References to the "company," "our," "us" or "we" refer to RMG Acquisition Corp.
III. The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the audited
financial statements and the notes related thereto which are included in "Item
8. Financial Statements and Supplementary Data" of this Annual Report on Form
10-K. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of many factors, including those set forth under "Cautionary Note
Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1.A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on December 23, 2020. We were formed for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar
business combination with one or more businesses (the "Business Combination").
We are an emerging growth company and, as such, we are subject to all of the
risks associated with emerging growth companies.
Our sponsor is RMG Sponsor III, LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for our Initial Public Offering was
declared effective on February 4, 2021. On February 9, 2021, we consummated our
Initial Public Offering of 48,300,000 units (the "Units" and, with respect to
the Class A ordinary shares included in the Units being offered, the "Public
Shares"), including 6,300,000 additional Units to cover over-allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of
$483.0 million, and incurring offering costs of approximately $27.1 million, of
which approximately $16.9 million was for deferred underwriting commissions and
$250,000 was for deferred legal fees (Note 7).
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 8,216,330 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to the Sponsor, generating
proceeds of approximately $12.3 million (Note 5).
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Upon the closing of the Initial Public Offering and the Private Placement,
$483.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account ("Trust Account") with Continental Stock Transfer & Trust Company
acting as trustee and has been invested in United States government treasury
bills with a maturity of 185 days or less or in money market funds investing
solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under
the Investment Company Act of 1940, as amended, or the Investment Company Act,
as determined by the Company, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
On January 11, 2023, at an extraordinary general meeting of shareholders, the
Company's shareholders voted to approve an amendment to the amended and restated
memorandum and articles of association (the "Extension Proposal") to extend the
date by which the Company must complete a business combination from February 9,
2023, to May 9, 2023 (the "Extended Date"), and to allow the Company, without
another shareholder vote, to elect to further extend the date to consummate a
business combination up to three times by an additional month each time after
the Extended Date, upon two days' advance notice prior to the applicable
deadline, for a total of up to six months, to August 9, 2023, if the Company has
entered into a definitive business combination agreement (the "Extension"). In
connection with the Extension, a total of 260 shareholders elected to redeem an
aggregate of 47,381,598 Class A ordinary shares, representing approximately
98.10% of our issued and outstanding Class A ordinary shares, for an aggregate
of approximately $478,003,632 in cash.
Our management has broad discretion with respect to the specific application of
the net proceeds of its Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination. Our initial
Business Combination must be with one or more operating businesses or assets
with a fair market value equal to at least 80% of the net assets held in the
Trust Account (excluding the deferred underwriting commissions and taxes payable
on the income earned on the Trust Account) at the time we sign a definitive
agreement in connection with the initial Business Combination. However, we will
only complete a Business Combination if the post-transaction company owns or
acquires 50% or more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient for it not to
be required to register as an investment company under the Investment Company
Act.
If we are unable to complete a Business Combination by May 9, 2023 or, if we
have entered into a definitive business combination agreement, August 9, 2023,
(the "Combination Period"), we will (1) cease all operations except for the
purpose of winding up; (2) as promptly as reasonably possible but not more than
10 business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest (less taxes payable, expenses relating to the
administration of the Trust Account, amounts withdrawn to fund the Company's
working capital requirements and up to $100,000 of interest to pay dissolution
expenses), divided by the number of then issued and outstanding Public Shares,
which redemption will completely extinguish Public Shareholders' rights as
shareholders (including the right to receive further liquidating distributions,
if any); and (3) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining shareholders and the board of
directors, liquidate and dissolve, subject in each case to the Company's
obligations under Cayman Islands 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 our warrants, which will expire
worthless if we fail to complete our initial business combination by the end of
the Combination Period, or by the applicable deadline as may be extended.
Recent Developments
Extension of Date to Consummate a Business Combination
The Company's amended and restated memorandum and articles of association
previously provided that the Company had until February 9, 2023 to complete a
business combination. On January 11, 2023, at an extraordinary general meeting
of shareholders, the Company's shareholders voted to approve an amendment to the
amended and restated memorandum and articles of association (the "Extension
Proposal") to extend the date by which the Company must complete a business
combination from February 9, 2023, to May 9, 2023 (the "Extended Date"), and to
allow the Company, without another shareholder vote, to elect to further extend
the date to consummate a business combination up to three times by an additional
month each time after the Extended Date, upon two days' advance notice prior to
the applicable deadline, for a total of up to six months, to August 9, 2023, if
the Company has entered into a definitive business combination agreement (the
"Extension"). In connection with the Extension, a total of 260 shareholders
elected to redeem an aggregate of 47,381,598 Class A ordinary shares,
representing approximately 98.10% of our issued and outstanding Class A ordinary
shares, for an aggregate of approximately $478,003,632 in cash.
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Entry into LOI
On January 4, 2023, we issued a press release and filed a Current Report on Form
8-K announcing that we had entered into a non-binding letter of intent ("LOI")
for a business combination with H2B2 Electrolysis Technologies ("H2B2" or the
"Target"), a vertically integrated provider of hydrogen energy systems,
services, and equipment.
Under the terms of the LOI, the Company and H2B2 would be become a combined
entity, with H2B2's existing equity holders continuing to hold substantially all
of their equity in the combined public company. We expect to announce additional
details regarding the proposed business combination when a definitive merger
agreement is executed, which is expected in the first half of 2023.
Completion of a business combination with the Target is subject to, among other
matters, the completion of due diligence, the negotiation of a definitive
agreement providing for the transaction, satisfaction of the conditions
negotiated therein and approval of the transaction by the board and shareholders
of both the Company and the H2B2. There can be no assurance that a definitive
agreement will be entered into or that the proposed transaction will be
consummated on the terms or timeframe currently contemplated, or at all.
