SECURITIES AND EXCHANGE COMMISSION
____________________________
____________________________
(Mark One) | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 31, 2024 |
For the quarterly period ended March 31, 2021
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ____________ to ____________ |
FOR THE TRANSITION PERIOD FROM TO
Commission
File Number:file number 001-39790
GORES HOLDINGS VI,
____________________________
(Exact name of registrant as specified in its
Charter)charter)____________________________
| | | | | | | | | | | |
| Delaware | | | 85-1695048 |
(State or other jurisdiction of | | (I.R.S. Employer
|
incorporation or organization) | | | (I.R.S. Employer Identification No.) |
| | | |
| 352 East Java Drive |
6260 Lookout Rd.
| | Sunnyvale, California 94089 |
Boulder, CO
| | 80301
|
(Address of principal executive offices) | | (Zip Code)
Principal Executive Offices, including zip code) |
(310) 209-3010
(650) 641-2241
(
Registrant’sRegistrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Trading Symbols
| Name of each exchange on which registered |
Class A Common Stock, par value of $0.0001 per share | | MTTR | | GHVI
| The Nasdaq CapitalGlobal Market |
Warrants
| | GHVIW
| | Nasdaq Capital Market
|
Units
| | GHVIU
| | Nasdaq Capital Market
|
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),; and (2) has been subject to such filing requirements for the past 90 days. Yes Yesx☐ No Noo
☒Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes Yesx☒ No NO ☐o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitiondefinitions of “large accelerated
filer”,filer,” “accelerated
filer”,filer,” “smaller reporting
company,”company” and “emerging growth company” in Rule
12b‑212b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☐
☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☒
☐ | | Smaller reporting company | ☒
☐ |
| |
Emerging growth company | ☒
| | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act). YES Yes ☐ No ☒ NO ☐As of May 27, 2021, there were 34,500,000
The registrant had 314,517,957 shares of
the Company’s Class A common stock
par value $0.0001 per share, and 8,625,000 sharesoutstanding as of
the Company’s Class F common stock, par value $0.0001 per share, issued and outstanding.
TABLE OF CONTENTS
May 1, 2024.
Table of Contents
GORES HOLDINGS VI,
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Report, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements in this Report are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this document, including the inability to consummate the proposed transaction within the anticipated time period, or at all, due to any reason, including the failure to obtain required regulatory approvals or satisfy the other conditions to the consummation of the proposed transaction with CoStar Group; the risk that the proposed transaction with CoStar Group disrupts Matterport’s current plans and operations or diverts management’s attention from its ongoing business; the effects of the proposed transaction with CoStar Group on Matterport’s business, operating results, and ability to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom Matterport does business; the risk that Matterport’s stock price may decline significantly if the proposed transaction with CoStar Group is not consummated; the nature, cost and outcome of any legal proceedings related to the proposed transaction; our ability to grow market share in our existing markets or any new markets we may enter; our ability to respond to general economic conditions; our ability to manage our growth effectively; our success in retaining or recruiting our officers, key employees or directors, or changes required in the retention or recruitment of our officers, key employees or directors; the impact of the regulatory environment and complexities with compliance related to such environment; our ability to maintain an effective system of internal controls over financial reporting; our ability to achieve and maintain profitability in the future; our ability to access sources of capital; our ability to maintain and enhance our products and brand, and to attract customers; our ability to manage, develop and refine our technology platform; the success of our strategic relationships with third parties; our history of losses and whether we will continue to incur continuing losses for the foreseeable future; our ability to protect and enforce our intellectual property rights; our ability to implement business plans, forecasts, and other expectations and identify and realize additional opportunities; our ability to attract and retain new subscribers; the size of the total addressable market for our products and services; the continued adoption of spatial data; any inability to complete acquisitions and integrate acquired businesses; general economic uncertainty and the effect of general economic conditions in our industry; environmental uncertainties and risks related to adverse weather conditions and natural disasters; the volatility of the market price and liquidity of our Class A common stock, and other securities; the increasingly competitive environment in which we operate; and other factors detailed under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2024, and subsequently filed Quarterly Reports on Form 10-Q.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Part I- Financial Information
