NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 1—Description
of Organization and Business Operations
Organization and General
7GC & Co. Holdings,
Inc. (the “Company”) was incorporated as a Delaware corporation on September 18, 2020. The Company was formed for the purpose
of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination
with one or more businesses (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.
As of March 31, 2021,
the Company has not commenced any operations. All activity for the period from September 18, 2020 (inception) through March 31, 2021 has
been related to the Company’s formation and the initial public offering (“Initial Public Offering”) described below,
and since the offering, the search for a prospective Initial Business Combination. The Company will not generate any operating revenue
until after the completion of its Initial Business Combination, at the earliest. The Company generates non-operating income in the form
of income earned on investments on cash and cash equivalents in the Trust Account (as defined below) and is subject to non-cash fluctuations
for changes in the fair value of derivative warrant liabilities in its unaudited condensed statement of operations. The Company has selected
December 31 as its fiscal year end.
Sponsor and Financing
The Company’s sponsor
is 7GC & Co. Holdings LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on December 22, 2020. On December 28, 2020, the Company consummated its Initial Public
Offering of 23,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered,
the “Public Shares”), including 3,000,000 additional Units to cover over-allotments (the “Over-Allotment Units”),
at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $13.2 million, of which
approximately $8.1 million was for deferred underwriting commissions (Note 5).
Simultaneously with the
closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 7,350,000 warrants
(each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per
Private Placement Warrant to the Sponsor, generating proceeds of approximately $7.4 million (Note 4).
Trust Account
Upon the closing of the
Initial Public Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering
and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”) in the United States,
with Continental Stock Transfer & Trust Company acting as trustee, and invested in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any money market funds meeting
certain conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest
only in direct U.S, government treasury obligations until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution
of the funds in the Trust Account to the Company’s stockholders, as described below.
Initial Business Combination
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market
value equal to at least 80% of the balance in the Trust Account (excluding the deferred underwriting commissions and taxes payable on
income earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will
only complete a Business Combination if the post-Business Combination 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. There is no assurance that the Company will be able to successfully effect a Business Combination.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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 stockholders meeting called to approve
the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek
stockholder approval of a Business Combination at a meeting called for such purpose at which public stockholders may seek to redeem their
shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only
if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination
and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s
Amended and Restated Certificate of Incorporation provides that, a Public Stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to
15% or more of the Public Shares without the Company’s prior written consent.
The Public Stockholders
will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus
any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The per-share amount to be distributed to Public Stockholders who redeem their shares will not be reduced by the deferred underwriting
commissions the Company will pay to the representative of the underwriters (as discussed in Note 5). There will be no redemption rights
upon the completion of a Business Combination with respect to the Company’s warrants. These shares of Class A common stock are recorded
at a redemption value and classified as temporary equity, in accordance with Accounting Standards Codification (“ASC”) Topic
480 “Distinguishing Liabilities from Equity.”
If a stockholder vote
is not required 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, offer such redemption pursuant to the tender offer rules of the Securities and
Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same information as would be
included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor
has agreed (a) to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering
in favor of a Business Combination, (b) not to propose an amendment to the Company’s amended and restated certificate of incorporation
with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the
Company provides dissenting Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment;
(c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the
right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares
in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith)
or a vote to amend the provisions of the amended and restated certificate of incorporation relating to stockholders’ rights of pre-Business
Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate
in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to
liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering
if the Company fails to complete its Business Combination.
If the Company is unable
to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or December 28, 2022 (the “Combination
Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but no 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 taxes (less up to $100,000 of interest to pay dissolution expenses), 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation
and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirement
of applicable law. The representative of the underwriters has agreed to waive its rights to the deferred underwriting commission held
in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event,
such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares.
In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be
less than the Initial Public Offering price per Unit ($10.00).
