UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the year ended December 31, 2019
Commission File Number 001-39119
MERIDA MERGER CORP. I
(Exact name of registrant as specified in its charter)
| Delaware | 84-2266022 | |
(State or Other Jurisdiction of Incorporation) |
(I.R.S. Employer Identification No.) | |
641 Lexington Avenue, 18th Floor New York, NY |
10022 | |
| (Address of principal executive offices) | (zip code) |
(917) 745-7085
(Issuer’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered | ||
| Common stock, par value $0.0001 per share | MCMJ MMK.U |
The Nasdaq Stock Market LLC Neo Exchange Inc. | ||
| Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share | MCMJW MMK.WT.U |
The Nasdaq Stock Market LLC Neo Exchange Inc. |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement 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 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 emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting 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 ☐
As of June 30, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s common stock was not publicly traded. Accordingly, there was no market value for the registrant’s common stock on such date.
As of March 30, 2020, 16,571,552 shares of common stock, par value $0.0001 per share, were issued and outstanding.
Documents Incorporated by Reference: The information contained in the registrant’s prospectus dated November 4, 2019, as filed with the Securities and Exchange Commission on November 5, 2019, pursuant to Rule 424(b)(4) (SEC File Nos. 333-234134 and 333-234499) is incorporated into certain portions of Parts I, II, and III, as disclosed herein.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to our:
| ● | ability to complete our initial business combination; | |
| ● | success in retaining or recruiting, or changes required in, our officers, key employees or directors following an initial business combination; | |
| ● | officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements; | |
| ● | potential ability to obtain additional financing to complete an initial business combination; | |
| ● | pool of prospective target businesses; | |
| ● | failure to maintain the listing on, or the delisting of our securities from, Nasdaq or the Neo Exchange or an inability to have our securities listed on Nasdaq, Neo Exchange or another national securities exchange following our initial business combination; | |
| ● | the ability of our officers and directors to generate a number of potential investment opportunities; | |
| ● | potential change in control if we acquire one or more target businesses for stock; | |
| ● | public securities’ potential liquidity and trading; | |
| ● | lack of a market for our securities; | |
| ● | use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or | |
| ● | our financial performance. |
The forward-looking statements contained in this annual report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this annual report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this annual report, those results or developments may not be indicative of results or developments in subsequent periods.
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MERIDA MERGER CORP. I
FORM 10-K
TABLE OF CONTENTS
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In this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,” “us,” and “our” refer to Merida Merger Corp. I.
We are a blank check company formed under the laws of the State of Delaware on June 20, 2019. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” Our efforts to identify a prospective target business will not be limited to a particular industry or geographic location, although we intend to focus our search for target businesses in the cannabis industry.
In August 2019, we issued an aggregate of 2,875,000 shares of our common stock (“founders’ shares”) for an aggregate purchase price of $25,000, or approximately $0.009 per share, to Merida Holdings, LLC, an affiliate of Merida Capital Partners III, LP (“Sponsor”). In November 2019, we effectuated a stock dividend of 0.2 shares of common stock for each outstanding share of common stock, resulting in Merida Holdings, LLC holding an aggregate of 3,450,000 founders’ shares.
In August 2019, we also issued to designees of EarlyBirdCapital, Inc., the representative of the underwriters in our IPO (“IPO”), an aggregate of 120,000 shares of common stock (after giving effect to the stock dividend referred to above) (“representative shares”) at a price of $0.0001 per share.
On November 7, 2019, we consummated the IPO of 12,000,000 units. Each unit (“Unit”) consists of one share of common stock and one-half of one redeemable warrant (“Warrant”), with each whole Warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $120,000,000.
Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) of 3,750,000 warrants (“Private Warrants”) at a price of $1.00 per Private Warrant, generating total proceeds of $3,750,000. The Private Warrants were sold to Merida Holdings, LLC and EarlyBirdCapital and its designees. The Private Warrants are identical to the Warrants included in the Units sold in the IPO, except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees.
On November 13, 2019, as a result of the underwriters’ election to partially exercise their over-allotment option, we consummated the sale of an additional 1,001,552 Units at $10.00 per Unit, generating gross proceeds of $10,015,520. Simultaneously with the closing of the sale of additional Units, we consummated the sale of an additional 200,311 Private Warrants at $1.00 per Private Warrant, generating total proceeds of $200,311. Following the closing of the over-allotment option and sale of additional Private Warrants, an aggregate amount of $130,015,520 has been placed in the trust account established in connection with the IPO. The underwriters’ remaining over-allotment option expired unexercised and, as a result, 199,612 founder shares were forfeited and 250,388 founder shares are no longer subject to forfeiture, resulting in an aggregate of 3,250,388 Founder Share shares outstanding as of December 31, 2019.
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Transaction costs amounted to $3,412,939, consisting of $2,600,311 of underwriting fees and $812,628 of other offering costs. As of December 31, 2019, $362,570 of cash was held outside of the trust account established in connection with the IPO and is available for working capital purposes.
On December 12, 2019, the shares of Common Stock and Warrants included in the Units began separate trading and the Units were delisted.
For further details regarding our business, see the section titled “Proposed Business” contained in our prospectus dated November 4, 2019, incorporated by reference herein.
For the risks relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated November 4, 2019, incorporated by reference herein. There have been no material changes to such risk factors except as follows:
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
We currently maintain our principal executive offices at 641 Lexington Avenue, 18th Floor, New York, NY 10022. The cost for this space is included in the $5,000 per-month fee Merida Manager III LLC, an affiliate of our Sponsor, charges us for general and administrative services. We consider our current office space, combined with the other office space otherwise available to our executive officers, adequate for our current operations.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock and warrants are listed on the Nasdaq Capital Markets (“Nasdaq”) under the symbols MCMJ and MCMJW, respectively, and on the Neo Exchange Inc. (“Neo”) under the symbols “MMK.U” and “MMK.WT.U”, respectively. The listing of the Company’s Common Stock and Warrants on the Neo is secondary to the primary listing on Nasdaq.
Holders
As of March 30, 2020, there were 0 holders of record of our units, 19 holders of record of our common stock and 4 holders of record of our warrants.
Dividends
We have not paid any cash dividends on our shares of common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On November 7, 2019, we consummated our IPO of 12,000,000 units. Each unit consisted of one share of common stock and one-half of one redeemable warrant, with each whole warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $120,000,000. EarlyBirdCapital, Inc. acted as sole book-running manager of the offering. The securities sold in the IPO were registered under the Securities Act on a registration statement on Form S-1 (No. 333-234134) which was declared effective by the Securities and Exchange Commission on November 4, 2019, and a registration statement on Form S-1MEF (No. 333-234499) which became effective automatically upon filing on November 4, 2019.
Simultaneously with the consummation of the IPO, we consummated the Private Placement of 3,750,000 Private Warrants at a price of $1.00 per Private Warrant, generating total proceeds of $3,750,000. The Private Warrants were sold to Merida Holdings, LLC, our Sponsor, and EarlyBirdCapital and its designees. The Private Warrants are identical to the warrants included in the units sold in the IPO, except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees.
Following the closing of the IPO on November 7, 2019, an amount of $120,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Warrants was placed in a trust account (the “Trust Account”).
On November 13, 2019, as a result of the underwriters’ election to partially exercise their over-allotment option, we 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. A total of $10,015,520 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $130,015,520.
On December 12, 2019, the shares of Common Stock and Warrants included in the Units began separate trading and the Units were delisted.
Transaction costs amounted to $3,412,939, consisting of $2,600,311 of underwriting fees and $812,628 of other costs, including repayment of a promissory note to our Sponsor in an aggregate principal amount of $100,569. As of December 31, 2019, we had $362,570 of cash held outside of the Trust Account available for working capital purposes.
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ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “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. When used in this Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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 December 31, 2019 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 from June 20, 2019 (inception) through December 31, 2019 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 period from June 20, 2019 (inception) through December 31, 2019, we had net income of $101,502, which consisted of interest income on marketable securities held in the Trust Account of $295,788 and an unrealized gain on marketable securities held in our Trust Account of $227, offset by operating costs of $167,531 and a provision for income taxes of $26,982.
