UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
(MARK ONE)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterquarterly period ended September 30, 2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
____________Commission file number: number: 001-39119
MERIDA MERGER CORP. I
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)
| Delaware | 84-2266022 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
113 Cherry Street, PMB 88154 Seattle, Washington | 98104-2205 | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
641 Lexington Avenue, 18th Floor
New York, NY 10022
(Address of principal executive offices)
(917) 745-7085
(Issuer’sRegistrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| The Nasdaq Stock Market LLC | ||||||||||||||
Warrants, exercisable for shares of common stock at an exercise price of $11.50 per share | LFLYW | The Nasdaq Stock Market LLC | ||||||||||||
CheckIndicate by check mark whether the issuerregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).files.) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”,company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||||||||||
| Emerging growth company | ☒ | |||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐
No ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒☐ No ☐
As of November 17, 2021, there were 14,982,0734, 2022, the registrant had 40,035,568 shares of common stock ($0.0001 par value $0.0001 per share, issued and outstanding.
MERIDA MERGER CORP. I
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
| Page | ||||||||
| Item 1. | Consolidated Financial Statements (unaudited) | |||||||
| Condensed Consolidated Balance Sheets as of September 30, | ||||||||
| Part II | ||||||||
i
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 27,829 | $ | 28,565 | |||||||
| Accounts receivable, net of allowance for doubtful accounts of $958 and $1,848, respectively | 2,610 | 2,958 | |||||||||
| Deferred transaction costs | — | 2,840 | |||||||||
| Prepaid expenses and other current assets | 3,569 | 1,347 | |||||||||
| Restricted cash | 607 | 130 | |||||||||
| Total current assets | 34,615 | 35,840 | |||||||||
| Property, equipment, and software, net | 2,213 | 313 | |||||||||
| Total assets | $ | 36,828 | $ | 36,153 | |||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 1,375 | $ | 3,048 | |||||||
| Accrued expenses and other current liabilities | 5,076 | 8,325 | |||||||||
| Deferred revenue | 2,052 | 1,975 | |||||||||
| Current portion of convertible promissory notes, net | — | 31,377 | |||||||||
| Total current liabilities | 8,503 | 44,725 | |||||||||
| Non-current liabilities | |||||||||||
| Non-current portion of convertible promissory notes, net | 28,726 | — | |||||||||
| Private warrants derivative liability | 662 | — | |||||||||
| Escrow shares derivative liability | 47 | — | |||||||||
| Stockholder earn-out rights derivative liability | 288 | — | |||||||||
| Total non-current liabilities | 29,723 | — | |||||||||
| Commitments and contingencies (Note 8) | |||||||||||
| Stockholders' deficit | |||||||||||
| Preferred stock; $0.0001 par value; 5,000 and 6,578 authorized, — and 6,140 issued and outstanding, and aggregate liquidation preference of $— and $19,436 at September 30, 2022 and December 31, 2021, respectively | — | 1 | |||||||||
| Common stock; $0.0001 par value; 200,000 and 69,361 authorized at September 30, 2022 and December 31, 2021, respectively; 43,052 issued at September 30, 2022 and 25,086 shares issued and outstanding at December 31, 2021 | 4 | 3 | |||||||||
| Treasury stock, at cost; 3,081,086 and — shares held at at September 30, 2022 and December 31, 2021, respectively | (31,663) | — | |||||||||
| Additional paid-in capital | 89,194 | 61,194 | |||||||||
| Accumulated deficit | (58,933) | (69,770) | |||||||||
| Total stockholders' deficit | (1,398) | (8,572) | |||||||||
| Total liabilities and stockholders' deficit | $ | 36,828 | $ | 36,153 | |||||||
PART I - FINANCIAL INFORMATION
Item 1.See Notes to Condensed Consolidated Financial Statements.
MERIDA MERGER CORP. I
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Restated) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 101,541 | $ | 171,540 | ||||
| Prepaid expenses and other current assets | 232,723 | 99,735 | ||||||
| Total Current Assets | 334,264 | 271,275 | ||||||
| Marketable securities held in Trust Account | 130,203,176 | 130,681,047 | ||||||
| TOTAL ASSETS | $ | 130,537,440 | $ | 130,952,322 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 264,828 | 147,830 | |||||
| Income taxes payable | — | 5,883 | ||||||
| Due to Sponsor | 16,458 | 16,458 | ||||||
| Promissory note – related party | 400,339 | 339 | ||||||
| Total Current Liabilities | 681,625 | 170,510 | ||||||
| Warrant liability | 7,229,069 | 3,950,311 | ||||||
| Deferred tax liability | — | 432 | ||||||
| Total Liabilities | 7,910,694 | 4,121,253 | ||||||
| Commitments | ||||||||
| Common stock subject to possible redemption 13,001,552 shares at redemption value as of September 30, 2021 and December 31, 2020 | 130,178,936 | 130,544,959 | ||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | — | — | ||||||
| Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,370,388 shares issued and outstanding (excluding 13,001,552 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020 | 337 | 337 | ||||||
| Accumulated deficit | (7,552,527 | ) | (3,714,227 | ) | ||||
| Total Stockholders’ Deficit | (7,552,190 | ) | (3,713,890 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 130,537,440 | $ | 130,952,322 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
MERIDA MERGER CORP. I
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | $ | 11,781 | $ | 10,896 | $ | 35,251 | $ | 30,959 | |||||||||||||||
| Cost of revenue | 1,515 | 1,261 | 4,411 | 3,564 | |||||||||||||||||||
| Gross profit | 10,266 | 9,635 | 30,840 | 27,395 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Sales and marketing | 6,403 | 4,999 | 21,529 | 13,148 | |||||||||||||||||||
| Product development | 3,406 | 3,522 | 10,927 | 9,905 | |||||||||||||||||||
| General and administrative | 6,489 | 4,949 | 20,730 | 10,485 | |||||||||||||||||||
| Total operating expenses | 16,298 | 13,470 | 53,186 | 33,538 | |||||||||||||||||||
| Loss from operations | (6,032) | (3,835) | (22,346) | (6,143) | |||||||||||||||||||
| Interest expense, net | (705) | (590) | (2,119) | (698) | |||||||||||||||||||
| Change in fair value of derivatives | 22,264 | — | 36,264 | — | |||||||||||||||||||
| Other expense, net | (73) | (29) | (962) | (39) | |||||||||||||||||||
| Net income (loss) | $ | 15,454 | $ | (4,454) | $ | 10,837 | $ | (6,880) | |||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | 0.43 | $ | (0.18) | $ | 0.31 | $ | (0.28) | |||||||||||||||
| Diluted | $ | 0.28 | $ | (0.18) | $ | 0.27 | $ | (0.28) | |||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 35,580 | 24,923 | 35,260 | 24,832 | |||||||||||||||||||
| Diluted | 43,215 | 24,923 | 38,704 | 24,832 | |||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Operating costs | $ | 440,194 | $ | 153,230 | $ | 953,102 | $ | 512,896 | ||||||||
| Loss from operations | (440,194 | ) | (153,230 | ) | (953,102 | ) | (512,896 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest earned on marketable securities held in Trust Account | 1,870 | 42,577 | 27,537 | 757,577 | ||||||||||||
| Unrealized gain (loss) on marketable securities held in Trust Account | — | 1,474 | — | (2,594 | ) | |||||||||||
| Change in fair value of warrant liability | (2,449,193 | ) | (197,516 | ) | (3,278,758 | ) | (197,516 | ) | ||||||||
| Other (expense) income, net | (2,447,323 | ) | (153,465 | ) | (3,251,221 | ) | 557,467 | |||||||||
| (Loss) income before provision for income taxes | (2,887,517 | ) | (306,695 | ) | (4,204,323 | ) | 44,571 | |||||||||
| Benefit from (provision for) income taxes | — | 22,871 | — | (51,031 | ) | |||||||||||
| Net loss | $ | (2,887,517 | ) | $ | (283,824 | ) | $ | (4,204,323 | ) | $ | (6,460 | ) | ||||
| Weighted average shares outstanding, Common Stock subject to possible redemption (1) | 13,001,552 | 13,001,552 | 13,001,552 | 13,001,552 | ||||||||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption (1) | $ | (0.18 | ) | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.00 | ) | ||||
| Weighted average shares outstanding, Common Stock (1) | 3,370,388 | 3,370,388 | 3,370,388 | 3,370,388 | ||||||||||||
| Basic and diluted net loss per share, Common Stock (1) | $ | (0.18 | ) | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.00 | ) | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
MERIDA MERGER CORP. I
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(RESTATED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance – January 1, 2021 (Restated- see Note 2) | 3,370,388 | $ | 337 | $ | — | $ | (3,714,227 | ) | $ | (3,713,890 | ) | |||||||||
| Accretion for common stock to redemption amount | — | — | — | 228,900 | 228,900 | |||||||||||||||
| Net loss | — | — | — | (886,006 | ) | (886,006 | ) | |||||||||||||
| Balance – March 31, 2021 (Restated- see Note 2) | 3,370,388 | $ | 337 | $ | — | $ | (4,371,333 | ) | $ | (4,370,996 | ) | |||||||||
| Accretion for common stock to redemption amount | — | — | — | 91,504 | 91,504 | |||||||||||||||
| Net loss | — | — | — | (430,800 | ) | (430,800 | ) | |||||||||||||
| Balance – June 30, 2021 (Restated- see Note 2) | 3,370,388 | $ | 337 | $ | — | $ | (4,710,629 | ) | $ | (4,710,292 | ) | |||||||||
| Accretion for common stock to redemption amount | — | — | — | 45,619 | 45,619 | |||||||||||||||
| Net loss | — | — | — | (2,887,517 | ) | (2,887,517 | ) | |||||||||||||
| Balance – September 30, 2021 (Restated – see Note 2) | 3,370,388 | $ | 337 | $ | — | $ | (7,552,527 | ) | $ | (7,552,190 | ) | |||||||||
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
| Common Stock | Additional Paid in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance – January 1, 2020 (Restated- see Note2) | 3,370,388 | $ | 337 | $ | — | $ | (1,492,550 | ) | $ | (1,492,213 | ) | |||||||||
| Accretion for common stock to redemption amount | — | — | — | (336,906 | ) | (336,906 | ) | |||||||||||||
| Net income | — | — | — | 376,330 | 376,330 | |||||||||||||||
| Balance – March 31, 2020 (Restated- see Note 2) | 3,370,388 | $ | 337 | — | (1,453,126 | ) | (1,452,789 | ) | ||||||||||||
| Accretion for common stock to redemption amount | — | — | — | (1,721 | ) | (1,721 | ) | |||||||||||||
