References to the "Company," "RMG Acquisition Corp. III," "RMG," "our," "us" or
"we" refer to RMG Acquisition Corp. III. The following discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with the unaudited interim condensed financial statements and the
notes thereto contained elsewhere in this report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act. We have based these forward-looking
statements on our current expectations and projections about future events.
These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about us that may cause our actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "could,"
"would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or
the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those
described in our other SEC filings.
Overview
We are a blank check company, also referred to as a special purpose acquisition
company ("SPAC") incorporated as a Cayman Islands exempted company on
December 23, 2020. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
Our sponsor is RMG Sponsor III, LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for our Initial Public Offering was
declared effective on February 4, 2021. On February 9, 2021, we consummated our
Initial Public Offering of 48,300,000 units (the "Units" and, with respect to
the Class A ordinary shares included in the Units being offered, the "Public
Shares"), including 6,300,000 additional Units to cover over- allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of
$483.0 million, and incurring offering costs of approximately $27.1 million, of
which approximately $16.9 million was for deferred underwriting commissions and
$250,000 was for deferred legal fees (Note 7).
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 8,216,330 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to the Sponsor, generating
proceeds of approximately $12.3 million (Note 5).
Upon the closing of the Initial Public Offering and the Private Placement,
$483.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account ("Trust Account") with Continental Stock Transfer & Trust Company
acting as trustee and has been invested in United States government treasury
bills with a maturity of 185 days or less or in money market funds investing
solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under
the Investment Company Act, as determined by the Company, until the earlier of:
(i) the completion of a Business Combination and (ii) the distribution of the
Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of its Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination. Our initial
Business Combination must be with one or more operating businesses or assets
with a fair market value equal to at least 80% of the net assets held in the
Trust Account (excluding the deferred underwriting commissions and taxes payable
on the income earned on the Trust Account) at the time we sign a definitive
agreement in connection with the initial Business Combination. However,
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we will only complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities of the target
or otherwise acquires a controlling interest in the target sufficient for it not
to be required to register as an investment company under the Investment Company
Act.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or February 9, 2023, (the "Combination
Period"), we will (1) cease all operations except for the purpose of winding up;
(2) as promptly as reasonably possible but not more than 10 business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest (less up to $100,000 of interest to pay dissolution expenses and which
interest shall be net of taxes payable, expenses relating to the administration
of the trust account and limited withdrawals for working capital), divided by
the number of then issued and outstanding Public Shares, which redemption will
completely extinguish Public Shareholders' rights as shareholders (including the
right to receive further liquidating distributions, if any); and (3) as promptly
as reasonably possible following such redemption, subject to the approval of the
remaining shareholders and the board of directors, liquidate and dissolve,
subject in each case to our obligations under Cayman Islands law to provide for
claims of creditors and the requirements of other applicable law.
Results of Operations
For the three months ended September 30, 2022, we had net income of
approximately $1.2 million principally from the change in the value of
derivative warrant liabilities of approximately $2.2 million, due to the
unrealized gain on investments held in Trust Account. The unrealized gain on
investments held in Trust Account was partially offset by the change in the
value of derivative warrant liabilities of approximately $697,000 and
approximately $294,000 in general and administrative costs.
For the three months ended September 30, 2021, we had net income of
approximately $5.8 million, resulting from a non-operating gain of approximately
$6.1 million from the change in fair value of the derivative warrant liabilities
and an unrealized gain on investments held in Trust of approximately $6,000,
partially offset by approximately $284,000 in general and administrative costs.
For the nine months ended September 30, 2022, we had net income of approximately
$13.6 million principally from the change in the value of derivative warrant
liabilities of approximately $12.2 million. The $2.9 million unrealized gain on
investments held in Trust Account was partially offset by approximately
$1.4 million in general and administrative costs.
For the nine months ended September 30, 2021, we had a net income of
approximately $5.3 million, resulting from a non-operating gain of approximately
$7.5 million from the change in fair value of the derivative warrant liabilities
and an unrealized gain on investments held in Trust of approximately $40,000,
partially offset by $1.5 million in general and administrative costs and
financing costs associated with derivative warrant liabilities of approximately
$734,000.
Going Concern
As of September 30, 2022, we had approximately $86,000 in our operating bank
account, and a working capital deficit of approximately $337,000. Further, we
have incurred and expect to continue to incur significant costs in pursuit of
our financing and acquisition plans. These factors, among others, raise
substantial doubt about our ability to continue as a going concern within one
year after the date that the financial statements are issued.
