The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(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”).
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.
On March 12, 2021, the Company
entered into definitive agreements to acquire four cannabis companies. The companies are Shango Holdings Inc. (Shango), Futureworks LLC
(d/b/a The Health Center), Theraplant, LLC, and True Harvest, LLC. As part of the acquisition, the company formed wholly owned subsidiaries
to effect the business combinations: i) GNRS NV Merger Sub, Inc., a Nevada corporation on March 10, 2021, ii) GNRS CT Merger Sub, LLC,
a Connecticut limited liability company on March 5, 2021, iii) Futureworks Holdings, Inc. a Delaware corporation on March 11, 2021, and
iv) True Harvest Holdings, Inc., a Delaware corporation on March 10, 2021.
As of June 30, 2021, the
Company had not commenced any operations. All activity through June 30, 2021 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 assets held in the Trust Account,
interest expense from the amortization of the debt discount on our promissory note and recognizes changes in the fair value of derivative
liabilities as other income (expense).
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.
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.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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 of (ii) and (iii) above) 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. See note 9 for details regarding extension of the
business combination and amendments to business combination agreements.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Liquidity and Going Concern
As of June 30, 2021, the
Company had cash of $253,115 held outside of the Trust Account, total current liabilities of $1,481,989 which excludes franchise taxes
payable of $50,000, of which such amount will be paid from interest earned on the Trust Account. For the six months ended June 30, 2021,
we incurred a net loss of $2,133,329 and used $1,569,414 cash from operating activities.
Until the consummation of
a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition
candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to
acquire, and structuring, negotiating and consummating the Business Combination.
The Company will need to
raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties.
The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any
time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly,
the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to
take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending
the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will
be available on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern through September 13, 2021, the date that the Company will be required to cease all operations, except for the
purpose of winding up, if a Business Combination is not consummated. These financial statements do not include any adjustments relating
to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to
continue as a going concern. See note 9 for details regarding extension of the business combination and additional financing.
The accompanying condensed
consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The accompanying condensed consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities
that may result from the outcome of the uncertainty related to our ability to continue as a going concern.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Note 2 — Summary of Significant Accounting
Policies
Basis of Presentation and Consolidation
The accompanying unaudited
condensed consolidated 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. We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions
and account balances have been eliminated in consolidation. Certain information or footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed consolidated or omitted, pursuant to the rules and regulations of the
SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of
the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the
year ended December 31, 2020 as filed with the SEC on May 27, 2021, which contains the audited financial statements and notes thereto.
The Company restated the condensed consolidated financial statements for the period ended March 31, 2020 and for the year ended December
31, 2020 in its previously filed Form 10-K. The interim results for the three and six months ended June 30, 2021 are not necessarily indicative
of the results to be expected for the year ending December 31, 2021 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
consolidated 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.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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 June 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At June 30, 2021 and December
31, 2020, substantially all of the assets held in the Trust Account were held in money market funds which are invested in U.S. Treasury
securities.
Derivative Liabilities
The Company accounts for
warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms
and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).
The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including
whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require
“net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.
This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the instruments are outstanding.
For issued or modified instruments
that meet all of the criteria for equity classification, the instruments are required to be recorded as a component of additional paid-in
capital at the time of issuance. For issued or modified instruments that do not meet all the criteria for equity classification, the instruments
are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the instruments are recognized as a non-cash gain or loss on the statements of operations. The fair value of the
instruments was estimated using a Black-Scholes model.
Common Stock Subject to Possible Redemption
The Company accounts for
its common stock subject to possible redemption in accordance with the guidance in 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 consolidated balance sheets.
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.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
ASC 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2021 and December 31, 2020. The
Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from
its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company’s currently
taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally
considered start-up costs and are not currently deductible. During the three months and six months ended June 30, 2021, the Company recorded
no income tax expense.
Net Income (Loss) Per Common Share
Net income (loss) per share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The Company applies
the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at June 30, 2021, 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 inclusion of such warrants would be anti-dilutive. There were no dilutive securities
for the period ended June 30, 2021 or December 31, 2020. These amounts are not included in the computation of dilutive loss per share
because their impact is antidilutive.
