined to be immaterial as of June 30, ~~2022:~~2023.

Earnout Liability

Expected term
4.3 years

Expected volatility

66.0
%
Expected dividend yield

0.0
%
Risk free interest rate

4.0
%
Price of Gelesis Common Stock
$
1.08

~~15.~~14.

~~Stockholder's~~Stockholders' Equity (Deficit)

Common Stock

The Company’s authorized capital stock consists of (a) 900,000,000 shares of common stock, par value $0.0001 per share; and (b) 250,000,000 shares of preferred stock, par value $0.0001 per share. At ~~September~~June 30, ~~2022,~~2023, there were ~~72,983,488~~73,335,110 shares of common stock issued and outstanding.

~~Common Stock Purchase Agreement~~

On August 11, 2022, the Company entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (the "Purchase Agreement") with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the agreement, the Company will have the right, but not the obligation, to sell to B. Riley up to the lesser of (i) $~~50,000,000~~ ~~of newly issued shares of common stock, and (ii)~~

~~14,506,475~~ ~~shares of common stock (which is the number of shares equal to approximately~~ ~~19.99% of the aggregate number of shares of the Company's common stock issued and outstanding immediately prior to the execution of the agreement) at~~ 97% of the volume weighted average price (“VWAP”) of the Company's common stock calculated in accordance with the Purchase Agreement, from time to time during the 24-month term commencing from the effectiveness date of the corresponding Form S-1 registration statement on September 6th, 2022. Sales and timing of any sales of Class A common stock are solely at the election of the Company, and the Company is under no obligation to sell any securities to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of the Company’s common stock, the Company issued ~~355,361~~ ~~shares of its common stock as commitment shares. The Company incurred an aggregate cost of approximately $1.2~~ ~~million in connection with the Purchase Agreement, including $0.5~~ ~~million for the fair value of the~~ ~~355,361~~ ~~commitment shares issued to B. Riley.~~

~~The Company recorded $1.2~~ ~~million legal and professional costs in the accompanying condensed consolidated statement of operations during the three months ended September 30, 2022, and recorded $0.5~~ ~~million of additional paid-in capital in the accompanying condensed consolidated balance sheets as of September 30, 2022 with respect to the fair value of the~~ ~~355,361~~ ~~common stock commitment shares issued to B. Riley.~~

~~The Company issued a total of~~ ~~34,246~~ ~~shares of its common stock and raised less than $0.1~~ ~~million gross proceeds under the Purchase Agreement for the three months ended September 30, 2022.~~

~~Legacy Redeemable Convertible Preferred Stock~~

At December 31, 2021 and immediately prior to the Business Combination, Legacy Gelesis had outstanding Series A-1, Series A-2, Series A-3, Series A-4, Series A-5, Series Growth, Series 2 Growth and Series 3 Growth redeemable convertible preferred stock which are collectively referred to as “redeemable convertible preferred stock.” Immediately prior to the closing of the Business Combination, Legacy Gelesis redeemable convertible preferred stock converted into Legacy Gelesis common stock and was subsequently split according to the exchange ratio of ~~2.59. Upon closing of the Business Combination, holders received shares of common stock of the Company on a one-to-one basis.~~

Public Warrants

In connection with the Business Combination the Company assumed 13,800,000 Public Warrants, which entitle the holder to acquire common stock, which are exercisable at an exercise price of $11.50 per share. The Public Warrants will expire at on the earlier to occur of five years after the completion of the Business Combination or redemption.

Once the Public Warrants become exercisable, the Company may call the Public Warrants for redemption for cash:

•

in whole and not in part;

•

at a price of $0.01 per warrant;

•

upon not less than thirty (30) days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

•

if, and only if, the closing price of the Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any ~~twenty(~~twenty (20) trading days within a thirty (30)-trading day period ending three (3) business days before the Company sends the notice of redemption to the warrant holders.

If the Company calls the Public Warrants for redemption, the Company 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. Additionally, in no event will the Company be required to net cash settle.

At ~~September~~June 30, ~~2022,~~2023, there were 13,800,000 Public Warrants outstanding.

Rollover Warrants

Business Combination, holders received ~~rollover~~shares of common stock ~~warrants~~ of the Company on a one-to-one basis. At close of Business

Combination and ~~September~~June 30, ~~2022,~~2023, there were 1,836,429 and 1,660,303 ~~rollover~~ warrants outstanding, respectively, with an exercise price of $0.02. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, 176,126 rollover warrants were exercised for proceeds of less than $0.1 million.

Immediately prior to the closing of the Business Combination, existing Legacy Gelesis common warrants were also split according to the exchange ratio of 2.59. Upon closing of the Business Combination, holders received shares of common stock of the Company on a one-to-one basis. At close of Business Combination and ~~at September~~through June 30, ~~2022,~~2023, respectively, there were 1,353,062 of these warrants outstanding with an exercise price of $4.26.

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 common stock reserved for future issuances was as follows:


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Common stock issued upon option exercise and RSUs vesting		18,694,129		13,486,708		15,335,476		16,881,549
Conversion of all classes of redeemable convertible preferred stock		—		48,566,655		—		—
Issuances upon exercise of warrants to purchase Series A-4, upon conversion to common warrants		—		1,836,429
Issuances upon exercise of common stock warrants		24,733,365		1,353,062		283,862,907		24,733,365
Earnout shares		23,482,845		—		23,482,845		23,482,845
Total common stock reserved for future issuance		66,910,339		65,242,854		322,681,228		65,097,759

~~16.~~15.

Stock-Based Compensation

2021 Stock Option Plan

In January 2022, the Company's Board of Directors approved the 2021 Stock Option and Incentive Plan (the "2021 Plan"), which supersedes the 2016 Stock Option and Grant Plan and the 2006 Stock Incentive Plan and provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards and restricted stock units to employees, directors, and nonemployees of the Company. The 2021 Plan was authorized initially to issue 9,583,570 shares, plus on January 1, 2023 and each January 1 thereafter, the number of shares of Stock reserved and available for issuance under the Plan shall be cumulatively increased by 4 percent of the number of shares of Stock issued and outstanding on the immediately preceding December 31. Under the 2021 Plan, ~~3,321,470~~7,375,070 shares remained available for issuance at ~~September~~June 30, ~~2022.~~2023.

Options and restricted stock awards generally vest based on the grantee’s continued service with the Company during a specified period following a grant as determined by the Board of Directors and expire ten years from the grant date. In general, awards typically vest in three to four years, but vesting conditions can vary based on the discretion of the Company’s Board of Directors.

The fair value of the options is estimated at the grant date using Black-Scholes and recognized over the vesting period, taking into account the terms and conditions upon which options are granted. The fair value of restricted stock awards is the fair value at the date of grant reduced by the exercise price of the award, if any. The fair value of both options and restricted stock awards are amortized on a straight-line basis over the requisite service period of the awards.

Stock-based compensation expense is summarized for employees and nonemployees, by category in the accompanying condensed consolidated statements of operations as follows (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Research and development	$	1,058	$	243	$	9,131	$	1,304	$	209	$	3,008	$	543	$	8,073
Selling, general and administrative		3,516		843		17,408		2,876		2,175		4,968		3,932		13,892
Total	$	4,574	$	1,086	$	26,539	$	4,180	$	2,384	$	7,976	$	4,475	$	21,965

2221

Stock Option Activity

The following table summarizes the Company’s stock option activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Number of
Options

Weighted-
Average
Exercise
Price per
Share

Weighted-
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding at December 31, 2021

4,889,820

$
10.39

6.17

$
54,449

Retroactive application of reverse recapitalization

7,784,666

(6.38
)

Adjusted and Outstanding at December 31, 2021

12,674,486

$
4.01

6.17

$
54,449

Granted

2,658,185

$
3.35

Exercised

(162,064
)

$
0.68

Forfeited - unvested

(548,653
)

$
5.23

Forfeited - vested

(63,718
)

$
4.31

Expired

(456,534
)

$
1.23

Outstanding at September 30, 2022

14,101,702

$
3.96

6.31

$
502

Exercisable at September 30, 2022

10,218,998

$
3.89

5.30

$
502

Vested and Expected to Vest at September 30, 2022

14,101,702

$
3.96

6.31

$
502


	Number of Options			Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		12,798,479		$	3.97		5.80	$	25
Granted		—
Exercised		—
Forfeited - unvested		(158,733	)	$	4.02
Forfeited - vested		—
Expired		(999,070	)	$	4.12
Outstanding at June 30, 2023		11,640,676		$	3.95		5.32	$	—
Exercisable at June 30, 2023		9,827,923		$	3.92		4.75	$	—
Vested and Expected to Vest at June 30, 2023		11,640,676		$	3.95		5.32	$	—

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the common stock. The total fair value of options vested during the ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 was $~~3.9~~ ~~million.~~

~~The fair value of each option issued was estimated at the date of grant using Black-Scholes with the following weighted-average assumptions:~~

For the Nine Months Ended

September 30, 2022

Market price of common stock

$
3.35

Expected volatility

72.4
%
Expected term (in years)

6.1

Risk-free interest rate

1.7
%
Expected dividend yield

0.0
%

~~The weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2022 was $2.17. At September 30, 2022 and December 31, 2021, there was $10.1~~1.0 million and $~~8.7~~2.9 million, ~~respectively, of~~respectively.

At June 30, 2023, there was $4.1 million unrecognized compensation cost related to unvested stock option grants under the 2021 Plan, which was expected to be recognized over a weighted-average period of ~~2.3~~2.1 ~~and~~ ~~2.2~~ ~~years, respectively.~~years.

Restricted Stock Unit (“RSU”) Activity

The following table summarizes the Company’s RSU activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Number of RSUs

Weighted-
Average Grant Date Fair Value

Outstanding and Unvested at December 31, 2021

313,354

$
21.41

Retroactive application of reverse recapitalization

498,868

$
(13.15
)
Adjusted and Outstanding and Unvested at December 31, 2021

812,222

$
8.26

Granted

4,555,197

$
3.46

Vested

(41,404
)

$
6.77

Forfeited

(640,849
)

$
3.35

Outstanding and Unvested at September 30, 2022

4,685,166

$
4.28


	Number of RSUs			Weighted- Average Grant Date Fair Value
Outstanding and Unvested at December 31, 2022		4,083,070		$	4.31
Granted		—
Vested		(10,088	)	$	8.26
Forfeited		(378,182	)	$	3.35
Outstanding at June 30, 2023		3,694,800		$	4.39

Each RSU entitles the holder to one share of common stock on vesting and the RSU awards are based on a cliff vesting schedule over requisite service periods in which the Company recognizes compensation expense for the RSUs. Vesting of the RSUs is subject to the satisfaction of certain service and or certain performance conditions. The Company recognizes the estimated grant date fair value of these awards as stock-based compensation expense over the service and or performance periods based upon its determination of whether it is probable that the service and or performance conditions will be achieved. The Company assesses the probability of achieving the service and orour performance conditions at each reporting period. Cumulative adjustments, if any, are recorded to reflect subsequent changes in the estimated or actual outcome of service and or performance-related conditions.

At ~~September~~June 30, ~~2022 and December 31, 2021,~~2023, unrecognized compensation cost for RSU awards granted totaled $~~10.7~~5.4 million, ~~and $6.7~~ ~~million, respectively,~~ which was expected to be recognized over a weighted-average period of ~~2.9~~2.7 ~~and~~ ~~0.9~~ ~~years, respectively.~~years.

~~17.~~16.

Income Taxes

The Company ~~did~~ no~~t record any income tax~~recorded a provision ~~during the three months ended September 30, 2022 and 2021, respectively. The Company recorded~~ ~~zero~~ ~~and~~of less than $0.1 million ~~income tax provision~~and $0.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021,~~2022, respectively. The provision recorded differs from the US statutory rate of 21% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021~~2022 primarily due to the valuation allowance recorded against the net operating losses and deferred tax assets.

The Company continues to evaluate the positive and negative evidence bearing upon the realizability of its net deferred tax assets and determined that it is not more likely than not that the Company will recognize the benefits of the net deferred tax assets. Therefore, a full valuation allowance has been recorded against the balance of net deferred tax assets in the United States as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~18.~~17.

Earnings (Loss) per Share

The weighted-average common shares outstanding and thus the net loss per share calculations and potentially dilutive security amounts for all periods prior to the Business Combination have been retrospectively adjusted to the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization. Historically reported weighted average shares outstanding have been multiplied by the exchange ratio of approximately ~~2.59. See Note 3 for further information.~~

Basic and diluted loss per share attributable to common stockholders was calculated as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Numerator:
Net loss	$	(14,149	)	$	(30,730	)	$	(32,365	)	$	(74,055	)	$	(7,681	)	$	(12,513	)	$	(12,827	)	$	(18,216	)
Accretion of redeemable convertible preferred stock to redemption value		—			(23,111	)		(37,934	)		(139,237	)		—			—			—			(37,934	)
Accretion of noncontrolling interest put option to redemption value		(80	)		(95	)		(253	)		(285	)		—			(85	)		—			(173	)
Income allocated to noncontrolling interest holder														—			—			(100	)		—
Net loss attributable to common stockholders	$	(14,229	)	$	(53,936	)	$	(70,552	)	$	(213,577	)	$	(7,681	)	$	(12,598	)	$	(12,927	)	$	(56,323	)
Denominator:
Weighted average common shares outstanding, basic and diluted		72,772,627			5,615,192			69,349,679			5,592,931			73,334,861			72,423,043			73,329,685			67,609,838
Net loss per share, basic and diluted	$	(0.20	)	$	(9.61	)	$	(1.02	)	$	(38.19	)	$	(0.10	)	$	(0.17	)	$	(0.18	)	$	(0.83	)

The Company’s potential dilutive securities, which include stock options, RSUs, warrants and earnout shares have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same for all periods presented. The Company excluded the following potential common stock, presented based on amounts outstanding at ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect.


	September 30,				June 30,
	2022		2021		2023		2022
Convertible preferred stock		—		48,566,655
Warrants on convertible preferred stock		—		1,836,429
Options and RSUs to acquire common stock		18,694,129		13,555,474		15,335,476		20,000,493
Warrants on common stock		24,733,365		1,353,062		283,862,907		24,333,365
Earnout shares		—		—		—		—
Total		43,427,494		65,311,620		299,198,383		44,333,858

Total potentially dilutive common share equivalents for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, excludes 23,482,845 shares related to the earnout liability as these shares are contingently issuable upon meeting certain triggering events.

~~19.~~18.

Commitments and Contingencies

Operating Leases

In June 2019, the Company entered into an operating lease agreement with PureTech Health LLC, or PureTech, for office space located in Boston, Massachusetts. The lease expires in August 2025, with total lease payments of $3.2 million over the term. The Company also has operating leases for certain storage and equipment with various terms expiring in 2027

~~At September 30, 2022, the Company’s operating lease right of use assets was $1.6~~ ~~million, of which $0.6~~ ~~million and $1.1~~ ~~million were the corresponding short-term and long-term lease liabilities, respectively. At December 31, 2021, the Company’s operating lease right of use assets was $2.0~~ ~~million, of which $0.5~~ ~~million and $1.5~~ ~~million were short-term and long-term lease liabilities, respectively. Operating lease expense was $0.2~~ ~~million during the three months ended September 30, 2022 and 2021, respectively. Operating lease expense was $0.5~~ ~~million during the nine months ended September 30, 2022 and 2021, respectively.~~. The remaining weighted average noncancelable term of the Company’s operating leases was ~~2.9~~2.3 years at ~~September~~June 30, ~~2022,~~2023, and the weighted average discount rate was ~~5.3~~5.4%.

The following table summarizes the Company's operating lease activity (in thousands):


	For the six months ended June 30,
	2023		2022
Lease liabilities, current		546		550
Lease liabilities, non-current		697		1,222
Total operating lease liabilities	$	1,243		1,772
Operating lease rental expense	$	376	$	272

Future maturities of the lease liability under the Company’s noncancelable operating leases at ~~September~~June 30, ~~2022~~2023 are as follows (in thousands):


	At September 30, 2022
Remaining 2022 maturities	$	163
2023		649
Remaining 2023 maturities					320
2024		567			565
2025		381			389
2026		29			38
2027					18
More than 5 years		13			-
Total undiscounted lease maturities	$	1,802		$	1,330
Imputed interest		(129	)		(87	)
Total lease liability	$	1,673		$	1,243

Royalty Agreements

Expenses from royalty agreements on net product sales and sublicense income is recognized as a cost of goods sold in the accompanying condensed consolidated statements of operations during the period in which the associated revenues are recognized.

PureTech

In December 2009, the Company entered into a royalty and sublicense income agreement with PureTech, a significant stockholder in the Company, whereby the Company is required to pay PureTech a 2.0% royalty on net product sales received as a result of developing products and technology using the intellectual property purchased from One.

One S.r.l

Under the amended and restated master agreement with One, the Company is required to pay a 2.0% royalty on net product sales and an aggregate of €17.5 million (approximately $~~17.1~~19.0 million at ~~September~~June 30, ~~2022)~~2023) upon the achievement of certain commercial milestones of new medical indications as well as Plenity and pay royalties on net product sales and/or a percentage of sublicense income. At ~~September~~June 30, ~~2022,~~2023, none of the milestones have been met.

Grant Agreements

The Company has been awarded grants from governmental agencies, which are recognized as income as the qualifying expenses are incurred (see Note 11). The grant agreements contain certain provisions, including, among others, maintaining a physical presence in the region for defined periods. Failure to comply with these covenants would require either a full or partial refund of the grant to the granting authority.

~~Research and Development Tax Credits~~

The Company’s subsidiary, Gelesis S.r.l., which conducts core manufacturing and research and development activities on behalf of the Company, is eligible to receive a non-income based and non-refundable tax credits for qualified research and development activities. The Company has earned research and development tax credits in Italy for qualifying expenses incurred by performing certain research and development activities.

In December 2018, the Italian government passed a new budget law, effective January 1, 2019, that amended the eligibility criteria for recognizing qualifying research and development tax credits (“2019 Budget Law”). The 2019 Budget Law requires retroactive application for research and development tax credits earned during the year ended December 31, 2019. Under the 2019 Budget Law, research and development tax credits claimed in prior periods under previous interpretations of the research and development tax credit law may potentially be repaid by the Company.

~~The Company evaluated the potential loss under ASC 450,~~ ~~Contingencies. The Company concluded that the likelihood of a potential loss arising from this matter is probable.~~

~~The Company has recorded $2.6~~ ~~million and $3.0~~ million as a component of other long-term liabilities in the accompanying condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively. In October 2021, the Italian federal tax authority initiated an audit of the research and development tax credits for the calendar years 2017 through 2019. The Company has had interactions during 2022 with the Italian federal tax authority regarding the tax audit.

~~Litigation~~

In connection with the Business Combination, the Company received a litigation demand letter from certain purported stockholders alleging that the Company was required to provide holders of Class A Common Stock a separate class vote in connection with proposed amendments of the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares, such that separate votes can be cast on the proposed increase in the number of shares of Class A common stock and the proposed increase in the number of shares of preferred stock. During the nine months ended September 30, 2022, the Company reached an agreement to resolve the claim and settled for an immaterial cash payment.

~~20.~~19.

Related Party Transactions

The Company had the following transactions with related parties:

PureTech

In June 2019, PureTech executed a sublease agreement with the Company (see Note ~~19)~~18). With respect to the sublease, the Company incurred lease expense of approximately $0.1 million and $~~0.1~~0.3 million during the three and six months ended ~~September~~June 30, ~~2022 and 2021, respectively,~~2023, and $~~0.4~~0.1 million and $~~0.2~~0.3 million during the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ respectively, recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations. The Company incurred royalty expense of $~~0.1~~ ~~million and~~ less than $0.1 million ~~during the three months ended September 30, 2022 and 2021, respectively,~~ and $~~0.5~~ ~~million and $0.3~~0.1 million in connection with the PureTech royalty agreement (see Note ~~19)~~18) during the ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023, and ~~2021,~~$0.1 million and $0.3 million during the three and six months ended June 30, 2022, respectively, recorded in cost of goods sold in the accompanying condensed consolidated statements of operations. The Company had an accounts payable accrued expense balance to PureTech of $~~0.3~~0.6 million and $0.1 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, in the accompanying condensed consolidated balance sheets.

On ~~December 13, 2021,~~July 25, 2022, the Company issued a convertible promissory note to PureTech in the principal amount of $15.0 million (see Note ~~12)~~11). At June 30, 2023 and December 31, ~~2021,~~2022, the outstanding balance was $~~15.1~~12.1 million and $16.6 million, respectively, recorded at fair value in the accompanying condensed consolidated balance sheets. ~~On January 19, 2022 the Company settled the convertible promissory notes in cash for principal plus accrued interest in the aggregate amount of $15.2~~ ~~million.~~ During the ~~nine~~three and six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized a ~~loss~~gain of $~~0.1~~1.6 million and $4.5 million with respect to the change in fair value of the 2022 convertible promissory notes on the accompanying condensed consolidated statements of operations.

Between February 2023 and June 2023, the Company entered into the 2023 NPA and amendments with aggregate gross proceeds of $10.4 million (see Note 11), pursuant to which the Company issued convertible senior secured notes in the aggregate par value of $10.4 million and warrants to purchase 259,129,542 shares of the Company’s common stock. The warrants have an exercise price ranging between $0.0142 and $0.2744 and may not be exercised prior to the receipt of stockholders' approval. At June 30, 2023, the

outstanding balance of the 2023 NPA convertible senior secured notes amounted to an aggregate of $8.2 million on the accompanying condensed consolidated balance sheets. The Company recognized a gain of $0.2 million and $0.3 million for the three and six months ended June 30, 2023 with respect to the change in fair value, as well as interest and issuance cost amortization of $ 0.2 million and $0.6 million for the three and six months ended June 30, 2023, respectively, in the accompanying condensed consolidated statements of operations.

SSD2

On July 25, 2022, the Company issued a convertible promissory note to SSD2, LLC in the principal amount of $5.0 million (see Note 11). At June 30, 2023 and December 31, 2022, the outstanding balance was $4.0 million and $5.5 million, respectively, recorded at fair value on the accompanying condensed consolidated balance sheets. The Company recognized a gain of $0.5 million and $1.5 million with respect to the change in fair value of the convertible promissory notes onin the accompanying condensed consolidated statements of operations.

~~On July 25, 2022, the Company issued a promissory note to PureTech in the principal amount of $15.0~~ ~~million (see Note 12). At September 30, 2022, the outstanding balance of the promissory note was $15.6~~ ~~million recorded at fair value in the accompanying condensed consolidated balance sheets. During the three months ended September 30, 2022, the Company recognized a loss of $0.6~~ ~~million with respect to the change in the fair value of the promissory notes.~~

~~SSD2~~

~~On December 13, 2021, the Company issued a convertible promissory note to SSD2 in the principal amount of $12.0~~ ~~million (see Note 12). At December 31, 2021, the outstanding balance was $12.1~~ million, recorded at fair value in the accompanying condensed consolidated balance sheets. On January 19, 2022 the Company settled the convertible promissory notes in cash for principal plus accrued interest in the aggregate amount of $~~12.1~~ ~~million. During the nine months ended September 30, 2022, the Company recognized a loss of less than $0.1~~ ~~million with respect to the change in fair value of the convertible promissory notes on the accompanying condensed consolidated statements of operations.~~

~~On July 25, 2022, the Company issued a promissory note to SSD2 in the principal amount of $5.0~~ ~~million (see Note 12). At September 30, 2022, the outstanding balance of the promissory note was $5.2~~ ~~million recorded at fair value in the accompanying condensed consolidated balance sheets. During the three months ended September 30, 2022, the Company recognized a loss of $0.2~~ ~~million with respect to the change in the fair value of the promissory notes.~~

One S.r.l

Consulting Agreement with Founder of One

The Company and one of the founders of One, who is also a stockholder of the Company, entered into a consulting agreement for the development of the Company's science and technology. The Company incurred costs for consulting services received from the founder of One totaling less than $0.1 million ~~during~~and $0.1 million for the three and six months ended ~~September~~June 30, ~~2022~~2023, and ~~2021, respectively,~~less than $0.1 million and $~~0.2~~0.1 million ~~during~~for the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ respectively, recorded in research and development expense in the accompanying condensed consolidated statements of operations. The Company recorded an accounts payable balance to the founder of less than $0.1 million at both ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, inon the accompanying condensed consolidated balance sheets.