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The Sponsor has agreed
that it will 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 entered into a written letter of intent, confidentiality or similar agreement
or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share
and (ii) the actual amount per public share held in the Trust Account as of the day of liquidation of the Trust Account, if less than
$10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to
any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account
(whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of
the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). However, we have not asked the Sponsor to reserve for such indemnification obligations, nor have we independently verified
whether the Sponsor has sufficient funds to satisfy its indemnity obligations. None of the Company’s officers or directors will
indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Liquidity and Capital Resources
As of March 31, 2021,
the Company had approximately $1.5 million of cash in its operating account and working capital of approximately $1.8 million (excluding
tax obligations of approximately $106,000 that may be paid using investment income earned in Trust Account).
The Company’s liquidity
prior to the consummation of the Initial Public Offering were satisfied through a payment of $25,000 from the Sponsor to purchase Founder
Shares (as defined in Note 4), and loan proceeds from the Sponsor of $150,000 under the Note (Note 4). The Company repaid the Note in
full on December 28, 2020. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.
Based on the foregoing,
management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier
of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds
for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence
on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring,
negotiating and consummating the Business Combination.
Note 2—Summary
of Significant Accounting Policies
Basis
of Presentation
The accompanying unaudited
condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they
do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial
statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and
results for the period presented. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results
that may be expected through December 31, 2021.
The accompanying unaudited
condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form
10-K/A filed by the Company with the SEC on May 27, 2021.
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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that an emerging growth 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 an 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 unaudited condensed financial statements with another public company that is neither an emerging growth company nor an
emerging growth company that 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 unaudited
condensed financial statements in conformity with GAAP requires 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 unaudited condensed 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 unaudited condensed financial statements, which management considered in formulating its estimate, could
change in the near term due to one or more future confirming events. One of the most significant accounting estimates included in these
financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more
current information becomes available and accordingly the actual results could differ significantly from those estimates. Actual results
could differ from those estimates.
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 Corporation limit of $250,000, and any investments held in Trust Account. As of March 31,
2021, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks
on such accounts. The Company’s investments held in the Trust Account as of March 31, 2021 are comprised of investments in U.S.
Treasury securities with an original maturity of 185 days or less or investments in money market funds that comprise only U.S. treasury
securities money market funds.
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 had no
cash equivalents as of March 31, 2021 and December 31, 2020.
Investments
Held in the Trust Account
The Company’s portfolio of investments held
in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination
thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented
on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair
value of these securities is included in net gain from investments held in Trust Account in the accompanying unaudited condensed statement
of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Fair
Value of Financial Instruments
Fair value is defined
as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market
participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value.
The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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In some circumstances,
the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances,
the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant
to the fair value measurement.
As of March 31, 2021 and December 31, 2020, the
carrying values of cash, prepaid expenses, accounts payable, accrued expenses, and franchise tax payable approximate their fair values
due to the short-term nature of the instruments. The Company’s investments held in Trust Account are comprised of investments in
U.S. Treasury securities with an original maturity of 185 days or less or investments in a money market funds that comprise only U.S.
treasury securities and are recognized at fair value. The fair value of investments held in Trust Account is determined using quoted prices
in active markets.
The fair value of the Public Warrants issued in
connection with the Initial Public Offering and Private Placement Warrants were initially and subsequently measured at fair value using
a Monte Carlo simulation model.
Offering
Costs
Offering costs consist
of legal, accounting, underwriting fees and other costs directly related to the Initial Public Offering. Offering costs are allocated
to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with derivative warrant liabilities are expensed as incurred, presented as non-operating expenses
in the unaudited condensed statement of operations. Offering costs associated with the Public Shares were charged to stockholders’
equity upon the completion of the Initial Public Offering.
Derivative
Warrant Liabilities
The Company does not
use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial
instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The 11,500,000 Warrants
issued in connection with the Initial Public Offering (the “Public Warrants”) and the 7,350,000 Private Placement Warrants
are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as
liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement
at each unaudited condensed balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited
condensed statement of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement
Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement
Warrants have been estimated using a Monte Carlo simulation model at each measurement date. The fair value of Public Warrants issued in
connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. Derivative
warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current
assets or require the creation of current liabilities.
