Celularity (CELU) - 2020 Q4 - Annual Report

Part I Business The company is a special purpose acquisition company (SPAC) focused on identifying and completing business combinations, notably with Celularity Inc - The company is a blank check company formed for the purpose of effecting a business combination with one or more businesses[18] - On January 8, 2021, the company entered into a Merger Agreement with Celularity Inc., with aggregate merger consideration of up to 147,327,224 newly issued shares of GX Class A Common Stock[19][20] - Concurrently with the Merger Agreement, the company entered into subscription agreements for a $83.4 million PIPE financing, selling 8,340,000 shares at $10.00 per share[26] Initial Public Offering and Trust Account Details | Event | Date | Details | | :--- | :--- | :--- | | Initial Public Offering (IPO) | May 23, 2019 | 28,750,000 units at $10.00/unit, generating $287.5 million | | Private Placement | May 23, 2019 | 7,000,000 warrants at $1.00/warrant, generating $7.0 million | | Trust Account Deposit | May 23, 2019 | $287.5 million deposited into the trust account | - The company has until May 23, 2021, to complete its initial business combination, failing which it will cease operations and redeem public shares[106] Risk Factors The company faces significant risks related to its SPAC nature, including failure to complete a business combination by the deadline, COVID-19 impacts, conflicts of interest, and potential delisting - Failure to complete an initial business combination by May 23, 2021, will result in the company ceasing all operations, redeeming public shares, and liquidating, causing public warrants to expire worthless[158][159] - The COVID-19 outbreak has adversely affected economies and financial markets, potentially impacting target companies and hindering transaction consummation[138] - The sponsor, officers, and directors have conflicts of interest as their founder shares and private placement warrants will be worthless if a business combination is not completed[269][270] - The company may be unable to obtain additional financing to complete its business combination, as the planned $83.4 million PIPE financing for the Celularity deal is not guaranteed[236][237] - Nasdaq may delist the company's securities if it fails to meet continued listing requirements, which could limit trading and reduce liquidity[272][273] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[328] Properties The company owns no real estate, maintaining its principal offices through a monthly $10,000 fee to a sponsor affiliate - The company does not own any real estate or other material physical properties[329] - The company pays an affiliate of its sponsor $10,000 per month for office space, utilities, and administrative services[329] Legal Proceedings The company faces stockholder lawsuits and demand letters alleging fiduciary duty breaches and misleading disclosures regarding the Celularity merger - Two lawsuits, the Spero Complaint and the Rogalla Complaint, have been filed by purported stockholders in connection with the Celularity Business Combination[330] - The lawsuits allege breach of fiduciary duties by the board and claim the S-4 Registration Statement contains misleading information or omissions, seeking injunctive relief, damages, and fees[330] - The company has also received two demand letters from putative stockholders with similar allegations, seeking corrective disclosures, but believes all allegations are without merit[331] Mine Safety Disclosures This item is not applicable to the company - Not applicable[333] Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's units, Class A common stock, and warrants trade on Nasdaq, with limited record holders and no recent unregistered sales or repurchases Trading Information | Security | Trading Symbol | Exchange | | :--- | :--- | :--- | | Units | GXGXU | Nasdaq Capital Market | | Class A Common Stock | GXGX | Nasdaq Capital Market | | Warrants | GXGXW | Nasdaq Capital Market | - As of March 1, 2021, there was one holder of record for the company's units, one for its Class A common stock, and two for its warrants[338] Selected Financial Data This item is not required as the company is a smaller reporting company - Not required for smaller reporting companies[343] Management's Discussion and Analysis of Financial Condition and Results of Operations As a pre-combination SPAC, the company reported a $2.63 million net loss in 2020, faces going concern doubts, and its Celularity merger will be a reverse recapitalization Financial Performance Highlights | Metric | For the year ended Dec 31, 2020 | For the year ended Dec 31, 2019 | | :--- | :--- | :--- | | Net (Loss) Income | ($2,630,297) | $2,512,971 | | Operating Costs | $4,219,960 | $564,339 | | Interest Income on Trust | $1,779,071 | $3,753,411 | - As of December 31, 2020, the company had $314,696 in cash outside the trust account and $291,797,144 in marketable securities held in the trust account[362][363] - The company's ability to continue as a going concern is in substantial doubt as it needs to complete a business combination by May 23, 2021, and may require additional capital[366][521] - The company has contractual obligations including a $10,000 monthly fee to a sponsor affiliate for administrative services and a $12,500 monthly fee to a consultant for target identification services[368][369] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is limited to interest rate risk on funds in its Trust Account, invested in short-term U.S. government treasury securities, deemed immaterial - The net proceeds from the IPO held in the Trust Account are invested in U.S. government treasury bills with maturities of 180 days or less or in certain money market funds[376] - Due to the short-term nature of these investments, the company believes there is no material exposure to interest rate risk[376] Financial Statements and Supplementary Data This section refers to the full financial statements and supplementary data which appear following Item 15 of the report - The company's financial statements and supplementary data are included by reference and appear after Item 15[377] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[378] Controls and Procedures Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - As of December 31, 2020, the company's disclosure controls and procedures were deemed effective by its Certifying Officers[380] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[382] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[383] Other Information The company reports no other information - None[385] Part III Directors, Executive Officers and Corporate Governance The company's governance includes Co-CEOs Jay R. Bloom and Dean C. Kehler, a five-member board with