Golden Falcon Acquisition Corp. - Quarter Report: 2023 March (Form 10-Q)

GOLDEN FALCON ACQUISITION CORP.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Golden Falcon Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Golden Falcon Sponsor Group, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations and the potential business combination, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Form 10-K”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 27, 2023, as well as Item 1A, Part II of this Quarterly Report. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a Delaware corporation structured as a blank check company formed on August 24, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to as our initial business combination. We intend to effectuate our business combination using cash from the proceeds of the initial public offering and the sale of the private placement warrants, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

On December 20, 2022, we held a special meeting at which our stockholders approved an amendment to our amended and restated certificate of incorporation (the “Charter Amendment”) and an amendment to the Investment Management Trust Agreement, dated as of December 17, 2020 (the “trust agreement”), by and between us and Continental Stock Transfer & Trust Company (the “Trust Amendment”. The Charter Amendment and the Trust Amendment extend the date by which we must consummate our initial business combination (the “Extension”) from December 22, 2022 to June 22, 2023, or such earlier date as determined by the our board of directors.

In connection with the stockholder vote to approve the Extension, the holders of 30,291,421 shares of Class A Common Stock properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.11 per share, for an aggregate redemption amount of approximately $306.3 million, leaving approximately $42.6 million in the trust account immediately following the redemptions.

Proposed Business Combination

Business Combination Agreement

On December 6, 2022, we entered into a business combination agreement (as amended, the “Business Combination Agreement”) with MNG Havayollari ve Tasimacilik A.S., a joint stock corporation organized under the laws of Turkey (“MNG”), Merlin HoldCo, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of MNG (“HoldCo”), Merlin IntermediateCo, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of HoldCo (“IntermediateCo”), Merlin FinCo, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of HoldCo (“FinCo”), and Merlin Merger Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of IntermediateCo (“Merger Sub”). If the Business Combination Agreement and the transactions contemplated thereby are adopted and approved by our stockholders, and the Business Combination is subsequently completed, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving company after the Merger, as a result of which the Company will become an indirect, wholly-owned subsidiary of MNG (the “Proposed Business Combination”).

Sponsor Support Agreement

Concurrently with the execution and delivery of the Business Combination Agreement we, the Sponsor, MNG and additional holders of founder shares (collectively, the “Sponsor Persons”) entered into a sponsor support agreement (as amended, the “Sponsor Support Agreement”), pursuant to which, among other things, the Sponsor Persons agreed to (a) support and vote their founder shares in favor of the Business Combination Agreement and the other transaction agreements to which the Company is or will be a party and the Business Combination; (b) subject their founder shares to certain transfer restrictions; and (c) after the Effective Time (as defined in the Sponsor Support Agreement), for as long as the Sponsor (or a permitted transferee of Sponsor) holds MNG warrants, any exercise by Sponsor (or a permitted transferee of the Sponsor) of such MNG warrants will only be done on a cash (and not a cashless) basis.

Registration Rights and Lock-Up Agreement

Concurrently with the execution and delivery of the Business Combination Agreement, MNG, the Sponsor and the other parties thereto (together with the Sponsor, the “Holders”) entered into a registration rights and lock-up agreement (as amended, the “Registration Rights and Lock-Up Agreement”), pursuant to which MNG agreed, among other things, to file a registration statement to register the resale of certain securities of MNG held by the Holders and to provide the parties thereto customary demand, shelf and piggy-back rights on secondary offerings, subject to customary cut-back provisions and coordinated offerings. MNG ordinary shares or MNG American depositary shares beneficially owned or owned of record by the holders are subject to lock-up provisions as set forth in the Registration Rights and Lock-Up Agreement.

Shareholders Statement

Concurrently with the execution and delivery of the Business Combination Agreement, the MNG Shareholders (as defined in the MNG Shareholders Statement) executed the MNG Shareholders Statement, pursuant to which, among other things, the MNG Shareholders agreed to support and vote their MNG ordinary shares in favor of the proposals that the MNG Shareholders shall be required to approve in connection with the Business Combination.