| Net loss | — | — | — | (98,966 | ) | (98,966 | ) | |||||||||||||
| Balance – June 30, 2020 (Restated- see Note 2) | 3,370,388 | $ | 337 | $ | — | $ | (1,553,813 | ) | $ | (1,553,476 | ) | |||||||||
| Accretion for common stock to redemption amount | — | — | — | 7,967 | 7,967 | |||||||||||||||
| Net loss | — | — | — | (283,824 | ) | (283,824 | ) | |||||||||||||
| Balance – September 30, 2020 (Restated- see Note 2) | 3,370,388 | $ | 337 | $ | — | $ | (1,829,670 | ) | $ | (1,829,333 | ) | |||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| Three and Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 6,140 | $ | 1 | 25,086 | $ | 3 | — | $ | — | $ | 61,194 | $ | (69,770) | $ | (8,572) | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (19,376) | (19,376) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | 1,924 | — | 1,924 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | 114 | — | — | — | 127 | — | 127 | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of 2021 Notes into Common Stock at Merger | — | — | 4,128 | — | — | — | 33,024 | — | 33,024 | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Stock into Common Stock at Merger | (6,140) | (1) | 6,140 | 1 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Merger and recapitalization, net of fees | — | — | 2,007 | — | — | — | 27,997 | — | 27,997 | ||||||||||||||||||||||||||||||||||||||||||||
| Stockholder contribution for debt issuance costs | — | — | — | — | — | — | 924 | — | 924 | ||||||||||||||||||||||||||||||||||||||||||||
| Escrow shares derivative liability | — | — | 1,625 | — | — | — | (6,867) | — | (6,867) | ||||||||||||||||||||||||||||||||||||||||||||
| Private warrants derivative liability | — | — | — | — | — | — | (3,916) | — | (3,916) | ||||||||||||||||||||||||||||||||||||||||||||
| Forward share purchase agreement derivative liability | — | — | 3,861 | — | — | — | (14,170) | — | (14,170) | ||||||||||||||||||||||||||||||||||||||||||||
| Stockholder earnout rights derivative liability | — | — | — | — | — | — | (26,131) | — | (26,131) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | — | $ | — | 42,961 | $ | 4 | — | $ | — | $ | 74,106 | $ | (89,146) | $ | (15,036) | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | 14,759 | 14,759 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | 464 | — | 464 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | 29 | — | — | — | 30 | — | 30 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | — | $ | — | 42,990 | $ | 4 | — | $ | — | $ | 74,600 | $ | (74,387) | $ | 217 | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | 15,454 | 15,454 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares canceled | — | — | (25) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | 771 | — | 771 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | 1 | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | 86 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement of forward share purchase agreement derivative liability | — | — | — | — | — | — | (17,841) | — | (17,841) | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | — | — | (3,081) | (31,663) | 31,663 | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | — | $ | — | 43,052 | $ | 4 | (3,081) | $ | (31,663) | $ | 89,194 | $ | (58,933) | $ | (1,398) | ||||||||||||||||||||||||||||||||||||||
| Three and Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Class 1, Class 2, and Class 3 Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 6,140 | $ | 1 | 24,752 | $ | 2 | $ | 59,812 | $ | (57,746) | $ | 2,069 | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (1,109) | (1,109) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 181 | — | 181 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | 36 | — | 40 | — | 40 | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | 6,140 | 1 | 24,788 | 2 | 60,033 | (58,855) | 1,181 | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (1,317) | (1,317) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 340 | — | 340 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | 49 | — | 68 | — | 68 | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 6,140 | 1 | 24,837 | 2 | 60,441 | (60,172) | 272 | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (4,454) | (4,454) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 208 | — | 208 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | 142 | — | 142 | — | 142 | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 6,140 | $ | 1 | 24,979 | $ | 2 | $ | 60,791 | $ | (64,626) | $ | (3,832) | |||||||||||||||||||||||||||||
MERIDA MERGER CORP. I
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | (4,204,323 | ) | $ | (6,460 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Change in fair value of warrant liability | 3,278,758 | 197,516 | ||||||
| Interest earned on marketable securities held in Trust Account | (27,537 | ) | (757,577 | ) | ||||
| Unrealized loss on marketable securities held in Trust Account | — | 2,594 | ||||||
| Deferred tax benefit | (432) | (592 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | (132,988 | ) | 37,870 | |||||
| Accounts payable and accrued expenses | 116,998 | (16,764 | ) | |||||
| Income taxes payable | (5,883 | ) | 3,844 | |||||
| Net cash used in operating activities | (975,407 | ) | (539,569 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
Cash withdrawn from Trust Account for franchise, income tax payments, and working capital needs | 505,408 | 419,894 | ||||||
| Net cash provided by investing activities | 505,408 | 419,894 | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from promissory note — related party | 400,000 | — | ||||||
| Net cash provided by financing activities | 400,000 | — | ||||||
| Net Change in Cash | (69,999 | ) | (119,675 | ) | ||||
| Cash – Beginning | 171,540 | 362,570 | ||||||
| Cash – Ending | $ | 101,541 | $ | 242,895 | ||||
| Supplementary cash flow information: | ||||||||
| Cash paid for income taxes | $ | 19,953 | $ | 41,039 | ||||
| Non-cash investing and financing activities: | ||||||||
| Change in value of common stock subject to possible redemption (Restated- see Note 2) | $ | 146,856 | $ | 512,502 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income (loss) | $ | 10,837 | $ | (6,880) | |||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 276 | 195 | |||||||||
| Stock-based compensation expense | 3,159 | 729 | |||||||||
| Bad debt expense | 1,023 | 841 | |||||||||
| Noncash lease costs | — | 230 | |||||||||
| Noncash amortization of debt discount | 369 | — | |||||||||
| Noncash interest expense associated with convertible debt | 243 | 710 | |||||||||
| Noncash change in fair value of derivatives | (36,264) | — | |||||||||
| Other | 15 | 44 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (675) | (674) | |||||||||
| Prepaid expenses and other current assets | (2,222) | (600) | |||||||||
| Accounts payable | 173 | (3) | |||||||||
| Accrued expenses and other current liabilities | (2,141) | 1,713 | |||||||||
| Deferred revenue | 77 | 594 | |||||||||
| Net cash used in operating activities | (25,130) | (3,101) | |||||||||
| Cash flows from investing activities | |||||||||||
| Additions of property, equipment, and software | (2,194) | (38) | |||||||||
| Net cash used in investing activities | (2,194) | (38) | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from exercise of stock options | 158 | 223 | |||||||||
| Proceeds from convertible promissory notes | 29,374 | 31,470 | |||||||||
| Proceeds from business combination placed in escrow and restricted | 39,032 | — | |||||||||
| Trust proceeds received from recapitalization at closing | 582 | — | |||||||||
| Repurchase of common stock and settlement of forward purchase agreements | (31,303) | — | |||||||||
| Transaction costs associated with recapitalization | (10,761) | — | |||||||||
| Payments on related party payables | (17) | (242) | |||||||||
| Net cash provided by financing activities | 27,065 | 31,451 | |||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (259) | 28,312 | |||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 28,695 | 4,934 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 28,436 | $ | 33,246 | |||||||
| Supplemental disclosure of non-cash financing activities | |||||||||||
| Stockholder contribution for debt issuance costs | $ | 924 | $ | — | |||||||
| Repurchase of common stock in other accrued expenses | $ | 360 | $ | — | |||||||
| Conversion of promissory notes into common stock | $ | 33,024 | $ | — | |||||||
| Issuance of forward share purchase agreements | $ | 14,170 | $ | — | |||||||
| Issuance of private warrants | $ | 3,916 | $ | — | |||||||
| Issuance of sponsor shares subject to earnout conditions | $ | 6,867 | $ | — | |||||||
| Issuance of stockholder earn-out rights | $ | 26,131 | $ | — | |||||||
SEPTEMBER 30, 2021
(Unaudited)
NoteNOTE 1 — Description of Organization,the Business Operations and Going Concern
AlthoughAgreement and the Company is not limitedother agreements being entered into by Merida and Legacy Leafly in connection with the Mergers as the “Business Combination” and to a particular industry or sector for purposes of consummating aMerida following the Business Combination as “New Leafly.”
Aswere not material, with no goodwill or other intangible assets recorded. The derivative liabilities, which are discussed in Notes 12 and 13, were recorded at fair value. The consolidated assets, liabilities, and results of September 30, 2021,operations of Legacy Leafly became the Company had not commenced any operations. All activity through September 30, 2021 relateshistorical financial statements, and operations prior to the Company’s formation,closing of the IPO (“IPO”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination at the earliest. The Company generates non-operating income in the formpresented for comparative purposes are those of interest income from the proceeds derived from the IPO, and non-operating income or expenses from the change in fair value of warrant liabilities.
The registration statements for the Company’s IPO were declared effective on November 4, 2019. On November 7, 2019, the Company consummated the IPO of 12,000,000 units (the “Units” and, with respect to theLegacy Leafly. Pre-Merger shares of common stock included inand preferred stock were converted to shares of common stock of the Units sold,combined company using the “Public Shares”), generating gross proceedsconversion ratio of $120,000,000, which is described in Note 4.
