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Celularity (CELU)

Filed: 22 Jul 21, 4:13pm

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Capitalized terms used but not defined in this Exhibit 99.2 shall have the meanings ascribed to them in the Current Report on Form 8-K to which this Exhibit 99.2 is attached.

 

The following unaudited pro forma condensed combined balance sheet as of March 31, 2021 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 and for the three months ended March 31, 2021 present the combination of the financial information of GX and Legacy Celularity after giving effect to the Business Combination, Palantir Technologies Investment and PIPE Financing and related adjustments described in the accompanying notes.

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 and for the three months ended March 31, 2021 gives pro forma effect to the Business Combination, Palantir Technologies Investment and PIPE Financing as if they had occurred on January 1, 2020. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives pro forma effect to the Business Combination, Palantir Technologies Investment, and PIPE Financing as if they were completed on March 31, 2021.

 

The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with the audited annual historical financial statements and unaudited interim historical financial statements of each of GX and Legacy Celularity and the notes thereto, as well as the disclosures contained in the sections entitled “GX’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Celularity’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Proxy Statement/Prospectus and incorporated herein by reference.

 

The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what Legacy Celularity’s financial condition or results of operations would have been had the Business Combination, Palantir Technologies Investment and PIPE Financing occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of Celularity. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

Description of the Business Combination

 

On the Closing Date, First Merger Sub merged with and into Legacy Celularity, with Legacy Celularity surviving the First Merger as a wholly owned subsidiary of GX. Immediately following the First Merger, and as part of the same overall transaction as the First Merger, Legacy Celularity merged with and into the Second Merger Sub with Second Merger Sub being the surviving entity of the Second Merger. Upon the consummation of the Business Combination, all holders of Legacy Celularity Capital Stock, Legacy Celularity Warrants, and Legacy Celularity Options received or had the right to receive shares of the Class A Common Stock at a deemed value of approximately $10.20 per share after giving effect to the Exchange Ratio of 0.7686 resulting in 122,487,170 shares of the Class A Common Stock immediately issued and outstanding and 41,534,480 shares to be reserved for the potential future issuance of the Class A Common Stock upon the exercise of the Company’s stock options and upon the exercise of the Warrants, based on the following transactions that occurred on the Closing Date:

 

the conversion of all outstanding shares of Legacy Celularity Preferred Stock into shares of Legacy Celularity Common Stock at the then-effective conversion rate pursuant to the Legacy Celularity Charter;

 

the cancellation of each issued and outstanding share of Legacy Celularity Common Stock (including shares of Legacy Celularity Common Stock resulting from the conversion of shares of Legacy Celularity Preferred Stock described above) and the conversion into the right to receive a number of shares of Class A Common Stock equal to the Exchange Ratio;
  
the cancellation of each share of Legacy Celularity Capital Stock held in treasury without any conversion or payment.
  
the conversion of each outstanding and unexercised Legacy Celularity Warrant into a right to purchase shares of GX Class A Common Stock (a “Converted Warrant”) on the same terms and conditions as were applicable to the Legacy Celularity Warrant immediately prior to the Mergers, except that the Converted Warrants will be adjusted by the Exchange Ratio; and
  
the conversion of all outstanding and unexercised vested and unvested Legacy Celularity Options into options exercisable for shares of the Class A Common Stock with the same terms except for the number of shares exercisable and the exercise price, each of which will be affected by the Exchange Ratio.

 

 

 

 

Accounting for the Business Combination

 

The Business Combination is accounted for as a reverse recapitalization in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, GX is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Legacy Celularity stockholders comprising a relative majority of the voting power of the Company, Legacy Celularity’s operations prior to the acquisition comprising the only ongoing operations of the Company, the majority of Legacy Celularity’s board of directors being appointed by the Company, and Legacy Celularity’s senior management comprising a majority of the senior management of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Celularity with the Business Combination being treated as the equivalent of Celularity issuing stock for the net assets of GX, accompanied by a recapitalization. The net assets of GX will be stated at historical costs, with no goodwill or other intangible assets recorded.