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 period from June 20, 2019 (inception) through December 31, 2019, cash used in operating activities was $217,499. Net income of $101,502 was comprised of interest earned on marketable securities held in the Trust Account of $295,788, an unrealized gain on marketable securities held in our Trust Account of $227 and a deferred tax provision of $48. Changes in operating assets and liabilities used $23,034 of cash from operating activities.
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As of December 31, 2019, we had marketable securities held in the Trust Account of $130,311,535 (including approximately $296,000 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. Through December 31, 2019, we did not withdraw any of the interest earned on the Trust Account. 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 income 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 December 31, 2019, we had $362,570 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.
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.
Related Party Transactions
The Sponsor advanced the Company an aggregate of $162,500 to cover expenses related to the IPO. The advances were non-interest bearing and due on demand. Outstanding advances amounting to $162,500 were repaid on November 14, 2019.
In anticipation of the underwriters’ election to fully exercise their over-allotment option, the Sponsor advanced the Company an additional $41,458 to cover the purchase of the additional Private Warrants. At December 31, 2019, advances of $16,458 were outstanding and due on demand.
On August 6, 2019, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company borrowed an aggregate principal amount of $100,569 under the Promissory Note. The Promissory Note was non-interest bearing and payable on the earlier of (i) June 30, 2020, (ii) the consummation of the IPO or (iii) the date on which the Company determined not to proceed with the IPO. As of December 31, 2019, the Company repaid $100,230 of amounts owed under the Promissory Note and $339 remained outstanding under the Promissory Note at December 31, 2019.
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In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be converted into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Warrants.
The Company entered into an agreement on November 4, 2019, as amended on November 26, 2019, whereby, commencing on November 4, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay Merida Manager III LLC a total of $5,000 per month for office space, utilities and secretarial and administrative support. For the period from June 20, 2019 (inception) through December 31, 2019, the Company incurred $10,000 in fees for these services, of which such fees are included in accrued expenses in the accompanying balance sheet as of December 31, 2019.
Off-balance sheet financing arrangements
We did not have any off-balance sheet arrangements as of December 31, 2019.
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.
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Critical Accounting Policies
The preparation of 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:
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 balance sheet.
Net loss per common share
We apply the two-class method in calculating earnings per share. Common stock subject to possible redemption which is not currently redeemable and is not redeemable at fair value, has been excluded from the calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2019, we were not subject to any market or interest rate risk. Following the consummation of our IPO, the net proceeds of our IPO, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 15 of this Report and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officer”), the effectiveness of our disclosure controls and procedures as of December 31, 2019, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of December 31, 2019, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers
Our current directors and executive officers are as follows:
| Name | Age | Position | ||
| Peter Lee | 43 | President, Chief Financial Officer, Secretary and Director | ||
| Richard Sellers | 49 | Executive Vice President of Mergers & Acquisitions | ||
| Mitchell Baruchowitz | 45 | Non-Executive Chairman of the Board | ||
| Jeffrey Monat | 41 | Director | ||
| Andres Nannetti | 42 | Director |
Peter Lee has served as our President since August 2019 and our Chief Financial Officer, Secretary and a member of our board of directors since September 2019. Mr. Lee has spent more than 20 years as an investment professional in both public markets and private equity. Since April 2018, Mr. Lee has been an independent investor and consultant for hedge funds. From 2011 to April 2018, he co-founded and was a Managing Partner at Sentinel Rock Capital, LLC, a long/short equity oriented hedge fund. Prior to this, from 2009 to 2011, he was an Analyst and a Partner at Spring Point Capital, a long/short equity oriented hedge fund. From 2007 to 2009, he was the sector head for financial services and retail industries at Blackstone Kailix, the long/short equity hedge fund business of The Blackstone Group. From 2005 to 2007, he was an analyst at Tiger Management evaluating public investments. Mr. Lee joined Tiger Management out of business school. Earlier, Mr. Lee focused on growth private equity investing in financial services and financial technology companies as a senior associate at J.H Whitney & Company from 2000 to 2002 and an associate at Capital Z Partners from 1999 to 2000. Mr. Lee began his career in 1997 as an analyst at Morgan Stanley Capital Partners, the private equity investment fund of Morgan Stanley. Mr. Lee received a B.S. in Business Administration from the University of California at Berkeley Haas School of Business and an MBA from Stanford Graduate School of Business. We believe Mr. Lee is well-qualified to serve as a member of the board of directors due to his business experience, including his consulting experience and business contacts and relationships.
Richard Sellers has served as our Executive Vice President of Mergers & Acquisitions since September 2019. Mr. Sellers has been involved in the cannabis industry for over 20 years. Since January 2018, Mr. Sellers has served as the Vice President of US Operations for Origin House (CSE: OH), a multinational, publicly traded company with cannabis assets throughout North America’s cannabis market. In addition to his duties in operations at Origin House, he has been instrumental in identifying, evaluating, negotiating, closing and transitioning multiple mergers and acquisitions. Previously, in January 2015, Mr. Sellers founded Alta Supply, California’s first formal cannabis distribution company. In March 2016, he also founded KAYA Manufacturing, one of the first California state licensed cannabis manufacturing companies. Kaya’s facility produces several cannabis products including gourmet cannabis chocolate, gummies, premium vaporizers, and mouth sprays. Alta Supply and Kaya were acquired by Origin House March 2018. From January 2010 to June 2019, Mr. Sellers was with Bhang Inc. (CSE: BHNG), a publicly traded company he co-founded and served as its Senior Vice President of Business Development. Bhang has become one of the most widely distributed cannabis brands in the world.
Mitchell Baruchowitz has been a member of the board of directors since August 2019 and our non-executive Chairman of the Board since September 2019. Mr. Baruchowitz has approximately 20 years of experience in the legal and finance fields. He also has nine years of experience in the legal cannabis industry. Through his leadership of Merida Capital Partners and his expertise in the diverse licensing regimes governing each state, Mr. Baruchowitz has been involved in over 100 cannabis transactions with a notional value over $1 billion. Mr. Baruchowitz has served as the Managing Member of Merida Advisors, LLC and the Managing Partner of Merida Capital Partners since September 2016. From April 2005 to March 2007, he served as the Associate General Counsel and Chief Compliance Officer of MarketAxess, a publicly traded financial technology company. He was also the General Counsel of investment banking boutique Pali Capital from October 2007 to May 2010. From May 2010 to October 2013, he served as the General Counsel of ACGM, Inc. In March 2013, he cofounded Theraplant, LLC, where he architected the highest scoring application in Connecticut’s highly selective licensing process. From October 2013 to October 2016, he served as the Head of Investment Banking of CAVU Securities. In 2014, he cofounded Leafline Labs, LLC, which was one of only two Minnesota companies to win a license to cultivate and dispense cannabis in extracted form. He formerly sat on the Board of Leafline Labs as well. In 2015, Mr. Baruchowitz co-founded a Nevada cultivator that also holds interests in two dispensary licenses. In 2016, he founded Merida Capital Partners and Grow West MD, a cultivator licensed in Maryland. He currently sits on the Boards of New Frontier Data, Simplifya, Mainstem, Steep Hill Labs and Manna Molecular Sciences. Mr. Baruchowitz received a B.A. in History from Brandeis University and a JD from Boston University School of Law. He is a member of the New York and Massachusetts Bars and held FINRA 7, 24, 63 and 79 licenses. We believe Mr. Baruchowitz is well qualified to serve on the board of directors due to his public and private company experience and experience in the cannabis industry.
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Jeffrey Monat has been a member of the board of directors since August 2019. He has been investing in cannabis companies since 2013, having made investments in cultivation and ancillary businesses. He has been with Merida since 2018 and is a partner in all three of its funds, where he serves in a primary analytical role for the funds’ investments. Since 2018, Mr. Monat has served as Chairman of the Board of Steep Hill Labs. From 2000 to 2002, he was with Goldman Sachs, where he advised clients on M&A transactions, financial valuation, and corporate governance issues. He worked in the Goldman Sachs Principal Strategies Group from 2002 to 2003, analyzing public-market opportunities for the firm’s proprietary investment fund. From 2003 to 2010, he was an investment analyst at Rockbay Capital, where he helped grow the firm to $1 billion in assets under management. From 2010 to 2012, he was with FrontPoint Rockbay, an event-driven hedge fund in New York where he evaluated prospective investments and helped build the firm’s investment analysis infrastructure. Mr. Monat also served as a Senior Analyst at Seven Locks Capital, a long/short equity hedge fund from 2012 to 2016 and was a Senior Analyst at Sage Rock Capital, an event-driven hedge fund based in New York from 2016 to 2018. Mr. Monat is treasurer and trustee of the Social Smarts Foundation, Inc., an after school program that helps children with special needs improve social skills. Mr. Monat received a B.S. in Economics from The Wharton School of the University of Pennsylvania. We believe Mr. Monat is well qualified to serve on the board of directors due to his investment advisory experience and experience in the cannabis industry.
