NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Celularity
Inc., (the “Company”), formerly known as GX Acquisition Corp. (“GX”), was 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.
Business
Combination
On
July 16, 2021 (the “Closing Date”), the Company consummated the previously announced merger pursuant to that certain Merger
Agreement and Plan of Reorganization, dated January 8, 2021 (the “Merger Agreement”), by and among GX, Alpha First
Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of GX (“First Merger Sub”), Celularity
LLC (f/k/a Alpha Second Merger Sub LLC), a Delaware limited liability company and a direct, wholly owned subsidiary of GX (“Second
Merger Sub”), and the entity formerly known as Celularity Inc., a Delaware corporation (“Legacy Celularity”).
Pursuant
to the terms of the Merger Agreement, a business combination between GX and Legacy Celularity was effected through the (a) merger of
First Merger Sub with and into Legacy Celularity with Legacy Celularity surviving as a wholly-owned subsidiary of GX (Legacy Celularity,
in its capacity as the surviving corporation of the merger, the “Surviving Corporation”) (the “First Merger”)
and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of the Surviving
Corporation with and into Second Merger Sub, with Second Merger Sub as the surviving entity of the Second Merger, which ultimately resulted
in Legacy Celularity becoming a wholly-owned direct subsidiary of GX (the “Second Merger” and, together with the First
Merger, the “Mergers” and, collectively with the other transactions described in the Merger Agreement, the “Business
Combination”). On the Closing Date, the registrant changed its name from GX Acquisition Corp. to Celularity Inc.
Immediately
prior to the effective time of the Mergers (the “Effective Time”), each share of preferred stock of Legacy Celularity
(the “Legacy Celularity Preferred Stock”) that was issued and outstanding was automatically converted into a number
of shares of common stock of Legacy Celularity, par value $0.001 per share (the “Legacy Celularity Common Stock”)
at the then-effective conversion rate as calculated pursuant to the Amended and Restated Certificate of Incorporation of Legacy
Celularity, dated March 16, 2020, as amended (the “Legacy Celularity Charter”), such that each converted share of
Legacy Celularity Preferred Stock was no longer outstanding and ceased to exist, and each holder of Legacy Celularity Preferred Stock
thereafter ceased to have any rights with respect to such securities (the “Legacy Celularity Preferred Stock Conversion”).
At
the Effective Time, by virtue of the First Merger and without any action on the part of GX, First Merger Sub, Legacy Celularity or the
holders of any of the following securities:
|
|
a)
|
each share of Legacy Celularity Common Stock (including shares of Legacy Celularity Common Stock resulting from the conversion of shares of Celularity Preferred Stock described above) that was issued and outstanding immediately prior to the Effective Time was cancelled and converted into the right to receive a number of shares of Company Class A common stock, par value $0.0001 per share (“Company Class A Common Stock”) equal to the Exchange Ratio (as defined below) (the “Per Share Merger Consideration”);
|
|
|
b)
|
each share of Legacy Celularity
Common Stock or Legacy Celularity Preferred Stock (together, “Legacy Celularity Capital Stock”) held in the treasury
of Celularity was cancelled without any conversion thereof and no payment or distribution was made with respect thereto;
|
|
|
c)
|
each share of First Merger Sub common
stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time was converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation;
|
|
|
d)
|
each Legacy Celularity Warrant (as
to which no notice of exercise had been delivered to Legacy Celularity prior to the Closing) that was outstanding immediately prior
to the Effective Time (and which would have otherwise been exercisable in accordance with its terms immediately following the Effective
Time), became, to the extent consistent with the terms of such Legacy Celularity Warrant, the right to purchase shares of Company
Class A Common Stock (and not Celularity Capital Stock) (each, a “Converted Warrant”) on the same terms and
conditions (including exercisability terms) as were applicable to such Legacy Celularity Warrant immediately prior to the Effective
Time, except that (A) each Converted Warrant became exercisable for that number of shares of Company Class A Common Stock
equal to the product (rounded down to the nearest whole number) of (1) the number of shares of Legacy Celularity Common Stock
that would have been issuable upon the exercise of a Legacy Celularity Warrant for cash and assuming the conversion of the Series
B Preferred Stock underlying such outstanding Legacy Celularity Warrant into Legacy Celularity Common Stock (the “Celularity
Warrant Shares”) subject to the Legacy Celularity Warrant immediately prior to the Effective Time and (2) the Exchange
Ratio (as defined below); and (B) the per share exercise price for each share of Company Class A Common Stock issuable
upon exercise of the Converted Warrant will be equal to the quotient (rounded up to the nearest whole cent) obtained by dividing
(1) the per share exercise price for each share of Series B Preferred Stock issuable upon exercise of such Celularity Warrant
immediately prior to the Effective Time by (2) the Exchange Ratio (as defined below); and
|
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
|
|
e)
|
each option to purchase Legacy Celularity
Common Stock, whether or not exercisable and whether or not vested, that was outstanding immediately prior to the Effective Time
(each, a “Legacy Celularity Option”) was assumed by GX and converted into an option to purchase shares of Company
Class A Common Stock (each, a “Converted Option”).
|
Business
Prior to the Business Combination
Prior
to the Business Combination, the Company had 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”).
