The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Note 1 — Description of Organization and Business Operations
Greenrose Acquisition Corp. (the “Company”)
was incorporated in Delaware on August 26, 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 September 30, 2020, the Company
had not commenced any operations. All activity through September 30, 2020 relates to the Company’s formation, the
initial public offering (“Initial Public Offering”), which is described below, and identifying a target company
or companies 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 Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on February 10, 2020. On February 13, 2020, the Company consummated the Initial
Public Offering of 15,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units
sold, the “Public Shares”), generating gross proceeds of $150,000,000, which is described in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 300,000 units (the “Private Units”) and 1,500,000 warrants
(the “Private Warrants” and, together with the Private Units, the “Private Securities”) at a price of $10.00
per Private Unit and $1.00 per Private Warrant in a private placement to Greenrose Associates LLC (the “Sponsor”) and
Imperial Capital, LLC (“Imperial”), generating gross proceeds of $4,500,000, which is described in Note 4.
Following the closing of the Initial Public
Offering on February 13, 2020, an amount of $150,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Private Securities was placed in a trust account (the “Trust Account”)
located in the United States, which will be only invested in U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 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 or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described
below.
On February 14, 2020, the underwriters
notified the Company of their intention to exercise their over-allotment option in full. As such, on February 14, 2020, the Company
consummated the sale of an additional 2,250,000 Units, at $10.00 per Unit, and the sale of an additional 30,000 Private Units,
at $10.00 per Private Unit, and 150,000 Private Warrants, at $1.00 per Private Warrant, generating total gross proceeds of $22,950,000.
A total of $22,500,000 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust
Account to $172,500,000.
Transaction costs amounted to $4,419,274
consisting of $3,450,000 of underwriting fees and $969,274 of other offering costs. In addition, at September 30,2020, cash of
$769,251 was held outside of the Trust Account and is available for working capital purposes.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Securities, 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 (excluding
taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination.
The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act.
The Company will provide its holders of
the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval
of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($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 franchise and income tax obligations. There will be no redemption rights upon the completion of a Business Combination with
respect to the Company’s warrants.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and,
if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a
stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal
reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission
(“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder
approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to
the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s
Sponsor and Imperial have agreed to vote their Founder’s Shares (as defined in Note 5), Private Shares (as defined in Note
4), and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination and
not to convert any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company
in a tender offer in connection with 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.
The Sponsor and Imperial have agreed (a)
to waive their redemption rights with respect to their Founder’s Shares, Private Shares and Public Shares held by it in connection
with the completion of a Business Combination, (b) to waive their rights to liquidating distributions from the Trust Account with
respect to the Founder’s Shares and Private 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 or sell their shares to the Company 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 August 13,
2021 (subject to its right to extend the period of time to consummate a Business Combination for up to an additional three months
if the Sponsor agrees to deposit $569,250 in the Trust Account for each one month extension) to complete 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 to pay franchise and income taxes, 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, 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 Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against
a third party, none of the Company’s officers or directors, the Sponsor, Imperial or their respective officers, directors,
shareholder or members (collectively, the “Insiders”) will be responsible to the extent of any liability for such third
party claims. The Company will seek to reduce the possibility that the Insiders will have to indemnify the Trust Account due to
claims of creditors by endeavoring to have all vendors, service providers, 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.
Note 2 — Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the
SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they
do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations,
or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments,
consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results
and cash flows for the periods presented.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019
as filed with the SEC on March 30, 2020, which contains the audited financial statements and notes thereto. The interim results
for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year
ending December 31, 2020 or for any future interim periods.
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)(l) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed 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.
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 September 30, 2020 and December 31, 2019.
Marketable Securities Held in Trust
Account
At September 30, 2020, substantially all
of the assets held in the Trust Account were held in money market funds which invest U.S. Treasury securities.
Common Stock Subject to Possible
Redemption
The Company accounts for its common stock
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability
instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption
rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely
within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented
at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance
sheets.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
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 statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax
expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2020 and
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.
On March 27, 2020, President Trump signed
the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant
business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL)
and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss
rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest
limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and
Jobs Act tax provisions.
Net Loss Per Common Share
Net loss per share is computed by dividing
net loss by the weighted average number of shares of common stock outstanding during the period. At September 30, 2019, weighted
average shares were reduced for the effect of an aggregate of 562,500 shares of common stock that were subject to forfeiture if
the over-allotment option was not exercised in full or in part by the underwriters. The Company applies the two-class method in
calculating earnings per share. Shares of common stock subject to possible redemption at September 30, 2020, which are not currently
redeemable and are not redeemable at fair value, have 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. The Company has not considered
the effect of warrants sold in the Initial Public Offering and the private placement to purchase 19,230,000 shares of common stock
in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events.
