c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.WASHINGTON, DC 20549
FORM 10-Q/A
(Amendment No.1No. 1)
(MARK ONE) Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterquarterly period ended September 30, 2021March 31, 2022
OR
☐ | 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: 001-39894
ENVIRONMENTAL IMPACT ACQUISITION CORP.GreenLight Biosciences Holdings, PBC
(Exact Name of Registrant as Specified in Itsits Charter)
Delaware | 85-1914700 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
200 Boston Avenue Medford, Massachusetts | 02155 | |
(Address of principal executive offices) | (Zip Code) |
535 Madison Avenue
New York, NY 10022
(Address of principal executive offices)
(212) 389-8109
(Issuer’sRegistrant’s telephone number)number, including area code: (617) 616-8188
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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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). 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of NovemberMay 24, 2021, there were 20,700,000 shares2022, the registrant had 123,199,202 shares of Class A common stock, $0.0001 par value and 5,175,000 shares of Class B common stock, $0.0001 par value, issued andper share, outstanding.
EXPLANATORY NOTE
ENVIRONMENTAL IMPACT ACQUISITION CORP.
FORMThis Amendment No. 1 on Form 10-Q/A FOR THE QUARTER ENDED SEPTEMBER 30,(“Amendment”) is being filed to correct our original Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (the “Initial Form 10-Q”) filed with the Securities and Exchange Commission (the “SEC”) on May 16, 2022. This Amendment amends Items 1 and 2 of the Initial Form 10-Q and no other items in the Initial Form 10-Q are amended hereby. The Amendment includes the Company’s restated condensed consolidated statement of operations for the three months ended March 31, 2022 and 2021 to correct an error related to the classification of operating expenses associated with general and administrative expense and research and development expense for the three months ended March 31, 2022, and to correct an error related to Net Loss per Share for the three months ended March 31, 2021. The condensed consolidated statement of operations for the three months ended March 31, 2022 and 2021, Notes 1 and 14 of the condensed consolidated financial statements, and the Results of Operations portion of Item 2 have been amended as a result of the correction of the foregoing errors. This restatement does not have any material impact on the Company's statement of financial positions, net loss, cash flows, liquidity, and capital resources.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), new certifications by the Company’s principal executive officer and principal financial officers are filed as exhibits to this filing.
These errors were identified by the Company subsequent to the filing of the Initial Form 10-Q on May 16, 2022 and not in a timely manner by the Company's financial review process. Management has reassessed its evaluation of the effectiveness of its internal control over financial reporting as of March 31, 2022 and has concluded that there were and continues to be material weaknesses in the Company’s disclosure controls and procedures including internal controls over financial reporting. For the Company’s plan to remediate the material weaknesses, see Part I – Item 4. Controls and Procedures of this Amendment No. 1.
Except as described above, the Amendment does not modify or update the disclosures presented in, or exhibits to, the Initial Form 10-Q. The Amendment continues to speak as of the date of the Initial Form 10-Q. Furthermore, the Amendment does not reflect events occurring after the filing of the Initial Form 10-Q.
TABLE OF CONTENTS
Table of Contents
| Page | |
PART I. | FINANCIAL INFORMATION | |
Item 1. | 1 | |
1 | ||
2 | ||
3 | ||
4 | ||
Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 35 |
Item 3. | Quantitative and Qualitative Disclosures |
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Item 4. |
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PART II. | OTHER INFORMATION | |
Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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56 | ||
i
EXPLANATORYCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Environmental Impact Acquisition Corp. (the “Company,” “we,” “us” or “our”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 (this “Quarterly Report”) to amend and restate certain terms in itsThis Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements regarding, among other things, the business and financial plans, strategies, and prospects of GreenLight Biosciences Holdings, PBC (“we,” “us,” “our,” the “Company” or “New GreenLight”). These statements are based on the beliefs and assumptions of the management of the Company. Although the Company believes that the plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, it cannot assure you that it will achieve or realize these plans, intentions, or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes”, “estimates”, “expects”, “projects”, “forecasts”, “may”, “might”, “will”, “should”, “seeks”, “plans”, “scheduled”, “possible”, “anticipates”, “intends”, “aims”, “works”, “focuses”, “aspires”, “strives” or “sets out” or similar expressions. Forward-looking statements are not guarantees of performance. Forward-looking statements involve a number of risks, uncertainties (many of which are beyond the Company’s control) or other factors that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. You should not place undue reliance on these statements, which speak only as of the date these statements were made. These risks and uncertainties include, but are not limited to, the following risks, uncertainties (some of which are beyond the Company’s control) or other factors:
Backgroundregulatory requirements, including good manufacturing practices, may materially delay preclinical studies, clinical trials or regulatory approval, any of Restatement
Allwhich may impact commercialization of the shares held byaffected product candidates;
The risks described above are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its Class A common stock subjectbusiness or the extent to possible redemption.which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. Some of these risks and uncertainties may in the future be amplified by the COVID-19 pandemic, and there may be additional risks that the Company considers immaterial or which are unknown. The Company previously determined the Class A common stock subjectdoes not undertake any obligation to possible redemption to be equal to the redemption value, while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Public Shares can be redeemedupdate or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification adjustment related to temporary equity and permanent equity as of the Initial Public Offering date and all subsequent reporting periods.
As a result, the Company’s management, together with the Audit Committee, determined that the Company’s financialrevise any forward-looking statements, and other financial data as of January 19, 2021 (the Initial Public Offering date),March 31, 2021, and June 30, 2021 should be restated in this Quarterly Reportwhether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
TRADEMARKS
This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this error (see Note 2Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable owner will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. The Company does not intend its use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of the financial statements included in this Quarterly Report). These restatements result in a change in the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock. Further, there is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss) but earnings per share was impacted due to a change in presentation relating to the restatements.
The financial information that has been previously filed or otherwise reported for these periods is supersededCompany by, the information in this Quarterly Report, and the financial statements and related financial information contained in the Original Quarterly Reports and the January 19, 2021 IPO 8-K should no longer be relied upon. On November 24, 2021, the Company filed a Current Report on Form 8-K disclosing the non-reliance on the financial statements included in the Original Quarterly Report.any other companies.
Internal Control Considerations
PART I—FINANCIAL INFORMATION
In connection with the restatement, management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2021. The Company’s management has concluded that, in light of the errors described above, and the filing of the Original Quarterly Report, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. Management plans to enhance the system of evaluating and implementing the accounting standards that apply to our financial statements, including enhanced training of our personnel and increased communication among our personnel and third-party professionals with whom we consult regarding application of complex financial instruments. For a discussion of management’s consideration of our disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures” of this Quarterly Report.
We are filing this Quarterly Report to amend and restate the Original Quarterly Report with modification as necessary to reflect the restatements. The following items have been amended to reflect the restatements:
Part I. Item 1. Financial StatementsStatements.
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Part I. Item 2. Management’s DiscussionCondensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and Analysis of Financial Condition and Results of Operationsper share data)
|
| MARCH 31, |
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| DECEMBER 31, |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
| $ | 83,223 |
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| $ | 31,446 |
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Prepaid expenses |
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| 8,725 |
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| 2,331 |
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Accounts receivable |
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| 5,000 |
|
|
| — |
|
Total Current Assets |
|
| 96,948 |
|
|
| 33,777 |
|
Restricted cash |
|
| 1,321 |
|
|
| 362 |
|
Property and equipment, net |
|
| 22,876 |
|
|
| 23,399 |
|
Deferred offering costs |
|
| — |
|
|
| 4,099 |
|
Other assets |
|
| 1,285 |
|
|
| 1,420 |
|
TOTAL ASSETS |
| $ | 122,430 |
|
| $ | 63,058 |
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK |
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CURRENT LIABILITIES |
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Accounts payable |
| $ | 6,049 |
|
| $ | 7,551 |
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Accrued expenses |
|
| 9,398 |
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|
| 14,624 |
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Convertible debt |
|
| — |
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|
| 31,691 |
|
Long-term debt, current portion |
|
| 9,849 |
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|
| 7,234 |
|
Deferred revenue, current portion |
|
| 3,941 |
|
|
| 963 |
|
Other current liabilities |
|
| 287 |
|
|
| 278 |
|
Total Current Liabilities |
|
| 29,524 |
|
|
| 62,341 |
|
Warrant liabilities |
|
| 1,820 |
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|
| 2,105 |
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Deferred revenue, net of current portion |
|
| 1,765 |
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|
| — |
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Long-term debt, net of current portion |
|
| 23,686 |
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|
| 27,152 |
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Other liabilities |
|
| 1,809 |
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|
| 1,435 |
|
TOTAL LIABILITIES |
|
| 58,604 |
|
|
| 93,033 |
|
COMMITMENTS AND CONTINGENCIES (Note 16) |
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LEGACY REDEEMABLE CONVERTIBLE PREFERRED STOCK (Note 12) |
|
| — |
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|
| — |
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STOCKHOLDERS’ EQUITY (DEFICIT) |
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Common stock, $0.0001 par value; 500,000,000 and 191,500,000 shares authorized, 122,980,505 and 96,575,107 shares issued and outstanding at March 31, 2022, and December 31, 2021, respectively |
|
| 13 |
|
|
| 10 |
|
Preferred Stock, $0.001 par value; 10,000,000 shares authorized, 0 shares issues and outstanding at March 31, 2022, and December 31, 2021, respectively |
|
| — |
|
|
| — |
|
Additional paid-in capital |
|
| 355,603 |
|
|
| 223,584 |
|
Accumulated deficit |
|
| (291,790 | ) |
|
| (253,569 | ) |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) |
|
| 63,826 |
|
|
| (29,975 | ) |
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED |
| $ | 122,430 |
|
| $ | 63,058 |
|
Part I. Item 4. Controls and Procedures
Part II. Item 1A. Risk Factors
In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing in connection with this Quarterly Report (Exhibits 31.1, 31.2, 32.1 and 32.2).
Except as described above, no other information included in the Original Quarterly Report is being amended or updated by this Quarterly Report and, other than as described herein, this Quarterly Report does not purport to reflect any information or events subsequent to the Original Quarterly Report, other than disclosures added in Item 2 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of this Quarterly Report for certain developments previously disclosed in our Current Report on Form 8-K filed on November 23, 2021. We have not amended our previously filed Quarterly Reports on Form 10-Q for the period affected by the restatement. This Quarterly Report continues to describe the conditions as of the date of the Original Quarterly Report and, except as expressly contained herein, we have not updated, modified or supplemented the disclosures contained in the Original Quarterly Report. Accordingly, this Quarterly Report should be read in conjunction with the Original Quarterly Report and with our filings with the SEC subsequent to the Original Quarterly Report.
ii
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, | December 31, 2020 | |||||||
| (Unaudited, restated) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 158,337 | $ | 156,848 | ||||
| Prepaid expenses | 698,309 | — | ||||||
| Total Current Assets | 856,646 | 156,848 | ||||||
| Deferred offering costs | — | 168,152 | ||||||
| Investments held in Trust Account | 207,008,746 | — | ||||||
| TOTAL ASSETS | $ | 207,865,392 | $ | 325,000 | ||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 3,017,789 | $ | 2,528 | ||||
| Accrued offering costs | 118,569 | — | ||||||
| Promissory note – related party | 500,000 | 300,000 | ||||||
| Total Current Liabilities | 3,636,358 | 302,528 | ||||||
| Warrant liabilities | 13,341,000 | — | ||||||
| Deferred underwriting fee payable | — | — | ||||||
| Total Liabilities | 16,977,358 | 302,528 | ||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption 20,700,000 and no shares at redemption value as of September 30, 2021 and December 31, 2020, respectively | 207,000,000 | — | ||||||
| Stockholders’ (Deficit) Equity | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | — | — | ||||||
| Class A common stock, $0.0001 par value; 100,000,000 shares authorized | — | — | ||||||
| Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,175,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020 | 518 | 518 | ||||||
| Additional paid-in capital | — | 24,482 | ||||||
| Accumulated deficit | (16,112,484 | ) | (2,528 | ) | ||||
| Total Stockholders’ (Deficit) Equity | (16,111,966 | ) | 22,472 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | 207,865,392 | $ | 325,000 | ||||
The accompanyingSee notes are an integral part of the unauditedto condensed consolidated financial statements.
1
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except share and per share data)
|
| THREE MONTHS ENDED MARCH 31, |
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|
| 2022 |
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| 2021 |
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REVENUE: |
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Grant revenue |
| $ | 257 |
|
| $ | 325 |
|
Total revenue |
|
| 257 |
|
|
| 325 |
|
OPERATING EXPENSES: |
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|
|
|
|
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Research and development |
|
| 27,281 |
|
|
| 17,411 |
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General and administrative |
|
| 9,755 |
|
|
| 3,898 |
|
Total operating expenses |
|
| 37,036 |
|
|
| 21,309 |
|
LOSS FROM OPERATIONS |
|
| (36,779 | ) |
|
| (20,984 | ) |
OTHER (EXPENSE) INCOME |
|
|
|
|
|
| ||
Interest income |
|
| 4 |
|
|
| 11 |
|
Interest expense |
|
| (1,073 | ) |
|
| (311 | ) |
Change in fair value of warrant liabilities |
|
| (359 | ) |
|
| 1 |
|
Total other (expense), net |
|
| (1,428 | ) |
|
| (299 | ) |
Net loss attributable to common stockholders |
| $ | (38,207 | ) |
| $ | (21,283 | ) |
Net loss per share available to common stockholders—basic and diluted |
| $ | (0.34 | ) |
| $ | (0.22 | ) |
Weighted-average common stock outstanding—basic and diluted |
|
| 113,558,404 |
|
|
| 96,300,247 |
|
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | For the Period from July 2, 2020 (Inception) Through September 30, 2020 | ||||||||||
| General and administrative expenses | $ | 2,556,742 | $ | 4,084,445 | $ | 878 | ||||||
| Loss from operations | (2,556,742 | ) | (4,084,445 | ) | (878 | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest earned on marketable securities held in Trust Account | 3,180 | 8,746 | — | |||||||||
| Loss in initial issuance of Private Placement Warrants | — | (1,272,500 | ) | — | ||||||||
| Change in fair value of warrant liabilities | 1,027,000 | 1,840,000 | — | |||||||||
| Other income, net | 1,030,180 | 576,246 | — | |||||||||
| Net loss | $ | (1,526,562 | ) | $ | (3,508,199 | ) | $ | (878 | ) | |||
| Weighted average shares outstanding, Class A common stock (restated) | 20,700,000 | $ | 19,335,165 | — | ||||||||
| Basic and diluted net loss per share, Class A common stock (restated) | $ | (0.06 | ) | $ | (0.14 | ) | $ | — | ||||
| Weighted average shares outstanding, Class B common stock (restated) | 5,175,000 | 5,130,495 | 4,500,000 | |||||||||
| Basic and diluted net loss per share, Class B common stock (restated) | $ | (0.06 | ) | $ | (0.14 | ) | $ | (0.00 | ) | |||
The accompanyingSee notes are an integral part of the unauditedto condensed consolidated financial statements.
2
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited)
(In thousands, except share and per share data)
ENVIRONMENTAL IMPACT ACQUISITION CORP.
|
| $0.001 PAR VALUE |
|
| COMMON STOCK |
|
| ADDITIONAL |
|
| ACCUMULATED |
|
| TOTAL |
| |||||||||||||
|
| SHARES |
|
| AMOUNT |
|
| SHARES |
|
| AMOUNT |
|
| CAPITAL |
|
| DEFICIT |
|
| EQUITY (DEFICIT) |
| |||||||
Balance at January 1, 2022 |
|
| 134,972,944 |
|
| $ | 218,790 |
|
|
| 3,663,894 |
|
| $ | 4 |
|
| $ | 4,800 |
|
| $ | (253,569 | ) |
| $ | (248,765 | ) |
Retroactive application of business combination |
|
| - |
|
|
| (218,790 | ) |
|
| 92,911,213 |
|
|
| 6 |
|
|
| 218,784 |
|
|
| - |
|
|
| 218,790 |
|
Adjusted balance, beginning of period |
|
| - |
|
|
| - |
|
|
| 96,575,107 |
|
|
| 10 |
|
|
| 223,584 |
|
|
| (253,569 | ) |
|
| (29,975 | ) |
Cashless exercise of Legacy GreenLight preferred stock warrants |
|
| - |
|
|
| - |
|
|
| 490,031 |
|
|
| - |
|
|
| 460 |
|
|
| - |
|
|
| 460 |
|
Cashless exercise of Legacy GreenLight common stock warrants |
|
| - |
|
|
| - |
|
|
| 170,981 |
|
|
| - |
|
|
| 1,183 |
|
|
| - |
|
|
| 1,183 |
|
Reclassification of Legacy GreenLight common stock warrants to equity |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 352 |
|
|
| - |
|
|
| 352 |
|
Conversion of convertible notes |
|
| - |
|
|
| - |
|
|
| 6,719,116 |
|
|
| 1 |
|
|
| 18,290 |
|
|
| - |
|
|
| 18,291 |
|
Conversion of convertible notes - PIPE Investors |
|
| - |
|
|
| - |
|
|
| 3,525,000 |
|
|
| - |
|
|
| 35,250 |
|
|
| - |
|
|
| 35,250 |
|
Business Combination transaction, net of transaction costs of $26.7 million |
|
| - |
|
|
| - |
|
|
| 15,285,374 |
|
|
| 2 |
|
|
| 72,987 |
|
|
| - |
|
|
| 72,989 |
|
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 1,567 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercise of common stock options |
|
| - |
|
|
| - |
|
|
| 79,055 |
|
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| 22 |
|
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,187 |
|
|
| - |
|
|
| 2,187 |
|
Exercise of public warrants |
|
| - |
|
|
| - |
|
|
| 105,120 |
|
|
| - |
|
|
| 1,209 |
|
|
| - |
|
|
| 1,209 |
|
Other |
|
| - |
|
|
| - |
|
|
| 29,154 |
|
|
|
|
|
| 79 |
|
|
| (14 | ) |
|
| 65 |
| |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (38,207 | ) |
|
| (38,207 | ) |
Balance at March 31, 2022 |
|
| - |
|
| $ | - |
|
|
| 122,980,505 |
|
| $ | 13 |
|
| $ | 355,603 |
|
| $ | (291,790 | ) |
| $ | 63,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at January 1, 2021 |
|
| 134,952,637 |
|
| $ | 218,787 |
|
| 3,252,636 |
|
| $ | 3 |
|
| $ | 2,434 |
|
| $ | (141,259 | ) |
| $ | (138,822 | ) | |
Retroactive application of business combination |
|
| (134,952,637 | ) |
|
| (218,787 | ) |
|
| 93,031,647 |
|
|
| 7 |
|
|
| 218,780 |
|
|
| - |
|
|
| 218,787 |
|
Adjusted balance, January 1, 2021 |
|
| - |
|
|
| - |
|
|
| 96,284,283 |
|
|
| 10 |
|
|
| 221,214 |
|
|
| (141,259 | ) |
|
| 79,965 |
|
Vesting of restricted stock awards |
| - |
|
| - |
|
|
| 7,271 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||
Stock-based compensation expense |
| - |
|
| - |
|
| - |
|
|
| - |
|
|
| 348 |
|
| - |
|
|
| 348 |
| ||||
Exercise of common stock options |
| - |
|
| - |
|
|
| 24,582 |
|
|
| - |
|
|
| 6 |
|
| - |
|
|
| 6 |
| |||
Net loss |
| - |
|
| - |
|
| - |
|
|
| - |
|
| - |
|
|
| (21,283 | ) |
|
| (21,283 | ) | ||||
Balance at March 31, 2021 |
|
| - |
|
| - |
|
|
| 96,316,136 |
|
| $ | 10 |
|
| $ | 221,568 |
|
| $ | (162,542 | ) |
| $ | 59,036 |
| |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
| Balance — January 1, 2021 | 5,175,000 | $ | 518 | $ | 24,482 | $ | (2,528 | ) | $ | 22,472 | ||||||||||
| Accretion of Class A common stock subject to possible redemption | — | — | (24,482 | ) | (12,601,757 | ) | (12,626,239 | ) | ||||||||||||
| Net income | — | — | — | 1,042,799 | 1,042,799 | |||||||||||||||
| Balance – March 31, 2021 (restated) | — | — | — | $ | (11,561,486 | ) | $ | (11,560,968 | ) | |||||||||||
| Net loss | — | — | — | (3,024,436 | ) | (3,024,436 | ) | |||||||||||||
| Balance – June 30, 2021 (restated) | 5,175,000 | $ | 518 | $ | — | $ | (14,585,922 | ) | $ | (14,585,404 | ) | |||||||||
| Net loss | — | — | — | (1,526,562 | ) | (1,526,562 | ) | |||||||||||||
| Balance – September 30, 2021 (restated) | 5,175,000 | $ | 518 | $ | — | $ | (16,112,484 | ) | $ | (16,111,966 | ) | |||||||||
FOR THE PERIOD FROM JULY 2, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholder ’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance — July 2, 2020 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Issuance of Class B common stock to Sponsor | — | — | 5,175,000 | 518 | 24,482 | — | 25,000 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (878 | ) | (878 | ) | |||||||||||||||||||
| Balance – September 30, 2020 | — | $ | — | $ | 5,175,000 | $ | 518 | $ | 24,482 | $ | (878 | ) | $ | 24,122 | ||||||||||||||
The accompanyingSee notes are an integral part of the unauditedto condensed consolidated financial statements.