Andres Nannetti has been a member of the board of directors since September 2019. Mr. Nannetti brings over twenty years of domestic and international business leadership and experience as both a CEO of companies and private equity principal investor. Since August 2018, Mr. Nannetti has served as Executive Chairman of Natuera Sarl, a Luxembourg-based global cannabis contract development and manufacturing organization with its initial production operations in Colombia. Natuera is a 50/50 Joint Venture between the Cronos Group, a publicly traded Toronto based leading global cannabinoid company whose main investor is Altria and Monaco Investments, and an affiliate of Agroidea SAS, Colombia’s leading agricultural services provider with over 30 years of research, development and production operations. Since 2005, Mr. Nannetti has also served as Managing Director of Leawood Investments, a privately held holding company whose direct and affiliated holdings include cannabis cultivation and manufacturing of derivative products, real estate development, fresh cut flower growing, and agricultural services companies in Colombia, and retail operations in the US. From 1999 to 2002, Mr. Nannetti was Co-founder and CEO of Rovia Inc., a Boston-based digital rights management software provider that was subsequently acquired by Enchoice. Mr. Nannetti began his career in 1998 at JP Morgan in the Latin America M&A and Morgan Capital Private Equity Groups. Mr. Nannetti received a BS in Economics from the Massachusetts Institute of Technology and an MBA from Stanford Graduate School of Business. We believe Mr. Nannetti is well qualified to serve on the board of directors due to his extensive private equity investment and operational experience as well as his experience in the cannabis industry.
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first class of directors, consisting of Andres Nannetti, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Mitchell Baruchowitz, will expire at the second annual meeting. The term of office of the third class of directors, consisting of Jeffrey Monat and Peter Lee, will expire at the third annual meeting. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. It is unlikely that there will be an annual meeting of stockholders to elect new directors prior to the consummation of a business combination, in which case all of the current directors will continue in office until at least the consummation of the business combination.
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Director Independence
Nasdaq rules require that a majority of the board of directors of a company listed on Nasdaq must be composed of “independent directors.” An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have determined that Mitchell Baruchowitz, Jeffrey Monat and Andres Nannetti are independent directors under the Nasdaq listing rules. Our independent directors hold regularly scheduled meetings at which only independent directors are present.
Any affiliated transactions will be on terms no less favorable to us than could be obtained from independent parties. Our board of directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.
Committees of the Board of Directors
We have three standing committees: an audit committee, a nominating committee, and a compensation committee. Each such committee is composed of solely independent directors.
Audit Committee
Effective November 4, 2019, we established an audit committee of the board of directors, in accordance with Section 3(a)(58)(A) of the Exchange Act, which consists of Mitchell Baruchowitz, Jeffrey Monat and Andres Nannetti, each of whom is an independent director under Nasdaq’s listing standards. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:
| ● | reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K; | |
| ● | discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; | |
| ● | discussing with management major risk assessment and risk management policies; |
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| ● | monitoring the independence of the independent auditor; | |
| ● | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; | |
| ● | reviewing and approving all related-party transactions; | |
| ● | inquiring and discussing with management our compliance with applicable laws and regulations; | |
| ● | pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; | |
| ● | appointing or replacing the independent auditor; | |
| ● | determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; | |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and | |
| ● | approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
During the fiscal year ended December 31, 2019, Merida’s audit committee held one meeting. Each of Merida’s audit committee members attended all of the meetings of the audit committee in fiscal year 2019.
Financial Experts on Audit Committee
The audit committee will at all times be composed exclusively of “independent directors” who are “financially literate” as defined under Nasdaq’s listing standards. Nasdaq listing standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. In addition, we must certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. The board of directors has determined that Mr. Baruchowitz qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC.
Nominating Committee
Effective November 4, 2019, we established a nominating committee of the board of directors, which consists of Mitchell Baruchowitz, Andres Nannetti and Jeffrey Monat, each of whom is an independent director under Nasdaq’s listing standards. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members, management, shareholders, investment bankers and others.
During the fiscal year ended December 31, 2019, Merida’s nominating committee did not hold any meetings.
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Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that persons to be nominated:
| ● | should have demonstrated notable or significant achievements in business, education or public service; | |
| ● | should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and | |
| ● | should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the shareholders. |
The Nominating Committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
Compensation Committee
Effective November 4, 2019, we established a compensation committee of the board of directors, which consists of Mitchell Baruchowitz, Andres Nannetti and Jeffrey Monat, each of whom is an independent director under Nasdaq’s listing standards. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; | |
| ● | reviewing and approving the compensation of all of our other executive officers; | |
| ● | reviewing our executive compensation policies and plans; | |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; | |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; | |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; | |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and | |
| ● | reviewing, evaluating, and recommending changes, if appropriate, to the remuneration for directors. |
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Notwithstanding the foregoing, as indicated below, other than the $5,000 per month administrative fee, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, including our directors, or any of their respective affiliates, prior to, or for any services they render in order to effectuate, the consummation of a business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
During the fiscal year ended December 31, 2019, Merida’s compensation committee did not hold any meetings.
Code of Ethics
Effective November 4, 2019, we adopted a code of ethics that applies to all of our executive officers, directors, and employees. The code of ethics codifies the business and ethical principles that govern all aspects of our business. We will provide, without charge, upon request, copies of our code of ethics. Requests for copies of our code of ethics should be sent in writing to 641 Lexington Avenue, 18th Floor, New York, NY 10022.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
No executive officer has received any cash compensation for services rendered to us. Commencing on the date of this prospectus through the acquisition of a target business, we will pay Merida Manager III LLC, an affiliate of our Sponsor, an aggregate fee of $5,000 per month for providing us with office space and certain office and secretarial services. However, this arrangement is solely for our benefit and is not intended to provide our officers or directors compensation in lieu of a salary.
Other than the $5,000 per month administrative fee, the payment of consulting, success or finder fees to our Sponsor, officers, directors, initial stockholders or their affiliates in connection with the consummation of our initial business combination and the repayment of the up to $150,000 of loans that may be made by our Sponsor to us, no compensation or fees of any kind, including finder’s, consulting fees and other similar fees, will be paid to our Sponsor, initial stockholders, special advisors, members of our management team or their respective affiliates, for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction that it is). However, they will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. However, the amount of such compensation may not be known at the time of the stockholder meeting held to consider our initial business combination, as it will be up to the directors of the post-combination business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K or a periodic report, as required by the SEC.