Acquisition of One

In connection with the amended and restated master agreement with One (see Note ~~11)~~10), the Company acquired a 10.0% equity interest in One in exchange for cash consideration. ~~During the nine months ended September 30, 2022 the Company made a payment of $2.9~~ ~~million to One shareholders with respect to the acquisition.~~ The Company had remaining undiscounted payments of €2.5 million due to One at June 30, 2023 and €December 31, 2022 (approximately $~~5.0~~2.7 million due to One at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, respectively (approximately $2.4~~ ~~million and $5.7~~ ~~million due to One~~2022), respectively. The balance at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, respectively). The balance at September 30,~~ 2022 was recorded in accrued expenses inon the accompanying condensed consolidated balance sheets as it is expected to be settled within the next twelve months.

Additionally, the Company incurred royalty expense of less than $0.1 million and $0.1 million with One (see Note ~~19) during~~18) for the three and six months ended ~~September~~June 30, ~~2022 and 2021,~~2023, respectively, ~~and $0.4~~ ~~million~~ and $0.2 million ~~during~~and $0.3 million for the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ respectively, recorded in cost of goods sold in the accompanying condensed consolidated statements of operations. The Company had an accounts payable ~~balance to One S.r.l. of $0.2~~ ~~million~~ and an accrued expense balance of $0.1 million at ~~September~~June 30, ~~2022~~2023 and ~~an accrued expense balance of less than $0.1~~ ~~million at~~ December 31, ~~2021,~~2022, respectively, related to royalties inon the accompanying condensed consolidated balance sheets.

RIF Transaction

In connection with the RIF transaction entered into in August 2020, the Company received $12.3 million from RIF as an equity investment that can be called by the Company beginning in December 2023 and ending in December 2026 by paying the investment plus 15.0% percent annual interest or put by RIF starting in January 2027 and ending in December 2027 for the investment amount plus 3.175% percent annual interest. RIF holds approximately 20% of the equity of Gelesis S.r.l. at ~~September 30, 2022~~December 31, 2021 (see Note ~~11)~~10). In addition, the shareholders of RIF provided the Company with a loan for $~~18.4~~16.3 million with a fixed interest rate of 6.35% per annum (see Note ~~12)~~11).

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

References to the “Company,” “our,” “us,” “we,” or “Gelesis” refer to Gelesis Holdings, Inc. and its consolidated ~~subsidiaries (formerly known as Capstar Special Purpose Acquisition Corp. or "CPSR") following the Business Combination with Gelesis Inc., or Legacy Gelesis.~~subsidiaries. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with (i) the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q and (ii) the audited ~~historical~~ consolidated financial statements ~~of Legacy Gelesis,~~ and ~~the~~related notes thereto and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form ~~8-K Amendment No. 1~~10-K for the year ended December 31, 2022, filed on with the SEC on March ~~24, 2022.~~28, 2023. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, but not limited to, those set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements” ~~in this Quarterly Report~~ and those set forth in the section entitled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q and in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 28, 2023, actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date hereof or to conform these statements to actual results or revised expectations. You should carefully read the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

We are a commercial stage biotherapeutics company built for consumer engagement. We are focused on advancing first-in-class superabsorbent hydrogel therapeutics for chronic gastrointestinal, or GI, diseases including excess weight, type 2 diabetes, non-alcoholic fatty liver disease/non-alcoholic steatohepatitis (“NAFLD/~~NASH,~~NASH”), functional constipation (“FC”), and inflammatory bowel disease. Our biomimetic superabsorbent hydrogels are inspired by the composition and mechanical properties (e.g. firmness) of raw vegetables. They are conveniently administered in capsules taken with water to create a much larger volume of small, non-aggregating hydrogel pieces that become an integrated part of the meals, and act locally in the digestive system.

Our first commercial product, ~~Plenity®~~,Plenity, received de novo clearance from the FDA on April 12, 2019 to aid in weight management in adults with excess weight or obesity, Body Mass Index (BMI) of 25 to 40 kg/m2, when used in conjunction with diet and exercise.

In January 2023, we submitted a premarket notification, or 510(k), to the FDA to change Plenity ~~which is available by prescription~~from prescription-only to over-the-counter, or OTC, in the United States ~~became~~and anticipate the FDA's decision on our 510(k) submission by the first quarter of 2024. We believe Plenity’s advantages are its differentiated safety-to-efficacy profile, broad approved labeling, and affordability to the consumer. Accordingly, we believe making Plenity available ~~for first commercial sale in May 2020~~OTC could make Plenity more accessible to ~~a limited number of consumers. In October 2020 availability was increased to test commercial interest and consumer experience.~~ ~~Activities~~people struggling with excess weight, reduce costs associated with ~~a full commercial launch~~acquiring new members as well as allow us to reduce costs associated with the prescription granting process, while also enabling new sales channels for us.

Our product pipeline also includes multiple other potential therapeutic candidates for common chronic conditions affected by gut health that are currently in ~~the United States began in late 2021. In~~ ~~February 2022, we launched the first national broad awareness media campaign for the product~~clinical and ~~we continued to invest in broad awareness during the nine months ended September 30, 2022.~~ ~~While these are significant milestones, continued commercialization of Plenity will require significant external funding until we are able to generate positive cash flows from product sales.~~preclinical testing, including type 2 diabetes, NAFLD, NASH and FC, all based on our hydrogel technology.

Since our inception, we have devoted our resources to business planning, developing proprietary superabsorbent hydrogel manufacturing know-hows and technologies, preclinical and clinical development, commercial activities, recruiting management and technical staff and raising capital. We have funded our operations to date through proceeds from the issuance of redeemable convertible preferred stock, license and collaboration agreements, long-term loans, ~~promissory notes,~~and government ~~grants and our January 2022 Business Combination, pursuant to which we received approximately $105.0 million of gross proceeds.~~grants. We have incurred significant operating losses to date. Our net losses were ~~$14.1~~$7.7 million and ~~$30.7~~$12.8 million for the three and six months ended ~~September~~June 30, ~~2022 and 2021, respectively, and $32.4 million and $74.1 million for nine months ended September 30, 2022 and 2021,~~2023, respectively. As of ~~September~~June 30, ~~2022,~~2023, we had an accumulated deficit of ~~$298.1~~$335.6 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future.

As a result, we will require substantial additional funding to support our continuing operations until we are able to generate positive cash flows from product sales. Until such time, we expect to finance our operations through equity offerings, debt financings or other capital sources, including collaborations, licenses, dealership partnerships or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. If we are unable to obtain funding, we may be forced to delay, reduce or eliminate some or all of our commercialization efforts, research and development programs or product pipeline expansion, which could adversely affect our business prospects, or we may be unable to continue operations.

As of the date of this Quarterly Report, we expect that our existing cash and cash equivalents, ~~will only be~~and collection of accounts and grants receivable, are not sufficient to ~~fund our operating expenses and capital expenditure requirements into~~meet the ~~second quarter of 2023,~~Company’s current obligations, prior to ~~considerations for~~considering any additional

funding, and not at least twelve months beyond the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this

Quarterly Report. In addition, we anticipate that this extension of our cash runway into the second quarter of 2023 will only be achievable with the significant reduction of discretionary spending from prior levels, particularly with respect to our discretionary sales and marketing activities and manufacturing and supply chain functions. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, which have been prepared in accordance with ~~accounting principles generally accepted in the United States (“US GAAP”),~~GAAP, contemplate that we will continue to operate as a going concern. Our financial statements do not contain any adjustments that might result if we are unable to continue as a going concern. See “—Liquidity and Capital Resources” for further information.

~~Promissory Notes~~On April 10, 2023, the NYSE Regulation reached its decision to delist our common stock because we had fallen below the NYSE's continued listing standard requiring listed companies to maintain an average global market capitalization over a consecutive 30 trading day period of at least $15 million. We did not appeal the delisting determination. Subsequently commencing April 11, 2023, our common stock has been traded on the OTC Pink Market operated by the OTC Markets Group Inc. (the “OTC Market”). In connection with the delisting, on April 26, 2023, the NYSE filed a Form 25 with the SEC regarding the removal of shares of our Common Stock from listing and ~~Promissory Note Warrants~~the withdrawal of the registration of our Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which became effective ten days thereafter. We will continue to make all required filings with the SEC and remain subject to all SEC rules and regulations applicable to reporting companies under the Exchange Act.

On June 12, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with PureTech Health LLC, a Delaware limited liability company (“Parent”) and Caviar Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, subject to the terms and conditions set forth therein, we will merge with and into Merger Sub (the “Merger”) with Merger Sub surviving the Merger as a wholly-owned subsidiary of Parent. Both the Parent and Merger Sub are subsidiaries of PureTech Health PLC, which beneficially owns 16,883,102 shares of our common stock and 259,345,750 shares of our warrants.

The Merger is conditioned upon i) our obtaining stockholder’s approval, ii) the absence of a bankruptcy or insolvency proceeding or formal corporate action by us or our subsidiaries to commence any such proceeding, iii) certain conditions related to our submission to the FDA, including that we shall not have received a “Not Substantially Equivalent” letter or a notice identifying any deficiencies from the FDA and with respect to such deficiencies, limitations on the costs and time frame to rectify them, iv) the receipt of certain amendments to agreements with certain lenders of the Company to restructure the terms of the applicable debt, and v) other customary closing conditions for a transaction of this type. We anticipates that at least one or more of these conditions will not be satisfied and will necessitate a waiver or amendment of the condition by PureTech. If the Merger is completed, each outstanding share of our common stock (other than (i) shares held in our treasury, (ii) shares owned by Parent or any of its direct or indirect subsidiaries (including Merger Sub) immediately before the effective time of the Merger, (iii) shares of our restricted common stock issued pursuant to the Business Combination Agreement (the “BCA”), dated as of July ~~25, 2022~~19, 2021, by and ~~August 4, 2022,~~among the Legacy Gelesis and Capstar Special Purpose Acquisition Corp. (“CPSR”) , as amended and/or otherwise modified, and subject to all of the terms and conditions of the BCA in respect of the “Earn Out Shares” (“Earn Out Shares”) and (iv) shares held by our stockholders will be converted automatically into and will thereafter represent only the right to receive $0.05664 in cash (the “Merger Consideration”), without interest and subject to applicable withholding taxes. Upon consummation of the Merger, we would become a subsidiary of the Parent and cease to be a publicly traded company.

On February 21, 2023, we entered into a Note and Warrant Purchase Agreement with PureTech (the “2023 NPA”), pursuant to which we issued ~~three term promissory notes~~a short-term convertible senior secured note ("Initial Close Note") in the aggregate principal amount of ~~$25.0~~$5.0 million and warrants to ~~existing investor CMS Bridging DMCC,~~purchase 23,688,047 shares of our common stock at an ~~affiliate~~exercise price of ~~CMS Medical Venture Investment (HK) Limited (“CMS”)~~$0.2744. The Initial Close Note bears interest at a rate of 12% per annum and matures on July 31, 2023. The notes issued pursuant to the 2023 NPA are secured by a first-priority lien on substantially all of our assets, including without limitation, intellectual property, regulatory filings and product approvals, clearances and trademarks worldwide (other than the equity interests in, and assets held by, Gelesis, S.r.l., our subsidiary located in Italy) and ~~existing investors~~a pledge of 100% of the PureTech’s equity in us.

On May 1, 2023, we amended the Note and Warrant Purchase Agreement dated February 21, 2023 with PureTech ~~Health LLC (“PureTech”~~(the “Amendment No. 1”). Pursuant to this Amendment, for a cash purchase price of $2.0 million, PureTech waived certain conditions contained in the original NPA and (i) we issued to PureTech Additional Notes in the aggregate principal amount of $2.0 million (the “Second Close Note”) and ~~SSD2 LLC~~(ii) we issued to PureTech additional warrants to purchase up to 192,307,692 shares of our common stock, at an exercise

price of $0.0182 (the “Second Close Warrant”). Additionally, as a result of the delisting from the NYSE, the Initial Warrant was amended to provide that the exercise thereof is no longer subject to the approval of our stockholders, additionally, the conversion of the Notes issued pursuant to the NPA is no longer subject to the approval of our stockholders.

On May 26, 2023, we entered into a Limited Waiver to the 2023 NPA (the “Waiver”) with PureTech, pursuant to which the PureTech waived the certain conditions with respect to the issuance of $350,000 aggregate principal amount of convertible note (the “Third Close Note”). Additionally, we entered into Amendment No. 2 to the 2023 NPA (“~~SSD2”~~Amendment No. 2”) with PureTech, under which if we enter into a binding definitive agreement with respect to a Takeover Proposal (as defined in the Merger Agreement) with any party other than PureTech and/or its affiliates, we will immediately pay to PureTech an amount equal to 200% of the aggregate principal amount of outstanding Additional Notes, and the Additional Notes will be cancelled. Pursuant to the Amendment No.2 and the Waiver, we issued to PureTech Additional Notes with par value of $350,000 (the “Third Close Note”) and additional warrants to purchase up to 43,133,803 shares of our common stock at an exercise price of $0.0142 (the “Third Close Warrants”), for an aggregate cash purchase price of $25.0 million (the “2022 Promissory Notes”). Each of the 2022 Promissory Notes is unsecured and bears interest at a rate of 15% per annum. Each 2022 Promissory Note matures on the earlier of (a) December 31, 2023 or (b) five (5) business days following a qualified financing. Upon a payment default under any 2022 Promissory Note that has not been cured after five days (i) we will be required to issue certain warrants to the holders as defined by the 2022 Promissory Note agreements and (ii) the holders will have the option to convert outstanding principal and accrued interest into a number of shares of our Common Stock as defined by the 2022 Promissory Note agreements.

On August 4, 2022, we entered into an amendment to the License, Collaboration and Supply Agreement, dated June 18, 2020, by and between us and CMS. Pursuant to the amendment, the one-time, non-refundable, and non-creditable regulatory approval milestone payment of $5.0 million provided for in the original agreement became immediately payable. In addition, the amendment expands the CMS Territory to include Brunei, Myanmar, Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines, Thailand and Vietnam and provides that the minimum annual royalty term for CMS territory will commence January 2024 (rather than January 2022, as previously provided under the original agreement) and extend through the expiration date of the amended agreement.

Upon execution of the amendment, we also issued to CMS a warrant to purchase up to 400,000 shares of common stock, par value $0.0001 per share, at an exercise price of $0.01 per share. The warrant expires on the date that is ten years from the date of issuance and is exercisable at any time from the date of issuance until the expiration date.Bridge Note

On August 9, 2022, we entered into an amendment to the Warrant Purchase Agreement dated October 21, 2020, by and between us and the holders of the warrants. Pursuant to the amendment we deferred payment of the aggregate remaining purchase price under the patent license and assignment agreement and master agreement between us and One S.r.l., totaling €2.5 million, (which we owe to One S.r.l. shareholders) until March 31, 2023.

~~Pursuant to the amendment, and in consideration for the deferral, we amended the exercise price of the 1,353,062 common stock warrants held by One S.r.l. shareholders from $4.26 to $1.45.~~

~~Committed Equity Facility~~In connection with ~~B. Riley Principal Capital II, LLC~~

On August 11, 2022, we entered into a Common Stock Purchase Agreement and a Registration Rights Agreement with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the agreement, we will have the right, but not the obligation, to sell to B. Riley up to the lesser of (i) $50,000,000 of newly issued shares of our common stock, and (ii) 14,506,475 shares of our common stock (which is the number of shares equal to approximately 19.99% of the aggregate number of shares of our common stock issued and outstanding immediately prior to the execution of the ~~agreement)~~Merger Agreement, on June 12, 2023, we issued $3.0 million convertible note (the “Bridge Note”, ~~from time~~or the “Fourth Close Note” of the 2023 NPA) to ~~time during~~PureTech for a cash price of $3.0 million. No concurrent warrant was issued to PureTech in connection with the ~~24-month term set forth in the agreement.~~Bridge Note pursuant to Amendment No. 2.

~~On September 27, 2022,~~Amendment No. 3 and Extension of Maturity Date of the Company entered into a separation and general release agreement with Mr. David Abraham, our General Counsel, Chief Compliance Officer and Corporate Secretary through September 30, 2022. Pursuant to this separation agreement, Mr. Abraham will cease to serve as General Counsel, Chief Compliance Officer and Corporate Secretary, effective October 1, 2022. Mr. Abraham will provide consulting services to the Company to assist with the transition of his responsibilities.

~~In December 2019, illnesses associated with COVID-19 were reported and~~On June 28, 2023, we entered into Amendment No. 3 to the ~~virus has since caused widespread and significant disruption~~2023 NPA (“Amendment No. 3”) PureTech, pursuant to ~~daily life and economies across geographies. The World Health Organization has classified~~which the ~~outbreak as a pandemic. Our business, operations and financial condition and results have not been significantly impacted as a result~~maturity date of all Notes issued to the ~~COVID-19 pandemic, rather we have recognized revenue for~~PureTech pursuant to the ~~first time during 2020 and we have expanded our facilities, sales/marketing and supply chain personnel~~NPA was extended to support the sale of Plenity. To date, COVID-19 has not materially impacted our ability to secure and deliver supply of Plenity. To date, COVID-19 has not significantly impacted the ongoing clinical trials of our other product candidates.March 31, 2024.

In response to the COVID-19 pandemic, we have taken swift actions to ensure the safety of our employees and other stakeholders. We are diligently working with our suppliers, customers, distributors and other partners to provide consumers with access to Plenity, while taking into account regulatory, institutional, and government guidance, policies and protocols.

However, the full extent of the impact of the pandemic and future outbreaks on our business, operations, and financial condition and results in future periods remain uncertain, particularly, with respect to consumer demand for or access to Plenity, and the administration of clinical research and development activities. Further, our ability to source raw materials and components, manufacture as well as transport and distribute Plenity may be limited and therefore impact sales of Plenity.

We believe Plenity’s advantages are its differentiated safety-to-efficacy profile, broad approved labeling, and affordability to the consumer. Accordingly, we believe it is important that Plenity be widely available and easily accessible to consumers. We plan to pursue an application with the FDA to change Plenity's classification in the United States from prescription-only to over-the-counter. In addition to making Plenity more accessible to people struggling with excess weight, we believe making Plenity available over-the-counter could reduce costs associated with acquiring new members and allow us to reduce costs associated with the prescription granting process, while also enabling new sales channels for the Company. We plan to submit our application to the FDA during the first quarter of 2023 and could receive market clearance by the third quarter of 2023.

We believe that our performance and future success depend on several factors that present not only significant opportunities for us but also pose risks and challenges, including those discussed below. In particular, our ability to successfully address the below key factors is dependent upon our ability to successfully raise the capital to fund such efforts. Our failure to obtain additional funding may force us to delay, limit or terminate our marketing efforts and investments in our product pipeline, which may negatively impact our ability to grow our business and attract and/or retain enough customers to operate profitably.

Our ability to attract new consumers is a key factor for our future growth. To date we have successfully acquired consumers through our U.S. commercial launch in conjunction with the continued development of marketing and sales tactics. We intend to acquire new members in the United States by promoting Plenity directly to the consumer. InHowever, in light of ~~current~~limited cash resources and to preserve liquidity, ~~while~~ we ~~seek to raise additional capital during the third quarter of 2022, we reduced~~suspended investments in broad awareness media and consumer acquisition ~~compared~~and reduced spend in digital marketing while waiting for the FDA approval of our 510K submission to ~~previous quarters in 2022 and 2021.~~switch Plenity from Rx to OTC. However, we continue to ~~engage in promotional activities, which we believe will motivate a potential future member~~commercially make Plenity available to ~~ask a health care professional about acquiring Plenity~~consumer through one of two channels:

Our ability to retain consumers is a key factor in our ability to generate revenue. We expect our direct home delivery, simple and transparent pricing, and consumer engagement to enhance the experience of our ~~consumer~~consumers and promote recurring revenue. ~~Our customer retention efforts may be negatively impacted by recent significant reductions in our discretionary spending with respect to discretionary sales and marketing activities.~~ If consumer retention decreases in the future, then future revenue will be negatively impacted. The ability of our consumers to continue to pay for our products and services will also impact the future results of our operations.

We are evaluating global strategic partnerships to build our brand globally; however, we may also retain the rights.

We expect to make significant investments in selling and marketing to acquire new consumers. Selling and marketing is an important driver of growth, and over the long term, we intend to continue to make significant investments in consumer acquisition and our selling and commercial infrastructure. However, in light of current cash resources, and to preserve liquidity while we seek to raise additional capital during the third quarter of 2022, we reduced investments in broad awareness media, consumer acquisition, and the healthcare provider sales force compared to previous quarters in 2022 and 2021. As such, we expect our selling and marketing expense decreased in absolute dollars during this period. However, if we are successful in raising additional capital in the future, we expect to increase selling and marketing activities to continue to launch Plenity, and expect selling and marketing expense to decrease as a percentage of revenue over the long term, although our selling and marketing expense may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

Additionally, although we intend to continue to invest in our manufacturing, fulfillment and operating capabilities in the future, these capabilities have recently been negatively impacted by recent significant reductions in our discretionary spending with respect to manufacturing and supply chain functions. If we are successful in raising addition capital in the future, we expect to continue to invest in increasing our manufacturing, fulfillment and operating capabilities. In the short term, we expect these investments will increase our operating expenses; however, in the long term we anticipate that these investments will positively impact our results of operations. If we are unable to generate sufficient demand in Plenity, we may not have sufficient funds to invest into these growth activities.

In addition to Plenity, we have invested in a pipeline of product candidates for prevalent and important gastrointestinal, or GI, tract-related chronic diseases including, type 2 diabetes, NAFLD/NASH, ~~functional~~chronic idiopathic constipation, and inflammatory bowel disease by targeting the natural processes of the GI pathway. We expect to continue investing in our pipeline over time to broaden our commercial opportunity. The continued preclinical and clinical development of the pipeline will require significant financial resources. If we are unable to generate sufficient demand in Plenity or raise additional capital at favorable terms, if at all, we may not have sufficient funds to invest in the research and development of additional product candidates.

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following metrics are useful in evaluating our business (dollar amounts in thousands except where noted):

We define new members acquired as the number of consumers in the United States who have begun their weight loss journey with Plenity during the financial period presented. This is the total number of recurring and non-recurring consumers who have begun their weight loss journey during the financial period presented. We do not differentiate from recurring and non-recurring consumers as of the date of this Quarterly Report as (i) we strongly believe every member’s weight-loss journey is chronic and long-term in nature, and (ii) we have not initiated our long-term strategy and mechanisms to retain and/or win-back members. We will continue to evaluate the utility of this business metric in future periods.

Units sold is defined as the number of 28-day supply units of Plenity sold to consumers based on prescriptions, through our strategic partnerships with online pharmacies and telehealth providers as well as the units sold to our strategic partners outside the United States.

See ~~discussion~~ elsewhere in this discussion and analysis under the heading “Key Components of Results of Operations — Product revenue, net”.

Average selling price per unit, net is the gross price per unit sold during the period net of estimates of per unit variable consideration for which reserves are established for expected product returns, shipping charges to end-users, pharmacy dispensing and platform fees, merchant and processing fees, and promotional discounts offered to end-users. See “— Critical Accounting Policies and Significant Judgments and Estimates” below and the “Revenue Recognition” section of Note 2 in the accompanying Notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a more detailed discussion of our revenue recognition policy.

Our gross profit represents product revenue, net, less our total cost of goods sold, and our gross margin is our gross profit expressed as a percentage of our product revenue, net. See discussion elsewhere in this discussion and analysis under the headings “Key Components of Results of Operations — Cost of goods sold”.

Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the prices we charge for our product, the costs we incur from our vendors for certain components of our cost of goods sold, the mix of channel sales in a period, and our ability to sell our inventory. We expect our gross margin to increase over the long term, although gross margins may fluctuate from period to period depending on these and other factors.

In addition to our financial results determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our operating performance. We use the following non-GAAP financial measure to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measure, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that the use of Adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate ~~similarly-titled~~similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP

financial measures as tools for comparison. A reconciliation is provided below for the non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure, and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. We define “Adjusted EBITDA” as net (loss) income before depreciation and amortization expenses, provision for (benefit from) income taxes, interest expense, net, stock-based compensation and (gains) and losses related to changes in fair value of our earnout liability, fair value of our warrant liability, our convertible promissory note liability and the One S.r.l. call option.

The following table reconciles net loss to Adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the six months ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
In thousands	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted EBITDA
Net loss	$	(14,149	)	$	(30,730	)	$	(32,365	)	$	(74,055	)	$	(7,681	)	$	(12,513	)	$	(12,827	)	$	(18,216	)
Provision for income taxes		—			—			—			17			—			—			16			—
Depreciation and amortization		1,260			800			3,833			2,291			2,066			987			4,642			2,573
Stock based compensation expense		4,574			1,086			26,539			4,180			2,384			7,976			4,475			21,965
Change in fair value of earnout liability		(2,814	)		—			(55,495	)		—			—			(18,812	)		(563	)		(52,681	)
Change in fair value of warrants		(540	)		2,231			(6,624	)		9,282			—			(2,600	)		(130	)		(6,084	)
Change in fair value of convertible promissory notes		852			—			1,008			—			(2,672	)		—			(7,631	)		156
Change in fair value of One S.r.l. call option		(1,673	)		47			(808	)		601			(141	)		607			(677	)		865
Interest expense, net		164			361			485			949			566			186			1,457			321
Adjusted EBITDA	$	(12,326	)	$	(26,205	)	$	(63,427	)	$	(56,735	)	$	(5,478	)	$	(24,169	)	$	(11,238	)	$	(51,101	)

Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our

performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.