Amendments

On February 14, 2023, each of the Business Combination Agreement, Registration Rights and Lock-Up Agreement and Sponsor Support Agreement were amended to, among other things, reflect that at the effective time of the Merger, holders of outstanding warrants to purchase shares of Class A common stock would receive warrants to purchase MNG ordinary shares (represented by MNG’s American depositary shares) instead of receiving MNG warrants in the form of MNG’s American depositary warrants, as previously provided.

The Proposed Business Combination, the Business Combination Agreement, the Sponsor Support Agreement, the Registration Rights and Lock-Up Agreement and the Shareholders Statement are more fully described in Note 1 to the condensed unaudited financial statements. A copy of each of the foregoing agreements was included as an exhibit to the Current Report on Form 8-K filed with the SEC on December 12, 2022, and were also filed as exhibits to the Form F-4. A copy of each of the amendments to the Business Combination Agreement, the Sponsor Support Agreement and the Registration Rights and Lock-Up Agreement was included as an exhibit to the Current Report on Form 8-K filed with the SEC on February 21, 2023, and are also filed as exhibits to this Annual Report.

Registration Statement on Form F-4

MNG filed a registration statement on Form F-4 (File No. 333-271206) (the “Form F-4”) with the SEC on April 10, 2023, in connection with the Business Combination. The consummation of the transactions contemplated by the Business Combination Agreement is subject to customary conditions, representations and warranties, covenants and closing conditions in the Business Combination Agreement, including, but not limited to, approval by the Company’s stockholders of the Business Combination Agreement, the effectiveness of the Form F-4, and other customary closing conditions. On May 8, 2023, MNG filed Amendment No. 1 to the Form F-4.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2023 were organizational activities, those necessary to prepare for the initial public offering, described below, and, after our initial public offering, identifying a target company for a business combination and, after signing the Business Combination Agreement, completing the Proposed Business Combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities held in the trust account, along with non-operating income or expense related to the change in fair value of the warrant liabilities and the Sponsor Convertible Promissory Note (defined below). We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended March 31, 2023, we had a net loss of $3,208,890, which consisted of change in fair value of convertible promissory note – related party of $7,800, change in fair value of warrant liabilities of $2,353,500, formation and operational costs of $1,187,689 and provision for income taxes of $77,115, partially offset by interest earned on marketable securities held in the trust account of $417,211, and interest income on bank of $3.

For the three months ended March 31, 2022, we had a net income of $9,383,232, which consists of interest earned on marketable securities held in the trust account of $174,761, unrealized gain on marketable securities held in the trust account of $65,646, change in fair value of convertible promissory note – related party of $132,122 and change in fair value of warrant liabilities of $9,398,310, partially offset by formation and operational costs of $387,608.

Liquidity and Capital Resources

On December 22, 2020, we consummated the initial public offering of 34,500,000 units, at $10.00 per unit, which included the full exercise by the underwriters of their over-allotment option in the amount of 4,500,000 units, generating gross proceeds of $345,000,000. Simultaneously with the closing of the initial public offering and the full over-allotment option, we consummated the sale of 8,900,000 private placement warrants to the sponsor at a price of $1.00 per warrant, generating gross proceeds of $8,900,000.

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Following the initial public offering, the full exercise of the over-allotment option, and the sale of the private placement warrants, a total of $345,000,000 was placed in the trust account. Transaction costs amounted to $19,455,706, consisting of $6,900,000 of underwriting fees, net of reimbursement, $12,075,000 of deferred underwriting fees and $480,706 of other offering costs.