Since our formation, we have not granted any stock options or stock appreciation rights or any other awards under long-term incentive plans to any of our executive officers or directors.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our common stock by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; | |
| ● | each of our officers and directors; and | |
| ● | all of our officers and directors as a group. |
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record of beneficial ownership of the warrants included in the units offered in the IPO or the Private Units as the warrants are not exercisable within 60 days of the date hereof.
| Amount and | Approximate | |||||||
| Nature of | Percentage of | |||||||
| Beneficial | Outstanding | |||||||
| Name and Address of Beneficial Owner(1) | Ownership | Shares | ||||||
| Peter Lee(2) | 3,318,262 | 19.99 | % | |||||
| Richard Sellers | 0 | 0.0 | % | |||||
| Mitchell Baruchowitz(2) | 3,318,262 | 19.99 | % | |||||
| Jeffrey Monat(2) | 3,318,262 | 19.99 | % | |||||
| Andres Nannetti(2) | 3,318,262 | 19.99 | % | |||||
| Merida Holdings, LLC | 3,318,262 | 19.99 | % | |||||
| All directors and executive officers as a group (seven individuals) | 3,318,262 | 19.99 | % | |||||
| Linden Advisors(3) | 1,195,100 | 7.2 | % | |||||
| * | Less than 1%. |
| (1) | Unless otherwise indicated, the business address of each of the individuals is 135 E. 57th St., 18th Floor, New York, NY 10022. |
| (2) | Represents securities held by Merida Holdings, LLC, of which each of Messrs. Lee, Baruchowitz, Monat and Nannetti is a managing member. Each individual has one vote, and the approval of three of the four managing members is required for approval of an action of the entity. Under the so-called “rule of three”, if voting and dispositive decisions regarding an entity’s securities are made by three or more individuals, and a voting or dispositive decision requires the approval of a majority of those individuals, then none of the individuals is deemed a beneficial owner of the entity’s securities. Based on the foregoing, no individual of the committee exercises voting or dipositive control over any of the securities held by such entity, even those in which he directly owns a pecuniary interest. Accordingly, none of them will be deemed to have or share beneficial ownership of such shares. |
| (3) | Represents shares beneficially held by Linden Advisors and Siu Min (Joe) Wong. This amount consists of 1,085,053 shares held by Linden Capital and 110,047 shares held by separately managed accounts. Based on information contained in a Schedule 13G filed with the Securities and Exchange Commission on January 14, 2020. |
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All of the founders’ shares outstanding prior to the IPO have been placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until (i) with respect to 50% of such shares, the earlier of one year after the date of the consummation of our initial business combination and the date on which the closing price of our common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after our initial business combination and (ii) with respect to the remaining 50% of such shares, one year after the date of the consummation of our initial business combination, or earlier if, subsequent to our initial business combination, we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
During the escrow period, the holders of these shares will not be able to sell or transfer their securities except for transfers, assignments or sales (i) among our initial stockholders or to our initial stockholders’ members, officers, directors, consultants or their affiliates, (ii) to a holder’s stockholders or members upon its liquidation, (iii) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business combination, or (vii) in connection with the consummation of a business combination at prices no greater than the price at which the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our stockholders, including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable to effect a business combination and liquidate, there will be no liquidation distribution with respect to the founders’ shares.
Our executive officers and our Sponsor are our “promoters,” as that term is defined under the federal securities laws.
Equity Compensation Plans
As of December 31, 2019, we had no compensation plans (including individual compensation arrangements) under which equity securities of the registrant were authorized for issuance.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
For a complete discussion regarding certain relationships and related transactions, see the section titled “Certain Transactions” contained in our prospectus dated November 4, 2019, incorporated by reference herein.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, for services rendered.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the period from June 20, 2019 (inception) through December 31, 2019 totaled $112,345. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Marcum for consultations concerning financial accounting and reporting standards for the period from June 20, 2019 (inception) through December 31, 2019.
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Tax Fees. We did not pay Marcum for tax planning and tax advice for the period from June 20, 2019 (inception) through December 31, 2019.
All Other Fees. We did not pay Marcum for other services for the period from June 20, 2019 (inception) through December 31, 2019.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our IPO. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, AND SCHEDULES
(a) The following documents are filed as part of this report:
(1) Financial Statements:
| Page | |
| Report of Independent Registered Public Accounting Firm | F-1 |
| Balance Sheet | F-2 |
| Statement of Operations | F-3 |
| Statement of Changes in Stockholders’ Equity | F-4 |
| Statement of Cash Flows | F-5 |
| Notes to Financial Statements | F-6 |
(2) Financial Statement Schedules:
None.
(3) The following Exhibits are filed as part of this report:
| * | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on November 7, 2019 |
| ** | Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (SEC File Nos. 333-234134 and 333-234499). |
None
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Pursuant to the requirements of the Section 13 or 15 or 15(d) 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 on the 30th day of March, 2020.
| MERIDA MERGER CORP. I | ||
| By: | /s/ Peter Lee | |
| Peter Lee | ||
| President and Chief Financial Officer | ||
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ Peter Lee |
President and Chief Financial Officer and Director |
March 30, 2020 | ||
| Peter Lee | (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer) | |||
| /s/ Mitchell Baruchowitz |
Non-Executive Chairman of the Board |
March 30, 2020 | ||
| Mitchell Baruchowitz | ||||
| /s/ Jeffrey Monat |
Director |
March 30, 2020 | ||
| Jeffrey Monat | ||||
| /s/ Andres Nannetti | Director |
March 30, 2020 | ||
| Andres Nannetti |
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MERIDA MERGER CORP. I
INDEX TO FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm | F-2 |
| Financial Statements: | |
| Balance Sheet | F-3 |
| Statement of Operations | F-4 |
| Statement of Changes in Stockholders’ Equity | F-5 |
| Statement of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 to F-20 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of
Merida Merger Corp. I
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Merida Merger Corp. I (the “Company”) as of December 31, 2019, the related statements of operations, changes in stockholders’ equity and cash flows for the period from June 20, 2019 (inception) through December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the period from June 20, 2019 (inception) through December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| /s/ Marcum LLP | |
| Marcum LLP | |
| We have served as the Company’s auditor since 2019. | |
| New York, NY | |
| March 30, 2020 |
F-2
BALANCE SHEET
DECEMBER 31, 2019
| ASSETS | ||||
| Current asset | ||||
| Cash | $ | 362,570 | ||
| Prepaid expenses | 176,869 | |||
| Total Current Assets | 539,439 | |||
| Marketable securities held in Trust Account | 130,311,535 | |||
| Total Assets | $ | 130,850,974 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accrued expenses | $ | 126,891 | ||
| Income taxes payable | 26,934 | |||
| Advances from related party | 16,458 | |||
| Promissory note – related party | 339 | |||
| Total Current liabilities | 170,622 | |||
| Deferred tax liability | 48 | |||
| Total Liabilities | 170,670 | |||
| Commitments | ||||
| Common stock subject to possible redemption 12,550,477 shares at redemption value | 125,680,303 | |||
| Stockholders’ Equity | ||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | - | |||
| Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,821,463 shares issued and outstanding (excluding 12,550,477 shares subject to possible redemption) | 382 | |||
| Additional paid-in capital | 4,898,117 | |||
| Retained earnings | 101,502 | |||
| Total Stockholders’ Equity | 5,000,001 | |||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 130,850,974 | ||
The accompanying notes are an integral part of the financial statements.
F-3
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 20, 2019 (INCEPTION) THROUGH DECEMBER 31, 2019
| Operating costs | $ | 167,531 | ||
| Loss from operations | (167,531 | ) | ||
| Other income: | ||||
| Interest income | 295,788 | |||
| Unrealized gain on marketable securities held in Trust Account | 227 | |||
| Other income, net | 296,015 | |||
| Income before provision for income taxes | 128,484 | |||
| Provision for income taxes | (26,982 | ) | ||
| Net income | $ | 101,502 | ||
| Weighted average shares outstanding, basic and diluted (1) | 3,305,465 | |||
| Basic and diluted net loss per common share (2) | $ | 0.03 |
| (1) | Excludes an aggregate of up to 12,550,477 shares subject to possible redemption. |
| (2) | Net loss per share – basic and diluted excludes income attributable to common stock subject to possible redemption of $175,486 for the period from June 20, 2019 (inception) through December 31, 2019. |
The accompanying notes are an integral part of the financial statements.
F-4
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM JUNE 20, 2019 (INCEPTION) THROUGH DECEMBER 31, 2019
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Retained | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance – June 20, 2019 (inception) | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Issuance of common stock to Sponsor | 3,450,000 | 345 | 24,655 | — | 25,000 | |||||||||||||||
| Issuance of Representative Shares | 120,000 | 12 | 898 | — | 910 | |||||||||||||||
| Sale of 13,001,552 Units, net of underwriting discounts and offering expenses | 13,001,552 | 1,300 | 126,601,281 | — | 126,602,581 | |||||||||||||||
| Sale of 3,950,311 Private Warrants | — | — | 3,950,311 | — | 3,950,311 | |||||||||||||||
| Common stock subject to possible redemption | (12,550,477 | ) | (1,255 | ) | (125,679,048 | ) | — | (125,680,303 | ) | |||||||||||
| Forfeiture of Founder Shares | (199,612 | ) | (20 | ) | 20 | — | — | |||||||||||||
| Net income | — | — | — | 101,502 | 101,502 | |||||||||||||||
| Balance – December 31, 2019 | 3,821,463 | $ | 382 | $ | 4,898,117 | $ | 101,502 | $ | 5,000,001 | |||||||||||
The accompanying notes are an integral part of the financial statements.
