References in this report (the "Quarterly Report") to "we," "us," "our" or the
"Company" refer to GigCapital3, Inc. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Founder" refer to GigAcquisitions3, LLC. The following discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with the condensed 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 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 Quarterly
Report 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,"
"may," "might," "plan," "possible," "potential," "should, "would" 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 final prospectus for our initial public offering 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 newly organized Private-to-Public Equity (PPE) company, also known as a
blank check company or special purpose acquisition vehicle, incorporated in the
State of Delaware and formed for the purpose of acquiring, engaging in a share
exchange, share reconstruction and amalgamation with, purchasing all or
substantially all of the assets of, or engaging in any other similar business
combination with one or more businesses or entities. We intend to effectuate our
initial Business Combination using cash from the proceeds from the sale of units
(the "Units") in our initial public offering (the "Offering"), the sale of the
units (the "Private Placement Units") to our Founder and Underwriters, the sale
of common stock to our Founder, our common equity or any preferred equity that
we may create in accordance with the terms of our charter documents, debt, or a
combination of cash, common or preferred equity and debt. The Units sold in the
Offering each consisted of one share of common stock, and three-fourths (3/4) of
one redeemable warrant to purchase our common stock (no fractional shares will
be issued upon exercise of the warrants). The Private Placement Units were
substantially similar to the Units sold in the Offering, but for certain
differences in the warrants included in each of them. For clarity, the warrants
included in the Units are referred to herein as the "public warrants", and the
warrants included in the Private Placement Units are referred to herein as the
"private warrants".
The issuance of additional shares of common stock or the creation of one or more
classes of preferred stock during our initial Business Combination:
• may significantly dilute the equity interest of investors in this Offering
who would not have pre-emption rights in respect of any such issue;
• may subordinate the rights of holders of common stock if the rights,
preferences, designations and limitations attaching to the preferred
shares are senior to those afforded our shares of common stock;
• could cause a change in control if a substantial number of shares of
common stock are issued, which may affect, among other things, our ability
to use our net operating loss carry forwards, if any, and could result in
the resignation or removal of our present officers and directors;
• may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to
obtain control of us; and
• may adversely affect prevailing market prices for our shares of common stock.
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Similarly, if we issue debt securities or otherwise incur significant
indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after our
initial Business Combination are insufficient to repay our debt
obligations;
• acceleration of our obligations to repay the indebtedness even if we make
all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if
the debt is payable on demand;
• our inability to obtain necessary additional financing if any document
governing such debt contains covenants restricting our ability to obtain
such financing while the debt security is outstanding;
• our inability to pay dividends on our shares of common stock;
• using a substantial portion of our cash flow to pay principal and interest
on our debt, which will reduce the funds available for dividends on our
common stock if declared, expenses, capital expenditures, acquisitions and
other general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
and
• limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, execution
of our strategy and other purposes and other disadvantages compared to our
competitors who have less debt.
We expect to incur significant costs in the pursuit of our acquisition plans.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
For the period from February 3, 2020 (date of inception) through March 31, 2021,
our only activities have been organizational activities, those necessary to
prepare for the Offering and to identify a target business for and closing of
the Business Combination. We do not expect to generate any operating revenues
until after completion of our initial Business Combination. We expect to
generate non-operating income in the form of interest income on cash and
marketable securities held in the Trust Account at Oppenheimer & Co., Inc. in
New York, New York with Continental Stock Transfer & Trust Company acting as
trustee, which was funded after the Offering to hold an amount of cash and
marketable securities equal to that raised in the Offering. There has been no
significant change in our financial or trading position and no material adverse
change has occurred since the date of our audited balance sheet of December 31,
2020 as filed with the SEC on March 31, 2021. We expect to 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.
For the three months ended March 31, 2021, we had a net loss of $104,909, which
consisted of operating expenses of $1,020,645, and a provision for income taxes
of $707 partially offset by other income from the change in fair value of
warrants of $911,347 and interest income on marketable securities held in the
Trust Account of $5,096.
For the period from February 3, 2020 (date of inception) through March 31, 2020,
we had a net loss of $$25,788, which consisted of operating expenses of $25,788.
Liquidity and Capital Resources
On May 18, 2020, we consummated the closing of the Offering with the delivery of
20,000,000 Units at a price of $10.00 per unit, generating gross proceeds of
$200,000,000. Simultaneously with the closing of the Offering, we consummated
the closing of the Private Placement with the sale of 650,000 Private Placement
Units at a price of $10.00 per unit to our Founder and sale of 243,479 Private
Placement Units at a price of $10.00 per unit to the Underwriters, generating
aggregated gross proceeds of $8,934,790.
