NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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 September 30, 2021, the Company has not
commenced any operations. All activity for the period from September 18, 2020 (inception) through September 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.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
The Company will provide its holders of the outstanding
Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a stockholders meeting called to approve the Business Combination
or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of
a Business Combination at a meeting called for such purpose at which public stockholders may seek to redeem their shares, regardless
of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company
has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if
the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks stockholder approval of
a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated
Certificate of Incorporation provides that, a Public Stockholder, together with any affiliate of such stockholder or any other person
with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more
of the Public Shares without the Company’s prior written consent.
The Public Stockholders will be entitled to redeem
their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to
be distributed to Public Stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company
will pay to the representative of the underwriters (as discussed in Note 5). There will be no redemption rights upon the completion of
a Business Combination with respect to the Company’s warrants. These shares of Class A common stock are recorded at a redemption
value and classified as temporary equity, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.”
If a stockholder vote is not required and the
Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and
Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission
(the “SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy
statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor has agreed (a) to
vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of
a Business Combination, (b) not to propose an amendment to the Company’s amended and restated certificate of incorporation with
respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company
provides dissenting Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c)
not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the right
to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares
in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith)
or a vote to amend the provisions of the amended and restated certificate of incorporation relating to stockholders’ rights of
pre-Business Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall
not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will
be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial
Public Offering if the Company fails to complete its Business Combination.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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).
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 September 30, 2021, the Company had approximately
$0.9 million of cash in its operating account and working capital of approximately $189,000 (excluding tax obligations of approximately
$124,000 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-Basis of Presentation and Summary of
Significant Accounting Policies (as restated)
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 nine months ended September 30, 2021, are not necessarily indicative of the results
that may be expected through December 31, 2021.
The accompanying unaudited condensed financial
statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K/A filed by
the Company with the SEC on May 27, 2021.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
Restatement of Previously Reported Financial
Statements
In preparation of the Company’s unaudited
condensed financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should restate its financial
statements to classify all Class A common stock subject to possible redemption in temporary equity. In accordance with the SEC and its
staff’s guidance on redeemable equity instruments, ASC 480, paragraph 10-S99, redemption provisions not solely within the control
of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified
a portion of its Class A common stock in permanent equity, or total stockholders’ equity. Although the Company did not specify
a maximum redemption threshold, its Amended and Restated Articles of Incorporation currently provides that, the Company will not redeem its Public Shares in an amount that
would cause its net tangible assets to be less than $5,000,001. Previously, the Company did not consider redeemable stock classified
as temporary equity as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation
to include temporary equity in net tangible assets. Accordingly, effective with this filing, the Company presents all redeemable Class
A common stock as temporary equity and recognized accretion from the initial book value to redemption value at the time of its Initial
Public Offering and in accordance with ASC 480. In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company restated its earnings
per share calculation to allocate income and losses share pro rata between the the two classes of shares. This presentation contemplates
a Business Combination as the most likely outcome, in which case, both clasees of shares participate pro rata in the income and losses
of the Company.
In accordance with SEC Staff Accounting
Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that
the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s
Form 10-Qs for the quarterly periods ended March 31, 2021 and June 30, 2021 (the “Affected Quarterly Periods”). Therefore,
the Company, in consultation with its Audit Committee, concluded that the Affected Quarterly Periods should be restated to present all
Class A common stock subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption
value at the time of its Initial Public Offering. As such, the Company is reporting these restatements to those periods in this quarterly
report.
Impact of the Restatement
None of the changes impacted the
Company’s cash position or cash held in the trust account established in connection with the IPO (the “Trust Account”).
