References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Merida Merger Corp. I. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to Merida Capital Partners III LP. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
June 20, 2019 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the IPO and the sale of the Private
Warrants, our capital stock, debt or a combination of cash, stock and debt.
All activity through June 30, 2021 relates to our formation, IPO, and search for
a prospective initial Business Combination target.
We are incurring significant costs in the pursuit of our acquisition plans. We
cannot assure you that our plans to complete a Business Combination will be
successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through June 30, 2021 were organizational activities, those
necessary to prepare for the IPO, described below, and identifying a target
company for a Business Combination. We do not expect to generate any operating
revenues until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities
held after the IPO. We incur expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses.
For the three months ended June 30, 2021, we had a net loss of $430,800, which
consisted of operating costs of $316,457 and change in fair value of warrants of
$118,509, offset by interest earned on marketable securities held in the Trust
Account of $3,067 and unrealized gain on marketable securities held in our Trust
Account of $1,099.
For the six months ended June 30, 2021, we had a net loss of $1,316,806, which
consisted of operating costs of $512,908 and change in fair value of warrants of
$829,565, offset by interest earned on marketable securities held in the Trust
Account of $25,667.
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Liquidity and Capital Resources
On November 7, 2019, we consummated the IPO of 12,000,000 Units at a price of
$10.00 per Unit, generating gross proceeds of $120,000,000. Simultaneously with
the closing of the IPO, we consummated the sale of 3,750,000 Private Warrants to
Merida Holdings, LLC and EarlyBirdCapital at a price of $1.00 per warrant,
generating gross proceeds of $3,750,000.
On November 13, 2019, as a result of the underwriters' election to partially
exercise their over-allotment option, the Company consummated the sale of an
additional 1,001,552 Units, at $10.00 per Unit, and the sale of an additional
200,311 Private Warrants, at a price of $1.00 per Private Warrant, generating
total gross proceeds of $10,215,831.
Following the IPO, the partial exercise of the over-allotment option and the
sale of the Private Warrants, a total of $130,015,520 was placed in the Trust
Account. We incurred $3,412,939 in transaction costs, including $2,600,311 of
underwriting fees and $812,628 of other costs.
For the six months ended June 30, 2021, cash used in operating activities was
$594,794. Net loss of $1,316,806 was affected by the change in fair value of the
warrant liability of $829,565 and interest earned on marketable securities held
in the Trust Account of $25,667. Changes in operating assets and liabilities
used $81,886 of cash from operating activities.
As of June 30, 2021, we had marketable securities held in the Trust Account of
$130,240,715 (including approximately $225,000 of interest income) consisting of
U.S. treasury bills with a maturity of 180 days or less. Interest income on the
balance in the Trust Account may be used by us to pay taxes and up to $250,000
per 12-month period can be withdrawn for working capital needs. During the three
and six months ended June 30, 2021, we withdrew $380,606 and $465,999 of the
interest earned on the Trust Account to pay for our franchise and income taxes
and for working capital needs. During the year ended December 31, 2020, we
withdrew $419,894 of the interest earned on the Trust Account to pay for our
franchise and income taxes and for working capital needs. We intend to use
substantially all of the funds held in the Trust Account, including any amounts
representing interest earned on the Trust Account (less taxes payable), to
complete our Business Combination. To the extent that our capital stock or debt
is used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the target business or businesses,
make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had $442,745 of cash held outside of the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into warrants
identical to the Private Warrants, at a price of $1.00 per warrant at the option
of the lender. As of June 30, 2021, there is $400,000 outstanding under the
Working Capital Loans.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $5,000 for office space, utilities and
secretarial and administrative support to the Company. We began incurring these
fees on November 4, 2019 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and the Company's
liquidation.
We have engaged EarlyBirdCapital as an advisor in connection with a Business
Combination to assist us in holding meetings with our stockholders to discuss
the potential Business Combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with a Business Combination, assist us in obtaining
stockholder approval for the Business Combination and assist us with our press
releases and public filings in connection with the Business Combination. We will
pay EarlyBirdCapital a cash fee for such services upon the consummation of a
Business Combination in an amount equal to 3.5% of the gross proceeds of the
IPO, or $4,550,543 (exclusive of any applicable finders' fees which might become
payable); provided that up to 30% of the fee may be allocated at our sole
discretion to other FINRA members that assist us in identifying and consummating
a Business Combination.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the Private Warrants in accordance with the guidance contained in
ASC 815-40 under which the Private Warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Accordingly, we classify the
Warrants as liabilities at their fair value and adjust the Warrants to fair
value at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The Private Placement Warrants are
valued using a binomial lattice model.
Common Stock Subject to Possible Redemption
We account for common stock subject to possible redemption in accordance with
the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that
features redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) is classified as temporary equity. At all other times,
common stock is classified as stockholders' equity. Our common stock features
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, common stock
subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders' equity section of our condensed balance
sheets.
Net Income (Loss) Per Common Share
We apply the two-class method in calculating earnings per share. Net income
(loss) per common share, basic and diluted for common stock subject to possible
redemption is calculated by dividing the interest income earned on the Trust
Account, net of applicable taxes, if any, by the weighted-average number of
shares of common stock subject to possible redemption outstanding for the
period. Net income (loss) per common share, basic and diluted for and
non-redeemable common stock is calculated by dividing net loss less income
attributable to common stock subject to possible redemption, by the
weighted-average number of shares of non-redeemable common stock outstanding for
the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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