Going Concern
As of December 31, 2022, we had approximately $22,000 in our operating bank
account, and a working capital deficit of approximately $1.1 million. Further,
we have incurred and expect to continue to incur significant costs in pursuit of
its financing and acquisition plans. These factors, among others, raise
substantial doubt about our ability to continue as a going concern within one
year after the date that the financial statements are issued.
Our liquidity needs to date have been satisfied through a payment of $25,000
from our Sponsor to cover certain expenses in exchange for the issuance of the
Founder Shares (as defined in Note 4), the loan of $135,000 from the Sponsor
pursuant to the Note (as defined in Note 4), and the proceeds from the
consummation of the Private Placement not held in the Trust Account. We fully
repaid the Note on February 12, 2021. In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors may
provide us Working Capital Loans (as defined in Note 4). As of December 31, 2022
and 2021, there was $500,000 and $0, respectively, outstanding under any Working
Capital Loan.
In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Basis of Presentation of Financial
Statements-Going Concern," we have determined that the mandatory liquidation
date and subsequent dissolution raises substantial doubt about the Company's
ability to continue as a going concern. If we are unable to complete a business
combination by May 9, 2023 or, if we have entered into a definitive business
combination agreement, August 9, 2023 (unless such a period is further extended
as described herein), then we will cease all operations except for the purpose
of liquidating. Over this time period, we have used, and will be using, these
funds for paying existing accounts payable, identifying and evaluating
prospective initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after May 9, 2023 or, if we have entered into a definitive business combination
agreement, August 9, 2023. The financial statements do not include any
adjustment that might be necessary if the Company is unable to continue as a
going concern.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
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In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
Results of Operations
Our entire activity since inception up to December 31, 2022 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We will not generate any operating revenues until after
the completion of our initial Business Combination. We generate non-operating
income in the form of investment income from the Trust Account. We will continue
to incur increased expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses. Additionally, we recognize non-cash gains and losses within
other income (expense) related to changes in recurring fair value measurement of
our derivative liabilities at each reporting period.
For the year ended December 31, 2022, we had net income of approximately
$15.9 million, resulting from a non-operating gain of approximately
$13.8 million from the change in fair value of the derivative warrant
liabilities and an unrealized gain on investments held in the Trust Account of
approximately $4.3 million, partially offset by approximately $2.2 million in
general and administrative costs.
For the year ended December 31, 2021, we had net income of approximately
$7.0 million, resulting from a non-operating gain of approximately $9.5 million
from the change in fair value of the derivative warrant liabilities and an
unrealized gain on investments held in the Trust Account of approximately
$50,000, partially offset by approximately $1.8 million in general and
administrative costs and approximately $734,000 in financing costs associated
with our derivative warrant liabilities.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than working capital loans and the administrative services agreement to
pay our Sponsor $20,000 per month for office space, secretarial and
administrative services provided to us.
Administrative Services Agreement
Commencing on the effective date of the Registration Statement, we agreed to pay
an affiliate of the Sponsor a total of $20,000 per month for office space,
administrative and support services (including salaries). Upon our liquidation,
we will cease paying these monthly fees. Upon completion of the Initial Business
Combination, we will pay to such affiliate an amount equal to $20,000 multiplied
by the number of whole months that have elapsed between the date of the
completion of the Initial Business Combination and the closing of the Initial
Public Offering.
The Sponsor, officers and directors, or any of their respective affiliates, will
be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations. The audit committee
will review on a quarterly basis all payments that were made by us to the
Sponsor, directors, officers or us or any of their respective affiliates.
We incurred approximately $240,000 and $220,000 in general and administrative
expenses in the accompanying statements of operations for years ended
December 31, 2022 and 2021, respectively. We had $120,000 and $0 included in
accrued expenses-related party in connection with such services as of
December 31, 2022 and 2021, respectively.
Registration and Shareholder Rights Agreement
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of Working Capital Loans (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares) were entitled to registration rights pursuant to a
registration and shareholder rights agreement signed upon the effective date of
the Initial Public Offering. The holders of these securities were entitled to
make up to three demands, excluding short form demands, that the Company
registers such securities. In addition, the holders have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
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Underwriting Agreement
We granted the underwriters a 45-day option from the date of the Initial Public
Offering to purchase up to 6,300,000 additional Units at the Initial Public
Offering price less the underwriting discounts and commissions. The underwriter
exercised its over-allotment option in full on February 9, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $9.7 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately
$16.9 million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
agreement.
Deferred Legal Fees
We entered into an engagement letter to obtain legal advisory services, pursuant
to which the Company's legal counsel agreed to defer their fees until the
closing of the initial Business Combination. As of December 31, 2022 and 2021,
the Company recorded an aggregate of $250,000 in connection with such
arrangement as deferred legal fees in the accompanying balance sheet.
Other Contractual Agreements
In December 2022, we engaged a capital market advisor to assist with the
completion of the business combination. We agreed to pay the advisor $250,000 in
cash and $250,000 paid in equivalent dollar amount in common stock, solely in
the event that we complete a Business Combination. As of December 31, 2022, we
determined that a Business Combination is not considered probable. If the fee is
determined to be a transaction cost for the Business Combination then the amount
payable to the advisor may be accounted for as an expense in the period the
liability is recorded.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") 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 the reported amounts of
income and expenses during the period reported. Actual results could materially
differ from those estimates. The Company has identified the critical accounting
estimates contained in Note 2 of our financial statements.
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Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company", we are not required to, among other things,
(i) provide an auditor's attestation report on our system of internal controls
over financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our initial public offering or until we are no longer an
"emerging growth company," whichever is earlier.
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