All
activity through June 30, 2021 related to the Company’s formation, the initial public offering (the “Initial Public Offering”),
which is described below, and identifying a target company for an initial business combination and consummating the acquisition of Celularity
Inc.
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.
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, on May 21, 2021
$164,191,472 in cash was removed from the Trust Account to pay such holders. In connection with the Extension Amendment Proposal, the
Company has deposited 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 was funded as follows: on May 21, 2021, the Company
deposited into the trust account $396,270 which was an amount equal to $0.0315 per share of Class A common stock not redeemed in connection
with the Special Meeting and on June 30, 2021, the Company deposited $314,500 into the trust account which was 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.
Liquidity and Going Concern
As of June 30, 2021, the Company had $211 in its
operating bank accounts, $128,357,595 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 $7,234,200. As of June 30, 2021, approximately $1,846,785
of the amount on deposit in the Trust Account represented interest income and unrealized gain on investments, which is available to pay
the Company’s tax obligations. For the six months ended June 30, 2021, the Company withdrew $120,050 of interest earned on the Trust
Account to pay franchise taxes.
Upon the consummation of the Business Combination,
the Company received $83.4 million of PIPE Investment, $20.0 million of investment from Palantir Technologies, Inc. and funds remaining
from the Trust Account net of redemptions and fees totaling $5.4 million.
The Company is seeking additional funding through
public or private equity and/or debt financings. The Company may not be able to obtain financing on acceptable terms, or at all. The terms
of any financing may adversely affect the holdings or the rights of the Company’s stockholders.
Based on its recurring losses from operations
incurred since inception, expectation of continuing operating losses for the foreseeable future, and need to raise additional capital
to finance its future operations, the Company has concluded that there is substantial doubt about its ability to continue as a going concern.
The accompanying condensed consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the unaudited condensed
consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates
the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
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 May 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 and six months ended June 30, 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.
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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 June 30, 2021 and December 31, 2020.
Marketable
Securities Held in Trust Account
At
June 30, 2021 and December 31, 2020, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. During
the six months ended June 30, 2021, the Company withdrew $120,050 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.
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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 June
30, 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 (loss) 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.
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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
June 30,
|
|
|
Six
Months
Ended
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
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
|
|
$
|
9,175
|
|
|
$
|
431,645
|
|
|
$
|
37,058
|
|
|
$
|
1,392,991
|
|
|
Unrealized loss on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
(408,696
|
)
|
|
|
—
|
|
|
|
(36,068
|
)
|
|
Less: Company’s portion available to pay taxes
|
|
|
(9,175
|
)
|
|
|
(10,255
|
)
|
|
|
(37,058
|
)
|
|
|
(289,917
|
)
|
|
Net Income allocable to shares subject to redemption
|
|
$
|
—
|
|
|
$
|
12,694
|
|
|
$
|
—
|
|
|
$
|
1,067,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
35,247,365
|
|
|
|
26,078,562
|
|
|
|
20,502,385
|
|
|
|
25,831,024
|
|
|
Basic and diluted net income per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Net income (loss) minus Net Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(7,130,104
|
)
|
|
$
|
(12,109,838
|
)
|
|
$
|
30,898,858
|
|
|
$
|
(5,741,401
|
)
|
|
Less: Net income allocable to common stock subject to possible redemption
|
|
|
—
|
|
|
|
(12,694
|
)
|
|
|
—
|
|
|
|
(1,067,006
|
)
|
|
Non-Redeemable Net income (loss)
|
|
$
|
(7,130,104
|
)
|
|
$
|
(12,122,532
|
)
|
|
$
|
30,898,858
|
|
|
$
|
(6,808,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
7,187,500
|
|
|
|
9,858,938
|
|
|
|
11,236,276
|
|
|
|
10,106,476
|
|
|
Basic and diluted net income (loss) per share
|
|
$
|
(0.99
|
)
|
|
$
|
(1.23
|
)
|
|
$
|
2.75
|
|
|
$
|
(0.67
|
)
|
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 9).
