The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
GX Acquisition Corp. (the “Company”)
is a blank check company incorporated in Delaware on August 24, 2018. The Company was formed for the purpose of effectuating a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses
(the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject
to all of the risks associated with early stage and emerging growth companies.
The Company has two subsidiaries, Alpha First
Merger Sub, Inc., a direct, wholly owned subsidiary of the Company incorporated on December 17, 2020 as a Delaware corporation (“First
Merger Sub”) and Alpha Second Merger Sub, LLC, a direct, wholly owned subsidiary of the Company formed on December 17, 2020 as a
Delaware limited liability company (“Second Merger Sub”).
As of March 31, 2021, the Company had not yet
commenced any operations. All activity through March 31, 2021 relates to the Company’s formation, the initial public offering (the
“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company
will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company
generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on May 20, 2019. On May 23, 2019, the Company consummated the Initial Public Offering of
28,750,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public
Shares”), which includes the full exercise by the underwriter of the over-allotment option to purchase an additional 3,750,000 Units,
at $10.00 per Unit, generating gross proceeds of $287,500,000, which is described in Note 3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 7,000,000 warrants (the “Private Placement Warrants”) at a price of $1.00
per Private Placement Warrant in a private placement to the Company’s sponsor, GX Sponsor LLC (the “Sponsor”), generating
gross proceeds of $7,000,000, which is described in Note 4.
Transaction costs amounted to $16,473,117, consisting
of $5,000,000 of underwriting fees, $10,812,500 of deferred underwriting fees and $660,617 of other offering costs.
Following the closing of the Initial Public Offering
on May 23, 2019, an amount of $287,500,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering
and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), which have been invested
in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
“Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out
as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier
of: (i) the completion of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders,
as described below.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ
rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to
at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and taxes payable on income earned on the
Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business
Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under
the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its holders of the outstanding
Public Shares (the “public shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or
(ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek shareholder approval of a Business
Combination at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote
for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets
of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks shareholder
approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks shareholder approval of a
Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated
Certificate of Incorporation provides that, a public shareholder, together with any affiliate of such shareholder or any other person
with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more of
the Public Shares without the Company’s prior written consent.
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The public shareholders will be entitled to redeem
their shares for a pro rata portion of the amount then in the Trust Account ($10.00 per share, plus any pro rata interest earned on the
funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed
to shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter
(as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s
warrants.
If a shareholder vote is not required and the
Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and
Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission
(the “SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy
statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor has agreed (a) to
vote its Founder Shares (as defined in Note 5), the common stock included in the Private Units (the “Private Shares”) and
any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment
to the Company’s Amended and Restated Certificate of Incorporation with respect to the Company’s pre-Business Combination
activities prior to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity
to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and
Private Placement Warrants (including underlying securities) into the right to receive cash from the Trust Account in connection with
a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination
if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the Company’s Amended
and Restated Certificate of Incorporation relating to shareholders’ rights of pre-Business Combination activity and (d) that the
Founder Shares and Private Placement Warrants (including underlying securities) shall not participate in any liquidating distributions
upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from
the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete
its Business Combination.
The Company will have until July 31, 2021 to
complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but no more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by
the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the
Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company,
subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter
has agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not
complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held
in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering
price per Unit ($10.00).
The Company’s Sponsor has agreed that it
will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement
or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share
and (ii) the actual amount per public share held in the Trust Account as of the day of liquidation of the Trust Account, if less than
$10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to
any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account
(whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriter of
this offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
However, the Company has not asked the Company’s Sponsor to reserve for such indemnification obligations, nor has the Company independently
verified whether the Company’s Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s
Sponsor’s only assets are securities of the Company. Therefore, we cannot assure you that the Company’s Sponsor would be able
to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties
including, without limitation, claims by vendors and prospective target businesses.
Liquidity and Going Concern
As of March 31, 2021, the Company had $28,654
in its operating bank accounts, $291,784,977 in securities held in the Trust Account to be used for a Business Combination or to repurchase
or redeem its common stock in connection therewith and a working capital deficit of $5,021,035, which excludes franchise and income taxes
payable as such amounts can be paid from the interest earned in the Trust Account. As of March 31, 2021, approximately $4,345,000 of the
amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations.