Simultaneously with
| Amount in Merida's trust account ("the Trust") at closing | $ | 90,824 | ||||||
| Total payment to Merida public redeeming stockholders | 49,466 | |||||||
| Amount available after paying Merida redeeming stockholders | 41,358 | |||||||
| Cash to escrow for Forward Share Purchase Agreements (see Note 13) | 39,032 | |||||||
| Remaining balance | 2,326 | |||||||
| Merida expenses paid from the Trust at closing | 1,744 | |||||||
| Net cash from the Trust to Leafly at closing | 582 | |||||||
| Cash received from escrow February 4, 2022 - September 30, 2022 | 8,089 | |||||||
| Net cash from the Trust to Leafly as of September 30, 2022 | $ | 8,671 | ||||||
Following the closingreconciliation of the IPO on November 7, 2019, an amount of $120,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust Accountcommon shares related to the Company’s stockholders, as described below.
On November 12, 2019,
| Merida public stockholders | 4,160 | |||||||
| Merida initial stockholders (including Sponsor and EarlyBirdCapital) | 1,667 | |||||||
| Holders of 2022 Notes (see Note 11) | 38 | |||||||
| Shares held by Sponsor in escrow that are subject to earn-out conditions (see Note 12) | 1,625 | |||||||
| Total Merida | 7,490 | |||||||
| Legacy Leafly existing securityholders | 35,434 | |||||||
| Total shares outstanding as of February 4, 2022 | 42,924 | |||||||
Transaction costs amounted to $3,412,939 consisting of $2,600,311 of underwriting fees and $812,628 of other offering costs.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company 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.
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination in connection with a stockholder meeting called to approve the Business Combination. Theby Merida public stockholders will be entitledand Holders of 2022 Notes, were subject to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously releasedrestrictions as to the Company to pay its tax obligations and up to $250,000 per 12-month period for working capital needs)trading through August 3, 2022 ("Lock Up Restrictions"). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. The Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules. The Company’s Sponsor and EarlyBirdCapital have agreed to vote their Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or do not vote at all.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and any Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect a public stockholders’ ability to convert their shares in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company originally had until November 7, 2021 to consummate a Business Combination. On October 29, 2021 the Company’s stockholders voted to extend the date in which the Company has to consummate a business combination to December 31, 2021 (the “Combination Period”). As a result of the extension, holders of an aggregate of 1,389,867 shares of Merida’s common stock exercised their right to redeem their shares for an aggregate of approximately $13.9 million in cash. If the Company is unable to complete a Business Combination within the Combination Period or it is not otherwise extended by stockholders again, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten 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 earned on the funds held in the Trust Account and not previously released to the Company, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
In order to protect the amounts held in the Trust Account, Merida Manager III LLC, the general partner of the Sponsor, has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.00 per Public Share, except as to any claims by a third party who executed a valid and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Merida Manager III LLC will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that Merida Manager III LLC will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or closing of a Business Combination, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and 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.
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NoteNOTE 2 — RestatementBasis of Previously Issued Financial Statements
In connection with the preparation of the Company's condensed financial statements as of September 30, 2021Presentation and in accordance with the SEC and its staff’s guidance on redeemable equity instruments, ASC 480, paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity, management determined it should restate its previously reported condensed financial statements. The Company had previously determined the shares of 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 that a redemption cannot result in net tangible assets being less than $5,000,001. Management has also determined that the shares of Common Stock issued in connection with the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control.
Therefore, management has concluded that the redemption value should include all the shares of Common Stock subject to possible redemption, resulting in the shares of Common Stock subject to possible redemption being equal to their redemption value. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the changes and has determined that the related impact was material to previously presented financial statements. As a result, management has noted a restatement related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the shares of Common Stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and the shares of Common Stock.
The revision do not result in any change in the Company’s total assets, liabilities or operating results.
The impact of the restatement on the Company’s financial statements is reflected in the following table:
| Balance Sheet as of November 7, 2019 (audited) | As Previously Reported | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | $ | 112,525,160 | $ | 7,474,840 | $ | 120,000,000 | ||||||
| Common stock | $ | 432 | $ | (75 | ) | $ | 357 | |||||
| Additional paid-in capital | $ | 5,020,136 | $ | (5,020,136 | ) | $ | — | |||||
| Accumulated deficit | $ | (20,567 | ) | $ | (2,454,196 | ) | $ | (2,475,196 | ) | |||
| Total stockholders’ equity (deficit) | $ | 5,000,001 | $ | (7,474,840 | ) | $ | (2,474,839 | ) | ||||
| Number of shares subject to redemption | 11,252,516 | 747,484 | 12,000,000 | |||||||||
| Balance Sheet as of December 31, 2019 (audited) | ||||||||||||
| Common stock subject to possible redemption | $ | 123,705,148 | $ | 6,492,214 | $ | 130,197,362 | ||||||
| Common stock | $ | 402 | $ | (65 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 3,693,446 | $ | (3,693,446 | ) | $ | — | |||||
| Accumulated deficit | $ | 1,306,153 | $ | (2,798,703 | ) | $ | (1,492,550 | ) | ||||
| Total stockholders’ equity (deficit) | $ | 5,000,001 | $ | (6,492,214 | ) | $ | (1,492,513 | ) | ||||
| Number of shares subject to redemption | 12,353,237 | 648,315 | 13,001,552 | |||||||||
| Balance Sheet as of March 31, 2020 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | 124,081,469 | $ | 6,452,799 | $ | 130,534,268 | ||||||
| Common stock | $ | 402 | $ | (65 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 3,317,125 | $ | (3,317,125 | ) | $ | — | |||||
| Accumulated deficit | $ | 1,682,483 | $ | (3,135,609 | ) | $ | (1,453,126 | ) | ||||
| Total stockholders’ equity (deficit) | $ | 5,000,010 | $ | (6,452,799 | ) | $ | (1,452,789 | ) | ||||
| Number of shares subject to redemption | 12,358,836 | 642,716 | 13,001,552 | |||||||||
| Balance Sheet as of June 30, 2020 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | 123,982,509 | $ | 6,553,480 | $ | 130,535,989 | ||||||
| Common stock | $ | 403 | $ | (66 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 3,416,084 | $ | (3,416,084 | ) | $ | — | |||||
| Accumulated deficit | $ | 1,583,517 | $ | (3,137,330 | ) | $ | (1,553,813 | ) | ||||
| Total stockholders’ equity (deficit) | $ | 5,000,004 | $ | (6,553,480 | ) | $ | (1,553,476 | ) | ||||
| Number of shares subject to redemption | 12,358,836 | 642,716 | 13,001,552 | |||||||||
| Balance Sheet as of September 30, 2020 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | 123,698,687 | $ | 6,829,335 | $ | 130,528,022 | ||||||
| Common stock | $ | 405 | $ | (68 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 3,699,904 | $ | (3,699,904 | ) | $ | — | |||||
| Accumulated deficit | $ | 1,299,693 | $ | (3,129,363 | ) | $ | (1,829,670 | ) | ||||
| Total stockholders’ equity (deficit) | $ | 5,000,002 | $ | (6,829,335 | ) | $ | (1,829,333 | ) | ||||
| Number of shares subject to redemption | 12,321,300 | 680,252 | 13,001,552 | |||||||||
| Balance Sheet as of December 31, 2020 (audited) | ||||||||||||
| Common stock subject to possible redemption | $ | 121,831,059 | $ | 8,713,900 | $ | 130,544,959 | ||||||
| Common stock | $ | 424 | $ | (87 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 5,567,513 | $ | (5,567,513 | ) | $ | — | |||||
| Accumulated deficit | $ | (567,927 | ) | $ | (3,146,300 | ) | $ | (3,714,227 | ) | |||
| Total stockholders’ equity (deficit) | $ | 5,000,010 | $ | (8,713,900 | ) | $ | (3,713,890 | ) | ||||
| Number of shares subject to redemption | 12,133,696 | 867,856 | 13,001,552 | |||||||||
| Balance Sheet as of March 31, 2021 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | 120,945,058 | $ | 9,371,001 | $ | 130,316,059 | ||||||
| Common stock | $ | 430 | $ | (93 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 6,453,508 | $ | (6,453,508 | ) | $ | — | |||||
| Accumulated deficit | $ | (1,453,933 | ) | $ | (2,917,400 | ) | $ | (4,371,333 | ) | |||
| Total stockholders’ equity (deficit) | $ | 5,000,005 | $ | (9,371,001 | ) | $ | (4,370,996 | ) | ||||
| Number of shares subject to redemption | 12,066,613 | 934,939 | 13,001,552 | |||||||||
| Balance Sheet as of June 30, 2021 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | 120,514,260 | $ | 9,710,295 | $ | 130,224,555 | ||||||
| Common stock | $ | 435 | $ | (98 | ) | $ | 337 | |||||
| Additional paid-in capital | $ | 6,884,301 | $ | (6,884,301 | ) | $ | — | |||||
| Accumulated deficit | $ | (1,884,733 | ) | $ | (2,825,896 | ) | $ | (4,710,629 | ) | |||
| Total stockholders’ equity (deficit) | $ | 5,000,003 | $ | (9,710,295 | ) | $ | (4,710,292 | ) | ||||
| Number of shares subject to redemption | 12,032,081 | 969,471 | 13,001,552 | |||||||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of December 31, 2019 (audited) | ||||||||||||
| Sale of 13,001,552 Units, net of underwriting discount and offering expenses | $ | 126,622,527 | $ | (126,622,527 | ) | $ | — | |||||
| Initial value of common stock subject to redemption at IPO | $ | (123,705,148 | ) | $ | 123,705,148 | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | (3,574,835 | ) | $ | (3,574,835 | ) | ||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of March 31, 2020 (unaudited) | ||||||||||||
| Change in value of common stock subject to redemption | $ | (376,321 | ) | $ | 376,321 | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | (336,906 | ) | $ | (336,906 | ) | ||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of June 30, 2020 (unaudited) | ||||||||||||
| Change in value of common stock subject to redemption | $ | 98,960 | $ | (98,960 | ) | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | (1,721 | ) | $ | (1,721 | ) | ||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of September 30, 2020 (unaudited) | ||||||||||||
| Change in value of common stock subject to redemption | $ | 283,822 | $ | (283,822 | ) | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | 7,967 | $ | 7,967 | ||||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of December 31, 2020 (unaudited) | ||||||||||||