 

Other Events in Connection with the Business Combination

 

GX was required to complete its initial Business Combination by May 23, 2021. On May 14, 2021, at a special meeting of GX stockholders, a vote to extend the time to consummate the initial Business Combination from May 23, 2021 to July 31, 2021 was approved (the “Extension”). In connection with this vote, shareholders exercised their right to redeem 16,169,996 shares of GX Class A Common Stock at a price of approximately $10.15 per share. Approximately $164.1 million was removed from the Trust Account to pay the stockholders, leaving a balance in the Trust Account of approximately $127.7 million. In connection with the Extension, GX agreed to deposit into the Trust Account $0.025 per share for each month of the Extension period, pro-rated for partial months during the Extension period, resulting in a maximum contribution of $0.0565 per share of GX Class A Common Stock that was not redeemed.

 

On July 14, 2021, at a special meeting of GX stockholders, the Business Combination was approved. In connection with this vote, shareholders exercised their rights to redeem 9,174,705 shares of GX Class A Common Stock at a price of approximately $10.20 per share. Approximately $93.6 million from the Trust Account was used to pay the stockholders, leaving a balance in the Trust Account of approximately $34.0 million.

 

In connection with the Business Combination, GX issued and sold 8,340,000 shares of its Class A Common Stock at a purchase price of $10.00 per share pursuant to the PIPE Financing and Palantir Technologies purchased 2,000,000 shares of Class A Common Stock at $10.00 per share.

 

Basis of Pro Forma Presentation

 

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, as adopted by the SEC in May 2020 (“Article 11”). The amended Article 11 is effective on January 1, 2021. The unaudited pro forma condensed combined financial information is provided for illustrative purposes only, does not necessarily reflect what the actual consolidated results of operations would have been had the acquisition occurred on the dates assumed and may not be useful in predicting the future consolidated results of operations or financial position. The Company’s results of operations and actual financial position may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The Company will incur additional costs after the Closing in order to satisfy its obligations as an SEC-reporting public company. In addition, the Company has adopted the Celularity Inc. 2021 Equity Incentive Plan and the Celularity Inc. 2021 Employee Stock Purchase Plan. No adjustment to the unaudited pro forma statement of operations has been made for these items as the amounts are not yet known.

 

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Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2021
(in thousands)

 

  GX
(Historical)
  Legacy
Celularity (Historical)
  Transaction Accounting Adjustments    Pro Form 
Combined
 
ASSETS                  
Current assets:                  
Cash and cash equivalents $29  $22,910 $80,400  A  $126,331 
          20,000  B     
          34,047  C     
          (10,813)  D     
          (4,887)  E     
          (1,104)  F     
          (15,631)  G     
          1,380  H     
Accounts receivable, net of allowance     1,009        1,009 
Note receivable     5,463        5,463 
Inventory     5,049        5,049 
Prepaid expenses  71   7,001        7,072 
Other current assets     1,226        1,226 
Total current assets  100   42,658  103,392      146,150 
Property and equipment     90,447        90,447 
Goodwill     123,304        123,304 
Intangible assets, net     124,839        124,839 
Restricted cash     15,202        15,202 
Marketable securities held in trust account  291,785     (257,738)  J / K    
          (34,047)  C     
Inventory, net of current portion     1,961        1,961 
Other long-term assets  43   6,703  (6,348)  F   398 
Total Assets $291,928  $405,114 $(194,741)     $502,301 
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)                  
Current liabilities:                  
Accounts payable $46  $5,497 $(817)  F  $4,726 
Accrued expenses and other current liabilities  4,994   11,128  (4,887)  E   10,948 
          (287)  F     
Current portion of financing obligation     3,012        3,012 
Deferred revenue     5,063        5,063 
Promissory notes – related party  120     (120)  I    
Total current liabilities  5,160   24,700  (6,111)      23,749 