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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 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 June 30, 2021, there was $0 outstanding under the Working Capital Loans.
Convertible Promissory Notes
On May 14, 2021 the Company entered into two convertible promissory note
agreements. In the first note (the “Working Capital Note”) related parties agreed to loan the Company an aggregate of up to
$1,289,230 to fund working capital requirements. In the second note (the “Trust Contribution Note”) related parties agreed
to loan the Company an aggregate amount of up to $710,770 to fund the extension fees for the Trust. The Notes were non-interest bearing
and were payable on the earlier of July 31, 2021 or the date of the consummation of the Business Combination. At the option of the Payees
the notes are convertible to Private Placement Warrants at $1.00 per share. At June 30, 2021 there was $398,500 outstanding on the Working
Capital Note and $710,770 outstanding on the Trust Contribution Note.
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 and six months ended June 30, 2021,
the Company incurred and paid $30,000 and $60,000 in fees for these services, respectively. For the three and six months ended June 30,
2020, the Company incurred and paid $30,000 and $60,000 in fees for these services, respectively.
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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.
In
connection with the Closing, on July 16, 2021, the Company, GX Sponsor LLC, certain stockholders of Legacy Celularity and certain PIPE
Investors entered into the Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”).
The terms of the Registration Rights Agreement are described in the Proxy Statement/Prospectus in the section entitled “Certain
Agreements Related to the Business Combination—Registration Rights Agreement” beginning on page 151 of the Proxy Statement/Prospectus.
Underwriter’s
Agreement
The
underwriter was entitled to a deferred fee of $10,812,500, which became payable to the underwriter from the amounts held in the Trust
Account after the Company completed the Business Combination, which was 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 provided for a monthly fee of $12,500.
For the three and six months ended June 30, 2021, the Company incurred and paid $37,500 and $75,000 in such fees, respectively. For the
three and six months ended June 30, 2020, the Company incurred and paid $37,500 and $75,000 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 June 30, 2021 and 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 June 30, 2021 and 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 Delaware General Corporation Law (“DGCL”), (i) First Merger Sub was merged 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 merged with and into Second Merger Sub, with
Second Merger Sub being the surviving entity of the Second Merger.
The
aggregate merger consideration was payable to stockholders of Celularity upon the Closing consisted of 101,554,371 newly issued
shares of the GX Class A Common Stock.
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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 changed its name to “Celularity Inc.”
The
Celularity Business Combination was 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 was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting,
the Company treated as the “acquired” company for financial reporting purposes. For accounting purposes, Celularity is deemed
to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Celularity (i.e.,
a capital transaction involving the issuance of the Company’s stock for the stock of Celularity). Accordingly, the consolidated assets, liabilities
and results of operations of Celularity became the Company’s historical financial statements after the Celularity Business Combination, and our
assets, liabilities and results of operations was 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 June 30, 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 June 30, 2021 and December 31, 2020,
there were 0 and 8,142,539 shares of Class A common stock issued and outstanding, excluding 12,580,004 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 June 30, 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
|
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 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.
|
CELULARITY
INC.
(f/k/a
GX ACQUISITION CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at June 30, 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
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
128,357,595
|
|
|
$
|
291,797,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
1
|
|
|
19,550,000
|
|
|
|
41,400,000
|
|
|
Warrant Liability – Private Placement Warrants
|
|
3
|
|
|
9,800,000
|
|
|
|
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:
|
Input
|
|
June
30,
2021
|
|
|
December 31,
2020
|
|
|
Risk-free interest rate
|
|
|
0.88
|
%
|
|
|
0.41
|
%
|
|
Trading days per year
|
|
|
250
|
|
|
|
250
|
|
|
Expected volatility
|
|
|
19.0
|
%
|
|
|
34.0
|
%
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
|
Stock Price
|
|
$
|
10.18
|
|
|
$
|
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
|
|
|
(12,600,000
|
)
|
|
|
(21,850,000
|
)
|
|
|
(34,450,000
|
)
|
|
Fair value as of June 30, 2021
|
|
$
|
9,800,000
|
|
|
$
|
19,550,000
|
|
|
$
|
29,350,000
|
|
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 July 12, 2021 the Company received additional Working Capital Note loans
totaling $390,730 from related parties. As of July 14, 2021 the outstanding balance on the Working Capital Note was $789,230 and the outstanding
balance on the Trust Contribution Note was $710,770, totaling $1,500,000 in convertible promissory notes. On July 14, 2021 the Working
Capital and Trust Contribution Notes were converted to whole warrants to purchase Class A common stock of GX Acquisition Corp.