Class A
Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. The
Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control
and subject to occurrence of uncertain future events. Accordingly, as of March 31, 2021 and December 31, 2020, 20,427,285 and 19,322,943
shares of Class A common stock subject to possible redemption were presented as temporary equity, outside of the stockholders’ equity
section of the Company’s condensed balance sheets, respectively.
Net
Income Per Common Stock
Net income per common stock is computed by dividing
net income by the weighted average number of shares of common stock outstanding during the period. The Company has not considered the
effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 18,850,000 shares of the
Company’s common stock in the calculation of diluted income per share, since their inclusion would be anti-dilutive under the treasury
stock method. As a result, diluted earnings per share is the same as basic earnings per share for the periods presented.
The Company’s unaudited condensed statement
of operations includes a presentation of income per common stock subject to redemption in a manner similar to the two-class method of
income per share. Net income per common stock, basic and diluted for Class A common stock is calculated by dividing the investment
income earned on the Trust Account, net of taxes payable, for the three months ended March 31, 2021, by the weighted average number of
shares of Class A common stock outstanding for the period. Net income per common stock, basic and diluted for Class B common
stock for the three months ended March 31, 2021 is calculated by dividing the net income of approximately $11.0 million, less net income
attributable to Class A common stock of $0, resulting in a net income of approximately $11.0 million, by the weighted average number of
Class B common stock outstanding for the period.
Income
Taxes
The Company follows the asset and liability method
of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable
to differences between the unaudited condensed financial statement 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. As of March 31, 2021 and December 31, 2020, the Company had a deferred
tax asset of approximately $87,000 and approximately $299,000 respectively, each of which had a full valuation allowance recorded against
them.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The Company complies with the accounting and reporting
requirements of FASB ASC 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed for differences between the unaudited condensed financial statement
and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized. The Company does not currently have taxable income but will generate
taxable income in the future primarily consisting of interest income earned 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 ended March 31, 2021, the Company
did not incur income tax expense.
There were no unrecognized tax benefits as of
March 31, 2021. FASB 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. No amounts were accrued for the payment of interest and penalties as of March 31,
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 management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve
months.
Recent
Accounting Standards
In
August 2020, the FASB issued Accounting Standards Update (“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. The ASU also removes certain settlement conditions
that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s
financial position, results of operations or cash flows.
The Company’s management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
unaudited condensed financial statements.
Note 3—Initial
Public Offering
On December 28, 2020, the Company consummated
its Initial Public Offering of 23,000,000 Units, including 3,000,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds
of $230.0 million, and incurring offering costs of approximately $13.2 million, of which approximately $8.1 million was for deferred underwriting
commissions.
Each Unit consists of one share of Class A common
stock, and one-half of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase
one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
Note 4—Related
Party Transactions
Founder
Shares
On October 13, 2020, the Sponsor purchased 5,031,250
shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”) for an aggregate purchase
price of $25,000, or approximately $0.005 per share. On December 1, 2020, the Sponsor transferred 25,000 Founder Shares to each of the
Company’s four director nominees. In December 2020, the Company effected a stock dividend of approximately 0.143 shares for each
share of Class B common stock outstanding, resulting in an aggregate of 5,750,000 Founder Shares outstanding. Certain of the initial stockholders
then retransferred an aggregate of 14,286 shares back to the Sponsor. Of the 5,750,000 Founder Shares outstanding, up to 750,000 shares
were subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full, so that
the initial stockholders would own 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriters
exercised their over-allotment option in full on December 28, 2020; thus, the 750,000 Founder Shares were no longer subject to forfeiture.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The Company’s initial stockholders agreed
not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business
Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds
$12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days
within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company
completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders
having the right to exchange their shares of common stock for cash, securities or other property.
Private
Placement Warrants
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the Private Placement of 7,350,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant to the Sponsor, generating proceeds of approximately $7.4 million.