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Following the closing of the Offering and the Private Placement, a total of
$202,000,000 was placed in the Trust Account. We incurred $12,785,179 in
offering related costs, including $4,000,000 of underwriting fees, $8,000,000 of
deferred underwriting fees, and $785,179 of other costs. Subsequently to the
closing of the Offering, offering costs of $785,179 accrued for at the closing
of the Offering were reduced to 732,907. Therefore, total transaction costs
amounted to $12,732,907.
As of March 31, 2021, we held cash and marketable securities in the amount of
$202,034,396 (including $47,119 of interest earned) in the Trust Account. In
addition, there was interest receivable to the Trust Account of $1,830. The
marketable securities consisted of money market funds meeting certain conditions
under Rule 2a-7 under the Investment Company Act of 1940 which invest only in
direct U.S. government obligations. Interest income earned from the funds held
in the Trust Account may be used by us to pay taxes. For the period from three
months ended March 31, 2021, we did not withdraw any funds from the interest
earned on the Trust Account.
For the quarter ended March 31, 2021, cash used in operating activities was
$744,033, consisting of a net loss of $104,909, a decrease in the fair value of
the warrant liability of $911,347, interest earned on marketable securities held
in the Trust Account of $5,096 including interest receivable of $1,830 and an
increase in net operating assets of $101,047, including an increase in prepaid
expenses and other current assets of $116,512, a decrease in other non-current
assets of $29,375, and an increase in receivable from related party of $13,910,
that were partially offset by an increase in net operating liabilities of
$378,366, including an increase in accrued liabilities of $389,324, a decrease
in accounts payable of $21,023, an increase in other current liabilities of $707
for our year-to-date income taxes, and an increase in payable to related parties
of $9,358.
On December 10, 2020, we entered into that certain PIPE Subscription Agreement
with BP Technology Ventures, Inc., pursuant to which, among other things, we
agreed to issue and sell to the BP Technology Ventures, Inc., in a private
placement to close the PIPE Investment immediately prior to the closing of the
business combination for an aggregate purchase price of $25,000,000. The
obligations of the parties to consummate the PIPE Investment are conditioned
upon, among other things, all conditions precedent to the closing of the
transactions contemplated by the Convertible Note Subscription Agreements having
been satisfied or waived, and the closing of the transaction contemplated by
such PIPE Subscription Agreement occurring concurrently with the closing of the
transactions contemplated by the Convertible Note Subscription Agreements. The
PIPE Investment will be consummated concurrently with the closing of the
business combination with Lightning.
On December 10, 2020, we also entered into certain Convertible Note Subscription
Agreements with certain institutional investors, pursuant to which, among other
things, we agreed to issue and sell to the Convertible Note Investors, in
private placements to close immediately prior to the closing of the business
combination with Lightning, (a) the Convertible Notes for an aggregate purchase
price of $100,000,000, which shall bear interest at a rate of 7.5% per annum,
payable semi-annually, and be convertible into shares of common stock at a
conversion price of $11.50 in accordance with the terms thereof, and shall
mature three (3) years after their issuance ,and (b) the Convertible Note
Warrants to purchase up to 8,695,652 shares of common stock for a per share
exercise price of $11.50. The Convertible Notes are convertible into 8,695,652
shares of Common Stock at the conversion price of $11.50. The obligations to
consummate the Convertible Note investment are conditioned upon, among other
things, customary closing conditions and the consummation of the transactions
contemplated by the Business Combination Agreement. The Convertible Note
investment will be consummated substantially concurrently with the closing of
the business combination with Lightning.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (which
interest shall be net of taxes payable by us), to acquire a target business or
businesses to complete our initial Business Combination and to pay our expenses
relating thereto. We may withdraw interest to pay taxes. We estimate our annual
franchise tax obligations to be approximately $200,000. Our annual income tax
obligations will depend on the amount of interest and other income earned on the
amounts held in the Trust Account. To the extent that our capital stock is used
in whole or in part as consideration to affect our initial Business Combination,
the remaining proceeds held in the Trust Account as well as any other net
proceeds not expended will be used as working capital to finance the operations
of the target business or businesses. Such working capital funds could be used
in a variety of ways including continuing or expanding the target business'
operations, for strategic acquisitions and for marketing, research and
development of existing or new products. Such funds could also be used to repay
any operating expenses or finders' fees which we had incurred prior to the
completion of our initial Business Combination if the funds available to us
outside of the Trust Account were insufficient to cover such expenses.