three independent directors, and established audit and compensation committees - The executive team includes Jay R. Bloom and Dean C. Kehler as Co-Chairmen and Chief Executive Officers, Michael G. Maselli as VP of Acquisitions, and Andrea J. Kellett as CFO[387] - The Board of Directors has five members, with a majority determined to be independent (Hillel Weinberger, Marc Mazur, Paul S. Levy) per Nasdaq standards[398] - The board has two standing committees: an Audit Committee and a Compensation Committee, both composed of independent directors[399] - The company has adopted a Code of Ethics, and the charter for the Audit Committee requires it to review and approve all related-party transactions[415][447] Executive Compensation No officers receive cash compensation; the company pays a sponsor affiliate $10,000 monthly for administrative support, and officers are reimbursed for expenses - None of the company's officers has received any no cash compensation for services rendered[419] - An affiliate of the sponsor is paid $10,000 per month for office space, utilities, and administrative support, which will cease upon business combination or liquidation[419] - Officers and directors are reimbursed for out-of-pocket expenses incurred on the company's behalf, such as those related to identifying potential target businesses[419] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 1, 2021, GX Sponsor LLC beneficially owned 100% of Class B common stock (20% of total), with several institutional investors holding over 5% of Class A common stock Beneficial Ownership | Beneficial Owner | Class B Shares | % of Class B | % of Total Common Stock | | :--- | :--- | :--- | :--- | | GX Sponsor LLC | 7,187,500 | 100% | 20% | | All executive officers and directors as a group | 7,187,500 | 100% | 20% | - Jay R. Bloom and Dean C. Kehler, as managing members of the sponsor, have voting and investment discretion over the shares held by the sponsor[429] - Significant shareholders of Class A common stock (over 5%) include BlueCrest Capital Management (6.35%), Magnetar Financial LLC (5.22%), HGC Investment Management Inc. (5.92%), and RP Investment Advisors LP (5.75%)[426] Certain Relationships and Related Transactions, and Director Independence The company has related party transactions with its sponsor, including founder shares, private placement warrants, and administrative fees, with related party transactions requiring audit committee approval - The sponsor purchased 7,187,500 founder shares for $25,000 and 7,000,000 private placement warrants for $7,000,000[438][439] - The company pays an affiliate of the sponsor $10,000 per month for office space and administrative support[441] - The sponsor or its affiliates may loan the company funds for transaction costs, with up to $1,500,000 of such loans convertible into warrants at $1.00 per warrant[444] - The company has adopted a related party transaction policy requiring review and audit committee approval[447] Principal Accountant Fees and Services Marcum LLP is the company's independent auditor, billing $53,701 in audit fees for FY2020 and $89,000 for FY2019, with all services pre-approved by the audit committee Audit Fees and Services | Fee Type | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Audit Fees | $53,701 | $89,000 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | - The audit committee pre-approves all auditing services and permitted non-audit services to be performed by the auditors[459] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed as part of the Form 10-K, including the Merger Agreement, charter, bylaws, and warrant agreements - The report includes an index of all exhibits filed, such as the Merger Agreement with Celularity, the Warrant Agreement, and various registration and support agreements[466] Form 10-K Summary This item is not applicable - Not applicable[463] Financial Statements Report of Independent Registered Public Accounting Firm Marcum LLP issued an unqualified opinion on the financial statements but highlighted substantial doubt about the company's going concern ability - Marcum LLP expressed an unqualified opinion that the financial statements present fairly, in all material respects, the financial position of the Company[475] - The auditor's report includes a "Going Concern" paragraph, noting that the company's need to complete a business combination and its insufficient working capital raise substantial doubt about its ability to continue as a going concern[476] Consolidated Financial Statements The consolidated financial statements show the company's pre-combination financial position, with total assets of $292.2 million in 2020, a net loss of $2.6 million, and Class A common stock classified as temporary equity Consolidated Balance Sheet Highlights (as of December 31) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Total Assets | $292,156,433 | $291,605,350 | | Cash | $314,696 | $917,007 | | Marketable securities held in Trust Account | $291,797,144 | $290,594,540 | | Total Liabilities | $14,222,974 | $11,041,594 | | Deferred underwriting fee payable | $10,812,500 | $10,812,500 | | Total Stockholders' Equity | $5,000,005 | $5,000,001 | Consolidated Statements of Operations Highlights (for the year ended December 31) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Operating costs | ($4,219,960) | ($564,339) | | Interest income on marketable securities | $1,779,071 | $3,753,411 | | Net (Loss) Income | ($2,630,297) | $2,512,971 | - As of December 31, 2020, 26,894,145 shares of Class A common stock were subject to possible redemption at a value of $272,933,454, classified as temporary equity[482] Notes to Consolidated Financial Statements The notes detail the company's SPAC formation, going concern issues, accounting policies, related-party transactions, commitments, and the subsequent Celularity merger agreement and PIPE financing - The company must complete a Business Combination by May 23, 2021, which raises substantial doubt about its ability to continue as a going concern (Note 1)[517][521] - The company accounts for its Class A common stock subject to possible redemption as temporary equity outside of the stockholders' equity section (Note 2)[534] - Related party transactions include the issuance of Founder Shares to the Sponsor, a promissory note for initial expenses, and an administrative support agreement for a $10,000 monthly fee (Note 5)[549][551][553] - The underwriter is entitled to a deferred fee of $10,812,500, payable from the Trust Account only upon completion of a Business Combination (Note 6)[557] - Subsequent to year-end, on January 8, 2021, the Company entered into a definitive Merger Agreement with Celularity Inc. and secured commitments for an $83.4 million PIPE financing (Note 10)[585][591]