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Until the consummation of a Business Combination,
the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing
due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring,
negotiating and consummating the Business Combination.
The Company will need to raise additional
capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The
Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any
time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it
may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide
any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern through July 31, 2021, the date that the Company
will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated. These
financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature,
which are necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K and the Form 10-K/A for the year
ended December 31, 2020 as filed with the SEC on March 4, 2021 and March 24, 2021, respectively, which contains the audited financial
statements and notes thereto. The financial information as of December 31, 2020 is derived from the audited financial statements presented
in the Company’s Annual Report on Form 10-K and the Form 10-K/A for the year ended December 31, 2020. The interim results for the
three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or
for any future interim periods.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries: First Merger Sub and Second Merger Sub. All significant intercompany
balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it 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 independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its 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.
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. The Company has elected not to opt out of such extended transition period, which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth
company and which has opted out of using the extended transition period difficult or impossible because of the potential differences in
accounting standards used.
GX ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Use of Estimates
The preparation of condensed consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of March 31, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At March 31, 2021 and December 31, 2020, substantially
all of the assets held in the Trust Account were held in U.S. Treasury Bills. During the three months ended March 31, 2021 the Company
withdrew $40,050 of interest earned on the Trust Account to pay its franchise taxes.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument
and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is
either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject
to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders’ equity section of the Company’s consolidated balance sheets.
The Company recognizes changes in redemption value immediately as they
occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases
or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated
deficit.
Warrant Liability
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment
considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant
to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants
are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the
time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required
to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Income Taxes
The Company complies with the accounting and
reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement
and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021 and December 31, 2020. The Company
is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential examination
by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The
Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve
months.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net
income by the weighted-average number of common stock outstanding during the period, excluding shares of common stock subject to forfeiture.
The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate
of 21,375,000 shares of common stock in the calculation of diluted loss per share, since the inclusion of such warrants would be
anti-dilutive.
The Company’s statement of operations includes
a presentation of income (loss) per share for ordinary shares subject to possible redemption in a manner similar to the two-class method
of income (loss) per share. Net income (loss) per ordinary share, basic and diluted, for Class A Ordinary shares subject to possible redemption
is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable
franchise and income taxes by the weighted average number of Class A Ordinary shares subject to possible redemption outstanding since
original issuance.
Net income (loss) per share, basic and diluted,
for non-redeemable ordinary shares common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable
securities attributable to Class A Ordinary shares subject to possible redemption, by the weighted average number of non-redeemable ordinary
shares outstanding for the period.
Non-redeemable common stock includes Founder
Shares and non-redeemable ordinary shares as these shares do not have any redemption features. Non-redeemable ordinary shares participate in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The following table reflects the calculation of
basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
$
|
23,622
|
|
|
$
|
1,006,042
|
|
|
Unrealized gain on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
389,953
|
|
|
Less: Company’s portion available to pay taxes
|
|
|
(5,528
|
)
|
|
|
(292,666
|
)
|
|
Net Income allocable to shares subject to redemption
|
|
$
|
18,094
|
|
|
$
|
1,103,329
|
|
|
Denominator: Weighted Average common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
20,607,461
|
|
|
|
25,583,486
|
|
|
Basic and diluted net income per share
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
38,028,962
|
|
|
$
|
6,368,437
|
|
|
Less: Net income allocable to common stock subject to possible redemption
|
|
|
(18,095
|
)
|
|
|
(1,103,329
|
)
|
|
Non-Redeemable Net Loss
|
|
$
|
38,010,868
|
|
|
$
|
5,265,108
|
|
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
15,330,039
|
|
|
|
10,354,014
|
|
|
Basic and diluted net income per share
|
|
$
|
2.48
|
|
|
$
|
0.51
|
|
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Depository Insurance Corporation coverage of $250,000. The Company has not experienced losses on this account and management believes
the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying
amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term nature.
Recently Issued Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed
consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the
Company sold 28,750,000 Units at a purchase price of $10.00 per Unit, which included 3,750,000 units sold at $10.00 per Unit upon the
full exercise by the underwriter of its over-allotment option. Each Unit consists of one share of the Company’s Class A common
stock, $0.0001 par value, and one-half of one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder
to purchase one share of Class A common stock at an exercise price of $11.50 per whole share (see Note 7).