As of March 31, 2021, we had cash of $426,268 held outside the Trust Account.
On May 6, 2021, we completed the Business Combination with Lightning Systems,
Inc. and changed our name to Lightning eMotors, Inc. In conjunction with the
Business Combination, and prior to the special meeting of stockholders to
approve the Business Combination, the holders of 5,816,664 shares of our common
stock sold in the Offering exercised their right to redeem those shares for cash
at a price of $10.1019 per share, for an aggregate of approximately $58.8
million, which redemption occurred concurrent with the consummation of the
Business Combination. We also completed the sale of 2,500,000 shares of Company
common stock for $25,000,000 under the PIPE Subscription Agreement and the
funding of $100,000,000 in convertible debt under the Convertible Note
Subscription Agreements.
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Off-Balance Sheet Arrangements
As of March 31, 2021, we have not entered into any off-balance sheet financing
arrangements. 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
As of March 31, 2021, we do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities, other than an
agreement to pay our Founder a monthly fee of $20,000 for office space,
administrative services and secretarial support. We began incurring these fees
on May 14, 2020 and will continue to incur these fees monthly until the earlier
of the completion of the Business Combination or the liquidation of the Company.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") 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:
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being
required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act
registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such election
to opt out is irrevocable. We have elected not to opt out of such extended
transition period which means that when an accounting standard is issued or
revised and it has different application dates for public or private companies,
we, as an emerging growth company, will adopt the new or revised accounting
standard at the time private companies adopt the new or revised standard.
Net Loss Per Common Share
Net loss per share of common stock is computed by dividing net loss by the
weighted-average number of shares of common stock outstanding for the period. We
apply the two-class method in calculating the net loss per common share. Shares
of common stock subject to possible redemption as of March 31, 2021 have been
excluded from the calculation of the basic net loss per share since such shares,
if redeemed, only participate in their pro rata share of the Trust Account
earnings. When calculating our diluted net loss per share, we have not
considered the effect of (i) the incremental number of shares of common stock to
settle warrants sold in the Offering and Private Placement, as calculated using
the treasury stock method; (ii) the shares issued to the Insiders representing
15,000 shares of common stock underlying restricted stock awards for the periods
they were outstanding; and (iii) the 750,000 shares of common stock issued to
the Founder that were forfeited due to the over-allotment option not being
exercised by the Underwriters. Since we were in net loss position during the
period after deducting net income attributable to common stock subject to
redemption, diluted net loss per common share is the same as basic net loss per
common share for the periods presented as the inclusion of all potential common
shares outstanding would have been anti-dilutive.
In accordance with the two-class method, our net loss is adjusted for net income
that is attributable to common stock subject to redemption, as these shares only
participate in the income of the Trust Account and not our losses. Accordingly,
net loss per common share, basic and diluted, is calculated as follows:
Period from
February 3,
2020
(Inception)
For the Three through
Months Ended March 31,
March 31, 2021 2020
Net loss $ (104,909 ) $ (25,788 )
Less: net income attributable to common stock subject
to redemption
(3,122 ) -
Net loss attributable to common stockholders $ (108,031 ) $ (25,788 )Weighted-average common shares outstanding, basic and
diluted
7,452,055 4,211,466
Net loss per share common share, basic and diluted $ (0.01 ) $ (0.01 )
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Common Stock subject to possible redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption (if any) is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common stock (including common stock that
features redemption rights that are 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' equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, as of March 31, 2021,
common stock subject to possible redemption is presented as temporary equity,
outside of the stockholders' equity section of our condensed balance sheet.
Warrant Liability
The Company accounts for warrants for shares of the Company's common stock that
are not indexed to its own stock as liabilities at fair value on the condensed
balance sheets. The warrants are subject to remeasurement at each balance sheet
date and any change in fair value is recognized as a component of other income
(expense), net on the condensed statements of operations and comprehensive loss.
The Company will continue to adjust the liability for changes in fair value
until the earlier of the exercise or expiration of the common stock warrants. At
that time, the portion of the warrant liability related to the common stock
warrants will be reclassified to additional paid-in capital.
Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material effect on our
condensed financial statements.
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LIGHTNING EMOTORS, INC. 