The table below presents the effect
of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited
condensed balance sheet as of March 31, 2021:
| As of March 31, 2021 (unaudited) | |
As Reported | | |
Adjustment | | |
As Restated | |
| Total assets | |
$ | 232,032,771 | | |
| - | | |
$ | 232,032,771 | |
| Total liabilities | |
$ | 22,759,919 | | |
| - | | |
$ | 22,759,919 | |
| Class A common stock subject to possible redemption | |
| 204,272,850 | | |
| 25,727,150 | | |
| 230,000,000 | |
| Preferred stock | |
| - | | |
| - | | |
| - | |
| Class A common stock | |
| 257 | | |
| (257 | ) | |
| - | |
| Class B common stock | |
| 575 | | |
| - | | |
| 575 | |
| Additional paid-in capital | |
| 7,544 | | |
| (7,544 | ) | |
| - | |
| Retained earnings (accumulated deficit) | |
| 4,991,626 | | |
| (25,719,349 | ) | |
| (20,727,723 | ) |
| Total stockholders’ equity (deficit) | |
$ | 5,000,002 | | |
$ | (25,727,150 | ) | |
$ | (20,727,148 | ) |
Total
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity
(Deficit) | |
$ | 232,032,771 | | |
$ | - | | |
$ | 232,032,771 | |
| Shares of Class A common stock subject to possible redemption | |
| 20,427,285 | | |
| 2,572,715 | | |
| 23,000,000 | |
| Shares of Class A non-redeemable common stock | |
| 2,572,715 | | |
| (2,572,715 | ) | |
| - | |
The Company’s unaudited condensed
statement of stockholders’ equity has been restated to reflect the changes to the impacted stockholders’ equity accounts described
above.
The table below presents the effect
of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited
condensed statement of cash flows for the three months ended March 31, 2021:
|
| Three months ended March 31, 2021 (unaudited) | |
As Reported | | |
Adjustment | | |
As Restated | |
| Supplemental Disclosure of Noncash Financing Activities: | |
| | |
| | |
| |
| Change in value of Class A common stock subject to possible redemption | |
$ | (11,043,420 | ) | |
$ | 11,043,420 | | |
$ | - | |
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
The table below presents the effect
of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited
condensed balance sheet as of June 30, 2021:
| As of June 30, 2021 (unaudited) | |
As Reported | | |
Adjustment | | |
As Restated | |
| Total assets | |
$ | 231,425,039 | | |
| - | | |
$ | 231,425,039 | |
| Total liabilities | |
$ | 26,450,879 | | |
| - | | |
$ | 26,450,879 | |
| Class A common stock subject to possible redemption | |
| 199,974,150 | | |
| 30,025,850 | | |
| 230,000,000 | |
| Preferred share | |
| - | | |
| - | | |
| - | |
| Class A common stock | |
| 300 | | |
| (300 | ) | |
| - | |
| Class B common stock | |
| 575 | | |
| - | | |
| 575 | |
| Additional paid-in capital | |
| 4,306,201 | | |
| (4,306,201 | ) | |
| - | |
| Retained earnings (accumulated deficit) | |
| 692,934 | | |
| (25,719,349 | ) | |
| (25,026,415 | ) |
| Total stockholders’ equity (deficit) | |
$ | 5,000,010 | | |
$ | (30,025,850 | ) | |
$ | (25,025,840 | ) |
Total
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity
(Deficit) | |
$ | 231,425,039 | | |
$ | - | | |
$ | 231,425,039 | |
| Shares of Class A common stock subject to possible redemption | |
| 19,997,415 | | |
| 3,002,585 | | |
| 23,000,000 | |
| Shares of Class A non-redeemable common stock | |
| 3,002,585 | | |
| (3,002,585 | ) | |
| - | |
The Company’s unaudited condensed
statement of stockholders’ equity has been restated to reflect the changes to the impacted stockholders’ equity accounts described
above.