Our ~~consolidated financial statements and~~unaudited condensed consolidated financial statements are prepared in accordance with GAAP. Any reference in this discussion and analysis to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”).

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. We view our operations and manage our business as one operating segment.

The noncontrolling interest attributable to Gelesis S.r.l., our variable interest entity (“VIE”), is presented as a separate component from stockholders’ ~~deficit~~equity (deficit) in our consolidated balance sheets and as a noncontrolling interest in our condensed consolidated statements of noncontrolling interest, redeemable convertible preferred stock and stockholders’ ~~deficit.~~equity. All intercompany balances and transactions have been eliminated in consolidation.

We recognize product revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Our product revenue is derived from product sales of Plenity, net of estimates of variable consideration for which reserves are established for expected product returns, shipping charges to end-users, pharmacy dispensing and platform fees, merchant and processing fees, and promotional discounts offered to end-users.

Cost of goods sold includes the cost of manufacturing our proprietary superabsorbent hydrogels for Plenity for which revenue was recognized during the period, as well as the associated costs for encapsulation, packaging, shipment, supply management and quality assurance. Expenses from royalty agreements on net product sales are also recognized as a component of cost of goods sold during the period in which the associated revenues are recognized. A portion of depreciation with respect to property and equipment directly utilized in manufacturing Plenity units is recognized as a component of cost of goods sold over the depreciable life of the asset.

A significant component of our selling, general and administrative expenses is comprised of our selling and marketing expense, which includes our limited contract sales force in the US markets and discretionary consumer acquisition expenses.

Selling, general and administrative costs are expensed as incurred. Selling, general and administrative costs include sales and marketing costs incurred as a result of the commercialization of our products, payroll and personnel expense, stock-based compensation expense, and costs of programs and infrastructure necessary for the general conduct of our business.

Research and development costs are expensed as incurred. Prepaid research and development costs are deferred and amortized over the service period, as the services are provided. Research and development costs include payroll and personnel expense, stock-based compensation expense, consulting costs, external contract research and development expenses, as well as depreciation and utilities. These activities relate primarily to formulation, CMC, preclinical and discovery activities. As such, we do not track these research and development expenses on an indication-by-indication basis as they primarily relate to expenses which are deployed across multiple projects under development or are for future product and pipeline candidates which utilize our platform technology. These costs are included in unallocated research and development expenses in the tables below.

Clinical trial costs are a component of research and development expenses and consist of clinical trial and related clinical manufacturing costs, fees paid to clinical research organizations and investigative sites. We track and maintain these costs on an indication-by-indication basis.

Amortization expense relates to the intangible asset that resulted from an amendment to our master agreement with the original inventor of our core patents, pursuant to which the percentage of royalties we are required to pay on future net revenues was reduced. The intangible asset is amortized over its useful life, which was determined as of the date of the amendment to be the earliest expiration of patents related to the underlying IP in November 2028.

We have earnout shares which are contingent issuable as incremental consideration pursuant to ASC 815. The earnout shares are initially recorded at fair value and remeasured to fair value at each reporting date until settlement with gains and losses arising from changes in fair value recognized in the ~~condensed~~ consolidated statements of operations.

We have issued warrants to investors which are liability classified and initially recorded at fair value and remeasured to fair value at each reporting date until settlement with gains and losses arising from changes in fair value recognized in the ~~condensed consolidated statements of operations.~~

We have issued convertible promissory notes to investors which are initially recorded at fair value and remeasured to fair value at each reporting date until repayment or conversion at the option of the holders, with gains and losses arising from changes in fair value recognized in the condensed consolidated statements of operations.

Interest expense, net consists of interest incurred on our various loans and interest income earned on our cash, cash equivalents and marketable securities.

Other income, net primarily consists of income earned on our grants from government agencies in Italy, research and development tax credits earned in Italy for qualifying expenses, and gains and losses on foreign currency transactions. Other income, net also consists of changes in fair value of the One ~~S.r.l.~~Srl call option.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using substantively enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Net deferred tax assets are not recorded if we do not assess their realization as probable. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our financial statements in the period that includes the substantive enactment date.

Comparison of the ~~Three Months Ended September~~three months ended June 30, ~~2022~~2023 and ~~September~~2022:

The following table summarizes our results of operations for the three months ended June 30, ~~2021:~~2023 and 2022:


	For the Three Months Ended September 30,									For the Three Months Ended June 30,
	2022			2021			Change			2023			2022			Change
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Revenue:
Product revenue, net	$	6,443		$	3,014		$	3,429		$	1,107		$	8,973		$	(7,866	)
Licensing revenue		209			—			209
Total revenue, net		6,652			3,014			3,638			1,107			8,973			(7,866	)
Operating expenses:
Costs of goods sold		3,616			2,763			853			498			4,786			(4,288	)
Selling, general and administrative		17,032			24,725			(7,693	)		7,456			32,450			(24,994	)
Research and development		3,365			3,238			127			2,582			5,523			(2,941	)
Amortization of intangible assets		567			567			—			567			566			1
Total operating expenses		24,580			31,293			(6,713	)		11,103			43,325			(32,222	)
Loss from operations		(17,928	)		(28,279	)		10,351			(9,996	)		(34,352	)		24,356
Other non-operating income (expense), net		3,779			(2,451	)		6,230			2,315			21,839			(19,524	)
Loss before income taxes		(14,149	)		(30,730	)		16,581			(7,681	)		(12,513	)		4,832
Provision for income taxes		—			—			—			—			—			—
Net loss	$	(14,149	)	$	(30,730	)	$	16,581		$	(7,681	)	$	(12,513	)	$	4,832

We recognized product revenue, net of ~~$6.4~~$1.1 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$3.0~~$9.0 million for the three months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$3.4~~$7.9 million or ~~114%~~88%. We sold ~~92,070~~15,819 units at an average selling price per unit, net of $69.98 for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~45,825~~139,890 units at an average selling price per unit, net of ~~$65.77~~$64.14 for the three months ended ~~September~~June 30, ~~2021.~~2022.

The ~~increase~~decrease in units sold was primarily attributable to the suspension of broad media campaigns and reduced digital marketing efforts for prescription-based Plenity branding, while we anticipate a decision by the FDA on our ~~planned and executed commercialization strategy for Plenity. We made Plenity available for commercial sale through a beta launch that began in in October 2020 and continued throughout 2021.~~OTC application by the first quarter of 2024. Activities associated with a full commercial launch of the ~~Product~~prescription-based Plenity in the United States began in late 2021, ~~and in February 2022, we launched~~followed by the first national broad awareness media campaign ~~for Plenity and continued to invest~~ in ~~consumer acquisition~~February 2022. We suspended broad media campaigns during the ~~three months ended September 30,~~third quarter of 2022 ~~though at a~~and reduced ~~level compared~~digital marketing efforts during the first quarter of 2023 to ~~the prior quarters in 2022.~~preserve liquidity.

We recognized cost of goods sold of ~~$3.6~~$0.5 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$2.8~~$4.8 million for the three months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$0.8 million.~~$4.3 million or 90%. Depreciation as a component of cost of goods sold was ~~$0.7~~$0.5 million and ~~$0.2~~$0.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increases were~~decrease in cost of goods sold was primarily attributable to ~~the revenue recognized with respect to~~a decrease in units sold for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to the three months ended ~~September~~June 30, ~~2021.~~2022.

Gross profit was ~~$3.0~~$0.6 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$0.3~~$4.2 million for the three months ended ~~September~~June 30, ~~2021, an increase of $2.7 million.~~2022. Gross margin ~~also increased to 44%~~was 55% for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to 8%47% for the three months ended ~~September~~June 30, ~~2021. The increases were~~2022. A slight increase in gross margin was primarily ~~attributable~~due to ~~production commencing at our first commercial-scale~~lower manufacturing ~~facility~~cost per unit for on hand inventory, partially offset by higher fulfillment cost per unit shipped, driven by a decrease in sales volume during the ~~fourth quarter of 2021 and the increased production quantity as well as the implementation of new finished-goods packaging in the third quarter 2021.~~three months ended June 30, 2023.

The following table summarizes our selling, general and administrative expenses for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Our selling, general and administrative expense was ~~$17.0 million and $24.7~~$7.5 million for the three months ended ~~September~~June 30, 2023, as compared to $32.5 million for the three months ended June 30, 2022, ~~and 2021, respectively,~~ a decrease of ~~$7.7~~$25.0 million or ~~31%~~77%.

Selling and marketing expense ~~was $7.3~~decreased $21.5 million ~~and $21.6~~ for the three months ended ~~September~~June 30, ~~2022 and 2021, respectively, a decrease of $14.2 million.~~2023, as compared to the three months ended June 30, 2022. The decrease in selling and marketing expense was primarily attributable to the suspension of broad awareness media campaign and reduced digital marketing efforts for prescription-based Plenity during the three months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~three months ended September 30, 2021 was primarily attributable to reduced investments~~same quarter in ~~media content creation, healthcare provider contract sales force, and startup costs associated with the broad commercial launch of Plenity.~~

General and administrative expense was $6.2 million and $2.3 million for the three months ended September 30, 2022 and 2021, respectively. The increase in general and administrative expense was primarily driven by the directors and officers insurance costs as well as legal costs associated with being a public company.2022.

Non-cash stock-based compensation expense ~~was $3.5 million and $0.8~~decreased $2.8 million for the three months ended ~~September~~June 30, 2022 and 2021, respectively. The increase of $2.7 million was primarily driven by the compensation costs with respect to contingently issuable earnout shares pertaining to Legacy Gelesis equity awards for the three months ended September 30, 20222023, as compared to the three months ended June 30, 2022. The decrease was primarily attributable to the elimination of non-essential positions between the second half of 2022 and the first quarter of 2023.

General and administrative expense decreased $0.7 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. The decrease was attributable to cost saving activities put in place since September ~~30, 2021.~~2022 to preserve liquidity, including the elimination of certain sales, marketing and supply chain positions.

The following table summarizes our research and development expenses for the three months ended ~~September~~June 30, 2023 and 2022:

Our research and development expense was $2.6 million for the three months ended June 30, 2023, as compared to $5.5 million for the three months ended June 30, 2022, ~~and 2021:~~a decrease of $2.9 million, or 53%.

Non-cash stock-based compensation expense decreased $2.8 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. This decrease was primarily attributable to reduction in research and development headcount since most of our research and development programs were put on hold during the second half of 2022 to preserve liquidity.

The following table summarizes our non-operating income (expenses) for the three months ended June 30, 2023 and 2022:

We recognized non-operating income, net of $2.3 million for the three months ended June 30, 2023, as compared to income, net of $21.8 million for the three months ended June 30, 2022, a decrease in non-operating income of $19.5 million. The income for the three months ended June 30, 2023 was primarily attributable to a gain of $2.7 million with respect to the change in the fair value of our convertible promissory notes outstanding. The non-operating income for the three months ended June 30, 2022 was primarily attributable to a gain with respect to the change in fair value of our earnout liabilities and warrant liabilities of $18.8 million and $2.6 million, respectively.

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:

We recognized product revenue, net of $2.9 million for the six months ended June 30, 2023, as compared to $16.5 million for the six months ended June 30, 2022, a decrease of $13.6 million or 83%. We sold 44,442 units at an average selling price per unit, net of $64.35 for the six months ended June 30, 2023, as compared to 244,460 units at an average selling price per unit, net of $67.44 for the six months ended June 30, 2022.

The decrease in units sold was primarily attributable to the suspension of broad media campaigns and reduced digital marketing efforts for prescription-based Plenity branding, while we anticipate the FDA approval of our OTC application by the first quarter of 2024. Activities associated with a full commercial launch of the prescription-based Plenity in the United States began in late 2021, followed by the first national broad awareness media campaign in February 2022. We suspended broad media campaigns during the third quarter of 2022 and reduced digital marketing efforts during the first quarter of 2023 to preserve liquidity.

We recognized cost of goods sold of $1.7 million for the six months ended June 30, 2023, as compared to $9.7 million for the six months ended June 30, 2022, a decrease of $8.0 million or 82%. Depreciation as a component of cost of goods sold was $1.2 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively. The decrease in cost of goods sold was primarily attributable to a decrease in units sold for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

Gross profit was $1.1 million for the six months ended June 30, 2023, as compared to $6.8 million for the six months ended June 30, 2022. Gross margin was 39% for the six months ended June 30, 2023, as compared to 41% for the six months ended June 30, 2022. A

decrease in gross margin was primarily due to higher fulfillment cost per unit shipped, driven by a decrease in sales volume during the six months ended June 30, 2023.

The following table summarizes our selling, general and administrative expenses for the six months ended June 30, 2023 and 2022:

Our selling, general and administrative expense was $15.7 million for the six months ended June 30, 2023, as compared to $70.2 million for the six months ended June 30, 2022, a decrease of $54.4 million or 78%.

Selling and marketing expense decreased $40.4 million for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. The decrease in selling and marketing expense was primarily attributable to the suspension of broad awareness media campaign and reduced digital marketing efforts for prescription-based Plenity during the six months ended June 30, 2023 compared to the same period in 2022.

Non-cash stock-based compensation expense decreased $10.0 million for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. The decrease was primarily attributable to the recording of a one-time compensation cost with respect to vested portion of the contingently issuable earnout shares pertaining to a business combination completed during the first quarter of 2022, partially offset by the reduction in sales, marketing and supply chain headcount since the second half of 2022.

General and administrative expense decreased $4.1 million for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. The decrease was attributable to professional and legal expenses incurred with respect to a business combination completed in the first quarter of 2022, as well as cost saving activities put in place since September 2022 to preserve liquidity.

The following table summarizes our research and development expenses for the six months ended June 30, 2023 and 2022:

Our research and development expense was ~~$3.4 million and $3.2~~$6.2 million for the ~~three~~six months ended ~~September~~June 30, 2023, as compared to $12.9 million for the six months ended June 30, 2022, ~~and 2021, respectively.~~a decrease of $6.7 million, or 52%.

Non-cash stock-based compensation expense ~~was $1.1 million and $0.2~~decreased $7.5 million for the ~~three~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively. The increase of $0.8 million~~2023, as compared to the six months ended June 30, 2022. This decrease was primarily attributable to the ~~incremental~~recording of a one-time compensation cost with respect to vested portion of the contingently issuable earnout shares pertaining to ~~Legacy Gelesis equity awards for~~a business combination completed during the ~~three months ended September 30,~~first quarter of 2022, ~~as compared to~~partially offset by a decrease in research and development headcount since the ~~three months ended September 30, 2021.~~second half of 2022.

The ~~decrease~~decline in research and development expenses within clinical indications (GS200, GS300 and GS500) was primarily attributable to the conclusion of the LIGHT-UP study with respect to GS200 during the year ended December 31, 2021, as well as the strategic prioritization of the commercialization of Plenity particularly with respect to our financial and human resources. Other research and

development expenses increased ~~$1.5~~by $1.0 million ~~primarily driven by development activities supporting the new manufacturing lines~~ for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023, as compared to the ~~three~~six months ended ~~September~~June 30, ~~2021.~~2022, primarily driven by an increase in allocation of facilities overhead to research and development.

The following table summarizes our non-operating income (expenses) for the six months ended June 30, 2023 and 2022:

We recognized ~~other~~ non-operating income, net of ~~$3.8~~$9.2 million ~~and~~ for the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~other~~income, net of $59.2 million for the six months ended June 30, 2022, a decrease in income of $50.1 million. The non-operating income for the six months ended June 30, 2023 was primarily attributable to a gain of $7.6 million with respect to the change in the fair value of our convertible promissory notes outstanding, an aggregate gain of $0.7 million with respect to the change in the fair value of our earnout and warrant liabilities, a gain of $0.7 million with respect to the change in the fair value of the One S.r.l. call option, income of $1.6 million in Italian regional grants and investment tax credits, which was partially offset by the interest expense, net of ~~$2.5 million for the three months ended September 30, 2021, an increase in income of $6.2~~$1.5 million.

The non-operating income for the ~~three~~six months ended ~~September~~June 30, 2022 was primarily attributable to ~~income of $2.8 million~~a gain with respect to the change in fair value of our earnout ~~liability, gain~~liabilities of ~~$1.7~~$52.7 million ~~with respect to the change in fair value of the One S.r.l call option, gain of $0.7 million with respect to the change in fair value of the interest rate swap contract,~~ as well as income of $0.5 million with respect to the change in fair value of our warrant liabilities. The income for the three months ended September 30, 2022, was further attributable to $0.4 million recognized with respect to grants awarded by the Puglia region of Italy.

The other non-operating expense for the three months ended September 30, 2021 was primarily attributable to a loss of $2.2 million recognized for the change in fair value of our warrant liabilities as well as interest expense of $0.4 million with respect to our long-term debt obligations.

~~Comparison of the nine months ended September 30, 2022 and September 30, 2021:~~

We recognized product revenue, net of $22.9 million and $8.3 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $14.6 million or 176%. We sold 336,530 units at an average selling price per unit, net of $68.14 for the nine months ended September 30, 2022, as compared to 118,490 units at an average selling price per unit, net of $69.99 for the nine months ended September 30, 2021.

The increase in units sold was primarily attributable to our planned and executed commercialization strategy for Plenity. We made Plenity available for commercial sale through a beta launch that began in in October 2020 and continued throughout 2021. Activities associated with a full commercial launch of the Product in the United States began in late 2021, and in February 2022, we launched the first national broad awareness media campaign for Plenity and continued to invest in broad awareness during the nine months ended September 30, 2022.

We recognized cost of goods sold of $13.3 million and $7.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $5.7 million or 76%. Depreciation as a component of cost of goods sold was $2.1 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively. The increases were primarily driven by the increase in units sold coupled with lower cost per unit for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

Gross profit was $9.8 million and $0.7 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $8.9 million. Gross margin also increased to 42% for the nine months ended September 30, 2022, as compared to 9% for the nine months ended September 30, 2021. The increases were primarily attributable to production commencing at our first commercial-scale manufacturing facility in the fourth quarter of 2021 and the increased production quantity as well as the implementation of new finished-goods packaging in the third quarter of 2021.

~~The following table summarizes our selling, general and administrative expenses for the nine months ended September 30, 2022 and 2021:~~

~~Total selling, general and administrative expense was $87.2 million and $50.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $36.5 million or 72%.~~

Selling and marketing expense increased $14.2 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase in selling and marketing expense was primarily attributable to increased marketing spend to support the commercial sale of Plenity. In February 2022, we launched the first national broad awareness media campaign for the product, which included TV, digital, social, and Out of Home media channels to grow awareness of Plenity. We continued to invest in broad awareness during the nine months ended September 30, 2022.

General and administrative expense increased $7.9 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase was primarily attributable to professional and legal expenses incurred with respect to the Business Combination as well as directors and officers insurance costs as a public company.

Non-cash stock-based compensation expense increased $14.5 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase was primarily attributable to compensation cost with respect to the issuance of new equity awards in 2022 as well as the incremental compensation cost with respect to contingently issuable earnout shares pertaining to Legacy Gelesis equity awards.

~~The following table summarizes our research and development expenses for the nine months ended September 30, 2022 and 2021:~~

~~Total research and development expense was $16.3 million and $13.2 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $3.1 million or 23%.~~

Non-cash stock-based compensation expense increased $7.8 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase was primarily attributable to compensation cost with respect to the issuance of new equity awards in 2022 as well as the incremental compensation cost with respect to contingently issuable earnout shares pertaining to Legacy Gelesis equity awards.

The decrease in research and development expenses within clinical indications (GS200, GS300 and GS500) was primarily attributable to the conclusion of the LIGHT-UP study with respect to GS200 during the year ended December 31, 2021, as well as the strategic prioritization of the commercialization of Plenity particularly with respect to our financial and human resources.

We recognized other non-operating income, net of $63.0 million for the nine months ended September 30, 2022, as compared to expense, net of $9.2 million for the nine months ended September 30, 2021, an increase in income of $72.2 million. The income for the nine months ended September 30, 2022 was primarily attributable to income of $55.5 million with respect to the change in fair value of our earnout liability, income of $6.6 million with respect to the change in fair value of our warrant liabilities ~~as well as income~~ of $0.8 million with respect to the One S.r.l. call option. The income for the nine months ended September 30, 2022, was further attributable to $0.8 million in investment tax credit income recognized with respect to certain tax incentives offered for property and equipment investment in Italy and income of $1.9 million recognized with respect to grants awarded by the Puglia region of Italy.

The expense for the nine months ended September 30, 2021 was primarily attributable to a loss of $9.2 million with respect to the change in fair value of our warrant liabilities, partially offset by income of $1.6 million recognized with respect to grants awarded by the Puglia region of Italy.$6.1 million.

Since inception, we have financed our operations primarily from the issuance of equity and debt instruments, license and collaboration agreements, supply and distribution agreements, and government grants. As of ~~September~~June 30, ~~2022,~~2023, our principal sources of liquidity were our cash and cash equivalents in the amount of ~~$24.8~~$7.9 million. ~~During the~~ ~~nine months ended September 30, 2022, we closed a business combination with CPSR, pursuant to which we received $105.0 million in gross proceeds, prior to the payment of transactions fees due and payable.~~ As of the date of this Quarterly Report, we expect that our existing cash and cash equivalents ~~will only be~~and collection of accounts and grants receivable are not sufficient to ~~fund~~meet our ~~operating expenses and capital expenditure requirements into the second quarter of 2023.~~ In addition, we anticipate that this extension of our cash runway into the second quarter of 2023 will only be achievable with the significant reduction of discretionary spending from prior levels, particularly with respect to our discretionary sales and marketing activities and manufacturing and supply chain functions.current obligations.

Due to our available cash and cash equivalents, a history of recurring losses from operations, negative cash flows from operations, and a significant accumulated deficit, we have concluded that there is substantial doubt about our ability to continue as a going concern. In addition, our independent registered public accounting firm included an emphasis of matter paragraph in their opinion for the years ended December 31, ~~2021~~2022 and ~~2020,~~2021, respectively, as to the substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, which have been prepared in accordance with GAAP, contemplate that we will continue to operate as a going concern. Our financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.

We have incurred negative cash flows from operating activities and significant losses from operations in the past. We expect to continue to incur operating losses for at least the next twelve months due to the investments that we intend to make in our business to support the commercialization of Plenity and, as a result, we will require additional capital resources to grow our business.

~~Prior~~Due to the closing of the Business Combination, holders of 26,844,777 shares of CPSR Class A Common Stock exercised their right to redeem such shares for cash at a price of approximately $10.00 per share for aggregate payments of $268,646,943. As a result, upon closing of the Business Combination, we received approximately $105.0 million of gross proceedslimited available liquidity to fund ~~our future capital and liquidity needs. Due to the significant number of redemptions,~~operations, we implemented an alternative business plan, ~~prioritizing short-term working capital needs such as investments in raw materials and finished goods~~significantly curtailed our sales marketing as well as ~~investments in sales~~supply chain activities since the third and ~~marketing,~~fourth quarter of 2022, reduced headcount and ~~delaying~~delayed certain long-term capital expenditures in commercial infrastructure and certain research and development expenses. We ~~reduced and optimized investments in sales and marketing, prioritizing investments in high return and high exposure mediums. We~~ have sought out, and continue to seek out financing and other alternative commercial arrangements or geographic distribution partnerships to finance certain investments in sales and marketing associated with the sale of Plenity. We expect these actions will provide uswith sufficient liquidity to manage short-term risk and uncertainty and (i) enable us to execute our alternative business plan, (ii) afford us time to access financing alternatives to provide for long-term liquidity and (iii) enable us to fund the continued commercialization of Plenity. See Part II, Item 1A, “Risk Factors — There ~~were~~is no assurance that the proposed Merger will be completed in a ~~significant number of redemptions in connection with~~timely manner or at all. If the ~~Business Combination~~proposed Merger is not consummated, our business could suffer materially and ifour stock price could decline.” and “Risk Factors

— If we are not successful in implementing an alternative business plan and/or raising additional capital in a timely manner, we may have insufficient cash and liquidity to pay operating expenses and other obligations. Any such event would have a material adverse effect on our business and financial condition.” and “Risk Factors — Risks Related to Ownership of Our Common Stock — Future sales of our Common Stock by us or existing stockholders, and issuances of our Common Stock or rights to purchase our Common

Stock, including pursuant to the Gelesis Holdings, Inc. 2021 Stock Option and Incentive Plan and future exercise of warrants, could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.” in this ~~Quarterly Report~~Form 10-Q for more information regarding certain factors that may impact our liquidity and our ability to raise additional capital.