3
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months September 30, | For the Period from July 2, September 30, | |||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | (3,508,199 | ) | $ | (878 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on issuance of Private Placement Warrants | 1,272,500 | — | ||||||
| Change in fair value of warrant liabilities | (1,840,000 | ) | — | |||||
| Transaction costs incurred in connection with warrants | 50,179 | — | ||||||
| Interest earned on marketable securities held in Trust Account | (8,746 | ) | — | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | (698,309 | ) | — | |||||
| Accounts payable and accrued expenses | 3,015,261 | 878 | ||||||
| Net cash used in operating activities | (1,717,314 | ) | — | |||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash into Trust Account | (207,000,000 | ) | — | |||||
| Net cash used in investing activities | (207,000,000 | ) | — | |||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of Class B common stock to Sponsor | — | 25,000 | ||||||
| Proceeds from sale of Units, net of underwriting discounts paid | 206,750,000 | — | ||||||
| Proceeds from sale of Private Placement Warrants | 2,000,000 | — | ||||||
| Proceeds from sale of Unit Purchase Option | 6,000 | — | ||||||
| Proceeds from promissory note – related party | 500,000 | 27,450 | ||||||
| Repayment of promissory note - related party | (300,000 | ) | — | |||||
| Payment of offering costs | (237,197 | ) | (27,450 | ) | ||||
| Net cash provided by financing activities | 208,718,803 | 25,000 | ||||||
| Net Change in Cash | 1,489 | 25,000 | ||||||
| Cash – Beginning | 156,848 | — | ||||||
| Cash – Ending | $ | 158,337 | $ | 25,000 | ||||
| Non-cash investing and financing activities: | ||||||||
| Offering costs included in accrued offering costs | $ | 118,569 | $ | 38,243 | ||||
| Offering costs paid through promissory note | $ | — | $ | 81,125 | ||||
| Initial classification of warrant liabilities | $ | 15,181,000 | $ | — | ||||
|
| THREE MONTHS ENDED MARCH 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (38,207 | ) |
| $ | (21,283 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization expense |
|
| 2,096 |
|
|
| 1,113 |
|
Gain on disposal of property and equipment |
|
| (9 | ) |
|
| (5 | ) |
Stock-based compensation expense |
|
| 2,187 |
|
|
| 348 |
|
Non-cash interest expense |
|
| 111 |
|
|
| 210 |
|
Change in fair value of warrant liabilities |
|
| 359 |
|
|
| (1 | ) |
Amortization of deferred finance costs |
|
| 224 |
|
|
| - |
|
Changes in operating assets and liabilities |
|
|
|
|
|
| ||
Prepaid expenses and other assets |
|
| (6,259 | ) |
|
| (1,554 | ) |
Accounts receivable |
|
| (5,000 | ) |
|
| - |
|
Accounts payable |
|
| (1,952 | ) |
|
| (272 | ) |
Accrued expenses and other liabilities |
|
| (8,039 | ) |
|
| 434 |
|
Deferred rent |
|
| 278 |
|
|
| (3 | ) |
Deferred revenue |
|
| 4,743 |
|
|
| (23 | ) |
Other liabilities |
|
| - |
|
|
| (322 | ) |
Net cash used in operating activities |
|
| (49,468 | ) |
|
| (21,358 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from sale of property and equipment |
|
| 37 |
|
|
| - |
|
Purchases of property and equipment |
|
| (287 | ) |
|
| (4,688 | ) |
Net cash used in investing activities |
|
| (250 | ) |
|
| (4,688 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from business combination, net of transaction costs |
|
| 80,491 |
|
|
| - |
|
Proceeds from issuance of convertible debt - PIPE Investors |
|
| 21,750 |
|
|
| - |
|
Proceeds from stock option exercises |
|
| 22 |
|
|
| 6 |
|
Principal payments on debt |
|
| (815 | ) |
|
| - |
|
Proceeds from equipment financing |
|
| - |
|
|
| 2,842 |
|
Exercise of public warrants |
|
| 1,209 |
|
|
| - |
|
Repayments of tenant improvement allowance |
|
| (43 | ) |
|
| (39 | ) |
Principal payments on capital lease obligations |
|
| (160 | ) |
|
| (175 | ) |
Net cash provided by financing activities |
|
| 102,454 |
|
|
| 2,634 |
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
| 52,736 |
|
|
| (23,412 | ) |
Cash, cash equivalents and restricted cash, beginning of period |
|
| 31,808 |
|
|
| 95,148 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 84,544 |
|
| $ | 71,736 |
|
SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 620 |
|
| $ | 85 |
|
The accompanying4
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND |
|
|
|
|
|
| ||
Property and equipment included in accrued expenses and accounts payable |
| $ | 1,313 |
|
| $ | 906 |
|
Conversion of convertible debt to equity |
| $ | 53,541 |
|
| $ | - |
|
Legacy GreenLight cashless warrant exercises |
| $ | 1,643 |
|
| $ | - |
|
Warrant liabilities assumed in the Business Combination |
| $ | 1,341 |
|
| $ | - |
|
Deferred financing costs in accrued expenses and accounts payable |
| $ | 1,948 |
|
| $ | - |
|
Non-cash equipment financing issuance costs |
| $ | - |
|
| $ | 138 |
|
|
|
|
|
|
|
| ||
|
| THREE MONTHS ENDED MARCH 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Reconciliation of cash, cash equivalents and restricted cash |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 83,223 |
|
| $ | 71,656 |
|
Restricted cash |
|
| 1,321 |
|
|
| 80 |
|
Total cash, cash equivalents and restricted cash |
| $ | 84,544 |
|
| $ | 71,736 |
|
See notes are an integral part of the unauditedto condensed consolidated financial statements.
5
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Notes to Unaudited Condensed Consolidated Financial Statements
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1. DESCRIPTIONNATURE OF ORGANIZATIONBUSINESS AND BUSINESS OPERATIONSBASIS OF PRESENTATION
Organization
GreenLight Biosciences Holdings, PBC (formerly known as Environmental Impact Acquisition Corp. (the) (“New GreenLight,” “ENVI” or the “Company”) was incorporated in Delaware on July 2, 2020. The Company was formed forhas developed technology to create high-performing, natural ribonucleic acid (“RNA”) products to address global sustainability challenges and promote healthier plants, foods, and people.
The Company is located and headquartered in Medford, Massachusetts. The Company has additional lab and office space in Research Triangle Park, North Carolina, a
manufacturing facility in Burlington, Massachusetts, additional lab and office space in Woburn, Massachusetts, additional lab and office space in Lexington, Massachusetts, and a manufacturing facility in Rochester, New York. The Company’s revenues and expenses are derived from operations in the purposeUnited States. Since its inception, the Company has devoted substantially all of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similarits efforts to research and development activities, including the development of the Company’s cell-free RNA production process. The Company does not currently generate revenue from sales of any products.
On August 9, 2021, the Company entered into the business combination agreement (“Business Combination Agreement”) with one or more businessesEnvironmental Impact Acquisition Corp. (“ENVI”) and Honey Bee Merger Sub, Inc. (“Merger Sub”). Pursuant to the Business Combination Agreement, on February 2, 2022, Merger Sub merged with and into GreenLight (the “Merger”), with GreenLight surviving the Merger as a wholly owned subsidiary off ENVI (the Merger, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). In connection with the consummation of the Merger on the Closing Date, ENVI changed its name to GreenLight Biosciences Holdings, PBC (“New GreenLight”) and became a public benefit corporation.References to “Legacy GreenLight” refer to GreenLight Biosciences, Inc. prior to the consummation of the Business Combination.
Upon the closing of the Business Combination, each share of Legacy GreenLight stock was exchanged for shares of Class A common stock in an amount determined by application of the exchange ratio of approximately 0.6656 (the “Exchange Ratio”). In connection with the Business Combination, the Company entered into subscription agreements with subscribers who agreed to purchase an aggregate of 12,425,000 shares of Class A common stock for a purchase price of $124.3 million (the “PIPE”), all of which were issued on the effective date. Of the total $124.3 million of PIPE proceeds, $35.3 million was received in December 2021 and January 2022 in for form of convertible notes. Upon the closing of the Business Combination, these convertible notes converted into Class A common stock.
In total, the Company received proceeds of $136.4 million inclusive of the PIPE and after redemptions which provided the Company with cash of $109.7 million, which is net of transaction costs of $26.7 million consisting of equity underwriting, legal, and other professional fees, all of which were recorded to additional paid‐in capital as a reduction of proceeds. Further, the Company assumed the outstanding Public Warrants to purchase 10,350,000 shares of the Company’s common stock at $11.50 per share and the outstanding Private Placement Warrants to purchase 2,062,500 shares of the Company’s Class A common stock at $11.50 per share. The Company is not limitedPublic and Private Placement Warrants expire five years after the completion of the Business Combination.
Legacy GreenLight was deemed to a particular industry or sector for purposes of consummating abe the accounting acquirer in the Business Combination. The determination was primarily based on Legacy GreenLight's stockholders
having a majority of the voting power in the combined Company, is an early stageLegacy GreenLight having the ability to appoint a majority of the Board of Directors of the Company, Legacy GreenLights’s existing management team comprising the senior management of the combined Company, Legacy GreenLight comprising the ongoing operations of the combined Company and emerging growth companythe combined Company assuming GreenLight’s name. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy GreenLight issuing stock for the net assets of ENVI, accompanied by a recapitalization. The net assets of ENVI are stated at historical cost, with 0 goodwill or other intangible assets recorded.
6
While ENVI was the legal acquirer in the Business Combination because Legacy GreenLight was deemed the accounting acquirer, the historical financial statements of Legacy GreenLight became the historical financial statements of the combined Company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy GreenLight prior to the Business Combination; (ii) the combined results of ENVI and Legacy GreenLight following the close of the Business Combination; (iii) the assets and liabilities of Legacy GreenLight at their historical cost; and (iv) the Legacy GreenLight’s equity structure for all periods presented, as affected by the recapitalization presentation after completion of the Business Combination.
In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparable periods up to February 2, 2022, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Legacy GreenLight’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy GreenLight’s outstanding convertible preferred stock and Legacy GreenLight's common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio of 0.0665 established in the Business Combination. Legacy GreenLight’s convertible preferred stock previously classified as temporary equity was retroactively adjusted, converted into common stock and reclassified to permanent equity as a result of the reverse recapitalization. See Note 3 for further details of the Business Combination.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2021 included herein, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis and also give effect to the reverse recapitalization described above. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed consolidated or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes included as Exhibit 99.1 to the Company’s Current Report on Form 8-K, dated March 31, 2022.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows for the interim periods presented. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending December 31, 2022, or any other period.
Liquidity and going concern
Since its inception, the Company has devoted substantially all of its resources to building its platform and advancing development of its portfolio of programs, establishing, and protecting its intellectual property, conducting research and development activities, organizing, and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company is subject to all ofrisks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, technical risks associated with early stagethe successful research, development and emerging growth companies.manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive field trials, preclinical and clinical trials, and regulatory approvals prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
7
As presented in the financial statements, the Company has incurred substantial losses since inception and incurred net losses of approximately $38.2 million and $21.3 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the Company had an accumulated deficit of approximately $291.8 million and cash and cash equivalents of approximately $83.2 million. Cash used in operating activities totaled approximately $49.5 million and $21.4 million for three months ended March 31, 2022 and 2021, respectively. The Company has one wholly-owned subsidiary, Honey Bee Merger Sub, Inc., which was incorporated inexpects to generate operating losses and negative operating cash flows for the State of Delaware on August 6, 2021 (“ENVI Merger Sub”).foreseeable future.
As of September 30,the issuance date of these quarterly financial statements for the three months ended March 31, 2022 and 2021, the Company hadexpects that its existing cash and cash equivalents of approximately $83.2 million as of March 31, 2022 will not commenced any operations. All activitybe sufficient to fund its operations for twelve months from the period from July 2, 2020 (inception) through September 30, 2021, relatesdate these financial statements are issued. The Company is evaluating a range of opportunities to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, identifying a target company for a Business Combinationextend its cash runway, including management of program spending, platform licensing collaborations and activities in connection with the proposed acquisition of GreenLight Biosciences, Inc., a Delaware corporation (“GreenLight”) (see Note 7). potential financing activity.
The Company will not generate any operating revenuesrevenue from product sales unless and until after the completionit successfully completes development and obtains regulatory approval for one or more of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the marketable securities held in the Trust Account.
The registration statement for the Company’s Initial Public Offering was declared effective on January 13, 2021. On January 19, 2021product candidates. If the Company consummatedobtains regulatory approval for any of its product candidates, it expects to incur significant expenses related to developing its internal commercialization capability to support product sales, marketing, and distribution.
As a result, the Initial Public OfferingCompany will need substantial additional funding to support its operating activities as it advances its product candidates through development, seeks regulatory approval and prepares for and, if any of 20,700,000 units (the “Units”its product candidates are approved, proceeds to commercialization. Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operating activities through a combination of equity offerings, debt financings, and license and development agreements in connection with respectany future collaborations. Adequate funding may not be available to the Class A common stock included inCompany on acceptable terms, or at all.
If the Units sold,Company is unable to obtain funding, the “Public Shares”), which includes the full exercise by the underwriterCompany will be forced to delay, reduce, or eliminate some or all of its over-allotment option in the amount of 2,700,000 Units, at $10.00 per Unit, generating gross proceeds of $207,000,000research and development programs, product portfolio expansion or commercialization efforts, which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering,could adversely affect its business prospects, or the Company consummated the sale of 2,000,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placementmay be unable to HB Strategies LLC (“HB Strategies”), the anchor investor and an affiliate of Hudson Bay Capital Management LP, generating gross proceeds of $2,000,000, which is described in Note 5.
Transaction costs amountedcontinue operations. Although management continues to $773,917, consisting of $250,000 in cash underwriting fees, inclusive of $150,000 paid for underwriter’s concession fees (see Note 7), and $523,917 of other offering costs.
Following the closing of the Initial Public Offering on January 19, 2021, an amount of $207,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States and will be invested only 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 certain 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 and (ii) the distribution of the funds held in the Trust Account, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Therepursue these plans, there is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets heldsuccessful in the Trust Account (excluding taxes payableobtaining sufficient funding on the interest earned on the Trust Account). 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 business sufficient for it not to be required to register as an investment company under the Investment Company Act.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Company will provide the 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 either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled 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 then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. In addition, HB Strategies has agreed to vote its Founder Shares in favor of approving a Business Combination. Each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by July 19, 2022 (or by January 19, 2023 if the Company, by resolution of it board, extends the period of time by an additional six months) and (c) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. HB Strategies has agreed to the foregoing terms with respect to its Founder Shares but not with respect to any Public Shares it may acquire.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Company will have until July 19, 2022 (or until January 19, 2023 if the Company, by resolution of its board, extends the period of time by an additional six months) to complete a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination within the Combination Period, 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 pay taxes (less up to $100,000 of interest to pay dissolution expenses), 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), 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, the Sponsor has agreed to be liableacceptable to the Company to fund continuing operations, 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 amountat all.
Based on its recurring losses from operations incurred since inception, expectation of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering 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, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (exceptcontinuing operating losses for the Company’s independent registered public accounting firm), prospective target businessesforeseeable future, and 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.
Liquidity and Going Concern
As of September 30, 2021, the Company had approximately $158,000 in cash and a working capital deficit of approximately $2,780,000.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to purchase the Founder Shares (as defined in Note 6), and loan proceeds from the Sponsor of $300,000 and $500,000 under separate Promissory Notes (as defined in Note 6). The Company repaid the $300,000 Note in full on January 19, 2021. The $500,000 Note was initiated on August 9, 2021 and total borrowings as of September 30, 2021 were $500,000. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the private placement held outside of the Trust Account.
The Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The Company’s officers and directors and the Sponsor may, but are not obligated to, loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
If the Company is unableneed to raise additional capital it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspendingfinance its future operations, the pursuit of a Business Combination. The Company cannot provide any assurancehas concluded that new financing will be available to it on commercially acceptable terms, if at all.
As a result of the above, 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,” management has determined that the liquidity condition and date for mandatory liquidation and dissolution raisethere is substantial doubt about the Company’sits ability to continue as a going concern through July 19, 2022,within one year after the scheduled liquidation date ofthat the Company if it does not complete a Business Combination prior to such date. Theseconsolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue asare issued.
The accompanying condensed consolidated financial statements have been prepared on a going concern.
Risksconcern basis, which contemplates the realization of assets and Uncertainties
Management continues to evaluate the impactsatisfaction of liabilities in the COVID-19 global pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, its resultsnormal course of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. Thebusiness. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Restatement
In connection with the preparation of the Company’sThese condensed consolidated financial statements as of September 30,March 31, 2022 and for the three months ended March 31, 2022 and 2021, including certain notes thereto have been restated. The restatement relates to the classification of the Company’s operating expenses between research and development and general and administrative expenses as disclosed on the March 31, 2022 condensed consolidated statement of operations, and as disclosed in the results of operations summary within Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The effect of the change to the classification is as follows:
8
|
| Three Months Ended March 31, 2022 |
| |||||||||
(in thousands) |
| As reported |
|
| Adjustment |
|
| As restated |
| |||
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| |||
Research and development |
| $ | 8,012 |
|
| $ | 19,269 |
|
| $ | 27,281 |
|
General and administrative |
|
| 29,024 |
|
|
| (19,269 | ) |
|
| 9,755 |
|
Total operating expenses |
| $ | 37,036 |
|
| $ | - |
|
| $ | 37,036 |
|
Further, the Company concluded it should restate its financial statements to classify all Public Shareshas restated the calculation of net loss per share as calculated in temporary equity. In accordance with ASC 480, paragraph 10-S99, redemption provisions not solely withinNote 14, where the control of the Company require common stock subject to possible redemption to be classified outside of permanent equity. The Company previously determined the Class A common stock subject to possible redemption to be equaladjustment to the redemption value of $10.00 per Class Anet loss available to common stockholders for preferred stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Previously, the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation to include temporary equity in net tangible assets. Accordingly, effective with this filing, the Company presents all redeemable Class A common stock as temporary equity and recognizes accretion from the initial book value to redemption value at the time of its Initial Public Offering and in accordance with ASC 480.
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 the previously issued (i) audited balance sheet as of January 19, 2021, included in exhibit 99.1 to the Company’s Form 8-K filed with the SEC on January 25, 2021 (the “Form 8-K”) and (ii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Qdividends accrued for the quarterly periodthree months ended March 31, 2021 filed with the SEC on May 24, 2021 and (iii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 13, 2021 (together with the Form 8-K, the “Affected Financial Statements”) and such Affected Financial Statements shouldis no longer be relied upon. Therefore, the Company, in consultation with its Audit Committee, concluded that its Affected Financial Statements should be restated to report all Public Sharesapplicable as temporary equity. As such the Company is reporting these restatements to the Affected Financial Statements in this Quarterly Report on Form 10-Q/A.