 

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Unaudited Pro Forma Condensed Combined Balance Sheet — (continued)
March 31, 2021
(in thousands)

 

  GX (Historical)  Legacy
Celularity (Historical)
  Transaction Accounting Adjustments     Pro Form 
Combined
 
Deferred revenue, net of current
portion
     6,789          6,789 
Acquisition-related contingent consideration     294,023          294,023 
Financing obligations     27,922          27,922 
Warrant liabilities  23,793   113,145   (113,145)  L   

25,503

 
           

1,590

   H     
           120   I     
Deferred income tax liabilities     7          7 
Deferred underwriting fees  10,813      (10,813)  D    
Other liabilities     345          345 
Total liabilities  39,766   466,931   (128,359)      

378,338

 
Redeemable convertible preferred
stock
                    
Series A     184,247   (184,247)  N    
Series B     290,866   (290,866)  N    
Series X     75,000   (75,000)  N    
Common stock subject to possible redemption  291,745      (164,156)  J    
           (93,582)  K     
           (34,007)  O     
Stockholder’s equity (deficit)                    
Class A common stock                
Class B common stock  1      (1)  M    
Common stock     1   1   A   12 
           8   N     
           2   M     
Treasury stock, at cost     (256)  256   P    
Additional paid-in capital     33,427   80,399   A   769,263 
           20,000   B     
           (6,348)  F     
           (15,631)  G     
                     
                     
           113,145   L     
           550,105   N     
           34,007   O     
           (256)  P     
           (39,584)  Q     
           (1)  M     
Retained earnings
(accumulated deficit)
          (210)  H     
   (39,584)  (645,102)  39,584   Q   (645,312)
Total stockholders’ equity (deficit)  (39,583)  (611,930)  

775,476

       

123,963

 
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $291,928  $405,114  $(194,741)     $502,301 

 

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Unaudited Pro Forma Condensed Combined
Statement of Operations for the Three Months Ended
March 31, 2021
(in thousands, except share and per share amounts)

 

  GX (Historical)  Legacy
Celularity (Historical)
  Transaction Accounting Adjustments    Pro Form
Combined
 
Net revenues                  
Product sales and rentals $  $840  $    $840 
Services     1,264        1,264 
License, royalty and other     556        556 
Total revenues     2,660        2,660 
                   
Operating expenses:                  
Cost of goods sold (excluding amortization of acquired intangible assets)                  
Product sales and rentals     518        518 
Services     724        724 
License, royalty and other               
Research and development     16,990        16,990 
Selling, general and administrative     7,626        7,626 
Operation costs  2,050           2,050 
Change in the fair value of contingent consideration liability     20,656        20,656 
Amortization of acquired intangible assets     541        541 
Total operating expenses  2,050   47,055        49,105 
Loss from operations  (2,050)  (44,395)       (46,445)
Other (expense) income                  
Interest income  28   140        168 
Interest expense     (752)       (752)
Income (expense) related to warrant liabilities  40,007   (36,505)  36,505  AA  40,007 
Other (expense) income, net     (27)       (27)
Total other income (expense)  40,035   (37,144)  36,505     39,396 
Income (loss) before income taxes  37,985   (81,539)  36,505     (7,049)
Income tax benefit (expense)  44           44 
Net income (loss) $38,029  $(81,539) $36,505    $(7,005)
Income (loss) per share                  
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption  20,607,461               
Basic and diluted net income per share, Class A common stock subject to possible redemption $               
Basic and diluted weighted average shares outstanding, Non-redeemable common stock  15,330,039               
Basic and diluted net loss (income) per share, Non-redeemable common stock $2.48               
Weighted average shares outstanding, basic and diluted      23,990,063         

123,464,113

 
Basic and diluted net loss per share     $(3.40)       $(0.06)

 

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Unaudited Pro Forma Condensed Combined
Statement of Operations for the Year Ended
December 31, 2020
(in thousands, except share and per share amounts)

