References in this report (the "Quarterly Report") to "we," "our," "us" or the
"Company" refer to Group Nine Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to Group Nine SPAC LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Exchange Act that are not historical facts, and involve
risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of
historical fact included in this Form 10-Q including, without limitation,
statements in 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. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission (the "SEC") and our other filings with the SEC. The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
November 9, 2020, for the purpose of effecting a Business Combination. 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.
On November 9, 2020, our Sponsor purchased an aggregate of 7,187,500 Founder
Shares of our Class B common stock for an aggregate purchase price of $25,000 or
approximately $0.003 per share. On November 19, 2020, we effectuated a 0.8-for-1
reverse split of the Founder Shares, resulting in an aggregate outstanding
amount of 5,750,000 Founder Shares. Our Sponsor transferred an aggregate of
125,000 of its Founder Shares to the Initial Stockholders and a Consultant.
On January 20, 2021 (the "IPO Closing Date"), we consummated our Public Offering
of 23,000,000 Units of the Company, including 3,000,000 Units issued pursuant to
the exercise of the underwriter's over-allotment option. Each Unit consists of
one share of Class A common stock and one-third of one public Warrant, each
whole Warrant entitling the holder thereof to purchase one share of Class A
common stock at an exercise price of $11.50 per share of Class A common stock.
The Units were sold at a price of $10.00 per share, generating gross proceeds to
us of $230,000,000. Simultaneously with the IPO Closing Date, we completed the
private sale of an aggregate of 2,840,000 warrants to our Sponsor at a price of
$1.50 per Private Placement Warrant, each exercisable to purchase one share of
Class A common stock at $11.50 per share, generating gross proceeds to us of
$4,260,000. The Private Placement Warrants have terms and provisions that are
identical to those of the public Warrants sold as part of the Units in the
Public Offering, except that the Private Placement Warrants may be physical
(cash) or net share (cashless) settled and are not redeemable so long as they
are held by the Sponsor or its permitted transferees. The sale of the Private
Placement Warrants was made pursuant to the exemption from registration
contained in Section 4(a)(2) of the Securities Act.
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On the IPO Closing Date, $230,000,000 of the gross proceeds from the Public
Offering and the sale of the Private Placement Warrants were deposited in the
Trust Account with the Trustee. Of the $4,260,000 held outside of the Trust
Account, $2,760,000 was used to pay underwriting discounts and commissions,
$458,681 was used to repay notes payable to our Sponsor and advances from our
Sponsor and the balance was available to pay accrued offering and formation
costs, business, legal and accounting due diligence on prospective acquisitions
and continuing general and administrative expenses. Funds held in the Trust
Account have been invested only in U.S. government treasury bills with a
maturity of one hundred and eighty-five (185) days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act of 1940, as amended, that invest only in direct U.S. government obligations.
Funds will remain in the Trust Account until the earliest of (i) the completion
of the Business Combination; (ii) the redemption of any shares of Class A common
stock properly tendered in connection with a stockholder vote to amend our
amended and restated certificate of incorporation to modify the substance or
timing of our obligation to redeem 100% of such shares of Class A common stock
if we do not complete a Business Combination within 24 months from the IPO
Closing Date and (iii) the redemption of 100% of the shares of Class A common
stock if we are unable to complete a Business Combination within 24 months from
the IPO Closing Date (subject to applicable law).
On March 8, 2021, we announced that the holders of our Units may elect to
separately trade the Class A common stock and Warrants included in the Units on
the NASDAQ under the symbols "GNAC" and "GNACW," respectively. Those Units not
separated will continue to trade on the NASDAQ under the symbol "GNACU."
We may pursue a target business in any stage of its corporate evolution or in
any industry, sector or geographic region.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through September 30, 2022 were
organizational activities and those necessary to prepare for our Public
Offering, described below. We do not expect to generate any operating revenues
until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities
held in the Trust Account. We expect that we will incur increased expenses as a
result of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses in connection with
searching for, and completing, a business combination.
For the three months ended September 30, 2022, we had net income of
approximately $2.3 million, which consists of approximately $1 million derived
from changes in fair value of warrant liabilities, interest earned on marketable
securities held in Trust Account of approximately $1 million and approximately
$0.8 million derived from the change in fair value of the convertible note,
offset by operating costs of approximately $0.4 million and approximately $0.2
million derived from provision for income taxes.
For the nine months ended September 30, 2022, we had net income of approximately
$5.2 million, which consists of approximately $4.9 million derived from the
changes in fair value of the warrant liabilities, interest earned on marketable
securities held in Trust Account of approximately $1.3 million and approximately
$0.6 million derived from the change in fair value of the convertible note,
offset by operating costs of approximately $1.4 million and approximately $0.2
million derived from provision for income taxes.
For the three months ended September 30, 2021, we had net income of
approximately $5 million, which consists of approximately $5.2 million derived
from changes in fair value of warrant liabilities, $0.14 million derived from
the change in fair value of the convertible note, and interest earned on
marketable securities held in Trust Account approximately $6 thousand, offset by
operating costs of approximately $0.34 million.
For the nine months ended September 30, 2021, we had net income of approximately
$5.2 million, which consists of approximately $7.2 million derived from changes
in fair value of warrant liabilities, $0.13 million derived from the change in
fair value of the convertible note and interest earned on marketable securities
held in Trust Account approximately $16 thousand, offset by operating costs of
approximately $1.5 million.