There has been no change in the Company’s total assets, liabilities, or operating results.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The impacta result of the retrospective restatement on the Company’s previously issued financial statement is reflected in the following tables:
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Balance Sheet as of January 19, 2021 (audited) | ||||||||||||
| Class A common stock subject to possible redemption | $ | 188,080,750 | $ | 18,919,250 | $ | 207,000,000 | ||||||
| Class A common stock | $ | 189 | $ | (189 | ) | $ | — | |||||
| Additional paid-in capital | $ | 6,323,303 | $ | (6,323,303 | ) | $ | — | |||||
| Accumulated deficit | $ | (51,506 | ) | $ | (12,595,758 | ) | $ | (12,647,264 | ) | |||
| Total Stockholders’ Equity (Deficit) | $ | 6,272,504 | $ | (18,919,250 | ) | $ | (12,646,746 | ) | ||||
| Balance Sheet as of March 31, 2021 (unaudited) | ||||||||||||
| Class A common stock subject to possible redemption | $ | 190,439,030 | $ | 16,560,970 | $ | 207,000,000 | ||||||
| Class A common stock | $ | 166 | $ | (166 | ) | $ | — | |||||
| Additional paid-in capital | $ | 3,959,047 | $ | (3,959,047 | ) | $ | — | |||||
| Accumulated deficit | $ | 1,040,271 | $ | (12,601,757 | ) | $ | (11,561,486 | ) | ||||
| Total Stockholders’ Equity (Deficit) | $ | 5,000,002 | $ | (16,560,970 | ) | $ | (11,560,968 | ) | ||||
| Balance Sheet as of June 30, 2021 (unaudited) | ||||||||||||
| Class A common stock subject to possible redemption | $ | 187,414,590 | $ | 19,585,410 | $ | 207,000,000 | ||||||
| Class A common stock | $ | 196 | $ | (196 | ) | $ | — | |||||
| Additional paid-in capital | $ | 6,983,457 | $ | (6,983,457 | ) | $ | — | |||||
| Accumulated deficit | $ | (1,984,165 | ) | $ | (12,601,757 | ) | $ | (14,585,922 | ) | |||
| Total Stockholders’ Equity (Deficit) | $ | 5,000,006 | $ | (19,585,410 | ) | $ | (14,585,404 | ) | ||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statement of Cash Flows for the Three Months Ended March 31, 2021 (unaudited) | ||||||||||||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | 190,439,030 | $ | 16,560,970 | $ | 207,000,000 | ||||||
| Change in value of Class A ordinary shares subject to possible redemption | (12,816,720 | ) | 12,816,720 | — | ||||||||
| Statement of Cash Flows for the Six Months Ended June 30, 2021 (unaudited) | ||||||||||||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | 187,414,590 | $ | 19,585,410 | $ | 207,000,000 | ||||||
| Change in value of Class A ordinary shares subject to possible redemption | (3,024,440 | ) | 3,204,440 | — | ||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statement of Changes in Stockholders’ Equity (Deficit) March 31, 2021 | ||||||||||||
| Sale of 20,700,000 Class A shares, net of underwriting discounts | $ | 194,373,761 | $ | (194,373,761 | ) | $ | — | |||||
| Accretion for Class A common stock to redemption amount | — | (12,626,239 | ) | (12,626,239 | ) | |||||||
| Change in value of Class A common stock subject to redemption | (190,439,030 | ) | 190,439,030 | — | ||||||||
| Total stockholders’ equity (deficit) | 5,000,002 | (16,560,970 | ) | (11,560,968 | ) | |||||||
| Statement of Changes in Stockholders’ Equity (Deficit) June 30, 2021 | ||||||||||||
| Change in value of Class A common stock subject to redemption | $ | 3,024,440 | $ | (3,024,440 | ) | $ | — | |||||
| Total stockholders’ equity (deficit) | 5,000,006 | (19,585,410 | ) | (14,585,404 | ) | |||||||
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
In connection with the change in presentationaccounting for the Class A common stock subject to redemption, the Company also restated its income (loss) per share calculated to allocate net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as disclosed in Notes 1 and 3. The adjustment related to accruals of dividends of preferred stock has been removed, and the most likely outcome, in which case, both classes of common stocknet loss per share pro rata infor the income (loss)three months ended March 31, 2021 has been restated as a result. The effect of the Company. The impactchange to calculation and presentation of this restatementnet loss per share for the three months ended March 31, 2021, on the Company’s financial statementscondensed consolidated statement of operations, as well as the disclosures in Note 14, is reflected in the following table:
as follows:
(In thousands, except shares and per share data) |
| THREE MONTHS ENDED MARCH 31, 2021 |
| |||||||||
|
| As reported |
|
| Adjustment |
|
| As restated |
| |||
Net loss |
| $ | (21,283 | ) |
| $ | — |
|
| $ | (21,283 | ) |
Numerator: |
|
|
|
|
|
|
|
|
| |||
Less: Accruals of dividends of preferred stock |
|
| (4,296 | ) |
|
| 4,296 |
|
|
| - |
|
Net loss available to common stockholders |
| $ | (25,579 | ) |
| $ | 4,296 |
|
| $ | (21,283 | ) |
Denominator: |
|
|
|
|
|
|
|
|
| |||
Weighted-average common stock outstanding |
|
| 96,300,247 |
|
|
| - |
|
|
| 96,300,247 |
|
Net loss per share, basic and diluted |
| $ | (0.27 | ) |
| $ | 0.05 |
|
| $ | (0.22 | ) |
| As Previously Reported For the Three Months Ended March 31, 2021 | As Restated For the Three Months Ended March 31, 2021 | As Previously Reported For the Three Months Ended June 30, 2021 | As Restated For the Three Months Ended June 30, 2021 | As Previously Reported For the Six Months Ended June 30, 2021 | As Restated For the Six Months Ended June 30, 2021 | |||||||||||||||||||
| Basic and diluted weighted average shares outstanding, Class A common stock | 20,700,000 | 16,560,000 | 20,700,000 | 20,700,000 | 20,700,000 | 18,641,436 | ||||||||||||||||||
| Basic and diluted net loss per share, Class A common stock | $ | — | $ | 0.05 | $ | — | $ | (0.12 | ) | $ | — | $ | (0.08 | ) | ||||||||||
| Basic and diluted weighted average shares outstanding, Class B common stock | 5,032,500 | 5,040,000 | 5,175,000 | 5,175,000 | 5,107,873 | 5,107,873 | ||||||||||||||||||
| Basic and diluted net loss per share, Class B common stock | $ | 0.21 | $ | 0.05 | $ | (0.58 | ) | $ | (0.12 | ) | $ | (0.39 | ) | $ | (0.08 | ) | ||||||||
NOTE 3. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Emerging Growth Company and Smaller Reporting Company Status
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted inFollowing the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on January 13, 2021, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on January 25, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts ofBusiness Combination, the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Emerging Growth Company
The Company isqualifies as an “emergingemerging growth company” (‘‘EGC’’) as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Ourour Business Startups (‘‘JOBS’’) Act. The JOBS Act of 2012 (the “JOBS Act”), and it maypermits companies with EGC status to 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 of 2002, 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 requiredan extended transition period to comply with new or revised financialaccounting standards, delaying the adoption of these accounting standards until they would apply to 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 undercompanies. The Company intends to use this extended transition period to enable the Exchange Act) are requiredCompany to comply with the new or revised financial accounting standards. The JOBS Act providesstandards that a company can elect tohave different effective dates for public and private companies until the earlier of the date the Company (i) is no longer an EGC or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, the Company's condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, the Company intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an EGC, the Company is not required to, among other things: (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosures that may be required of non-EGCs under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with the requirements that applyof the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the consolidated financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to non-emerging growth companies but any such election to opt out is irrevocable. median employee compensation.
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, aswill remain an emerging growth company can adoptuntil the new or revised standard atearlier of: (i) the time private companies adopt the new or revised standard. This may make comparisonlast day of the Company’s financial statementsfiscal year (a) following the fifth anniversary of the closing of ENVI’s initial public offering, (b) in which the Company has total annual gross revenue of at least $1.1 billion, or (c) in which the Company is deemed to be a large accelerated filer, which
9
means the market value of its common equity that is held by non-affiliates exceeds $700.0 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with another publicit in the JOBS Act.
The Company is also a “smaller reporting company” as defined in the Exchange Act. The Company may continue to be a smaller reporting company whicheven after the Company is neitherno longer an emerging growth company nor an emerging growth company which has opted outcompany. The Company may take advantage of using the extended transition period difficult or impossible becausecertain of the potential differences in accounting standards used.scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of the Company's voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of the Company's second fiscal quarter, or the Company's annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of the Company's voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of the Company's second fiscal quarter.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and liabilitiesexpenses, and the disclosure of contingent assets and liabilities atas of and during the datereporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Significant estimates and the reported amounts of 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 includedassumptions reflected in these condensed consolidated financial statements isinclude, but are not limited to, revenue recognition, the determinationaccrual of research and development costs, acquisition of in-process research and development assets, useful lives assigned to property and equipment, and the fair value of the warrant liabilities. SuchThe Company assesses estimates may be subject to change as more current information becomes available and accordingly theon an ongoing basis; however, actual results could materially differ significantly from those estimates.
Operating Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s Chief Executive Officer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.
Cash and Cash Equivalents
The Company considers all short-termhighly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have anyInvestments qualifying as cash equivalents asprimarily consist of September 30, 2021 and December 31, 2020.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and is measured at redemption 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.money market funds. The Company’s Class A common stock features certain redemption rights that are considered to be outside ofcash and cash equivalents in the Company’s control and subject to occurrence of uncertain future events. Accordingly,condensed consolidated balance sheets at September 30, 2021 and DecemberMarch 31, 2020, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets. Accordingly, at September 30, 20212022 and December 31, 2021, Classwere approximately $83.2 million and $31.4 million, respectively.
Restricted Cash
The Company maintains letters of credit in conjunction with the Company’s lease agreements. As of March 31, 2022 and December 31, 2021, the underlying cash balance securing these letters of credit of approximately $1.3 million and $0.4 million, respectively, was classified as a noncurrent asset in the condensed consolidated balance sheets based on the terms of the lease agreement.
Concentrations of Credit Risk
The Company has no significant off-balance sheet credit risk. Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash
10
and cash equivalents in financial institutions that it believes have high credit quality, has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A common stockfinancial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Maintenance and repairs to an asset that do not improve or extend its life are expensed in the period incurred. Expenditures made to improve or extend the life of property and equipment are capitalized. Leasehold improvements are depreciated over the shorter of the useful life of the improvements or the remaining term of the associated lease. The estimated useful lives of property and equipment are as follows:
ESTIMATED USEFUL LIFE | ||
Laboratory equipment | 5 years | |
Computer equipment and software | 3 years | |
Leasehold improvements | Shorter of useful life or lease term |
Property and equipment subject to possible redemptiona capital lease are depreciated over the shorter of the useful life or the term of the lease. Construction in progress is stated at cost, which includes direct costs attributable to the setup or construction of the related asset. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the Company’s statement of operations.
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Acquired In-process Research and Development
The Company measures and recognizes acquisitions that are not deemed to be business combinations as acquisitions of assets based on the cost to acquire the assets, which includes transaction costs, and the consideration is allocated to the items acquired based on a relative fair value methodology. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development with no alternative future use is charged to research and development expense at the acquisition date. At the time of acquisition, the Company determines if a transaction should be accounted for as a business combination or acquisition of assets.
Impairment of Long-lived Assets
The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such events and circumstances include, but are not limited to, significant decreases in the market value of an asset, adverse changes in the extent or manner in which the asset is being used, or significant changes in business climate. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the three months ended March 31, 2022 and 2021, no impairment indicators were identified and 0 impairments were recorded.
Warrants
The Company applies relevant accounting guidance for warrants to purchase the Company’s stock based on the nature of the relationship with the counterparty. For warrants issued to investors or lenders in exchange for cash or other financial assets, the Company follows guidance issued within ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”), to assist in the determination of whether the warrants should be classified as liabilities or equity. Warrants that are determined to require liability classification are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classification are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.
For warrants issued to nonemployees for goods or services, or to customers as non-cash consideration, the Company follows guidance issued within ASC 718, Compensation – Stock Compensation (“ASC 718”), to determine whether the share-based payments are equity or liability classified. Such warrants are measured at fair value on the grant date. The related expense or reduction in transaction price is recognized in the same period and in the same manner as if the Company had paid cash for the goods or services, or in the same manner that transfer of control of the related performance obligations occurs.
Contract Revenue
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which provides a five-step model for recognizing revenue from contracts with customers as follows:
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Under ASC 606, an entity recognizes revenue when or as its customer obtains control of distinct promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
Our customer arrangements primarily consist of a license, rights to our intellectual property, and research and developments services. Performance obligations are promises in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, we consider factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own, or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract.
The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration, which is included in the transaction price, may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the variability is resolved.
For revenue related to sales-based royalties received from licensees, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any consideration related to sales-based royalty revenue resulting from the Ingredion collaboration agreement.
The Company allocates the transaction price based on the estimated stand-alone selling price of each of the performance obligations and develops assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in a contract with a customer. The Company utilizes key assumptions to determine the stand-alone selling price for service obligations, which may include other comparable transactions, pricing considered in negotiating the transaction, and the estimated costs. Any variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts we would expect to receive for the satisfaction of each performance obligation.
The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services, which is either over time or at a point in time. Revenue is recognized over time if either (i) the customer simultaneously receive and consumes the benefits provided by the entity’s performance, (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to the customer.
For contracts that include a license of intellectual property (“IP”), the Company applies judgment to determine if the license of IP is distinct from other promises in the contract. License of IP that are determined to be distinct from other promises in the contract are recognized as revenue at a point in time when the license of IP is transferred to the customer and the customer can use and benefit from the license. For licenses of IP that are combined with other promises in a contract, the Company uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Determining the revenue recognition of a license of IP requires significant judgment and is discussed further in for the Company’s license and collaboration agreements in Note 4, License Agreement.
At the inception of a contract that includes development or regulatory milestone payment, the Company evaluates the probability of reaching the milestones and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable a significant reversal of revenue would not occur in the future, the
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associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as milestone payments for regulatory approvals, are not considered probable of being achieve until those approvals are received. Therefore, related revenue associated with the milestone payment is constrained as management is unable to assert that a significant reversal or revenue would not be possible. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development and regulatory milestone payments and any constraints applied, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are generally recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Development or regulatory milestone payments are allocated either among the various performance obligations included in a contract on a relative standalone selling price basis, or to one or more specific performance obligations to which the milestone payment primarily relates.
For contracts that include commercial milestone payments, which are based on the achievement of future sales, and sales-based royalties, if the license is determined to be the predominant item to which the commercial milestones and royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the milestone or royalty has been allocated has been satisfied (or partially satisfied).
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. The grant agreement with the Bill & Melinda Gates foundation provides for payments for reimbursed costs, which include general and administrative costs. As we are performing services under the agreement that are consistent with the Company’s ongoing central activities and we have determined that we are the principal in the agreement, we recognize grant revenue as we perform services under this agreement when the funding is committed, which occurs as underlying costs are incurred. Revenues and related expenses are presented gross in the condensed consolidated statements of operations as temporary equity, outside ofwe have determined that we are the stockholders’ equity section ofprimary obligor under the agreement relative to the research and development services we perform as the lead technical expert.
Deferred Revenue
Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months, the related deferred revenue will be classified in current liabilities.
Deferred Financing Costs
The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as
deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the condensed consolidated statement of operations. Unamortized deferred financing costs are presented on the condensed consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.
Research and Development Costs
Research and development expenses consist primarily of costs related to discovery and research and development of products, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees, and external costs of outside vendors engaged to conduct field trials and clinical development activities. The Company recognizes changesrecords accruals for estimated costs relating to our field trials, preclinical studies, and manufacturing development. A portion of our field trials, preclinical studies, and manufacturing development activities are conducted by third-party service providers, including contract research organizations and contract manufacturing organizations. The financial terms of these contracts may result in redemption value immediatelypayments that do not match the periods over which materials or services are provided. We accrue the costs incurred under the agreements based on an estimate of actual work completed in accordance with the agreements. In the event we make advance payments for goods or services that will be used or rendered for future research and development activities, the payments are deferred and capitalized as they occura prepaid expense and adjusts recognized as expense as
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the carrying valuegoods are received or the related services are rendered. Research and development costs that do not meet the requirements will be recognized as an asset as the associated future benefits are uncertain and there is no alternative future use at the time the costs were incurred are expensed as incurred.
General and Administrative Expenses
The Company expenses general and administrative costs to operations as incurred. General and administrative expenses consist primarily of redeemablecompensation, benefits, and other employee-related expenses for personnel in the Company’s administrative, finance, legal, information technology, business development, communications, and human resources functions. Other costs include the legal costs incurred in connection with filing and prosecuting patent and trademark applications, general and administrative related facility costs, insurance costs and professional fees for accounting, tax, consulting, legal and other services.
Stock-Based Compensation Expense
The Company accounts for all stock-based payment awards granted to employees and non-employees as stock-based compensation expense at grant date fair value. The Company’s stock-based payments include stock options and grants of common stock, to equal the redemption value at the end of each reporting period.
At September 30, 2021, the Class Aincluding common stock subject to possible redemption reflectedvesting. The measurement date for employee and non-employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the recipient’s requisite service period, which is the vesting period, on a straight-line basis. The Company has also issued common stock options with milestone or performance-based vesting conditions and recorded the expense for these awards if or when it was deemed probable that the milestone or performance condition would be achieved. Stock-based compensation is classified in the accompanying statements of operations based on the function to which the related services are provided. The Company recognizes stock-based compensation expense for the portion of awards that have vested. Forfeitures are accounted for as they occur.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company has historically been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees and non-employees, whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its lack of sufficient historical data. The expected term of stock options granted to non-employees is determined in the same manner as stock options granted to employees. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.
Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. Net loss per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities.
Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants and unvested restricted stock.
Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common
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stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the three months ended March 31, 2022 and 2021.
As the Merger has been accounted for as a reverse recapitalization, the condensed consolidated financial statements of the merged entity reflect the continuation of the pre-merger GreenLight financial statements; GreenLight equity has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, ENVI. As a result, net loss per share was also retrospectively adjusted for periods ended prior to the Merger. See Note 3 for details and Note 14 for discussion of the retrospective adjustment of net loss per share.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the three months ended March 31, 2022 and 2021, the Company had no items qualifying as other comprehensive loss; accordingly, comprehensive loss equaled net loss.
Deferred Offering Costs
As of December 31, 2021, the Company capitalized deferred offering costs of approximately $4.1 million. Deferred offering costs include certain legal, accounting, consulting and other third-party fees incurred directly related to the anticipated business combination. At the closing of the business combination during the first quarter of 2022, these previously deferred costs were recorded in stockholders’ equity as a reduction of additional paid-in capital. See Note 3 for further details of the Business Combination.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as subsequently amended (“Topic 842”), to improve financial reporting and disclosures about leasing transactions. This ASU requires companies that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, where the lease terms exceed 12 months. The recognition, measurement and presentation of expense and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease; both types of leases will be recognized on the balance sheet. This ASU also requires disclosures to help financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. On June 3, 2020, the FASB issued ASU 2020-05, which amended the effective dates of Topic 842 to give immediate relief from business disruptions caused by the COVID-19 pandemic and provides a one-year deferral of the effective date for nonpublic companies. Therefore, for public companies, the effective date is still December 15, 2018, while the effective date for private companies will now be fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. As the Company qualifies as an emerging growth company, the Company will follow the annual reporting guidance as of January 1, 2022 in connection with the issuance of its annual financial statements for year ended December 31, 2022 and apply the provisions of ASC 842 in interim periods commencing after December 15, 2022. The Company will use the optional transition method to the modified retrospective approach in which Topic 842 will not be applied to comparative periods presented and incremental disclosures are not required for periods before the Company’s adoption of Topic 842. The Company will elect this transition approach as well as the package of practical expedients permitted under the transition guidance within the new standard, which allows the Company to carry forward the historical lease classification of contracts entered into prior to January 1, 2022. As a result of electing the package of practical expedients described above, existing leases and related initial direct costs will not be reassessed prior to the effective date, and therefore, adoption of the lease standard will not have an impact on the Company’s previously reported consolidated financial statements. The Company will also elect the following practical expedients: (i) combining lease and non-lease components for all asset classes and (ii) leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets, and the associated lease payments are recognized in the consolidated statements of operations on a straight-line basis over the lease term.
The Company expects the adoption of Topic 842 will result in the recognition of material right-of-use assets and lease liabilities. These amounts are still being determined through the development of an incremental borrowing rate. The Company does not expect the adoption of Topic 842 to have a material impact to the condensed consolidated statements of operations, redeemable convertible preferred stock and stockholders’ equity (deficit), or cash flows.
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In August 2020, the FASB issued ASU 2020-06, Debt – Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share (EPS) calculations as a result of these changes. These changes will be effective for the Company as of January 1, 2023. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. This new standard is effective for the Company in the fiscal year beginning January 1, 2023 and must be adopted using a modified retrospective approach, with certain exceptions. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
3.BUSINESS COMBINATION
On February 2, 2022, the Company consummated a Business Combination with ENVI. The Business Combination, and the PIPE financing which was entered into as of the same date, are further described in Note 1.
Upon the closing of the Business Combination, the Company's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 510,000,000 shares, of which 500,000,000 were designated as common stock and 10,000,000 were designated as preferred stock, both having a par value of $0.0001 per share.
Upon the closing of the Business Combination, holders of Legacy GreenLight common stock and preferred stock received shares of common stock in an amount determined by application of the Exchange Ratio. The Company additionally converted all of their convertible notes, including both the GLPRI convertible notes and the PIPE prepayment notes, to shares of common stock.
For periods prior to the Business Combination, the reported share and per share amounts have been retroactively converted by applying the Exchange Ratio. See Note 11 for information on the Legacy GreenLight warrants that were exercised prior to the Business Combination. The consolidated assets, liabilities, and results of operations prior to the Business Combination are those of Legacy GreenLight.
The following table reconciles the elements of the Business Combination to the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders’ Deficit:
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| BUSINESS COMBINATION |
| |
Cash - ENVI trust and cash (net of redemptions) | $ | 12,123 |
|
Cash - PIPE Investors, including proceeds from conversion of Convertible notes - PIPE Investors |
| 124,250 |
|
Gross proceeds |
| 136,373 |
|
Less: total transaction costs |
| (26,660 | ) |
Less: cash proceeds from Convertible notes - PIPE Investors |
| (35,250 | ) |
Add: transaction costs paid in 2021 |
| 4,080 |
|
Add: transaction costs accrued at March 31, 2022 |
| 1,948 |
|
Cash proceeds from Business Combination received in 2022 |
| 80,491 |
|
|
|
| |
Less: transaction costs paid in 2021 |
| (4,080 | ) |
Less: warrant liabilities assumed |
| (1,341 | ) |
Less: transaction costs accrued at March 31, 2022 |
| (1,948 | ) |
Less: net liabilities assumed in the Business Combination |
| (133 | ) |
Reverse merger, net of transactions costs | $ | 72,989 |
|
The number of shares of common stock outstanding immediately following the consummation of the Business Combination was as follows:
Number of Shares | |||
Common stock, outstanding prior to the Business Combination | 20,700,000 | ||
Less: Redemption of ENVI shares | (19,489,626 | ) | |
ENVI Public Shares | 1,210,374 | ||
ENVI Sponsor Shares | 5,175,000 | ||
Shares issued in PIPE financing | 12,425,000 | ||
Business combination and PIPE financing shares | 18,810,374 | ||
Legacy GreenLight shares (1) | 104,011,760 | ||
Total shares of common stock immediately after Business Combination | 122,822,134 | ||
(1) - The number of Legacy GreenLight shares was determined from the shares of Legacy GreenLight outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio. All fractional shares were rounded down.
Public Warrants
The Company concluded that following the close of the transaction the Public Warrants met the criteria for equity classification. As of the Closing Date, the 10,350,000 shares of Public Warrants were classified as equity in accordance with the accounting policy described within Note 2 and recognized in additional paid-in capital.
Private Placement Warrants
As of the Closing Date, the total value of the liability associated with the Private Placement Warrants was $1.3 million. The Company concluded that the Private Warrants met the definition of a liability in accordance with the accounting policy described within Note 2 and have been classified as such on the balance sheet. At March 31, 2022, the fair value of the warrant liability was $1.6 million.
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4.LICENSE AGREEMENT
Acuitas License Agreement
In August 2020, the Company entered into a Development and Option Agreement (the “Development and Option Agreement”) with Acuitas Therapeutics, Inc. (“Acuitas”). Under the terms of the Development and Option Agreement, the parties agreed to a program for the joint development of certain products combining the Company’s mRNA constructs with Acuitas’ liquid nanoparticle technology (“Acuitas LNP Technology”). Upon entering the Development and Option Agreement, the Company incurred a $0.8 million technology access fee. Under the Development and Option Agreement, the Company may reserve up to three specified targets (“Reserved Targets”) for development of therapeutic products related to such targets, using the Acuitas LNP Technology. In order to reserve a Reserved Target, the Company must provide a target reservation notice to Acuitas and must pay a target reservation and maintenance fee of $0.1 million per target per contract year. For each Reserved Target, the Company may also reserve up to three additional vaccine or antibody targets meant to be included within the same product as the Reserved Target (“Additional Targets”), which incur additional target reservation fees per contract year. Under the Development and Option Agreement, the Company is required to maintain at least one Reserved Target.