| Change in value of common stock subject to redemption | $ | 1,867,628 | $ | (1,867,628 | ) | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | (16,937 | ) | $ | (16,937 | ) | ||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of March 31, 2021 (unaudited) | ||||||||||||
| Change in value of common stock subject to redemption | $ | 886,001 | $ | (886,001 | ) | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | 228,900 | $ | 228,900 | ||||||
| Condensed Statement of Changes in Stockholders’ Equity (Deficit) as of June 30, 2021 (unaudited) | ||||||||||||
| Change in value of common stock subject to redemption | $ | 430,798 | $ | (430,798 | ) | $ | — | |||||
| Accretion for common stock to redemption amount | $ | — | $ | 91,504 | $ | 91,504 | ||||||
| Statement of Cash Flows for the Period from June 20, 2019 (inception) to December 31, 2019 (audited) | ||||||||||||
| Initial classification of common stock subject to possible redemption | $ | 122,378,428 | $ | 7,637,092 | $ | 130,015,520 | ||||||
In connection with the change in presentation for the common stock subject to redemption, the Company also restated its income (loss) per common share calculated to allocate net income (loss), with all allocated to common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock share pro rata in the income (loss) of the Company. There is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss). The impact of this restatement on the Company’s financial statements is reflected in the following table:
| Statement of Operations for the period from June 20, 2019 (inception) to December 31, 2019 (audited) | As Previously Reported | Adjustment | As Restated | |||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,128,362 | $ | (7,617,397 | ) | $ | 4,510,965 | ||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | 0.01 | $ | 0.16 | $ | 0.17 | ||||||
| Weighted average shares outstanding, Common Stock | 3,394,029 | (246,439 | ) | 3,147,590 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | 0.33 | $ | (0.16 | ) | $ | 0.17 | |||||
| Statement of Operations for the three months ended March 31, 2020 (unaudited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,353,237 | $ | (648,315 | ) | $ | 13,001,552 | ||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | 0.04 | $ | (0.02 | ) | $ | 0.02 | |||||
| Weighted average shares outstanding, Common Stock | 4,018,703 | (648,315 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.04 | ) | $ | 0.06 | $ | 0.02 | |||||
| Statement of Operations for the six months ended June 30, 2020 (unaudited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,356,037 | $ | 645,515 | $ | 13,001,552 | |||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | 0.04 | $ | (0.02 | ) | $ | 0.02 | |||||
| Weighted average shares outstanding, Common Stock | 4,015,904 | (645,516 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.06 | ) | $ | 0.08 | $ | 0.02 | |||||
| Statement of Operations for the nine months ended September 30, 2020 (unaudited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,353,612 | $ | 647,940 | $ | 13,001,552 | |||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | 0.05 | $ | (0.05 | ) | $ | — | |||||
| Weighted average shares outstanding, Common Stock | 4,018,328 | (647,940 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.14 | ) | $ | 0.14 | $ | — | |||||
| Statement of Operations for the year ended December 31, 2020 (audited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,345,490 | $ | 656,062 | $ | 13,001,552 | |||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | 0.05 | $ | (0.16 | ) | $ | (0.11 | ) | ||||
| Weighted average shares outstanding, Common Stock | 4,026,450 | (656,026 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.60 | ) | $ | 0.49 | $ | (0.11 | ) | ||||
| Statement of Operations for the three months ended March 31, 2021 (unaudited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,133,696 | $ | 867,856 | $ | 13,001,552 | |||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.05 | ) | |||
| Weighted average shares outstanding, Common Stock | 4,238,244 | (867,856 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.15 | ) | $ | 0.10 | $ | (0.05 | ) | ||||
| Statement of Operations for the three months ended June 30, 2021 (unaudited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,066,613 | $ | 934,939 | $ | 13,001,552 | |||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | — | $ | (0.03 | ) | $ | (0.03 | ) | ||||
| Weighted average shares outstanding, Common Stock | 4,305,327 | (934,939 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.10 | ) | $ | 0.07 | $ | (0.03 | ) | ||||
| Statement of Operations for the six months ended June 30, 2021 (unaudited) | ||||||||||||
| Weighted average shares outstanding, Common Stock subject to possible redemption | 12,099,969 | $ | 901,583 | ) | $ | 13,001,552 | ||||||
| Basic and diluted net income per share, Common Stock subject to possible redemption | $ | — | $ | (0.08 | ) | $ | (0.08 | ) | ||||
| Weighted average shares outstanding, Common Stock | 4,271,971 | (901,583 | ) | 3,370,388 | ||||||||
| Basic and diluted net loss per share, Common Stock | $ | (0.31 | ) | $ | 0.23 | $ | (0.08 | ) | ||||
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unauditedinterim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”(“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial informationreporting and should be read in conjunction with the Company's audited consolidated financial statements for the years ended December 31, 2021 and 2020, and Management’s Discussion and Analysis of Financial Condition and Results of Operations of Leafly for the year ended December 31, 2021, each of which was filed on the company’s Amendment No. 1 on Form 8-K/A filed with the SEC on March 31, 2022 (the “2021 Financial Information”).
| September 30, 2022 | December 31, 2021 | ||||||||||
| Cash and cash equivalents | $ | 27,829 | $ | 28,565 | |||||||
| Restricted cash | 607 | 130 | |||||||||
| $ | 28,436 | $ | 28,695 | ||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Prepaid insurance | $ | 2,065 | $ | 57 | |||||||
| Other prepaid expenses | 1,441 | 1,134 | |||||||||
| Other current assets | 63 | 156 | |||||||||
| $ | 3,569 | $ | 1,347 | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Balance, beginning of period | $ | 1,469 | $ | 1,142 | $ | 1,848 | $ | 1,131 | |||||||||||||||
| Add: provision for doubtful accounts, net of recoveries | 383 | 529 | 1,023 | 841 | |||||||||||||||||||
| Less: write-offs | (894) | (93) | (1,913) | (394) | |||||||||||||||||||
| Balance, end of period | $ | 958 | $ | 1,578 | $ | 958 | $ | 1,578 | |||||||||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Furniture and equipment | $ | 902 | $ | 1,049 | |||||||
| Leasehold improvements | — | 2 | |||||||||
| Internal-use software | 2,081 | — | |||||||||
| 2,983 | 1,051 | ||||||||||
| Less: accumulated depreciation and amortization | (770) | (738) | |||||||||
| $ | 2,213 | $ | 313 | ||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Accrued bonuses | $ | 537 | $ | 3,668 | |||||||
| Other employee-related liabilities | 2,547 | 2,131 | |||||||||
| Accrued interest | 400 | 1,313 | |||||||||
Other accrued expenses 1 | 1,592 | 1,213 | |||||||||
| $ | 5,076 | $ | 8,325 | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Advertising | $ | 11,731 | $ | 10,840 | $ | 34,959 | $ | 30,813 | |||||||||||||||
| Other services | 50 | 56 | 292 | 146 | |||||||||||||||||||
| $ | 11,781 | $ | 10,896 | $ | 35,251 | $ | 30,959 | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
United States1 | $ | 11,140 | $ | 9,757 | $ | 32,787 | $ | 27,644 | |||||||||||||||
All other countries1 | 641 | 1,139 | 2,464 | 3,315 | |||||||||||||||||||
| $ | 11,781 | $ | 10,896 | $ | 35,251 | $ | 30,959 | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Arizona | 19 | % | 16 | % | 18 | % | 16 | % | |||||||||||||||
| California | 13 | % | 11 | % | 11 | % | 10 | % | |||||||||||||||
| Oregon | 10 | % | 11 | % | 10 | % | 12 | % | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| Over time | ||||||||||||||||||||
Retail1 | $ | 9,042 | $ | 8,606 | $ | 27,286 | $ | 24,572 | ||||||||||||
Brands2 | 1,759 | 1,581 | 5,067 | 4,591 | ||||||||||||||||
| $ | 10,801 | $ | 10,187 | $ | 32,353 | $ | 29,163 | |||||||||||||
| Point in time | ||||||||||||||||||||
Brands3 | 980 | 709 | 2,898 | 1,796 | ||||||||||||||||
| $ | 11,781 | $ | 10,896 | $ | 35,251 | $ | 30,959 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| Balance, beginning of period | $ | 2,467 | $ | 2,079 | $ | 1,975 | $ | 1,585 | ||||||||||||
| Add: net increase in current period contract liabilities | 1,630 | 1,947 | 1,976 | 2,112 | ||||||||||||||||
| Less: revenue recognized from beginning balance | (2,045) | (1,847) | (1,899) | (1,518) | ||||||||||||||||
| Balance, end of period | $ | 2,052 | $ | 2,179 | $ | 2,052 | $ | 2,179 | ||||||||||||
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, 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. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed consolidated financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalentsdeferred revenue balance as of September 30, 2021 and2022 is expected to be recognized in the subsequent 12-month period. No other contract assets or liabilities are recorded on the Company’s Consolidated Balance Sheets as of September 30, 2022 or December 31, 2020.
Marketable Securities Held in Trust Account
At September 30, 2021 and December 31, 2020, the assets held in the Trust Account were substantially held in money market funds. During
Common Stock Subject to Possible Redemption
The Company accounts for its 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 is 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. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by chargesfull valuation allowance recorded against additional paid in capital and accumulated deficit. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated deficit.
At September 30, 2021, the Common Stock reflected in the balance sheets are reconciled in the following table:
| Gross proceeds | $ | 130,015,520 | ||
| Less: | ||||
| Common stock issuance costs | $ | (3,392,993 | ) | |
| Plus: | ||||
| Accretion of carrying value to redemption value | $ | 3,922,432 | ||
| Common stocks subject to possible redemption, December 31, 2020 | $ | 130,544,959 | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | $ | (382,583 | ) | |
| Common stocks subject to possible redemption, September 30, 2021 | $ | 130,162,376 |
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Warrant Liability
The Company accounts 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, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private 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 the statements of operations. The Private Warrants are valued using a binomial lattice model. Public Warrants are treated as equity and therefore require no fair value adjustment.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect onits deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 20212022 and December 31, 2020.2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company ishas been subject to income tax examinations by major taxing authorities since inception.The
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Net Loss Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Accretion associatedconsidered traditional convertible debt with the redeemable sharesentire amount recognized as a liability (with no amount allocated to equity), reduced for direct issuance costs, with initial and subsequent recognition at amortized cost in accordance with the interest method. Unless converted, the entire balance of common stock is excluded from net income (loss) per common share asprincipal and accrued but unpaid interest was due on December 3, 2022. The 2021 Notes were contingently convertible upon the redemption value approximates fair value.