Each warrant is exercisable to purchase one share
of the Company’s Class A common stock at a price of $11.50 per share. Certain proceeds from the sale of the Private Placement Warrants
were added to the net 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 Placement Warrants will be used to fund the redemption
of the Public Shares (subject to the requirement of applicable law) and the Private Placement Warrants will expire worthless.
Promissory
Note - Related Party
On September 18, 2020, the Sponsor agreed to loan
the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the
“Note”). This loan was non-interest bearing and was due upon the completion of the Initial Public Offering. The Company borrowed
$150,000 under the Note and repaid the Note in full on December 28, 2020.
Related
Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans
would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest,
or, at the lenders’ discretion, up to $1.5 million of notes may be converted upon consummation of a Business Combination into additional
Private Placement Warrants at a price of $1.00 per Warrant. 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. As of March 31, 2021 and December 31, 2020, the Company had no borrowings under the Working
Capital Loans.
Administrative
Support Agreement
The Company agreed to pay $10,000 a month for
office space, utilities, and secretarial and administrative support to the Sponsor. Services commenced on the date the securities were
first listed on the Nasdaq and will terminate upon the earlier of the consummation by the Company of a Business Combination or the liquidation
of the Company.
Note 5—Commitments &
Contingencies
Registration
Rights
The holders of the Founder Shares, Private Placement
Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable
upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon
conversion of the Founder Shares) were entitled to registration rights pursuant to a registration rights agreement signed on the effective
date of the Initial Public Offering. The holders of these securities were entitled to make up to three demands, excluding short form demands,
that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to the consummation of a Business Combination. The registration rights agreement does not
contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The
Company will bear the expenses incurred in connection with the filing of any such registration statements.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Underwriting
Agreement
The Company granted the underwriters a 45-day
option to purchase up to 3,000,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting
discounts and commissions. The underwriters exercised their over-allotment option in full on December
28, 2020.
The underwriters were entitled to a cash underwriting
discount of 2.0% of the gross proceeds of the Initial Public Offering, or $4.6 million in the aggregate. In addition, the representative
of the underwriters is entitled to a deferred fee of 3.5% of the Initial Public Offering, or approximately $8.1 million. The deferred
fee will become payable to the representative of the underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Risks
and Uncertainties
Management continues to evaluate the impact of
the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect
on 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 unaudited condensed financial statements. The unaudited condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Note 6—Derivative
Warrant Liabilities
As of March 31, 2021 and December 31, 2020, the
Company had 11,500,000 and 7,350,000 Public Warrants and Private Placement Warrants outstanding, respectively.
The Public Warrants will become exercisable on
the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the closing of the Initial Public Offering,
provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A
common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders
to exercise their warrants on a cashless basis under certain circumstances). The Company has agreed that as soon as practicable, but in
no event later than 15 business days after the closing of the initial Business Combination, it will its best efforts to file with the
SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration
statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants
expire or are redeemed. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants
is not effective by the 60th business day after the closing of the initial Business Combination, the warrant holders may, until such time
as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration
statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
The warrants have an exercise price of $11.50
per share, subject to adjustments, and will expire five years from the consummation of a Business Combination or earlier upon redemption
or liquidation. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted
in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. In
addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes
in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share
of Class A 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 or its affiliates, without taking into account any Founder Shares held
by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (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
the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions),
and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the
trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”)
is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher
of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below will be adjusted (to
the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Additionally, in no event will the Company be
required to net cash settle the Public 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. 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 common shares issuable upon exercise of the Public Warrants may be adjusted
in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger
or consolidation. 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 respect to such warrants. Accordingly,
the warrants may expire worthless.
Once the Warrants become exercisable, the Company
may redeem the outstanding Warrants (except for the Private Placement Warrants):
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per Warrant;
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and
|
|
●
|
if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the Warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
The Company will not redeem the warrants unless
a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is
effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period,
except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities
Act. If and when the warrants become redeemable by the Company, it may not exercise its redemption right if the issuance of shares of
common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the
Company is unable to effect such registration or qualification.