 

        Assuming
No Redemption Scenario
 
  GX (Historical)  Legacy
Celularity (Historical)
  Transaction Accounting Adjustments    Pro Form
Combined
 
Net revenues                  
Product sales and rentals $  $6,854 $     $6,854 
Services     5,556        5,556 
License, royalty and other     1,868        1,868 
Total revenues     14,278        14,278 
                   
Operating expenses:                  
Cost of goods sold (excluding amortization of acquired intangible assets)                  
Product sales and rentals     2,247        2,247 
Services     2,294        2,294 
License, royalty and other     391         391 
Research and development     52,707        52,707 
Selling, general and administrative     31,336        31,336 
Operation costs  4,220           4,220 
Change in the fair value of contingent consideration liability     (55,566)       (55,566)
Amortization of acquired intangible assets     3,394        3,394 
Impairment of acquired intangible assets     129,400        129,400 
Total operating expenses  4,220   166,203        170,423 
Loss from operations  (4,220)  (151,925)       (156,145)
Other (expense) income                  
Interest income  1,779   370        2,149 
Interest expense     (2,354)       (2,354)
Loss on the sale of business     (4,434)       (4,434)
Expenses related to warrant liabilities  (46,630)  (58,686) 58,686  AA   (46,630)
Other income, net  2   4,096        4,098 
Total other (expense) income  (44,849)  (61,008) 58,686      (47,171)
Loss before income taxes  (49,069)  (212,933) 58,686      (203,316)
Income tax (expense) benefit  (192)  4,700        4,508 
Net income (loss) $(49,261) $(208,233) $58,686     $(198,808)
Loss per share                  
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption  25,105,895               
Basic and diluted net income per share, Class A common stock subject to possible redemption $0.04               
Basic and diluted weighted average shares outstanding, Non-redeemable common stock  10,831,605               
Basic and diluted net loss (income) per share, Non-redeemable common stock $(4.64)              
Weighted average shares outstanding, basic and diluted      23,963,119         

120,652,412

 
Basic and diluted net loss per share     $(8.69)       $(1.65)

 

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Notes to Unaudited Proforma Condensed Combined Financial Statements
(in thousands except share and per share amounts)

 

1. Basis of Presentation

 

The Business Combination is being accounted for as a reverse recapitalization in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, GX has been treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Legacy Celularity stockholders comprising a relative majority of the voting power of the Company, Legacy Celularity’s operations prior to the acquisition comprising the only ongoing operations of the Company, the majority of the Company’s board of directors being appointed by Legacy Celularity and Legacy Celularity’s senior management comprising a majority of the senior management of the Company. Accordingly, for accounting purposes, the financial statements of the Company are represented a continuation of the financial statements of Legacy Celularity with the Business Combination being treated as the equivalent of Legacy Celularity issuing stock for the net assets of GX, accompanied by a recapitalization. The net assets of GX will be stated at historical costs, with no goodwill or other intangible assets recorded.

 

The Company management has made significant estimates and assumptions in its determination of the pro forma adjustments based on information available as of the date of this proxy statement/prospectus. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented as additional information becomes available. Management considers this basis of presentation to be reasonable under the circumstances.

 

2. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

 

Balance sheet

 

A.Reflects the proceeds of $83,400 from the issuance and sale of 8,340,000 shares of Class A Common Stock at $10.00 per share pursuant to the PIPE Subscription Agreements entered into in connection with the PIPE Financing, net of $3,000 of issuance costs.
  
B.Reflects the Palantir Technologies purchase of 2,000,000 shares of Class A Common Stock at $10.00 per share for proceeds of $20,000.
  
C.Reflects the liquidation and reclassification of $34,047 of marketable securities held in the GX Trust Account to cash and cash equivalents that becomes available for general corporate use by the Company following the Closing.
  
D.Represents the payment of GX’s deferred underwriting fees of $10,813 that becomes payable upon the Closing.
  