Under the Development and Option Agreement, the Company has the right to exercise a license option to develop and commercialize one or more therapeutic products relating to each Reserved Target. In the event that the Company exercises the options, the Company will pay $1.5 million for the first non-exclusive license, approximately $1.8 million for the second non-exclusive license and approximately $2.8 million for the third non-exclusive license. Under the terms of the Development and Option Agreement, the Company is also responsible for the full-time employee funding obligations and reimbursements to Acuitas for certain development and material costs incurred by them, which totaled approximately $0.5 million in 2021. The Company incurred an insignificant amount of full-time employee reimbursable to Acuitas for the three months ended March 31, 2022.
In January 2021, the Company exercised the first option under the Development and Option Agreement and entered into a non-exclusive license agreement with Acuitas (the “Acuitas License Agreement”), under which the Company was granted a non-exclusive, worldwide, sublicensable license under the Acuitas LNP Technology to research, develop, manufacture, and commercially exploit vaccine products consisting of certain of the Company’s mRNA constructs and Acuitas’s LNP technology. In connection with the option exercise, the Company paid Acuitas an option exercise fee of $1.5 million. Under the Acuitas License Agreement, the Company is required to pay Acuitas an annual license maintenance fee of $1.0 million for the first and second targets and $0.8 million for the third target until the Company achieves a particular development milestone. Acuitas is entitled to receive potential clinical and regulatory milestone payments in in the low double-digit millions for this exercised option. With respect to the sale of each licensed product, the Company is also obligated to pay Acuitas percentage royalties in the low single digits on net sales of the licensed products by the Company and its affiliates and sublicensees in a given country until the last to occur, in such country, of (i) the expiration or abandonment of all licensed patent rights covering the licensed product, (ii) expiration of any regulatory exclusivity for the licensed product, or (iii) ten years from the first commercial sale of the licensed product.
The option exercise fee under the Development and Option Agreement was recorded as research and development expense upon the Company’s exercise of the first option. Additionally, the technology access fees, target reservation and maintenance fees, expenses associated with the full-time employee funding obligations and reimbursements for development and material costs incurred by Acuitas are recorded as research and development expense when incurred. The annual maintenance fee will be recorded as an expense on an annual basis based on the stated amount for the applicable year. Upon determination that a milestone payment is probable to occur, the amount of the milestone payment will be recorded as research and development expense. As the triggering of these milestone payments was not considered probable as of March 31, 2022 and December 31, 2021, 0 expense has been recorded during these periods. The royalty payment is contingent upon sales of licensed products under the Acuitas License Agreement. As such, when such expenses are considered probable and estimable at the commencement of sales, the Company will accrue royalty expense for the amount the Company is obligated to pay.
The Company recorded an aggregate of $0.3 million and $1.7 million of research and development expenses, consisting of the technology access fees, option exercise fee and technology maintenance fees, for the three months ended March 31, 2022 and 2021, respectively.
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5. LICENSE AND COLLABORATION AGREEMENT
Serum License Agreement
In March 2022, the Company entered into a License Agreement (the “Agreement”) with Serum Institute of India Private Limited (“SIIPL”), pursuant to which the Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to use the Company’s proprietary technology platform to develop, manufacture and commercialize up to 3 mRNA products in all territories other than the United States, the 27 member states of the European Union, the United Kingdom, Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong, Macau, and Taiwan (the “SIIPL Territory”). The first licensed product target will be a shingles product target, and SIIPL has an option to select the additional 2 licensed product targets through the end of 2024. Under the terms of the Agreement with SIIPL, the Company will provide research search services related to the shingles product target to develop a “proof of concept” and will provide manufacturing technology transfer services. In addition, GreenLight retains the option purchase research plan and clinical trial data, developed by SIIPL, for 50% of the cost of the research plan and clinical trials for use in the Company’s own development.
SIIPL is responsible for the development, formulation, filling and finishing, registration and commercialization of the products in the SIIPL Territory, subject to oversight from a joint steering committee composed of representatives of the Company and SIIPL. SIIPL will use commercially reasonable efforts to develop and obtain regulatory approval for the products in the countries in the SIIPL Territory. The License Agreement includes terms customary in the industry for provisions related to sublicensing, intellectual property, and termination, and customary representations and warranties of GreenLight and SIIPL, along with certain customary covenants, including confidentiality, limitation of liability and indemnity provisions.
Pursuant to the License Agreement, SIIPL will pay the Company an upfront license fee of $5.0 million, as well as payments upon additional target selection and reservation
of exclusivity. The Company may receive up to a total of an additional $22.0 million in development, regulatory and commercial (net sales) based milestone payments across all three product targets, as well as manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay royalty payments in the mid-double digits, based on the net sales of products resulting from the licensed technology for the term of the License Agreement. The License Agreement shall terminate on a product-by product and country-by-country basis on the later of the expiration of the patent rights owned by the Company or the tenth anniversary of the first commercial sale of the applicable product(s) in the applicable country. The Company had not received payment of the $5.0 million upfront license fee as of March 31, 2022, thus has recorded a receivable for the amount billed to SIIPL.
The Company has determined that the Agreement falls within the scope of ASC 606, as it includes a customer-vendor relation as defined by ASC 606 and meets the criteria
of a contract. The Company has determined that the license of IP granted is not distinct from the research services and thus should be combined. The Agreement contains a single performance obligation for the combined License of IP/research services and the manufacturing technology transfer services. Revenue from the contract will be recognized over time, using an input-method. The Company has determined that variable consideration from the development and regulatory payments in the Agreement should be fully constrained as of March 31, 2022, and commercial milestones and royalties will be recognized in the period the underlying sales occur. Through March 31, 2022, no revenue had been recorded from the Agreement and the entire amount of upfront consideration is recorded as deferred revenue. Based on current estimated timelines, the Company expects to recognize the deferred revenue over approximately 18 months, and the portion expected to be recognized over the next 12 months is classified as current in the condensed consolidated balance sheet are reconciled inas of March 31, 2022.
20
6.FAIR VALUE MEASUREMENTS
The following table presents information about the following table:
| Gross proceeds | $ | 207,000,000 | ||
| Less: | ||||
| Proceeds allocated to Public Warrants | (11,902,500 | ) | ||
| Class A common stock issuance costs | (723,739 | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | 12,626,239 | |||
| Class A common stock subject to possible redemption | $ | 207,000,000 |
Warrant Liabilities
The Company accounts for the Public Warrants (as defined in Note 4)Company’s financial assets and Private Placement Warrants (together, with the Public Warrants, the “Warrants”) in accordance with the guidance contained in ASC 815-40-15-under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities measured at their fair value on a recurring basis and adjustsindicates the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statementslevel of operations. The Private Placement Warrants for periods where no observable traded price was available were valued using a Modified Black Scholes Option Pricing Model. The Public Warrants for periods where no observable traded price was available were valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.hierarchy utilized to determine such fair values:
DESCRIPTION |
| MARCH 31, |
|
| QUOTED PRICES |
|
| SIGNIFICANT |
|
| SIGNIFICANT |
| ||||
Asset |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
| 83,223 |
|
|
| 83,223 |
|
|
| 0 |
|
|
| 0 |
|
Total assets measured at fair value |
| $ | 83,223 |
|
| $ | 83,223 |
|
| $ | 0 |
|
| $ | 0 |
|
Liability |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Warrant liabilities |
|
| 1,820 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,820 |
|
Total liabilities measured at fair value |
| $ | 1,820 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,820 |
|
DESCRIPTION |
| DECEMBER 31, |
|
| QUOTED PRICES |
|
| SIGNIFICANT |
|
| SIGNIFICANT |
| ||||
Asset |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
| 31,446 |
|
|
| 31,446 |
|
|
| 0 |
|
|
| 0 |
|
Total assets measured at fair value |
| $ | 31,446 |
|
| $ | 31,446 |
|
| $ | 0 |
|
| $ | 0 |
|
Liability |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Warrant liabilities |
|
| 2,105 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,105 |
|
Total liabilities measured at fair value |
| $ | 2,105 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 2,105 |
|
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 on 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. As of September 30, 2021 and December 31, 2020,Money market funds were valued by the Company had deferred tax assets withbased on quoted market prices, which represent a full valuation allowance recorded against them.Level 1 measurement within the fair value hierarchy.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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, 2021 and December 31, 2020. 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 is subject to income tax examinations by major taxing authorities since inception.
The Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. Duringhave been 0 transfers between fair value levels during the three months ended March 31, 2022 and nine months ended September 30, 2021, the Company recorded no income tax expense.respectively. The Company’s effective tax rate for the threecarrying values of other current assets, accounts payable and nine months ended September 30, 2021 was approximately 0%, which differs from the expected income tax rate mainlyaccrued expenses approximate their fair values due to the changeshort-term nature of these assets and liabilities.
The fair value of the common and Preferred Stock warrant liabilities was determined using the Black-Scholes option-pricing model with the assumptions as disclosed in Note 11. These assumptions include significant judgments including the fair value of the underlying common and Preferred Stock and volatility. An increase or decrease in the estimated fair value or changes in volatility will result in increases or decreases in the fair value of the warrant liabilities and such changes could be material.
The carrying value of each of the start-up costs (discussed above) which are not currently deductible.
Net Income (Loss) Per Common Share
Horizon term loan, the SVB term loan, and the equipment financing as of March 31, 2022, and December 31, 2021 approximates their fair value as the interest rate approximates the market rate for loans with similar terms and risk characteristics. The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is computed by dividing net income (loss) byestimated the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating income (loss) per common share. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemptionfair value approximates fair value.
The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering,convertible debt using a discounted cash flow analysis and (ii) the private placement since the exerciseprevailing market terms as of December 31, 2021. The carrying value and fair value of the warrants is contingent upon the occurrenceconvertible debt was $30.2 million and $28.9 million, respectively, as of future events. The warrants are exercisable to purchase 13,100,000 shares of Class A common stock in the aggregate. As of September 30, 2021 and 2020, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net income (loss) loss per common share is the same as basic net income (loss) per common share for the periods presented.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | For the Period from July 2, 2020 (Inception) Through September 30, 2020 | ||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||
| Basic and diluted net loss per common share | ||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||
| Allocation of net loss, as adjusted | $ | (1,221,250 | ) | $ | (305,312 | ) | $ | (2,765,190 | ) | $ | (743,009 | ) | $ | — | $ | (878 | ) | |||||||
| Denominator: | ||||||||||||||||||||||||
| Basic and diluted weighted average shares outstanding | 20,700,000 | 5,175,000 | 19,335,165 | 5,130,495 | — | 4,500,000 | ||||||||||||||||||
| Basic and diluted net loss per common share | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.14 | ) | $ | (0.14 | ) | $ | — | $ | (0.00 | ) | |||||||
Fair Value of Financial Instruments
December 31, 2021. The fair value of the Company’s assets and liabilities, which qualifyconvertible debt was determined using Level 3 inputs. See Note 10 for further detail of all outstanding debt as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximatesof March 31, 2022.
21
The following table presents a roll-forward of the carrying amounts represented inaggregate fair values of the Company’s balance sheets, primarily due to their short-term nature, exceptliabilities for the warrant liabilities (see Note 10).which fair value is determined by Level 3 inputs:
|
| WARRANT LIABILITY |
| |
Balance—December 31, 2021 |
| $ | 2,105 |
|
Warrants exercised in business combination |
|
| (1,633 | ) |
Warrants reclassified to equity |
|
| (352 | ) |
Change in fair value of warrants |
|
| 359 |
|
Warrants assumed in business combination |
|
| 1,341 |
|
Balance—March 31, 2022 |
| $ | 1,820 |
|
Recent Accounting Standards7.GRANT REVENUE
In AugustJuly 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”)”,Company was approved to simplify accounting for certain financial instruments ASU 2020-06 eliminatesreceive a grant from 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 financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 20,700,000 Units, which includes a full exercise by the underwriters of their over-allotment optionBill & Melinda Gates Foundation in the amount of 2,700,000 Units, at a priceapproximately $3.3 million. As of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 9).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, HB Strategies and/or its affiliates purchased an aggregate of 2,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant ($2,000,000 in the aggregate) from the Company in a private placement. Each Private Placement Warrant will be exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 9). A portion of the proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held 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 Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In August and September of 2020, the Company issued an aggregate of 7,187,500 shares of Class B common stock (the “Founder Shares”) to the Sponsor and HB Strategies (together, the “Initial Stockholders”) for an aggregate price of $25,000. In December 2020, the Sponsor and HB Strategies returned to the Company, at no cost, 862,500 and 2,443,750 Founder Shares, respectively, and the Company issued an aggregate of 431,250 Founder Shares to its independent director nominees, resulting in an aggregate of 4,312,500 Founder Shares issued and outstanding. On January 13,31, 2021, the Company effected a stock dividendhad received the entire grant award, of 1.2 shareswhich approximately $2.4 million was received during the year ended December 31, 2020, and the remaining approximately $0.9 million was received during the year ended December 31, 2021. The grant funds are to be used for each sharethe sole purpose of common stock outstanding, resultingresearch for in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and or durable suppression of HIV in developing countries. The Company incurred research and development costs of approximately $0.3 million and $0.3 million associated with this grant for the three months ended March 31, 2022 and March 31, 2021, respectively. The Company has recognized revenue of approximately $0.3 million and $0.3 million in the Initial Stockholders holding an aggregatecondensed consolidated statements of 5,175,000 Founder Shares. All shareoperations during the three months ended March 31, 2022 and per share amounts have been retroactively restated.March 31, 2021, respectively, and recorded the unearned balance of approximately $0.7 million and $1.3 million as deferred revenue in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. The Founder Shares included an aggregate of upresearch supported by this grant is expected to 675,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20%be completed by May 31, 2022.
8.PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the Company’s issuedfollowing as of March 31, 2022 and outstanding common shares afterDecember 31, 2021:
|
| MARCH 31, |
|
| DECEMBER 31, |
| ||
Computer hardware and software |
| $ | 778 |
|
| $ | 732 |
|
Laboratory equipment |
|
| 20,480 |
|
|
| 19,590 |
|
Leasehold improvements |
|
| 10,442 |
|
|
| 10,442 |
|
Construction in progress |
|
| 2,483 |
|
|
| 1,894 |
|
Total |
|
| 34,183 |
|
|
| 32,658 |
|
Less: Accumulated depreciation and amortization |
|
| (11,307 | ) |
|
| (9,259 | ) |
Property and equipment, net |
| $ | 22,876 |
|
| $ | 23,399 |
|
As of March 31, 2022 and December 31, 2021, property and equipment, net included capital lease assets of approximately $2.5 million, with accumulated amortization of approximately $1.6 million and $1.5 million, respectively. Depreciation and amortization expense for three months ended March 31, 2022 and March 31, 2021, was $2.1 million and $1.1 million respectively, within the Initial Public Offering. As a resultcondensed consolidated statements of operations.
22
9.ACCRUED EXPENSES
Accrued expenses as of March 31, 2022 and December 31, 2021 consisted of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture. following:
|
| MARCH 31, |
|
| DECEMBER 31, |
| ||
Accrued employee compensation and benefits |
| $ | 4,620 |
|
| $ | 8,492 |
|
Accrued research and development |
|
| 2,169 |
|
|
| 4,059 |
|
Accrued professional fees |
|
| 1,334 |
|
|
| 1,888 |
|
Accrued other |
|
| 1,275 |
|
|
| 185 |
|
Total accrued expenses |
| $ | 9,398 |
|
| $ | 14,624 |
|
The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell anyA summary of the Founder Shares until the earlier to occur of: (A) six months after the completionoutstanding debt as of a Business Combination and (B) subsequent to a Business Combination, (x) if the last sale priceMarch 31, 2022 is as follows:
AS OF MARCH 31, 2022 |
| |||||||||||||||||||
DESCRIPTION |
| ISSUANCE DATE(S) |
| MATURITY DATE(S) |
| STATED INTEREST RATE |
|
| PRINCIPAL BALANCE OUTSTANDING |
|
| UNAMORTIZED DEBT DISCOUNT |
|
| DEBT BALANCE |
| ||||
Trinity Equipment Financing |
| March 2021 - August 2021 |
| March 2024 - August 2024 |
| 9.48% - 9.73% |
|
| $ | 8,598 |
|
| $ | (223 | ) |
| $ | 8,375 |
| |
Term Loan – Silicon Valley Bank |
| September 2021 |
| September 2024 |
|
| 3.50 | % |
|
| 10,000 |
|
|
| (193 | ) |
|
| 9,807 |
|
Term Loan – Horizon |
| December 2021 |
| May 2025 |
|
| 9.00 | % |
|
| 15,000 |
|
|
| (479 | ) |
|
| 14,521 |
|
Capital lease |
|
|
|
|
|
|
|
|
| 832 |
|
|
| — |
|
|
| 832 |
| |
Total Debt |
|
|
|
|
|
|
|
|
| 34,430 |
|
|
| (895 | ) |
|
| 33,535 |
| |
Less: Current Portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (9,849 | ) | |||
Total Long-Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 23,686 |
| |||
A summary of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizationsoutstanding debt as of December 31, 2021 is as follows:
23
AS OF DECEMBER 31, 2021 |
| |||||||||||||||||||
DESCRIPTION |
| ISSUANCE DATE(S) |
| MATURITY DATE(S) |
| STATED INTEREST RATE |
|
| PRINCIPAL BALANCE OUTSTANDING |
|
| UNAMORTIZED DEBT DISCOUNT |
|
| DEBT BALANCE |
| ||||
Trinity equipment financing |
| March 2021 - August 2021 |
| March 2024 - August 2024 |
| 9.48% - 9.73% |
|
| $ | 9,454 |
|
| $ | (252 | ) |
| $ | 9,202 |
| |
Term loan - Silicon Valley Bank |
| September 2021 |
| September 2024 |
|
| 3.50 | % |
|
| 10,000 |
|
|
| (225 | ) |
|
| 9,775 |
|
Term loan - Horizon |
| December 2021 |
| May 2025 |
|
| 9.00 | % |
|
| 15,000 |
|
|
| (582 | ) |
|
| 14,418 |
|
Capital lease |
|
|
|
|
|
|
|
|
| 992 |
|
|
| - |
|
|
| 992 |
| |
Total Debt |
|
|
|
|
|
|
|
|
| 35,446 |
|
|
| (1,060 | ) |
|
| 34,386 |
| |
Less: Current Portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,234 | ) | |||
Total Long-Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,152 |
| |||
Convertible notes - PIPE Investors |
| December 2021 |
| December 2022 |
|
| 0.33 | % |
|
| 13,500 |
|
|
| 0 |
|
|
| 13,500 |
|
Convertible notes (a) |
| April & |
| April & |
|
| 5.00 | % |
|
| 18,213 |
|
|
| (22 | ) |
|
| 18,191 |
|
|
|
|
|
|
|
|
|
|
| 31,713 |
|
|
| (22 | ) |
|
| 31,691 |
| |
Total debt and convertible notes |
|
|
|
|
|
|
|
| $ | 67,159 |
|
| $ | (1,082 | ) |
| $ | 66,077 |
| |
Convertible Instruments -PIPE Investors
In December 2021, certain new and existing investors in all of the Public Stockholders having the rightGreenLight (the “Prepaying PIPE Investors”) agreed to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
On September 4, 2020, HB Strategies issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up topurchase from GreenLight convertible instruments with an aggregate principal amount of $300,000.approximately $35.3 million (the “PIPE Instruments”). The Promissory NoteCompany received $13.5 million in December 2021 and $21.8 million in January of 2022.
In conjunction with entering into the PIPE Instruments, each PIPE Investor entered into a side letter agreement (the “Side Letter”) with GreenLight, which required the PIPE
Investor to tender its PIPE Instrument as a corresponding payment for all or a portion of such PIPE Investor’s purchase of shares upon the closing of a business combination.
In February of 2022, in accordance with the Business Combination, $35.3 million of the PIPE Instruments were surrendered, cancelled, and converted into shares of common
stock. The Company determined that the cancellation and conversion of the PIPE Instruments represented an extinguishment for accounting purposes.
Term Loan – Horizon
In December 2021, the Company entered into a loan and security agreement with Horizon Technology Finance Corporation and Powerscourt Investments XXV, LP (together, “Horizon”), which provided for a term loan facility in an aggregate principal amount of up to $25.0 million, $15.0 million of which was non-interest bearingborrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after June 30, 2022.
Accrued interest is payable onmonthly. The principal of each term loan must be repaid in equal monthly installments beginning February 1, 2023 (or August 1, 2023 if any of the remaining $10.0 million is borrowed), with a scheduled final maturity date of July 1, 2025. The Company may prepay the term loans in full, but not in part, without premium or penalty, other than a premium equal to (i) 3% of the principal amount of any prepayment made within 12 months after the applicable funding date, (ii) 2% of the principal amount of any prepayment made between 12 and 24 months after the applicable funding date and (iii) 1% of the principal amount of any prepayment made more than 24 months after the applicable funding date. On the earlier of (i) March 31, 2021 or (ii) the consummationscheduled final maturity date and the prepayment in full of the Initial Public Offering. Asterm loans, the Company must pay a final payment fee equal to 3.0% of December 31, 2020, therethe original principal amount of the funded term loans.
24
The debt was $300,000recorded based on proceeds received net of related debt issuance costs of approximately $0.6 million. The debt issuance costs include the fair value of approximately $0.4 million for the warrants the Company is committed to issue in borrowings outstanding underconjunction with this financing. The warrants were issued on January 19, 2022. See Note 11 for further discussion of the Promissory Note,warrants.