~~As a result, even with proceeds from the Business Combination, we~~We will need substantial additional funding to support our continuing operations and pursue ~~our growth strategy.~~an OTC strategy upon receipt of an anticipated FDA approval in the first quarter of 2024. Until such time as we can generate ~~significant~~ revenue from product sales, if ever, we expect to finance our operations through issuance of additional equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions.

On June 12, 2023, we entered into a Merger Agreement with PureTech and Merger Sub. We anticipate closing the transaction in the fourth quarter of 2023 pending satisfactory completion of the closing conditions set forth within the Merger Agreement. In connection with entering into the Merger Agreement, we received $3.0 million from PureTech through the issuance of convertible notes, in addition to the $7.4 million in aggregate proceeds previously received from PureTech during 2023. The proceeds from this and previous issuances of convertible notes are intended to provide the necessary funding required for us to continue our operations as a stand-alone entity through the consummation of the proposed Merger. Despite the planned Merger and funding provided by the issuance of convertible notes to PureTech, we expect our cash on hand as of the date of the condensed consolidated financial statements and collection of accounts and grants receivable are not sufficient to meet our obligations for at least twelve months beyond the date of issuance of the condensed consolidated financial statements, and may not be sufficient to continue operations through the anticipated date of closing the Merger without additional bridge funding. Our raise of additional capital would be conditional upon obtaining PureTech consent.

As of the date of this Quarterly Report, we are continuing to evaluate opportunities to raise additional capital. If we are unsuccessful in raising additional capital, we may need to further restrict our spending particularly with respect to discretionary sales and marketing activities and our manufacturing and supply chain ~~functions.~~functions, 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. Further changes to the execution of our alternative business plan may impact the growth of Plenity sales and the pace of acquisition and retention of consumers, as well as the price of our common stock.

Our revenue projections are highly dependent on (i) our ability to acquire new consumers and/or retain existing consumers and (ii) our ability to access additional capital and raise sufficient levels of funding in a timely manner to support the sales and marketing of Plenity at a broad national level within the United States. If our access to additional capital is delayed or insufficient, it may adversely impact the sale of Plenity and our revenue projections. See Part II, Item 1A “Risk Factors – Risks Related to Financial Position and Financing Needs – The financial and operational projections and commercialization and product candidate development timelines that we may provide from time to time are subject to inherent risks.” in this Quarterly Report for more information.

As of the date of this Quarterly Report, we have (i) 13,800,000 outstanding Public Warrants to purchase 13,800,000 shares of our common stock, exercisable at an exercise price of $11.50 per share, which expire on the earlier to occur of January 13, 2027 or redemption; (ii) 7,520,000 outstanding Private Warrants to purchase 7,520,000 shares of our common stock, exercisable at an exercise price of $11.50 per share, which expire on the earlier of January 13, 2027 or redemption; (iii) 3,013,365 exercisable Rollover Warrants, 1,353,062 of which are exercisable at an exercise price of $4.26 ~~and expire on October 21, 2030~~ ~~and 1,660,303 of which are exercisable at an exercise price of $0.02~~ ~~and expire on February 15, 2025; and~~ ~~(iv) 400,000 warrants issued to CMS which are exercisable at an exercise price of $0.01 and expire on August 4, 2032.~~

The exercise of warrants is highly dependent on the price of our common stock and the spread between the exercise price of the warrant and the price of our common stock at the time of exercise. For example, to the extent that the price of our common stock exceeds $11.50 per share, it is more likely that holders of our Public Warrants and Private Warrants will exercise their warrants. To the extent that the price of our common stock is less than $11.50 per share, it is less likely that such holders will exercise their warrants. As of November 11, 2022, the closing price of our common stock price was $0.35 per share. There can be no assurance that our warrants will be in the money prior to their expiration and, as such, any or all of our warrants may expire worthless. Our Public Warrants under certain conditions, as described in the warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis. Our Private Warrants are not redeemable so long as they are held by the initial stockholders and are exercisable on a cashless basis. Our Rollover Warrants and CMS Warrants are not redeemable and are exercisable on a cashless basis only with respect to the 1,660,303 Rollover Warrants that have an exercise price of $0.02. As such, it is possible that we may never generate any cash proceeds from the exercise of our warrants. As of the date of this Quarterly Report, we have neither included nor intend to include any potential cash proceeds from the exercise of our warrants in our short-term or long-term liquidity projections. We will continue evaluate the probability of warrant exercise over the life of our warrants and the merit of including potential cash proceeds from the exercise thereof in our liquidity projections.

To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock, which increase the likelihood that our warrants will not be in the money prior to their expiration.

We expect to devote significant efforts to raise capital, restructure our indebtedness and identify and evaluate potential strategic alternatives, in each case, to the extent permitted under the Merger Agreement or with Parent’s consent, however, there can be no assurance that we will be successful in obtaining capital sufficient to meet our operating needs on terms or a timeframe acceptable to us or at all. Further, in the event that market conditions preclude our ability to consummate such a transaction, we may be required to evaluate additional alternatives in restructuring our business and our capital structure. Any failure

in these efforts could force us to delay, limit or terminate our operations, make reductions in our workforce, discontinue our commercialization efforts for Plenity as well as other development 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.

Although we have estimated our liquidity requirements based on assumptions we consider to be reasonable, we may need additional cash resources due to changed business conditions or other developments, including supply chain challenges, disruptions due to COVID-19, competitive pressures, and regulatory developments, among other developments. Our budget projections may be subject to cost overruns for reasons outside of our control and Plenity may experience slower sales growth than anticipated, which would pose a risk to achieve positive cash flow.

Our future capital requirements will depend on many factors, including increases in sales of Plenity, increases in our customer base, the timing and extent of spend to support the expansion of sales, marketing and development activities, and the impact of the COVID-19 pandemic. We may in the future also enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights.

We have based our estimate of liquidity on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Our cash flows may fluctuate and are difficult to forecast and will depend on many factors mentioned elsewhere in this discussion and analysis. If we require additional equity or debt financing from outside sources, we may not be able to raise it on terms acceptable to us, or at all, and the Company may pursue financing transactions that ~~will~~are not be completed. If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be harmed.

The following table summarizes our cash flows for each of the periods presented:

Net cash used in operating activities was ~~$61.5 million and $26.4~~$8.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and September 30, 2021, respectively. Our net loss after adjusting for non-cash operating activities was $62.4~~2023, as compared to $39.8 million for the ~~nine~~six months ended ~~September~~June 30, 2022. The decrease in outflows was primarily attributable to cost saving measures put in place since the second half of 2022, ~~as compared to $57.3 million for the nine months ended September 30, 2021, an increase~~including reduction in ~~loss of $5.1 million. The increase in loss was partially offset by inflows of $5.2 million with respect to prepaid expenses~~research and ~~other current assets, $3.4 million grant reimbursement collected~~development, supply chain, sales and marketing activities as well as ~~outflows~~the elimination of ~~$4.9 million with respect to inventories for~~non-essential positions while we anticipate the nine months ended September 30, 2022. For the nine months ended September 30, 2022, we also received $15.0 million as a pre-buy commitment from Ro, which was partially offset by revenue recognized with respect to RoFDA approval of ~~$13.4 million for the nine months ended September 30, 2022. The increase in operating activity outflows was further influenced~~our OTC submission by the ~~timing~~first quarter of ~~receivables from our government grants as well as GGM for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.~~2024.

Net cash used in investing activities was ~~$8.5~~$0.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$5.6~~$5.1 million ~~provided by investing activities~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The outflows were primarily attributable to ~~$8.5~~$1.9 million in the purchase of property and equipment for the ~~nine~~commercial manufacturing scale-up during the six months ended ~~September~~June 30, 2022. ~~For~~Cash used in investing activities was significantly reduced due to our need to preserve cash and the ~~nine months ended September 30, 2021, inflows were primarily attributable~~delay of our plan for additional manufacturing scale up was delayed until the FDA approval of our OTC submission is approved and we are able to ~~$24.0 million in maturities of marketable securities, which were partially offset by $18.4 million~~successfully re-market Plenity in the ~~purchase of property and equipment for the nine months ended September 30, 2021.~~OTC markets.

Net cash provided by financing activities was ~~$67.0 million and $5.5~~$8.8 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023, as compared to $42.2 million for the six months ended June 30, 2022. The cash inflows for the six months ended June 30, 2023 was primarily attributable to the proceeds from the issuance of a short-term convertible senior secured note and ~~2021, respectively.~~warrants, partially offset by the repayments of term loans in Italy. The ~~increase in~~cash inflows for the six months ended June 30, 2022 was primarily attributable to net proceeds of $70.5 million received from the completion of ~~the Business Combination~~a business combination in January 2022, ~~and $25 million proceeds from issuance of promissory notes,~~which was partially offset by our

repayment of convertible promissory notes also in January 2022, totaling $27.3 ~~million, as compared to net proceeds of $4.5 million from the issuance of loans in Italy for the nine months ended September 30, 2021.~~million.

Our contractual obligations primarily consist of our commitments under non-cancellable operating leases, promissory notes and debt obligations as well as contractual obligations under significant agreements with related and unrelated parties.

For the three and six months ended ~~September~~June 30, 2022, we issued three term promissory notes in the aggregate principal amount of $25.0 million to existing investor CMS, and existing investors and related parties PureTech Health LLC and SSD2 LLC, for an aggregate cash purchase price of $25.0 million. Each of the promissory notes is unsecured and bears interest at a rate of 15% per annum. Each promissory note matures on the earlier of (a) December 31, 2023, or (b) five (5) business days following a qualified financing. Upon a payment default under any promissory note that has not been cured after five days (i) the Company will be required to issue certain warrants to the holders as defined by the promissory note agreements and (ii) the holders will have the option to convert outstanding principal and accrued interest into a number of shares of Gelesis common stock as defined by the promissory note agreements.

At September 30, 2022, the aggregate outstanding balance of the promissory notes was $25.9 million recorded at fair value in the accompanying condensed consolidated balance sheets. We recognized a loss of $0.8 million with respect to the change in the fair value of the 2022 Promissory Notes.

~~Except for the aforementioned transactions,~~ there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form ~~8-K Amendment No. 1~~10-K for the year ended December 31, 2022, filed with the SEC on March ~~24, 2022, except in January 2022, we settled convertible promissory notes in cash for principal plus accrued interest in the aggregate amount of $27.3 million.~~28, 2023. For further information on these ~~convertible promissory notes,~~commitments, please see Note 1218 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

~~We currently do not have, and did not have during the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.~~

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there have been no material changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form ~~8-K Amendment No. 1~~10-K for the year ended December 31, 2022, filed with the SEC on March ~~24, 2022~~28, 2023, other than those described in Note 2 in the accompanying Notes to unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

For a discussion of recent accounting pronouncements, see Note 2 in the accompanying Notes to unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, an “emerging growth company” can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We have elected to avail ourselves of this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, where allowable we have early adopted certain standards as described in Note 2 of our consolidated financial statements. There are other exemptions and reduced reporting requirements provided by the JOBS Act that we are currently evaluating. For example, as an “emerging growth company,” we are exempt from Sections 14A(a) and (b) of the Exchange Act which would otherwise require us to (1) submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “golden parachutes;” and (2) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of our chief executive officer’s compensation to our median employee compensation.

We also intend to rely on an exemption from the rule requiring us to provide an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We will continue to remain an “emerging growth company” until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of ~~this registration;~~our initial public offering; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than ~~$1.07~~$1.235 billion; (3) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act") and are not required to provide the information otherwise required under this item.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports we file or submit 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 us in the reports we file or submit under the Exchange Act 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. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

~~Our management, with~~

As of June 30, 2023, as required by Rules 13a-15 and 15d-15 under the ~~participation of~~Exchange Act, our Chief Executive Officer and Chief Financial Officer ~~who serve as our principal executive officer~~carried out an evaluation of the effectiveness of the design and ~~principal financial officer, respectively, has evaluated the effectiveness~~operation of our disclosure controls and ~~procedures as of September 30, 2022. Our assessment is that, based on such~~procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer ~~have~~ concluded ~~we maintain~~that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective ~~internal control over financial reporting~~at the reasonable assurance level as of ~~September 30, 2022.~~such date. Management has concluded that the ~~unaudited~~ condensed consolidated financial statements included in this ~~Quarterly Report~~quarterly report on Form 10-Q present fairly, in all material respects, the ~~Company’s~~Company's financial position, results of operations and cash flows for the periods disclosed in accordance with U.S. GAAP.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows, or financial position. We are not presently party to any legal proceedings that, in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

An investment in our securities involves a high degree of risk. ~~You should consider carefully all~~Certain factors that may affect the Company’s business or operations are described under “Risk Factors” in Part I, Item 1A, of ~~the risks described below, together with the other information contained in this Quarterly Report, and in~~ our Annual Report on Form 10-K for the year ended December 31, ~~2021 as filed~~2022. Other than the risk factors set forth below, there have been no material changes in the risk factors previously disclosed in such Annual Report on Form 10-K. You should consider all of such risks, together with the ~~SEC~~other information set forth in this Quarterly Report on ~~April 1, 2022 (our “2021~~Form 10-Q and the Annual ~~Report”), and our other filings with the SEC,~~Report on Form 10-K, before making a decision to invest in our securities. If any of ~~the following~~these events occur, our business, financial condition and operating results may be ~~materially~~ adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. ~~We have marked with an asterisk (*) those risks described below that reflect material changes from, or additions to, the risks described in our 2021 Annual Report.~~

Our business is subject to numerous risks and uncertainties, including those highlighted below, which illuminate challenges that we face in connection with the successful implementation of our strategy and the growth of our business. The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our securities and result in a loss of all or a portion of any investment in our securities:

~~Risks Related to Product Development, Regulatory Approval and Commercialization~~

There is no assurance that the proposed Merger will be completed in a timely manner or at all. If the proposed Merger is not consummated, our business could suffer materially and ~~Strategy~~our stock price could decline.

~~Risks Related to Product Development, Regulatory Approval and Commercialization~~

~~We are dependent on the success of our hydrogel technology for Plenity, which is currently our only marketed and FDA-authorized product.~~

Plenity is currently our only marketed FDA de novo authorized product and our business depends on the successful commercialization of Plenity. We may never be able to achieve widespread market acceptance of Plenity or, if we do, be able to develop additional indications for Plenity, which will require substantial additional clinical development, testing and regulatory approval before we are permitted to commercialize those indications. The manufacturing and marketing of Plenity is subject to extensive and rigorous review and regulation by numerous government authorities in the United States Food and inDrug Administration, including that we shall not have received a “Not Substantially Equivalent” letter or a notice identifying any deficiencies from the FDA and with respect to such deficiencies, limitations on the costs and time frame to rectify them, (iv) the receipt of certain amendments to agreements with certain lenders of the Company to restructure the terms of the applicable debt and (v) other ~~countries where we intend to market Plenity. Because our business is almost entirely dependent upon Plenity and our underlying hydrogel technology, any setback in our pursuit~~customary closing conditions for a transaction of ~~commercialization~~this type, including the absence of ~~Plenity would have~~ a material adverse effect on the Company, the accuracy of representations and warranties, the performance of covenants and the delivery of certain customary closing certificates. The closing of the Merger is not subject to a financing condition. We anticipate that at least one or more of these conditions will not be satisfied and will necessitate a waiver or amendment of the condition by PureTech. If the conditions are not satisfied or waived, the proposed Merger may be materially delayed or abandoned. If the proposed Merger is not consummated, our ongoing business may be adversely affected and, without realizing any of the benefits of having consummated the proposed Merger.

During the period prior to the closing of the Merger, our business is exposed to certain inherent risks due to the effect of the announcement or pendency of the Merger on our business relationships, financial condition, operating results and ~~prospects.~~

Plenity may cause undesirable side effects that could result in significant negative consequences, including product liability or other litigation, that may be costly to us and/or adversely impact the commercial success of Plenity.

Undesirable side effects caused by Plenity could cause us, the FDA or European regulatory authorities to interrupt, delay or halt the continued commercialization of Plenity and could result in more restrictive labeling, or withdrawal or limitations on Plenity’s marketing approval. To date, the main adverse events in patients taking Plenity have been bloating, flatulence, abdominal pain and diarrhea. However, there have been no serious adverse events attributed to Plenity and the difference in adverse events between Plenity and placebo has been negligible. If we or others identify other undesirable side effects caused by Plenity, a number of potentially significant consequences could result,business, including:

46The Merger may be delayed, an may ultimately not be completed, due to a number of factors, including:

If the Merger does not close, our business and stockholders would be exposed to additional risks, including:

Any of these events could prevent us from achieving or maintaining market acceptance of Plenity and could substantially increase the costs of commercializing the product and/or significantly impact our ability to successfully commercialize and generate product sales.

~~The broad prescription pharmaceutical and medical device market for overweight and obesity is strictly regulated.~~

Even though we obtained the required regulatory approval in the United States, our ability to generate product sales is dependent on our ability to market and sell Plenity, which depends upon the awareness and acceptance of Plenity among the medical community, including physicians and patients. If Plenity does not achieve an adequate level of acceptance by patients and physicians, we will not generate sufficient product sales of Plenity to become or remain profitable. Our efforts to educate the medical community about the benefits of Plenity may require significant resources and may never be successful.

~~We are, and will continue to be, subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.~~

We are, and will continue to be, subject to ongoing FDA requirements and continued regulatory oversight and review, including routine inspections by the FDA of our manufacturing facilities and compliance with requirements such as the Quality System Regulation, or QSR, which establishes extensive requirements for quality assurance and control as well as manufacturing procedures; requirements pertaining to the registration of our manufacturing facilities and the listing of Plenity with the FDA; continued complaint, adverse event and malfunction reporting; corrections and removals reporting; and labeling and promotional requirements. The promotional claims we are, and will continue to be, able to make for Plenity are limited to the approved indications for use. We may also be subject to additional FDA post-marketing requirements. If we are not able to maintain regulatory compliance, we may not be permitted to market Plenity and/or may be subject to enforcement by the FDA such as the issuance of warning or untitled letters, the imposition of fines, injunctions, and civil penalties; the recall or seizure of products; the imposition of operating restrictions; and the institution of criminal prosecution. In addition, we will be subject to similar regulatory regimes in Europe for Plenity. Adverse EU Competent Authority or FDA action in any of these areas could significantly increase our expenses and limit our product sales and profitability.

The FDA and other regulatory authorities actively enforce the laws and regulations pertaining to the advertising and promotion of healthcare products. If we are found to have improperly promoted off-label uses, including for the use of an unapproved indication or in an unapproved age group or dosage, we may become subject to significant liability and corresponding litigation.

The FDA and European regulatory authorities strictly regulate the promotional claims that may be made about prescription products, such as Plenity. In particular, a medical device may not be promoted for uses that are not approved by the FDA or other regulatory authorities as reflected in the product’s approved labeling. For example, we are not allowed to make claims for Plenity pertaining to diabetes management or glycemic control in prediabetic and type 2 diabetic patients without approval of specific labeling regarding such use. Even though we received marketing approval for Plenity to aid in weight management in overweight and obese adults with a body mass index (kg/m2), or BMI, of 25 - 40, when used in conjunction with diet and exercise, physicians may nevertheless prescribe Plenity to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to enforcement action by the FDA, including warning or untitled letters. In addition, the federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of Plenity, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

Healthcare laws and regulations expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings, and our direct marketing strategy could enhance such exposure.

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of Plenity. Any arrangements with third party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute Plenity. Restrictions under applicable federal and state healthcare laws and regulations include the following:

~~Plenity is currently regulated as a medical device by the FDA and may become subject to similar or other therapeutic regulatory requirements outside the United States.~~

Plenity is currently regulated by the FDA as a medical device and may become subject to similar or other therapeutic regulatory requirements outside of the United States. We expect to expand the sales of Plenity internationally, and as we do so we will also become subject to similar regulations by foreign governments. Government regulations specific to medical devices are wide ranging and govern, among other things:

~~Before a new medical device, or a new intended use for a device in commercial distribution, can be marketed~~$1,000,000 in the United States, a company must first submit and receive either 510(k) clearance pursuant to section 510(k) of the Federal Food, Drug, and Cosmetic Act, or FDCA, unless an exemption applies; approval of a premarket approval, or PMA, application from the FDA; or de novo classification or authorization. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, in order to clear the proposed device for marketing. To be substantially equivalent, the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence. Failure to demonstrate substantial equivalence to a predicate device to the FDA’s satisfaction will require the submission and approval by the FDA of a PMA application. However, the FDA can reclassify, or use “de novo classification” for, a device for which there was no predicate device if the device is low or moderate risk. The FDA will identify “special controls” that the manufacturer must implement, which often include labeling and other restrictions. Subsequent applicants can rely on the de novo product as a predicate for a 510(k) clearance. The FDA’s 510(k) clearance process usually takes from three to 12 months, but may last longer. The process for obtaining a PMA approval takes from one to three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. Any delay or failure to obtain necessary regulatory approvals, authorizations, or clearances for new product offerings, if any, could have a material adverse effect on our business, financial condition and results of operations. Material modifications to the intended use or technological characteristics of Plenity may also require new 510(k) clearances, premarket approvals, or de novo authorizations prior to implementing the modifications, or require us to recall or cease marketing Plenity until these clearances, approvals or authorizations are obtained.

In addition, we are required to timely submit various reports with the FDA, including reports that Plenity may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not filed in a timely manner, regulators may impose sanctions and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business, financial condition and results of operations. Any corrective actions can be costly, time-consuming, and divert resources from other portions of our business. Furthermore, the submission of these reports could be used by competitors against us, which could harm our reputation.

The FDA and the FTC also regulate the advertising and promotion of Plenity and services to ensure that the claims we make are consistent with our marketing authorizations, that there is adequate and reasonable data to substantiate the claims and that our promotional labeling and advertising are neither false nor misleading. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.

Recently enacted and future legislation may increase the difficulty and cost for us to further commercialize Plenity and any other products we may develop in the future and decrease the prices we may obtain for our approved products.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our products, restrict or regulate post-approval activities, and affect our ability to profitably sell our approved products and any product candidates for which we obtain marketing approval.

In March 2010, the Patient Protection and Affordable Care Act, or ACA, was enacted into law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms.

~~Among the provisions of the ACA of importance to Plenity and other product candidates are the following:~~

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to reform through legislation and executive orders by the previous U.S. presidential administration and to judicial challenges. In 2012, the U.S. Supreme Court heard challenges to the constitutionality of the individual mandate and the viability of certain provisions of the ACA. The U.S. Supreme Court’s decision upheld most of the ACA and determined that requiring individuals to maintain “minimum essential” health insurance coverage or pay a penalty to the Internal Revenue Service was within Congress’s constitutional taxing authority. However, as a result of tax reform legislation enacted into law in late December 2017, the individual mandate has been eliminated, effective January 1, 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the 2017 Tax Reform Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review this case, and held oral arguments on November 10, 2020. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the U.S. Supreme Court’s decision, President Biden issued an executive order that initiated a special enrollment period from February 15, 2021 through August 15, 2021 for the purpose of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact our business.

Other legislative changes have also been proposed and adopted since the ACA was enacted that, directly or indirectly, affect or are likely to affect, the pharmaceutical industry and the commercialization of our products, including the Budget Control Act of 2011, or BCA, the American Taxpayer Relief Act of 2012, or ATRA, and the Middle Class Tax Relief and Job Creation Act of 2012. In August 2011, the BCA, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers averaging 2% per fiscal year, and, due to subsequent legislative amendments, will remain in effect through 2031 unless additional Congressional action is taken.

However, the Medicare sequester reductions under the BCA were suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. The ATRA, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for our products that obtain marketing approval. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost-containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at containing or lowering the cost of healthcare. The implementation of cost-containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on anticipated revenue from our products and product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop future product candidates. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for our approved products. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product and product candidates, if approved. Litigation and legislative efforts to change or repeal the ACA are likely to continue, with unpredictable and uncertain results.

We are responsible for manufacturing Plenity and currently have a validated and active commercial scale manufacturing facility that we are currently expanding, a fully functional pilot manufacturing site that can be quickly activated and land owned and zoned for commercial capacity expansion. We will continue to invest in manufacturing capacity at these sites and possibly build additional manufacturing sites to meet increased demand as Plenity is launched through new channels or in new markets. Our inability to produce an adequate supply of Plenity, due to the loss of these facilities or other future facilities or any material limitation of production at these facilities, could materially and adversely impact the commercial growth and success of Plenity and, consequently, could cause our revenue, earnings or reputation to suffer.

