References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Merida Merger Corp. I. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to Merida Capital Partners III LP. 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 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.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of December 31, 2019, March 31, 2020, June 30, 2020,
September 30, 2020, December 31, 2021, March 31, 2021 and June 30, 2021.
Management identified errors made in its historical financial statements where,
at the closing of our Initial Public Offering, we improperly valued ours common
stock subject to possible redemption. We previously determined the common stock
subject to possible redemption to be equal to the redemption value of $10.00 per
share of common stock while also taking into consideration a redemption cannot
result in net tangible assets being less than $5,000,001. Management determined
that the common stock issued during the Initial Public Offering can be redeemed
or become redeemable subject to the occurrence of future events considered
outside of the Company's control. Therefore, management concluded that the
redemption value should include all common stock subject to possible redemption,
resulting in the common stock subject to possible redemption being equal to
their redemption value. As a result, management has noted a reclassification
error related to temporary equity and permanent equity. This resulted in a
restatement to the initial carrying value of the common stock subject to
possible redemption with the offset recorded to additional paid-in capital (to
the extent available), accumulated deficit and common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
June 20, 2019 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. We intend to effectuate our Business
Combination using cash from the proceeds of the IPO and the sale of the Private
Warrants, our capital stock, debt or a combination of cash, stock and debt.
All activity through September 30, 2021 relates to our formation, IPO, and
search for a prospective initial Business Combination target.
We are incurring significant costs in the pursuit of our acquisition plans. We
cannot assure you that our plans to complete a Business Combination will be
successful.
Recent Developments
On August 9, 2021, we entered into the Merger Agreement with First Merger Sub,
Second Merger Sub, and Leafly. Pursuant to the Merger Agreement, among other
things the parties will undertake the following Transactions: (i) First Merger
Sub will merge with and into Leafly, with Leafly surviving such merger ("First
Merger"), and (ii) immediately following the First Merger and as part of the
same overall transaction as the First Merger, Leafly will merge with and into
Second Merger Sub, with Second Merger Sub surviving such merger (the "Second
Merger") and being a wholly-owned subsidiary of Merida.
Pursuant to the Merger Agreement, the aggregate value of the consideration
(prior to giving effect to the earnout consideration described below) to be paid
to Leafly's securityholders is $385 million, as follows: (a) each share of Class
1 common stock of Leafly, par value $0.0001 per share, each share of Class 2
common stock of Leafly, par value $0.0001 per share, and each share of Class 3
common stock of Leafly, par value $0.0001 per share (collectively, the "Leafly
Common Stock"), issued and outstanding immediately prior to the First Merger
(including shares of Leafly Common Stock issued upon the conversion of the
Notes) will be converted into the right to receive a number of shares Merida
Common Stock equal to the Exchange Ratio, and (b) each share of Leafly Preferred
Stock, issued and outstanding immediately prior to the First Merger will be
converted into the right to receive a number of shares of Merida Common Stock
equal to the Exchange Ratio multiplied by the number of shares of Leafly Common
Stock issuable upon conversion of such shares of Leafly Preferred Stock.
The Transaction will be consummated subject to the deliverables and provisions
as further described in the Merger Agreement.
20
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2021 were organizational activities,
those necessary to prepare for the IPO, described below, and transaction
expenses related to the Business Combination with Leafly. 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 after the IPO. We incur expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence and transaction expenses.
For the three months ended September 30, 2021, we had a net loss of $2,887,517,
which consisted of operating costs of $440,194 and a change in fair value of
warrant liability of $2,449,193, partially offset by interest earned on
marketable securities held in the Trust Account of $1,870.
For the nine months ended September 30, 2021, we had a net loss of $4,204,323,
which consisted of operating costs of $953,102 and a change in fair value of
warrant liability of $3,278,758, partially offset by interest earned on
marketable securities held in the Trust Account of $27,537.
For the three months ended September 30, 2020, we had a net loss of $283,824,
which consisted of operating costs of $153,230 and a change in fair value of
warrant liability of $197,516, partially offset by interest earned on marketable
securities held in the Trust Account of $42,577, unrealized gain on marketable
securities held in our Trust Account of $1,474, and a benefit from income taxes
of $22,871.
For the nine months ended September 30, 2020, we had a net loss of $6,460, which
consisted of operating costs of $512,896, unrealized loss on marketable
securities held in Trust Account of $2,594, a change in fair value of warrant
liability of $197,516, and a provision for income taxes of $51,031, partially
offset by interest earned on marketable securities held in the Trust Account of
$757,577.