Term Loan – Silicon Valley Bank
In September 2021, the Company entered into a loan and security agreement with Silicon Valley Bank (“SVB”), which provided for a term loan facility in an aggregate principal amount of up to $15.0 million, $10.0 million of which was repaidborrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after March 31, 2022. The remaining $5.0 million was no longer available as it was not borrowed as of March 31, 2022.
Accrued interest is payable monthly. The principal of each term loan must be repaid in equal monthly installments beginning April 1, 2022, with a scheduled final maturity date of September 1, 2024. On the earlier of the Initial Public Offeringscheduled final maturity date and the prepayment in full of the term loans, the Company must pay a final payment fee equal to 4.0% of the original principal amount of the term loans. GreenLight may prepay the term loans in increments of $5.0 million and without premium or penalty, other than a premium equal to (i) with respect to any prepayment made on January 19, 2021. Borrowings underor before September 22, 2022, 3% of the Promissory Note are no longer available.principal so prepaid, (ii) with respect to any prepayment made after September 22, 2022 and on or before September 22, 2023, 2% of the principal so prepaid and (iii) with respect to any prepayment made after September 22, 2023 and on or before September 1, 2024, 1% of the principal so prepaid. GreenLight granted a first-priority, perfected security interest in substantially all of its present and future personal property and assets, excluding intellectual property, to secure its obligations to SVB.
The debt was recorded based on proceeds received net of related debt issuance costs of approximately $0.3 million. The debt issuance costs include the fair value of approximately $0.2 million for the 51,724 shares of common warrants the Company previously issued in conjunction with this financing. No additional common warrants were issued in conjunction with this financing. Total debt issuance costs of approximately $0.4 million is being amortized over the term of the financing agreement.
Equipment Financing
On August 9,March 29, 2021, the Sponsor agreedCompany entered into a master equipment financing agreement with Trinity Capital (Trinity) authorizing equipment financing in the aggregate of approximately $11.3 million with advances to loanbe made as follows: (1) up to $5.0 million at execution of the agreement and (2) the remaining balance to be drawn at Company’s option but no later than September 1, 2021. The monthly payment factors are determined by Trinity based on the Prime Rate reported in The Wall Street Journal on the first day of the month in which a financing schedule is executed, which as of the effective date of the equipment financing agreement was 3.25%. As of March 31, 2022, the Company has drawn the entire $11.3 million on multiple advances, which is repayable over a 36-month period that commenced on the advance date. The historical cost of the assets subject to a lien under this financing arrangement is approximately $14.7 million.
The debt was recorded based on proceeds received net of related debt issuance costs of approximately $0.4 million, which are being amortized over the term of the financing agreement. The debt issuance costs include the fair value of approximately $0.1 million for the 219,839 common stock warrants the Company issued in conjunction with this financing.
Convertible Notes
In connection with the Merger (See Note 3), $16.8 million of the Company’s outstanding convertible notes, which were issued in 2020, and accrued interest converted into 10.1 million shares of Series D Preferred Stock. Concurrently with the business combination, the Series D Preferred Stock was exchanged for shares of common stock of New GreenLight in February of 2022.
Loan Interest Expense and Amortization
The Company’s total interest expense was approximately $1.0 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively. The following summarizes the components of total interest expense:
25
|
| MARCH 31, |
|
| MARCH 31, |
| ||
Interest paid or accrued |
| $ | 804 |
|
| $ | 101 |
|
Non-cash amortization of debt discount and deferred financing cost |
|
| 224 |
|
|
| 210 |
|
Total |
| $ | 1,028 |
|
| $ | 311 |
|
Scheduled future principal payments on total outstanding debt, as of March 31, 2022 are as follows:
|
| MARCH 31, 2022 |
| |
Remainder of 2022 |
| $ | 6,706 |
|
2023 |
|
| 14,438 |
|
2024 |
|
| 10,786 |
|
2025 and thereafter |
|
| 2,500 |
|
Total |
| $ | 34,430 |
|
Common Stock Warrant classified as Liability
Horizon Debt Warrants
In connection with Loan Agreement the Company entered into with Horizon which provided for a term loan facility in an aggregate principal amount of up to $500,000 pursuant to a promissory note (the “Note”)$25.0 million, $15.0 million of which was borrowed at the closing (See Note 10). The Note is non-interest bearingCompany issued warrants for both the $15.0 million loan drawn at the closing and payable upon consummationthe remaining $10.0 million available commitment which had different terms and conditions. In conjunction with the $10.0 million available commitment, the Company made available Horizon a warrant to purchase up 57,034 shares, of which 28,517 shares of the Company’s initial Business Combination. At September 30, 2021, there was $500,000common stock were issued at an exercise price per share of borrowings outstanding under$5.26. These warrants are recognized as liabilities on the Note.
Related Party Loans
In order to finance transaction costscondensed consolidated balance sheets and were measured at their inception date fair value and subsequently remeasured at each reporting period with changes recorded as a component of other income in connection with a Business Combination, the Sponsor, members of the Company’s management team or anycondensed consolidated statements of their respective affiliates or other third partiesoperations. The warrants issued for the $10.0 million available commitment was summarized below as a liability classified Common Stock Warrant.
Warrant Class |
| Shares |
|
| Fair Value |
|
| Issuance Date |
| Exercise Price |
|
| Expiration Date | |||
Common stock |
|
| 28,517 |
|
| $ | 249 |
|
| January 19, 2022 |
| $ | 5.26 |
|
| The earlier of March 29, 2031 or the date of a qualifying acquisition |
The warrant’s fair value upon issuance and as of March 31, 2022 was estimated to be approximately $0.2 million, and was measured using a probability weighted Black-Scholes option-pricing model with the following assumptions:
26
Valuation Assumptions |
| AT ISSUANCE (AS OF JANUARY 19, 2022) |
|
| AS OF |
| ||
Fair value of common stock |
| $ | 5.89 |
|
| $ | 9.63 |
|
Risk free interest rate |
|
| 1.50 | % |
|
| 2.39 | % |
Expected volatility |
|
| 59.60 | % |
|
| 59.60 | % |
Expected term (in years) |
|
| 10.50 |
|
|
| 10.00 |
|
Private Placement Warrants
The Private Placement Warrants may but are not obligated to, loanbe redeemed by the Company fundsso long as may be required (“Working Capital Loans”), which will be repaid only upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, the Company may use a portion of any funds held outside the Trust Account to repay the Working Capital Loans; however, no proceeds from the Trust Account may be used for such repayment. If such funds are insufficient to repay the Working Capital Loans, the unpaid amounts would be forgiven. Up to $1,500,000 of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant at the option of the holder. The warrants would be identical to the Private Placement Warrants. As of September 30, 2021Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. The Private Placement Warrants have terms and December 31, 2020, there were no Working Capital Loans outstanding.
Sponsor and Director Insider Warrants
At the closingprovisions identical to those of the Initial Public Offering, the Company issued 600,000 private placement-equivalent warrants to the Sponsor and 50,000 private placement-equivalent warrants to each of Gov. Patrick, Messrs. Brewster and Seavers, the Company’s independent director. Such warrants were issued for nominal amount andWarrants which are identical to the Private Placement Warrants,discussed below, including as to exercise price, exercisability, and exercise period. The Company recorded the fair value of these warrants of approximately $0.9 million on the date of issuance which is included in loss on initial issuance of Private Placement Warrants in the statements of operations for the three and nine months ended September 30, 2021.
Underwriter
The underwriter is an affiliate of the Sponsor (see Note 7).
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on January 13, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Notwithstanding the foregoing, the Initial Stockholders may not exercise their demand and “piggyback” registration rights after five and seven years, respectively, after the effective date of the Initial Public Offering and may not exercise its demand rights on more than one occasion.
In addition, pursuant to a registration agreement with Hudson Bay Capital Management LP (“Hudson Bay”) and its permitted transferees, the Company is required to register (i) resale of any securities purchased in the Initial Public Offering by filing a registration statement within 30 days after the closing of the Initial Public Offering and use its best effort to have such registration statement declared effective within 90 days after the closing of the Initial Public Offering; and (ii) resale of any Private Placement Warrants and shares of Class A common stock underlying the Private Placement Warrants by filing a registration statement within 30 days after the completion of a Business Combination and use its best effort to have such registration statement declared effective within 90 days after the completion of a Business Combination. In the event of any delay in filing and/or effectiveness of any aforesaid registration statement under the registration agreement with Hudson Bay and its permitted transferees, the unavailability of such restatement after effectiveness or a public information failure (each, a “Registration Default”), Hudson Bay and its permitted transferees are entitled to payments from the Company equal to 2% of the purchase price on the occurrence of each Registration Default and 2% per month (or a portion thereof pro rata) that such Registration Default continues to exist.
Underwriting Agreement
The Company engaged a qualified independent underwriter to participate in the preparation of the registration statement and exercise the usual standards of “due diligence” in respect thereto. The Company paid the independent underwriter a fee of $100,000 upon the completion of the Initial Public Offering in consideration for its services and expenses as the qualified independent underwriter. Additionally, the Company agreed to pay the underwriter $150,000 in expenses to cover seller’s concessions to selling group member in connection with the Initial Public Offering. The independent underwriter will receive no other compensation.
Business Combination Marketing Agreement
The Company engaged Canaccord Genuity LLC (“Canaccord”) as advisors in connection with its Business Combination to assist the Company in arranging meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that may be interested in purchasing the Company’s securities, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with the preparation of its press releases and public filings in connection with the Business Combination. The Company will pay Canaccord for such services upon the consummation of a Business Combination a cash fee in an amount equal to 3.76% of the gross proceeds of the Initial Public Offering. Pursuant to the terms of the business combination marketing agreement, no fee will be dueperiod, except if the Company does not complete a Business Combination.
Proposed Business Combination and Related Agreements
On August 9, 2021, the Company entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”) with ENVI Merger Sub and GreenLight.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Business Combination Agreement provides for, among other things, the following transactions on the closing date (collectively, the “Business Combination”):
Private Placement
Concurrently with the execution of the Business Combination Agreement, the Company entered into Subscription Agreements with certain investors (collectively, the “Private Placement Investors”) pursuant to which, among other things, such investors agreed to subscribe for and purchase and the Company agreed to issue and sell to such investors, an aggregate of 10,525,000 ENVI Class A Shares (the “Private Placement Shares”), at a purchase price of $10.00 per share (the “Private Placement”). The closing of the Private Placement is contingent upon, among other things, the substantially concurrent consummation of the Business Combination and related transactions. In connection with the Private Placement, the Company will grant the Private Placement Investors certain customary registration rights. The Private Placement Shares have not been registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D or Regulation S promulgated thereunder without any form of general solicitation or general advertising.
Registration Rights and Transfer Restrictions
Concurrently with the execution of the Business Combination Agreement, the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”) with certain stockholders of GreenLight, ENVI Sponsor, HB Strategies and the other holders of Class B Common Stock, pursuant to which the Company agreed, following the consummation of the Merger, to register for resale, pursuant to Rule 415 under the Securities Act, certain shares of common stock of the Company, as well as other equity securities that are held by the parties thereto from time to time.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Additionally, the Investor Rights Agreements and the Bylaws that will be effective following the consummation of the Business Combination, contain certain restrictions on transfer with respect to the ENVI Class A Common Stock received as consideration for the Merger. Such restrictions begin at the consummation of the Business Combination and end at the date that is 180 days after the consummation of the Business Combination (the “Lock-Up Period”), except that the Lock-Up Period may shorten to 120 days if, following the consummation of the Business Combination, the last sale price of the ENVI Class A Common Stock equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period.
Transaction Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Company entered into a Transaction Support Agreement (the “Transaction Support Agreement”) with certain stockholders of GreenLight (the “Supporting Stockholders”). Under the Transaction Support Agreement, the Supporting Stockholders agreed, within five business days following the declaration by the staff of the SEC that the proxy statement / prospectus relating to the approval by the Company’s stockholders of the transactions contemplated in the Business Combination Agreement is effective, to execute and deliver a written consent with respect to the outstanding Greenlight Shares held by the Supporting Stockholder adopting the Business Combination Agreement and related transactions and approving the Merger. The Greenlight Shares owned by the Supporting Stockholders represent a majority of the outstanding voting power (on a converted basis) of GreenLight.
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2020 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2021, there were 20,700,000 shares of Class A common stock issued and outstanding, which are subject to possible redemption and presented as temporary equity. At December 31, 2020, there were no shares of Class A common stock issued or outstanding.
Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2021 and December 31, 2020, there were 5,175,000 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders except as otherwise required by law.
The shares of Class B common stock will automatically convert into Class A common stock at the time of the Business Combination, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding (i) any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combination, (ii) any securities issued to the initial stockholders of the Company upon conversion of Working Capital Loans and (iii) any public shares redeemed by public stockholders in connection with a Business Combination, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
NOTE 9. WARRANTS
As of September 30, 2021, there were 10,350,000 Public Warrants outstanding. As of December 31, 2020, there were no Public Warrants outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective within 60 business days following a Business Combination and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A 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, except as described below, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
As of September 30, 2021, there were 2,000,000 Private Placement Warrants outstanding and 750,000 Insider Warrants outstanding which are identical to the Private Placement Warrants. As of December 31, 2020 there were no Private Placement Warrants or Insider Warrants outstanding. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that (1) the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants will be exercisable on a cashless basis, (3) the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will have certain registration rights. If the Private Placement Warrants are held by someone other than the initial purchasers or theirpurchasers’ permitted transferees, then the Private Placement Warrants will beare redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 10. FAIR VALUE MEASUREMENTS On the Closing Date and as of March 31, 2022, there were 2,062,500 Private Warrants issued and outstanding. These warrants are recognized as liabilities on the condensed consolidated balance sheets and were measured at their inception date fair value and subsequently remeasured at each reporting period with changes recorded as a component of other income in the Company’s condensed consolidated statements of operations.
Warrant Class |
| Shares |
|
| Fair Value |
|
| Initial Recognition Date |
| Exercise Price |
|
| Expiration Date | |||
Private Placement Warrants |
|
| 2,062,500 |
|
| $ | 1,341 |
|
| February 2, 2022 |
| $ | 11.50 |
|
| March 2, 2027 |
The fair value of the Company’s financial assetsPrivate Placement Warrant upon initial recognition and liabilities reflects management’s estimateas of amounts thatMarch 31, 2022 was estimated to be approximately $1.3 million and $1.6 million respectively, and was measured using a Black-Scholes option-pricing model with the Company would have received infollowing assumptions:
Valuation Assumptions |
| INITIAL RECOGNITION |
|
| AS OF |
| ||
Fair value of common stock |
| $ | 8.82 |
|
| $ | 9.63 |
|
Risk free interest rate |
|
| 1.59 | % |
|
| 2.39 | % |
Implied volatility (1) |
|
| 15.9 | % |
|
| 12.0 | % |
Expected term (in years) |
|
| 5.00 |
|
|
| 4.85 |
|
(1) The implied volatility considers the trading price of the public warrants and calculated value of the public warrants based on a Monte Carlo simulation model.
Common Stock Warrant classified as Equity
In connection with the saleLoan Agreement the Company entered into with Horizon in December 2021, the Company issued the warrants to Horizon to purchase 85,552 shares of the assetsCompany’s common stock at an exercise price per share of $5.26 for the $15.0 million drawn commitment. Upon the issuance during January 2022, the Company reassessed for the classification of these warrants, and noted that there were no variability on the number of shares or paid in connection with the transferexercise price of the liabilities in an orderly transaction between market participants atsettlement. The Company determined that the measurement date. In connection with measuringWarrants met the requirements for equity classification and the fair value of its$0.4 million was reclassified to equity during the period.
27
Warrant Class |
| Shares |
|
| Issuance Date |
| Exercise Price per Share |
|
| Expiration Date | ||
Common stock warrant |
|
| 85,552 |
|
| January 19, 2022 |
| $ | 5.26 |
|
| January 19, 2032 |
The warrant’s fair value upon issuance was estimated to be approximately $0.4 million, and was measured using a Black-Scholes option-pricing model with the following assumptions:
Valuation Assumptions |
| AT ISSUANCE (AS OF JANUARY 19, 2022) |
| |
Fair value of common stock |
| $ | 5.89 |
|
Risk free interest rate |
|
| 1.50 | % |
Expected volatility |
|
| 59.60 | % |
Expected term (in years) |
|
| 10.00 |
|
Public Warrants
Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. On the Closing Date, there were 10,350,000 Public Warrants issued and outstanding.
In March 2022, 105,210 of the Public Warrants were exercised into shares of the Company's common stock for a total exercise price of $1.2 million in cash.
The following table presents a roll-forward of the Company’s warrants from December 31, 2021 to March 31, 2022:
|
| COMMON STOCK WARRANTS |
| PREFERRED STOCK WARRANTS |
| ||
Warrants Outstanding, December 31, 2021 (1) |
|
| 207,376 |
|
| 635,404 |
|
Exercised in the business combination (1) |
|
| (207,376 | ) |
| (635,404 | ) |
Issued (1) |
|
| 75,924 |
|
| - |
|
Assumed in the business combination |
|
| 12,412,500 |
|
| - |
|
Exercised subsequent to the business combination |
|
| (105,120 | ) |
| - |
|
Warrants Outstanding, March 31, 2022 |
|
| 12,383,304 |
|
| - |
|
(1) Number of warrants have been adjusted to reflect the exchange for New GreenLight warrants at an exchange ratio of approximately 0.6656 as a result of the Business Combination. See Note 3 for further information.
Authorized shares
The Company was authorized to issue 500,000,000 shares of $0.0001par value common stock and 10,000,000 shares of $0.0001 par value preferred stock as of March 31, 2022 and 191,500,000 shares of $0.001 par value common stock as of December 31, 2021.
28
As of March 31, 2022, there were 122,980,505 shares of common stock issued and outstanding and 12,383,304 warrants to purchase the Company’s common stock outstanding. As of March 31, 2022, there were 0 shares of preferred stock issued or outstanding.
Legacy Greenlight Redeemable Convertible Preferred Stock
In connection with the Business Combination, Legacy Redeemable Convertible Preferred Stock previously classified as temporary equity was retroactively adjusted, converted into common stock at an exchange ratio of approximately 0.6656, and reclassified to permanent equity as a result of the reverse recapitalization. As of March 31, 2022, there was 0 Legacy Redeemable Convertible Preferred Stock authorized, issued or outstanding. The following table summarizes details of Legacy Redeemable Convertible Preferred Stock authorized, issued, and outstanding immediately prior to the Business Combination.
|
| MARCH 31, |
|
| DECEMBER 31, |
| ||
Redeemable Convertible Preferred Stock Classes |
| 2022 |
|
| 2021 |
| ||
Series A-1 redeemable convertible preferred stock, $0.001 par value, |
| $ | 0 |
|
| $ | 4,414 |
|
Series A-2 redeemable convertible preferred stock, $0.001 par value, |
|
| 0 |
|
|
| 11,438 |
|
Series A-3 redeemable convertible preferred stock, $0.001 par value, |
|
| 0 |
|
|
| 19,917 |
|
Series B redeemable convertible preferred stock, $0.001 par value, |
|
| 0 |
|
|
| 18,671 |
|
Series C redeemable convertible preferred stock, $0.001 par value, |
|
| 0 |
|
|
| 55,851 |
|
Series D redeemable convertible preferred stock, $0.001 par value, |
|
| 0 |
|
|
| 108,499 |
|
Total |
| $ | 0 |
|
| $ | 218,790 |
|
29
The following describes the rights and preferences of the Legacy GreenLight Redeemable Convertible Preferred Stock prior to the conversion in the Business Combination:
Voting Rights
The holders of each share of Preferred Stock (“Preferred Stockholders”) generally had the right to one vote for each share of common stock into which such Preferred Stock could then convert. On matters on which the holders of shares of a particular series of Preferred Stock had the right to vote separately as a single class, such holders had the right to one vote per share of Preferred Stock of that particular series.
Conversion
Each share of Preferred Stock was convertible into common stock at any time at the option of the holder. Each share was converted into such number of shares of common stock as is determined by dividing the applicable original issuance price by the applicable conversion price in effect at the time of the conversion. The conversion price was subject to adjustment upon the happening of specified events, including the issuance or deemed issuance of certain additional shares of common stock, stock splits and combinations, dividends, distributions, mergers, and reorganizations. The original issuances prices of the shares of Series A-1, Series A-2, Series A-3, Series B, Series C and Series D Preferred Stock were $1.53, $1.65, $2.32, $0.86, $1.60 and $1.81 per share, respectively. As of three months ended March 31, 2022 and 2021, the Series A-1, Series A-2, Series A-3, Series B, Series C, and Series D conversion prices were $1.21, $1.27, $1.63, $0.86, $1.60, and $1.81 per share, respectively. As such, the shares of Preferred Stock converted on a one-for-one basis, except that the shares of Series A-1, Series A-2 and Series A-3 Preferred Stock converted at the rates of approximately 1.26446, 1.29528 and 1.42239 shares of common stock, respectively, per share of Preferred Stock.
Conversion was mandatory at the earlier of the closing of a firm commitment underwritten public offering of the Company’s common stock at a price of at least $5.4354 per share and with net proceeds to the Company of at least $75.0 million or at the election of the holders of a majority of the outstanding shares of Series D Preferred Stock.
Dividends
The holders of Series A-1 Preferred Stock were entitled to receive cumulative dividends that accrued at an annual rate of approximately 5%. The holders of Series A-2, Series A-3, Series B, Series C and Series D Preferred Stock were entitled to receive cumulative dividends that accrued at an annual rate of approximately 8%. Dividends were payable only when, as and if declared by the Board of Directors. In the event the Company declared, paid, or set aside any dividends on shares of any class of capital stock of the Company, other than dividends on shares of common stock payable in shares of common stock, the holders of Preferred Stock were entitled to receive, before or at the same time as such dividends, a dividend on each outstanding share of Preferred Stock in the amount of the accruing dividends unpaid as of such date as well as a comparable dividend on an as-converted basis. As of March 31, 2022 and December 31, 2021, 0 dividends had been declared.