Reconciliation of Net Income (Loss) per
Common Share
The Company’s net income
(loss) 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
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
As Restated
|
|
|
2021
|
|
|
2020
As Restated
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
4,325
|
|
|
|
43,276
|
|
|
|
8,606
|
|
|
|
1,147,848
|
|
Less: interest available to be withdrawn for payment of taxes
|
|
|
(4,325
|
)
|
|
|
—
|
|
|
|
(8,606
|
)
|
|
|
(237,639
|
)
|
Net income
|
|
$
|
—
|
|
|
$
|
43,276
|
|
|
$
|
—
|
|
|
$
|
910,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
16,337,862
|
|
|
|
10,328,183
|
|
|
|
16,375,933
|
|
|
|
10,332,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Net (loss) income minus Net (loss) Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,348,378
|
)
|
|
$
|
561,389
|
|
|
$
|
(2,133,329
|
)
|
|
$
|
1,691,643
|
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
—
|
|
|
|
(43,276
|
)
|
|
|
—
|
|
|
|
(910,209
|
)
|
Non-redeemable net income (loss)
|
|
$
|
(1,348,378
|
)
|
|
$
|
518,113
|
|
|
$
|
(2,133,329
|
)
|
|
$
|
781,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common Stock
|
|
|
5,554,638
|
|
|
|
5,197,872
|
|
|
|
5,516,567
|
|
|
|
4,991,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss) income per common share
|
|
$
|
(0.24
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.39
|
)
|
|
$
|
0.16
|
|
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(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.
Recent Accounting Standards
In August 2020, the
FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity
contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain
areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted.
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 consolidated 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.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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, 2020,
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.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
On March 26, 2020, the Company
issued an unsecured promissory note (the “2020 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.
On January 29, 2021, the
Company issued an unsecured promissory note (the “2021 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.
The Company assessed the
provisions of the convertible promissory note under ASC 815-15. The derivative component of the obligation is initially valued and classified
as a derivative liability with an offset to a discount on the promissory note. The discount will be amortized over the life of the Note.
For the three and six months ended June 30, 2021, $552,973 and $1,039,311, respectively, were included within interest expense. To calculate
the value of the embedded derivative we utilized a “with” and “without” approach. In the “with” scenario
we valued the convertible promissory notes using a Black-Scholes model as it was determined that on a business combination, a holder would
likely convert into private warrants, which were themselves valued using a Black-Scholes model and are considered to be a Level 3 fair
value measurement (see Note 8). In the “without” scenario, we valued the repayment of the notional value of the convertible
promissory note using a risk-adjusted discounted cash flow model. The primary unobservable inputs utilized in determining the fair value
of the conversion option are volatility and credit spread.
For the 2021 Note, the assumptions
used to value the conversion option were consistent with those utilized in the Company’s Black-Scholes valuation for private warrants
and are detailed below:
|
|
January 29,
2021
|
|
|
June 30,
2021(2)
|
|
Expected volatility (%)
|
|
|
17.5
|
%
|
|
|
12.2
|
%
|
Risk-free interest rate (%)
|
|
|
0.54
|
%
|
|
|
0.90
|
%
|
Expected dividend yield (%)
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Contractual term (years)
|
|
|
0.5
|
|
|
|
0.17
|
|
Conversion price(1)
|
|
|
((1)
|
)
|
|
|
((1)
|
)
|
Underlying share price
|
|
|
10.28
|
|
|
|
9.99
|
|
Convertible notes amount
|
|
$
|
1,000,000
|
|
|
$
|
2,000,000
|
|
Fair value of the conversion feature (3)
|
|
$
|
1,087,401
|
|
|
$
|
1,163,000
|
|
(1)
|
The conversion price is $10.00 per unit and/or $1.00 per warrant
|
(2)
|
June 30, 2021 reflects the inputs for the fair value assumptions for the 2020 Note, 2021 Note, and private warrants
|
(3)
|
The fair value adjustments for both the 2020 Note and 2021 Note are included in the June 30, 2021 column
|
The following table presents the change
in the fair value of conversion option:
|
|
2020 Note
|
|
|
2021 Note
|
|
Fair value as of January 1, 2020
|
|
$
|
-
|
|
|
$
|
-
|
|
Initial measurement on March 26, 2020
|
|
|
492,165
|
|
|
|
-
|
|
Change in valuation inputs and other assumptions
|
|
|
320,721
|
|
|
|
-
|
|
Fair value as of December 31, 2020
|
|
$
|
812,886
|
|
|
$
|
-
|
|
Initial measurement on January 29, 2021
|
|
|
|
|
|
|
1,087,401
|
|
Change in valuation inputs and other assumptions
|
|
|
(231,385
|
)
|
|
|
(505,901
|
)
|
Fair value as of June 30, 2021
|
|
$
|
581,500
|
|
|
$
|
581,500
|
|
Administrative Support Agreement
The Company entered into
an agreement whereby, commencing on 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 months ended June 30, 2021 and 2020, the Company incurred and paid $30,000 in fees for these services. For the