On December 6, 2022, the representatives in the Initial Public Offering, agreed, on behalf of the underwriters, to a reduction of their deferred underwriting fee of $0.35 per Unit. Pursuant to an amendment to the underwriting agreement, the deferred underwriting fee from any remaining funds on deposit in the Trust Account and/or any other funds available in connection with the Business Combination, which will be payable at closing of the Business Combination is as follows: (i) $5,000,000 of the deferred underwriting fee (the “Minimum Deferred Underwriting Fee”) will be due and payable in cash to the underwriters, upon the closing of the Business Combination irrespective of the amount of Available Cash (as defined in the Business Combination Agreement); (ii) if the Available Cash is equal to or greater than $30.0 million and up to $100.0 million, an additional amount equal to up to $4.0 million of the deferred underwriting fee will be due and payable in cash to the underwriters upon the closing of the Business Combination, which additional amount will be linearly determined in relation to the amount of the Available Cash and will be at least $0 and up to $4.0 million; and (iii) if the Available Cash is equal to or greater than $100.0 million and up to $345.0 million, an additional amount of up to $3,075,000 of the deferred underwriting fee will be due and payable in cash to the underwriters upon the closing of the Business Combination, which additional amount will be linearly determined in relation to the amount of the Available Cash and will be at least $0 and up to $3,075,000 (such additional amounts in clauses (ii) and (iii) being referred to herein as an “Incremental Deferred Underwriting Commission,” and together with the Minimum Deferred Underwriting Fee, the “Deferred Underwriting Fee”). As a result of the amendment, the reduction in deferred fees was split on a pro rata basis between additional paid-in capital and other income based upon the original amount of the deferred underwriting fee’s allocation to the liability-classified instruments in the Initial Public Offering. Therefore, the deferred underwriting fee was reduced by $6,365,867 during the three months ended December 31, 2022, of which $350,123 was shown in the statement of operations for the year ended December 31, 2022, as the partial reversal of transaction costs incurred in connection with the Initial Public Offering and $6,015,744 was charged to additional paid-in capital in the statement of stockholders’ deficit. As a result of the reduction, the outstanding deferred underwriting fee payable was reduced to $5,709,133.

For the three months ended March 31, 2023, net cash used in operating activities was $307,017. Net loss of $3,208,890 was affected by the change in fair value of convertible promissory note – related party of $7,800, change in fair value of warrant liabilities of $2,353,500, and interest earned on marketable securities held in Trust Account of $417,211. Changes in operating assets and liabilities provided $957,784 of cash from operating activities due primarily to an increase in accounts payable and accrued liabilities.

For the three months ended March 31, 2022, net cash used in operating activities was $96,508. Net income of $9,383,232 was affected by the change in fair value of warrant liabilities of $9,398,310, change in fair value of convertible promissory note – related party of $132,122, interest earned on marketable securities held in Trust Account of $174,761 and an unrealized gain on marketable securities held in Trust Account of $65,646. Changes in operating assets and liabilities provided $291,099 of cash from operating activities due primarily to an increase in accounts payable and accrued liabilities.

For the three months ended March 31, 2023, net cash provided by investing activities was $40,050 as a result of a withdrawal of interest earned on the Trust Account to pay tax obligations.

For the three months ended March 31, 2022, there were no cash transactions in investing activities.

For the three months ended March 31, 2023, net cash provided by financing activities was $347,000 as a result of the drawdowns on the Sponsor Convertible Promissory note.

For the three months ended March 31, 2022, net cash provided by financing activities was $300,000 as a result of the drawdowns on the Sponsor Convertible Promissory Note.

At March 31, 2023 we had cash held in the Trust Account of $42,940,237. Interest income on the balance in the Trust Account may be used by us to pay taxes. As of March 31, 2023, net cash provided by investing activities was $40,050 as a result of withdrawals of interest earned on the Trust Account to pay our tax obligations.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions, franchise taxes, and income taxes payable), to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

At March 31, 2023, we had cash of $103,968 outside of the Trust Account, accounts payable and accrued expenses of $3,079,327, and income taxes payable of $442,279. We intend to use the funds held outside the Trust Account in addition to the remaining amount unborrowed on the related party convertible promissory note of $891,505 after total draws of $1,017,495, primarily to complete a business combination.

In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, the sponsor or an affiliate of the sponsor or certain of our directors and officers may, but are not obligated to, lend us funds as may be required. If we complete a business combination, we would repay such lent amounts. In the event that a business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such lent amounts but no proceeds from our Trust Account would be used for such repayment. On September 13, 2021, our sponsor agreed to lend us an aggregate of up to $1,000,000 pursuant to a convertible promissory note for working capital purposes (as amended, the “Sponsor Convertible Promissory Note”). On May 1, 2023, in the amended and restated convertible promissory note, effective March 1, 2023, the Sponsor agreed to increase the aggregate amount to be drawn on the Sponsor Convertible Promissory Note for working capital purposes to $2,000,000. At March 31, 2023, there was $1,107,495 of cumulative cash advanced under the Sponsor Convertible Promissory Note.

