The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our unaudited financial
statements and the notes related thereto which are included in "Item 1.
Financial Statements" of this Quarterly Report on Form 10Q.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this
Quarterly Report on Form 10Q including, without limitation, statements under
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. When used in this Quarterly Report on Form 10Q,
words such as "anticipate," "believe," "estimate," "expect," "intend" and
similar expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors detailed in our filings with the SEC. All subsequent written or oral
forward-looking statements attributable to us or persons acting on the Company's
behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporated on July 21, 2020 as a Delaware
corporation and formed for the purpose of effecting a Business Combination with
one or more target businesses. We completed our Public Offering on January 22,
2021.
We intend to effectuate our Business Combination using cash from the proceeds of
our Public Offering and the sale of the Private Placement Warrants, our capital
stock, debt, or a combination of cash, stock and debt.
Recent Developments
Proposed Business Combination
On April 29, 2021, Gores Metropoulos II, Inc. (the "Company") entered into an
Agreement and Plan of Merger (the "Merger Agreement"), by and among the Company,
Sunshine Merger Sub I, Inc. ("First Merger Sub"), Sunshine Merger Sub II, LLC
("Second Merger Sub"), and Sonder Holdings Inc. ("Sonder"), which provides for,
among other things: (a) the merger of First Merger Sub with and into Sonder,
with Sonder continuing as 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 Sonder with and into Second
Merger Sub, with Second Merger Sub continuing as the surviving entity (the
"Second Merger" and, together with the First Merger, the "Mergers"). The
transactions set forth in the Merger Agreement, including the Mergers, will
constitute a "Business Combination" as contemplated by the Company's Amended and
Restated Certificate of Incorporation.
The Merger Agreement and the transactions contemplated thereby (the "Business
Combination") were unanimously approved by the Board of Directors of the Company
on April 29, 2021 and the Board of Directors of Sonder (the "Sonder Board") on
April 29, 2021.
The Merger Agreement
Merger Consideration
Pursuant to the terms of the Merger Agreement, at the Effective Time, (a) each
share of Sonder's Common Stock, par value $0.000001 per share (the "Sonder
Common Stock"), will be converted into the right to receive a number of
newly-issued shares of the Company's common stock, par value $0.0001 per share
("Company Common Stock"), equal to the Per Share Company Common Stock
Consideration (as defined in the Merger Agreement) and (b) each share of
Sonder's Special Voting Series AA Common Stock, par value $0.000001 per share
("Sonder Special Voting Common Stock"), will be converted into the right to
receive a number of newly-issued shares of the
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Company's Special Voting Common Stock, par value $0.000001 per share (the
"Company Special Voting Common Stock"), equal to the Per Share Company Special
Voting Stock Consideration (as defined in the Merger Agreement).
Pursuant to the Merger Agreement, the aggregate merger consideration payable at
the closing of the Business Combination to all of the stockholders of Sonder
will be an aggregate number of shares of Company Common Stock (deemed to have a
value of $10.00 per share) equal to $2,176,603,000, divided by $10.00.
Furthermore, the Company will reserve for issuance to each holder of Series AA
Common Exchangeable Preferred Shares of Sonder Canada Inc., an affiliate of
Sonder ("Sonder Canada" and, such shares, the "Sonder Canada Exchangeable Common
Shares"), upon the exchange thereof following the closing of the Business
Combination, an aggregate number of shares of Company Common Stock equal to the
number of shares of Company Special Voting Common Stock issuable pursuant to the
Merger Agreement.
In addition to the consideration to be paid at the closing of the Business
Combination, holders of Sonder Common Stock, Sonder Canada Exchangeable Common
Shares and warrants of Sonder as of immediately prior to the Effective Time will
be entitled to receive their pro rata share of an additional number of earn-out
shares from the Company, issuable in Company Common Stock and subject to the
terms provided in the Merger Agreement, up to an aggregate of 14,500,000 shares
collectively issuable to all such holders of Sonder Common Stock, Sonder Canada
Exchangeable Common Shares and warrants of Sonder.