Item 1. Financial statements
CONDENSED CONSOLIDATED BALANCE
SHEETSHEETS | | March 31, 2021 | | | December 31, 2020 | |
| | (unaudited) | | | (audited) | |
CURRENT ASSETS: | | | | | | | | | | |
Cash and cash equivalents | | $ | | 176,595 | | | $ | | 633,266 | |
Prepaid assets | | | | 835,981 | | | | | 897,754 | |
Total current assets | | | | 1,012,576 | | | | | 1,531,020 | |
Deferred tax asset | | | | — | | | | | 26,273 | |
Investments and cash held in Trust Account | | | | 345,022,332 | | | | | 345,008,625 | |
Total assets | | $ | | 346,034,908 | | | $ | | 346,565,918 | |
| | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | | | |
Current liabilities: | | | | | | | | | | |
Accrued expenses, formation and offering costs | | $ | | 2,659,357 | | | $ | | 475,462 | |
Related party note | | | | 600,000 | | | | | — | |
State franchise tax accrual | | | | 50,000 | | | | | 55,241 | |
Public warrants derivative liability | | | | 27,255,000 | | | | | 11,040,000 | |
Private warrants derivative liability | | | | 17,577,500 | | | | | 7,120,000 | |
Total current liabilities | | | | 48,141,857 | | | | | 18,690,703 | |
Deferred underwriting compensation | | | | 12,075,000 | | | | | 12,075,000 | |
Total liabilities | | $ | | 60,216,857 | | | $ | | 30,765,703 | |
| | | | | | | | | | |
Commitments and Contingencies | | | | | | | | | | |
Class A Common Stock subject to possible redemption, 34,500,000 shares (at redemption value of $10 per share) | | | | 345,000,000 | | | | | 345,000,000 | |
| | | | | | | | | | |
Stockholders’ equity (deficit): | | | | | | | | | | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized, NaN issued or outstanding | | | | — | | | | | — | |
Common stock | | | | | | | | | | |
Class A Common Stock, $0.0001 par value; 400,000,000 shares authorized | | | | — | | | | | — | |
Class F Common Stock, $0.0001 par value; 40,000,000 shares authorized, 8,625,000 shares issued and outstanding | | | | 863 | | | | | 863 | |
Additional paid-in-capital | | | | — | | | | | — | |
Accumulated deficit | | | | (59,182,812 | ) | | | | (29,200,648 | ) |
| | | | | | | | | | |
Total stockholders’ equity (deficit) | | | | (59,181,949 | ) | | | | (29,199,785 | ) |
| | | | | | | | | | |
Total liabilities and stockholders’ equity (deficit) | | $ | | 346,034,908 | | | $ | | 346,565,918 | |
See
(In thousands, except per share data)
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 79,449 | | | $ | 82,902 | |
| | | |
| Short-term investments | 249,917 | | | 305,264 | |
| Accounts receivable, net of allowance of $760 and $1,155, as of March 31, 2024 and December 31, 2023, respectively | 18,473 | | | 16,925 | |
| Inventories | 8,457 | | | 9,115 | |
| Prepaid expenses and other current assets | 8,880 | | | 8,635 | |
| Total current assets | 365,176 | | | 422,841 | |
| Property and equipment, net | 31,808 | | | 32,471 | |
| Operating lease right-of-use assets | 493 | | | 625 | |
| Long-term investments | 89,409 | | | 34,834 | |
| Goodwill | 69,593 | | | 69,593 | |
| Intangible assets, net | 8,677 | | | 9,120 | |
| Other assets | 7,651 | | | 7,671 | |
| Total assets | $ | 572,807 | | | $ | 577,155 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities | | | |
| Accounts payable | $ | 6,929 | | | $ | 7,586 | |
| | | |
| Deferred revenue | 26,304 | | | 23,294 | |
| Accrued expenses and other current liabilities | 13,354 | | | 13,354 | |
| | | |
| Total current liabilities | 46,587 | | | 44,234 | |
| Warrants liability | 410 | | | 290 | |
| | | |
| | | |
| Deferred revenue, non-current | 2,803 | | | 3,141 | |
| | | |
| Other long-term liabilities | — | | | 206 | |
| Total liabilities | 49,800 | | | 47,871 | |
| Commitments and contingencies (Note 7) | | | |
| Redeemable convertible preferred stock, $0.0001 par value; 30,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; nil shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | — | | | — | |
| Stockholders’ equity: | | | |
| Common stock, $0.0001 par value; 640,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; and 314,507 shares and 310,061 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | 31 | | | 31 | |
| Additional paid-in capital | 1,337,794 | | | 1,307,324 | |
| Accumulated other comprehensive income (loss) | (216) | | | 403 | |
| Accumulated deficit | (814,602) | | | (778,474) | |
| Total stockholders’ equity | 523,007 | | | 529,284 | |
| Total liabilities and stockholders’ equity | $ | 572,807 | | | $ | 577,155 | |
The accompanying notes
to theare an integral part of these unaudited
interimcondensed consolidated financial statements.
3
GORES HOLDINGS VI,
MATTERPORT, INC.