Redemption
The Company’s Preferred Stock could only be redeemed upon a deemed liquidation event as described in the Company’s certificate of incorporation. Upon redemption, holders of shares of Preferred Stock of a particular series were entitled to receive a redemption amount equal to the original issue price of the shares of that series, plus any accrued but unpaid dividends and any declared but unpaid dividends for the shares of that series, subject to the terms summarized in the “Liquidation Preference” section below.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company, the holders of shares of Preferred Stock of a particular series were entitled to receive an amount per share equal to the greater of (i) the original issuance price of the shares of Preferred Stock of that series, plus any accruing dividends that are unpaid, whether or not declared, plus any other dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had such shares of Preferred Stock been converted into common stock. Such liquidating distributions were payable first, to the holders of shares of Series D Preferred Stock, second, to the holders of shares of Series C Preferred Stock and Series B Preferred Stock on a pari passu basis, third, to the holders of shares of Series A Preferred Stock on a pari passu basis, and finally, to the holders of shares of common stock. If
30
insufficient assets and liabilities,funds were available to permit payment of the full amount of the applicable liquidation preference payable to the holders of any series of Preferred Stock (or group of series payable on a pari passu basis), then all available assets and funds would have been distributed to the holders of such series (or group of series) on a pro rata basis, taking into account the order of priority set forth in the previous sentence.
After payment in full to the Preferred Stockholders, the holders of common stock are entitled to receive the remaining assets of 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). The following fair value hierarchy is used to classify assets and liabilitiesavailable for distribution on a pro rata basis based on the observable inputsnumber of shares held.
13. STOCK-BASED COMPENSATION
2022 Stock Incentive Plan
On February 1, 2022, stockholders approved the New GreenLight 2022 Equity and unobservable inputs used in orderIncentive Plan, or the “New GreenLight Equity Plan”, or “Equity Plan”, replacing the GreenLight 2012 Equity Plan (the “2012 Plan”), pursuant to which the Company’s Board of Directors may grant stock options, both incentive stock options and nonstatutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, dividend equivalent rights, or cash awards to employees, directors and consultants. There are 31,750,000 registered shares of common stock reserved for issuance under the Equity Plan. During the three months ended March 31, 2022, 555,000 stock options were granted under the Equity Plan.
The Plan is administered by the Company’s Board of Directors (the “Board”). The exercise prices, vesting and other restrictions are determined at the discretion of the Board, except that the exercise price per share of incentive stock options may not be less than 100% of the fair market value of the assetscommon stock on the date of grant. Stock options awarded under the Plan expire ten years after the grant date unless the Board sets a shorter term. Vesting periods for awards under the plans are determined at the discretion of the Board. Incentive stock options granted to employees and liabilities:non-statutory options and restricted stock awards granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over four or five years.
The fair value of stock option awards is estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:
|
| THREE MONTHS ENDED MARCH 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Fair value of underlying common stock |
| $ | 9.15 |
|
| $ | 0.82 |
|
Weighted average risk-free interest rate |
|
| 2.56 | % |
| 0.27% - 1.55% |
| |
Expected term (in years) |
|
| 6.00 |
|
| 5.00 - 6.00 |
| |
Expected volatility |
|
| 56.28 | % |
| 69.49% - 70.36% |
| |
Expected dividend yield |
|
| — |
|
|
| — |
|
The following table summarizes the activity of the Company’s stock options under the Plan for the three months ended March 31, 2022:
|
|
|
|
|
|
|
| AVERAGE |
|
| AGGREGATE |
| ||||
|
|
|
|
| WEIGHTED- |
|
| REMAINING |
|
| INTRINSIC |
| ||||
|
|
|
|
| AVERAGE |
|
| CONTRACTUAL |
|
| VALUE |
| ||||
|
| SHARES (1) |
|
| EXERCISE PRICE (1) |
|
| TERM (in years) |
|
| (in thousands) |
| ||||
Outstanding at December 31, 2021 |
|
| 18,101,548 |
|
| $ | 1.14 |
|
|
| 8.0 |
|
| $ | 139,505 |
|
Granted |
|
| 555,000 |
|
|
| 9.15 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| (79,055 | ) |
|
| 0.32 |
|
|
| — |
|
|
| 594 |
|
Cancelled or forfeited |
|
| (72,127 | ) |
|
| 0.27 |
|
|
| — |
|
|
| — |
|
Outstanding at March 31, 2022 |
|
| 18,505,366 |
|
|
| 0.71 |
|
|
| 7.8 |
|
|
| 141,869 |
|
Vested and expected to vest at March 31, 2022 |
|
| 18,505,366 |
|
|
| 0.71 |
|
|
| 7.8 |
|
|
| 141,869 |
|
Exercisable at March 31, 2022 |
|
| 8,337,001 |
|
| $ | 0.54 |
|
|
| 6.3 |
|
| $ | 69,248 |
|
31
(1) Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy GreenLight's stock options for New GreenLight stock options at an exchange ratio of approximately 0.665 as a result of the Business Combination. See Note 3 for further information.
The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2022 and 2021 was $5.06 per share and $0.51 per share, respectively.
As of March 31, 2022, total unrecognized compensation expense related to stock options totaled approximately $9.8 million, which is expected to be recognized over a weighted-average period of 2.7 years.
The aggregate intrinsic value of common stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The intrinsic value of options exercised for the three months ended March 31, 2022 and 2021, was approximately $0.6 million and $0.1 million, respectively.
Restricted Stock
The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of the Company’s common stock on that same date.
A summary of the Company’s restricted stock activity during the three months ended March 31, 2022 is presented below:
|
| SHARES |
|
| WEIGHTED |
| ||
Unvested shares as of December 31, 2021 |
|
| 4,231 |
|
| $ | 0.76 |
|
Vested |
|
| (1,567 | ) |
|
| 0.23 |
|
Unvested shares as of March 31, 2022 |
|
| 2,664 |
|
| $ | 0.22 |
|
The total fair value of restricted stock that vested during the three months ended March 31, 2022 and 2021 was approximately $25 thousand and $3 thousand, respectively.
Stock-Based Compensation Expense
Stock-based compensation expense recorded as research and development and general and administrative expenses, for employees, directors and non-employees during the three months ended March 31, 2022 and 2021 is as follows:
|
| THREE MONTHS ENDED MARCH 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Research and development |
| $ | 504 |
|
| $ | 131 |
|
General and administrative |
|
| 1,683 |
|
|
| 217 |
|
Total stock-based compensation expense |
| $ | 2,187 |
|
| $ | 348 |
|
The Company classifies its U.S. Treasuryrecognized additional stock-based compensation expense associated with 292,469 shares subject to GreenLight options that vest based on both a liquidity and equivalenta service condition. At the date of grant in 2020, achievement of the conditions in the performance-based award was deemed not probable and, accordingly, the grant date fair value of the award was 0 based upon the probable outcome of such conditions. The liquidity condition is satisfied upon the occurrence of certain events, including a merger or acquisition or other business combination transaction involving the Company and a publicly traded special purpose acquisition company or other similar entity and, as a result, the liquidity condition for certain of GreenLight’s options was satisfied upon the completion of the Business Combination. Assuming achievement of the highest level of performance,
32
the performance-based award would have had a grant date fair value of $0.2 million. In December 2021, the Company’s Board of Directors voted to extend the length of time to allow for the performance vesting to occur by March 31, 2022. The fair value of the award, as modified, was $2.2 million as of the modification date. Upon closing of the Business Combination, the Company recognized approximately $1.4 million of incremental stock-based compensation expense associated with these options during the three months ended March 31, 2022, and the remainder will be recognized over the remaining service period.
14. NET LOSS PER SHARE
The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:
(In thousands, except shares and per share data) |
| THREE MONTHS ENDED MARCH 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net loss available to common stockholders |
| $ | (38,207 | ) |
| $ | (21,283 | ) |
Denominator: |
|
|
|
|
|
| ||
Weighted-average common stock outstanding |
|
| 113,558,404 |
|
|
| 96,300,247 |
|
Net loss per share, basic and diluted |
| $ | (0.34 | ) |
| $ | (0.22 | ) |
The Company’s potential dilutive securities include unvested restricted stock, common stock options and common stock warrants. The Company excluded the following potential common stock, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:
|
| AS OF MARCH 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Unvested restricted stock |
|
| 2,664 |
|
|
| 20,097 |
|
Options to purchase common stock |
|
| 18,505,366 |
|
|
| 16,294,545 |
|
Common stock warrants |
|
| 12,383,304 |
|
|
| 831,304 |
|
Total |
|
| 30,891,334 |
|
|
| 17,145,946 |
|
15. INCOME TAXES
The Company did 0t record income tax expense for the three months ended March 31, 2022 or the three months ended March 31, 2021 due to the Company’s historical net operating losses, forecasted continued net operating losses, and the Company’s recognition of a full valuation allowance.
The effective tax rate differs from the statutory rate, primarily due to the Company’s history of incurring losses, which have not been benefited, and other permanent differences. Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
16. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company’s significant operating leases entered as held-to-maturityof December 31, 2021, are disclosed in accordanceNote 18, Commitments and Contingencies – Operating Leases, of the notes to the audited consolidated financial statements for the year ended December 31, 2021 as filed with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities arethe SEC March 31, 2021 on form 8-K/A. Since the date of those securities whichfinancial statements, the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheets and adjustedentered into new operating leases or has modified existing operating leases for the amortization or accretion of premiums or discounts.
At September 30, 2021, assets held in the Trust Account were comprised of $1,002 in cash $207,007,744 in money market funds, which primarily invest in U.S. Treasury securities. During the ninethree months ended March 31, 2021, as noted below.
33
On September 30, 2021, the Company did not withdraw any interest income from the Trust Account.entered into a lease for new laboratory, office and greenhouse space in Research Triangle Park, North Carolina, which commenced in January 2022. The lease term expires in July 2033, unless extended. The base rent for this lease is approximately $2.3 million per year, subject to a 3% increase each year
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputsIn March 2022, the Company utilizedentered into a lease for new laboratory space in Lexington, Massachusetts, with an anticipated commencement date of May 2022. The lease term expires in July 2033. The base rent for this lease is $3.9 million per year, subject to determine such fair value.a 3% increase each year.
| Level | Fair Value | |||||||
| Assets: | ||||||||
| Investments held in Trust Account – Money market funds | 1 | $ | 207,007,744 | |||||
| Liabilities: | ||||||||
| Warrant Liability – Public Warrants | 1 | 10,453,500 | ||||||
| Warrant Liability – Private Placement Warrants | 3 | 2,100,000 | ||||||
| Warrant Liability - Sponsor and Directors | 3 | 787,500 | ||||||
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and presented within warrant liabilities in the accompanying condensed consolidated balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilitiesTotal rent expense in the condensed consolidated statements of operations.
operations for the operating leases was approximately $2.8 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.
The Private Placement Warrants were initially valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair valueA summary of the Private Placement Warrants is the expected volatility of the common stock. The expected volatilityCompany’s future minimum lease payments under noncancelable operating leases, excluding tenant improvement payables, as of March 31, 2022, is as follows:
|
| AS OF MARCH 31, 2022 |
| |
Remainder of 2022 |
| $ | 8,840 |
|
2023 |
|
| 12,286 |
|
2024 |
|
| 8,285 |
|
2025 |
|
| 7,296 |
|
2026 |
|
| 7,018 |
|
Thereafter |
|
| 43,975 |
|
Total |
| $ | 87,700 |
|
Legal proceedings
Legal claims may arise from time to time in the Initial Public Offering date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatilitynormal course of business. There are 0 such claims as of subsequent valuation dates was implied fromthree months ended March 31, 2022 and 2021, that are expected to have a material effect on the Company’s own Public Warrant pricing. A Monte Carlo simulation methodology was usedcondensed consolidated financial statements.
Other funding commitments
In December 2020, the Company entered into an assignment and license agreement with Bayer CropScience LLP (“Bayer”) under which the Company may be obligated to make milestone and royalty payments. These payment obligations are contingent upon future events, such as achieving certain development, regulatory, and commercial milestones or generating product sales. The timing of these events is uncertain; accordingly, the Company cannot predict the period during which these payments may become due. The Company have agreed to pay up to $2.0 million in estimatingmilestone payments under this assignment and license agreement when certain development milestones are met. The Company assessed the fair value ofmilestones at three months ended March 31, 2022 and concluded no such milestone payments were deemed probable nor due.
In November 2021, the Public Warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. For periods subsequent to the detachment of the warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The measurement of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market.
The key inputsCompany entered into the Black-Scholes-Merton modela manufacturing and development contract service agreement with a contract development and manufacturing organization for the warrants were as follows:
| Input | January 13, 2021 | September 30, 2021 | ||||||
| Risk-free interest rate | 0.74 | % | 1.07 | % | ||||
| Expected term (years) | 5.00 | 5.00 | ||||||
| Expected volatility | 21 | % | 16.3 | % | ||||
| Exercise price | $ | 11.50 | $ | 11.50 | ||||
| Fair value of Units | $ | 9.43 | $ | 9.89 | ||||
The following table presentsCompany’s mRNA COVID-19 vaccine. Based on the changesCompany’s minimum purchase commitments, the Company expects to pay the organization a minimum of approximately $11.5 million in service fees under the agreement, excluding the cost of raw materials. Based on the current schedule, the Company expects to incur the majority of these expenses in 2022 and a portion in the fair valuefirst quarter of Level 3 warrant liabilities:2023.
| Private Placement | Public | Warrant Liabilities | ||||||||||
| Fair value as of January 1, 2021 | $ | — | $ | — | $ | — | ||||||
| Initial measurement on January 19, 2021 | 3,272,500 | 11,902,500 | 15,175,000 | |||||||||
| Change in valuation inputs or other assumptions | (385,000 | ) | (2,898,000 | ) | (3,283,000 | ) | ||||||
| Transfers to Level 1 | — | (9,004,500 | ) | (9,004,500 | ) | |||||||
| Fair value as of September 30, 2021 | $ | 2,887,500 | $ | — | $ | 2,887,500 | ||||||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the nine months ended September 30, 2021 was approximately $9.0 million, when the Public Warrants were separately listed and traded.
NOTE 11.17. SUBSEQUENT EVENTS
The Company evaluatedhas completed an evaluation of all subsequent events and transactions that occurred after the balance sheet date up to through May 16, 2022, the date that thethese condensed consolidated financial statements were available to be issued. Based upon this review, the Company did not identify anyThere were no subsequent events that would have required adjustmentrequire adjustments to or disclosure in the financial statements.
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Environmental Impact Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to CG Investments VI. The following discussion and analysis of the Company’s financial condition and results of operations of GreenLight Biosciences Holdings
PBC and its consolidated subsidiaries should be read in conjunctiontogether with the Company’s unaudited condensed consolidated financial statements, andtogether with the related notes thereto, containedincluded elsewhere in this Quarterly Report. Certain information contained inReport on Form 10-Q (this “Report”) and the Company’s audited consolidated financial statements, together with the related notes thereto (the “2021 Consolidated Financial Statements”), included as Exhibit 99.1 to the Company’s Amendment No. 1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 31, 2022. This discussion and analysis set forth below includescontains forward-looking statements that involve numerous risks and uncertainties.
Specialuncertainties, including, but not limited to, those described under the heading “Risk Factors” in Item 1A of Part I of the Company’s Annual Report for the year ended December 31, 2021. See “Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” withinStatements” at the meaningbeginning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual resultsthis Report. All references to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q/A including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), 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, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, pleaseyears, unless otherwise noted, refer to the Risk FactorsCompany’s fiscal years, which end on December 31. For purposes of this section, all references to “we,” “us,” “our,” “New GreenLight” or the “Company” refer to GreenLight Biosciences Holdings PBC and its consolidated subsidiaries.
Overview
GreenLight Biosciences Holdings, PBC is a pre-commercial stage synthetic biology company with a proprietary cell- free ribonucleic acid (RNA) production platform for the discovery, development, and commercialization of high- performing products to promote healthier plants, foods, and people. Our vision is to pave the Company’s final prospectusway for its Initial Public Offering fileda sustainable planet through widely available and affordable RNA products. We are developing RNA products for plant and life science applications to advance crop management, plant protection, animal health, vaccine development and pandemic preparation. We have a pipeline of product candidates across various stages of development.
Since our inception in 2008, we have devoted substantially all of our efforts and financial resources to conducting research and development activities for our programs, acquiring, in-licensing, and discovering product candidates, securing related intellectual property rights, raising capital, and organizing and staffing our company. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily with proceeds from the U.S. Securitiessale of preferred stock and Exchange Commission (the “SEC”to a lesser extent proceeds from the issuance of convertible notes and debt financing. From our founding through March 31, 2022, we have raised funds through proceeds from the sale of our preferred stock, from the Business Combination, from purchase of ENVI's Common Stock ("PIPE Prepayment"). The Company’s securities filings can be accessed, and from the issuance of debt.
We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the EDGAR sectionsuccessful development and eventual commercialization of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intentionone or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatementmore of our financial statements ascurrent or future product candidates. Our net losses were $38.2 million and $21.3 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021 and June 30, 2021. Management identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our Class A common stock subject to possible redemption. We previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per Class A commons share while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management concluded that the redemption value should include all Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available),had an accumulated deficit of $291.8 million and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on July 2, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
$253.6 million, respectively. We expect to continue to incur significant costsexpenses and increasing operating losses. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:
35
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. We expect to finance our operations through the sale of equity securities, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements or arrangements as and when needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates and delay or discontinue the pursuit of ourpotential in-license or acquisition plans. We cannot assure you that our plansopportunities.
Because of the numerous risks and uncertainties associated with product development, we are unable to complete a Business Combinationpredict the timing or amount of increased expenses or when or if we will be successful.able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. The Company expects that its existing cash and cash equivalents of $83.2 million as of March 31, 2022 will not be sufficient to fund its operations for twelve months from the date we issued our condensed consolidated financial statements for the three months ended March 31, 2022. We are evaluating a range of opportunities to extend cash runway, including management of program spending, platform licensing collaborations and potential financing activities.
Response to COVID-19
Proposed In response to the ongoing global COVID-19 pandemic, we established a cross-functional task force and have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees and our business. Our operations are considered an essential business and we have been allowed to continue operating under governmental restrictions during this period. We have taken measures to continue our research and development activities, while work in laboratories and facilities has been organized to reduce risk of COVID-19 transmission. The extent of the impact of the COVID-19 pandemic on our business, operations and product development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak and its impact on our field trial completion, clinical trial enrollment, trial sites, contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. While we are experiencing limited financial and operational impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, and results of operations ultimately could be materially adversely affected. We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.
Recent Developments
Business Combination and Related AgreementsPublic Company Costs
On August 9, 2021, weGreenLight entered into athe Business Combination Agreement (as it may be amended, supplemented or otherwise modified from timewith ENVI and Merger Sub. On February 2, 2022, GreenLight consummated the Business Combination, pursuant to time, the “Business Combination Agreement”) with Honey Beewhich Merger Sub Inc.,merged with and into GreenLight, with GreenLight surviving the Merger as a Delaware corporation and our wholly owned subsidiary (“of ENVI. On February 2, 2022, in connection with the consummation of the Merger, ENVI Merger Sub”), andchanged its name to GreenLight Biosciences Inc.,Holdings, PBC and became a Delaware corporation (“GreenLight”).public benefit corporation.
The Business Combination Agreement provides for, among other things,Immediately before the following transactions on the closing date (collectively, the “Business Combination”):
Private Placement
Concurrently with the execution of the Business Combination, Agreement,ENVI held approximately $207.0 million in a trust account for its public stockholders. In connection with the CompanyBusiness Combination, ENVI’s public stockholders redeemed shares of public common stock for $194.9 million, and the funds remaining after such redemptions became available to finance transaction expenses and the future operations of New GreenLight. In connection with the Business Combination, ENVI entered into Subscription Agreementsagreements with certainnew investors (collectively, the “Private Placement Investors”) pursuant to which, among other things, suchand existing GreenLight investors agreed to subscribe for and purchase and the Company agreed to issue and sell to such investors, an aggregate of 10,525,000approximately 12.4 million shares of ENVI Class A SharesCommon Stock (the “Private Placement Shares”), at a purchase price of $10.00 per share (the “Private Placement”“PIPE Financing”). The closingPIPE
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Financing was consummated on February 2, 2022 and resulted in gross proceeds of approximately $124.3 million (of which $35.3 million was advanced to GreenLight by the Prepaying PIPE Investors).
The Merger was accounted for as a reverse recapitalization, whereby for accounting and financial reporting purposes, GreenLight was the acquirer. A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the Private Placement is contingent upon, among other things,combined entity will represent the substantially concurrent consummationcontinuation of the consolidated financial statements of GreenLight in many respects. The shares of ENVI remaining after redemptions of shares of ENVI public common stock and the unrestricted net cash and cash equivalents on the date the Business Combination was consummated were accounted for as a capital infusion to GreenLight.
The most significant change in GreenLight’s financial position and related transactions. In connection with the Private Placement, the Company will grant the Private Placement Investors certain customary registration rights. The Private Placement Shares have not been registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2)results of the Securities Act and/or Regulation D or Regulation S promulgated thereunder without any form of general solicitation or general advertising.
Registration Rights and Transfer Restrictions
Concurrently with the execution of the Business Combination Agreement, the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”) with certain stockholders of GreenLight, ENVI Sponsor, HB Strategies and the other holders of Class B Common Stock, pursuant to which the Company agreed, following the consummation of the Merger, to register for resale, pursuant to Rule 415 under the Securities Act, certain shares of common stock of the Company, as well as other equity securities that are held by the parties theretooperations resulting from time to time.