The calculation of diluted income (loss) per common share does not consider the effect of the warrants issuedOn February 4, 2022, in connection with the (i) Initial Public Offering, and (ii)Business Combination, the private placement since2021 Notes were converted to approximately 4,128 shares of Leafly common stock at the exerciseconversion price of approximately $2.63, which was 80% of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 10,451,087 sharesimplied price per share of common stock in the aggregate. Business Combination. Upon closing of the Business Combination, the shares of common
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, exceptstock are entitled to one vote per share amounts):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Allocation of net loss, common stock subject to redemption | $ | (2,293,082 | ) | $ | (225,395 | ) | $ | (3,338,806 | ) | $ | (5,130 | ) | ||||
| Weighted average shares outstanding, common stock subject to possible redemption | 13,001,552 | 13,001,552 | 13,001,552 | 13,001,552 | ||||||||||||
| Basic and diluted net income per share, common stock subject to possible redemption | $ | (0.18 | ) | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.00 | ) | ||||
| Allocation of net loss, common stock | $ | (594,435 | ) | $ | (58,429 | ) | $ | (865,517 | ) | $ | (1,330 | ) | ||||
| Weighted average shares outstanding, common stock | 3,370,388 | 3,370,388 | 3,370,388 | 3,370,388 | ||||||||||||
| Basic and diluted net loss per share, common stock | $ | (0.18 | ) | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.00 | ) | ||||
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Concentrationon each matter properly submitted to a vote of Credit Risk
Financial instruments that potentially subjectstockholders. The holders of Leafly common stock will at all times vote together as one class on all matters submitted to a vote of stockholders, unless otherwise required by Delaware law or the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Companycharter. If Leafly has not experienced losses on these accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amount represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term nature, except for the Private Warrants (see Note 10).
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. 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 other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
Note 4 — Initial Public Offering
Pursuant to the IPO, the Company sold 13,001,552 Units at a price of $10.00 per Unit, inclusive of 1,001,552 Units sold to the underwriters on November 13, 2019 upon the underwriters’ election to partially exercise their over-allotment option. Each Unit consists of one sharemultiple classes of common stock in the future, then Delaware law could require holders of shares of a class of capital stock to vote separately as a single class in the following circumstances:
Note 5 — Private Placement
Simultaneously with the closing of the IPO, Merida Holdings, LLC and EarlyBirdCapital purchased an aggregate of 3,750,000 Private Warrants at a price of $1.00 per Private Warrant for an aggregate purchase price of $3,750,000, in a private placement that occurred simultaneously with theBusiness Combination, were granted upon closing of the IPO. On November 13, 2019, in connection with the underwriters’ electionBusiness Combination, contingent rights to partially exercise their over-allotment option, the Company sold an additional aggregate of 200,311 Private Warrantsreceive up to Merida Holdings, LLC and EarlyBirdCapital, at a price of $1.00 per Private Warrant, generating gross proceeds of $200,311. Each whole Private Warrant is exercisable to purchase one share5,429 shares of common stock at an exercise price of $11.50 per share. The proceeds from(the "Rights") if the Private Warrants were addedCompany achieves certain earn-out conditions prior to the proceeds fromthird anniversary of the IPO heldBusiness Combination. We will account for the Rights as derivative liabilities, which we will remeasure to their current fair value as of the end of each reporting period, with changes in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Warrantsfair value recorded to earnings. See Note 20 for additional information.
Note 6 — Related Party Transactions
Founder Shares
In August 2019, the Sponsor purchased 2,875,000 shares (the “Founder Shares”) of the Company’s common stock will be issued as follows:
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until, with respect to 50% of the Founder Shares, the earlier of one year after the consummation of a Business Combination and •the date on which the closingvolume-weighted average price of the common stock equalsfor a period of at least 20 days out of 30 consecutive trading days ending on the trading day immediately prior to the date of determination is greater than or exceeds $12.50 per shareequal to $13.50 during the two-year period beginning on the trading day after the closing date of the Merger (as adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30-trading day period commencing after a Business Combination and,reclassifications, combinations, exchanges of shares or other like changes or transactions with respect to the remaining 50% of the Founder Shares, until the one year after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securitiesoccurring at or other property.
Administrative Support Agreement
The Company entered into an agreement on November 4, 2019, as amended on November 26, 2019, whereby, commencing on November 4, 2019 through•a change of control occurs within the earliertwo years after the closing date of the Company’s consummation of a Business Combination at the first target price or higher, or
Advances — Related Party
In anticipation of the underwriters’ election to fully exercise their over-allotment option, the Sponsor advanced the Company an additional $41,458 to cover the purchase of the additional Private Warrants. As of September 30, 2021 and December 31, 2020, advances of $16,458 were outstanding and due on demand.
Promissory Note — Related Party
On August 6, 2019, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company borrowed an aggregate principal amount of $100,569 under the Promissory Note. The Promissory Note was non-interest bearing and payable on the earlier of (i) September 30, 2020, (ii) the consummation of the IPO or (iii) •the date on which the Company determined notvolume-weighted average price of common stock for a period of at least 20 days out of 30 consecutive trading days ending on the trading day immediately prior to proceed with the IPO. $339 remained underdate of determination is greater than or equal to $15.50 during the Promissory Note at September 30, 2021 and December 31, 2020, respectively, which is currently duethree-year period beginning on demand.
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, or certaintrading day after the closing date of the Company’s officers and directorsMerger
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Note 7 — Commitmentsvoting power and Contingencies
Registration Rights
Pursuant to a registrationother rights agreement entered into on November 4, 2019,of the holders of the Founder Shares, Representative Shares, Private Warrants, and any warrants that may be issued in payment of Working Capital Loans (and all underlying securities) are entitled to registration rights. The holders of the majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which the Founder Shares are to be released from escrow. The holders of a majority of the Representative Shares, Private Warrants or warrants issued in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time commencing after the Company consummates a Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one occasion and only during the five-year period beginning on the effective date of the IPO. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the IPO. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day to purchase up to 1,800,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On November 13, 2019, the underwriters partially exercised their over-allotment option to purchase an additional 1,001,552 Units at $10.00 per Unit, leaving 798,448 Units available for a purchase price of $10.00 per Unit.
Business Combination Marketing Agreement
The Company has engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company 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 IPO, or an aggregate of $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 the Company’s sole discretion to other FINRA members that assist the Company in identifying and consummating a Business Combination.
Merger Agreement
The Company has entered into an Agreement and Plan of Merger, dated August 9, 2021 and amended September 8, 2021 (the “Merger Agreement”), by and among the Company, Merida Merger Sub, Inc., a Washington corporation and wholly-owned subsidiary of Merida (“First Merger Sub”), Merida Merger Sub II, LLC, a Washington limited liability company and wholly-owned subsidiary of Merida (“Second Merger Sub”), and Leafly Holdings, Inc., a Washington corporation (“Leafly”). Pursuant to the Merger Agreement, among other things the parties will undertake the following transactions (collectively, the “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 the Company.
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 of common stock of the Company, par value $0.0001 per share (“Merida Common Stock”) equal to the Exchange Ratio (as defined below), and (b) each share of Leafly Series A preferred stock, par value $0.0001 per share (“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 the Company’s 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.could have anti-takeover effects. The “Exchange Ratio” is the quotient of (i) 38,500,000 shares of Merida Common Stock, divided by (ii) the adjusted fully diluted shares of Leafly Common Stock outstanding immediately prior to the completion of the First Merger (taking into account the number of shares of Leafly Common Stock issuable upon the conversionability of the Leafly Preferred Stock and Notes and upon exerciseboard of outstandingdirectors to issue Leafly preferred stock optionswithout stockholder approval could have the effect of Leafly, assuming for the purposesdelaying, deferring or preventing a change of this definition that all such Company Stock Options are fully vested and exercised on a net exercise basis. Each optioncontrol of Leafly that is outstanding immediately prior to the Closing will automatically convert to an option to acquire an adjusted number of shares of Merida Common Stock at an adjusted exercise price, in each case, pursuant to the terms of the Merger Agreement.
Concurrently with the execution of the Merger Agreement, the Company, the Sponsor, and Leafly entered into an agreement (“Sponsor Agreement”) providing (a) for the forfeiture of such number of shares of Merida Common Stock held by the Sponsor (such shares, the “Forfeited Shares”) equal to the quotient of the amount by which Merida’s transaction expenses exceed $6.5 million divided by $10.00, provided, that variable fees paid or required to be paid to capital markets advisory firms engaged by Parent will not be included for purposes of determining whether Merida’s transaction expenses exceed $6.5 million, (b) for The Company, the Sponsor, and Continental Stock Transfer & Trust Company to enter into an amendment to the existing stock escrow agreement providing for the forfeiture and cancellation of the Forfeited Shares and that the remaining shares held in escrow will be released or forfeited, as the case may be, upon the satisfaction or failure to satisfy certain earnout conditions, and for such shares to be subject to a six month lock-up.
The Merger Agreement may be terminated by either the Company or Leafly with mutual written notice at any time. If the closing has not occurred by February 5, 2022 (“Termination Date”), Leafly by way of written notice may terminate the Merger Agreement. The Merger Agreement can be terminated by Leafly or the Comany by wayremoval of written notice if eitherexisting management. Leafly or the Company breachdid not have any conditions of the Merger Agreement.
Note 8 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue 1,000,000issued and outstanding shares of preferred stock with a par valueas of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 20212022.
Common Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. At September 30, 2021 and December 31, 2020, there were 3,370,388 shares of common stock issued and6,501 warrants outstanding excluding 13,001,552 shares of common stock subject to possible redemption.
