Celularity Inc. — filing identity and period
Important: The supplied filing is GX Acquisition Corp.’s Form 10-K for the fiscal year ended December 31, 2020, not a Celularity Inc. 10-K. GX was a blank-check company with no operating business or revenue at year-end. Celularity appears as the proposed merger target; the merger agreement was signed January 8, 2021, after the reporting period.
Financial results and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | None | None |
| Operating costs | $4.22 million | $0.56 million |
| Operating loss | $4.22 million | $0.56 million |
| Trust-account interest and investment gains/(losses), net | $1.78 million | $3.75 million |
| Net income/(loss) | $(2.63) million | $2.51 million |
| Cash used in operating activities | $1.18 million | $1.10 million |
- Net loss per common share was $0.45 in 2020, compared with reported net loss per share of $0.03 in 2019; 2019 company-wide net income included trust-account earnings attributable to redeemable shares.
- At December 31, 2020, cash outside the trust was $314,696; trust-account securities were $291.80 million. The filing reports a $3.02 million working-capital deficit in its notes.
- Total liabilities were $14.22 million, including $10.81 million of deferred underwriting fees payable upon a completed business combination. The company reported no long-term debt.
- Trust assets were U.S. Treasury bills with maturities of 180 days or less. The filing states that interest-rate exposure was not material given their short duration. Operating margins are not meaningful because GX had no operating revenue.
Changes versus the prior year
- Operating costs rose substantially, from $0.56 million to $4.22 million, and the company moved from net income to a net loss.
- Trust-account interest fell from $3.75 million to $1.78 million, while cash outside the trust declined from $917,007 to $314,696.
- Accounts payable and accrued expenses increased to $3.41 million from $210,211.
Outlook, risks, contingencies and unusual items
- GX had until May 23, 2021 to complete a business combination; otherwise it was required to cease operations, redeem public shares and liquidate. Its auditors and management cited substantial doubt about its ability to continue as a going concern if no combination closed. The financial statements contain no adjustments for that uncertainty.
- The January 2021 Celularity transaction proposed up to 147,327,224 GX Class A shares for Celularity stockholders, valued at approximately $10.15 per share. A separate PIPE was agreed for 8,340,000 shares at $10 per share, or $83.4 million. Both were subject to closing conditions; neither was completed as of the 10-K’s reporting date.
- Two stockholder lawsuits and two demands, all filed or received after year-end, alleged fiduciary-duty or securities-law issues and claimed the merger registration statement was misleading or incomplete. GX said it considered the allegations without merit; it could not estimate a loss, and an injunction could prevent the merger.
- Liquidity outside the trust was limited, and sponsor or management loans were discretionary, not committed. The filing also identifies risks from redemptions, third-party claims against trust funds, conflicts of interest, COVID-19 disruption and the possibility that warrants would expire worthless if no merger closed.
- No financial guidance or operating outlook for Celularity is provided in this GX 10-K. Celularity-specific operating performance and risks should be assessed using its financial statements and the merger registration statement.
Investor facts to verify
- Confirm the correct issuer and filing: this is GX Acquisition Corp.’s 2020 10-K, not Celularity’s annual report.
- Review the merger registration statement for Celularity’s historical results, financial condition, projections, transaction terms and dilution.
- Verify the status and final terms of the merger and PIPE, including any changes to consideration, financing or closing conditions.
- Assess whether the trust balance, redemptions, transaction costs and available financing would have supported the proposed transaction.
- Check the resolution and potential financial impact of the lawsuits and stockholder demands, as well as the going-concern and liquidation risks if the merger did not close by the deadline.