We have developed proprietary processes and manufacturing technologies for the production of Plenity. Our subsidiary, Gelesis S.r.l., operates manufacturing and research and development facilities in southern Italy that produce Plenity. These facilities are currently our sole supplier of Plenity and while we currently plan to quadruple the output of this facility in 2022 to meet the near term demands associated with the commercialization of Plenity there are no assurances that we will be able to do so successfully or at all.

Any performance failure by us could delay or otherwise adversely affect the commercialization of Plenity and we may encounter difficulties involving the production yields, regulatory compliance, lot release, quality control and quality assurance, as well as shortages of qualified personnel. Moreover, the ability to manufacture and supply Plenity adequately and in a timely manner is dependent on the uninterrupted and efficient operation of Gelesis S.r.l., which may be impacted by many manufacturing variables, including, but not limited to:

In addition, we may encounter delays and problems in manufacturing Plenity for a variety of reasons, including accidents during operations, failure of equipment, delays in receiving materials, natural or other disasters, political or governmental unrest or changes, social unrest, epidemics and pandemics, intentional misconduct or other factors inherent in operating complex manufacturing facilities. We may not be able to operate our manufacturing facility in a cost-effective manner or in a time frame that is consistent with manufacturing needs. If we cease or interrupt production or if other third parties fail to supply materials, products or services to us for any reason, such interruption could delay the commercial supply of Plenity, with the potential for additional costs and lost product sales. If this were to occur, we may also need to seek alternative means to fulfill our manufacturing needs. If we encounter unexpected failures or difficulties in our manufacturing process or require amounts of Plenity in excess of our current estimates we may be unable to manufacture sufficient supplies to support its commercialization, which will adversely impact the growth and success of Plenity and, consequently, could cause our revenue, earnings or reputation to suffer.

Furthermore, we will also be subject to ongoing periodic inspection, which may be unannounced, by the FDA, corresponding state authorities and European regulatory authorities to ensure strict compliance with QSR requirements and other applicable government regulations and corresponding foreign standards. If we fail to maintain compliance or otherwise experience setbacks, we could be subject to ~~enforcement action, including warning~~litigation related to any failure to consummate the proposed Merger or ~~untitled letters or civil or criminal penalties,~~to perform our obligations under the ~~production of Plenity could be interrupted or suspended, or Plenity could be recalled or withdrawn, resulting in delays, additional costs and potentially lost product sales.~~

~~There is no guarantee that we will be able to successfully commercialize Plenity through~~Merger Agreement. If the ~~channels, or in the markets we are targeting or at all.~~

The commercial success of Plenity depends upon the awareness and acceptance of Plenity among the medical community, including physicians and patients. Market acceptance of Plenity depends on a number of factors, including, among others:

If Plenity does not achieve an adequate level of acceptance by patients and physicians, we will not generate sufficient product sales of Plenity to become or remain profitable. Our efforts to educate the medical community about the benefits of Plenity may require significant resources and may never be successful.

The telehealth market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, or if it encounters negative publicity, our ability to fully commercialize Plenity and grow our business will be harmed.

Our ability to fully commercialize Plenity and grow our business will depend, to a certain extent, upon the willingness of patients to use, and extent of their utilization of, telehealth services. The telehealth market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. The outbreak of the COVID-19 pandemic has increased utilization of telehealth services, but it is uncertain whether such increase in demand will continue post-pandemic. Negative publicity concerning the telehealth market as a whole could limit market acceptance of, or ability to generate sales of, Plenity. If patients do not engage with Plenity through telehealth services then our ability to access potential patients and, accordingly, our market, may be limited, may develop more slowly than we expect, or may not develop at all. Similarly, individual and healthcare industry concerns or negative publicity regarding patient confidentiality and privacy in the context of telehealth could limit the use of telehealth services to access Plenity. If any of these events occurs, it could have a material adverse effect on our business, financial condition and results of operations.

Our ability to market and sell Plenity through telehealth services in a particular jurisdiction is directly dependent on the applicable laws that govern remote healthcare and the practice of medicine and healthcare delivery in general in such jurisdiction, which are subject to changing political, regulatory and other influences that may restrict our use of telehealth services or otherwise negatively impact our business model and growth.

The ability of our qualified distributors to market and sell Plenity through telehealth services in a particular jurisdiction is directly dependent upon the applicable laws in such jurisdiction that govern remote healthcare and the practice of medicine and healthcare delivery in general in such jurisdictions, which are subject to changing political, regulatory and other influences. Some state medical boards have established rules or interpreted existing rules in a manner that may limit or restrict the ability of our qualified distributors to use telehealth services in connection with providing patients with access to Plenity or otherwise negatively impact our business model and growth.

Telehealth offers patients the ability to see a licensed medical professional for advice, diagnosis and treatment of routine health conditions on a remote basis, which has been particularly important during the COVID-19 pandemic. Due to the nature of this service and the provision of medical care and treatment by licensed medical professionals, certain of our qualified distributors and their physicians and healthcare professionals who prescribe our products via telehealth are and may in the future be subject to complaints, inquiries and compliance orders by national and state medical boards. Such complaints, inquiries or compliance orders may result in disciplinary actions taken by these medical boards against the licensed physicians who provide Plenity through these telehealth services, which could include suspension, restriction or revocation of the physician’s medical license, probation, required continuing medical education courses, monetary fines, administrative actions and other conditions and would, in turn, limit the distribution of Plenity and slow our commercialization efforts.

Due to the uncertain regulatory environment, certain states may determine that our qualified distributors and their affiliated physicians or healthcare professionals are in violation of their laws and regulations or such laws and regulations may change. In the event that we must remedy such violations, we may be required to modify how we utilize telehealth services, if at all, in connection with the distribution of Plenity in such states in a manner that undermines our business, we may become subject to fines or other penalties or, if we determine that the requirements to operate in compliance in such states are overly burdensome, we may elect to terminate our operations in such states. In each case, our revenue may decline and our business, financial condition and results of operations could be materially adversely affected.

In order to sell, market and distribute Plenity, we may enter into additional strategic collaborations with third parties. We have limited experience with such collaborations and if we have problems establishing these relationships, the commercialization of Plenity could be impaired.

We are continually evaluating changing consumer preferences and the competitive environment of the weight management industry and seeking out opportunities to improve our performance through the implementation of selected strategic collaborations. The goal of these efforts is to develop and implement a comprehensive and competitive business strategy that addresses those changes and drives the sale and distribution of Plenity. We may not be able to successfully implement our strategic collaborations and realize the intended business opportunities, growth prospects, including new business channels, and competitive advantages. Our efforts to capitalize on business opportunities may not bring the intended results. Assumptions underlying expected financial results or consumer demand and receptivity may not be met or economic conditions may deteriorate. We also may be unable to attract and retain highly qualified and skilled personnel to implement our strategic collaborations and we have limited experience implementing such arrangements with third parties. If we have problems establishing these relationships or executing thereunder, the commercialization of Plenity could be impaired.

~~Successful commercialization of Plenity is dependent on the willingness of the ultimate patient to pay out-of-pocket. If there~~proposed Merger is not ~~sufficient patient demand for Plenity, our financial results~~consummated, these risks may materialize and ~~future prospects will be harmed.~~

We cannot be certain that third party reimbursement will be available for Plenity, and, if reimbursement is available, the amount of any such reimbursement. As a result, we expect that our success will be dependent on the willingness of patients to pay out-of-pocket for Plenity. The decision by a patient to elect to undergo treatment with Plenity may ~~be influenced by a number of factors, such as:~~

~~Our financial performance will be materially harmed if we cannot generate significant patient demand for Plenity.~~

Competing products and technologies could emerge, including pharmaceuticals, devices and surgical procedures, that adversely affect our opportunity to generate sales of Plenity and achieve profitability.

The biotechnology, pharmaceutical and medical device industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Competitors may invest heavily to quickly discover and develop products that could make Plenity obsolete or economically disadvantageous. Competitors may also choose to develop a substantial equivalent of Plenity and obtain clearance through the FDA’s 510(k) clearance process, taking advantage of our investment and work. A new product that competes with Plenity may need to demonstrate that it is substantially equivalent to Plenity or that it has compelling advantages in efficacy, convenience, tolerability and safety to be commercially successful, which if demonstrated, could adversely affect our sales of Plenity and, therefore, our profitability. Competing products, whether substantially equivalent or not, may also be sold at lower prices. This and other competitive factors could force us to lower prices or could result in reduced sales. In addition, products developed by others could emerge as competitors to Plenity. If we are not able to compete effectively against our competitors, our financial condition and operations will suffer.

Our competitors in the obesity market include drugs that are FDA-approved and currently marketed for the treatment of obesity. Plenity primarily competes with orlistat, phentermine/topiramate and naltrexone/ bupropion, three orally administered, marketed pharmaceutical products in the United States for the treatment of obesity, and several older products, indicated for short-term administration, including phentermine, phendimetrazine, benzphetamine and diethylpropion. Orlistat is marketed in the United States by Roche Group under the brand name Xenical and over-the-counter under the brand name alli, at half the prescribed dose, by GlaxoSmithKline. Vivus, Inc. also has a combination product, phentermine/ topiramate, which is marketed under the trade name Qsymia, Further, Orexigen Therapeutics, Inc. received FDA approval of naltrexone/bupropion which is marketed under the brand name Contrave in the United States and has also received marketing approval under the name Mysimba in the European Union. Plenity also competes with injectable pharmaceutical obesity therapies, including Saxenda and Wegovy marketed by Novo Nordisk. In addition, other approaches which utilize various implantable devices or surgical tools marketed by Apollo EndoSurgery, Inc., Obalon Therapeutics, Inc., Aspire Bariatrics, Inc., Scientific Intake Limited Co., and BioEnterics Corporation.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we have. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitors also may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.

If we are unable to adequately protect our proprietary technology or maintain issued patents that are sufficient to protect Plenity, or if competitors are able to market competitive products without infringing our protected intellectual property rights, others could compete against us in ways that would have a material adverse impact on our business, results of operations, financial condition and prospects.

Our commercial success will depend in part on our success in obtaining and maintaining issued patents and other intellectual property rights in the United States and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies without infringing on our intellectual property rights and erode or negate any competitive advantage that we may have, which could harm our business and ability to achieve profitability.

As of September 30, 2022, we own nine families of patents and patent applications relating to our hydrogel technology, two of which are directed to methods of treating obesity and reducing caloric intake using certain hydrogels, the hydrogel composition in Plenity and methods of producing hydrogels. The issued U.S. patents in these two families have expiration dates or projected expiration dates ranging from 2028 to 2033. We cannot provide any assurances that competitors will not practice the claims in our issued patents, or that claims in our issued patents are valid. Further, we cannot provide any assurances that the scope of the claims is sufficient to protect Plenity or its uses or that competitors will practice the claims. In Europe, there are additional issued patents directed to the hydrogel in Plenity, its production and uses of certain hydrogels to treat obesity and reduce caloric intake. In one of the seven other patent families, we have pending applications directed to treating overweight and obesity with certain hydrogels that are projected to expire in 2035.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect Plenity, that they will be sufficient to prevent competitors from

marketing competitive products or that any indications obtained for Plenity, now or in the future, will be protected by any issued or future claim. Other parties have developed technologies that may be related or competitive to our approach and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming the same methods or formulations or by claiming subject matter that could dominate our patent position. The patent positions of biotechnology, pharmaceutical and medical device companies, including our patent position, involve complex legal and factual questions and, therefore, the issuance, scope, validity, and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patent law is continually evolving and rapidly changing, creating uncertainty and risk. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented or it may be determined that competitive products do not infringe upon our rights. U.S. patents and patent applications may also be subject to interference proceedings, ex parte reexamination, inter partes review proceedings, post-grant review proceedings and challenges in district court. Patents may also be subjected to opposition, post-grant review, or comparable proceedings lodged in various foreign, both national and regional, patent offices.

These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we own may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize Plenity.

Furthermore, though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability, and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar or equivalent products. Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees and current employees. We also may encounter significant problems in protecting our proprietary rights in foreign countries. If these developments were to occur, they could have a material adverse effect on our sales.

Our ability to enforce our patent rights depends on the scope of our claims and our ability to detect infringement. It is difficult to detect infringers who do not advertise the components of their products or how they are made. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s potential competitor’s product or methods of production. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful. Third parties may also assert claims that they do not practice our patents and seek a determination of non-infringement.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering Plenity are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted.

~~The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:~~

We also rely upon unpatented trade secrets, unpatented know-how, and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us and have non-compete agreements with some, but not all, of our consultants. It is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could otherwise become known or be independently discovered by our competitors, which could adversely affect our business, financial condition and ~~results~~the market price of ~~operations.~~our common stock.

~~We have licensed Plenity~~Even if successfully completed, there are certain risks to ~~third party partners (e.g.~~our stockholders from the Merger, including:

~~We have acquired certain patent rights~~If the proposed Merger is not completed, we may be unsuccessful in completing an alternative transaction on terms that ~~cover Plenity and these rights impose various obligations on us, including a requirement to make certain milestone and royalty payments and to prosecute and maintain~~are as favorable as the ~~patent rights. We have also granted a non-exclusive license to practice~~terms of the ~~patent rights for noncommercial, research purposes,~~proposed Merger with PureTech, or at all, and we ~~have agreed under certain circumstances~~may otherwise be unable to ~~grant~~continue to operate our business. Our board of directors may decide to pursue a dissolution and liquidation of Gelesis. In such an ~~additional non-blocking license~~event, the amount of cash available for distribution to our stockholders will depend heavily on the ~~development~~timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and commercialization of certain drug delivery products that do not include any composition of matter that is claimed by the patent rights, exclusive of products relating to obesity, weight loss, diabetes, metabolic diseases, GI disorders, laxatives and liquid removal. contingent liabilities.

While we ~~believe that~~have entered into the ~~scope~~Merger Agreement with PureTech, the closing of ~~any non-blocking license will~~the proposed Merger may be ~~clearly distinct from our field of interest,~~delayed or may not occur at all and there can be no ~~guarantee~~assurance that ~~a disagreement~~the proposed Merger will ~~not arise over a particular product area, or that such a disagreement could not materially and adversely impact our business. In addition,~~deliver the anticipated benefits we have also granted an exclusive, transferable, sublicensable, and royalty-bearing license of our intellectual property to develop, import, register, manufacture, and commercialize Plenity in Greater China (including Mainland China, Hong Kong, Macau, and Taiwan), Singapore and United Arab Emirates.

Additionally, under these agreements, such third parties have agreed to assign to us certain future technology relating to food products that they develop during the term of the agreements, as well as other improvements to our existing intellectual property rights that result from activities they perform under the agreements. There can be no guarantee, however, such third parties will not attempt to act contrary to such obligations or that, if they do, we would succeed in a legal action to stop them from doing so.

We may be required to enter into additional license(s) to use third party intellectual property that we find necessary or useful to our business, or because that third party owner asserts we are infringing on such third party intellectual property. In such a case, even if we are successful in obtaining terms that are commercially reasonable, such a future licensor might also allege that we have breached our license agreement and may accordingly seek to terminate our license with them or may insist on the right to terminate such a license at will. If successful, any such termination could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize a product candidate or product, if approved, as well as harm our competitive business position and our business prospects.

~~We may infringe the intellectual property rights of others, which may prevent or delay our development efforts or stop us from commercializing or increase the costs of commercializing Plenity.~~

Our success will depend in part on our ability to operate without infringing the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products and methods do not or will not infringe the patents or other intellectual property rights of third parties.

The medical device, pharmaceutical and biotechnology industries are characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that Plenity or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced to take a license. In addition, if any

such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing Plenity or our other product candidates.

~~Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us.~~expect. If we are unable to ~~avoid infringing~~consummate the ~~patent rights~~proposed Merger, our board of ~~others, we~~directors may elect to pursue an alternative strategy, one of which may be ~~required~~a strategic transaction similar to ~~seek a license, defend~~the proposed Merger. Attempting to complete an ~~infringement action or challenge~~alternative transaction like the ~~validity of the patents in court, or redesign our products. Patent litigation is~~proposed Merger will be costly and time ~~consuming. We~~consuming, and we can make no assurances that such an alternative transaction would occur at all. Alternatively, our board of directors may ~~not have sufficient resources~~elect to ~~bring these actions~~continue our operations to ~~a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of~~advance the ~~following:~~

~~Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.~~

~~We may be subject to claims challenging the inventorship or ownership~~development of our ~~patents~~programs, which would require that we obtain additional funding, and ~~other intellectual property.~~

~~We may also be subject~~ to ~~claims that former employees, collaborators,~~resume our efforts to seek potential collaborative, partnering or other ~~third parties have an ownership interest in~~strategic arrangements for our ~~patents~~program, including a sale or other ~~intellectual property. For example, each~~divestiture of our ~~patents~~program assets, or our board of directors could instead decide to pursue a dissolution and ~~patent~~

~~applications names one or more inventors affiliated with other institutions, any~~liquidation of whom may assert an ownership claim. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our ~~business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.~~

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.company. In such an event, ~~competitors might be able to enter the market earlier than would otherwise have been the case.~~

~~We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.~~

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Common Stock.

~~Issued patents covering Plenity could be found invalid or unenforceable if challenged in court.~~

If we initiated legal proceedings against a third party to enforce a patent covering our product candidate, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness, indefiniteness or non-enablement.

Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review and equivalent proceedings in foreign jurisdictions, e.g., opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they do not cover Plenity or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on Plenity. Such a loss of patent protection would have a material adverse impact on our business.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time, and if we do not obtain protection under the Hatch-Waxman Amendments and similar non-United States legislation for extending the term of patents covering each of our product candidates, our business may be materially harmed.*

~~Given~~ the amount of ~~time required~~cash available for ~~the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Depending upon~~distribution to our shareholders will depend heavily on the timing ~~duration~~of such decision, and ~~conditions of FDA marketing approval of our product candidates, one or more of our United States patents may be eligible for limited patent term extension under~~subject to the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent may be extended, and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the lengthprovisions of the ~~extension could be less than we request. If we are unable to obtain patent term extension or~~law of the ~~term~~state of ~~any such extension is less than we request,~~Delaware, and with the ~~period during which we can enforce our patent rights~~passage of time the amount of cash available for ~~that product~~distribution will be ~~shortened and~~reduced as we continue to fund our ~~competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced and could have a material adverse effect on our business.~~

We do not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on Plenity and any other product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and we did not pursue intellectual property rights in some countries outside the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as in other jurisdictions. Consequently, we may not be able to prevent third parties from practicing our inventions in all jurisdictions, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but where enforcement is limited. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals and medical devices, which could make it

difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

~~Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.~~

The United States has implemented the America Invents Act of 2011, which was wide-ranging patent reform legislation. Further, the Federal Circuit and the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations, such as with respect to patent claims using “consisting essentially of” transitional language. In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents or future patents.

We may be subject to damages resulting from claims that we, our employees, consultants or third parties we engage to manufacture our products have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

Many of our employees were previously employed at pharmaceutical companies and other medical device companies, including our potential competitors, in some cases until recently. We may be subject to claims that we, our employees, consultants or third parties have inadvertently or otherwise used or disclosed alleged trade secrets or proprietary information of these former employers or competitors.operations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount

to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the company.

If adverse changes occur and we and PureTech still complete the Merger, the market price of the combined organization’s common stock may suffer. This in turn may reduce the value of the Merger to the equityholders of our company, PureTech or both.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that ~~we caused~~may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit us from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when our board of directors determines in good faith that an ~~employee~~unsolicited bona fide alternative takeover proposal is more favorable to ~~breach~~our stockholders, from a financial point of view, than the terms of ~~his or her non-competition or non-solicitation agreement. Litigation may~~the Merger and is reasonably likely to be ~~necessary~~consummated in accordance with its terms on a timely basis, taking into account all legal, regulatory, financial, financing and other aspects of such proposal and of the Merger Agreement. Our board of directors must also determine in good faith that the failure to ~~defend against these claims. Even if~~take actions with respect to such proposal would be inconsistent with its fiduciary duties. If we terminate the Merger Agreement to enter into an alternative takeover proposal, we are ~~successful in defending against these claims, litigation~~required to pay a termination fee of $350,000 and reimburse Parent for certain expenses up of $1,000,000.

We are subject to business uncertainties and contractual restrictions while the proposed Merger is pending, which could adversely affect our business and operations.

In connection with the pendency of the Merger, it is possible that some customers, suppliers and other persons with whom we have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with us as a result ~~in substantial costs~~of the Merger, which could negatively affect our revenues, earnings and ~~could be a distraction for~~cash flows, as well as the market price of our ~~management. If~~common stock, regardless of whether the Merger is completed.

Under the terms of the Merger Agreement, we are subject to certain restrictions on the conduct of our ~~defense~~business prior to ~~those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Any litigation or~~completing the ~~threat thereof~~Merger, which may adversely affect our ability to ~~hire employees~~execute certain of our business strategies, including the ability in certain cases to enter into or ~~contract~~amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could negatively affect our business and operations prior to the completion of the Merger.

All the risks described above may be exacerbated by delays or other adverse developments with ~~third parties. A~~respect to the completion of the Merger.

Uncertainties associated with the Merger may cause a loss of management personnel and other key ~~personnel or their work product~~employees which could ~~have an adverse effect on~~adversely affect our business ~~results of operations and financial condition.~~

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.*

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

We will need to continue to develop and expand, and if we fail to manage such development and expansion effectively, our expenses could increase more than expected, our revenue may not increase sufficiently to generate sustainable profits and we may be unable to successfully execute on our growth initiatives, business strategies or operating plans.

As of September 30, 2022, we had 101 full-time employees and 12 consultants and we expect to continue to increase the number of our administrative employees. We also plan to continue to expand the scope of our operations including the development of a commercial-scale manufacturing line and hiring manufacturing staff. To manage our anticipated development and expansion, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage such development and the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the commercialization of Plenity, and we may not be able to sufficiently increase our revenue to generate sustainable profits. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our product sales could be reduced, and we may not be able to successfully execute on our growth initiatives, business strategies or operating plans. Our future financial performance and our ability to commercialize Plenity and compete effectively will depend in part on our ability to effectively manage the future development and expansion of our company.

Our estimated addressable market is subject to inherent challenges and uncertainties. If we have overestimated the size of our addressable market generally or markets in which we intend to offer Plenity, our future growth opportunities may be limited.

Data regarding the size and potential growth of the addressable market for weight management and weight loss solutions, generally, and the size of the target market for Plenity, specifically in the United States, is based upon, in part, internal estimates, forecasts and information obtained from independent trade associations, industry publications and surveys and other independent sources, proprietary research studies and management’s knowledge of the industry, and is subject to significant uncertainty and is based on assumptions that may not prove accurate. While these estimates are made in good faith and are based on assumptions and estimates we believe to be reasonable, they may not be accurate and are subject to change. If we have overestimated the size of the addressable market for Plenity, including within the markets in which we intend to offer Plenity, our future growth opportunities may be limited.

~~Our ability to identify, engage with and retain Plenity patients is essential to our ability to grow and sustain our sales.~~

Sales of Plenity are our sole source of revenue, and our future growth depends upon our ability to identify, engage with, retain and grow our patient base and audience. To do so will require us to address changing consumer demands and developments in technology and improve Plenity, including by developing additional indications, while continuing to provide our distributors and patients with guidance and inspiring them on their weight management journeys by providing a product that provides meaningful results. We have invested and will continue to invest significant resources in these efforts, but there is no assurance that we will be able to successfully maintain and increase our patient base or that we will be able to do so without taking steps such as reducing pricing or incurring manufacturing costs that would affect our revenues, margin and/or profitability.

We depend on collaborations with third parties for the commercialization of Plenity in certain markets. If our third-party partners do not launch and successfully commercialize Plenity in key markets before our competitors offer products for the same or similar uses, we may not be able to fully capitalize on the market potential of Plenity.*

We have entered into agreements with third-party partners for the launch and commercialization of Plenity in certain markets. For example, in June 2020, we entered into a License, Collaboration and Supply Agreement with CMS Bridging DMCC, which was subsequently expanded and amended in August 2022, for CMS Bridging DMCC to develop, import, register, manufacture, and commercialize Plenity in Greater China and certain other territories. The launch and commercialization of Plenity by our third-party

partners in certain markets may be subject to the receipt of regulatory approvals or the satisfaction of other conditions. Our ability to generate milestone and royalty payments from our agreements with our third-party partners will depend on our partners’ abilities to obtain necessary approvals and otherwise successfully perform the functions assigned to them in these agreements. We cannot predict the success of our third-party partners. If competitors are able to successfully launch competitive products more rapidly than our partners are able to launch Plenity or if our third-party partners are not effective in commercializing Plenity, our potential milestone and royalty payments from sales of Plenity may be reduced.