Treatment of Sonder's Equity Awards
Pursuant to the Merger Agreement, at the closing of the Business Combination,
each of Sonder's stock options, to the extent then outstanding and unexercised,
will automatically be converted into an option to acquire a certain number of
shares of Company Common Stock (pursuant to a ratio based on the Per Share
Company Common Stock Consideration), at an adjusted exercise price per share.
Each such converted option will be subject to the same terms and conditions as
were applicable immediately prior to such conversion, except to the extent such
terms or conditions are rendered inoperative by the Business Combination.
Representations, Warranties and Covenants
The parties to the Merger Agreement have made representations, warranties and
covenants that are customary for transactions of this nature. The
representations and warranties of the respective parties to the Merger Agreement
will not survive the closing of the Business Combination. The covenants of the
respective parties to the Merger Agreement will also not survive the closing of
the Business Combination, except for those covenants that by their terms
expressly apply in whole or in part after the closing of the Business
Combination.
Covenants
The Merger Agreement includes customary covenants of the parties with respect to
operation of their respective businesses prior to consummation of the Business
Combination and efforts to satisfy conditions to consummation of the Business
Combination. The Merger Agreement also contains additional covenants of the
parties, including, among others, (a) covenants providing for the Company and
Sonder to use commercially reasonable efforts to obtain all necessary regulatory
approvals and (b) covenants providing for the Company and Sonder to cooperate in
the preparation of the Registration Statement, Proxy Statement and Consent
Solicitation Statement (as each such term is defined in the Merger Agreement)
required to be filed in connection with the Business Combination. The covenants
of the parties to the Merger Agreement will not survive the closing of the
Business Combination, except for those covenants that by their terms expressly
apply in whole or in part after the closing of the Business Combination.
Conditions to Consummation of the Business Combination
The consummation of the Business Combination is conditioned upon, among other
things, (a) the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (b) the
absence of any governmental order, statute, rule or regulation enjoining or
prohibiting the consummation of the Business Combination, (c) the Company having
at least $5,000,001 of net tangible assets (as
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determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) remaining after the completion of the
redemption offer in relation to Company Common Stock in accordance with the
terms of the Merger Agreement, (d) receipt of the required Company stockholder
approval, (e) the adoption of the Merger Agreement and the approval of the
transactions contemplated by the Merger Agreement by certain majorities of
holders of various classes of Sonder's capital stock comprising the Company
Requisite Approval (as defined in the Merger Agreement, and referred to
hereinafter as the "Sonder Requisite Approval"), (f) the delivery of the
Canadian Approvals (as defined in the Merger Agreement) to the Company, (g) the
effectiveness of the Registration Statement (as defined below) under the
Securities Act, and (h) the receipt of the approval for listing by Nasdaq of the
Company Common Stock to be issued in connection with the closing of the Business
Combination, subject only to (i) the requirement to have a sufficient number of
round lot holders and (ii) official notice of listing.
Private Placement Subscription Agreements
On April 29, 2021, the Company entered into subscription agreements (each, a
"Subscription Agreement" and collectively, the "Subscription Agreements") with
certain investors and Gores Metropoulos Sponsor II, LLC (the "Sponsor"),
pursuant to which the investors have agreed to purchase an aggregate of
20,000,000 shares of Company Common Stock in a private placement for $10.00 per
share (the "Private Placement").