Additionally, the Investor Rights Agreements and the Bylaws that will be effective following the consummation of the Business Combination contain certain restrictions(including the PIPE Financing) was an estimated cash inflow (as compared to GreenLight’s balance sheet at December 31, 2021) of approximately $136.4 million, prior to payment of the transaction costs. Total direct and incremental transaction costs of $26.7 million was treated as a reduction of the cash proceeds with capital raising costs being deducted from GreenLight’s additional paid-in capital. Cash on transfer with respecthand after giving effect to the ENVI Class A Common Stock received as considerationMerger will be used for the Merger. Such restrictions begin at the consummationgeneral corporate purposes, including advancement of our product development efforts.
As a consequence of the Business Combination, GreenLight effectively became the successor to a publicly traded and end at the date thatNasdaq-listed company, which is 180 days after the consummationrequiring GreenLight to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. GreenLight expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Financial Overview
Components of the Business Combination (the “Lock-Up Period”), except that the Lock-Up Period may shorten to 120 days if, following the consummation of the Business Combination, the last sale price of the ENVI Class A Common Stock equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period.
Transaction Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Company entered into Transaction Support Agreement (the “Transaction Support Agreement”) with certain stockholders of GreenLight (the “Supporting Stockholders”). Under the Transaction Support Agreements, the Supporting Stockholders agreed, within five business days following the declaration by the staff of the SEC that the proxy statement / prospectus relating to the approval by the Company’s stockholders of the transactions contemplated in the Business Combination Agreement is effective, to execute and deliver a written consent with respect to the outstanding Greenlight Shares held by the Supporting Stockholder adopting the Business Combination Agreement and related transactions and approving the Merger. The Greenlight Shares owned by the Supporting Stockholders represent a majority of the outstanding voting power (on a converted basis) of GreenLight.
Extended Private Placement
On November 23, 2021, the Company announced that it entered into subscription agreements, dated as of November 19, 2021, with Serum Life Sciences Ltd, (“Serum Life Sciences”), and as of November 22, 2021 (collectively, the “Extended Subscription Agreements”), with certain investors (together with Serum Life Sciences, the “Extended Private Placement Investors”) comprising of new investors as well as investors party to the previously announced private placement pursuant (the “Original Private Placement”) to those certain subscription agreements, dated as of August 9, 2021, by and among the Company and the parties named thereto (the “Original Subscription Agreements”). Pursuant to the Extended Subscription Agreements, the Extended Private Placement Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell, an aggregate of 1.9 million shares (the “Extended Private Placement Shares”) of Class A common stock at a purchase price of $10.00 per share (the “Extended Private Placement”).
The Extended Private Placement pursuant to the Extended Subscription Agreements are on substantially the same terms as the terms of the Original Private Placement pursuant to the Original Subscription Agreements. In connection with the Extended Private Placement, the Company will grant the Extended Private Placement Investors certain customary registration rights.
Our Results of Operations
Revenue
We have neither engaged inThrough March 31, 2022, we have not recognized any operations nor generated any revenues to date. Our only activitiesrevenue from July 2, 2020 (inception) through September 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, identifying a target company for a Business Combination,product sales, and activities in connection wth the proposed acquisition of GreenLight. Wewe do not expect to generate any operating revenues until afterrevenue from the sale of products in the next year. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales or license agreements. However, there can be no assurance as to when we will generate such revenue, if at all.
All of our revenue through March 31, 2022 has been derived from private grants from the Bill & Melinda Gates Foundation. In March 2022, the Company entered into a License Agreement with Serum Institute of India Private Limited (“SIIPL”). The Company has not generated revenue to date from the License Agreement with SIIPL.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. We were approved to receive a grant of $3.3 million in the aggregate. As of March 31, 2022, we had received the entire grant amount, of which $0.7 million was recorded as deferred revenue as of that date. The grant agreement provides for payments to reimburse qualifying costs, including general and administrative costs, incurred to perform our obligations under the agreement. Revenue from this grant agreement is recognized as the qualifying costs related to the grant are incurred, and any amounts received in excess of revenue recognized are initially recorded as deferred revenue on our condensed consolidated balance sheets and later recognized as revenue when qualified costs are incurred. The revenue recognized through March 31, 2022 under the grant was related to qualifying research and development expenditures that we incurred. The research supported by this grant is expected be completed by the end of May 2022.
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Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates. We expense research and development costs as incurred. These expenses include:
Program expenses
Personnel expenses
Facilities and other expenses
Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our Business Combination. We generate non-operating incomevendors and analyzing the progress of our field trials and preclinical studies or other services performed.
This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Nonrefundable advance payments for goods or services to be received in the formfuture for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.
Our direct research and development expenses are not tracked on a program-by-program basis for our product candidates and consist primarily of interest income on marketable securities heldexternal costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in the Trust Account.connection with our pre-clinical development, field trials, process development, manufacturing, and clinical development activities. Our direct research and development expenses by program also include fees incurred under license, acquisition, and option agreements. We incurdo not allocate costs associated with our discovery efforts, laboratory supplies, employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as a result of being a public company (for legal, financial reporting, accountingsuch, are not separately classified. We use internal resources primarily to conduct our research and auditing compliance),discovery as well as for managing our pre-clinical development, field trials, process development, manufacturing, and clinical development activities. We expect that our research and development
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expenses will continue to increase as we continue our current discovery and research programs, initiate new research programs, continue development of our product candidates, and conduct future field and clinical trials for our product candidates.
General and Administrative Expenses
General and administrative expense consists primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, and other related costs. General and administrative expense also includes professional services, including legal, accounting and audit services, consulting fees and facility costs not otherwise included in research and development expenses, insurance, and other general administrative expenses.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Other (Expense) Income, Net
Other (expense) income, net consists of interest income, interest expense and any change in the fair value of our warrant liabilities.
Interest Income
Interest income consists of income earned in connection with our investments in money market funds.
Interest Expense
Interest expense consists of interest on outstanding borrowings under our loan agreements with Trinity Capital, Silicon Valley Bank and Horizon Technology Finance, our convertible debt and tenant improvement loans payable with our lessors. Interest expense also includes amortization of debt discount and debt issuance costs.
Fair value of Warrant Liabilities
Change in fair value of warrant liabilities consists of the remeasurement gains or losses associated with changes in the fair value of the warrant liabilities. Until settlement, fluctuations in the fair value of our warrant liabilities are based on the remeasurement at each reporting period.
Provision for Income Taxes
Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. There is no provision for income taxes for the three months ended March 31, 2022 and 2021, as we have historically incurred net operating losses, and expect to continue to generate net operating losses. Based on this history of net operating losses, we also maintain a full valuation allowance against our deferred tax assets.
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Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:
|
| THREE MONTHS ENDED |
|
| INCREASE / |
| ||||||
Dollars (in thousands) |
| 2022 |
|
| 2021 |
|
| (DECREASE) |
| |||
Grant revenue |
| $ | 257 |
|
| $ | 325 |
|
| $ | (68 | ) |
Total revenue |
|
| 257 |
|
|
| 325 |
|
|
| (68 | ) |
Operating expenses: |
|
|
|
|
|
|
|
|
| |||
Research and development |
|
| 27,281 |
|
|
| 17,411 |
|
|
| 9,870 |
|
General and administrative |
|
| 9,755 |
|
|
| 3,898 |
|
|
| 5,857 |
|
Total operating expenses |
|
| 37,036 |
|
|
| 21,309 |
|
|
| 15,727 |
|
Loss from operations |
|
| (36,779 | ) |
|
| (20,984 | ) |
|
| (15,795 | ) |
Other expenses: |
|
|
|
|
|
|
|
|
| |||
Interest income |
|
| 4 |
|
|
| 11 |
|
|
| (7 | ) |
Interest expense |
|
| (1,073 | ) |
|
| (311 | ) |
|
| (762 | ) |
Change in fair value of warrant liability |
|
| (359 | ) |
|
| 1 |
|
|
| (360 | ) |
Total other expense, net |
|
| (1,428 | ) |
|
| (299 | ) |
|
| (1,129 | ) |
Net loss |
| $ | (38,207 | ) |
| $ | (21,283 | ) |
| $ | (16,924 | ) |
Grant Revenue
Grant revenue was $0.3 million for the March 31, 2022, compared to grant revenue of $0.3 million for the three months ended March 31, 2021. All of our grant revenue is derived from a grant made by the Bill & Melinda Gates Foundation in July 2020.
Research and Development Expenses
|
| THREE MONTHS ENDED |
|
| INCREASE / |
| ||||||
Dollars (in thousands) |
| 2022 |
|
| 2021 |
|
| (DECREASE) |
| |||
Program expense |
| $ | 7,988 |
|
| $ | 7,122 |
|
| $ | 866 |
|
Personnel costs |
|
| 12,628 |
|
|
| 7,041 |
|
|
| 5,587 |
|
Other |
|
| 6,665 |
|
|
| 3,248 |
|
|
| 3,417 |
|
Total research and development expenses |
| $ | 27,281 |
|
| $ | 17,411 |
|
| $ | 9,870 |
|
Research and development expense was $27.3 million for the three months ended March 31, 2022, compared to $17.4 million for the three months ended March 31, 2021. The increase of $9.9 million resulted primarily from increased program and personnel expenses, as well as facilities costs such as rent and depreciation expenses.
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Our headcount supporting research and development activities increased, which generated additional personnel-related costs of $5.6 million. Other research and development costs increased by approximately $3.4 million, primarily related to a $2.6 million increase in rental expense as we expanded our footprints and entered into multiple leases during 2021, and an increase of $0.9 million in depreciation expense due diligenceto an increase in capitalized spend in lab equipment and lab space leasehold improvement.
General and Administrative Expenses
General and administrative expense was $9.8 million for the three months ended March 31, 2022, compared to $3.9 million for the three months ended March 31, 2021. The increase of $5.9 million was primarily due to an increase of $2.7 million in personnel-related costs in general and administrative functions, which resulted from increased headcount supporting general and administrative activities; a $1.7 million increase in professional services fees to support the Business Combination Agreement; and an increase of $1.4 million related to facilities and other administrative expenses.
Interest Income
For the three months ended September 30, 2021,March 31, 2022, interest income decreased by an insignificant amount.
Interest Expense
Interest expense was $1.0 million for the three months ended March 31, 2022, compared to $0.3 million for the three months ended March 31, 2021. The increase of $0.7 million is primarily related to interest accrued on the various loan agreements we had a net lossentered into during 2021.
Change in Fair Value of $1,526,562, which consists of general and administrative expenses of $2,556,742, offset byWarrant Liabilities
Expense attributable to the change in fair value of warrant liabilities was $0.3 million for the three months ended March 31, 2022, and zero for the three months ended March 31, 2021. The entire increase of $1,027,500, and interest earned on marketable securities held$0.3 million in the Trust Account of $3,180.
For the nine months ended September 30, 2021, we had a net loss of $3,508,199, which consists of general and administrative expenses of $4,084,445 and a loss on initial issuance of the Private Placement Warrants of $1,272,500, offset by the change in fair value of our warrant liabilities of $1,840,000 and interest earned on marketable securities heldwas due to the increase in the Trust Accountestimated fair value of $8,746.
Forour common stock underlying the period from July 2, 2020 (inception) through September 30, 2020, we had net loss of $878, which consists of formation and operational costs.outstanding warrants.
Liquidity and Capital Resources
Sources of Liquidity
On January 19, 2021Since our inception, we have generated recurring net losses. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. Since our inception, we have funded our operations primarily through proceeds from the Companyissuance of preferred stock and to a lesser extent through the issuance of convertible notes and debt financings. From our founding through March 31, 2022, we have raised an aggregate of approximately $330.2 million of net proceeds from the sale of our preferred stock, the Business Combination, and from purchase of ENVI's Common Stock ("PIPE Prepayment"), and from from founding through March 31, 2022 we have raised $67.0 million from the issuance of debt and convertible notes. As of March 31, 2022, we had cash and cash equivalents of $83.2 million.
Business Combination and PIPE Financing .
In February 2022, GreenLight consummated the InitialBusiness Combination with ENVI, which generated gross proceeds to New GreenLight of approximately $136.4 million, including $124.3 million from the PIPE Financing and $12.1 million from the trust account (after redemptions). The gross proceeds do not reflect transaction costs of $26.7 million. For more information, see “—Recent Developments—Business Combination and Public OfferingCompany Costs” above.
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Horizon Loan Agreement
In December 2021, we entered into a loan and security agreement with Horizon Technology Finance Corporation and Powerscourt Investments XXV, LP (together, “Horizon”), which provided for a term loan facility in an aggregate principal amount of 20,700,000 Units,up to $25.0 million, $15.0 million of which includeswas borrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after June 30, 2022. Under the agreement, in January 2022 the lenders were granted 10-year warrants to purchase shares of common stock of GreenLight. The warrants are exercisable in the aggregate for a number of shares equal to 3% of the total term loan facility (assuming we borrow the full exercisefacility amount of $25.0 million) divided by the underwriterexercise price of its over-allotment option in the amount of 2,700,000 Units, at $10.00 per Unit, generating gross proceeds of $207,000,000 which is described in Note 4. Simultaneously withwarrants. Upon the closing of the Initial Public Offering,Business Combination, the warrants became warrants to purchase shares of New GreenLight Common Stock based on the exchange ratio under the Business Combination Agreement.
Accrued interest is payable monthly. The principal of each term loan must be repaid in equal monthly installments beginning February 1, 2023 (or August 1, 2023 if we consummated the sale of 2,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement with HB Strategies, generating gross proceeds of $2,000,000, which is described in Note 5.
Following the Initial Public Offering, the full exerciseborrow any of the over-allotment option,remaining $10.0 million), with a scheduled final maturity date of July 1, 2025. We may prepay the term loans in full, but not in part, without premium or penalty, other than a premium equal to (i) 3% of the principal amount of any prepayment made within 12 months after the applicable funding date, (ii) 2% of the principal amount of any prepayment made between 12 and 24 months after the applicable funding date and (iii) 1% of the principal amount of any prepayment made more than 24 months after the applicable funding date. On the earlier of the scheduled final maturity date and the saleprepayment in full of the Private Placement Warrants,term loans, we must pay a total of $207,000,000 was placed in the Trust Account. We incurred $773,917 of transaction costs, consisting of $250,000 in cash underwriting fees and $523,918 of other offering costs in transaction costs relatedfinal payment fee equal to the Initial Public Offering.
For the nine months ended September 30, 2021, cash used in operating activities was $1,717,314. Net loss of $3,508,199 included noncash charges (income) related to the change in fair value3.0% of the warrant liabilitiesoriginal principal amount of $1,840,000, a loss on initial issuance of Private Placement Warrants of $1,272,500, transaction costs associated with the warrants of $50,179,funded term loans.
The agreement contains customary affirmative and interest earned on marketable securities held in the Trust Account of 8,746. Net changes in operating assets and liabilities provided $2,316,952negative covenants (including an obligation to maintain certain amounts of cash for operating activities.
Asin accounts subject to springing control in favor of September 30, 2021, we had marketable securities heldthe lenders) and customary events of default; it does not contain a financial covenant. We granted a second-priority, perfected security interest in the Trust Account of $207,008,746 (including approximately $8,746 of interest income consisting of U.S. Treasury Bills with a maturity of 185 days or less). Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2021, we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of our present and future personal property and assets, excluding intellectual property, to secure our obligations to the funds heldlenders, which security interest is subordinated to the security interest granted to Silicon Valley Bank.
In April 2021, we entered into a joinder agreement with Horizon pursuant to which the Company became a party to the Horizon loan agreements as a co-borrower. Under the joinder agreement, the Company also granted Horizon a continuing security interest in its existing and after-acquired personal property and assets, excluding intellectual property.
Silicon Valley Bank Loan Agreement
In September 2021, we entered into a loan and security agreement with Silicon Valley Bank, or SVB, providing for a term loan facility in an aggregate principal amount of up to $15.0 million, $10.0 million of which we borrowed at the Trust Account, includingclosing and the remainder of which we may borrow following the achievement of certain milestones, but not after March 31, 2022. We have not borrowed any additional amounts representing interest earned onfrom SVB at the Trust Account (less income taxes payable),time of this filing. At the closing, we granted SVB a 10-year warrant to complete our Business Combination. Topurchase up to 51,724 shares of GreenLight Common Stock (assuming we borrow the extent that our capital stock or debt is used, in whole or in part, as consideration to complete ourentire $15.0 million from SVB). Upon the closing of the Business Combination, the warrants became warrants to purchase shares of New GreenLight Common Stock based on the exchange ratio under the Business Combination Agreement.
Accrued interest is payable monthly. The principal of each term loan must be repaid in equal monthly installments beginning April 1, 2022 (or October 1, 2022, if the Company borrows any of the remaining proceeds held$5.0 million), with a scheduled final maturity date of September 1, 2024. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, the Company must pay a final payment fee equal to 4.0% of the original principal amount of the term loans. The Company may prepay the term loans in increments of $5.0 million and without premium or penalty, other than a premium equal to (i) with respect to any prepayment made on or before September 22, 2022, 3% of the principal so prepaid, (ii) with respect to any prepayment made after September 22, 2022 and on or before September 22, 2023, 2% of the principal so prepaid and (iii) with respect to any prepayment made after September 22, 2023 and on or before September 1, 2024, 1% of the principal so prepaid.
The loan and security agreement with SVB contains customary affirmative and negative covenants (including an obligation to maintain cash in accounts at SVB sufficient to repay all loan obligations) and customary events of default; it does not contain a financial covenant. We granted a first-priority, perfected security interest in substantially all of our present and future personal property and assets, excluding intellectual property, to secure our obligations to SVB.
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In April 2021, we entered into a joinder agreement and first amendment to loan and security agreement with SVB pursuant to which the Company became a party to the SVB loan agreements as a borrower. Under these agreements, the Company also granted SVB a continuing security interest in its existing and after-acquired personal property and assets, excluding intellectual property. These agreements also amended certain terms of the original SVB loan agreement to, among other things, add representations, affirmative and negative covenants, and events of default regarding the Company’s obligations as a public benefit corporation. Under the amended terms, it is an event of default for there to be any pending or threatened litigation by a shareholder alleging that we or our directors failed to satisfy any obligations under Delaware law regarding our status as a public benefit corporation, if the litigation is likely to result in a final monetary judgment against us in excess of $250,000. In addition, if any action, investigation, or proceeding is pending or known to be threatened in writing against us with respect to such a claim, the bank may not need to make further loans to us.
Trinity Capital Equipment Financing Agreement
In March 2021, we entered into a master equipment financing agreement with Trinity Capital (Trinity) authorizing equipment financing with an aggregate borrowing capacity of $11.3 million, with up to $5.0 million available immediately and the remaining principal balance available to be drawn before September 2021. We entered into this loan to finance our capital purchases associated primarily with our research and manufacturing programs. The monthly payment factors for each draw are determined by Trinity based on the Prime Rate reported in the Trust Account will be used as working capital to financeWall Street Journal on the operationsfirst day of the target business or businesses, make other acquisitions and pursue our growth strategies.
month in which an equipment financing schedule for such draw is executed. As of September 30,December 31, 2021, wethe Company had drawn the entire $11.3 million, which is repayable in monthly installments starting April 2021.
Funding Future Operations; Going Concern
The Company expects that its existing cash and cash equivalents of $158,337. We intend$83.2 million as of March 31, 2022 will not be sufficient to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to andfund its operations for twelve months 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.
On August 9, 2021, the Sponsor agreed to loan the Company an aggregate of up to $500,000 pursuant to a promissory note (the “Note”). The Note is non-interest bearing and payable upon consummation of the Company’s initial Business Combination. At September 30, 2021, there was $500,000 of borrowings under the Note.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain ofdate we issued 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 at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
If we are unable to raise additional capital, we 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. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
audited consolidated financial statements. As a result, of the above, in connection with our 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,” management has determined that the liquidity condition and date for mandatory liquidation and dissolution raisethere is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of our financial statements, as discussed in Note 1 of the notes to our condensed consolidated financial statements for the three months ended March 31, 2022 and 2021, included elsewhere herein.
Based on our existing cash and cash equivalents, we are evaluating a range of opportunities to extend cash runway, including management of program spending, platform licensing collaborations and potential financing activities.
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through July 19, 2022,preclinical and clinical development and field trials, seek regulatory approval, and pursue commercialization of any approved product candidates. We expect that our research and development and general and administrative costs will increase in connection with our planned research and development activities. In addition, in light of the scheduledcompletion of the Business Combination, we expect to incur additional costs associated with operating as a public company. Because of the numerous risks and uncertainties associated with research, development, and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:
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Until we can generate product revenues to support our cost structure, if any, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation, datedividend, redemption, and other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we do not completewould otherwise prefer to develop and market such product candidates ourselves.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
|
| THREE MONTHS ENDED |
|
| INCREASE / |
| ||||||
|
| 2022 |
|
| 2021 |
|
| (DECREASE) |
| |||
Net cash (used in) operating activities |
| $ | (49,468 | ) |
| $ | (21,358 | ) |
| $ | (28,110 | ) |
Net cash (used in) investing activities |
|
| (250 | ) |
|
| (4,688 | ) |
|
| 4,438 |
|
Net cash provided by financing activities |
|
| 102,454 |
|
|
| 2,634 |
|
|
| 99,820 |
|
Net increase (decrease) in cash, cash equivalents |
| $ | 52,736 |
|
| $ | (23,412 | ) |
| $ | 76,148 |
|
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Operating Activities
Cash flows from operating activities represent the cash receipts and disbursements related to all our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net loss for non-cash operating items such as depreciation, amortization, and stock-based compensation as well as changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.
During the three months ended March 31, 2022, operating activities used $49.5 million of cash, primarily resulting from our net loss of $38.2 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include stock-based compensation of $2.2 million and depreciation and amortization expense of $2.1 million. Net cash used by changes in our operating assets and liabilities for three months ended March 31, 2022 consisted primarily of a $9.5 million decrease in accounts payable and accrued expenses, a $6.5 million increase in prepaid expenses and other current assets, and an increase of $5.0 million in accounts receivable, partially offset by an increase in deferred revenue of $4.7 million. The increase in accounts payable and accrued expenses related to our increased level of operating activities and timing of vendor invoicing and payments. The increase in prepaid expenses and other assets was due to our increased level of research collaborations and manufacturing development activities related to our product candidates.