On
July 16, 2021, the Company consummated the previously announced merger pursuant to a certain Merger Agreement and Plan of Reorganization,
dated January 8, 2021, by and among the Company, First Merger Sub, Second Merger Sub and the entity formerly known as Celularity Inc.,
a Delaware corporation (see Note 6).
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly
Report”) to “we,” “us” or the “Company” refer to GX Acquisition Corp. References to our “management”
or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to GX Sponsor,
LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical
facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s
financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.
Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek”
and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements
relate to future events or future performance, but reflect management’s current beliefs, based on information currently available.
A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed
in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially
from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report
on Form 10-K for the year ended December 31, 2020 filed with the SEC. The Company’s securities filings can be accessed on the EDGAR
section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the
laws of the State of Delaware on August 24, 2018 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase,
recapitalization, reorganization or similar Business Combination with one or more businesses. We intend to effectuate our Business Combination
using cash from the proceeds of Initial Public Offering and the sale of the Private Placement Warrants, our securities, debt or a combination
of cash, securities and debt. Our efforts to identify a prospective target business will not be limited to a particular geographic region
or industry.
We expect to continue to incur significant costs
in the pursuit of our initial Business Combination plans. We cannot assure you that our plans to raise capital or to complete our initial
Business Combination will be successful.
Recent Developments
On January 8, 2021, we entered into the Merger
Agreement with First Merger Sub, Second Merger Sub and Celularity.
Pursuant to the Merger Agreement, at the Closing,
and in accordance with the DGCL, (i) First Merger Sub merged 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 merged 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 consisted of 101,554,371 newly issued shares of the GX Class A Common Stock.
Immediately prior to Effective Time,
Celularity caused each share of Celularity Preferred Stock that is issued and outstanding immediately prior to the Effective Time
was 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 changed its name to “Celularity Inc.”
The Celularity Business Combination 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 was
accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, we are treated as the
“acquired” company for financial reporting purposes. For accounting purposes, Celularity was deemed to be the
accounting acquirer in the transaction and, consequently, the transaction was 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 became our historical financial statements after the Celularity Business
Combination, and our assets, liabilities and results of operations were consolidated with Celularity beginning on the acquisition
date.
On July 16, 2021, the Company consummated the previously announced
merger pursuant to a certain Merger Agreement and Plan of Reorganization, dated January 8, 2021, by and among the Company, First Merger
Sub, Second Merger Sub and the entity formerly known as Celularity Inc., a Delaware corporation.
Results of Operations
We have neither engaged in any operations
nor generated any revenues to date. Our only activities through June 30, 2021 were organizational activities and those necessary to
prepare for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a
Business Combination and consummating the Business Combination with Celularity, Inc. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on
marketable securities held in the Trust Account. We are incurring expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2021, we
had net loss of $7,130,104 which consisted of a change in the fair value of the warrant liability of $5,557,500, operating costs of $1,538,681,
and a provision for income taxes of $43,700 offset by interest income on marketable securities held in the Trust Account of $9,175, and
Miscellaneous Income of $602.
For the six months ended June 30, 2021, we had
net income of $30,898,858 which consisted of a change in the fair value of the warrant liability of $34,450,000, Miscellaneous Income
of $602, and interest income on marketable securities held in the Trust Account of $37,058 offset by operating costs of $3,588,802.
For the three months ended June 30, 2020, we
had net loss of $12,109,838, which consisted of a change in the fair value of the warrant liability of $11,966,250, an unrealized loss
on marketable securities held in our Trust Account of $471,500, and operating costs of $208,233 offset by interest income on marketable
securities held in the Trust Account of $497,975 and a benefit from income taxes of $38,170.
For the six months ended June 30, 2020, we had
net loss of $5,741,401, which consisted of a change in the fair value of the warrant liability of 6,622,500, an unrealized loss on marketable
securities held in our Trust Account of $41,610, a provision for income taxes of $234,469 and operating costs of $449,872 offset by interest
income on marketable securities held in the Trust Account of $1,607,050.
Liquidity and Capital Resources
On May 23, 2019, we consummated the Initial Public
Offering of 28,750,000 Units, 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. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 7,000,000 Private Placement Warrants, at $1.00 per Private Placement Warrant, to our Sponsor, generating
gross proceeds of $7,000,000.
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.
For the six months ended June 30, 2021, cash
used in operating activities was $828,940. Net income of $30,898,858 was offset by interest earned on marketable securities held in the
Trust Account of $37,058, change in deferred tax liability of $602, and change in the fair value of the warrant liability of $34,450,000.
Changes in operating assets and liabilities provided for $2,759,862 of cash.