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of 7,000,000 Private Placement Warrants at a price of $1.00 per Private Placement
Warrant ($7,000,000 in the aggregate), each exercisable to purchase one share of Class A common stock at a price of $11.50 per share.
The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the
Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the
Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and
the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In September 2018, the Company issued an aggregate
of 8,625,000 shares (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. In April 2019,
the Sponsor contributed back to the Company, for no consideration, 1,437,500 Founder Shares, resulting in an aggregate of 7,187,500 Founder
Shares outstanding. The 7,187,500 Founder Shares included an aggregate of up to 937,500 shares subject to forfeiture by the Sponsor to
the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the Sponsor would collectively
own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase
any Public Shares in the Initial Public Offering and excluding the Private Placement Warrants and underlying securities). As a result
of the underwriter’s election to fully exercise its over-allotment option, 937,500 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed not to transfer, assign
or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) the
date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the shareholders
having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the
last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after the Business Combination, the Founder Shares will be released from the lock-up.
Promissory Note – Related Party
On September 24, 2018, the Sponsor agreed to loan
the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the
“Note”). The Note was non-interest bearing and was payable on the earlier of March 31, 2019 or the completion of the Initial
Public Offering. On March 29, 2019, the Sponsor and the Company, for no consideration, agreed to extend the maturity date of the Note
from the earlier of March 31, 2019 or the completion of the Initial Public Offering to the earlier of June 30, 2019 or the completion
of the Initial Public Offering. The borrowings outstanding under the Note of $280,000 were repaid upon the consummation of the Initial
Public Offering on May 23, 2019.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans
would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest,
or, at the lender’s discretion. Up to $1,500,000 of notes may be converted upon consummation of a Business Combination into additional
Private Units at a price of $10.00 per Unit. In the event that a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to
repay the Working Capital Loans. As of March 31, 2020 there was $120,000 outstanding under the Working Capital Loans.
Administrative Support Agreement
The Company entered into an agreement whereby,
commencing on May 20, 2019, the Company began paying an affiliate of the Sponsor a total of $10,000 per month for office space, utilities
and secretarial and administrative support. Upon completion of the Business Combination or the Company’s liquidation, the Company
will cease paying these monthly fees. For the three months ended March 31, 2021 and 2020, the Company incurred and paid $30,000 in fees
for these services, respectively.
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered
into on May 20, 2019, the holders of the Founder Shares, Private Placement Warrants (and their underlying securities) and any Units that
may be issued upon conversion of the Working Capital Loans (and underlying securities) will be entitled to registration rights. The holders
of 25% of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities.
In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent
to the consummation of a Business Combination. The registration rights agreement will not contain liquidating damages or other cash settlement
provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriter’s Agreement
The underwriter is entitled to a deferred fee
of $10,812,500, which will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company
completes a Business Combination, subject to the terms of the underwriting agreement.
Consulting Agreement
In June 2019, the Company entered into a consulting
arrangement for services to help identify and introduce the Company to potential targets and provide assistance with the negotiations
in connection with a Business Combination. The agreement provides for a monthly fee of $12,500. For the three months ended March 31, 2021,
the Company incurred and paid $37,500 and $112,500 in such fees, respectively. For the three months ended March 31, 2021, the Company
incurred and paid $37,500 in such fees, respectively.
Advisory and Consulting Agreements
During the year ended December 31, 2020, the Company
entered into an agreement with a service provider, pursuant to which the service provider will serve as the placement agent for the Company
in connection with a proposed private placement (the “Transaction”) of the Company’s equity or equity-linked securities
(the “Securities”). The Company agreed to pay the service provider a cash fee equal to the greater of (i) $3 million (the
“Minimum Fee”) and (ii) 3% of the gross proceeds of the total Securities sold in the Transaction and 3% of the gross proceeds
of the total Securities sold in the Transaction. The fee will not be payable in the event the Company does not consummate the Transaction.
As of December 31, 2020, no amounts were incurred under this agreement.