STATEMENT
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three
| |
| | Months Ended
| |
| | March 31, 2021
| |
Professional fees and other expenses
| | $
| | (3,238,968
| )
|
State franchise taxes, other than income tax
| | | | (50,000
| )
|
Change in fair value of warrant liability
| | | | (26,672,500
| )
|
Net loss from operations
| | | | (29,961,468
| )
|
Other income - interest and dividend income
| | | | 13,707
| |
Loss before income taxes
| | | | (29,947,761
| )
|
Income tax expense
| | | | (26,273
| )
|
Net loss attributable to common shares
| | $
| | (29,974,034
| )
|
| | | | | |
Net loss per ordinary share:
| | | | | |
Class A Common Stock - basic and diluted
| | $
| | (0.70
| )
|
Class F Common Stock - basic and diluted
| | $
| | (0.70
| )
|
(In thousands, except per share data)See
(unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Revenue: | | | | | | | |
| Subscription | $ | 24,015 | | | $ | 19,874 | | | | | |
| | | | | | | |
| Services | 9,103 | | | 8,704 | | | | | |
| Product | 6,754 | | | 9,416 | | | | | |
| Total revenue | 39,872 | | | 37,994 | | | | | |
| Costs of revenue: | | | | | | | |
| Subscription | 7,643 | | | 6,962 | | | | | |
| | | | | | | |
| Services | 6,375 | | | 6,244 | | | | | |
| Product | 6,262 | | | 8,376 | | | | | |
| Total costs of revenue | 20,280 | | | 21,582 | | | | | |
| Gross profit | 19,592 | | | 16,412 | | | | | |
| Operating expenses: | | | | | | | |
| Research and development | 14,900 | | | 18,273 | | | | | |
| Selling, general, and administrative | 45,476 | | | 54,933 | | | | | |
| Total operating expenses | 60,376 | | | 73,206 | | | | | |
| Loss from operations | (40,784) | | | (56,794) | | | | | |
| Other income (expense): | | | | | | | |
| Interest income | 2,264 | | | 1,471 | | | | | |
| | | | | | | |
| | | | | | | |
| Change in fair value of warrants liability | (120) | | | 222 | | | | | |
| | | | | | | |
| Other income, net | 2,553 | | | 1,183 | | | | | |
| Total other income | 4,697 | | | 2,876 | | | | | |
| Loss before provision for income taxes | (36,087) | | | (53,918) | | | | | |
| Provision for (benefit from) income taxes | 41 | | | (76) | | | | | |
| Net loss | $ | (36,128) | | | $ | (53,842) | | | | | |
| | | | | | | |
| | | | | | | |
| Net loss per share, basic and diluted | $ | (0.12) | | | $ | (0.18) | | | | | |
| | | | | | | |
| | | | | | | |
| Weighted-average shares used in per share calculation, basic and diluted | 313,008 | | | 293,074 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes
to theare an integral part of these unaudited
interimcondensed consolidated financial statements.
GORES HOLDINGS VI,
MATTERPORT, INC.
STATEMENT
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)For the Three Months Ended March 31, 2021
(Unaudited)
COMPREHENSIVE LOSS | | Class A Common Stock | | | Class F Common Stock | | | Additional | | | Accumulated | | | Stockholders' | |
| | Shares | | | Amount | | | | Shares | | | Amount | | | Paid-In Capital | | | Deficit | | | Equity (Deficit) | |
Balance at January 1, 2021 | | | - | | | $ | | - | | | | | 8,625,000 | | | $ | | 863 | | | $ | | - | | | $ | | (29,200,648 | ) | | $ | | (29,199,785 | ) |
Subsequent measurement under ASC 480-10-S99 against accumulated deficit | | | - | | | | | - | | | | | - | | | | | - | | | | | - | | | | | (8,130 | ) | | | | (8,130 | ) |
Net loss | | | - | | | | | - | | | | | - | | | | | - | | | | | - | | | | | (29,974,034 | ) | | | | (29,974,034 | ) |
Balance at March 31, 2021 | | | - | | | $ | | - | | | | | 8,625,000 | | | $ | | 863 | | | $ | | 0 | | | $ | | (59,182,812 | ) | | $ | | (59,181,949 | ) |
See
| | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
| Net loss | | | | | $ | (36,128) | | | $ | (53,842) | |
| Other comprehensive income (loss), net of taxes: | | | | | | | |
| | | | | | | |
| Unrealized gain (loss) on available-for-sale securities, net of tax | | | | | (619) | | | 2,223 | |
| Other comprehensive income (loss) | | | | | $ | (619) | | | $ | 2,223 | |
| Comprehensive loss | | | | | $ | (36,747) | | | $ | (51,619) | |
The accompanying notes
to theare an integral part of these unaudited
interimcondensed consolidated financial
statementsstatements.
MATTERPORT, INC.