Going Concern

As of March 31, 2023, the Company had $103,968 in its operating bank account, $42,940,237 in cash held in the Trust Account to be used for a Business Combination, or to repurchase or redeem its stock in connection therewith and a working capital deficit of $2,811,347, which excludes the permitted withdrawal should the Company elect to withdraw from the Trust Account for additional franchise taxes payable of $50,000 or income taxes payable of $442,279. As of March 31, 2023, $417,211 of the amount on deposit in the Trust Account represented interest income. Interest income earned on the Trust Account is available to pay the Company’s tax obligations. The Company has withdrawn from the Trust Account amounts totaling $1,017,482 and $40,050 as of December 31, 2022 and March 31, 2023, respectively, to pay the Company’s franchise and income tax obligations.

The Company may raise additional capital through loans or additional investments from the Sponsor or an affiliate of the Sponsor or certain of its directors and officers. The Sponsor may but is not obligated to (except as described below), lend the Company funds, from time to time in whatever amounts it deems reasonable in its sole discretion, to meet the Company’s working capital needs. On September 13, 2021, the Sponsor agreed to lend the Company an aggregate of up to $1,000,000 for working capital purposes pursuant to a convertible promissory note. On May 1, 2023, in the amended and restated convertible promissory note, effective March 1, 2023, the Sponsor agreed to increase the aggregate amount to be drawn on the convertible promissory note for working capital purposes to $2,000,000. The Company had drawn an aggregate of $1,107,495 under the convertible promissory note as of March 31, 2023, which includes drawdowns of $120,000 on September 13, 2021, $114,311 on October 5, 2021, $70,800 on October 26, 2021, $15,000 on November 29, 2021, $150,000 on January 31, 2022, $150,000 on March 31, 2022, $27,384 on November 9, 2022, $113,000 on December 27, 2022, $59,000 on January 17, 2023, and $288,000 on March 24, 2023. There can be no assurance that the Company will be able to obtain additional financing prior to completing the Business Combination, however. Moreover, the Company may need to obtain additional financing either to complete its Business Combination or because the Company becomes obligated to redeem a significant number of its public shares upon consummation of its Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its Business Combination.

If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

In connection with the Company’s assessment of going concern considerations in accordance with ASC Subtopic 205-40, Presentation of Financial Statements – Going Concern, pursuant to its Amended and Restated Certificate of Incorporation, the Company has until June 22, 2023, or such earlier date as determined by our board of directors, to consummate a Business Combination. If a Business Combination is not consummated by June 22, 2023, there will be a mandatory liquidation and subsequent dissolution of the Company. Although the Company intends to consummate a Business Combination on or before June 22, 2023, it is uncertain that the Company will be able to consummate a Business Combination by June 22, 2023. This, as well as its liquidity condition, raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after June 22, 2023.

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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2023.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our sponsor a monthly fee of $10,000 for certain administrative, research, transaction and other support services. We began incurring these fees on December 22, 2020 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation. For the three months ended March 31, 2023, administrative fees were $30,000 of which $20,000 were unpaid in accrued expenses and accounts payable. For the three months ended March 31, 2022, administrative fees were $30,000 of which $20,000 were unpaid in accrued expenses.

The underwriters are entitled to the Deferred Underwriting Fee. The Deferred Underwriting Fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement, as amended. Refer above to the discussion on the reduction to the deferred fees as of December 31, 2022.

Critical Accounting Policies

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Form 10-K for the year ended December 31, 2022, on file with the SEC.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report, as of March 31, 2023, an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)under the Exchange Act). Based on such evaluation, our CEO and CFO concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective, due solely to the material weaknesses in our internal control over financial reporting related to our accounting for complex financial instruments, as previously disclosed in our quarterly reports and our Form 10-K. As a result, we performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with GAAP. Accordingly, management believes that the condensed financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter of the fiscal year covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Form 10-K . Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Form 10-K.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On December 22, 2020, we consummated the Initial Public Offering of 34,500,000 Units, inclusive of 4,500,000 Units sold to the underwriters upon the underwriters’ election to fully exercise their over-allotment option at a price of $10.00 per Unit, generating total gross proceeds of $345,000,000. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (Nos. 333-251058 and 333-251448). The SEC declared the registration statements effective on December 17, 2020.

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Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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