NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Note
1 — Description of Organization and Business Operations
Merida
Merger Corp. I (the “Company”) was incorporated in Delaware on June 20, 2019. The Company was formed for the purpose
of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business
combination with one or more businesses or entities (the “Business Combination”).
Although
the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company
intends to focus its search on companies in the cannabis industry. The Company is an early stage and emerging growth company and,
as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As
of September 30, 2019, the Company had not commenced any operations. All activity for the period from June 20, 2019 (inception)
through September 30, 2019 relates to the Company’s formation and the initial public offering (“Initial Public Offering”),
which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination,
at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from
the Initial Public Offering.
The
registration statements for the Company’s Initial Public Offering were declared effective on November 4, 2019. On November
7, 2019, the Company consummated the Initial Public Offering of 12,000,000 units (the “Units” and, with respect to
the shares of common stock included in the Units sold, the “Public Shares”), generating gross proceeds of $120,000,000,
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 3,750,000 warrants (the “Private Warrants”)
at a price of $1.00 per Private Warrant in a private placement to Merida Holdings, LLC and EarlyBirdCapital, Inc. (“EarlyBirdCapital”),
generating gross proceeds of $3,750,000, which is described in Note 4.
Following
the closing of the Initial Public Offering on November 7, 2019, an amount of $120,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the sale of the Private Warrants was placed in a trust account (the
“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out
as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined
by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust
Account to the Company’s stockholders, as described below.
On
November 12, 2019, the underwriters notified the Company of their intention to partially exercise their over-allotment option
on November 13, 2019. As such, on November 13, 2019 the Company consummated the sale of an additional 1,001,552 Units, at $10.00
per Unit, and the sale of an additional 200,311 Private Warrants, at $1.00 per Private Warrant, generating total gross proceeds
of $10,215,831. A total of $10,015,520 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds
held in the Trust Account to $130,015,520.
Transaction
costs amounted to $3,412,939 consisting of $2,600,311 of underwriting fees and $812,628 of other offering costs. In addition,
$796,558 of cash was held outside of the Trust Account and is available for working capital purposes.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination
successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets
held in the Trust Account (as defined below) (excluding taxes payable on income earned on the Trust Account) at the time of the
agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940,
as amended (the “Investment Company Act”). Upon the closing of the Initial Public Offering, management has agreed
that an amount equal to at least $10.00 per Unit sold in the Initial Public Offering, including the proceeds from the sale of
the Private Warrants, will be held in a trust account (“Trust Account”), located in the United States and invested
only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity
of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company
meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
MERIDA MERGER CORP. I
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of a Business Combination in connection with a stockholder
meeting called to approve the Business Combination. The public stockholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro
rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations
and up to $250,000 per 12-month period for working capital needs). There will be no redemption rights upon the completion of a
Business Combination with respect to the Company’s warrants. The Company will proceed with a Business Combination if the
Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the
shares voted are voted in favor of the Business Combination. The Company will, pursuant to its Amended and Restated Certificate
of Incorporation (the “Amended and Restated Certificate of Incorporation”), offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules. The Company’s Sponsor and EarlyBirdCapital have agreed to vote their
Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of
approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a Business Combination.
Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against
the proposed transaction or don’t vote at all.
The
Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and any Public Shares held by it in connection
with the completion of a Business Combination, (b) to waive its rights to liquidating distributions from the Trust Account with
respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not to propose an amendment to
the Amended and Restated Certificate of Incorporation that would affect a public stockholders’ ability to convert their
shares in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem
100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders
with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The
Company will have until November 7, 2021 to consummate a Business Combination (the “Combination Period”). If the Company
is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company, divided by the number of then
outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s
board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination
within the Combination Period.
In
order to protect the amounts held in the Trust Account, Merida Manager III LLC, the general partner of the Sponsor, has agreed
to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount
of funds in the Trust Account to below $10.00 per Public Share, except as to any claims by a third party who executed a valid
and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any
monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of Initial
Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Merida Manager
III LLC will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the
possibility that Merida Manager III LLC will have to indemnify the Trust Account due to claims of creditors by endeavoring to
have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target
businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
MERIDA
MERGER CORP. I
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
Note
2 — Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions
to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation
of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its
Initial Public Offering as filed with the SEC on November 5, 2019, as well as the Company’s Current Reports on Form 8-K,
as filed with the SEC on November 7, 2019 and November 14, 2019. The interim results for the period from June 20, 2019 (inception)
through September 30, 2019 are not necessarily indicative of the results to be expected for the period from June 30, 2019 (inception)
through December 31, 2019 or for any future periods.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to,
not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of
the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2019.