We depend on a limited number of third-party suppliers, and the loss of any of these suppliers or their inability to provide us with an adequate supply of materials or distribution could harm our business.

We rely on a limited number of third-party suppliers to provide certain components for the hydrogel technology utilized in the manufacture of Plenity as well as related packaging for Plenity. The supply and price of these components are subject to market conditions and are influenced by many factors beyond our control, including pandemics (such as the COVID-19 pandemic) or other outbreaks of contagious diseases, weather patterns affecting component production, governmental programs and regulations, labor disruptions, and inflation. Although we strive to maintain relationships with suppliers with the objective of ensuring that we have adequate sources for the supply of such components and packaging materials, increases in demand for such items, both within our industry and in general, can result in shortages and higher costs. Our suppliers may not be able to meet our delivery schedules, we may lose a significant supplier, a supplier may not be able to meet performance and quality specifications and we may not be able to purchase such items at a competitive cost. Our freight costs may increase due to factors such as limited carrier availability, increased fuel costs, increased compliance costs associated with new or changing government regulations, pandemics (such as the COVID-19 pandemic) or other outbreaks of contagious diseases and inflation. Higher prices for natural gas, propane, electricity and fuel also may increase our component, production and delivery costs. The prices charged for Plenity may not reflect changes in our component, packaging material, freight, tariff and energy costs at the time they occur, or at all.

The loss of key supply sources, for any reason, our inability to obtain necessary quantities of components and packaging materials or changes in freight or energy costs may limit our ability to maintain existing margins and may have a material adverse effect on our business, financial condition, results of operations and cash flows. If we fail or are unable to hedge and prices subsequently increase, or if we institute a hedge and prices subsequently decrease, our costs may be greater than anticipated or greater than our competitors’ costs, and our business, financial condition, results of operations and cash flows could be adversely affected.

We rely on a limited number of channels for the distribution of Plenity, with a few qualified distributors currently accounting for substantially all of our revenue. The loss of one or more of such qualified distributors would materially harm our business.

For the three and nine months ended September 30, 2021 and 2022, respectively, we relied on three customers or distributors for the distribution of Plenity accounting for 100% of our revenue. We also rely on our reputation and recommendations from key qualified distributors in order to promote Plenity to potential new patients. The loss of any of our key qualified distributors, or a failure of some of them to renew or expand their relationships with us, could have a significant impact on the growth rate of our revenue, reputation and our ability to obtain new users. In addition, mergers and acquisitions involving our qualified distributors could lead to cancellation or non-renewal of our contracts with those distributors or by the acquiring or combining companies, thereby reducing the number of our existing and potential distributors, which would materially harm our business.

If our existing qualified distributors do not continue or renew their contracts with us, renew at lower price levels or decline to purchase additional amounts of Plenity from us, it could have a material adverse effect on our business, financial condition and results of operations.

We expect to derive a significant portion of our revenue from renewal of existing qualified distributor contracts and sales of Plenity to existing distributors. As part of our growth strategy, for instance, we have recently focused on the distribution of Plenity through telehealth services as well as using our sales force to drive sales of Plenity. As a result, increasing sales of Plenity is critical to our future business, revenue growth and results of operations.

~~Factors that may affect our ability to increase sales of Plenity include, but are not limited to, the following:~~

We enter into exclusive supply and distribution agreements with our qualified distributors. Most of our distributors have no obligation to renew their contracts with us after the initial term expires. In addition, our distributors may negotiate terms less advantageous to us upon renewal, which may reduce our revenue from these distributors. Our future results of operations also depend, in part, on our ability to expand the number of our distributors. If our distributors fail to renew their contracts, renew their contracts upon less favorable terms or at lower fee levels or fail to purchase new products and services from us, our revenue may decline, or our future revenue growth may be constrained.

~~Our future success depends on our ability to retain our senior executive officers and to attract and keep senior management and key scientific and commercial personnel.~~

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We are highly dependent upon our senior management, particularly Yishai Zohar, our Chief Executive Officer and President, as well as other employees and consultants. Although none of these individuals has informed us to date that he intends to retire or resign in the near future, the loss of services of any of these individuals or one or more of our other members of senior management could delay or prevent the successful commercialization of Plenity and the development of future product candidates.

Although we have not historically experienced unique difficulties attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified personnel in the biotechnology, pharmaceutical and medical device field is intense, and we face competition for the hiring of scientific and clinical personnel from other biotechnology and pharmaceutical companies, as well as universities and research institutions. In addition, the consultants and advisors, including scientific and clinical advisors, upon whom we rely to assist us in formulating our research development and commercialization strategy, may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. In addition, we will need to hire additional personnel as we expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms, if at all.

~~We may not be successful in our efforts to identify or discover additional product candidates.~~

The success of our business depends primarily upon our ability to identify, develop and commercialize products using our proprietary hydrogel technology. Although Plenity is currently in the early stages of commercialization, our research programs may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval.

Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

Our employees may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

We are ~~exposed~~dependent on the experience and industry knowledge of our officers and other key employees to ~~the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures~~execute our business plan. Prior to ~~comply with the regulations~~completion of the ~~FDA~~Merger, current and ~~European regulatory authorities, provide accurate information to the FDA and applicable non-U.S. regulators, comply with healthcare~~

fraud and abuse laws and regulations in the United States and abroad, as well as the Foreign Corrupt Practices Act, or FCPA, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

~~We face potential product liability exposure and if claims are brought against us, we may incur substantial liability.~~

The sale of Plenity exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with Plenity. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities.

~~In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:~~

Our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive.

Significant judgments have been awarded in class action lawsuits based on drugs and medical devices that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in lightprospective employees of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline, and if we are unsuccessful in defending such a claim or claims andCompany may experience uncertainty about their roles within the ~~resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.~~

Ifcombined company following the ~~weight management industry is subject to adverse publicity, our business could be harmed.~~

~~Unfavorable publicity regarding, for example, the weight management industry, the healthcare industry, litigation or regulatory activity, the actions~~completion of the entities included or otherwise involved in our platform, negative perceptions of Plenity, our hydrogel technology, pricing, our data privacy or data security practices, telehealth services or our revenue could materially adversely affect our reputation. Such negative publicity also couldMerger, which may have an adverse effect on our ability to attract or retain key management and ~~retain consumers, patients, business partners or employees,~~other key personnel and ~~result~~ in ~~decreased revenue, which would materially~~turn could adversely affect our business ~~financial condition~~ and results of operations.

While the ~~perception of~~Merger Agreement is in effect, we are subject to certain interim covenants and our ~~brands or business reputation is damaged, customers and the ultimate user may not purchase Plenity, which~~management could ~~materially and adversely affect~~be distracted.

The Merger Agreement generally requires us to operate our business ~~financial condition~~in the ordinary course, subject to certain exceptions, including as required by applicable law, and ~~results of operations.~~

~~We are building our reputation~~subjects us to customary interim operating covenants that restrict us, without Parent’s approval (such approval not to be unreasonably withheld, delayed or conditioned), from taking certain specified actions until the Merger is completed or the Merger Agreement is terminated in accordance with its terms. For example, the Merger Agreement requires us to provide budget plans and cash flow projections on a bi-weekly and monthly basis demonstrating capital requirements satisfactory to PureTech. These restrictions could prevent us from pursuing certain business opportunities that may arise prior to the ~~efficacy of Plenity and the high-quality nature~~consummation of the ~~product, its availability~~Merger and the limited side effects. We must protect and expand on the value of Plenity to continue to be successful in the future. Any incident that erodes consumer or patient affinity for Plenity could significantly reduce our value and damage our business. For example, negative third-party reports regarding Plenity, related side effects or the quality and availability of the product generally, whether accurate or not, may ~~adversely~~ affect consumer and patient perceptions, which could cause our value to suffer and adversely affect our business. In addition, if we are forced or voluntarily elect to recall Plenity or there are other regulatory actions taken with respect to Plenity, the public perception of the quality, safety and efficacy of Plenity may be diminished. We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as public health concerns, illness, safety, security breaches of personal information or employee information, employee-related claims relating to alleged employment discrimination, health care and benefits issues or government or industry findings about our retailers, distributors, manufacturers or others across the industry supply chain.

As part of our marketing initiatives, we have contracted with certain public figures to market and endorse our products. While we maintain specific selection criteria and are diligent in our efforts to seek out public figures that resonate genuinely and effectively with our consumer audience, the individuals we choose to market and endorse Plenity may fall into negative favor with the general public. Because our consumers may associate the public figures that market and endorse Plenity with us, any negative publicity on behalf of such individuals may cause negative publicity about us and Plenity. This negative publicity could materially and adversely affect our brands and reputation and our revenue and profits.

A significant interruption in the operations of our third-party partners could potentially disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.

We rely on Roman Health Pharmacy LLC to provide our members with access to telehealth services and we partner with GoGoMeds to provide online pharmacy access to Plenity for non-telehealth patients. Although our ability to attract, retain, and serve our members is significantly dependent upon the reliable performance of our third party partners and their respective underlying information technology, we have limited control over their operations. Any significant disruption of their operations, whether as a result of general market or economic conditions, the failure of their equipment or information technology systems, a breach of data security or unauthorized disclosures of sensitive data, such as personally identifiable information or individually identifiable health information, could result in a decrease in consumer demand for Plenity. In addition, any disruption in the operations ofexecute our business ~~partners could subject us to reputational damage~~strategies and ~~have a material adverse effect on our business,~~attain financial ~~condition and results of operations.~~

Negative information, including inaccurate information about us on social media, which may include information attributable to spokespersons with whom we have a relationship, may harm our reputation and brand, which could have a material adverse effect on our business, financial condition and results of operations.

There has been a marked increase in the use of social media platforms and similar channels, including the use of celebrity endorsements or spokespersons with whom we may have a relationship with, that provide individuals with access to a broad audience of consumers and other ~~interested persons. The availability of~~

information on social media platforms is virtually immediate, as is its effect. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information about our business and Plenity may be posted on such platforms at any time. Negative views regarding Plenity and its efficacy may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interestsgoals and may harm our reputation and brand. The harm may be immediate without affording an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity cannot be eliminated or completely mitigated and may materially and adversely affect our business, financial condition and results of operations.

We must expend resources to maintain consumer awareness of Plenity, build brand loyalty and generate increasing sales. Our marketing strategies and channels will evolve and our programs may or may not be successful.

To remain competitive and expand, we may need to increase our marketing and advertising spending to maintain and increase consumer awareness of Plenity, protect and grow our existing market share or promote new products, which could affect our operating results. Substantial advertising and promotional expenditures may be required to maintain or improve our brand’s market position or to introduce new products to the market or new indications for Plenity, when and if available, and participants in our industry are increasingly engaging with non-traditional media, including consumer outreach through social media, celebrity promotions and web-based channels, which may not prove successful and may have a negative impact on perception of Plenity or reduce market acceptance of Plenity. An increase in our marketing and advertising efforts may not maintain or increase our current reputation, or lead to increased brand awareness. Moreover, we may not maintain current awareness of our brand due to any potential fragmentation of our marketing efforts as we continue to focus on a particular target market for weight management patients. Our inability to increase or maintain sales of Plenity could negatively impact our ability to develop other indications for Plenity as well as other product offerings, which may have an adverse effect on our business, financial condition and results of operations.

If we do not continually enhance our brand recognition, increase distribution of Plenity, attract new patients and introduce new and innovative products, either on a timely basis or at all, our business may suffer.

The weight management industry is subject to rapid and frequent changes in consumer demands and preferences. Because consumers are constantly seeking new products and strategies to achieve their weight goals, our success relies heavily on our ability to enhance our brand awareness through the increased distribution of Plenity, by attracting new patients and by continuing to develop and market new and innovative products that build on Plenity’s commercialization. Since Plenity is currently our only product offering, our ability to generate sales of Plenity and for it to achieve widespread market acceptance is essential to the success of our business. To respond

to new and evolving consumer demands and preferences, continue to enhance brand recognition and keep pace with new weight management, technological and other developments, we must constantly introduce new and innovative products into the market, after regulatory approval, some of which may not be accepted by consumers, or may not be achieved in a timely manner that allows us to build off of the commercialization of Plenity. If we cannot commercialize Plenity or other new products, our revenue may not grow as expected, which would materially and adversely affect our business, financial condition and results of operations.

If our security measures fail or are breached and unauthorized access to personal information and data is obtained, we may incur significant liabilities, our reputation may be harmed and we could lose sales, customers and patients.

Breaches of data security, website defacements and other malicious acts, which are increasingly negatively impacting companies, could result in unauthorized access to personal information or data, or cause interruptions to our manufacturing and supply chain for Plenity and therefore, limited supply of Plenity and access thereto. Such unauthorized access or interruptions could cause us to incur significant liabilities, harm our reputation, and may result in a decrease in sales and/or the loss of existing or potential customers and patients. We rely upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and utilize personal information and data, and it is critical that we do so in a secure manner to maintain the integrity of such personal information and data as well as to comply with applicable regulatory requirements and contractual obligations.

We also have outsourced the majority of elements that comprise our information technology infrastructure and, as a result, we manage multiple independent vendor relationships with third parties who may or could have access to the personal information and data that we collect. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to security breaches. While we have invested, including by maintaining cybersecurity insurance coverage, and developed systems and processes designed to protect such proprietary or customer information or data, these measures are costly, and there can be no assurance that our efforts will prevent service interruptions or security breaches.

Existing, proposed or new data privacy legislation and regulations, including interpretations thereof, could also significantly affect our business. Data protection and privacy laws have been enacted by the U.S. federal and state governments, including the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020, the Health Insurance Portability and Accountability Act (HIPAA), and other relevant statutes, as well as in Europe, including the European Genera Data Protection Regulation, which took effect in May 2018. These laws also typically include notification obligations and impose significant penalties and potential liability for non-compliance. The data privacy and security regulatory regime continues to evolve and is increasingly demanding. Many U.S. states are considering privacy and security legislation and there are ongoing discussions regarding a national privacy law. Variations in requirements across U.S. and foreign jurisdictions could present compliance challenges, and any failures to comply with such requirements may have an adverse effect on our business or results of operations.

Further, many jurisdictions require that customers be notified if a security breach results in the disclosure of their personal financial account or other information, and additional jurisdictions and governmental entities are considering such laws. In addition, other public disclosure laws may require that material security breaches be reported. If we experience, or in certain cases suspect, a security breach and such notice or public disclosure is required in the future, our reputation, brands and business may be harmed.

Prospective and existing customers and patients may have concerns regarding our use of personal information or data collected on our website, such as weight management information, financial data, email addresses and home addresses. These privacy concerns could keep customers and patients from using our website or purchasing Plenity, and third parties from partnering with us.

While no cybersecurity breach or attack to date has had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of our information technology networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. In addition, the transmission of computer viruses, or similar malware, could adversely affect our information technology systems and harm our business operations. As a result, it may become necessary to expend significant additional amounts of capital and other resources to protect against, or to alleviate, problems caused by security breaches. These expenditures, however, may not prove to be a sufficient protection or remedy and our business, financial condition and results of operations could be materially and adversely impacted.

~~Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our business.~~

We rely on software, hardware, network systems and similar technology, including cloud-based technology, that is licensed from or maintained by third parties to operate our websites, to access Plenity and other services and products to support our business operations, including our manufacturing and supply chain operations. As much of this technology is complex, there may be future errors, defects or performance problems, including when we update our technology or integrate new technology to expand and enhance our capabilities. Our technology may malfunction or suffer from defects that become apparent only after extended use. The

integrity of our technology may also be compromised as a result of third-party cyber-attacks, such as hacking, spear phishing campaigns and denial of service attacks, which are increasingly negatively impacting companies. In addition, our operations depend on our ability to protect our information technology systems against damage from third-party cyber-attacks, fire, power loss, water, earthquakes, telecommunications failures and similar unexpected adverse events. Disruptions in our websites, services and products or network systems could result from a number of factors, including unknown technical defects, insufficient capacity and the failure of our third-party providers to provide continuous and uninterrupted service. Such disruptions would be most impactful if they reduced accessibility to Plenity, including by delaying or halting the manufacture of Plenity and access to our supply chain. While we maintain disaster recovery capabilities to return to normal operation in a timely manner and we deploy multiple parallel instances of our applications across multiple computer resources, we do not have a fully redundant system that includes an instantaneous recovery capability. In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner, which could have an adverse impact on our business.

As a result of such possible defects, failures, interruptions or other problems, Plenity could be rendered unreliable or be perceived as unreliable by customers, which could result in harm to our reputation and brands. Any failure of our technology or systems could result in an adverse impact on our business.

~~We may acquire businesses or products or form strategic alliances in the future, and we may not realize the benefits of such acquisitions.~~

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that following any such acquisition we will achieve the expected synergies to justify the transaction.

Our international operations for the supply chain and manufacture of Plenity pose certain political, legal and compliance, operational, regulatory, economic and other risks to our business that may be different from or more significant than risks associated with our U.S. operations.

The international nature of our operations for the supply chain and manufacture of Plenity involves a number of risks, including changes in U.S. and foreign regulations, tariffs, taxes and exchange controls; economic downturns; inflation and political and social instability in the countries in which we operate; weakening or loss of the protection of intellectual property rights in some countries and limitations on our ability to enforce our intellectual property rights under some local laws; and our dependence on foreign personnel. Foreign regulations may also restrict our ability to operate in some countries, acquire new businesses or repatriate cash from foreign subsidiaries back to the United States. If we expand our operations into additional foreign countries, we may be subject to additional risks, including the ability to successfully adapt to local culture and navigate regulatory, economic, political, social and intellectual property risks. We cannot be certain that we will be able to enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the foreign markets in which we currently operate.

If inflation continues or worsens, it could negatively impact us by increasing our operating expenses. Inflation may lead to cost increases in multiple areas across our business, for example, rises in the prices of raw materials and manufactured goods, increased energy rates, as well as increased wage pressures and other expenses related to our employees. In particular, where we have agreed to undertake infrastructure build outs on a fixed budget for our carrier customers or by accepting government grants, inflation may result in build costs that exceed our original budget given the long delays experienced in procuring equipment and materials due to global supply chain delays. To the extent that we are unable to pass on these costs through increased prices, revised budget estimates, or offset them in other ways, they may impact our financial condition and cash flows.

~~Foreign currency exchange rate fluctuations could adversely affect our business, financial condition and results of operations.~~

A significant portion of our operating costs are denominated in foreign currencies. We are therefore exposed to fluctuations in the exchange rates between the U.S. dollar and the currencies in which our foreign operations pay expenses. We do not currently hedge, and have not historically hedged, our exposure to foreign currency fluctuations. Our consolidated financial results are presented in U.S. dollars and therefore, the assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Expenses are translated into U.S. dollars at the average exchange rate for the period. Translation adjustments arising from the use of differing exchange rates from period to period are recorded in shareholders’ equity as accumulated other comprehensive income (loss). Translation adjustments arising from intercompany receivables and payables with our foreign

subsidiaries are generally recorded as a component of other expense (income). Accordingly, changes in currency exchange rates will cause our operating costs, net income and shareholders’ equity to fluctuate and could adversely affect our business, financial conditions and results of operations.

Competition from other weight management and wellness industry participants or the development of more effective or more favorably perceived weight management methods could result in decreased demand for Plenity.

The weight management and wellness industry is highly competitive. We compete against a wide range of providers of weight management services and products and wellness industry participants. Our competitors include: commercial weight management programs; weight loss and wellness apps; surgical procedures; the pharmaceutical industry; the genetics and biotechnology industry; self-help weight management regimens and other self-help weight management products, services and publications, such as books, magazines, websites and social media influencers and groups; dietary supplements and meal replacement products; healthy living services, coaching, products, content and publications; weight management services administered by doctors, nutritionists and dieticians; government agencies and non-profit groups that offer weight management services; fitness centers; and national drug store chains. As we or others develop new or different weight management services, products, methods or technologies, additional competitors may emerge. Furthermore, existing competitors may enter new markets or expand their current offerings or advertising and marketing programs. More effective or more favorably perceived diet and weight management methods, including pharmaceutical treatments, fat and sugar substitutes or other technological and scientific advancements in weight management methods, also may be developed. This competition may reduce demand for Plenity.

The purchasing decisions of weight management and healthy living consumers are highly subjective and can be influenced by many factors, such as brand image, marketing programs, cost, social media presence and sentiment, consumer trends, the digital platform, content and user experience and perception of the efficacy of the product offerings. Moreover, consumers can, and frequently do, change approaches easily and at little cost. Any decrease in demand for Plenity may adversely affect our business, financial condition or results of operations.

~~If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.~~

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions, which could have a material adverse effect on our operations.

~~Changes in federal, state, local or foreign tax law or interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect~~ our financial condition, results of operations orand cash flows.

~~We are subject~~In addition, our management will also need to ~~taxation at~~take certain other actions in connection with the ~~federal, state~~pendency of the proposed Merger, including, among other things, convening a meeting of our stockholders for the purpose of considering and ~~local levels~~voting on the Merger, filing a proxy statement in connection with our solicitation of proxies from our stockholders for such meeting, using reasonable best efforts to obtain all necessary consents and approvals required in connection with the ~~U.S.~~Merger and to satisfy the other conditions to the consummation of the Merger, addressing any litigation brought against the Company in connection with the Merger, and responding to questions we may receive from our stockholders, employees, vendors and other countries and jurisdictions. Our future effective tax rate could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, or changes in determinationsinterested stakeholders regarding the ~~jurisdictions in which we are subject~~Merger. Taking these actions could require our management to ~~tax. From~~expend time toand resources, reducing the time ~~the U.S. federal, state~~ and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher taxes than would be incurred under existing tax law or interpretation and could adversely affectresources our profitability, financial condition, results of operations or cash flows. State and local tax authorities have also increased their efforts to increase revenues through changes in tax law and audits. Such changes and proposals, if enacted, could increase our future effective income tax rates. We are subject to ongoing and periodic tax audits and disputes in various jurisdictions. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.management

~~Global economic, political~~could otherwise direct towards our ongoing business operations. If our management is unable to expend the necessary time and ~~social conditions and uncertainties in the markets that we serve, including risks and uncertainties caused by the COVID-19 pandemic, may adversely impact~~resources on our ~~business.~~

~~Our~~business, our results of operations could be ~~adversely affected by general conditions~~negatively impacted.

The dilutive nature of the financing transactions with PureTech could result in PureTech’s ownership of the ~~global economy and in the global financial markets, including risks and uncertainties caused by the COVID-19 pandemic, including, weakened demand for any~~vast majority of our ~~future products~~outstanding Common Stock and ~~our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also result in supply disruption or cause our customers to delay making payments~~limited proceeds of an acquisition for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.other stockholders.

~~Natural or man-made disasters and other similar events may significantly disrupt our business and negatively impact our business, financial condition and results of operations.~~

Our ability to make, move and sell products in coordination with our suppliers, manufacturer and business partners is critical to our success. Damage or disruption to our collective supply, manufacturing or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, pandemics (such as the COVID-19 pandemic) or other outbreaks of contagious diseases, fire, explosion, cyber-attacks, terrorism, strikes, repairs or enhancements at facilities manufacturing or delivering Plenity or other reasons could impair our ability to manufacture, sell or timely deliver Plenity to customers and patients.

We rely on a limited number of third party suppliers to provide certain components and packaging materials, and currently have two manufacturing facilities in southern Italy. Adverse events affecting such suppliers or manufacturers may limit our ability to obtain such raw materials, or alternatives for these raw materials, at competitive prices, or at all. Competitors can be affected differently by weather conditions and natural disasters depending on the location of their suppliers and operations. Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a component or packaging material is sourced from a single location or supplier or produced by a single manufacturer, could adversely affect our business, financial condition, results of operations and/or require additional resources to restore our supply chain or manufacturing capabilities, as applicable.

~~We are a commercial stage biotherapeutics company, but to date~~Since inception, we have ~~generated limited product sales. We have incurred significant operating losses since our inception and anticipate that we will continue to incur continued losses for the next several years.~~

~~We are a commercial stage biotherapeutics company and to date we have funded~~financed our operations ~~through proceeds~~ from ~~collaborations,~~ the issuance of ~~common stock~~equity and ~~convertible preferred stock, the issuance of convertible~~debt instruments and ~~non-convertible debt and non-dilutive grants received from government agencies. We~~ have ~~incurred losses~~engaged in each year since our inception, other than fiscal 2013. Our net losses were $14.1 million and $30.7 million for the three months ended September 30, 2022 and 2021, respectively, and $32.4 million and $74.1 million for the nine months ended September 30, 2022 and 2021, respectively.multiple financing transactions with PureTech. As of ~~September 30, 2022, we had an accumulated deficit~~the date of ~~$298.1 million. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect~~this Quarterly Report on our stockholders’ deficit and working capital. We expect to incur increasing levels of operating losses over at least the next several years. We expect to continue to incur significant sales and marketing expenses and additional costs associated with operating as a public company. Because of the numerous risks and uncertainties associated with commercializing Plenity and developing any future product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

~~Our ability to become profitable depends upon our ability to generate product sales. To date,~~Form 10-Q, we have ~~generated limited product sales~~issued, and PureTech holds, 16,727,582 shares of ~~Plenity, and we do not know when or if we will generate meaningful product sales from Plenity. Our ability~~Common Stock, options to ~~generate product sales depends on a number~~purchase up to 155,520 shares of ~~factors, including, but not limited to, our ability to:~~

We expect to incur significant sales and marketing costs as we commercialize Plenity and we may not achieve profitability soon after generating product sales, if ever, and we may be unable to continue operations without continued funding. Failure to successfully commercialize Plenity would materially harm our business, financial condition and results of operations.