Each Subscription Agreement will terminate with no further force and effect upon
the earliest to occur of: (a) such date and time as the Merger Agreement is
terminated in accordance with its terms; (b) upon the mutual written agreement
of the parties to such Subscription Agreement; (c) if any of the conditions to
closing set forth in such Subscription Agreement are not satisfied or waived on
or prior to the closing and, as a result thereof, the transactions contemplated
by such Subscription Agreement are not consummated at the closing; and (d) if
the closing of the Business Combination shall not have occurred by October 28,
2021. As of the date hereof, the shares of Company Common Stock to be issued
pursuant to the Subscription Agreements have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"). The Company will,
within 30 days after the closing of the Business Combination, file with the
Securities and Exchange Commission ("SEC") a registration statement (the
"Post-Closing Registration Statement") registering the resale of such shares of
Common Stock and will use its commercially reasonable efforts to have such
Post-Closing Registration Statement declared effective as soon as practicable
after the filing thereof.
Recent Stockholder Action
The Company and the members of its Board of Directors have been named as
defendants in a putative stockholder action filed in the Supreme Court of the
State of New York, County of New York, captioned Ryan Harvey v. Gores
Metropoulos II, Inc., et al., Index No. 654693/2021, in connection with the
proposed business combination of the Company with Sonder Holdings, Inc. (the
"Proposed Transaction"). The complaint generally alleges breach of fiduciary
duty and aiding and abetting claims relating to, among other things, alleged
misstatements and omissions in the Form S-4 registration statement filed by the
Company with the SEC on July 7, 2021 in connection with the Proposed Transaction
(the "Registration Statement"). The complaint seeks, among other things,
injunctive relief and an award of attorneys' fees. The Company believes the
claims asserted in the Harvey matter are without merit, and intends to
vigorously defend against them.
Results of Operations
For the six months ended June 30, 2021, we had net income of $761,330 of which
$5,945,000 is non-cash gain related to the change in fair value of the warrant
liability. Our business activities during the quarter mainly consisted of
identifying and evaluating prospective acquisition candidates for a Business
Combination. We believe that we have sufficient funds available to complete our
efforts to effect a Business Combination with an operating business by January
22, 2023. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our Business
Combination.
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As indicated in the accompanying unaudited financial statements, at June 30,
2021, we had $53,080 in cash and deferred offering costs of $15,750,000.
Further, we expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete our Business
Combination will be successful.
Liquidity and Capital Resources
On July 23, 2020, the Sponsor purchased 11,500,000 Founder Shares for $25,000,
or approximately $0.002 per share. On January 12, 2021, the Sponsor transferred
25,000 Founder Shares to each of the Company's three independent director
nominees at their original purchase price. On March 7, 2021, the Sponsor
forfeited 250,000 Founder Shares following the expiration of the unexercised
portion of underwriters' over-allotment option, so that the Founder Shares held
by the Initial Stockholders would represent 20.0% of the outstanding shares of
common stock following completion of the Public Offering.
On January 22, 2021, we consummated our Public Offering of 45,000,000 Units at a
price of $10.00 per Unit, including 5,000,000 Units as a result of the
underwriters' partial exercise of its over-allotment option, generating gross
proceeds of $450,000,000. On the IPO Closing Date, we completed the private sale
of an aggregate of 5,500,000 Private Placement Warrants, each exercisable to
purchase one share of Common Stock at $11.50 per share, to our Sponsor, at a
price of $2.00 per Private Placement Warrant, generating gross proceeds, before
expenses, of $11,000,000. After deducting the underwriting discounts and
commissions (excluding the Deferred Discount, which amount will be payable upon
consummation of the Business Combination, if consummated), the total net
proceeds from our Public Offering and the sale of the Private Placement Warrants
were $452,000,000, of which $450,000,000 (or $10.00 per share sold in the Public
Offering) was placed in the Trust Account. The amount of proceeds not deposited
in the Trust Account was $2,000,000 at the closing of our Public Offering.
Interest earned on the funds held in the Trust Account may be released to us to
fund our Regulatory Withdrawals, subject to an annual limit of $900,000, for a
maximum of 24 months and/or additional amounts necessary to pay our franchise
and income taxes.