F-5
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 20, 2019 (INCEPTION) THROUGH DECEMBER 31, 2019
| Cash Flows from Operating Activities: | ||||
| Net income | $ | 101,502 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | (295,788 | ) | ||
| Unrealized gain on marketable securities held in Trust Account | (227 | ) | ||
| Deferred tax provision | 48 | |||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (176,859 | ) | ||
| Accrued expenses | 126,891 | |||
| Income taxes payable | 26,934 | |||
| Net cash used in operating activities | (217,499 | ) | ||
| Cash Flows from Investing Activities: | ||||
| Investment of cash in Trust Account | (130,015,520 | ) | ||
| Net cash used in investing activities | (130,015,520 | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from sale of Units, net of underwriting discounts paid | 127,415,209 | |||
| Proceeds from sale of Private Warrants | 3,950,311 | |||
| Advances from related party | 203,958 | |||
| Repayment of advances from related party | (187,500 | ) | ||
| Proceeds from promissory note – related party | 100,569 | |||
| Repayment of promissory note – related party | (100,230 | ) | ||
| Payment of offering costs | (786,728 | ) | ||
| Net cash provided by financing activities | 130,595,589 | |||
| Net Change in Cash | 362,570 | |||
| Cash – Beginning | — | |||
| Cash – Ending | $ | 362,570 | ||
| Non-cash investing and financing activities: | ||||
| Initial classification of common stock subject to possible redemption | $ | 125,578,180 | ||
| Change in value of common stock subject to possible redemption | $ | 102,123 | ||
| Issuance of Representative Shares | $ | 910 | ||
| Deferred offering costs paid directly by shareholder from proceeds from issuance of common stock to Sponsor | $ | 25,000 | ||
The accompanying notes are an integral part of the financial statements.
F-6
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Merida Merger Corp. I (the “Company”) was incorporated in Delaware on June 20, 2019. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on companies in the cannabis industry. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2019, the Company had not commenced any operations. All activity for the period from June 20, 2019 (inception) through December 31, 2019 relates to the Company’s formation, the IPO (“IPO”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statements for the Company’s IPO were declared effective on November 4, 2019. On November 7, 2019, the Company consummated the IPO of 12,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units sold, the “Public Shares”), generating gross proceeds of $120,000,000, which is described in Note 3.
Simultaneously with the closing of the IPO, the Company consummated the sale of 3,750,000 warrants (the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to Merida Holdings, LLC and EarlyBirdCapital, Inc. (“EarlyBirdCapital”), generating gross proceeds of $3,750,000, which is described in Note 4.
Following the closing of the IPO on November 7, 2019, an amount of $120,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust Account to the Company’s stockholders, as described below.
On November 12, 2019, the underwriters notified the Company of their intention to partially exercise their over-allotment option on November 13, 2019. As such, on November 13, 2019 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 $1.00 per Private Warrant, generating total gross proceeds of $10,215,831. A total of $10,015,520 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $130,015,520.
F-7
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Transaction costs amounted to $3,412,939 consisting of $2,600,311 of underwriting fees and $812,628 of other offering costs. In addition, as of December 31, 2019, there was $362,570 of cash held outside of the Trust Account and available for working capital purposes.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”). Upon the closing of the IPO, management has agreed that an amount equal to at least $10.00 per Unit sold in the IPO, including the proceeds from the sale of the Private Warrants, will be held in a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination in connection with a stockholder meeting called to approve the Business Combination. 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 earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations and up to $250,000 per 12-month period for working capital needs). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. The Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules. The Company’s Sponsor and EarlyBirdCapital have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or don’t vote at all.
F-8
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and any Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect a public stockholders’ ability to convert their shares in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until November 7, 2021 to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete 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 the Company, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
In order to protect the amounts held in the Trust Account, Merida Manager III LLC, the general partner of the Sponsor, has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.00 per Public Share, except as to any claims by a third party who executed a valid and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Merida Manager III LLC will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that Merida Manager III LLC will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
F-9
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging growth company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of estimates
The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
F-10
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2019.
Marketable securities held in Trust Account
At December 31, 2019, the assets held in the Trust Account were substantially held in U.S. Treasury Bills.
Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
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.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements 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 December 31, 2019. 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.
F-11
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Net loss per common share
Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at December 31, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants to purchase 10,451,087 shares of common stock that were sold in the IPO and the private placement in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per share is the same as basic loss per share for the period presented.
Reconciliation of net loss per common share
The Company’s net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income and losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:
For the Period from June 20, 2019 (inception) through | ||||
December 31, 2019 | ||||
| Net income | $ | 101,502 | ||
| Less: Income attributable to shares subject to redemption | (175,486 | ) | ||
| Adjusted net loss | $ | (73,984 | ) | |
| Weighted average shares outstanding, basic and diluted | 3,305,465 | |||
| Basic and diluted net loss per share | $ | (0.02 | ) | |
F-12
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal Depository Insurance Coverage of $250,000. At December 31, 2019, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair value of financial instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Recently issued accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the IPO, the Company sold 13,001,552 Units at a price of $10.00 per Unit, inclusive of 1,001,552 Units sold to the underwriters on November 13, 2019 upon the underwriters’ election to partially exercise their over-allotment option. Each Unit consists of one share of common stock and one-half of one warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, Merida Holdings, LLC and EarlyBirdCapital purchased an aggregate of 3,750,000 Private Warrants at a price of $1.00 per Private Warrant for an aggregate purchase price of $3,750,000, in a private placement that occurred simultaneously with the closing of the IPO. On November 13, 2019, in connection with the underwriters’ election to partially exercise their over-allotment option, the Company sold an additional aggregate of 200,311 Private Warrants to Merida Holdings, LLC and EarlyBirdCapital, at a price of $1.00 per Private Warrant, generating gross proceeds of $200,311. Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The proceeds from the Private Warrants were added to the proceeds from the IPO 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 Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Warrants and all underlying securities will expire worthless.
F-13
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 5. RELATED PARTY TRANSACTION
Founder Shares
In August 2019, the Sponsor purchased 2,875,000 shares (the “Founder Shares”) of the Company’s common stock for an aggregate price of $25,000. On November 4, 2019, the Company effected a stock dividend of 0.2 shares for each share outstanding, resulting in an aggregate of 3,450,000 Founder Shares being held by the Sponsor. All share and per-share amounts have been retroactively restated to reflect the stock dividend. The Founder Shares included an aggregate of up to 199,612 shares that were subject to forfeiture by the Sponsor following the underwriter’s election to partially exercise its over-allotment option. The underwriters’ remaining over-allotment option expired unexercised and, as a result, 199,612 Founder Shares were forfeited and 250,388 Founder Shares are no longer subject to forfeiture, resulting in an aggregate of 3,250,388 Founder Share shares outstanding as of December 31, 2019.
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until, with respect to 50% of the Founder Shares, the earlier of one year after the consummation of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 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 commencing after a Business Combination and, with respect to the remaining 50% of the Founder Shares, until the one year after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Advances — Related Party
The Sponsor advanced the Company an aggregate of $162,500 to cover expenses related to the IPO. The advances were non-interest bearing and due on demand. Outstanding advances amounting to $162,500 were repaid on November 14, 2019.
In anticipation of the underwriters’ election to fully exercise their over-allotment option, the Sponsor advanced the Company an additional $41,458 to cover the purchase of the additional Private Warrants. At December 31, 2019, advances of $16,458 were outstanding and due on demand.
Promissory Note — Related Party
On August 6, 2019, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company borrowed an aggregate principal amount of $100,569 under the Promissory Note. The Promissory Note was non-interest bearing and payable on the earlier of (i) June 30, 2020, (ii) the consummation of the IPO or (iii) the date on which the Company determined not to proceed with the IPO. As of December 31, 2019, the Company repaid $100,230 of amounts owed under the Promissory Note and $339 remained outstanding under the Promissory Note at December 31, 2019.