~~We may be unable to accurately forecast revenue and appropriately plan our expenses in the future.~~

We base our current and future expense levels on our operating forecasts and estimates of future income. Income and results of operations are difficult to forecast because they generally depend on our ability to fully commercialize Plenity, including our ability to quickly and efficiently scale production thereof, which remains uncertain. Additionally, our business is affected by general economic and business conditions around the world, including the impact of the COVID-19 pandemic. A softening in income, whether caused by changes in consumer preferences or a weakening in global economies, may result in decreased demand for Plenity or our ability to generate adequate supply of Plenity, which in turn would negatively impact our revenue levels and make it increasingly difficult to achieve and maintain profitability. If so, and we are unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in the commercialization of Plenity, we could experience lower net income or greater net loss in a given quarter than expected.

In order to support our business, we will need to incur additional indebtedness or seek capital through new equity or debt financings, which sources of additional indebtedness or capital have become increasingly difficult to secure and may not be available on acceptable terms, if at all, and the failure to obtain this additional funding when needed may force us to delay, limit or terminate our product development efforts or other operations.*

We are currently commercializing Plenity. Manufacturing and marketing our hydrogel technology is expensive and, accordingly, we expect our manufacturing and marketing expenses will increase substantially in connection with any ongoing commercialization activities. However, we will require additional capital to fund our growth and operating needs, including our ongoing commercialization activities. We will also need to raise additional funds sooner if we choose to pursue additional indications and/or geographies for Plenity or otherwise expand more rapidly than we presently anticipate.

As of September 30, 2022, our cash and cash equivalents were $24.8 million. Upon the close of the Business Combination in January 2022, we received approximately $105 million of gross proceeds to fund our operations. Due to a significant number of redemptions associated with the Business Combination, we determined to seek additional funds sooner than originally planned, through public or private equity or debt financings, government or other third party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these sources. For example, on July 25, 2022 and August 4, 2022, we issued the 2022 Promissory NotesCommon Stock, notes in the aggregate principal amount of ~~$25.0~~$25.4 million, to CMS, PureTech and SSD2, (together, the “Promissory Note Investors”) for an aggregate cash purchase price of $25.0 million. In addition, on August 11, 2022, we established a Committed Equity Facility pursuant to which ~~we will have the right, but not the obligation, to sell to B. Riley up to the lesser of (i) $50,000,000 of newly issued~~are convertible into 378,943,720 shares of Common Stock, and ~~(ii) 14,506,475 shares of our Common Stock from time~~warrants to ~~time, at our sole discretion.~~

However, we will require additional capital to continue to commercialize Plenity and to develop and commercialize any future product candidates. There is a substantial correlation between our sales of Plenity and our expenditure on marketing. For example, in January 2022, we launched a broad awareness media campaign for Plenity that resulted in significant increases in our web traffic and in the number of individuals seeking new Plenity prescriptions compared to previous months. Our ability to expand our customer base through marketing efforts such as our January 2022 media campaign, and generate related revenue, is dependent upon our ability to successfully raise the capital to fund such efforts. Our failure to obtain additional funding may force us to delay, limit or terminate our marketing efforts, which may negatively impact our ability to attract enough customers to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations which could cause our Common Stock to lose value.

Even if we ultimately obtain sufficient funds for our current or future operating plans, we may nevertheless seek additional capital through debt or equity financings if market conditions are favorable or if we have specific strategic considerations. Such financing is increasingly difficult to secure and there can be no assurance that such debt or equity financings will be available on acceptable terms or will be able to be completed at all. If we are unable to obtain additional funding on a timely basis, or at all, we may be required to significantly curtail, delay or discontinue our research or development programs or the commercialization of Plenity (including limitations on marketing efforts) or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

If we are not successful in implementing an alternative business plan and/or raising additional capital in a timely manner, we may have insufficient cash and liquidity to pay operating expenses and other obligations. Any such event would have a material adverse effect on our business and financial condition.

We implemented an alternative business plan, prioritizing short-term working capital needs such as investments in raw materials and finished goods as well as investments in sales and marketing, and delaying certain long-term capital expenditures in commercial infrastructure and certain research and development expenses. We reduced and optimized investments in sales and marketing, prioritizing investments in high return and high exposure mediums. We have sought out alternative commercial arrangements or geographic distribution partnerships to finance certain investments in sales and marketing associated with the full commercial launch of Plenity. We expect these actions will provide us with sufficient liquidity to manage short-term risk and uncertainty and (i) enable us to execute our alternative business plan, (ii) afford us time to access financing alternatives to provide for long-term liquidity and (iii) enable us to fund the continued commercialization of Plenity. These changes to the execution of our business plan may impact the growth of Plenity sales and the pace of acquisition and retention of consumers. We may need to raise additional capital to fund our operations and our alternative business plan. There can be no assurance that we will be successful in obtaining capital sufficient to meet our operating needs on terms or a timeframe acceptable to us or at all. Further, in the event that market conditions preclude our ability to consummate such a transaction, we may be required to evaluate additional alternatives in restructuring our business and our capital structure.

We believe our current cash and cash equivalents will not be sufficient to fund our business for the next twelve months from the date of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, raising substantial doubt about our ability to continue as a going concern.*

~~As of September 30, 2022, our cash and cash equivalents was $24.8 million. Based on our current operating plan,~~ ~~considering the aggregate proceeds from the post-period issuance of the 2022 Promissory Notes and the post-period CMS amendment,~~ we expect that our existing cash and cash equivalents will only be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2023 and not at least twelve months beyond the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report without generating positive cash flows through increased revenue and by raising additional capital from outside sources (including, for example, our Committed Equity Facility). In addition, we anticipate that this extension of our cash runway into the second quarter of 2023 will only be achievable with the significant reduction of discretionary spending from prior levels, particularly with respect to our discretionary sales and marketing activities and manufacturing and supply chain functions. In addition, our current operating plan is based on current assumptions that may prove to be wrong, and we could use our available capital resources sooner than is currently expected. As stated above, if we are unable to obtain additional funding on a timely basis, or at all, we may be required to significantly curtail, delay or discontinue our research or development programs or the commercialization of Plenity (including our marketing efforts) or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations. There can be no assurance that we will be able to continue as a going concern.

~~Raising additional funding in the future may cause dilution to our stockholders, restrict our operations or require us to relinquish rights.~~

We may seek additional capital through a combination of private and public equity and debt offerings, government or other third party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these sources. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest in us will be diluted. In addition, the terms of any such securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder. For example, on August 11, 2022, we established our Committed Equity Facility with B. Riley and if and when we sellpurchase 259,345,750 shares of Common Stock, which warrants are immediately exercisable. If PureTech elects to ~~B. Riley under~~convert all the ~~program, after B. Riley has acquired such~~notes and exercise all the warrants, PureTech would hold 655,172,572 shares ~~it may resell all, some,~~of Common Stock, or ~~none~~approximately 92.0% of ~~those shares at any time or from time to time in its discretion. Therefore, sales to B. Riley under pursuant to our Committed Equity Facility~~the Company. As a result, the dilution caused by PureTech’s ownership interests could result in ~~substantial dilution to our existing stockholders. In addition, upon a payment default under any~~PureTech’s ownership of the vast majority of our 2022 Promissory Notes we issued on July 25, 2022 and August 4, 2022 that is not cured after five days, (i) we will be required to issue certain warrants to the holder of such note, which the holder may then exercise foroutstanding shares of ~~our~~ Common Stock and ~~(ii)~~ the ~~holder~~proceeds of any acquisition of us by a third-party. In such ~~2022 Promissory Note will also have~~a scenario, other stockholders would only receive a small portion of the ~~option to convert the outstanding principal and accrued interest under~~proceeds of any such note into a number of shares of our Common Stock. Further debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to Plenity, our intellectual property or future revenue streams or grant licenses on terms that are not favorable to us.transaction.

~~Our ability to use our net operating loss carryforwards and certain tax credit carry forwards may be subject to limitation.~~

We had federal and state net operating loss carryforwards of $184.6 million (federal) and $168.4 million (state), as of December 31, 2021. Our federal net operating loss carryforwards begin to expire in 2027, and our state net operating loss carryforwards began to expire in 2015. Under Section 382 of the Code, changes in our ownership may limit the amount of our net operating loss

carryforwards and research and development tax credit carryforwards that could be utilized annually to offset our future taxable income, if any. Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and research and development tax credit carryforwards before they expire. These limitations, whether as the result of the Business Combination, the PIPE Financing, prior private placements, sales of our common stock by our existing stockholders or additional sales of our common stock by us hereafter, could have a material adverse effect on the amount of net operating losses we can utilize to offset future taxable income.

An active trading market for our Common Stock may never develop or be sustained, which may make it difficult to sell the shares of our Common Stock you purchase.

Our Common Stock is currently traded in the OTC Market (as defined below) and not listed on a securities exchange. The trading volume of securities in the OTC Market is typically much lower than on a securities exchange. An active trading market for our Common Stock may not develop or continue or, if developed, may not be sustained, which would make it difficult for you to sell your shares of our Common Stock at an attractive price (or at all). The market price of our Common Stock may decline below your purchase price, and you may not be able to sell your shares of our Common Stock at or above the price you paid for such shares (or at all).

The NYSE has delisted our public warrants and our Common Stock from ~~the NYSE indicating that we were not~~trading on its exchange, which has and could limit investors’ ability to make transactions in compliance with the continued listing standard set forth in Rule 802.01C of the NYSE Listed Company Manual.*our Common Stock and subject us to additional trading restrictions.

Our Common Stock ~~and Public Warrants are currently listed on the NYSE. In order for our Common Stock to continue to be~~was listed on the NYSE, ~~we are required~~but as a result of our failure to ~~comply with various continued listing standards, On November 2, 2022, we received a letter from~~maintain the ~~NYSE indicating that we were not in compliance with the~~NYSE’s continued listing standard ~~set forth in Rule 802.01C~~requiring listed companies to maintain an average global market capitalization over a consecutive 30 trading day period of at least $15 million under Section 802.01B of the NYSE Listed Company Manual, ~~because~~on April 10, 2023, our Common Stock was delisted from NYSE. On April 11, 2023, our Common Stock began trading on the ~~average closing~~OTC Pink Market operated by the OTC Markets Group Inc. (the “OTC Market”) On April 26, 2023, the NYSE filed the Notification of Removal From Listing and Registration Under 12(b) of the Securities

Exchange Act of 1934 with the SEC. Our warrants were also previously delisted from the NYSE.

Delisting from the NYSE has made trading our Common Stock and warrants more difficult for investors, potentially leading to declines in the trading price of our Common Stock fell below $1.00 per share over a period of 30 consecutive trading days (the “minimum share price requirement”). If we are unable to satisfy the NYSE requirement that our stock price return to a level over $1.00 by May 2, 2023, we will be subject to the NYSE’s suspensionsecurities and ~~delisting procedures. We are closely monitoring the closing share price of our common stock~~liquidity and are considering all available options. We intend to regain compliance with the minimum share price requirement by pursuing measures that are in the best interest of the Company and our shareholders. The last reported sale price of our Common Stock on the NYSE on November 11, 2022 was $0.35 per share.

~~However, if we fail to regain compliance with the minimum share price requirement or we fail to meet~~ other requirements for continued listing on the NYSE, the NYSE may take steps to delist our Common Stock and/or Public Warrants. If the NYSE delists our securities for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for

We do not now, and are not expected to ~~sell~~in the foreseeable future, meet the listing standards of the NYSE or ~~purchase our~~any other national securities ~~when you wish to do so. In the event of a delisting, we~~exchange. We can provide no assurance that ~~any action taken by us~~our Common Stock or warrants will continue to ~~restore compliance with listing requirements would allow our securities~~trade on this market, whether broker-dealers will continue to ~~become listed again, stabilize the market price or improve the liquidity~~provide public quotes of our ~~securities,~~ordinary shares on the OTC Market, whether the trading volume of our Common Stock or ~~prevent~~warrants will be sufficient to provide for an efficient trading market or whether quotes for our Common Stock or warrants will continue on this market in the future, ~~non-compliance with NYSE’s listing requirements.~~which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our Common Stock or warrants.

The price of our Common Stock has been, and may continue to be, volatile, and you could lose all or part of your investment.*

Our Common Stock is currently quoted for public trading on the OTC Market under the symbol “GLS.” The market price and trading volume of our Common Stock has been, and may continue to be, highly volatile and the price of our Common Stock has declined substantially. ~~During 2022 to~~To date, the closing price of our Common Stock has fluctuated from a high of $10.78 on February 9, 2021 to a low of ~~$0.25~~$0.01 per share on ~~November 3, 2022. During 2022 to~~April 13, 2023. To date, daily trading volume ranged from approximately zero to 9,578,900 shares. Continued volatility in the market price and trading volume of our Common Stock could cause purchasers of our Common Stock to incur substantial losses. The market price and trading volume of our Common Stock could continue to remain volatile for many reasons, including in response to the risks described herein and in the other filings we make with the SEC, or for reasons unrelated to our operations, many of which may be beyond our control, such as:

The stock market, ~~the NYSE~~ and biotechnology companies, in recent years, and during the COVID-19 pandemic in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our Common Stock, regardless of our actual operating performance. Continued declines in the market price of our Common Stock have, among other things, made it more difficult to raise capital on terms acceptable to us, or at all, and may make it difficult for our investors to sell their Common Stock. In addition, in the past, securities class action litigation has often been instituted against companies following periods of volatility in, or significant market price decline of, a company’s securities. This type of litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, financial condition and results of operations.

~~Securities of many companies formed through a merger or other business combinations with a SPAC, such as ours, have experienced a material decline in price relative~~Because our Common Stock is subject to the ~~share price~~“penny stock” rules, brokers cannot generally solicit the purchase of ~~the SPAC prior to the Business Combination~~our Common Stock, which adversely affects its liquidity and may continue to experience high price volatility.*market prices.

As with many SPAC initial public offerings in recent years, our predecessor CPSR issued shares and warrants for $10.00 per unit upon the closing of its July 2020 initial public offering. As with other SPACs, the $10.00 unit price reflected each share havingThe SEC has adopted regulations which generally define “penny stock” to be an equity security that has a one-time right to redeem such share for a pro rata portion of the proceeds held in the trust account prior to the Closing of the Business Combination. Following the Closing of the Business Combination, the shares outstanding no longer have any such redemption right and the market price of ~~such shares are now solely dependent upon the fundamental value of our company. Similar~~less than $5.00 per share, subject to ~~the securities of many other companies formed through a merger or other business combinations with a SPAC in recent years, the~~specific exemptions. The market price of our ~~securities~~Common Stock on the OTC Market is ~~currently significantly~~presently less than ~~$10.00 unit~~$5.00 per share and therefore we are considered a “penny stock” company according to SEC rules. Further, we do not expect our stock price to rise above $5.00 in the foreseeable future. The “penny stock” designation requires any broker-dealer selling our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of ~~our predecessor. The last reported sale prices~~broker-dealers to solicit purchases of our Common Stock and ~~Public Warrants on~~therefore reduce the ~~NYSE on November 11, 2022 was $0.35 per share and $0.01 per warrant, respectively.~~liquidity of the public market for our shares.

~~If securities~~Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority (FINRA), a growing number of broker-dealers decline to permit investors to purchase and sell or ~~industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our~~otherwise make it difficult to sell shares ~~or if our results~~ of ~~operations do not meet their expectations, our stock price and trading volume could decline.~~

penny stocks. The ~~trading market~~“penny stock” designation may have a depressive effect upon our Common Stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We will not have any control over these analysts. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.price.

Future sales of our Common Stock by us or existing stockholders, and issuances of our Common Stock or rights to purchase our Common Stock, including pursuant to the Gelesis Holdings, Inc. 2021 Stock Option and Incentive Plan and future exercise of warrants, could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.*

~~The sale of substantial amounts of shares of~~Risks Related to Financial Position and Financing Needs

We are a commercial stage biotherapeutics company, but to date we have generated limited product sales. We have incurred significant operating losses since our Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a timeinception and ~~at a price~~anticipate that we ~~deem appropriate. Pursuant~~will continue to incur continued losses for the next several years.

We are a commercial stage biotherapeutics company and to date we have funded our ~~resale registration statement on Form S-1, declared effective on June 7, 2022~~operations through proceeds from collaborations,

the issuance of common stock and convertible preferred stock, the ~~expiration~~issuance of ~~otherwise applicable lock-ups,~~convertible and non-convertible debt and non-dilutive

grants received from government agencies. We have incurred losses in each year since our inception, other than certain shares of our Common Stock held by our affiliates (or affiliates of our predecessor), stockholders who held our capital stock prior to our Business Combination, or who received shares in connection with our Business Combination, now hold freely tradable shares of our Common Stock without restriction or further registration requirements under the Securities Act, and therefore they may take steps to sell their shares. Additionally, any shares of Common Stock held by our affiliates (or affiliates of our predecessor) will be eligible for resale pursuant to Rule 144 under the Securities Act, subject to the volume, manner of sale, holding period and other limitations of Rule 144 and, with respect to Founder Shares (as defined below) and Private Warrants, lock-up restrictions that expire on January 13, 2023.fiscal year 2013. Our

~~In addition,~~net losses were $7.7 million and $12.8 million for the three and six months ended June 30, 2023, and $55.8 million for the year ended December 31, 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $335.6 million. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital. We expect ~~that significant additional capital may be needed in~~to incur increasing levels of operating losses over at least the ~~future~~next several years. We expect to continue our planned operations, including continued commercialization of Plenity, expanding commercial operations, self-commercialization of our products in new markets, conducting clinical trials, expanded researchto incur significant sales and ~~development activities,~~marketing expenses and additional costs associated with operating as a public company. ~~To raise capital,~~Because of the numerous risks and uncertainties associated with commercializing Plenity and developing any future product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may ~~sell shares~~ not be able to sustain or increase our profitability on a quarterly or annual basis.

Our ability to become profitable depends upon our ability to generate product sales. To date, we have generated limited product sales

of Plenity, and we do not know when or if we will generate meaningful product sales from Plenity. Our ability to generate product

sales depends on a number of factors, including, but not limited to, our ~~Common Stock, convertible securities or other equity securities~~ability to:

We expect to incur significant sales and marketing costs as we ~~determine from time to time. If~~commercialize Plenity and we ~~sell shares of our Common Stock, convertible securities or other equity securities, investors~~may not achieve profitability soon after generating product sales, if ever, and we may be unable to continue operations without continued funding. Failure to successfully commercialize Plenity would materially ~~diluted by subsequent sales. Such sales may also result in material dilution to~~harm our ~~existing shareholders,~~business, financial condition and ~~new investors could gain rights, preferences, and privileges senior to existing holders~~results of ~~our Common Stock.~~operations.

Pursuant to the Gelesis Holdings, Inc. 2021 Stock Option and Incentive Plan (the “Equity Incentive Plan”), we are authorized to grant equity awards to our employees, directors and consultants. Initially, the aggregate number of Common Stock that may be issued pursuant to share awards under the Equity Incentive Plan is equal to eight percent (8%) of the fully diluted shares of Common Stock as of immediately following the Effective Time. The Equity Incentive Plan also provides that the number of shares of Common Stock reserved for issuance thereunder will automatically increase annually on the first day of each calendar year, beginning on January 1, 2023, by an amount equal to four percent (4%) of the number of shares of Common Stock outstanding on December 31 of the immediately preceding calendar year or such lesser amount as determined by the administrator of the Equity Incentive Plan. Unless our Board elects not to increase the number of shares available for future grants each year, our shareholders may experience additional dilution, which could cause our share price to fall.

~~We filed~~If we are not successful in implementing an alternative business plan and/or raising additional capital in a ~~registration statement~~timely manner, we may

have insufficient cash and liquidity to pay operating expenses and other obligations. Any such event would have a material

adverse effect on ~~Form S-8 to register shares of~~ our common stock issued or reserved for issuance under the Equity Incentive Plan. Subject to the satisfaction of vesting conditions, shares of Common Stock registered under the registration statement on Form S-8 generally became available for resale immediately in the public market without restriction.business and financial condition.

We implemented an alternative business plan, prioritizing over the counter approval and expenses related to such regulatory

pathway, short-term working capital needs, and delaying certain long-term capital expenditures in commercial infrastructure and

certain research and development expenses. We reduced and optimized investments in sales and marketing, prioritizing investments in

high return and high exposure mediums. We have ~~also agreed~~sought out an alternative regulatory path and alternative commercial arrangements or geographic distribution partnerships to ~~file a resale registration statement covering~~facilitate the ~~resale by B. Riley~~commercial launch of shares of Common Stock that we may issue to B. Riley in an aggregate amount of up to the lesser of (i) $50.0 million and (ii) an amount not to exceed 14,506,475 shares of Common Stock (such number of shares equal to approximately 19.99% of the aggregate number of shares of Common Stock issued and outstanding immediately priorPlenity. These changes to the execution of our business plan may impact the ~~CEF Purchase Agreement)~~growth of Plenity sales and the pace of acquisition and retention of consumers. We may need to raise additional capital to fund our operations and our alternative business plan. There can be no assurance that we will be successful in ~~connection with~~implementing this strategy or obtaining capital sufficient to meet our ~~Committed Equity Facility. If and when we sell shares of Common Stock~~operating needs on terms or a timeframe acceptable to ~~B. Riley under the program, after B. Riley has acquired the shares, it may resell all, some,~~us or ~~none of such shares~~ at ~~any time or from time to time in its discretion. Therefore, sales to B. Riley could result in substantial dilution to our existing stockholders.~~all. Further, ~~given this substantial number of shares are potentially available for resale, the sale of shares by B. Riley, or the perception~~ in the event that market ~~that B. Riley intends~~conditions preclude our ability to ~~sell shares, could increase~~consummate such a transaction, we may be required to evaluate additional alternatives in restructuring our business and our capital structure.

We believe our current cash and cash equivalents will not be sufficient to fund our business for the ~~volatility~~next twelve months from the

date of the ~~market price of~~unaudited consolidated financial statements included elsewhere in this Form 10-Q, raising substantial doubt about our ~~Common Stock or result in a decline in the market price of our Common Stock.~~

~~In addition,~~ability to continue as of this Quarterly Report, our Common Stock is also subject to potential dilution from the exercise of up to 24,733,365 warrants, the exercise of up to 14,101,702 stock options, the issuance of common stock pursuant to the vesting of up to 4,685,166 restricted stock units, the issuance of up to 23,482,845 earnout shares pursuant to the triggering events in the Business Combination Agreement, and the potential Common Stock is also subject to potential dilution issuance of Common Stock in connection with future equity and or convertible debt financings, including the 2022 Promissory Notes. Sales of substantial numbers of such shares in the public market, including the resale of the shares of Common Stock held by our stockholders, could adversely affect the market price of our Common Stock, the impact of which is increased as the value of our stock price increases.

~~If certain holders of our Common Stock sell~~ a significant portion of their securities, it may negatively impact the market price of the shares of our Common Stock and such holders still may receive significant proceeds.*going concern.

As of June 30, 2023, our cash and cash equivalents was $7.9 million. Based on our current operating plan, we expect that our existing cash and cash equivalents and collection of accounts and grants receivable, are not sufficient to meet the Company’s current obligations, and not at least twelve months beyond the date of issuance of the unaudited consolidated financial statements included elsewhere in this ~~Quarterly Report, the market price~~Form 10-Q without generating positive cash flows through increased revenue and by raising additional capital from outside sources. In addition, we anticipate that this extension of our ~~Common Stock~~cash runway will only be achievable with a continued reduction of discretionary spending from prior levels, particularly with respect to our discretionary sales and marketing activities and manufacturing and supply chain functions. In addition, our current operating plan is ~~below $10.00 per share,~~based on current assumptions that may prove to be wrong, and we could use our available capital resources sooner than is currently expected. As stated above, if we are unable to obtain additional funding on a timely basis, or at all, we may be required to significantly curtail, delay or discontinue our research or development programs or the commercialization of Plenity (including our marketing efforts) or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, 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, which ~~was the price per unit sold~~could materially affect our business, financial condition and results of operations. There can be no assurance that we will be able to continue as a going concern.