six months ended June 30, 2021 and 2020, the Company incurred and paid $60,000 in fees for these services.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(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 CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(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 June 30, 2021 and December 31, 2020, 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
June 30, 2021 and December 31, 2020, there were 5,670,615 and 5,478,072 shares of common stock issued and outstanding, excluding 16,221,885
and 16,414,428 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 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 CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(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 and liabilities that are measured at fair value on a recurring basis at June 30, 2021, and
indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
June 30,
2021
|
|
Assets:
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
173,402,529
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Private warrants liability
|
|
2
|
|
$
|
1,445,400
|
|
Convertible component of convertible promissory note
|
|
3
|
|
$
|
1,163,000
|
|
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 private placement warrants
and the convertible component of the convertible promissory note (collectively, the “Derivative Instruments”) were accounted
for as liabilities in accordance with ASC 815-40 and are presented within the private warrant liabilities and convertible promissory note,
net – related party on our condensed consolidated balance sheets. The instruments are measured at fair value at inception and on
a recurring basis, with changes in fair value presented within Change in fair value of private warrant liabilities and Change in fair
value of Convertible promissory note, net – related party in the condensed consolidated statements of operations.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Initial Measurement
The Company established the
initial fair value for the warrants on February 13, 2020, the date of the Company’s Initial Public Offering, using a Black-Scholes
model for the private warrants. The Company allocated the proceeds received from the sale of private warrants first to the warrants based
on their fair values as determined at initial measurement, with the remaining proceeds allocated to common stock subject to possible redemption
and common stock based on their relative fair values at the initial measurement date. The warrants were classified as Level 3 at the initial
measurement date due to the use of unobservable inputs, and they move to a Level 2 when the public warrants begin trading separately on
May 11, 2020.
Subsequent Measurement
The private warrants are
measured at fair value on a recurring basis. As of March 31, 2020, the private warrants are classified as Level 2 due to the use of an
observable market quote in an active market.
As of June 30, 2021, the
aggregate values of the private warrants and the convertible component of convertible promissory note were $1,445,400 and $1,163,000,
respectively. The fair value assumptions are included in Note 5.
The following tables present
the changes in the fair value of private warrants and the convertible component of Convertible promissory note:
|
|
Private
Warrants
|
|
Fair value as of December 31, 2020
|
|
$
|
1,980,000
|
|
Change in fair value
|
|
|
(534,600
|
)
|
Fair value as of June 30, 2021
|
|
$
|
1,445,400
|
|
|
|
Convertible
Components
|
|
Fair value as of December 31, 2020
|
|
$
|
812,886
|
|
Convertible Components issued in 2021
|
|
|
1,087,401
|
|
Change in fair value
|
|
|
(737,287
|
)
|
Fair value as of June 30, 2021
|
|
$
|
1,163,000
|
|
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Note 9 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed consolidated financial
statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that
would have required adjustment or disclosure in the unaudited condensed financial statements.
True Harvest
On July 2, 2021, the Company
entered into an amendment (the “True Harvest Amendment No.1”) to the True Harvest Holdings, Inc. Asset Purchase Agreement,
dated as of March 12, 2021. Pursuant to True Harvest Amendment No. 1, the table in Section 1.05(c) of the Purchase Agreement was deleted
and replaced with the following table:
36 Month Price Point
|
Percentage of Earnout
|
|
Flower Production - average price
|
0%
|
|
<$2,199
|
20%
|
|
$2,200-$2,199
|
50%
|
|
$2,200-$2,499
|
80%
|
|
$2,500-$2,799
|
100%
|
|
$2,800+
|
In addition, pursuant to
the True Harvest Amendment No. 1, a new Section 1.05.1 Hurdle Amount is added to the Purchase Agreement, whereby the purchase price of
True Harvest would be adjusted by the addition of (i) up to a maximum of four million seven hundred thousand dollars ($4,700,000) added
to the principal amount of the secured note to be issued at closing and (ii) up to a maximum of one million four hundred thousand dollars
($1,400,000) of additional debt to be assumed by the Buyer at closing, in each case, subject to True Harvest achieving certain revenue
targets, as well as True Harvest having constructed eight grow rooms in a condition ready to accept plants for grow prior to closing,
in each case as set forth in the True Harvest Amendment No. 1. Also in addition, pursuant to the True Harvest Amendment No. 1, the “drop
dead” date for closing was amended to be November 30, 2021.