Representative Shares
In August 2019, the Company issued to EarlyBirdCapital and its designees the 120,000 Representative Shares (as adjusted for the stock dividend described above). The Company accounted for the Representative Shares as an offering cost of the IPO, with a corresponding credit to stockholder’s equity. The Company estimated the fair value of Representative Shares to be $910 based upon the price of the Founder Shares issued to the Sponsor. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The Representative Shares havethat had been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the IPO pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would resultincluded in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the IPO except to any underwriter and selected dealer participatingunits issued in the IPO and their bona fide officers or partners.
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Note 9 — Warrants
As of September 30, 2021 and December 31, 2020, there were 6,500,776 Public Warrants outstanding.Merida’s initial public offering (the "Public Warrants"). Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50. Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combinationmerger or (b) 12 months from the closing of the IPO. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock.
| in whole and not in part; | ||
The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
In addition, if (x) the Company issues additional Plan, 4,502 shares of common stock or equity-linked securitieswere initially reserved for capital raising purposes in connection withissuance. During the closingterm of an initial Business Combination at an issue price or effective issue pricethe 2021 Plan, the number of less than $9.20 per shareshares of common stock (withthereunder automatically increases on each January 1, commencing on January 1, 2023, and ending on (and including) January 1, 2031, by the lesser of (i) 10% of the fully diluted shares of common stock as of the last day of the preceding fiscal year and (ii) 4,502 shares (adjusted pursuant to the terms of the 2021 Plan).
| Risk-free interest rate | 4.1 | % | |||
| Expected term in years | 4.06 | ||||
| Expected volatility | 74.6 | % | |||
| Expected dividend yield | 0.0 | % | |||
| Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term (in years) | |||||||||||||||||||||||
| Outstanding at June 30, 2022 | — | $ | — | $ | — | — | ||||||||||||||||||||
| Granted | 101 | 1.98 | ||||||||||||||||||||||||
| Exercised | — | — | ||||||||||||||||||||||||
| Forfeited or expired | — | — | ||||||||||||||||||||||||
| Outstanding at September 30, 2022 | 101 | $ | 1.98 | $ | — | 9.89 | ||||||||||||||||||||
Vested and exercisable | — | $ | — | $ | — | — | ||||||||||||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value | Total Fair Value | |||||||||||||||||||||
| Unvested at June 30, 2022 | — | $ | — | ||||||||||||||||||||
| Granted | 1,228 | 1.98 | $ | 2,432 | |||||||||||||||||||
| Vested | (173) | 1.98 | $ | 325 | |||||||||||||||||||
| Forfeited | (65) | 1.98 | |||||||||||||||||||||
| Unvested at September 30, 2022 | 990 | $ | 1.98 | ||||||||||||||||||||
| Risk-free interest rate | 1.0 | % | |||
| Expected term in years | 5.90 | ||||
| Expected volatility | 61.2 | % | |||
| Expected dividend yield | 0.0 | % | |||
| Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||||||||||||||
| Outstanding at January 1, 2022 | 3,851 | $ | 1.77 | ||||||||||||||||||||||||||
| Exercised | (114) | 1.12 | |||||||||||||||||||||||||||
| Forfeited or expired | (56) | 1.08 | |||||||||||||||||||||||||||
| Outstanding at March 31, 2022 | 3,681 | $ | 1.78 | $ | 23,918 | 8.62 | |||||||||||||||||||||||
| Exercised | (29) | $ | 1.05 | ||||||||||||||||||||||||||
| Forfeited or expired | (3) | $ | 2.30 | ||||||||||||||||||||||||||
| Outstanding at June 30, 2022 | 3,649 | $ | 1.78 | $ | 11,307 | 8.35 | |||||||||||||||||||||||
| Exercised | (5) | 0.79 | |||||||||||||||||||||||||||
| Forfeited or expired | (110) | 7.75 | |||||||||||||||||||||||||||
Outstanding at September 30, 2022 1 | 3,534 | $ | 1.60 | $ | 84 | 8.29 | |||||||||||||||||||||||
Vested and exercisable | 1,849 | $ | 1.18 | $ | 82 | 7.80 | |||||||||||||||||||||||
| Three Months Ended September 30, 2022 | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Sales and marketing | $ | 77 | $ | 15 | $ | 137 | $ | 65 | |||||||||||||||
| Product development | 86 | 14 | 123 | 126 | |||||||||||||||||||
| General and administrative | 608 | 179 | 2,899 | 538 | |||||||||||||||||||
| $ | 771 | $ | 208 | $ | 3,159 | $ | 729 | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net income (loss) (A) | $ | 15,454 | $ | (4,454) | $ | 10,837 | $ | (6,880) | |||||||||||||||
| Income impact of FPAs | (3,939) | — | (346) | — | |||||||||||||||||||
| Income impact of convertible promissory notes | 600 | — | — | — | |||||||||||||||||||
| Total undistributed income (loss) (B) | 12,115 | (4,454) | 10,491 | (6,880) | |||||||||||||||||||
| Weighted average shares outstanding (C) | 35,580 | 24,923 | 35,260 | 24,832 | |||||||||||||||||||
| Dilutive effect of FPAs | 3,547 | — | 1,140 | — | |||||||||||||||||||
| Dilutive effect of convertible promissory notes | 2,477 | — | — | — | |||||||||||||||||||
| Dilutive effect of stock-based awards | 1,611 | — | 2,304 | — | |||||||||||||||||||
| Common stock and common stock equivalents (D) | 43,215 | 24,923 | 38,704 | 24,832 | |||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic (A/C) | $ | 0.43 | $ | (0.18) | $ | 0.31 | $ | (0.28) | |||||||||||||||
| Diluted (B/D) | $ | 0.28 | $ | (0.18) | $ | 0.27 | $ | (0.28) | |||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | ||||||||||||||||||||||
| Common | Class 1 | Class 2 | Class 3 | ||||||||||||||||||||
| Net income (loss) | $ | 15,454 | $ | (1,676) | $ | (2,458) | $ | (320) | |||||||||||||||
| Weighted average shares outstanding | 35,580 | 9,379 | 13,755 | 1,789 | |||||||||||||||||||
| Common stock and common stock equivalents | 43,215 | 9,379 | 13,755 | 1,789 | |||||||||||||||||||
| Basic net income (loss) per share | $ | 0.43 | $ | (0.18) | $ | (0.18) | $ | (0.18) | |||||||||||||||
| Diluted net income (loss) per share | $ | 0.28 | $ | (0.18) | $ | (0.18) | $ | (0.18) | |||||||||||||||
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||
| Common | Class 1 | Class 2 | Class 3 | ||||||||||||||||||||
| Net loss | $ | 10,837 | $ | (2,598) | $ | (3,811) | $ | (471) | |||||||||||||||
| Weighted average shares outstanding | 35,260 | 9,379 | 13,755 | 1,698 | |||||||||||||||||||
| Common stock and common stock equivalents | 38,704 | 9,379 | 13,755 | 1,698 | |||||||||||||||||||
| Basic net income (loss) per share | $ | 0.31 | $ | (0.28) | $ | (0.28) | $ | (0.28) | |||||||||||||||
| Diluted net income (loss) per share | $ | 0.27 | $ | (0.28) | $ | (0.28) | $ | (0.28) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Shares subject to warrants | 10,451 | — | 10,451 | — | |||||||||||||||||||
| Shares subject to convertible promissory notes | — | 12,240 | 2,428 | 12,240 | |||||||||||||||||||
| Preferred stock | — | 6,141 | — | 6,141 | |||||||||||||||||||
| Escrow Shares | 1,625 | — | 1,625 | — | |||||||||||||||||||
| Shares subject to outstanding common stock options and RSUs | 1,056 | 3,785 | 1,056 | 3,785 | |||||||||||||||||||
| Shares subject to stockholder earn-out rights | 5,429 | — | 5,429 | — | |||||||||||||||||||
| $ | 18,561 | $ | 22,166 | $ | 20,989 | $ | 22,166 | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Retail | $ | 9,042 | $ | 8,606 | $ | 27,286 | $ | 24,572 | |||||||||||||||
| Brands | 2,739 | 2,290 | 7,965 | 6,387 | |||||||||||||||||||
| Total revenue | $ | 11,781 | $ | 10,896 | $ | 35,251 | $ | 30,959 | |||||||||||||||
| Gross profit: | |||||||||||||||||||||||
| Retail | 7,979 | 7,744 | 24,193 | 22,339 | |||||||||||||||||||
| Brands | 2,287 | 1,891 | 6,647 | 5,056 | |||||||||||||||||||
| Total gross profit | $ | 10,266 | $ | 9,635 | $ | 30,840 | $ | 27,395 | |||||||||||||||
Note 10
period. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
| Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | ||
| Description | Level | Fair Value at September 30, 2022 | Fair Value at June 30, 2022 | Fair Value at February 4, 2022 | Gain (Loss) Three Months Ended September 30, 20221 | Gain (Loss) Nine Months Ended September 30, 20221 | |||||||||||||||||||||||
| Private Warrants derivative liability | 3 | $ | 662 | $ | 3,693 | $ | 3,916 | $ | 3,031 | $ | 3,254 | ||||||||||||||||||
Forward share purchase agreements derivative liability 2 | 3 | — | 17,763 | 14,170 | 3,939 | 346 | |||||||||||||||||||||||
| Escrow Shares derivative liability | 3 | 47 | 3,481 | 6,868 | 3,434 | 6,821 | |||||||||||||||||||||||
| Stockholder earn-out rights derivative liability | 3 | 288 | 12,147 | 26,131 | 11,859 | 25,843 | |||||||||||||||||||||||
| Total | $ | 997 | $ | 37,084 | $ | 51,085 | 22,264 | $ | 36,264 | ||||||||||||||||||||
| Description | Level | September 30, 2021 | December 31, 2020 | |||||||||
| Assets: | ||||||||||||
| Cash and marketable securities held in Trust Account | 1 | $ | 130,203,176 | $ | 130,681,047 | |||||||
| Liabilities: | ||||||||||||
| Warrant Liability – Private Warrants | 3 | $ | 7,229,069 | $ | 3,950,311 | |||||||
MERIDA MERGER CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
As of September 30, 2021 and December 31, 2020, the Company had 3,950,311 Private Warrants outstanding.