During the three months ended March 31, 2021, net cash used in operating activities was $21.4 million. Net cash used in operating activities consists of net loss of $21.3 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include depreciation and amortization expense of $1.1 million and stock-based compensation of $0.3 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2021, primarily consisted of a $1.6 million increase in prepaid expenses. The increase in prepaid expenses was primarily due to our increased level of research collaborations and manufacturing development activities related to our product candidates.
Investing Activities
During the three months ended March 31, 2022, investing activities used $0.3 million of cash, consisting of purchases of property and equipment, of which a substantial majority related to laboratory and facilities improvements in Research Triangle Park, North Carolina and purchases of laboratory equipment and facilities improvements for our manufacturing facility in Rochester, New York.
During the three months ended March 31, 2021, investing activities used $4.7 million of cash consisting of purchases of property and equipment, of which a substantial majority related to purchases of laboratory equipment and facilities improvements for our manufacturing facility in Rochester, New York, construction of cleanrooms and preclinical manufacturing capacity in our facility in Burlington, Massachusetts, and laboratory construction in our facility in Woburn, Massachusetts.
Financing Activities
During the three months ended March 31, 2022, financing activities provided $102.5 million of cash, consisting primarily of $80.5 million of net proceeds from the Business Combination, prior to such date.net of transaction costs, a $21.8 million in proceeds from issuance of convertible debt from PIPE Investors, and $1.2 million of proceeds from the exercise of public warrants, which were partially offset by $0.8 million of repayments on our secured debt and term loan payable.
During the three months ended March 31, 2021, financing activities provided $2.6 million of cash, consisting primarily of $2.8 million of proceeds from equipment financing.
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Contractual Obligations and Commitments
Off-Balance Sheet ArrangementsOperating Lease Obligations
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations,non-cancelable operating lease obligations, or long-term liabilities.
We engaged Canaccord as advisorsconsisting primarily of lease payment obligations for our facilities, including our headquarters in connectionMedford, Massachusetts; clean rooms in Burlington, Massachusetts; office, laboratory and greenhouse space in Research Triangle Park, North Carolina; laboratory and office space in Woburn, Massachusetts; office and laboratory space in Lexington, Massachusetts, and our manufacturing facilities in Rochester, New York. The leases for these facilities expire on various dates through 2026, unless extended.
In March 2022, the Company entered into a lease for new laboratory space in Lexington, Massachusetts, with its Business Combinationan anticipated commencement date of May 2022. The lease term expires in July 2033. The base rent for this lease is $3.9 million per year, subject to assist us in arranging meetingsa 3% increase each year.
See Note 16, Commitments and Contingencies — Operating Leases, of the notes to our condensed consolidated financial statements for the three months ended March 31, 2022 and 2021, for further information on our future operating lease obligations.
Purchase Obligations
In the normal course of business, we enter into contracts with our stockholders to discuss the potential Business Combinationthird parties for field trials, preclinical studies and the target business’ attributes, introduce us to potential investors thatresearch and development supplies. These contracts generally do not contain minimum purchase commitments and provide for termination on notice, and therefore are cancellable contracts.
License Agreement Obligations
In December 2020, we entered into an assignment and license agreement with Bayer CropScience LLP (“Bayer”) under which we may be interestedobligated to make milestone and royalty payments. These payment obligations are contingent upon future events, such as achieving certain development, regulatory, and commercial milestones or generating product sales. The timing of these events is uncertain; accordingly, we cannot predict the period during which these payments may become due. We have agreed to pay up to $2.0 million in purchasing our securities, assist usmilestone payments under this assignment and license agreement when certain development milestones are met. The Company assessed the milestones at three months ended March 31, 2022 and concluded no such milestone payments were deemed probable nor due.
In August 2020, we entered into a license agreement with Acuitas Therapeutics, Inc. (“Acuitas”) under which we are obligated to make potential milestone payments, royalty payments, or both. These payment obligations are contingent upon future events, such as achieving certain clinical and regulatory milestones and generating product sales. Such payments are dependent upon the development of products using the intellectual property licensed under the agreements and are contingent upon the occurrence of future events. The potential clinical and regulatory milestone payments that Acuitas is entitled to receive is in obtaining stockholder approvalthe low double-digit millions for the Business Combination and assist us withfirst option exercised. With respect to the preparationsale of our press releases and public filingseach licensed products, the Company is also obligated to pay Acuitas royalties in connection with the Business Combination. We will pay Canaccord for such services upon the consummation of a Business Combination a cash fee in an amount equal to 3.76%low single digit percentages on net sales of the gross proceedslicensed products by the Company and its affiliates and sublicensees in a given country until the last to occur, in such country, of (i) the expiration or abandonment of all licensed patent rights covering the licensed product, (ii) expiration of any regulatory exclusivity for the licensed product, or (iii) ten years from the first commercial sale of the Initial Public Offering.licensed product. As of three months ended March 31, 2022, none of these events were deemed probable and hence no expenses were recorded.
Debt Obligations
See Note 10, Debt, of the notes to our condensed consolidated financial statements included elsewhere in this filing for further information on our future debt repayment obligations.
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Manufacturing Commitments and Obligations
In November 2021, we entered into the Samsung Agreements, pursuant to which we engaged Samsung as a contract development and manufacturing organization for our mRNA COVID-19 vaccine. Pursuant to the Samsung Agreements, we must, among other things, (a) pay Samsung service fees for its pharmaceutical development and manufacturing services, (b) purchase certain minimum quantities of drug products, and (c) pay Samsung, on a minimum take-or-pay basis for each year under the agreement, for our minimum purchase commitments, as determined under the terms of the business combination marketing agreement, no fee will be due ifSamsung Agreements. Based on our minimum purchase commitments, we do not completeexpect to pay Samsung a Business Combination.minimum of approximately $11.5 million in service fees under the Samsung Agreements, excluding the cost of raw materials. Based on our current schedule, we expect to incur the substantial majority of these expenses in 2022 and a portion in the first quarter of 2023.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation ofOur condensed consolidated financial statements and related disclosureshave been prepared in conformityaccordance with generally accepted accounting principles generally accepted in the United StatesStates. The preparation of America requires managementthese condensed consolidated financial statements require us to make estimatesjudgments and assumptionsestimates that affect the reported amounts of assets, liabilities, revenues and liabilities,expenses, and the disclosure of contingent assets and liabilities atin our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of the financial statements, and income and expenses duringchange in the periods reported. Actual results could materially differ from those estimates. estimate.
We have identifiedbelieve that the following accounting policies are those most critical accounting policies:to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Warrant LiabilitiesContract Revenue
In March 2022, the Company entered into a License Agreement (the “Agreement”) with Serum Institute of India Private Limited (“SIIPL”), pursuant to which the Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to use the Company’s proprietary technology platform to develop, manufacture and commercialize up to three mRNA products in all territories other than the United States, the 27 member states of the European Union, the United Kingdom, Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong, Macau, and Taiwan (the “SIIPL Territory”). The first licensed product target will be a shingles product target, and SIIPL has an option to select the additional two licensed product targets through the end of 2024. Under the terms of the Agreement with SIIPL, the Company will provide research search services related to the shingles product target to develop a “proof of concept” and will provide manufacturing technology transfer services. In addition, GreenLight retains the option purchase research plan and clinical trial data, developed by SIIPL, for 50% of the cost of the research plan and clinical trials for use in the Company’s own development.
We account
SIIPL is responsible for the Warrantsdevelopment, formulation, filling and finishing, registration and commercialization of the products in the SIIPL Territory, subject to oversight from a joint steering committee composed of representatives of the Company and SIIPL. SIIPL will use commercially reasonable efforts to develop and obtain regulatory approval for the products in the countries in the SIIPL Territory. The License Agreement includes terms customary in the industry for provisions related to sublicensing, intellectual property, and termination, and customary representations and warranties of GreenLight and SIIPL, along with certain customary covenants, including confidentiality, limitation of liability and indemnity provisions.
Pursuant to the License Agreement, SIIPL will pay the Company an upfront license fee of $5.0 million, as well as payments upon additional target selection and reservation of exclusivity. The Company may receive up to a total of an additional $22.0 million in development, regulatory and commercial (net sales) based milestone payments across all three product targets, as well as manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay royalty payments in the mid-double digits, based on the net sales of products resulting from the licensed technology for the term of the License Agreement. The License Agreement shall terminate on a product-by product and country-by-country
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basis on the later of the expiration of the patent rights owned by the Company or the tenth anniversary of the first commercial sale of the applicable product(s) in the applicable country. The Company had not received payment of the $5.0 million upfront license fee as of March 31, 2022, thus has recorded a receivable for the amount billed to SIIPL.
The Company has determined that the Agreement falls within the scope of ASC 606, as it includes a customer-vendor relation as defined by ASC 606 and meets the criteria of a contract. The Company has determined that the license of IP granted is not distinct from the research services and thus should be combined. The Agreement contains a single performance obligation for the combined License of IP/research services and the manufacturing technology transfer services. Revenue from the contract will be recognized over time, using an input-method. The Company has determined that variable consideration from the development and regulatory payments in the Agreement should be fully constrained as of March 31, 2022, and commercial milestones and royalties will be recognized in the period the underlying sales occur. Through March 31, 2022, no revenue had been recorded from the Agreement and the entire amount of upfront consideration is recorded as deferred revenue. Based on current estimated timelines, the Company expects to recognize the deferred revenue over approximately 18 months, and the portion expected to be recognized over the next 12 months is classified as current in the condensed consolidated balance sheet as of March 31, 2022.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. The grant agreement provides for payments to reimburse qualifying costs, including, general and administrative costs. As we are performing services under the agreement that are consistent with the Company’s ongoing central activities and we have determined that we are the principal in the agreement, we recognize grant revenue as we perform services under this agreement when the funding is committed, which occurs as underlying costs are incurred. Revenues and related expenses are presented gross in the condensed consolidated statement of operations as we have determined that we are the primary obligor under the agreement relative to the research and development services we perform as the lead technical expert.
Stock-Based Compensation
We measure stock-based awards granted to employees, non-employees and directors based on their fair value on the date of the grant using the Black-Scholes option-pricing model for options and the fair value of our common stock for restricted common stock awards. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award for employees and directors and the period during which services are performed for non-employees. We use the straight-line method to record the expense of awards with service-based vesting conditions. We recognize stock-based compensation for performance awards based on grant date fair value over the service period to the extent achievement of the performance condition is probable.
The fair value of our stock option awards is estimated using a Black-Scholes option-pricing model that uses the following inputs: (1) fair value of our common stock, (2) assumptions we make for the expected volatility of our common stock, (3) the expected term of our stock option awards, (4) the risk-free interest rate for a period that approximates the expected term of our stock option awards, and (5) our expected dividend yield, if any.
Determination of the Fair Value of Common Stock
Determination of the Fair Value of Common Stock As there has not been a public market for our common stock, the estimated fair value of our common stock was determined by our board of directors as of the date of grant of each option or restricted stock award, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance containedoutlined in ASC 815-40-15-7Dthe American Institute of Certified Public Accountants’ Accounting and 7F underValuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using either an option pricing method (“OPM”) or a hybrid method, both of which used market approaches to estimate our enterprise value. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the Warrants do not meetallocation among the criteriavarious holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the preferred stock
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liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock. The hybrid method is a probability-weighted expected return method (“PWERM”) where the equity treatment and must be recorded as liabilities. Accordingly, we classifyvalue in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the Warrants as liabilities at their fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and adjustprobability weighted to arrive at an indication of value for the Warrantscommon stock. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.
These independent third-party valuations were performed at various dates, which resulted in estimated valuations of our common stock by our board of directors of $0.46 per share as of December 31, 2019, $0.65 per share as of August 1, 2020, $0.82 per share as of December 31, 2020, $1.74 per share as of May 1, 2021, $5.26 per share as of September 30, 2021, and $5.89 per share as of December 31, 2021. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used different assumptions or estimates, the fair value is recognized inof our statements of operations. The Private Placement Warrants for periods where no observable traded price was available were valued using a Modified Black Scholes Option Pricing Model. The Public Warrants for periods where no observable traded price was available were valued using a Monte Carlo simulation. For periods subsequent tocommon stock and our stock-based compensation expense could have been materially different. Following the detachmentconsummation of the Public Warrants fromBusiness Combination, the Units,fair value of New GreenLight Common Stock will be determined based on the Public Warrant quoted market price was usedon the Nasdaq Global Market.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrumentrules and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the controlregulations of the holder or subject to redemption upon the occurrenceSEC.
Recently Adopted Accounting Pronouncements
A description of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rightsrecently issued accounting pronouncements that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net Income (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. The Company applies the two-class method in calculating income (loss) per common share. Accretion associated with the redeemable shares of Class A common stock is excluded from income (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 themay potentially 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 recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect onflows is provided in Note 2 to our condensed consolidated financial statements.statements appearing elsewhere herein.
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Emerging Growth Company and Smaller Reporting Company Status
New GreenLight 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 auditor 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 nonbinding stockholder advisory votes on executive compensation and 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, have not filed and not withdrawn a Securities Act registration statement that has not become 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. New GreenLight 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, New GreenLight, 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 New GreenLight’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
New GreenLight will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of ENVI’s initial public offering, (b) in which New GreenLight has total annual gross revenue of at least $1.1 billion, or (c) in which New GreenLight is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which New GreenLight has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to certain market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Interest Rate Risk
As of March 31, 2022 and December 31, 2021, we had cash and cash equivalents which consisted of cash and money market funds. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.
Not required for smallerWe have exposure to interest rate risk from our variable rate debt. We do not hedge our exposure to changes in interest rates. As of March 31, 2022, we had $25.0 million in variable rate debt outstanding. A 10% change in interest rates would have an immaterial impact on annualized interest expense.
Foreign Currency Exchange Risk
Our reporting companies.and functional currency is the U.S. dollar. We currently do not have significant exposure to foreign currencies as we hold no foreign exchange contracts, option contracts, or other foreign hedging arrangements. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Effects of Inflation
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. Our operations may be subject to inflation in the future.
Item 4. Controls and ProceduresProcedures.
DisclosureBackground and Remediation of Material Weakness
In connection with the preparation and audit of our consolidated financial statements as of and for the years ended December 31, 2021 and 2020, material weaknesses were identified in our internal control over financial reporting. Please see the sections of the Annual Report titled “Risk Factors— Risks Related to our Business and Industry—Our accounting predecessor, GreenLight, has identified material weaknesses in its internal controls of financial reporting. If we are unable to remediate the material weaknesses, or if we identify additional material weaknesses or otherwise fail to maintain effective internal control over financial reporting, this may result in material misstatements or restatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations” and “—During 2021, ENVI identified two material weaknesses in its internal control over financial reporting which may result in material misstatements or restatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations” for more information.
We are focused on designing and implementing effective internal controls measures to improve our evaluation of disclosure controls and procedures, including internal control over financial reporting, and remediate the material weaknesses. In order to remediate these material weaknesses, we have taken and plan to take the following actions:
● | the hiring and continued hiring of additional accounting, finance, and legal resources with public company experience; and |
● | implementation of an ERP system and establishment of review controls and processes requiring timely account reconciliation and analyses of certain transactions and accounts and integrate appropriate segregation of duties. |
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These actions and planned actions are subject to ongoing evaluation by management and will require testing and validation of design and operating effectiveness of internal controls over financial reporting over future periods. We are committed to the continuous improvement of our internal control over financial reporting and other procedures that are designedwill continue to ensure that information required to be disclosed in our reports filed or submitted underreview the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosureinternal controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.over financial reporting.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021,March 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on thisupon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of March 31, 2022 to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act is recorded, processed, summarized and reported as and when required.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. Our internal control over financial reporting did not result in the proper accounting classification of complex financial instruments which, dueor persons performing similar functions, as appropriate to its impact on our financial statements, we determined to be a material weakness.allow timely decisions regarding required disclosure.
Changes in Internal Control Overover Financial Reporting
There wasOther than the material weakness referenced above, there have been no changechanges in our internal control over financial reporting identified in connection with the evaluation of such internal control required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form 10-Q/AMarch 31, 2022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. Management has identified a material weakness in internal controls related to complex financial instruments, as described above. In light of the material weakness identified and the resulting restatement, although we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART – II - II—OTHER INFORMATION
Item 1. Legal ProceedingsProceedings.
We currently are not a party to any material litigation or other material legal proceedings. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.
None
Item 1A. Risk Factors
Not required forInvesting in our securities involves a smaller reporting company. However, ashigh degree of risk. Before you decide to invest in any of our securities, you should
consider carefully the date of this Quarterly Report other than set forth below, there have been no material changes with respect to those risk factors previously disclosedrisks described in the Company’s final prospectus as filed with the SEC on January 11, 2021, and the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2021 as filed with the SEC on May 24, 2021, and with respect to risks associated with the Merger and Greenlight, insection of our Registration Statement on Form S-4, initially filed on September 7, 2021, and as amended on October 19, 2021.
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We have identified, in light of the prior reclassification of warrants from equity to liability,Annual Report entitled “Item 1A. Risk Factors,” as well as the reclassificationrisks described below. If any of these risks actually occur, our business, results of operations and financial condition would likely be materially and adversely affected. In these circumstances, the market price of our redeemable Class Asecurities could decline, and you may lose part or all of your investment. This Report also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, the risks referred to in this paragraph.
Investors should not rely on outdated financial projections.
In connection with the Business Combination, we disclosed certain projections of GreenLight’s potential financial performance in future years. As previously disclosed, these projections were prepared solely for GreenLight’s internal use, capital budgeting and other management purposes, were finalized as of June 30, 2021 and were not updated to reflect events after that date. Also, as previously disclosed, the projections were not prepared with a view toward public disclosure or with a view toward complying with U.S. GAAP, the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Readers were cautioned not to rely on the prospective financial information because actual results are likely to differ materially from the prospective financial information. In light of the substantial passage of time since June 30, 2021, the projections have become outdated and do not represent the current views of management. We reiterate our prior caution not to rely on the previously published and now outdated financial projections. We have not undertaken any obligation to publish any financial projections.
As a public benefit corporation, we face burdens that traditional corporations may not encounter.
Public benefit corporations are a relatively new type of legal entity compared to more common stockcorporate forms and may be unfamiliar to some of the parties with whom we interact, causing additional delays, demands or costs because of that unfamiliarity. While under the Delaware General Corporation Law public benefit corporations share many of the same legal characteristics as temporary equity,traditional corporations, they also have unique aspects, such as a material weaknesspurpose to benefit the public, as well as fiduciary obligations to address that public benefit in our internal controls over financial reporting relatinga manner that balances it with both the pecuniary interests of stockholders and the best interests of those materially affected by the corporation’s conduct, including creditors, employees, and others. Because of the relative novelty of the legal regime governing public benefit corporations, companies and others that do business with us may seek to our accounting for complex financial instruments. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting suchimpose obligations on us that there is a reasonable possibility that a material misstatementthey would not seek from traditional corporations. For example, one of our annuallenders, Silicon Valley Bank, required, among other things, that (a) we agree that it is an event of default under our loan agreement for there to be any pending or interim financial statements willthreatened litigation by a shareholder alleging that we or our directors failed to satisfy any obligations under Delaware law regarding our status as a public benefit corporation if the litigation is likely to result in a final monetary judgment against us in excess of $250,000, (b) we agree that, if any action, investigation or proceeding is pending or known to be threatened in writing against us with respect to such a claim, the bank may not be prevented,need to make further loans to us under the loan agreement, and (c) if an event of default has occurred or detected and corrected on a timely basis.
Effective internal controls are necessaryis reasonably likely to occur, our board must in some cases, at the bank’s request, consider whether it is advisable for us to provide reliable financial reportsconvert to a traditional Delaware corporation. Accordingly, we may face stricter contractual obligations and prevent fraud. Measures to remediate material weaknessestighter controls on our operations than traditional corporations, which may be time-consuming and costly and there is no assurance that such initiatives will ultimatelyincrease our costs or otherwise have the intended effects. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and adversely affectadverse effect on our business and operating results. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.operations.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 13, 2021, the Company consummated its initial public offering (the “IPO”) of 20,700,000 Units, including 2,700,000 Units issued pursuant to the exercise of the underwriters’ over-allotment option in full. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share, and one-half of one redeemable warrant of the Company (“Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $207,000,000.
A total of $207,000,000 of the proceeds from the IPO and the sale of the Private Placement Warrants, was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A., maintainedinformation required by Continental Stock Transfer & Trust Company, acting as trustee, and such proceeds were subsequently transferred to a trust account held at Bank of America Merrill Lynch. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended.
We paid a total of $250,000 in cash underwriting discounts and commissions and $523,918 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/A.item has been previously reported.
Item 3. Defaults Upon Senior SecuritiesSecurities.
NoneNone.
Item 4. Mine Safety DisclosuresDisclosures.
Not Applicable
None
Item 5. Other InformationInformation.
None.
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Item 6. ExhibitsExhibits.
The followingFurnish the exhibits are filed as partrequired by Item 601 of or incorporated by reference into,Regulation S-K (§ 229.601 of this Quarterly Report on Form 10-Q/A.chapter).
Number |
| |
| ||
| ||
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101.INS | Inline XBRL Instance | |
101.SCH | Inline XBRL Taxonomy Extension Schema | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
104 | Cover Page Interactive Data File |
|
* Filed herewith.
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SIGNATURES
In accordance withPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GreenLight Biosciences Holdings, PBC | |||
Date: | By: | /s/ | |
|
| Andrey J. Zarur | |
| President and Chief Executive Officer | ||
| |||
Date: June 1, 2022 | By: | /s/ Susan Keefe | |
Susan Keefe | |||
Chief Financial Officer | |||
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