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"). 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 merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses ("Business Combination"). We intend to
effectuate our Business Combination using cash from the proceeds of our Initial
Public Offering ("Initial Public Offering") and the sale of the Private
Placement Warrants (as defined below), 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 shares (the
"Founder Shares") of our Class B common stock, par value $0.0001 per share (the
"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
100,000 of its Founder Shares to the Company's independent directors (together
with our Sponsor, the "Initial Stockholders").
On January 20, 2021 ("IPO Closing Date"), we consummated our Public Offering of
23,000,000 units (the "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 of the Company, par value $0.0001
per share (the "Class A common stock" and, together with the Class B common
stock, the "common stock"), and one-third of one redeemable warrant of the
Company ("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 (the "Private Placement Warrants" and together with the
Public Warrants "Warrants") 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
20
Table of Contents
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 of 1933, as amended (the "Securities Act").
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 a
U.S.-based trust account (the "Trust Account") with Continental Stock Transfer
and Trust Company acting as trustee (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 Capital Market under the symbols "GNAC" and "GNACW," respectively.
Those Units not separated will continue to trade on the Nasdaq Capital Market
LLC under the symbol "GNACU."
Although we may pursue a target business in any stage of its corporate evolution
or in any industry, sector or geographic region, we initially intend to focus
our search on target businesses in the digital media and adjacent industries,
including the social media, e-commerce, events, and digital publishing and
marketing sectors.
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 March 31, 2021 were
organizational activities and those necessary to prepare for our Initial Public
Offering, described below. We do not expect to generate any operating revenues
until after the completion of our initial Business Combination. We expect to
generate non-operating income in the form of interest income on marketable
securities held after our initial public offering. 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 March 31, 2021, we had net income of approximately
$7.0 million, which consists of income of approximately $8.1 million derived
from the changes in fair value of the warrant liability offset by operation
costs of approximately $1.1 million.
Liquidity and Capital Resources
On January 20, 2021 the Company consummated the Initial Public Offering of
23,000,000 Units, which includes the full exercise by the 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
21
Table of Contents
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 Initial 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, $9,890,000 of deferred underwriting
fees and $506,274 of other offering costs.
For the three months ended March 31, 2021, net cash used in operating activities
was $1,101,903. Net income of $6,965,615 was affected by noncash items such as
the change in fair value of the warrant liability of approximately $8.1 million,
interest earned on marketable securities held in trust account of $4,096 and
transaction costs associated with the Initial Public Offering of approximately
$1.1 million. Changes in operating assets and liabilities used $525,588 of cash
from operating activities.
At March 31, 2021, we had cash held in the Trust Account of $230,004,096. 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 March 31, 2021, we had cash of $25,541 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 $1.00 per warrant. The
warrants would be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate 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. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such 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.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2021. 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
22
Table of Contents
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 $0.08 per unit, or $1,840,000 in the
aggregate, payable to one of the underwriters on the earlier of (i) the
completion of a Business Combination and (ii) December 31, 2021. Such amounts
will be paid from funds released to the Company upon completion of a Business
Combination, or if due prior to the completion of a Business Combination, the
Company anticipates such amounts will be paid with a loan from the Sponsor.
Although the Sponsor currently has expressed the intention to loan funds to the
Company in such circumstance, the Sponsor has no obligation to do so. The terms
of any such loan have not been determined and no written agreement exists with
respect to such loan.
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 condensed 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. We have identified the following critical accounting policies.
Warrant Liability
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 statement of operations. The Private 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 (Loss) Per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable franchise and income taxes, by the weighted average number of Class A
redeemable common stock outstanding for the period. Net loss per common share,
basic and diluted for Class B non-redeemable common stock is calculated by
dividing the net income, less income attributable to Class A redeemable common
stock, by the weighted average number of Class B non-redeemable common stock
outstanding for the period presented.
23
Table of Contents
Recent Accounting Standards
Other than below, management does not believe that any recently issued, but not
yet effective, accounting standards, including the standard referenced in the
next paragraph, if currently adopted, would have a material effect on our
condensed financial statements.
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, 2022 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.
© Edgar Online, source Glimpses
GROUP NINE ACQUISITION CORP. 