F-14
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be converted into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Warrants.
Administrative Support Agreement
The Company entered into an agreement on November 4, 2019, as amended on November 26, 2019, whereby, commencing on November 4, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay Merida Manager III LLC a total of $5,000 per month for office space, utilities and secretarial and administrative support. For the period from June 20, 2019 (inception) through December 31, 2019, the Company incurred $5,000 in fees for these services, of which such fees are included in accrued expenses in the accompanying balance sheet as of December 31, 2019.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on November 4, 2019, the holders of the Founder Shares, Representative Shares, Private Warrants, and any warrants that may be issued in payment of Working Capital Loans (and all underlying securities) are entitled to registration rights. The holders of the majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which the Founder Shares are to be released from escrow. The holders of a majority of the Representative Shares, Private Warrants or warrants issued in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time commencing after the Company consummates a Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one occasion and only during the five-year period beginning on the effective date of the IPO. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the IPO. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
F-15
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Underwriting Agreement
The Company granted the underwriters a 45-day to purchase up to 1,800,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On November 13, 2019, the underwriters partially exercised their over-allotment option to purchase an additional 1,001,552 Units at $10.00 per Unit, leaving 798,448 Units available for a purchase price of $10.00 per Unit.
Business Combination Marketing Agreement
The Company has engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount equal to 3.5% of the gross proceeds of IPO, or an aggregate of $4,550,543 (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at the Company’s sole discretion to other FINRA members that assist the Company in identifying and consummating a Business Combination.
NOTE 7. 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 designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2019, there were no shares of preferred stock issued or outstanding.
Common Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. At December 31, 2019, there were 3,821,463 shares of common stock issued and outstanding, excluding 12,550,477 shares of common stock subject to possible redemption.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the IPO. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
F-16
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Once the warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $0.01 per warrant; | |
| ● | upon not less than 30 days’ prior written notice of redemption; | |
| ● | if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period commencing after the warrants become exercisable and ending on the third business day prior to the notice of redemption to the warrant holders; and | |
| ● | If, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the warrants. |
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 Private Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. 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.
F-17
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per share of 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, initial stockholders or their affiliates, without taking into account any Founder’s Shares held by them prior to such issuance), (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 an initial Business Combination on the date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummated an initial 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 greater of (i) the Market Value or (ii) the price at which the Company issues the additional shares of common stock or equity-linked securities.
Representative Shares
In August 2019, the Company issued to EarlyBirdCapital and its designees the 120,000 Representative Shares (as adjusted for the stock dividend described above). The Company accounted for the Representative Shares as an offering cost of the IPO, with a corresponding credit to stockholder’s equity. The Company estimated the fair value of Representative Shares to be $910 based upon the price of the Founder Shares issued to the Sponsor. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the IPO pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the IPO except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners.
F-18
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 8. INCOME TAX
The Company’s net deferred tax asset at December 31, 2019 is as follows:
| Deferred tax liability | ||||
| Unrealized gain on securities | $ | (48 | ) | |
| Total deferred tax liability | (48 | ) | ||
| Valuation allowance | — | |||
| Deferred tax liability, net of allowance | $ | (48 | ) | |
The income tax provision for the year ended December 31, 2019 consists of the following:
| Federal | ||||
| Current | $ | 26,934 | ||
| Deferred | 48 | |||
| State | ||||
| Current | $ | — | ||
| Deferred | — | |||
| Change in valuation allowance | — | |||
| Income tax provision | $ | 26,982 | ||
As of December 31, 2019, the Company did not have any U.S. federal and state net operating loss carryovers (“NOLs”) available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2019 is as follows:
| Statutory federal income tax rate | 21.0 | % | ||
| State taxes, net of federal tax benefit | 0.0 | % | ||
| Income tax provision | 21.0 | % |
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities. The Company’s tax returns since inception remain open and subject to examination.
F-19
MERIDA MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | December 31, 2019 | ||||||
| Assets: | ||||||||
| Marketable securities held in Trust Account | 1 | $ | 130,311,535 | |||||
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
F-20
Exhibit 4.5
DESCRIPTION OF REGISTRANT’S SECURITIES
The following summary of Merida Merger Corp. I’s securities is based on and qualified by the Company’s Amended and Restated Articles of Incorporation (the “Amended and Restated Charter”). References to the “Company” and to “we,” “us,” and “our” refer to Merida Merger Corp. I.”
General
As of December 31, 2019, the Company is authorized to issue 50,000,000 shares of common stock, par value $0.0001 and 1,000,000 shares of preferred stock, par value $0.0001. There are no shares of preferred stock currently outstanding.
Common Stock
At December 31, 2019, there were 16,371,940 issued and outstanding shares of common stock, including 12,550,477 subject to possible redemption. Our stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. In connection with any vote held to approve our initial business combination, our Sponsor, as well as all of our officers and directors, have agreed to vote their respective shares of common stock owned by them immediately prior to our IPO and any shares purchased in IPO or following the IPO in the open market in favor of the proposed business combination.
Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares eligible to vote for the election of directors can elect all of the directors.
Pursuant to our Amended and Restated Charter, if we do not consummate an initial business combination by November 7, 2021, our corporate existence will cease except for the purposes of winding up our affairs and liquidating and we will redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust account, 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 us, divided by the number of then outstanding public shares, subject to applicable law and as further described herein. Our Sponsor, officers and directors have agreed to waive their rights to participate in any liquidation distribution from the trust account occurring upon our failure to consummate an initial business combination with respect to the founder’s common stock. Our Sponsor, officers and directors will therefore not participate in any liquidation distribution from the trust account with respect to such shares. They will, however, participate in any liquidation distribution from the trust account with respect to any shares of common stock acquired in, or following, our IPO.
Our stockholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the shares of common stock, except that public stockholders have the right to have their shares of common stock converted to cash equal to their pro rata share of the trust account in connection with the consummation of our business combination. Public stockholders who convert their stock into their share of the trust account still have the right to exercise the warrants that they received as part of the units.
If we seek to amend any provisions of our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert their shares in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination within 24 months from the closing of this offering, we will provide dissenting public stockholders with the opportunity to convert their public shares in connection with any such vote. This conversion right shall apply in the event of the approval of any such amendment, whether proposed by our Sponsor, any executive officer, director or director nominee, or any other person.
Preferred Stock
There are no shares of preferred stock outstanding. Our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. However, the underwriting agreement entered into by us in connection with the IPO prohibits us, prior to a business combination, from issuing preferred stock which participates in any manner in the proceeds of the trust account, or which votes as a class with the common stock on a business combination. We may issue some or all of the preferred stock to effect a business combination. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Warrants
There are 10,451,087 warrants outstanding. Each whole warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 30 days after the completion of an initial business combination or November 7, 2020. However, no warrants will be exercisable for cash unless we have an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants is not effective within a specified period following the consummation of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of such a cashless exercise, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise. The warrants will expire on the fifth anniversary of our completion of an initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
2
The private warrants issued to EarlyBirdCapital, Inc. and our Sponsor, as well as any warrants underlying additional units we issue to our Sponsor, officers, directors or their affiliates in payment of working capital loans made to us, will be identical to the warrants underlying the units being offered by this prospectus except that such warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by our Sponsor or its permitted transferees.
We may call the warrants for redemption (excluding the private warrants and any warrants underlying additional units issued to our Sponsor, initial stockholders, officers, directors or their affiliates in payment of working capital loans made to us), in whole and not in part, at a price of $0.01 per warrant, (i) at any time after the warrants become exercisable, (ii) upon not less than 30 days’ prior written notice of redemption to each warrant holder after the warrants become exercisable, (iii) if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders, and (iv) if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices.
3
In addition, if (x) we issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by our board of directors, and in the case of any such issuance to our Sponsor, initial stockholders or their affiliates, without taking into account any founders’ shares held by them prior to such issuance), (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 our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) 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 greater of (i) the Market Value or (ii) the price at which we issue the additional shares of common stock or equity-linked securities. The “Market Value” for this purpose means the volume weighted average trading price of our common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number the number of shares of common stock to be issued to the warrant holder.