The Private Placement Warrants will be identical
to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants will,
and the common shares issuable upon the exercise of the Private Placement Warrants will not, be transferable, assignable or salable until
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Note 7—Stockholders’
Equity
Preferred stock—The Company
is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of March 31, 2021 and December 31,
2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock—The Company
is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of March 31, 2021 and December
31, 2020, there were 23,000,000 shares of Class A common stock outstanding, including 20,427,285 shares and 19,322,943 shares of Class
A common stock subject to possible redemption that were classified as temporary equity in the accompanying unaudited condensed balance
sheet, respectively.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Class B Common Stock—The Company
is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of March 31, 2021 and December
31, 2020, there were 5,750,000 shares of Class B common stock outstanding with no shares subject to forfeiture.
Holders of the Company’s Class B common
stock are entitled to one vote for each share. The shares of Class B common stock will automatically convert into shares of Class A common
stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations,
recapitalizations and the like. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or
deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of the initial Business Combination,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,
in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion
of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection
with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the
initial Business Combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of
loans made to the Company).
Note 8—Fair Value Measurements
The following tables present information
about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicate the
fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
March 31, 2021
Description
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Other Unobservable Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account
|
|
$
|
230,005,861
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities – Public Warrants
|
|
$
|
8,740,000
|
|
|
$
|
-
|
|
|
$
|
|
|
Derivative warrant liabilities – Private Warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,659,500
|
|
December 31, 2020
Description
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Other Unobservable Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account
|
|
$
|
230,000,189
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities – Public Warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
15,640,000
|
|
Derivative warrant liabilities – Private Warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,216,500
|
|
Transfers to/from Levels
1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from
a Level 3 measurement to a Level 1 fair value measurement as of March 31, 2021, when the Public Warrants were separately listed and traded.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Level 1 instruments include
investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted
market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The fair value of Public
Warrants issued in connection with the Initial Public Offering have been measured based on the listed market price of such warrants, a
Level 1 measurement, since March 2021. For the three months ended March 31, 2021, the Company recognized a benefit to the unaudited condensed
statement of operations resulting from an decrease in the fair value of liabilities of approximately $11.5 million presented as change
in fair value of derivative warrant liabilities on the accompanying unaudited condensed statement of operations.
The estimated fair value
of the Private Placement Warrants and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs.
Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate
and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s
traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of
the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar
to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual
term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides
quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
|
|
As of
March 31,
2021
|
|
|
As of
December 31,
2020
|
|
Volatility
|
|
|
15.0
|
%
|
|
|
11.0
|
%
|
Stock price
|
|
$
|
9.89
|
|
|
$
|
9.87
|
|
Time to M&A
|
|
|
1 year
|
|
|
|
1 year
|
|
Risk-free rate
|
|
|
1.16
|
%
|
|
|
0.51
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The change in the fair
value of the derivative warrant liabilities for the period for the three months ended March 31, 2021 is summarized as follows:
|
|
Private Placement Warrants
|
|
|
Public Warrants
|
|
|
Warrant Liabilities
|
|
Derivative warrant liabilities at December 31, 2020
|
|
$
|
10,216,500
|
|
|
$
|
15,640,000
|
|
|
$
|
25,856,500
|
|
Change in fair value of derivative warrant liabilities
|
|
|
(4,557,000
|
)
|
|
|
(6,900,000
|
)
|
|
|
(11,457,000
|
)
|
Derivative warrant liabilities at March 31, 2021
|
|
$
|
5,659,500
|
|
|
$
|
8,740,000
|
|
|
$
|
14,399,500
|
|
Note 9—Subsequent
Events
The Company evaluated
subsequent events and transactions that occurred after the unaudited condensed balance sheet date up to the date that the unaudited condensed
financial statements were available to be issued, and determined that there have been no events that have occurred that would require
adjustments to the disclosures in the unaudited condensed financial statements.