Prior to the completion of the Public Offering, the Sponsor loaned the Company
an aggregate of $300,000 by the issuance of an unsecured promissory note (the
"Note") issued by the Company in favor of the Sponsor to cover organization
expenses and expenses related to the Public Offering. The Note was non-interest
bearing and payable on the earlier of July 31, 2021 or the completion of the
Public Offering. The Note was repaid upon completion of the Public Offering.
On February 17, 2021, the Sponsor made available to the Company a loan of up to
$1,500,000 pursuant to a promissory note issued by the Company to the Sponsor.
The proceeds from the note will be used for on-going operational expenses and
certain other expenses in connection with the Proposed Business Combination. The
note is unsecured, non-interest bearing and matures on the earlier of: (i)
February 28, 2022 or (ii) the date on which the Company consummates the Proposed
Business Combination. As of June 30, 2021, the amount advanced by Sponsor to the
Company was $1,000,000.
As of June 30, 2021 and December 31, 2020, we had cash held outside of the Trust
Account of approximately $53,080 and $160,314, respectively, which is available
to fund our working capital requirements. Additionally, interest earned on the
funds held in the Trust Account may be released to us to fund our Regulatory
Withdrawals, subject to an annual limit of $900,000, for a maximum of 24 months
and/or additional amounts necessary to pay our franchise and income taxes.
At June 30, 2021 and December 31, 2020, the Company had current liabilities of
$24,807,367 and $461,173 and working capital of ($23,211,715) and ($14,918),
respectively, the balances of which are primarily related to warrants we have
recorded as liabilities. Other amounts are related to accrued expenses owed to
professionals, consultants, advisors and others who are working on seeking a
Business Combination. Such work is continuing after June 30, 2021 and amounts
are continuing to accrue. Additionally, the warrant liability will not impact
the Company's liquidity until a Business Combination has been consummated, as
they do not require cash settlement until such event has occurred.
We intend to use substantially all of the funds held in the Trust Account,
including interest (which interest shall be net of Regulatory Withdrawals and
taxes payable) to consummate our Business Combination. Moreover, we may need to
obtain additional financing either to complete a Business Combination or because
we become obligated
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to redeem a significant number of shares of our Common Stock upon completion of
a Business Combination. Subject to compliance with applicable securities laws,
we would only complete such financing simultaneously with the completion of our
Business Combination. If we are unable to complete our Business Combination
because we do not have sufficient funds available to us, we will be forced to
cease operations and liquidate the Trust Account. In addition, following our
Business Combination, if cash on hand is insufficient, we may need to obtain
additional financing in order to meet our obligations. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to
consummate our Business Combination, the remaining proceeds held in our Trust
Account, if any, will be used as working capital to finance the operations of
the target business or businesses, make other acquisitions and pursue our growth
strategy.
Contractual Obligations
As of June 30, 2021 and December 31, 2020, we did not have any long-term debt
obligations, capital lease obligations, operating lease obligations, purchase
obligations or long-term liabilities. In connection with the Public Offering, we
entered into an administrative services agreement to pay monthly recurring
expenses of $20,000 to The Gores Group for office space, utilities and
secretarial support. The administrative services agreement terminates upon the
earlier of the completion of a Business Combination or the liquidation of the
Company.
The underwriters are entitled to underwriting discounts and commissions of 5.5%
($24,750,000), of which 2.0% ($9,000,000) was paid at the closing of the Public
Offering, and 3.5% ($15,750,000) was deferred. The Deferred Discount will become
payable to the underwriters from the amounts held in the Trust Account solely in
the event that the Company completes a Business Combination, subject to the
terms of the underwriting agreement. The underwriters are not entitled to any
interest accrued on the Deferred Discount.
Recently Issued Accounting Pronouncements Not Yet Adopted
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements based on current operations of the
Company. The impact of any recently issued accounting standards will be
re-evaluated on a regular basis or if a Business Combination is completed where
the impact could be material.
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