Dividends
We have not paid any cash dividends on our shares of common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
Listing of Securities
Our common stock and warrants are listed on Nasdaq under the symbols “MCMJ,” and “MCMJW,” respectively and on the Neo under the symbols “MMK.U,” and “MMK.WT.U,” respectively.
Delaware Anti-Takeover Law
Staggered Board of Directors
Our Amended and Restated Charter provides that our board of directors will be classified into three classes of directors of approximately equal size. As a result, in most circumstances, a person can gain control of our board only by successfully engaging in a proxy contest at two or more annual meetings.
4
Special Meeting of Stockholders
Our bylaws provide that special meetings of our stockholders may be called only by a majority vote of our board of directors, by our president or by our chairman or by our secretary at the request in writing of stockholders owning a majority of our issued and outstanding capital stock entitled to vote.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders must provide timely notice of their intent in writing. To be timely, a stockholder’s notice will need to be delivered to our principal executive offices not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the scheduled date of the annual meeting of stockholders. In the event that less than 70 days’ notice or prior public disclosure of the date of the annual meeting of stockholders is given, a stockholder’s notice shall be timely if delivered to our principal executive offices not later than the 10th day following the day on which public announcement of the date of our annual meeting of stockholders is first made or sent by us. Our bylaws also specify certain requirements as to the form and content of a stockholders’ meeting. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.
Authorized but Unissued Shares
Our authorized but unissued common stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
5
Exclusive Forum Selection
Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware, except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. If an action is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder and therefore bring a claim in another appropriate forum. Additionally, we cannot be certain that a court will decide that this provision is either applicable or enforceable, and if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our Amended and Restated Charter will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
6
Exhibit 31.1
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter Lee, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Merida Merger Corp. I; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 30, 2020 | /s/ Peter Lee |
| Peter Lee | |
|
President and Chief Financial Officer (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Merida Merger Corp. I (the “Company”) on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| Date: March 30, 2020 | /s/ Peter Lee |
| Peter Lee | |
President and Chief Financial Officer (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer) |
Income Tax (Details 2) |
6 Months Ended |
|---|---|
Dec. 31, 2019 | |
| Income Tax Disclosure [Abstract] | |
| Statutory federal income tax rate | 2100.00% |
| State taxes, net of federal tax benefit | 0.00% |
| Income tax provision | 2100.00% |
Private Placement |
6 Months Ended |
|---|---|
Dec. 31, 2019 | |
| Private Placement [Abstract] | |
| PRIVATE PLACEMENT | NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, Merida Holdings, LLC and EarlyBirdCapital purchased an aggregate of 3,750,000 Private Warrants at a price of $1.00 per Private Warrant for an aggregate purchase price of $3,750,000, in a private placement that occurred simultaneously with the closing of the IPO. On November 13, 2019, in connection with the underwriters' election to partially exercise their over-allotment option, the Company sold an additional aggregate of 200,311 Private Warrants to Merida Holdings, LLC and EarlyBirdCapital, at a price of $1.00 per Private Warrant, generating gross proceeds of $200,311. Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The proceeds from the Private Warrants were added to the proceeds from the IPO 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 Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Warrants and all underlying securities will expire worthless. |
Income Tax |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAX | NOTE 8. INCOME TAX
The Company's net deferred tax asset at December 31, 2019 is as follows:
The income tax provision for the year ended December 31, 2019 consists of the following:
As of December 31, 2019, the Company did not have any U.S. federal and state net operating loss carryovers ("NOLs") available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.
A reconciliation of the federal income tax rate to the Company's effective tax rate at December 31, 2019 is as follows:
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities. The Company's tax returns since inception remain open and subject to examination. |
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Balance Sheet |
Dec. 31, 2019
USD ($)
|
|---|---|
| Current asset | |
| Cash | $ 362,570 |
| Prepaid expenses | 176,869 |
| Total Current Assets | 539,439 |
| Marketable securities held in Trust Account | 130,311,535 |
| Total Assets | 130,850,974 |
| Current liabilities: | |
| Accrued expenses | 126,891 |
| Income taxes payable | 26,934 |
| Advances from related party | 16,458 |
| Promissory note - related party | 339 |
| Total Current liabilities | 170,622 |
| Deferred tax liability | 48 |
| Total Liabilities | 170,670 |
| Common stock subject to possible redemption 12,550,477 shares at redemption value | 125,680,303 |
| Stockholders' Equity | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | |
| Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,821,463 shares issued and outstanding (excluding 12,550,477 shares subject to possible redemption) | 382 |
| Additional paid-in capital | 4,898,117 |
| Retained earnings | 101,502 |
| Total Stockholders' Equity | 5,000,001 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 130,850,974 |
Summary of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Shedule of net loss adjusted for portion of income |
|
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Statement of Changes in Stockholders' Equity (Parenthetical) |
6 Months Ended |
|---|---|
|
Dec. 31, 2019
USD ($)
shares
| |
| Statement of Stockholders' Equity [Abstract] | |
| Net of underwriting discounts and offering expenses | shares | 13,001,552 |
| Private Warrants | $ | $ 3,950,311 |
Summary of Significant Accounting Policies (Details) |
6 Months Ended | |||||
|---|---|---|---|---|---|---|
|
Dec. 31, 2019
USD ($)
$ / shares
shares
| ||||||
| Accounting Policies [Abstract] | ||||||
| Net income | $ 101,502 | |||||
| Less: Income attributable to shares subject to redemption | (175,486) | |||||
| Adjusted net loss | $ (73,984) | |||||
| Weighted average shares outstanding, basic and diluted | shares | 3,305,465 | [1] | ||||
| Basic and diluted net loss per share | $ / shares | $ 0.03 | [2] | ||||
| ||||||
Related Party Transactions (Details) - USD ($) |
1 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Nov. 04, 2019 |
Aug. 31, 2019 |
Dec. 31, 2019 |
Nov. 14, 2019 |
Aug. 06, 2019 |
|
| Related Party Transactions (Textual) | |||||
| Stock issued shares | 2,875,000 | ||||
| Stock issued value | $ 25,000 | $ 126,602,581 | |||
| Sponsor rate | 20.00% | ||||
| Stockholders' equity note, stock split | The Founder Shares until, with respect to 50% of the Founder Shares, the earlier of one year after the consummation of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 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 commencing after a Business Combination and, with respect to the remaining 50% of the Founder Shares, until the one year after the consummation of a Business Combination. | ||||
| Cover expenses | $ 162,500 | ||||
| Advances amount | $ 162,500 | ||||
| Principal amount | $ 100,569 | ||||
| Share outstanding | 3,821,463 | ||||
| Promissory note payable,description | The Promissory Note was non-interest bearing and payable on the earlier of (i) June 30, 2020, (ii) the consummation of the IPO or (iii) the date on which the Company determined not to proceed with the IPO. As of December 31, 2019, the Company repaid $100,230 of amounts owed under the Promissory Note and $339 remained outstanding under the Promissory Note at December 31, 2019. | ||||
| Working capital loans | $ 1,500,000 | ||||
| Business combination entity price | $ 1.00 | ||||
| Office space utilities and secretarial and administrative support | $ 5,000 | ||||
| Service fee | $ 10,000 | ||||
| Cover expenses | 41,458 | ||||
| Outstanding promissory note | 16,458 | ||||
| Services fees | $ 5,000 | ||||
| Over-Allotment Option [Member] | |||||
| Related Party Transactions (Textual) | |||||
| Stock issued shares | 199,612 | ||||
| Founder Shares [Member] | |||||
| Related Party Transactions (Textual) | |||||
| Stock issued shares | 3,450,000 | ||||
| Founder Shares [Member] | Over-Allotment Option [Member] | |||||
| Related Party Transactions (Textual) | |||||
| Stock issued shares | 250,388 | 199,612 | |||
| Share outstanding | 3,250,388 |
Description of Organization and Business Operations (Details) - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Nov. 14, 2019 |
Nov. 13, 2019 |
Nov. 07, 2019 |
Dec. 31, 2019 |
|
| Description of Organization and Business Operations (Textual) | ||||
| Stock price | $ 10.00 | |||
| Sale of additional stock issued | 13,001,552 | |||
| Transaction costs | $ 3,412,939 | |||
| Business combination, description | The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the "Investment Company Act"). Upon the closing of the IPO, management has agreed that an amount equal to at least $10.00 per Unit sold in the IPO, including the proceeds from the sale of the Private Warrants, will be held in a trust account ("Trust Account"), located in the United States and invested only in U.S. government securities. | |||
| Business combination net tangible assets | $ 5,000,001 | |||
| Working capital purposes on an annual basis | $ 250,000 | |||
| Business combination period | Nov. 07, 2021 | |||
| Private Placement [Member] | ||||