The table below presents the effect
of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited
condensed statement of cash flows for the six months ended June 30, 2021:
|
| Six months ended June 30, 2021 (unaudited) | |
As Reported | | |
Adjustment | | |
As Restated | |
| Supplemental Disclosure of Noncash Financing Activities: | |
| | |
| | |
| |
| Change in value of Class A common stock subject to possible redemption | |
$ | (6,744,720 | ) | |
$ | 6,744,720 | | |
$ | - | |
The impact to the reported amounts
of weighted average shares outstanding and basic and diluted earnings per share is presented below for the Affected Quarterly Periods:
| | |
Earnings (Loss) Per Share | |
| | |
As Reported | | |
Adjustment | | |
As Restated | |
| Three months ended March 31, 2021 (unaudited) | |
| | |
| | |
| |
| Net income | |
$ | 11,043,416 | | |
$ | - | | |
$ | 11,043,416 | |
| Weighted average shares outstanding - Class A common stock | |
| 23,000,000 | | |
| - | | |
| 23,000,000 | |
| Basic and diluted earnings per share - Class A common stock | |
$ | - | | |
$ | 0.38 | | |
$ | 0.38 | |
| Weighted average shares outstanding - Class B common stock | |
| 5,750,000 | | |
| - | | |
| 5,750,000 | |
| Basic and diluted earnings per share - Class B common stock | |
$ | 1.92 | | |
$ | (1.54 | ) | |
$ | 0.38 | |
| Three months ended June 30, 2021 (unaudited) | |
| | | |
| | | |
| | |
| Net loss | |
$ | (4,298,692 | ) | |
$ | - | | |
$ | (4,298,692 | ) |
| Weighted average shares outstanding - Class A common stock | |
| 23,000,000 | | |
| - | | |
| 23,000,000 | |
| Basic and diluted loss per share - Class A common stock | |
$ | - | | |
$ | (0.15 | ) | |
$ | (0.15 | ) |
| Weighted average shares outstanding - Class B common stock | |
| 5,750,000 | | |
| - | | |
| 5,750,000 | |
| Basic and diluted loss per share - Class B common stock | |
$ | (0.75 | ) | |
$ | 0.60 | | |
$ | (0.15 | ) |
| Six months ended June 30, 2021 (unaudited) | |
| | | |
| | | |
| | |
| Net income | |
$ | 6,744,724 | | |
$ | - | | |
$ | 6,744,724 | |
| Weighted average shares outstanding - Class A common stock | |
| 23,000,000 | | |
| - | | |
| 23,000,000 | |
| Basic and diluted earnings per share - Class A common stock | |
$ | - | | |
$ | 0.23 | | |
$ | 0.23 | |
| Weighted average shares outstanding - Class B common stock | |
| 5,750,000 | | |
| - | | |
| 5,750,000 | |
| Basic and diluted earnings per share - Class B common stock | |
$ | 1.17 | | |
$ | (0.94 | ) | |
$ | 0.23 | |
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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.
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 liabilities. 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 September 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 September 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 September
30, 2021, and December 31, 2020.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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.
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 against the carrying value of the Class A common
stock subject to possible redemption 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.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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
liabilities 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 September 30, 2021, and December 31, 2020, 23,000,000 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.
Under ASC 480-10-S99, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying
value of the security to equal the redemption value at the end of the reporting period. This method would view the end of the reporting
period as if it were also the redemption date of the security. Effective with the closing of the Initial Public
Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional
paid-in capital (to the extent available) and accumulated deficit.
Net Income
(Loss) Per Common Stock
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss)
per common share is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding
for the respective period.
The calculation of diluted net income per common
stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to
purchase an aggregate of 18,850,000 shares of common stock in the calculation of diluted income per share, because their exercise is
contingent upon future events. As a result, diluted net income per share is the same as basic net income per share for the three
and nine months ended September 30, 2021. Accretion associated with the redeemable Class A common stock is excluded from earnings per
share as the redemption value approximates fair value.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
The following table presents a reconciliation
of the numerator and denominator used to compute basic and diluted net income per share for each class of common stock:
| | |
For the Three Months Ended | | |
For the Nine Months Ended | |
| | |
September 30, 2021 | | |
September 30, 2021 | |
| | |
Class A | | |
Class B | | |
Class A | | |
Class B | |
| Basic and diluted net income (loss) per common share: | |
| | |
| | |
| | |
| |
| Numerator: | |
| | |
| | |
| | |
| |
| Allocation of net income (loss) | |
$ | 4,782,634 | | |
$ | 1,195,659 | | |
$ | 10,178,414 | | |
$ | 2,544,603 | |
| | |
| | | |
| | | |
| | | |
| | |
| Denominator: | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted weighted average common shares outstanding | |
| 23,000,000 | | |
| 5,750,000 | | |
| 23,000,000 | | |
| 5,750,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted net income (loss) per common share | |
$ | 0.21 | | |
$ | 0.21 | | |
$ | 0.44 | | |
$ | 0.44 | |
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 September 30, 2021, and December 31, 2020, the
Company had a deferred tax asset of approximately $453,000 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 September 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 September
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.