Liquidity and Capital Resources
On November 7, 2019, we consummated the IPO of 12,000,000 Units at a price of
$10.00 per Unit, generating gross proceeds of $120,000,000. Simultaneously with
the closing of the IPO, we consummated the sale of 3,750,000 Private Warrants to
Merida Holdings, LLC and EarlyBirdCapital at a price of $1.00 per warrant,
generating gross proceeds of $3,750,000.
On November 13, 2019, as a result of the underwriters' election to partially
exercise their over-allotment option, the Company consummated the sale of an
additional 1,001,552 Units, at $10.00 per Unit, and the sale of an additional
200,311 Private Warrants, at a price of $1.00 per Private Warrant, generating
total gross proceeds of $10,215,831.
Following the IPO, the partial exercise of the over-allotment option and the
sale of the Private Warrants, a total of $130,015,520 was placed in the Trust
Account. We incurred $3,412,939 in transaction costs, including $2,600,311 of
underwriting fees and $812,628 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities
was $975,407. Net loss of $4,204,323 was affected by the change in fair value of
the warrant liability of $3,278,758, interest earned on marketable securities
held in the Trust Account of $27,537 and change in deferred tax of $432. Changes
in operating assets and liabilities used $21,873 of cash from operating
activities.
For the nine months ended September 30, 2020, cash used in operating activities
was $539,569. Net loss of $6,460 was affected by the change in fair value of the
warrant liability of $197,516, unrealized loss on marketable securities of
$2,594 and interest earned on marketable securities held in the Trust Account of
$757,577. Changes in operating assets and liabilities provided $24,950 of cash
from operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account
of $130,203,176 (including approximately $188,000 of interest income) consisting
of U.S. treasury bills with a maturity of 180 days or less. Interest income on
the balance in the Trust Account may be used by us to pay taxes and up to
$250,000 per 12-month period can be withdrawn for working capital needs. During
the three and nine months ended September 30, 2021, we withdrew $39,409 and
$505,408 of the interest earned on the Trust Account to pay for our franchise
and income taxes and for working capital needs. During the year ended December
31, 2020, we withdrew $419,894 of the interest earned on the Trust Account to
pay for our franchise and income taxes and for working capital needs. We intend
to use substantially all of the funds held in the Trust Account, including any
amounts representing interest earned on the Trust Account (less taxes payable),
to complete our Business Combination. To the extent that our capital stock 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.
21
As of September 30, 2021, we had $101,541 of cash held outside of the Trust
Account. We intend to use 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, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. 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
identical to the Private Warrants, at a price of $1.00 per warrant at the option
of the lender. As of September 30, 2021, there is $400,000 outstanding under the
Working Capital Loans.
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.
Going Concern
As of September 30, 2021, the Company had $101,541 in its operating bank
accounts, $130,203,176 in securities held in the Trust Account to be used for a
Business Combination or to repurchase or redeem its ordinary shares in
connection therewith and a working capital deficit of $323,121.
The Company intends to complete a Business Combination by December 31, 2021.
However, in the absence of a completed Business Combination, the Company may
require additional capital. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit
of a Business Combination. The Company cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until December 31, 2021 to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by this time. If a Business Combination is
not consummated by this date, there will be a mandatory liquidation and
subsequent dissolution of the Company. Management has determined that the
liquidity condition and mandatory liquidation, should a Business Combination not
occur, and potential subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after December 31, 2021
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $5,000 for office space, utilities and
secretarial and administrative support to the Company. We began incurring these
fees on November 4, 2019 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and the Company's
liquidation.
We have engaged EarlyBirdCapital as an advisor in connection with a Business
Combination to assist us in holding meetings with our stockholders to discuss
the potential Business Combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with a Business Combination, assist us in obtaining
stockholder approval for the Business Combination and assist us with our press
releases and public filings in connection with the Business Combination. We will
pay EarlyBirdCapital a cash fee for such services upon the consummation of a
Business Combination in an amount equal to 3.5% of the gross proceeds of the
IPO, or $4,550,543 (exclusive of any applicable finders' fees which might become
payable); provided that up to 30% of the fee may be allocated at our sole
discretion to other FINRA members that assist us in identifying and consummating
a Business Combination.
22
Critical Accounting Policies
The preparation of condensed consolidated 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 Private Warrants in accordance with the guidance contained in
ASC 815-40 under which the Private 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 are
valued using a binomial lattice model.
Common Stock Subject to Possible Redemption
We account for 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 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
the Company's 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, all common stock
subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders' equity section of our condensed
consolidated balance sheets.
Net Income (Loss) Per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding during the period. Accretion
associated with the redeemable shares of common stock is excluded from net loss
per common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06 - "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.
We are currently assessing the impact, if any, that ASU 2020-06 would have on
our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed consolidated financial statements.
23© Edgar Online, source Glimpses
LEAFLY HOLDINGS 