| Description of Organization and Business Operations (Textual) | ||||
| Sale of IPO consumed | 200,311 | 3,750,000 | 3,750,000 | |
| Stock price | $ 1.00 | $ 1.00 | $ 1.0 | $ 1.00 |
| Gross proceeds from investors | $ 200,311 | $ 3,750,000 | $ 3,750,000 | |
| Sale of additional stock issued | 200,311 | |||
| IPO [Member] | ||||
| Description of Organization and Business Operations (Textual) | ||||
| Sale of IPO consumed | 120,000,000 | |||
| Stock price | $ 10.00 | |||
| Net proceeds sales of units | $ 1,001,552 | |||
| Sale of additional stock issued | 13,001,552 | 13,001,552 | ||
| Transaction costs | $ 812,628 | |||
| Business combination, description | The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and any Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect a public stockholders’ ability to convert their shares in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. | |||
| Over-Allotment Option [Member] | ||||
| Description of Organization and Business Operations (Textual) | ||||
| Stock price | $ 10.00 | |||
| Sale of additional stock issued | 1,001,552 | |||
| Sale of stock received on transaction | $ 10,215,831 | |||
| Trust Account [Member] | ||||
| Description of Organization and Business Operations (Textual) | ||||
| Net proceeds sales of units | 10,015,520 | |||
| Sale of stock received on transaction | $ 130,015,520 | |||
| Cash held of trust account | $ 362,570 | |||
| UnderwritingFees [Member] | ||||
| Description of Organization and Business Operations (Textual) | ||||
| Transaction costs | $ 2,600,311 |
Private Placement (Details) - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Nov. 14, 2019 |
Nov. 13, 2019 |
Nov. 07, 2019 |
Dec. 31, 2019 |
|
| Private Placement (Textual) | ||||
| Stock price | $ 10.00 | |||
| Sale of additional stock issued | 13,001,552 | |||
| Common Stock [Member] | ||||
| Private Placement (Textual) | ||||
| Aggregate purchase shares | ||||
| Warrants to purchase, exercise price | $ 11.50 | |||
| Private Placement [Member] | ||||
| Private Placement (Textual) | ||||
| Stock price | $ 1.00 | $ 1.00 | $ 1.0 | $ 1.00 |
| Aggregate purchase shares | 200,311 | 3,750,000 | 3,750,000 | |
| Aggregate purchase price | $ 200,311 | $ 3,750,000 | $ 3,750,000 | |
| Sale of additional stock issued | 200,311 |
Fair Value Measurements (Details) - Level 1 [Member] |
6 Months Ended |
|---|---|
|
Dec. 31, 2019
USD ($)
| |
| Assets: | |
| Description | Marketable securities held in Trust Account |
| Fair value | $ 130,311,535 |
Balance Sheet (Parenthetical) |
Dec. 31, 2019
$ / shares
shares
|
|---|---|
| Statement of Financial Position [Abstract] | |
| Preferred stock par value | $ / shares | $ 0.0001 |
| Preferred stock shares authorized | 1,000,000 |
| Preferred stock shares issued | |
| Preferred stock shares outstanding | |
| Common stock par value | $ / shares | $ 0.0001 |
| Common stock shares authorized | 50,000,000 |
| Common stock shares issued | 3,821,463 |
| Common stock shares outstanding | 3,821,463 |
| Common stock subject to possible redemption, shares | 12,550,477 |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation | Basis of presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the SEC. |
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| Emerging growth company | Emerging growth company
The Company is an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. |
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| Use of estimates | Use of estimates
The preparation of the financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. |
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| Cash and cash equivalents | Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2019. |
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| Marketable securities held in Trust Account | Marketable securities held in Trust Account
At December 31, 2019, the assets held in the Trust Account were substantially held in U.S. Treasury Bills. |
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| Common stock subject to possible redemption | Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. The Company's common stock features certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' equity section of the Company's balance sheet. |
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| Income taxes | 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.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements 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 December 31, 2019. 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. |
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| Net loss per common share | Net loss per common share
Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at December 31, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants to purchase 10,451,087 shares of common stock that were sold in the IPO and the private placement in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per share is the same as basic loss per share for the period presented. |
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| Reconciliation of net loss per common share | Reconciliation of net loss per common share
The Company's net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income and losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:
|
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| Concentration of credit risk | Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal Depository Insurance Coverage of $250,000. At December 31, 2019, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. |
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| Fair value of financial instruments | Fair value of financial instruments
The fair value of the Company's assets and liabilities, which qualify as financial instruments under ASC Topic 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature. |
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| Recently issued accounting standards | Recently issued accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's financial statements. |
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Initial Public Offering |
6 Months Ended |
|---|---|
Dec. 31, 2019 | |
| Initial Public Offering [Abstract] | |
| INITIAL PUBLIC OFFERING | NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the IPO, the Company sold 13,001,552 Units at a price of $10.00 per Unit, inclusive of 1,001,552 Units sold to the underwriters on November 13, 2019 upon the underwriters' election to partially exercise their over-allotment option. Each Unit consists of one share of common stock and one-half of one warrant ("Public Warrant"). Each whole Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment (see Note 7). |
Stockholders' Equity |
6 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | ||||||||||||||||
| Equity [Abstract] | ||||||||||||||||
| STOCKHOLDERS' EQUITY | NOTE 7. 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 designation, rights and preferences as may be determined from time to time by the Company's board of directors. At December 31, 2019, there were no shares of preferred stock issued or outstanding.
Common Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. At December 31, 2019, there were 3,821,463 shares of common stock issued and outstanding, excluding 12,550,477 shares of common stock subject to possible redemption.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the IPO. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
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 Private Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable for cash or on a cashless basis, at the holder's option, and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. 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 common stock or equity-linked securities for capital raising purposes in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per share of 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, initial stockholders or their affiliates, without taking into account any Founder's Shares held by them prior to such issuance), (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 an initial Business Combination on the date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummated an initial 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 greater of (i) the Market Value or (ii) the price at which the Company issues the additional shares of common stock or equity-linked securities.
Representative Shares
In August 2019, the Company issued to EarlyBirdCapital and its designees the 120,000 Representative Shares (as adjusted for the stock dividend described above). The Company accounted for the Representative Shares as an offering cost of the IPO, with a corresponding credit to stockholder's equity. The Company estimated the fair value of Representative Shares to be $910 based upon the price of the Founder Shares issued to the Sponsor. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the IPO pursuant to Rule 5110(g)(1) of FINRA's NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the IPO except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners. |
Income Tax (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of deferred tax assets |
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| Schedule of income tax provision |
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| Schedule of Effective Income Tax Rate Reconciliation |
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Summary of Significant Accounting Policies (Details Textual) |
Dec. 31, 2019
shares
|
|---|---|
| Summary of Significant Accounting Policies (Textual) | |
| Warrants to purchase shares of common stock, shares | 10,451,087 |
Commitments (Details) |
6 Months Ended |
|---|---|
|
Dec. 31, 2019
USD ($)
| |
| Commitments (Textual) | |
| Gross proceeds, percentage | 3.50% |
| Underwriters Agreement [Member] | |
| Commitments (Textual) | |
| Business combination, description | The Company granted the underwriters a 45-day to purchase up to 1,800,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On November 13, 2019, the underwriters partially exercised their over-allotment option to purchase an additional 1,001,552 Units at $10.00 per Unit, leaving 798,448 Units available for a purchase price of $10.00 per Unit. |
| Aggregate amount of purchased value | $ 4,550,543 |
| FINRA [Members] | |
| Commitments (Textual) | |
| Gross proceeds, percentage | 30.00% |