The Private Warrants were accounted for as liabilities in accordance with ASC 815-40valued using a Black-Scholes model and are presented within warrant liabilities on the balance sheet. following Level 3 inputs:
| September 30, 2022 | June 30, 2022 | February 4, 2022 | ||||||||||||
| Exercise price | $ | 11.50 | $ | 11.50 | $ | 11.50 | ||||||||
| Stock price | $ | 0.68 | $ | 4.50 | $ | 6.53 | ||||||||
| Volatility | 98.0% | 51.6% | 34.3% | |||||||||||
| Term (in years) | 4.34 | 4.59 | 5.00 | |||||||||||
| Risk-free rate | 4.1% | 3.0% | 1.8% | |||||||||||
| Dividend yield | 0.0% | 0.0% | 0.0% | |||||||||||
the Public Warrants. The term input represents the maximum contractual term, though the Private Warrants may be exercised earlier. The interest rate input is the U.S. Treasury constant maturity rate for the instrument that most closely matches the term input.
| September 30, 2022 | June 30, 2022 | February 4, 2022 | ||||||||||||
| Exercise price - one agreement | N/A | $ | 10.31 | $ | 10.16 | |||||||||
| Exercise price - three agreements | N/A | $ | 10.16 | $ | 10.01 | |||||||||
| Stock price | N/A | $ | 4.50 | $ | 6.53 | |||||||||
| Volatility | N/A | 70.4% | 63.9% | |||||||||||
| Term (in years) | N/A | 0.09 | 0.24 | |||||||||||
| Risk-free rate | N/A | 1.3% | 0.2% | |||||||||||
| Dividend yield | N/A | 0.0% | 0.0% | |||||||||||
| September 30, 2022 | June 30, 2022 | February 4, 2022 | ||||||||||||
| First stock price trigger | $ | 13.50 | $ | 13.50 | $ | 13.50 | ||||||||
| Second stock price trigger | $ | 15.50 | $ | 15.50 | $ | 15.50 | ||||||||
| Stock price | $ | 0.68 | $ | 4.50 | $ | 6.53 | ||||||||
| Volatility | 79.0% | 68.0% | 64.0% | |||||||||||
| Term (in years) | 2.34 | 2.59 | 3.00 | |||||||||||
| Risk-free rate | 4.2% | 3.0% | 1.6% | |||||||||||
| Dividend yield | 0.0% | 0.0% | 0.0% | |||||||||||
| September 30, 2022 | June 30, 2022 | February 4, 2022 | ||||||||||||
| First stock price trigger | $ | 13.50 | $ | 13.50 | $ | 13.50 | ||||||||
| Second stock price trigger | $ | 15.50 | $ | 15.50 | $ | 15.50 | ||||||||
| First revenue trigger | $ | 65,000 | $ | 65,000 | $ | 65,000 | ||||||||
| Second revenue trigger | $ | 101,000 | $ | 101,000 | $ | 101,000 | ||||||||
| Stock price | $ | 0.68 | $ | 4.50 | $ | 6.53 | ||||||||
| 2022 Revenue assumption | $ | 47,500 | $ | 49,500 | $ | 55,500 | ||||||||
| Volatility | 79.0% | 68.0% | 64.0% | |||||||||||
| Term (in years) | 2.34 | 2.59 | 3.00 | |||||||||||
| Risk-free rate | 4.2% | 3.0% | 1.6% | |||||||||||
| Dividend yield | 0.0% | 0.0% | 0.0% | |||||||||||
The following table presents the quantitative information regarding Level 3 fair value measurements of the warrant liability:
| September 30, 2021 | December 31, 2020 | |||||||
| Exercise price | $ | 11.50 | $ | 11.50 | ||||
| Stock price | $ | 9.99 | $ | 10.20 | ||||
| Volatility | 18.3 | % | 17.2 | % | ||||
| Term | 5.00 | 5.00 | ||||||
| Risk-free rate | 0.90 | % | 0.29 | % | ||||
| Dividend yield | 0.0 | % | 0.0 | % | ||||
The following table presents the changes in the fair value of warrant liabilities:
| Private Placement | ||||
| Fair value as of December 31, 2020 | $ | 3,950,311 | ||
| Change in fair value | 711,056 | |||
| Fair value as of March 31, 2021 | 4,661,367 | |||
| Change in fair value | 118,509 | |||
| Fair value as of June 30, 2021 | 4,779,876 | |||
| Change in fair value | 2,449,193 | |||
| Fair value as of September 30, 2021 | $ | 7,229,069 | ||
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the three and nine months ended September 30, 2021.
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements other than the below.
On October 13, 2021, the Company issued an unsecured promissory note in the amount of $400,000 to the Sponsor (the “Promissory Note”)Nasdaq Global Market’s requirements for continued listing. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), pursuant to which the Company borrowed an aggregate principal amount of $400,000 under the Promissory Note. The Promissory Note is non-interest bearing and payable prior to the consummation of a business combination.
On October 29, 2021 the Company’s stockholders voted to extend the date in which the Company has been provided an initial period of 180 calendar days, or until May 1, 2023, to consummate a business combination to December 31, 2021. Holdersregain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of an aggregate of 1,389,867 shares of Merida’sthe Company’s common stock exercised their rightmust be $1.00 per share or more for a minimum of 10 consecutive business days at any time before May 1, 2023 and we must otherwise satisfy the Nasdaq Global Market’s requirements for continued listing The Company's failure to redeem their sharesregain compliance during this period could result in delisting.
References in this report (the “Quarterly Report”(“MD&A”) 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 condensed consolidated financial statements and the notes thereto contained elsewhererelated notes. The MD&A is intended to assist in this Quarterly Report. Certain information contained in theunderstanding our financial condition and results of operations. This discussion and analysis set forth below includescontains 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 Our 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 due to various factors discussed under “Risk Factors” in the forward-looking statements, please refer to the Risk Factors section of the Company’sour Annual Report on Form 10-K filedand “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.
This Management’s DiscussionAccordingly, the consolidated assets, liabilities, and Analysisresults of Financial Condition and Resultsoperations of Operations has been amended and restated to give effect toLeafly became 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,with Merida’s assets, liabilities and results of operations consolidated with Leafly’s beginning on the Business Combination date. Except for certain derivative liabilities (which were measured at fair value), the assets and liabilities of Merida were recognized at historical cost (which is consistent with carrying value) and were not material, with no goodwill or other intangible assets recorded. Operations prior to the closing of the Business Combination presented for comparative purposes below are those of Leafly.
Overview
Users (visitors) are considered active by initiating a session on at least one webpage or app. Each month’s MAUs is the total of unique visitors to Leafly during the specified month and includes both new visitors as well as those returning from the previous month. We count a unique user the first time an individual accesses one of our websites or native apps during a calendar month. If an individual accesses our websites using different web browsers within a given month, the first access by each such web browser is counted as a separate unique user. If an individual accesses more than one of our websites or native apps in a single month, the first access to each website or app is counted as a separate unique user since unique users are tracked separately for each domain and native app. The unique visitors are measured using Google Analytics for our web applications and Firebase for our native applications.
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 pursuitvolume element of our acquisition plans. We cannot assure you thatrevenue and provides an indication of 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 andRetailer ARPA is calculated 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 multipliedmonthly retail revenue, on an account basis, divided by the number of sharesretail accounts that were active during that same month. An active account is one that had an active paying subscription with Leafly in the month. Leafly does not provide retailers with an ongoing free subscription offering but may offer a free introductory period with certain subscriptions. This metric is helpful because it represents the price element of Leafly Common Stock issuable upon conversionour revenue.
| Three Months Ended September 30, | 2022 | 2021 | Change | Change (%) | ||||||||||||||||||||||
Average Monthly Active Users ("MAUs") (in thousands)1 | 8,187 | 9,433 | (1,246) | (13) | % | |||||||||||||||||||||
Ending retail accounts2 | 5,637 | 4,769 | 868 | 18 | % | |||||||||||||||||||||
Retailer average revenue per account ("ARPA")3 | $ | 556 | $ | 621 | $ | (65) | (10) | % | ||||||||||||||||||
3 Calculated as a simple average of monthly retailer ARPA for the period presented. Using the prior calculation of retailer ARPA which included retail revenue on a product basis, retailer ARPA would have been $551 and $619 for the three months ended September 30, 2022 and 2021, respectively, for a decrease of $68 or 11%.
| Nine Months Ended September 30, | 2022 | 2021 | Change | Change (%) | ||||||||||||||||||||||
Average Monthly Active Users ("MAUs") (in thousands)1 | 7,940 | 10,451 | (2,511) | (24) | % | |||||||||||||||||||||
Ending retail accounts2 | 5,637 | 4,769 | 868 | 18 | % | |||||||||||||||||||||
Retailer average revenue per account ("ARPA")3 | $ | 570 | $ | 649 | $ | (79) | (12) | % | ||||||||||||||||||
The Transaction will be consummated subject
Discussion of our Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through
| Three Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) | ||||||||||||||||||||||
| Retail | $ | 9,042 | $ | 8,606 | $ | 436 | 5 | % | ||||||||||||||||||
| Brands | 2,739 | 2,290 | 449 | 20 | % | |||||||||||||||||||||
| Total revenue | $ | 11,781 | $ | 10,896 | $ | 885 | 8 | % | ||||||||||||||||||
| Nine Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) | ||||||||||||||||||||||
| Retail | $ | 27,286 | $ | 24,572 | $ | 2,714 | 11 | % | ||||||||||||||||||
| Brands | 7,965 | 6,387 | 1,578 | 25 | % | |||||||||||||||||||||
| Total revenue | $ | 35,251 | $ | 30,959 | $ | 4,292 | 14 | % | ||||||||||||||||||
For the three months ended September 30, 2021, we had a net loss2022, Brands revenue increased due primarily to:
For the nine months ended September 30, 2021,2022, Brands revenue increased due primarily to:
| Three Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) | ||||||||||||||||||||||
| Retail | $ | 1,063 | $ | 862 | $ | 201 | 23 | % | ||||||||||||||||||
| Brands | 452 | 399 | 53 | 13 | % | |||||||||||||||||||||
| Total cost of revenue | $ | 1,515 | $ | 1,261 | $ | 254 | 20 | % | ||||||||||||||||||
| Nine Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) | ||||||||||||||||||||||
| Retail | $ | 3,093 | $ | 2,233 | $ | 860 | 39 | % | ||||||||||||||||||
| Brands | 1,318 | 1,331 | (13) | (1) | % | |||||||||||||||||||||
| Total cost of revenue | $ | 4,411 | $ | 3,564 | $ | 847 | 24 | % | ||||||||||||||||||
Forrevenue increased across nearly all components when comparing the three months ended September 30, 2020, we had2022 to the prior year. Partially offsetting these increases was a net lossdecrease of $283,824, which consisted of operating$55 in costs of $153,230 and a change in fair valueaudience extension services, corresponding to decreased associated revenue.