E.Represents the payment of $4,887 of transaction costs accrued by GX at March 31, 2021.
  
F.Reflects the elimination of $6,348 of transaction costs incurred by Legacy Celularity, of which $1,104 were accrued and $5,244 were paid at March 31, 2021. The transaction costs are recorded as a reduction of the net assets of GX received upon the Business Combination and offset against additional paid-in capital.
  
G.

Represents additional estimated direct and incremental transaction costs of $25,936 incurred by GX and Legacy Celularity and paid upon the Closing of the Business Combination. Of the total incremental transaction costs, $15,631 were paid in cash and $10,305 were paid through the issuance of common stock. The transaction costs are recorded as a reduction of the net assets of GX received upon the Business Combination and offset against additional paid-in capital.

  
H.

Reflects additional borrowings of $1,380 from related parties for amounts due monthly for extension of the period of time for which GX was required to consummate a Business Combination and other borrowings by GX from related parties and settlement of the total related party borrowings of $1,500 through the issuance of 1,499,999 warrants to purchase Class A Common Stock at an initial exercise price of $11.50 per share. The fair value of the warrants issued is $1,710, resulting in stockholders’ equity adjustment of $210.

 

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I.Represents the settlement of GX Promissory notes - related party that were outstanding at March 31, 2021, through the issuance of warrants (see note H).
  
J.Reflects the redemption in May 2021 of 16,169,996 shares of the Company’s Class A common stock at a redemption price of approximately $10.15 per share in connection with the vote by GX stockholders to extend the period of time for which GX is required to consummate a Business Combination to July 31, 2021 by certain GX shareholders.
  
K.Represents the redemption of 9,174,705 GX Class A common stock shares at a redemption price of $10.20 per share at closing.
  
L.Represents the reclassification of the Legacy Celularity warrant liabilities to equity.
  
M.To eliminate GX Class B Common stock and to adjust par value for shares outstanding.
  
N.Reflects the conversion of Legacy Celularity’s outstanding redeemable convertible preferred stock into Class A Common Stock.
  
O.Reflects the reclassification of GX Class A common stock no longer subject to possible redemption to permanent equity.
  
P.Reflects the elimination of Legacy Celularity’s treasury stock.

 

Q.Reflects the elimination of GX’s historical accumulated deficit.

 

Statement of operations

 

AA.Represents the elimination of the expense associated with the Legacy Celularity warrant liabilities as the warrants are being reclassified to equity as a result of the Business Combination (see Balance Sheet — note L).

 

3. Loss per share

 

Represents the net loss per share calculated using the basic and diluted weighted average shares of common stock outstanding as a result of the pro forma adjustments. As the Business Combination, Palantir Technologies Investment and PIPE Financing are being reflected as if they had occurred as of January 1, 2020, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes the shares to be issued and outstanding upon the Closing have been outstanding for the entire periods presented. The shares of Class A Common Stock redeemed by GX public stockholders are eliminated as of January 1, 2020.

 

The unaudited pro forma condensed combined financial information are based on historical GX weighted averages shares outstanding:

 

  Year Ended December 31, 2021  Three Months Ended March 31, 2021 
Pro forma net loss $(198,808) $(7,005)
Weighted average shares outstanding,
basic and diluted
  120,652,412   123,464,113 
Basic and diluted net loss per share(1) $(1.65) $(0.06)
Weighted average shares outstanding, basic and diluted        
Legacy Celularity stockholders  98,742,670   101,554,371 
Palantir Technologies  2,000,000   2,000,000 
PIPE Investors  8,340,000   8,340,000 
GX Public Common  3,405,299   3,405,299 
Transactions fees paid in stock  976,943   976,943 
GX Sponsor  7,187,500   7,187,500 
   120,652,412   123,464,113 

 

 
(1)Outstanding options and warrants are anti-dilutive due to the reported net losses and are not included in the calculation of diluted net loss per share.

 

 

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