Business context and reporting period
This Form 10-Q covers the quarter and six months ended June 30, 2021. The financial statements are for GX Acquisition Corp., a blank-check company, before its July 16, 2021 business combination with Legacy Celularity. They do not present Celularity’s operating results. The merger was accounted for as a reverse recapitalization, with Legacy Celularity as the accounting acquirer; Celularity’s historical financial statements become the post-merger company’s historical statements.
Financial results and condition
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0; no revenues generated | $0; no revenues generated | $0; no revenues generated | $0; no revenues generated |
| Operating costs | $1.54 million | $0.21 million | $3.59 million | $0.45 million |
| Net income (loss) | $(7.13) million | $(12.11) million | $30.90 million | $(5.74) million |
| Cash used in operating activities | Not separately stated | Not separately stated | $0.83 million | $0.77 million |
The six-month 2021 net income primarily reflects a $34.45 million noncash gain from a decrease in warrant fair value; it does not indicate operating profitability. Q2 loss included a $5.56 million warrant fair-value expense. Operating margins are not meaningful because the company reported no revenue.
- At June 30, cash outside the trust was $211; trust investments were $128.36 million. Working capital deficit was $7.23 million.
- Total liabilities were $47.45 million, including $29.35 million of warrant liability, $10.81 million deferred underwriting fees, and $1.11 million of related-party promissory notes. The company reported no long-term debt.
- On July 16, after quarter-end, the company reported receiving $83.4 million of PIPE investment, $20.0 million from Palantir, and $5.4 million of remaining trust funds net of redemptions and fees.
Material changes, outlook, and risks
In May, shareholders approved an extension of the business-combination deadline and redeemed 16.17 million shares for approximately $164.2 million. The business combination closed July 16, 2021; merger consideration included 101.55 million newly issued Class A shares. Related-party convertible notes totaling $1.50 million were converted into warrants on July 14.
Management stated that the company’s June 30 cash was insufficient to fund operating expenses and capital needs for the following 12 months, and that additional financing might not be available on acceptable terms or at all. The filing concludes there is substantial doubt about the company’s ability to continue as a going concern. It anticipates substantial future spending on therapeutic-candidate development, preclinical studies, clinical trials, regulatory approvals, and potential commercialization, but provides no quantified spending guidance or revenue forecast. Financing terms could dilute shareholders or otherwise affect their rights.
Controls and procedures were deemed ineffective as of June 30 due to a material weakness associated with the restatement of 2020 financial statements. The filing reports no material change in internal control during the quarter. No legal proceedings were reported. The pre-merger statements’ unusual warrant-liability remeasurement materially affected reported earnings; warrants were valued using market prices and, for private warrants, a model with volatility assumptions.
Investor facts to verify
- Review post-merger Celularity financial statements and cash runway; the figures in this filing largely reflect the pre-merger SPAC, not the operating business.
- Reconcile the reported post-close financing and trust proceeds with subsequent cash, transaction costs, and capital needs.
- Assess the scale and timing of clinical, regulatory, and commercialization spending and the need for further financing.
- Track remediation of the disclosed material weakness and any subsequent restatements or control disclosures.
- Evaluate warrant terms, potential dilution, and the effect of fair-value changes on reported earnings.