Theraplant
On August 10, 2021, the Company
entered into an amendment (the “Theraplant Amendment No.1”) to the Agreement and Plan of Merger dated as of March 12, 2021,
by and among the Company, GNRS CT Merger Sub, LLC, Theraplant and Shareholder Representative Services LLC (the “Merger Agreement”).
Pursuant to the Theraplant
Amendment No. 1, the purchase price of Theraplant would be adjusted by the addition of the issuance registered shares of the Company’s
common stock, par value $10.00 per share, in the aggregate amount of Fifty Million Dollars ($50,000,000). Theraplant’s selling shareholders
will receive customary registration rights in connection with the issuance of shares of the Company’s common stock as part of the
merger consideration. Also in addition, pursuant to the Theraplant Amendment No. 1, the “drop dead” date for closing was amended
to be November 30, 2021.
The Theraplant Amendment
No.1 also provides that the Company shall bear (i) 50% of all documented accounting transaction expenses incurred by Theraplant in connection
with the auditor review of the Theraplant’s 2021 first quarter financial statements and (ii) all documented legal, accounting and
other transaction expenses of Theraplant incurred in connection with the Merger from and after the date of the Theraplant Amendment No.
1.
Extension of Business Combination
On August 8, 2021, the Sponsor
provided notification to Continental Stock Transfer & Trust Company that it was exercising its option to extend the time available
in order to consummate a Business Combination with the target businesses to September 13, 2021 and by depositing $569,250 into the Trust
Account. The Sponsor has the right to exercise its right to extend the time available to consummate a Business Combination for up to two
additional months.
GREENROSE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Senior Secured Loan
On July 30, 2021, the Company
entered into a commitment letter (the “Commitment Letter”) with SunStream Bancorp Inc. (“Sunstream”), pursuant
to which Sunstream committed to provide, subject to the satisfaction of customary closing conditions stipulated in the Commitment Letter,
a multi-tranche senior secured loan (the “Loan”) to the Company. The proceeds of the Loan are expected to be used (i) to consummate
one or more of the Company’s previously announced Business Combinations and (ii) for general working capital purposes.
The Loan consists of $78.1
million of loan principal including an initial tranche of $52.1 million (“Tranche I”) on the closing date of the Loan and
second tranche of $26.0 million (“Tranche II”) available prior to the 12-month anniversary of the closing date of the Loan,
in each case.
The Loan will be collateralized
by a senior secured first-priority lien over all of the assets of the Company and its subsidiaries, subject to to-be-agreed upon carve-outs
and exceptions. The Loan matures 48 months following the closing date of the Loan and has an interest rate, payable monthly, of 11.9%
per annum on the outstanding principal. The Loan amortizes at a rate of 15.0% of outstanding principal per annum, beginning on the 24-month
anniversary of the closing date of the Loan.
Tranche I of the Loan is
prepayable, at Greenrose’s option, prior to the 36-month anniversary of the closing of the loan, subject to certain fees. In addition,
Tranche II of the Loan is prepayable, at the Company’s option, prior to the 36-month anniversary of the Tranche II drawdown date,
subject to certain fees.
The Company has also agreed
to pay to Sunstream certain additional fees customary to transactions of this type.
In connection with the Loan
commitments, Sunstream will be issued warrants with a five-year term to acquire additional shares of common stock of Greenrose with terms
substantially similar to the warrants issued to the Company’s sponsors in connection with the initial public offering of the Company.
In addition, the Loan will
be subject to the Company’s compliance with certain on-going financial covenants customary to other senior secured loans of this
type, as will be negotiated by Sunstream and the Company in the course of ongoing due diligence by Sunstream prior to funding of the Loan.
In connection with the Commitment
Letter, the Company and Sunstream have agreed to deal exclusively with one another until the earlier of September 30, 2021 or the closing
of one or more of the Company’s previously announced Business Combinations with respect to any financing proposals similar to the
financings contemplated by the Loan commitments.
Tranche I of the Loan is
anticipated to close substantially simultaneously with the consummation of one or more of the Company’s previously announced Business
Combinations.