During the year ended December 31, 2020, the Company
entered into an agreement with the same service provider, pursuant to which the service provider will provide the Company with capital
markets advisory services for a potential Business Combination. The Company agreed to pay the service provider a transaction fee (the
“Transaction Fee”), payable upon the closing in connection with a Transaction, equal to $5 million. In addition to the Transaction
Fee, the Company agreed to reimburse the service provider all reasonable expenses relating to due diligence not to exceed $75,000 in the
aggregate. As of December 31, 2020, no amounts were incurred under this agreement.
Merger Agreement
On January 8, 2021, the Company entered into a
Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with First Merger Sub, Second Merger Sub, and Celularity
Inc., a Delaware corporation (“Celularity”).
Pursuant to the Merger Agreement, at the Closing,
and in accordance with the DGCL, (i) First Merger Sub will merge with and into Celularity, with Celularity surviving the First Merger
as a wholly owned subsidiary of the Company; and (ii) immediately following the First Merger and as part of the same overall transaction
as the First Merger, the Surviving Corporation will merge with and into Second Merger Sub, with Second Merger Sub being the surviving
entity of the Second Merger.
The aggregate merger consideration payable to
stockholders of Celularity upon the Closing consists of up to 147,327,224 newly issued shares of the GX Class A Common Stock valued
at approximately $10.15 per share.
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Immediately prior to Effective Time, Celularity
will cause each share of Celularity Preferred Stock that is issued and outstanding immediately prior to the Effective Time to be automatically
converted into a number of shares Celularity Common Stock at the then-effective conversion rate as calculated pursuant to the Celularity
Charter.
Upon the consummation of the Celularity Business
Combination, the Company intends to change its name to “Celularity Inc.”
The Celularity Business Combination will be consummated
subject to certain conditions as further described in the Merger Agreement.
For additional information regarding Celularity,
the Merger Agreement and related agreements and the Celularity Business Combination, see the S-4 Registration Statement.
The Celularity Business Combination will be accounted
for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, we will be treated as the “acquired”
company for financial reporting purposes. For accounting purposes, Celularity will be deemed to be the accounting acquirer in the transaction
and, consequently, the transaction will be treated as a recapitalization of Celularity (i.e., a capital transaction involving the issuance
of our stock for the stock of Celularity). Accordingly, the consolidated assets, liabilities and results of operations of Celularity will
become our historical financial statements after the Celularity Business Combination, and our assets, liabilities and results of operations
will be consolidated with Celularity beginning on the acquisition date.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company
is authorized to issue up to 1,000,000 shares of $0.0001 par value preferred stock. At March 31, 2021 and December 31, 2020, there were
no preferred shares issued or outstanding.
Class A Common Stock — The
Company is authorized to issue up to 100,000,000 shares of Class A,
$0.0001 par value common stock. Holders of the Company’s Class A common stock are entitled to one vote for each share. At March
31, 2021 and December 31, 2020, there were 0 and 8,142,539 shares of Class A common stock issued and outstanding, excluding 28,750,000
and 20,607,461 shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock — The
Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s Class
B common stock are entitled to one vote for each share. The shares of Class B common stock will automatically convert into shares of Class
A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends,
reorganizations, recapitalizations and the like. As a result of the underwriter’s election to fully exercise its over-allotment
option, 937,500 Founder Shares are no longer subject to forfeiture. At March 31, 2021 and December 31, 2020, there were 7,187,500 shares
of Class B common stock issued and outstanding.
The Company may issue additional common stock
or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.