Raising additional funding in the initial public offering of our predecessor, CPSR, the per-share price of the 9,000,000 shares of CPSR Class A Common Stock our predecessor sold to certain investors in connection with our Business Combination in a private placement for an aggregate amount of $90.0 million (the “PIPE Financing”) and also the per share value of the consideration issued to Legacy Gelesis shareholders upon consummation of our Business Combination. However, certain of our shareholders who hold shares of our Common Stock that were (i) originally purchased by our predecessor’s sponsor, Capstar Sponsor Group, LLC, in a private placement priorfuture may cause dilution to our ~~predecessor’s initial~~stockholders, restrict our operations or require us to relinquish

We may seek additional capital through a combination of private and public ~~offering (the “Founder Shares”)~~equity and debt offerings, government or ~~(ii) originally issued by CPSR in~~other third party

funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a private placement in connection with Backstop Agreement, dated December 30, 2021 (the “Backstop Agreement”), between CPSR and certain investors (the “Backstop Shares”), may nonetheless be inclined to sell such Founder Shares or Backstop Shares as they were originally purchased at an effective price significantly less than $10.00 per share. The currently outstanding 4,916,250 Founder Shares were purchased at an effective pricecombination of ~~$0.0051 per share. Holders of~~these sources. To the Backstop Shares purchased an aggregate of 744,217 shares of CPSR Class A Common Stock in a private placement at a price of $10.00 per share, for an aggregate purchase price of $7.4 million and such holders also received an aggregate of 1,983,750 shares of CPSR Class A Common Stock asextent that we raise additional consideration, resulting in an effective purchase price for the currently outstanding 2,727,967 Backstop Shares of approximately $2.73 per share. Accordingly, holders of the Founder Shares and Backstop Shares could sell their securities at a per-share price that is less than $10.00 and still realize a significant profit fromcapital through the sale of ~~those~~common stock or securities convertible

or exchangeable into common stock, your ownership interest in us will be diluted. In addition, the terms of any such securities may

include liquidation or other preferences that ~~could not be realized by our other shareholders. On November 11, 2022, the closing price~~materially adversely affect your rights as a stockholder. In addition, upon a payment default under any of our ~~Common Stock was $0.35. Based~~promissory notes we issued on ~~this closing price, the aggregate sales price of the Founder Shares would be approximately $1.7 million and the aggregate sales price of the Backstop Shares would be approximately $0.9 million.~~

The Founder Shares are currently subject to restrictions on transfer under applicable lock-up agreements; however, these restrictions are due to expire on January 13, 2023, resulting in these shares becoming eligible for public sale on January 14, 2023 if they are registered under the Securities Act, or if they qualify for an exemption from registration under the Securities Act. Pursuant to the Registration Rights Agreement dated January 13, 2022, by and among us, certain former stockholders of Legacy Gelesis, Capstar Sponsor Group, LLC and certain directors and officers of our predecessor, CPSR, we have filed a registration statement, declared effective by the SEC on June 7, 2022, which registers for resale the Founder Shares and certain additional shares our Common Stock held by certain of our other stockholders.

The holders of our recently issued 2022 Promissory Notes have certain additional rights upon an event of default under such notes which could cause material dilution to investors and a decline in our stock price.*

On July 25, 2022 and August 4, 2022 that is not cured after five days, (i) we ~~issued the 2022 Promissory Notes~~will

be required to issue certain warrants to the ~~Promissory Note Investors, each a beneficial owner~~holder of ~~more than 5%~~such note, which the holder may then exercise for shares of our Common Stock for an aggregate cash purchase price of $25.0 million. Each 2022 Promissory Note contains certain customary events of default including, without limitation, our failure to pay amounts due thereunder (a “Payment Default”). If a Payment Default occurs

and is continuing under an Investor’s 2022 Promissory Note, such Investor may declare the unpaid principal and accrued interest due and payable. If a Payment Default is not cured by us after five days, (x) we will be required to issue a warrant to the Investor holding such 2022 Promissory Note (a “Promissory Note Warrant”) to purchase, at an exercise price of $0.01 per share, subject to adjustment, an aggregate of number of shares of Common Stock equal to: (i) (A) 0.2 multiplied by (B) the amount of outstanding principal and accrued interest under such 2022 Promissory Note as of the date of conversion divided by (ii) the ~~volume weighted average price~~holder of ~~the Common Stock, as reported by the NYSE, for the five (5) trading days (the “Common Stock VWAP”) occurring immediately prior to the date of exercise and (y)~~ such ~~Investor may elect, at its~~notes will also have the option to convert the outstanding principal and accrued interest under ~~the 2022 Promissory Notes~~such note into a number of shares of Common Stock equal to (i) the amount of outstanding principal and accrued interest under the 2022 Promissory Note as of the date of conversion, divided by (ii) the lesser of the price per share of (A) the Common Stock, as reported by the NYSE or (B) the Common Stock VWAP as of the day prior to the date of such Investor’s conversion notice. The number of shares of Common Stock issuable upon exercise of Promissory Note Warrants and/or conversion of 2022 Promissory Notes following a Payment Default will be calculated based on the market price per share of our Common Stock at the time of exercise/conversion, however, any such issuance may result in (i) increased beneficial ownership of our shares and increased voting power for the Investors, (ii) material dilution in the value of the remaining outstanding shares of our Common Stock and the voting power represented thereby and (iii) a decline in our the market price off our Common Stock. In addition, any sales in the public market of the Common Stock issuable upon such exercise or conversion of Promissory Note Warrants or 2022 Promissory Notes, as applicable, could adversely affect the market price of our Common Stock.

The financial and operational projections and commercialization and product candidate development timelines that we may provide from time to time are subject to inherent risks.*

The projections and timelines that our management may provide from time to time (including with respect to financial or operational matters, commercialization efforts or product candidate development) reflect numerous assumptions made by our management with respect to our specific, as well as general, ability to raise additional capital, and other matters, all of which may be difficult to predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections themselves, will prove inaccurate or, in the event we do not successfully raise additional capital, that our commercialization or product development activities may be curtailed. There may be differences between actual and projected results from time to time. Our future actual results may be materially different from those contained in our projections, both as to amounts and as to timing. Further, if our commercialization or product development activities are slowed or stopped, we will likely be unable to meet the timelines and projections we have previously provided. The inclusion of projections or timelines in (or incorporated by reference in) this Quarterly Report or any other filing we make with the SEC periodically should not be regarded as an indication that we or our management or representatives considered or consider such projections and timelines to be a reliable prediction of future events, and the projections and timelines should not be relied upon as such.

~~We do not intend to pay dividends on our Common Stock, so any returns will be limited to the value of our Common Stock.~~

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, we may enter into agreements that prohibit us from paying cash dividends without prior written consent from our contracting parties, or which other terms prohibit or limit the amount of dividends that may be declared or paid on our Common Stock. Any return to shareholders will therefore be limited to the appreciation of their shares of Common Stock, which may never occur.

~~We are an emerging growth company, and it cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.~~

We are currently an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of 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 registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a 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 election to opt out is irrevocable. We have 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, we, 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 our consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Further, even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our share price may be more volatile.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management has and will be required to devote substantial time to new compliance initiatives.

As a public company, we have incurred and will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC, and the NYSE to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas, such as “say-on-pay” and proxy access. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five (5) years following the year in which CPSR completed its initial public offering. We intend to take advantage of this new legislation but cannot guarantee that it will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

These rules and regulations applicable to public companies have increased and will continue to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition, and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, these rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board, our Board committees, or as executive officers.

Pursuant to Section 404, in our second annual report due to be filed with the SEC after becoming a public company, we will be required to furnish a report by our management on our internal control over financial reporting. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate consolidated financial statements on a timely basis may harm the market price of our shares.

~~If we fail to maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.~~

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate consolidated financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles. We will continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to document, review and improve our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act and applicable United States laws, which will require annual management assessment of the effectiveness of our internal control over financial reporting. As we continue to grow, we expect to recruit additional finance and accounting personnel with certain skill sets that it will need as a public company.

Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes, and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate consolidated financial statements on a timely basis, could increase our operating costs and harm our business. In our efforts to maintain proper and effective internal control over financial reporting, we may discover significant deficiencies or material weaknesses in our internal control over financial reporting, which we may not successfully remediate on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our consolidated financial statements. If we identify one or more material weaknesses in our internal control over financial reporting in the future, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements, which may harm the market price of our Common Stock.

For example, in connection with management’s assessment of the effectiveness of our internal control over financial reporting at December 31, 2021, management identified a material weakness in internal controls related to the accounting for complex financial instruments. While we have implemented remediation steps to improve our internal control over financial reporting, the elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. In addition, we cannot assure you that there will not be additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once we begin our Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Common Stock could decline, and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities. Failure to remediate any material weakness in our internal control over financial reporting on a timely basis, if at all, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Delaware law and our Bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

Our Bylaws and the Delaware General Corporation Law contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our Common Stock, and therefore depress the trading price of our Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board or taking other corporate actions, including effecting changes in our management. Among other things, the Organizational Documents include provisions regarding:

~~These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.~~

Our Bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with our Company or our Company’s directors, officers, or other employees.

Our Bylaws require, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware.

Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Our Bylaws provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations promulgated thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

We may be subject to securities litigation, which is expensive and could divert management attention.*

The market price of our Common Stock has been volatile and, in the past, companies that have experienced volatility in the market price of their stock, particularly companies who have recently “gone public” through a merger or other business combination with a special purpose acquisition company (“SPAC”), have been subject to securities class action litigation. Stockholder activism, which could take many forms or arise in a variety of situations, has also been increasing recently. Volatility in the market price of our Common Stock or other reasons may cause us to become the target of this type of litigation or stockholder activism in the future. Securities litigation against us and stockholder activism could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future and make it more difficult to attract and retain qualified personnel. We may be required to incur significant legal fees and other expenses related to any securities litigation or activist stockholder matters. Further, the market price of our Common Stock could be adversely affected by the events, risks and uncertainties of any securities litigation or stockholder activism.

The exercise of our Warrants for shares of our Common Stock would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.*

We have previously filed a Form S-1 prospectus to register (i) 13,800,000 outstanding Public Warrants to purchase 13,800,000 shares of our Common Stock exercisable at an exercise price of $11.50 per share commencing thirty (30) days following the Closing; (ii) 7,520,000 outstanding Private Warrants to purchase 7,520,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share commencing thirty (30) days following the Closing and (iii) 3,189,49 currently exercisable Rollover Warrants, 1,353,062 of which are exercisable at an exercise price of $1.45 and 1,836,429 of which are exercisable at an exercise price of $0.02. In connection with the CMS License Agreement Amendment, we issued to CMS a warrant to purchase 400,000 shares of our Common Stock, exercisable at an exercise price of $0.01 per share immediately upon issuance. In addition, Promissory Note Warrants (as defined above) may potentially be issued in connection with a Payment Default (as defined above) under our Promissory Notes. To the extent any such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock, the impact of which is increased as the value of our stock price increases.

~~We may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.~~

We will have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of our Common Stock equals or exceeds $18.00 per share for any twenty (20) trading days within a thirty (30) trading-day period ending on the third trading day prior to the date we give notice of redemption. If and when such warrants become redeemable, we may exercise the redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of such warrants could force holders to (i) exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the warrants at the then-current market price when the holder might otherwise wish to hold onto such warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.

~~In addition, we may redeem the Public Warrants after they become exercisable for~~ a number of shares of our Common ~~Stock determined based on the redemption date~~Stock. Further debt financing, if available, would increase our fixed payment obligations and ~~the fair market value of~~may

involve agreements that include covenants limiting or restricting our ~~Common Stock. Any~~ability to take specific actions, such ~~redemption~~as incurring additional debt,

making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic partnerships and licensing arrangements with third parties, we may have ~~similar consequences~~ to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the- money,” in which case you would lose any potential embedded value from a subsequent increase in the value ofrelinquish valuable rights to Plenity, our ~~Common Stock had such warrants remained outstanding.~~intellectual property or future

Our Private Warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effectrevenue streams or grant licenses on ~~the market price of our Common Stock.~~

Under GAAP, we are required to evaluate our Warrants to determine whether they should be accounted for as a warrant liability or as equity. We have concluded that the Private Warrants contain provisions requiring liability classification. Therefore, we are accounting for the Private Warrants as a warrant liability and are recording that liability at fair value upon issuance. We will record any subsequent changes in fair value as of the end of each period for which earnings are reported. The impact of changes in fair value on earnings may have an adverse effect on the market price of our Common Stock and may cause fluctuations in our results of operations based on factorsterms that are ~~outside of our control.~~not favorable to us.

There can be no assurance that our Warrants will be in the money at the time they become exercisable; they may expire worthless and therefore we may not receive cash proceeds from the exercise of Warrants.*

As of the date of this Quarterly Report, we have (i) 13,800,000 outstanding Public Warrants to purchase 13,800,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share, which expire on the earlier to occur of January 13, 2027 or redemption; (ii) 7,520,000 outstanding Private Warrants to purchase 7,520,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share, which expire on the earlier to occur of January 13, 2027 or redemption; (iii) 3,013,365 exercisable Rollover Warrants, 1,353,062 of which are exercisable at an exercise price of $1.45 and expire on October 21, 2030 and 1,660,303 of which are exercisable at an exercise price of $0.02 and expire on February 15, 2025; and (iv) 400,000 warrants issued to CMS which are exercisable at an exercise price of $0.01 and expire on August 4, 2032.

The exercise of Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Common Stock and the spread between the exercise price of the warrant and the price of our Common Stock at the time of exercise. For example, to the extent that the price of our Common Stock exceeds $11.50 per share, it is more likely that holders of our Public Warrants and Private Warrants will exercise their warrants. If the price of our Common Stock is less than $11.50 per share, it is unlikely that such holders will exercise their warrants. As of November 11, 2022, the closing price of our Common Stock was $0.35 per share. There can be no assurance that all of our warrants will be in the money prior to their expiration. Our Public Warrants under certain conditions, as described in the warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis. Our Private Warrants are not redeemable so long as they are held by the initial stockholders and are exercisable on a cashless basis. Our Rollover Warrants and CMS Warrants are not redeemable and are exercisable on a cashless basis only with respect to the 1,660,303 Rollover Warrants that have an exercise price of $0.02. As such, it is possible that we may never generate any cash proceeds from the exercise of our Warrants.

Item 2(a) - Stock Issuances - Except as disclosed in our previously filed current reports on Form 8-K, the Company has not issued equity securities of the Company on an unregistered basis during the quarter ended September 30, 2022.

* Filed herewith.+ The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to be furnished with this Quarterly Report on Form 10-Q and will not be deemed to be "filed" for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

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.


Delaware	84-4730610
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
501 Boylston Street, Suite 6102, Boston, MA	02116
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~Common stock, par value $0.0001 per share~~	~~GLS~~	~~New York Stock Exchange~~
~~Redeemable warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50~~	~~GLS WS~~	~~New York Stock Exchange~~


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	1
	Unaudited Condensed Consolidated Statements of Operations for the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, ~~2022~~2023 and ~~2021~~2022	2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, ~~2022~~2023 and ~~2021~~2022	3
	Unaudited Condensed Consolidated Statements of Noncontrolling Interest, Redeemable Convertible Preferred Stock and Stockholders’ ~~Deficit~~Equity (Deficit) for the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, ~~2022~~2023 and ~~2021~~2022	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine Months Ended September~~six months ended June 30, ~~2022~~2023 and ~~2021~~2022	65
	Notes to Unaudited Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4341
Item 4.	Controls and Procedures	4341
PART II.	OTHER INFORMATION	4442
Item 1.	Legal Proceedings	4442
Item 1A.	Risk Factors	4442
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8149
Item 3.	Defaults Upon Senior Securities	8149
Item 4.	Mine Safety Disclosures	8149
Item 5.	Other Information	8149
Item 6.	Exhibits	8250
SIGNATURES		8352


	~~Common Stock~~
~~CPSR Public Stockholders~~		~~755,223~~
~~CPSR Sponsor Stockholders~~		~~4,916,250~~
~~Total CPSR Stockholders~~		~~5,671,473~~
~~Common stock issued to Gelesis Legacy Equityholders~~		~~54,814,847~~
~~Common stock issued to PIPE Investors and Backstop Agreement~~		~~11,727,967~~
~~Total common stock immediately after Closing~~		~~72,214,287~~


	At September 30, 2022
Remaining 2022 obligation	$	1,063
2023		33,268
2024		4,985
2025		3,627
2026		3,646
More than 5 years		11,123
Total maturities	$	57,712


☒	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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒


Accretion of noncontrolling interest put option to redemption value		88		—		—	—		—		—		—			(88	)		(88	)
Foreign currency translation adjustment		(239	)	—		—	—		—		—		(137	)		—			(137	)
Net loss		—		—		—	—		—		—		—			(5,703	)		(5,703	)
Balance at March 31, 2022	$	11,704		—		—	72,390,413	$	7	$	281,246	$	82		$	(271,298	)	$	10,037
Stock based compensation expense		—		—		—	—		—		7,976		—			—			7,976
Issuance of common stock upon exercise of stock options		—		—		—	162,064		—		110		—			—			110
Accretion of noncontrolling interest put option to redemption value		85		—		—	—		—		—		—			(85	)		(85	)
Foreign currency translation adjustment		(702	)	—		—	—		—		—		(426	)		—			(426	)
Net loss		—		—		—	—		—		—		—			(12,513	)		(12,513	)
Balance at June 30, 2022	$	11,087		-	$	—	72,552,477	$	7	$	289,332	$	(344	)	$	(283,896	)	$	5,099
Stock based compensation expense		—		—		—	—		—		4,574		—			—			4,574
Release of restricted stock units		—		—		—	41,404		—		—		—			—			—
Issuance of common stock commitment shares		—		—		—	355,361		—		500		—			—			500
Sale of common stock, net of commissions		—		—		—	34,246		—		37		—			—			37
Issuance of common stock warrants		—		—		—					890		—			—			890
Accretion of noncontrolling interest put option to redemption value		80		—		—	—		—		—		—			(80	)		(80	)
Foreign currency translation adjustment		(693	)	—		—	—		—		—		(466	)		—			(466	)
Net loss		—		—		—	—		—		—					(14,149	)		(14,149	)
Balance at September 30, 2022	$	10,474		—	$	—	72,983,488	$	7	$	295,333	$	(810	)	$	(298,125	)	$	(3,595	)


	Amount
Cash - CPSR trust and cash (net of redemptions)	$	7,558
Cash - PIPE Investment		90,000
Cash - Backstop Agreement		7,442
Gross proceeds	$	105,000
Less: transaction costs, advisory fees and liabilities paid		(34,522	)
Net proceeds from the Business Combination	$	70,478


	Convertible Promissory Notes			Legacy Gelesis Redeemable Preferred Stock Warrants Liabilities			One S.r.l. Call Option			Earnout Liability			Private Placement Warrant Liability
Balance at December 31, 2021	$	27,128		$	15,821		$	2,416		$	—		$	—
Assumed upon Business Combination		—			—			—			—			8,140
Recognized upon Business Combination		—			—			—			58,871			—
Issuance of convertible promissory notes		25,000			—			—			—			—
Changes in fair value		1,008			926			(808	)		(55,495	)		(7,550	)
Foreign currency translation adjustment		—			—			(364	)		—			—
Conversion and exchange upon Business Combination		—			(16,747	)		—			—			—
Settlement		(27,284	)		—			—			—			—
Balance at September 30, 2022	$	25,852		$	—		$	1,244		$	3,376		$	590


	2022			2021
Balance at December 31,	$	82		$	14
Provision related to product sales		1,595			376
Credits and payments made		(1,653	)		(365	)
Balance at September 30,	$	24		$	25


	Intangible Assets
Intangible asset at relative fair value	$	15,564
Adjustment to record deferred tax liability		5,783
Carrying value of intangible asset at June 2019 acquisition date		21,347
Cumulative amortization expense		(5,667	)
Balance at December 31, 2021	$	15,680
Period amortization expense		(1,700	)
Balance at September 30, 2022	$	13,980


	Series A-4 Warrants			Private Placement Warrants			Total
Balance at December 31, 2021	$	15,821		$	—		$	15,821
Assumed upon Business Combination		—			8,140			8,140
Changes in fair value		926			(7,550	)		(6,624	)
Conversion and exchange upon Business Combination		(16,747	)		—			(16,747	)
Balance at September 30, 2022	$	—		$	590		$	590


	For the Nine Months Ended
	September 30, 2022
Market price of common stock	$	3.35
Expected volatility		72.4	%
Expected term (in years)		6.1
Risk-free interest rate		1.7	%
Expected dividend yield		0.0	%


Exhibit Number		Description
2.1†		Agreement and Plan of Merger, dated June 12, 2023, by and between Gelesis Holdings, Inc., PureTech Health LLC and Caviar Merger Sub LLC by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Company on June 12, 2023
3.1		Amended and Restated Certificate of Incorporation of Gelesis Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Company on January 20, 2022)
3.2		Amended and Restated Bylaws of Gelesis Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Company on January 20, 2022)
4.1		Warrant ~~to Purchase Common~~Agreement, dated July 1, 2020, between the Company and Continental Stock ~~of Gelesis Holdings, Inc., dated August 4, 2022, issued to CMS Bridging DMCC~~Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by ~~the Company~~Capstar Special Purpose Acquisition Corp. on ~~August 10, 2022)~~
~~4.2~~		~~Form of Promissory Note (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by the Company on August 10, 2022)~~
~~4.3~~		~~Form of Warrant to Purchase Common Stock of Gelesis Holdings, Inc. (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by the Company on August 10, 2022)~~
~~4.4~~		Amended and Restated Warrant to Purchase Common Stock of Gelesis Holdings, Inc., dated August 9, 2022 (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed by the Company on August 10, 2022)July 8, 2020).
10.1		Amendment No.1 to Note and Warrant Purchase Agreement, dated ~~August 4, 2022, to License, Collaboration and Supply Agreement~~May 1, 2023, by and ~~between the Subsidiary~~among Gelesis Holdings, Inc., Gelesis, Inc., Gelesis 2012, Inc., Gelesis LLC and ~~CMS Bridging DMCC~~PureTech Health LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on ~~August 10, 2022)~~May 3, 2023)
10.2		~~Common Stock~~Form of the Convertible Senior Secured Promissory Note (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on May 3, 2023)
10.3		Form of Amended Warrant (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on May 3, 2023)
10.4		Form of New Warrant (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by the Company on May 3, 2023)
10.5		Limited Waiver to Note and Warrant Purchase Agreement, dated ~~August 11, 2022,~~May 26, 2023, by and ~~between~~among Gelesis Holdings, Inc., Gelesis, Inc., Gelesis 2012, Inc., Gelesis LLC and PureTech Health LLC by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on May 31, 2023
10.6		Convertible Senior Secured Promissory Note, dated May 26, 2023, issued to PureTech Health LLC by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on May 31, 2023
10.7		Warrant, dated May 26, 2023, issued to PureTech Health LLC by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on May 31, 2023
10.8		Form of Voting and ~~B. Riley Principal Capital II, LLC.~~Support Agreement by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on June 12, 2023
10.9		Amendment No. 2 to Note and Warrant Purchase Agreement, dated June 12, 2023, by and among Gelesis Holdings, Inc., Gelesis, Inc., Gelesis 2012, Inc., Gelesis LLC and PureTech Health LLC by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on June 12, 2023
10.10		Convertible Senior Secured Promissory Note, dated June 12, 2023, issued to PureTech Health LLC by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on June 12, 2023
10.11		Amendment No. 3 to Note and Warrant Purchase Agreement, dated June 28, 2023, by and among Gelesis Holdings, Inc., Gelesis, Inc., Gelesis 2012, Inc., Gelesis LLC and PureTech Health LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on ~~August 12, 2022)~~
~~10.3~~		Registration Rights Agreement, dated August 11, 2022, by and between the Company and B. Riley Principal Capital II, LLC. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on August 12, 2022).
10.4†*		~~Separation and General Release Agreement, effective September 30, 2022, by and between the Company and Mr. David Abraham~~June 29, 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.
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*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*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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†	Certain portions of this exhibit are omitted because they are not material and would likely cause competitive harm to the registrant if disclosed.


	~~Company Name~~GELESIS HOLDINGS, INC.

Date: ~~November~~August 14, ~~2022~~2023	By:	/s/ Yishai Zohar
		Yishai Zohar
		Chief Executive Officer (Principal Executive Officer)

Date: ~~November~~August 14, ~~2022~~2023	By:	/s/ Elliot Maltz
		Elliot Maltz
		Chief Financial Officer (Principal Financial and Accounting Officer)