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Liquidity, Capital Resources and Going Concern
On January 20, 2021, the Company consummated the Public Offering of 23,000,000
Units, which includes the full exercise by underwriter of its over-allotment
option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross
proceeds of $230,000,000. Simultaneously with the closing of the Public
Offering, the Company consummated the sale of 2,840,000 Private Placement
Warrants at a price of $1.50 per Private Placement Warrant in a private
placement to the Sponsor, generating gross proceeds of $4,260,000.
Following the Public Offering, the full exercise of the over-allotment option,
and the sale of the Private Placement Warrants, a total of $230,000,000 was
placed in the Trust Account. We incurred $13,156,274 in transaction costs,
including $2,760,000 of underwriting fees, net of reimbursement, $9,890,000 of
deferred underwriting fees and $506,274 of other offering costs.
For the nine months ended September 30, 2022, net cash used by operating
activities was approximately $0.66 million. Net income of approximately $5.2
million was affected by noncash items such as the change in fair value of the
warrant liabilities of approximately $4.9 million, change in fair value of
convertible promissory notes of approximately $0.6 million, and interest earned
on marketable securities held in trust account of approximately $1.3 million.
Changes in operating assets and liabilities provided approximately $0.98 million
of cash from operating activities.
For the nine months ended September 30, 2021, net cash provided by operating
activities was approximately $2.2 million. Net income of $5.2 million was
affected by noncash items such as the change in fair value of the warrant
liability of $7.2 million, change in fair value of convertible promissory notes
of $0.13 million, interest earned on marketable securities held in trust account
of $16 thousand and transaction costs associated with the Initial Public
Offering of $0.6 million. Changes in operating assets and liabilities used $0.7
million of cash from operating activities.
At September 30, 2022, we had cash held in the Trust Account of $231,349,593. We
are using substantially all of the funds held in the trust account, including
any amounts representing interest earned on the trust account (less deferred
underwriting commissions and income taxes payable), to complete our business
combination. To the extent that our share capital or debt is used, in whole or
in part, as consideration to complete our business combination, the remaining
proceeds held in the trust account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and
pursue our growth strategies.
At September 30, 2022, we had cash of $69,053 held outside of the Trust Account.
We are using the funds held outside the trust account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. Up to $1,500,000 of such loans may be convertible into warrants of
the post-Business Combination entity, at a price of $1.50 per warrant. The
warrants would be identical to the Private Placement Warrants.
As of September 30, 2022, the Company had approximately $69,000 in cash and
working capital deficit of approximately $3,628,450 (not taking into account
franchise and income tax obligations of $583,085 that may be paid using
investment income earned in the Trust Account).
In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial
Statements-Going Concern," management has evaluated the Company's liquidity and
financial condition and determined that it may not be sufficient to meet the
Company's obligation over the period of twelve months from the issuance date of
the financial statements. The Company's sponsor has agreed to provide support to
enable the Company to continue its operations and meet its potential obligations
over a period of one year from the issuance date of these financial statements.
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Management believes current working capital, and the support from its Sponsor,
provides sufficient capital to sustain operations for a reasonable period of
time, which is considered to be one year from the issuance date of those
financial statements and therefore substantial doubt has been alleviated.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities other than described below.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$9,890,000. The deferred fee 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.
Additionally, the deferred fee includes an additional $0.08 per unit, or
$1,840,000 in the aggregate that was due in December 2021. In December 2021, the
Company paid $1,825,600 to the underwriters. The fees were paid by the Sponsor
and are included as a liability, due to the Sponsor on the balance sheets.
Pursuant to an agreement between the Company and its attorneys, certain fees
have been deferred and will become payable only if the Company consummates a
Business Combination. If a Business Combination does not occur, the Company will
not be required to pay these contingent fees. As of the closing of the Public
Offering, the amount of these contingent fees was approximately $342,690. There
can be no assurances that the Company will complete a Business Combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption, if any,
are classified as a liability instrument and are measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' deficit. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' deficit section of our balance sheets.
Warrant Liabilities
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We account for the Warrants in accordance with the guidance contained in ASC
815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Accordingly, we classify the
Warrants as liabilities at their fair value and adjust the Warrants to fair
value at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statements of operations. The Private Placement Warrants and
the public Warrants for periods where no observable traded price was available
are valued using a Monte Carlo simulation. For periods subsequent to the
detachment of the public Warrants from the Units, the public Warrant quoted
market price was used as the fair value as of each relevant date.
Net Income Per Common Share
The Company has two classes of shares, which are referred to as Class A common
stock and Class B common stock (the "Common Stock"). Earnings and losses are
shared pro rata between the two classes of shares. Private and public warrants
to purchase 10,506,667 shares of Common Stock at $11.50 per share were issued on
January 20, 2021. No warrants were exercised during the three months ended
September 30, 2022. The 10,506,667 potential common shares for outstanding
warrants to purchase the Company's stock were excluded from diluted earnings per
share for the three and nine months ended September 30, 2022 and 2021, as the
exercise price of the warrants was less than the average market price for the
period. For the nine months ended September 30, 2021, the deemed dividend
associated with the redeemable shares of Class A common stock is included in
income per common share in the Public Offering quarter and year to date
calculation in which the Public Offering occurred. As a result, diluted net
income per common share is the same as basic net income per common share for the
period.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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