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.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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 8).
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.
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 September 30, 2021, and December 31, 2020, the
Note is no longer available.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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 September 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 nine months ended September 30, 2021, the Company incurred and expensed $30,000 and approximately $91,000
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 September 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.
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.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
Note 6-Derivative Warrant Liabilities
As of September 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.
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.
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
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-Class A Common Stock Subject to Possible
Redemption
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 the occurrence of future events.
The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s
Class A common stock are entitled to one vote for each share. As of September 30, 2021, there were 23,000,000 shares of Class A common
stock outstanding, which were all subject to possible redemption and are classified outside of permanent equity in the condensed balance
sheets.
The Class A common stock subject to possible
redemption reflected on the condensed balance sheets is reconciled on the following table:
| Gross proceeds | |
$ | 230,000,000 | |
| Less: | |
| | |
| Proceeds allocated to Public Warrants | |
| (13,340,000 | ) |
| Class A common stock issuance costs | |
| (12,403,774 | ) |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 25,743,774 | |
| Class A common stock subject to possible redemption | |
$ | 230,000,000 | |
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
Note 8-Stockholders’ Deficit
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 September 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 September 30, 2021, and
December 31, 2020, there were 23,000,000 shares of Class A common stock outstanding, including 23,000,000 shares of Class A common stock
subject to possible redemption that were classified as temporary equity in the accompanying condensed balance sheets.
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 September 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).
Note 9-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.
September 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 | |
$ | 230,017,394 | | |
$ | - | | |
$ | - | |
| Liabilities: | |
| | | |
| | | |
| | |
| Derivative warrant liabilities - Public Warrants | |
$ | 6,670,000 | | |
$ | - | | |
$ | | |
| Derivative warrant liabilities - Private Warrants | |
$ | - | | |
$ | - | | |
$ | 4,410,000 | |
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 | |
7GC & CO. HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS (AS RESTATED)
Transfers to/from Levels 1, 2, and 3 are recognized
at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a
Level 1 fair value measurement, as the Public Warrants were separately listed and traded in February 2021.
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 the
three months ended March 31, 2021 reporting period. In the three and nine months ended September 30, 2021, the Company recognized a benefit
of $6.2 million, and $14.8 million resulting from a decrease in the fair value of the derivative warrant liabilities, and 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.
The following table provides quantitative information
regarding Level 3 fair value measurements inputs at their measurement dates:
| | |
As of
September 30,
2021 | | |
As of
December 31,
2020 | |
| Volatility | |
| 6.0 | % | |
| 11.0 | % |
| Stock price | |
$ | 9.73 | | |
$ | 9.87 | |
| Time to M&A (Yr) | |
| 0.50 | | |
| 1.00 | |
| Risk-free rate | |
| 1.07 | % | |
| 0.51 | % |
| 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 nine months ended September 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 | |
| Change in fair value of derivative warrant liabilities | |
| (2,425,500 | ) | |
| - | | |
| (2,425,500 | ) |
| Derivative warrant liabilities at September 30, 2021 | |
$ | 4,410,000 | | |
$ | - | | |
$ | 4,410,000 | |
Note 10-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, other than the restatements described in Note 2, determined that there have been no events that have occurred that would require adjustments to the disclosures in the unaudited
condensed financial statements.