As a result, diluted net loss per common share is the same as basic net loss per common share for the period presented.
Reconciliation of Net Loss per Common
Share
The Company’s net (loss) 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 or losses of the Company. Accordingly, basic and diluted loss per common
share is calculated as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
For the Period from
August 26,
2019 (Inception) Through
September 30,
|
|
|
|
2020
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
|
|
$
|
(341,347
|
)
|
|
$
|
131,386
|
|
|
$
|
1,623
|
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
(4,244
|
)
|
|
|
(908,054
|
)
|
|
|
—
|
|
Adjusted net loss
|
|
$
|
(345,591
|
)
|
|
$
|
(776,668
|
)
|
|
$
|
(1,623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
5,131,227
|
|
|
|
4,984,555
|
|
|
|
3,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.00
|
)
|
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
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. 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 Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
Note 3 — Public Offering
Pursuant to the Initial Public Offering,
the Company sold 17,250,000 Units, which includes a full exercise by the underwriters of their over-allotment option in the amount
of 2,250,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of common stock and one warrant (“Public
Warrant”). Each 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
Initial Public Offering, the Sponsor and Imperial purchased an aggregate of 300,000 Private Units at a price of $10.00 per Private
Unit and 1,500,000 Private Warrants at a price of $1.00 per Private Warrant, for an aggregate purchase price of $4,500,000.
The Sponsor purchased 200,000 Private Units and 1,000,000 Private Warrants and Imperial purchased 100,000 Private Units and 500,000
Private Warrants. As a result of the underwriters’ election to fully exercise their over-allotment option on February 14,
2020, the Sponsor and Imperial purchased an additional 30,000 Private Units, at a purchase price of $10.00 per Private Unit, and
150,000 Private Warrants, at a purchase price of $1.00 per Private Warrant, for an aggregate purchase price of $450,000. Each Private
Unit consists of one share of common stock (“Private Share”) and one warrant. Each Private Warrant is exercisable to
purchase one share of common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7). The proceeds
from the Private Securities were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company
does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Securities will
be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Shares will
expire worthless.
Note 5 — Related Party Transactions
Founder’s Shares
In August 2019, the Sponsor purchased 4,312,500
shares (the “Founder’s Shares”) of the Company’s common stock for an aggregate price of $25,000. The Founder’s
Shares included an aggregate of up to 562,500 shares subject to forfeiture by the Sponsor to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the Sponsor would collectively own 20% of the Company’s issued
and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the Initial
Public Offering and excluding the Private Shares underlying the Private Securities). On February 14, 2020, as a result of the underwriters’
election to fully exercise their over-allotment option, 562,500 Founder’s Shares are no longer subject to forfeiture.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Sponsor has agreed that, subject to
certain limited exceptions, it will not transfer, assign or sell any of the Founder’s Shares until (i) with respect to 50%
of the Founder’s Shares, for a period ending on the earlier of the one-year anniversary of the date of the consummation of
the Business Combination and the date on which the closing price of the Company’s 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 a 30-trading
day period following the consummation of the Business Combination and (ii) with respect to the remaining 50% of the Founder’s
Shares, for a period ending on the one-year anniversary of the date of the consummation of the Business Combination, or earlier
if, subsequent to the Business Combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction
which results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other
property. The limited exceptions include transfers, assignments or sales (i) to the Company’s or Sponsor’s officers,
directors, consultants or their affiliates, (ii) to an entity’s members upon its liquidation, (iii) to relatives and trusts
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 the Company for no value for cancellation in connection with the consummation of a 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 the Company’s prior consent) where the transferee
agrees to the terms of the escrow agreement and to be bound by these transfer restrictions.
In addition, the Sponsor has agreed not
to sell, transfer, pledge, hypothecate or otherwise dispose of all or any part of the Founder’s Shares unless, prior to (a)
a registration statement on the appropriate form under the Securities Act and applicable state securities laws with respect to
the Founder’s Shares proposed to be transferred shall then be effective or (b) the Company has received an opinion from counsel
reasonably satisfactory to the Company, that such registration is not required because such transaction is exempt from registration
under the Securities Act and the rules promulgated by the SEC thereunder and with all applicable state securities laws.