Forrevenue decreased for the nine months ended September 30, 2020, we had2022, primarily reflecting a net lossdecrease of $6,460, which consisted of operating$346 in costs of $512,896, unrealized lossaudience extension, corresponding to decreased associated revenue. Partially offsetting this decrease were $147 higher business platform costs and $68 higher website infrastructure costs, as described under Retail cost of revenue above, as these costs are shared across both of our segments. Brands cost of revenue also increased $86 for the nine months ended September 30, 2022, due to increased headcount costs, generally.
| Three Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) | ||||||||||||||||||||||
| Sales and marketing | $ | 6,403 | $ | 4,999 | $ | 1,404 | 28 | % | ||||||||||||||||||
| Product development | 3,406 | 3,522 | (116) | (3) | % | |||||||||||||||||||||
| General and administrative | 6,489 | 4,949 | 1,540 | 31 | % | |||||||||||||||||||||
| Total operating expenses | $ | 16,298 | $ | 13,470 | $ | 2,828 | 21 | % | ||||||||||||||||||
| Nine Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) | ||||||||||||||||||||||
| Sales and marketing | $ | 21,529 | $ | 13,148 | $ | 8,381 | 64 | % | ||||||||||||||||||
| Product development | 10,927 | 9,905 | 1,022 | 10 | % | |||||||||||||||||||||
| General and administrative | 20,730 | 10,485 | 10,245 | 98 | % | |||||||||||||||||||||
| Total operating expenses | $ | 53,186 | $ | 33,538 | $ | 19,648 | 59 | % | ||||||||||||||||||
| Three Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) 1 | ||||||||||||||||||||||
| Interest expense, net | $ | (705) | $ | (590) | $ | (115) | 19 | % | ||||||||||||||||||
| Change in fair value of derivatives | 22,264 | — | 22,264 | nm | ||||||||||||||||||||||
| Other expense, net | (73) | (29) | (44) | nm | ||||||||||||||||||||||
| Total other income (expense) | $ | 21,486 | $ | (619) | $ | 22,105 | nm | |||||||||||||||||||
| Nine Months Ended September 30, | 2022 | 2021 | Change ($) | Change (%) 1 | ||||||||||||||||||||||
| Interest expense, net | $ | (2,119) | $ | (698) | $ | (1,421) | 204 | % | ||||||||||||||||||
| Change in fair value of derivatives | 36,264 | — | 36,264 | nm | ||||||||||||||||||||||
| Other expense, net | (962) | (39) | (923) | nm | ||||||||||||||||||||||
| Total other income (expense) | $ | 33,183 | $ | (737) | $ | 33,920 | nm | |||||||||||||||||||
Liquidity and Capital Resources
On November 7, 2019, we consummatedcosts incurred in connection with the IPO of 12,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $120,000,000. Simultaneously with theBusiness Combination, which were allocated upon closing of the IPO,Business Combination to newly issued derivative liabilities that are recorded at fair value on a recurring basis. See Note 2 to our condensed consolidated financial statements within this Quarterly Report for information on allocation of these costs.
On November 13, 2019,EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider these in isolation or as a resultsubstitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net income (loss) | $ | 15,454 | $ | (4,454) | $ | 10,837 | $ | (6,880) | |||||||||||||||
| Interest expense, net | 705 | 590 | 2,119 | 698 | |||||||||||||||||||
| Depreciation and amortization expense | 127 | 57 | 276 | 195 | |||||||||||||||||||
| EBITDA | 16,286 | (3,807) | 13,232 | (5,987) | |||||||||||||||||||
| Stock-based compensation | 771 | 208 | 3,159 | 729 | |||||||||||||||||||
| Transaction expenses allocated to derivatives | — | — | 874 | — | |||||||||||||||||||
| Change in fair value of derivatives | (22,264) | — | (36,264) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | (5,207) | $ | (3,599) | $ | (18,999) | $ | (5,258) | |||||||||||||||
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.
ForAs compared to the nine months ended September 30, 2021, cash used in operatingoperations increased by $22,029 to $25,130 for the nine-month period ended September 30, 2022, mainly due to increased net loss from operations. See discussion under “— Discussion of our Results of Operations” above for more information. Cash used in investing activities was $975,407. Net lossincreased $2,156 to a use of $4,204,323 was affected by the change$2,194 due to additional investments in fair value of the warrant liability of $3,278,758, interest earned on marketable securities heldproperty and equipment in the Trust Account of $27,537current year. Cash and change in deferred tax of $432. Changes in operating assets and liabilities used $21,873 ofrestricted cash from operating activities.
Forprovided by financing decreased $4,386 over this same period to $27,065 for the nine months ended September 30, 2020, cash used in operating activities was $539,569. Net loss2022, mainly due to the use 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 heldfinancing proceeds received earlier in the Trust Accountyear to repurchase common stock in settlement of $757,577. ChangesFPAs in operating assetsthe third quarter of 2022. See Notes 3, 11, and liabilities provided $24,95013 to our condensed consolidated financial statements within this Quarterly Report for more information.
As ofDeferred revenue is primarily related to software subscriptions and display ads. The revenue deferred at September 30, 2021, we had marketable securities held2022 is expected to be recognized in the Trust Accountsubsequent 12-month period. See Note 9 to our condensed consolidated financial statements within this Quarterly Report for further discussion.
As of$69,770 at 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 identify2022 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 thatrespectively.
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 completionclosing of the Business Combination, andLeafly issued the Company’s liquidation.
We have engaged EarlyBirdCapital as an advisor in connection with a Business Combination2022 Notes, which provided incremental funding for our operations. Note 11 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.
Critical Accounting Policies
The preparation of condensed consolidated financial statements within this Quarterly Report provides additional information regarding the 2022 Notes. As discussed in Note 21 and related disclosures in conformityunder “—
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 WarrantsSee Note 16 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.
As of September 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Evaluation of Disclosure Controls and Procedures
DisclosureThe term “disclosure controls and procedures,” as defined in Rules 13a-15 and 15d-15 under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by usa company in ourthe reports
As requiredBecause there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by Rules 13a-15the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and 15d-15 under the Exchange Act,benefits of controls must be considered relative to their costs.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improvecovered by this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
Changes in Internal Control Overover Financial Reporting
There werehave been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f)13a-15(d) and 15d-15(f) ofunder the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
As ofOther than the date of this Quarterly Report,items discussed below, there have been no material changes with respect to those risk factors previouslythe Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended, except as set forth below. Any2021:
We identified an additional material weakness in our internal control over financial reporting relating to our complex financial instruments. This material weakness could continue to adversely affect our ability to reportattract and retain key employees.
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Dollar Value of Shares that May Yet Be Purchased Under the Program | ||||||||||
| July 1 through 31, 2022 | — | $ | — | — | $ | — | ||||||||
| August 1 through 31, 2022 | 3,081,086 | $ | 10.28 | — | $ | — | ||||||||
| September 1 through 30, 2022 | — | $ | — | — | $ | — | ||||||||
| 3,081,086 | $ | 10.28 | — | $ | — | |||||||||
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation ofcondensed consolidated financial statements within this Quarterly Report for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this report, in connection with the preparation of our financial statements as of September 30, 2021, management identified errors made in our historical financial statements where we improperly classified some of our 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 that a redemption cannot result in net tangible assets being less than $5,000,001 pursuant to our amended and restated certificate of incorporation. Management determined that the common stock issued during our initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside our control. Therefore, management concluded that temporary equity should include all shares of common stock subject to possible redemption. As a result, management has noted a classification 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. Management concluded that the foregoing constituted a material weakness as of September 30, 2021.
As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented. However, we cannot assure you that the foregoing will not result in any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In August 2019, the Sponsor purchased 2,875,000 Founder Shares of the Company for an aggregate price of $25,000. On November 4, 2019, we effected a stock dividend of 0.2 shares for each outstanding share, resulting in our initial stockholders holding an aggregate of 3,450,000 founder shares. The foregoing issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On November 7, 2019, we consummated the Initial Public Offering of 12,000,000 Units. On November 13, 2019, we sold an additional 1,001,552 Units pursuant to the underwriters’ election to partially exercise their over-allotment option. The Units sold in the Initial Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of $130,015,520. EarlyBirdCapital, Inc. acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-234134). The Securities and Exchange Commission declared the registration statement effective on November 4, 2019.
Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement of an aggregate of 3,950,311 Private Warrants to the Sponsor and EarlyBirdCapital at a price of $1.00 per Private Warrant, generating total proceeds of $3,950,311. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, the partial exercise of the over-allotment option and the sale of the Private Warrants, $130,015,520 was placed in the Trust Account.
We paid a total of $3,412,939 in underwriting discounts and commissions and $812,628 for other costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
The following documents are included as exhibits are filed as part of, or incorporated by reference into,to this Quarterly Report on Form 10-Q.
| * | Filed herewith. | ||||
| *** | The XBRL Instance Document and Cover Page Interactive Data File do not appear in the | ||||
| **** | Submitted electronically herewith | ||||
| + | |||||
SIGNATURES
In accordance withPursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Principal Financial and Accounting Officer) | ||
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