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 June 30, 2021,
the Company has not commenced any operations. All activity for the period from September 18, 2020 (inception) through June 30, 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 held 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 statements 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.
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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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 Going Concern
As
of June 30, 2021, the Company had approximately $1.0 million of cash in its operating account and working capital of approximately $386,000
(excluding tax obligations of approximately $73,000 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.
The Company has incurred
and expects to incur significant costs in pursuit of its financing and acquisition plans which resulted in the Company’s accrued
expenses being greater than the cash balance in its operating account. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that the financial statements are issued. There is no assurance
that the Company’s plans to consummate a Business Combination or raise additional funds will be successful within the Combination
Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 periods presented. Operating results for the three and six months ended June 30, 2021 are not necessarily
indicative of the results that may be expected through December 31, 2021 or any future period.
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.
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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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 June 30, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 2020 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 June 30, 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 and generally
have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised
of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the
Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in
money market funds are presented on the 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 income on investments held in the Trust Account in the accompanying unaudited
condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available
market information.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair
Value Measurements,” equal or approximate the carrying amounts represented in the condensed balance sheets.
Fair
Value Measurements
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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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 consist of:
|
●
|
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets;
|
|
●
|
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
|
|
●
|
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.
|
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.
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 statements
of operations. Offering costs associated with the Public Shares were charged to stockholders’ equity upon the completion of the
Initial Public Offering. The Company classifies deferred underwriting commissions are non-current liabilities as their liquidation is
not reasonably expected to require the use of current assets or require the creation of current liabilities.
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 FASB ASC Topic 815, “Derivatives and Hedging” (“ASC
815”). 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.
The warrants issued in
connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative
liabilities in accordance with ASC 815. 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 statements 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. The determination of the fair value
of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could
differ significantly. 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 June 30, 2021 and December 31,
2020, 19,997,415 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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Net
Income (Loss) Per Common Stock
The
Company’s condensed statements of operations include a presentation of net income (loss) per share for Class A common stock subject
to possible redemption in a manner similar to the two-class method of net income (loss) per common stock. Net income (loss) per common
stock, basic and diluted, for Class A common stock is calculated by dividing the interest income earned on the Trust Account, less interest
available to be withdrawn for the payment of taxes, by the weighted average number of Class A common stock outstanding for the periods.
Net income (loss) per common stock, basic and diluted, for Class B common stock is calculated by dividing the net income (loss), adjusted
for income attributable to shares of Class A common stock, by the weighted average number of Class B common stock outstanding for the
periods. Class B common stock includes the Founder Shares as these shares of stock do not have any redemption features and do not participate
in the income earned on the Trust Account.
The calculation of diluted net income (loss)
per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private
Placement since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants
would be anti-dilutive as the exercise price of the warrants is in excess of the average ordinary share price for the period.
The
following table reflects the calculation of basic and diluted net income (loss) per share of common stock:
|
|
For the Three
Months Ended
June 30,
2021
|
|
|
For the Six
Months Ended
June 30,
2021
|
|
|
|
|
|
|
|
|
Class A common stock
|
|
|
|
|
|
|
Numerator: Income allocable to Class A common stock
|
|
|
|
|
|
|
Income from investments held in Trust Account
|
|
$
|
5,735
|
|
|
$
|
11,407
|
|
Less: Company’s portion available to be withdrawn to pay taxes
|
|
|
(5,735
|
)
|
|
|
(11,407
|
)
|
Net income attributable to Class A common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator: Weighted average Class A common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Class A common stock
|
|
|
23,000,000
|
|
|
|
23,000,000
|
|
Basic and diluted net income per share, Class A common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Class B common stock
|
|
|
|
|
|
|
|
|
Numerator: Net income (loss) minus net income allocable to Class A common stock
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,298,692
|
)
|
|
$
|
6,744,724
|
|
Net income allocable to Class A common stock
|
|
|
-
|
|
|
|
-
|
|
Net income (loss) attributable to Class B common stock
|
|
$
|
(4,298,692
|
)
|
|
$
|
6,744,724
|
|
Denominator: weighted average Class B common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Class B common stock
|
|
|
5,750,000
|
|
|
|
5,750,000
|
|
Basic and diluted net income (loss) per share, Class B common stock
|
|
$
|
(0.75
|
)
|
|
$
|
1.17
|
|
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 June 30, 2021 and December 31, 2020, the Company had a deferred
tax asset of approximately $402,000 and $21,000 respectively, each of which had a full valuation allowance recorded against them.
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. There were no unrecognized tax benefits as of June 30, 2021 or December 31, 2020. 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 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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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.
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.
7GC & CO. HOLDINGS,
INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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. As of June 30, 2021 and December 31, 2020, the Note is no longer
available.
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 June 30, 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. In the three and six months ended June 30, 2021, the Company incurred and expensed $30,000 and approximately $61,000 in
expenses for these services, respectively. These expenses were included in general and administrative expenses on the accompanying unaudited
condensed statements of operations. There was no outstanding balance for such services as of June 30, 2021 or December 31, 2020.
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.
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.
7GC & CO. HOLDINGS, INC.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 June 30, 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 June 30, 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 June 30, 2021 and December 31, 2020, there were 23,000,000 shares of Class A common stock outstanding, including 19,997,415
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.
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 June 30, 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).
7GC & CO. HOLDINGS, INC.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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.
June
30, 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
|
|
$
|
230,011,596
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities – Public Warrants
|
|
$
|
10,465,000
|
|
|
$
|
-
|
|
|
$
|
|
|
Derivative warrant liabilities – Private Warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,835,500
|
|
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 in February 2021, when the Public Warrants were separately listed and traded.
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 June 30, 2021, the Company recognized a charge of $2.9 million to the
unaudited condensed statements of operations resulting from an increase in the fair value of the derivative warrant liabilities. In the
six months ended June 30, 2021, the Company recognized a benefit to the unaudited condensed statements of operations resulting from a
decrease in the fair value of liabilities of approximately $8.6 million presented as change in fair value of derivative warrant liabilities
on the accompanying unaudited condensed statements 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.
7GC & CO. HOLDINGS, INC.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
Volatility
|
|
|
13.0
|
%
|
|
|
15.0
|
%
|
Stock price
|
|
$
|
9.68
|
|
|
$
|
9.89
|
|
Time to M&A (Yr)
|
|
|
0.75
|
|
|
|
1.00
|
|
Risk-free rate
|
|
|
1.00
|
%
|
|
|
1.16
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The change in the fair
value of the Level 3 derivative warrant liabilities for the period for the three and six months ended June 30, 2021 is summarized as follows:
|
|
Private
Placement
|
|
|
Public
|
|
|
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
|
)
|
Transfer of Public warrants to Level 1
|
|
|
-
|
|
|
|
(8,740,000)
|
|
|
|
(8,740,000)
|
|
Derivative warrant liabilities at March 31, 2021
|
|
$
|
5,659,500
|
|
|
$
|
-
|
|
|
$
|
5,659,500
|
|
Change in fair value of derivative warrant liabilities
|
|
|
1,176,000
|
|
|
|
-
|
|
|
|
1,176,000
|
|
Derivative warrant liabilities at June 30, 2021
|
|
$
|
6,835,500
|
|
|
$
|
-
|
|
|
$
|
6,835,500
|
|
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 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.