Advances — Related Party
As of December 31, 2019, the Sponsor had
advanced an aggregate of $631,366 on the Company’s behalf to cover certain expenses (the “Advances”). An additional
$164,753 was advanced as of February 2020. The Advances were non-interest bearing and due on demand. Total advances of $796,119
were repaid on March 9, 2020.
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 $2,000,000 of the Working Capital Loans may be convertible into units at
a price of $10.00 per unit and/or warrants at a price of $1.00 per warrant. The units would be identical to the Private Units and
the warrants would be identical to the Private Warrants.
On March 26, 2020, the Company issued an
unsecured promissory note (the “Note”) in the principal amount of $1,000,000 to the Sponsor. The Note is non-interest
bearing and payable upon the consummation of a Business Combination. Up to $1,000,000 of such loans may be convertible into units
at a price of $10.00 per unit and/or warrants at a price of $1.00 per warrant. The units would be identical to the Private Units
and the warrants would be identical to the Private Warrants.
Administrative Support Agreement
The Company entered into an agreement whereby,
commencing on the February 10, 2020, through the earlier of the Company’s consummation of a Business Combination and its
liquidation, the Company will pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative
support. For the three and nine months ended September 30, 2020, the Company incurred and paid $30,000 and $80,000, respectively,
in fees for these services.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Note 6 — Commitments
Registration Rights
Pursuant to a registration rights agreement
entered into on February 11, 2020, the holders of the Founder’s Shares, Private Units, Private Warrants, and any units or
warrants that may be issued upon conversion 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’s Shares can elect to exercise these registration rights at any time commencing
three months prior to the date on which the Founder’s Shares are to be released from escrow. The holders of a majority of
the Private Units or units 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, Imperial may only make a demand on one occasion and only during the five-year period beginning on the
effective date of the Initial Public Offering. 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
Imperial may participate in a “piggy-back” registration only during the seven-year period beginning on the effective
date of the Initial Public Offering. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The Initial Public Offering
underwriting agreement provides that in the event the Company completes a financing transaction similar to the Initial Public
Offering or Business Combination, or enters into a statement or letter of intent that results in such a transaction, within
18 months following its termination, Imperial shall be entitled to receive any expense reimbursement due to it along with
payment in full of its applicable fee of either (i) 2% of the gross proceeds of the offering, of which 1% will be in cash and
1% will be in equity of the Company for a financing transaction, or (ii) an amount equal to 5% of the face amount of any
equity securities and 3% of the face amount of any debt sold or arranged as part of the Business Combination (exclusive of
any applicable finders’ fees which might become payable). Additionally, Imperial has the right to act as a book-runner
and managing underwriter for all underwritten follow-on offerings for 18 months following completion of the Initial Public
Offering and the right to approve any co-lead managing underwriter or co-book runner.
Business Combination Marketing Agreement
The Company has engaged Imperial as an
advisor in connection with a Business Combination to assist the Company in holding meetings with its shareholders 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
shareholder 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 Imperial a cash fee for such services upon the consummation of a Business Combination
in an amount equal to 4.5% of the gross proceeds of Initial Public Offering, or $7,762,500 (exclusive of any applicable finders’
fees which might become payable); provided that up to 20% 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.
Additionally, the Company has agreed to
pay Imperial a cash fee for assisting it in obtaining financing for the Business Combination in an amount equal to 5% of the face
amount of any equity securities and 3% of the face amount of any debt sold or arranged as part of the Business Combination (exclusive
of any applicable finders’ fees which might become payable).
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Note 7 — Stockholders’ Equity
Preferred Stock — On February
10, 2020, the Company amended its certificate of incorporation such that the Company is authorized to issue up to 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 September 30, 2020 and December 31, 2019, there were no shares of preferred
stock issued or outstanding.
Common Stock — On February
10, 2020, the Company amended its certificate of incorporation such that the Company is authorized to issue up to 70,000,000 shares
of common stock with a par value of $0.0001 per share. Holders of the common stock are entitled to one vote for each share. At
September 30, 2020 and December 31, 2019, there were 5,167,714 and 4,312,500 shares of common stock issued and outstanding, excluding
16,724,786 and no shares of common stock subject to possible redemption, respectively.
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 Initial Public Offering. 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:
|
●
|
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 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 Initial Public Offering, 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 $9.50 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 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 consummates an initial Business Combination
(such price, the “Market Value”) is below $9.50 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.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Note 8 — 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 September 30, 2020, and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
|
September 30,
2020
|
|
Assets:
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
|
$
|
173,652,225
|
|
Note 9 — Subsequent Events
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the condensed 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 condensed financial statements.