MERIDA
MERGER CORP. I
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
Deferred
offering costs
Offering
costs consist of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly
related to the Initial Public Offering. Offering costs amounting to $3,412,939 were charged to stockholders’ equity upon
the completion of the Initial Public Offering.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statements recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for
interest and penalties as of September 30, 2019. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by
major taxing authorities since inception.
The
provision for income taxes was deemed to be immaterial for the period from June 20, 2019 (inception) through September 30, 2019.
Net
Loss Per Common Share
Net
loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the
period, excluding shares of common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate
of 450,000 shares of common stock that were subject to forfeiture if the over-allotment option was not exercised by the underwriters
(see Note 7). At September 30, 2019, the Company did not have any dilutive securities and other contracts that could, potentially,
be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted loss
per share is the same as basic loss per share for the period presented.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At September 30, 2019, the Company has not
experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily
due to their short-term nature.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s condensed financial statements.
Note
3 — Initial Public Offering
Pursuant
to the Initial Public Offering, the Company sold 13,001,552 Units at a price of $10.00 per Unit, inclusive of 1,001,552 Units
sold to the underwriters on November 13, 2019 upon the underwriters’ election to partially exercise their over-allotment
option. Each Unit consists of one share of common stock and one-half of one warrant (“Public Warrant”). Each whole
Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment
(see Note 7).
MERIDA
MERGER CORP. I
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
Note
4 — Private Placement
Simultaneously
with the closing of the Initial Public Offering, Merida Holdings, LLC and EarlyBirdCapital purchased an aggregate of 3,750,000
Private Warrants at a price of $1.00 per Private Warrant for an aggregate purchase price of $3,750,000, in a private placement
that occurred simultaneously with the closing of the Initial Public Offering. On November 14, 2019, in connection with the underwriters’
election to partially exercise their over-allotment option, the Company sold an additional aggregate of 200,311 Private Warrants
to Merida Holdings, LLC and EarlyBirdCapital, at a price of $1.00 per Private Warrant, generating gross proceeds of $200,311.
Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The
proceeds from the Private Warrants were added to the proceeds from the 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 Warrants
will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Warrants
and all underlying securities will expire worthless.
Note
5 — Related Party Transactions
Founder
Shares
In
August 2019, the Sponsor purchased 2,875,000 shares (the “Founder Shares”) of the Company’s common stock for
an aggregate price of $25,000. On November 4, 2019, the Company effected a stock dividend of 0.2 shares for each share outstanding,
resulting in an aggregate of 3,450,000 Founder Shares being held by the Sponsor. All share and per-share amounts have been retroactively
restated to reflect the stock dividend. The Founder Shares include an aggregate of up to 199,612 shares that remain subject to
forfeiture by the Sponsor following the underwriter’s election to partially exercise its over-allotment option. These shares
are subject to forfeiture to the extent that the underwriters’ do not exercise the remaining option so that the Sponsor
will collectively own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the
Sponsor did not purchase any Public Shares in the Initial Public Offering and excluding the 120,000 shares of common stock issued
to EarlyBirdCapital and its designees (the “Representative Shares”)). As a result of the underwriters’ election
to partially exercise their over-allotment option, 250,388 Founder Shares are no longer subject to forfeiture.
The
Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until, with
respect to 50% of the Founder Shares, the earlier of one year after the consummation of a Business Combination and the date on
which the closing price of the common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after a Business
Combination and, with respect to the remaining 50% of the Founder Shares, until the one year after the consummation of a Business
Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger,
stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange
their shares of common stock for cash, securities or other property.
Advances
— Related Party
Subsequent
to September 30, 2019, the Sponsor advanced the Company an aggregate of $162,500 to cover expenses related to the Initial Public
Offering. The advances were non-interest bearing and due on demand. Advances amounting to $162,500 were repaid on November 14,
2019.
Promissory
Note — Related Party
On
August 6, 2019, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to
which the Company may borrow up to an aggregate principal amount of $150,000, of which $75,569 is outstanding under the Promissory
Note as of September 30, 2019. The Promissory Note was non-interest bearing and payable on the earlier of (i) June 30, 2020, (ii)
the consummation of the Initial Public Offering or (iii) the date on which the Company determines not to proceed with the Initial
Public Offering. The borrowings outstanding under the Promissory Note of $100,569 were repaid on November 14, 2019.