Our liquidity needs to date have been satisfied through a payment of $25,000
from Sponsor to cover for certain expenses in exchange for the issuance of the
Founder Shares (as defined in Note 4), the loan of $135,000 from the Sponsor
pursuant to the Note (as defined in Note 4), and the proceeds from the
consummation of the Private Placement not held in the Trust Account. We fully
repaid the Note on February 12, 2021. In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors
may, but are not obligated to, provide us Working Capital Loans (as defined in
Note 6). As of September 30, 2022 and December 31, 2021, there was $500,000 and
$0, respectively, outstanding under any Working Capital Loan.
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In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Basis of Presentation of Financial
Statements-Going Concern," we have determined that the mandatory liquidation
date and subsequent dissolution raises substantial doubt about the Company's
ability to continue as a going concern. If we are unable to complete a business
combination by February 9, 2023 (unless such a period is extended as described
herein), then we will cease all operations except for the purpose of
liquidating. Over this time period, we have used, and will be using, these funds
for paying existing accounts payable, identifying and evaluating prospective
initial Business Combination candidates, performing due diligence on prospective
target businesses, paying for travel expenditures, selecting the target business
to merge with or acquire, and structuring, negotiating and consummating the
Business Combination. No adjustments have been made to the carrying amounts of
assets or liabilities should we be required to liquidate after February 9, 2023.
The condensed financial statements do not include any adjustment that might be
necessary if the Company is unable to continue as a going concern.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than an working capital loan and the administrative services agreement to
pay our Sponsor $20,000 per month for office space, secretarial and
administrative services provided to us.
Administrative Services Agreement
Commencing on the effective date of the Registration Statement, we agreed to pay
an affiliate of the Sponsor a total of $20,000 per month for office space,
administrative and support services (including salaries). Upon our liquidation,
we will cease paying these monthly fees. Upon completion of the Initial Business
Combination, we will pay to such affiliate an amount equal to $20,000 multiplied
by the number of whole months remaining between the date of the completion of
the Initial Business Combination and the date that is 24 months from the closing
of the Offering.
The Sponsor, officers and directors, or any of their respective affiliates, will
be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations. The audit committee
will review on a quarterly basis all payments that were made by us to the
Sponsor, directors, officers or us or any of their respective affiliates.
We incurred approximately $60,000 and $60,000 in expenses in connection with
such services during the three months ended September 30, 2022 and 2021,
respectively, as reflected in the accompanying statements of operations. We
incurred approximately $180,000 and $160,000 in expenses in connection with such
services during the nine months ended September 30, 2022 and 2021, respectively,
as reflected in the accompanying statements of operations. We had $60,000 and $0
included in accrued expenses-related party in connection with such services as
of September 30, 2022 and December 31, 2021, respectively.
Registration and Shareholder Rights Agreement
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of Working Capital Loans (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares) were entitled to registration rights pursuant to a
registration and shareholder rights agreement signed upon the
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effective date of the Initial Public Offering. The holders of these securities
were entitled to make up to three demands, excluding short form demands, that
the Company registers such securities. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of this prospectus to
purchase up to 6,300,000 additional Units at the Initial Public Offering price
less the underwriting discounts and commissions. The underwriters exercised
their over-allotment option in full on February 9, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $9.7 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately
$16.9 million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
agreement.
Deferred Legal Fees
We entered into an engagement letter to obtain legal advisory services, pursuant
to which the Company's legal counsel agreed to defer their fees until the
closing of the initial Business Combination. As of September 30, 2022 and
December 31, 2021, the Company recorded an aggregate of $250,000 in connection
with such arrangement as deferred legal fees in the accompanying consolidated
balance sheet.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. A summary of our significant accounting policies is
included in Note 2 to our condensed financial statements in Part I, Item 1 of
this Quarterly Report. Certain of our accounting policies are considered
critical, as these policies are the most important to the depiction of our
financial statements and require significant, difficult or complex judgments,
often employing the use of estimates about the effects of matters that are
inherently uncertain. Such policies are summarized in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
in our 2021 Annual Report on Form 10-K filed with the SEC on March 31, 2022.
There have been no significant changes in the application of our critical
accounting policies during the nine months ended September 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed financial statements included in Part I,
Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" under the JOBS Act and are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We elected to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, the
unaudited condensed financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company
effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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