For the six months ended June 30, 2020, cash
used in operating activities was $774,010. Net loss of $5,741,401 was affected by a change in the fair value of the warrant liability
of $6,622,500, interest earned on marketable securities held in the Trust Account of $1,607,050, an unrealized loss on marketable securities
held in our Trust Account of $41,610 and a deferred tax provision of $7,085. Changes in operating assets and liabilities used $82,584
of cash.
As of June 30, 2021, we had marketable securities
held in the Trust Account of $128,357,595 (including approximately $1,846,785 of interest income and unrealized gains) consisting of
U.S. Treasury Bills with a maturity of 180 days or less. We intend to use substantially all of the funds held in the Trust Account, including
any amounts representing interest earned on the Trust Account (less deferred underwriting commissions) to complete a Business Combination.
We may withdraw interest to pay taxes. For the six months ended June 30, 2021, we withdrew $120,050 of interest earned on the Trust Account
to pay our franchise taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete a
Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the
target business.
On July 16, 2021, as part of the closing of the
Business Combination, the Company received $103.4 million of proceeds from PIPE and other investors and the remaining $5.4 million net
of redemptions and expenses in its trust account at closing became available for working capital purposes.
Based upon the Company’s current operating
plan, Company does not believe that its existing cash and cash equivalents as of June 30, 2021, will be sufficient to fund its operating
expenses and capital expenditure requirements through the next twelve months. The Company is seeking additional funding through public
or private equity and/or debt financings, in addition to the receipt of the PIPE Financing funds and funds in the Trust Account. The Company
may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or
the rights of the Company’s stockholders. Based on its recurring losses from operations incurred since inception, expectation of
continuing operating losses for the foreseeable future, and need to raise additional capital to finance its future operations, the Company
has concluded that there is substantial doubt about its ability to continue as a going concern.
The Company expects to incur substantial expenses
in the foreseeable future for the development and potential commercialization of its cellular therapeutic candidates and ongoing internal
research and development programs. At this time, Company cannot reasonably estimate the nature, timing or aggregate amount of costs for
its development, potential commercialization, and internal research and development programs. However, to complete its current and future
preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for its therapeutic candidates,
as well as to build the sales, marketing and distribution infrastructure that it believes will be necessary to commercialize its cellular
therapeutic candidates, if approved, the Company may require substantial additional funding in the future.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of June 30, 2021. We do not participate in transactions that create relationships
with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established
for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly
fee of $10,000 for office space, utilities and secretarial and administrative services. We began incurring these fees on May 20, 2019
and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.
In June 2019, we entered into a consulting arrangement
for services to help identify and introduce us 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.
During the year ended December 31, 2020, we entered
into an agreement with a service provider, pursuant to which the service provider will serve as the placement agent for us in connection
with a proposed private placement (the “Transaction”) of our equity or equity-linked securities (the “Securities”).
We 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 we do not consummate the Transaction.
During the year ended December 31, 2020, we entered
into an agreement with the same service provider, pursuant to which the service provider will provide us with capital markets advisory
services for a potential Business Combination. We 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, we agreed to reimburse
the service provider all reasonable expenses relating to due diligence not to exceed $75,000 in the aggregate
Critical Accounting Policies
The preparation of condensed consolidated financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the warrants issued in connection
with our Initial Public Offering in accordance with the guidance contained in ASC 815-40-15-7D under which the warrants do not meet the
criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet
date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the warrants was estimated
using a Monte Carlo simulation approach.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject
to possible conversion 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 measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified
as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly,
common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of our consolidated balance sheets.
Net Income (Loss) Per Common Share
We apply the two-class method in calculating
earnings per share. Net income (loss) per common share, basic and diluted for Class A ordinary shares subject to possible redemption
is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number
of shares of Class A ordinary shares subject to possible redemption outstanding for the period. Net income (loss) per ordinary share,
basic and diluted for and non-redeemable common stock is calculated by dividing net loss less income attributable to Class A ordinary
shares subject to possible redemption, by the weighted average number of shares of non-redeemable ordinary shares outstanding for the
period presented.
Recent 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 our condensed consolidated
financial statements.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Following the consummation of our Initial Public
Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government
treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries.
Due to the short-term nature of these investments, we do not believe that there will be an associated material exposure to interest rate
risk.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls
and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted 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
in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(f) and 15d-15 under
the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of June 30, 2021. In connection with this Report, and in light of the restatement
of our financial statements for the year ended December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective due solely
to the material weakness in our internal control over financial reporting described in Amendment No. 1 to our Annual Report on Form 10-K
for the year ended December 31, 2020.
Changes in Internal Control Over Financial
Reporting
During the most recently completed fiscal quarter,
there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.