MERIDA
MERGER CORP. I
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
Related
Party Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans
may be converted into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be
identical to the Private Warrants.
Administrative
Support Agreement
The
Company entered into an agreement on November 4, 2019, as amended on November 26, 2019, whereby, commencing on November 4, 2019
through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay Merida
Manager III LLC a total of $5,000 per month for office space, utilities and secretarial and administrative support.
Note
6 — Commitments
Registration
Rights
Pursuant
to a registration rights agreement entered into on November 4, 2019, the holders of the Founder Shares, Representative Shares,
Private Warrants, and any warrants that may be issued in payment of Working Capital Loans (and all underlying securities) are
entitled to registration rights. The holders of the majority of these securities are entitled to make up to two demands that the
Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights
at any time commencing three months prior to the date on which the Founder Shares are to be released from escrow. The holders
of a majority of the Representative Shares, Private Warrants or warrants issued in payment of Working Capital Loans made to the
Company (or underlying securities) can elect to exercise these registration rights at any time commencing after the Company consummates
a Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one occasion and
only during the five-year period beginning on the effective date of the Initial Public Offering. In addition, the holders have
certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation
of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back” registration
only during the seven-year period beginning on the effective date of the Initial Public Offering. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day to purchase up to 1,800,000 additional Units to cover over-allotments, if any, at the
Initial Public Offering price less the underwriting discounts and commissions. On November 13, 2019, the underwriters partially
exercised their over-allotment option to purchase an additional 1,001,552 Units at $10.00 per Unit, leaving 798,448 Units available
for a purchase price of $10.00 per Unit.
Business
Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist the Company in holding
meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce
the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business
Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its
press releases and public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital a cash fee
for such services upon the consummation of a Business Combination in an amount equal to 3.5% of the gross proceeds of Initial
Public Offering (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee
may be allocated at the Company’s sole discretion to other FINRA members that assist the Company in identifying and consummating
a Business Combination.
MERIDA
MERGER CORP. I
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
Note
7 — Stockholders’ Equity
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share
with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors.
At September 30, 2019, there were no shares of preferred stock issued or outstanding.
Common
Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share.
At September 30, 2019, there were 3,570,000 shares of common stock issued and outstanding, of which an aggregate of up to 199,612
shares remain subject to forfeiture as a result of the underwriters’ election to partially exercise their over-allotment
option, so that the Sponsor will collectively own 20% of the Company’s issued and outstanding common stock after the Initial
Public Offering (assuming the Sponsor did not purchase any Public Shares in the initial Public Offering and excluding the Representative
Shares).
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business
Combination or (b) 12 months from the closing of the Initial Public Offering. No warrants will be exercisable for cash unless
the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of
the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration
statement covering the shares of common stock issuable upon exercise of the public warrants is not effective within a specified
period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption
is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on
a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
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in
whole and not in part;
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at
a price of $0.01 per warrant;
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upon
not less than 30 days’ prior written notice of redemption;
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if,
and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading
days within a 30-trading day period commencing after the warrants become exercisable and ending on the third business day prior
to the notice of redemption to the warrant holders; and
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If,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the warrants.
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If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the
Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable
or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they
are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the
initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such
holders on the same basis as the Public Warrants.
The
exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants
will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination
Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds
with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust
Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
MERIDA
MERGER CORP. I
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
In
addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes
in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20
per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s
board of directors, and in the case of any such issuance to the Sponsor, initial stockholders or their affiliates, without taking
into account any Founder’s Shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances
represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of an initial Business Combination
on the date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummated
an initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the
warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at
which the Company issues the additional shares of common stock or equity-linked securities.
Representative
Shares
In
August 2019, the Company issued to EarlyBirdCapital and its designees the 120,000 Representative Shares (as adjusted for the stock
dividend described above). The Company accounted for the Representative Shares as an offering cost of the Initial Public Offering,
with a corresponding credit to stockholder’s equity. The Company estimated the fair value of Representative Shares to be
$910 based upon the price of the Founder Shares issued to the Sponsor. The holders of the Representative Shares have agreed not
to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed
(i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and
(ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails
to complete a Business Combination within the Combination Period.
The
Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately
following the effective date of the registration statement related to the Initial Public Offering pursuant to Rule 5110(g)(1)
of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging,
short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person
for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public
Offering, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following
the effective date of the registration statements related to the Initial Public Offering except to any underwriter and selected
dealer participating in the Initial Public Offering and their bona fide officers or partners.
Note
8 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial
statements were issued. Other than as described in these financial statements, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the financial statements.