NOTE 8. WARRANT LIABILITIES
The Public Warrants will become exercisable on
the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the effective date of the registration
statement relating to the Initial Public Offering. No Public Warrants will be exercisable for cash unless the Company has an effective
and current registration statement covering the common shares issuable upon exercise of the Public Warrants and a current prospectus
relating to such common shares. Notwithstanding the foregoing, if a registration statement covering the common shares issuable upon the
exercise of the Public Warrants is not effective within 90 days from the consummation of a Business Combination, the holders may, until
such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective
registration statement, exercise the Public Warrants on a cashless basis pursuant to an available exemption from registration under the
Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless
basis. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company may call the Public Warrants for redemption
(excluding the Private Placement Warrants), in whole and not in part, at a price of $0.01 per warrant:
|
|
●
|
at any time while the Public Warrants are exercisable,
|
|
|
●
|
upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder,
|
|
|
●
|
if, and only if, there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing
|
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The Private Placement Warrants are identical to
the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the common
shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until after the completion
of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on
a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the
Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The exercise price and number of shares of Class
A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend,
or recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional shares of Class A common
stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an
issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price
to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates,
without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest
thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial
Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during
the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price
described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Additionally, in no event will the Company
be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the
Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such
funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the
Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. If the Company calls the Public
Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so
on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common shares issuable
upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend,
extraordinary dividend or recapitalization, reorganization, merger or consolidation. If the Company is unable to complete a Business
Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will
not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets
held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
|
|
Level 3:
|
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
|
GX ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020, and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
Description
|
|
Level
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
|
$
|
291,784,977
|
|
|
$
|
291,797,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
1
|
|
|
|
15,182,500
|
|
|
|
41,400,000
|
|
|
Warrant Liability – Private Placement Warrants
|
|
3
|
|
|
|
7,980,000
|
|
|
|
22,400,000
|
|
The Private Placement Warrants were initially
valued using a Monte Carlo Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Monte Carlo model’s
primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the
common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’
companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s
own public warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the public warrants for periods
where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private
Placement Warrants. For periods subsequent to the detachment of the warrants from the Units, the close price of the public warrant price
was used as the fair value as of each relevant date.
The key inputs into the Monte Carlo simulation
model for the Private Placement Warrants and Public Warrants were as follows at initial measurement and December 31, 2020:
|
Input
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Risk-free interest rate
|
|
|
0.94
|
%
|
|
|
0.41
|
%
|
|
Trading days per year
|
|
|
250
|
|
|
|
250
|
|
|
Expected volatility
|
|
|
11.0
|
%
|
|
|
11.0
|
%
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
|
Stock Price
|
|
$
|
10.08
|
|
|
$
|
11.00
|
|
The following table presents the changes in the fair value of warrant
liabilities:
|
|
|
Private Placement
|
|
|
Public
|
|
|
Warrant Liabilities
|
|
|
Fair value as of December 31, 2020
|
|
$
|
22,400,000
|
|
|
$
|
41,400,000
|
|
|
$
|
63,800,000
|
|
|
Change in valuation inputs or other assumptions
|
|
|
(14,420,000
|
)
|
|
|
(25,587,500
|
)
|
|
|
(40,007,500
|
)
|
|
Fair value as of March 31, 2021
|
|
$
|
7,980,000
|
|
|
$
|
15,812,500
|
|
|
$
|
23,792,500
|
|
There were no transfers in or out of Level 3 from other levels in the
fair value hierarchy.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon
this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or
disclosure in the condensed consolidated financial statements.
On May 14, 2021, the Company’s stockholders
held a meeting (the “Special Meeting”) and approved and adopted an amendment to its Amended and Restated Certificate of Incorporation
to extend the period of time for which the Company is required to consummate a Business Combination from May 23, 2021 to July 31, 2021
the “Extension Amendment Proposal”. In connection with the Extension Amendment Proposal, stockholders holding 16,169,996 shares
of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s
trust account (the “Trust Account”) at a redemption price of approximately $10.15 per share. As a result, approximately $164.1
million in cash will be removed from the Trust Account to pay such holders. In connection with the Extension Amendment Proposal, the Company
has agreed to deposit into the Trust Account $0.025 per share for each month of the Extension period, pro-rated for partial months during
the Extension period, resulting in a maximum contribution of $0.0565 per share of Class A common stock that was not redeemed in connection
with the Special Meeting (the “Maximum Contribution”). This contribution will be funded as follows: on (or prior to) May 23,
2021, the Company will deposit into the trust account an amount equal to $0.0315 per share of Class A common stock not redeemed in connection
with the Special Meeting and on (or prior to) July 1, 2021, the Company will deposit into the trust account an amount equal to $0.025
per share of Class A common stock not redeemed in connection with the Special Meeting, provided that, no such deposits will be made following
the completion of the Company’s previously announced business combination. Affiliates of the Company’s Sponsor, have agreed
to contribute to the Company as a loan an amount equal to the aggregate amount of each monthly contribution. The loan will not bear interest
and will be repayable by the Company upon consummation of the Business Combination in cash or through the issuance of private placement
warrants (at a price of $1.00 per warrant, capped at $1,500,000), at the option of the lender.