STATEMENT
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock | | | | | | | | | | | | | |
| | | | | | Shares | | Amount | | Additional Paid-In Capital | | | | | | Accumulated Other Comprehensive loss | | Accumulated Deficit | | Total Stockholders’ Equity | |
| Balance as of December 31, 2023 | | | | | | 310,061 | | | $ | 31 | | | $ | 1,307,324 | | | | | | | $ | 403 | | | $ | (778,474) | | | $ | 529,284 | | |
| Net loss | | | | | | — | | | — | | | — | | | | | | | — | | | (36,128) | | | (36,128) | | |
| Other comprehensive loss | | | | | | — | | | — | | | — | | | | | | | (619) | | | — | | | (619) | | |
| Issuance of common stock in connection with employee equity incentive plans, net of tax withholding | | | | | | 4,446 | | | — | | | 259 | | | | | | | — | | | — | | | 259 | | |
| | | | | | | | | | | | | | | | | | | | | |
| Stock-based compensation | | | | | | — | | | — | | | 30,211 | | | | | | | — | | | — | | | 30,211 | | |
| Balance as of March 31, 2024 | | | | | | 314,507 | | | $ | 31 | | | $ | 1,337,794 | | | | | | | $ | (216) | | | $ | (814,602) | | | $ | 523,007 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock | | | | | | | | | | | | | |
| | | | | | Shares | | Amount | | Additional Paid-In Capital | | | | | | Accumulated Other Comprehensive loss | | Accumulated Deficit | | Total Stockholders’ Equity | |
| Balance as of December 31, 2022 | | | | | | 290,541 | | | $ | 29 | | | $ | 1,168,313 | | | | | | | $ | (5,034) | | | $ | (579,397) | | | $ | 583,911 | | |
| Net loss | | | | | | — | | | — | | | — | | | | | | | — | | | (53,842) | | | (53,842) | | |
| Other comprehensive income | | | | | | — | | | — | | | — | | | | | | | 2,223 | | | — | | | 2,223 | | |
| Issuance of common stock in connection with employee equity incentive plans, net of tax withholding | | | | | | 4,910 | | | 1 | | | 356 | | | | | | | — | | | — | | | 357 | | |
| Issuance of common stock in connection with acquisitions | | | | | | 249 | | | — | | | 3,921 | | | | | | | — | | | — | | | 3,921 | | |
| Stock-based compensation | | | | | | — | | | — | | | 33,510 | | | | | | | — | | | — | | | 33,510 | | |
| Balance as of March 31, 2023 | | | | | | 295,700 | | | $ | 30 | | | $ | 1,206,100 | | | | | | | $ | (2,811) | | | $ | (633,239) | | | $ | 570,080 | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MATTERPORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Three
| |
| | Months Ended
| |
Cash flows from operating activities:
| | March 31, 2021
| |
Net loss
| | $
| | (29,974,034
| )
|
Changes in state franchise tax accrual
| | | | (5,241
| )
|
Changes in prepaid assets
| | | | 61,773
| |
Changes in accrued expenses, formation and offering costs
| | | | 2,183,895
| |
Change in fair value of warrant liability
| | | | 26,672,500
| |
Changes in deferred income tax
| | | | 26,273
| |
Net cash used in operating activities
| | | | (1,034,834
| )
|
Cash used in investing activities:
| | | | | |
Interest and dividends reinvested in the Trust Account
| | | | (13,707
| )
|
Net cash used in investing activities
| | | | (13,707
| )
|
Cash flows from financing activities:
| | | | | |
Proceeds from notes and advances payable – related party
| | | | 600,000
| |
Payment of issuance expenses
| | | | (8,130
| )
|
Net cash provided by financing activities
| | | | 591,870
| |
Increase in cash
| | | | (456,671
| )
|
Cash at beginning of period
| | | | 633,266
| |
Cash at end of period
| | $
| | 176,595
| |
Supplemental disclosure of income and franchise taxes paid:
| | | | | |
Cash paid for income and state franchise taxes
| | $
| | 55,241
| |
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023See
(In thousands, unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net loss | $ | (36,128) | | | $ | (53,842) | |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | |
| Depreciation and amortization | 5,576 | | | 4,391 | |
| | | |
| Accretion of discounts, net of amortization of investment premiums | (2,919) | | | (681) | |
| | | |
| Stock-based compensation, net of amounts capitalized | 27,951 | | | 31,074 | |
| Change in fair value of warrants liability | 120 | | | (222) | |
| | | |
| Deferred income taxes | — | | | (184) | |
| | | |
| | | |
| Allowance for doubtful accounts | (241) | | | 289 | |
| Loss from excess inventory and purchase obligation | — | | | 622 | |
| Other | 154 | | | (381) | |
| Changes in operating assets and liabilities, net of effects of businesses acquired: | | | |
| Accounts receivable | (1,308) | | | (1,261) | |
| Inventories | 658 | | | (3,258) | |
| Prepaid expenses and other assets | 481 | | | 1,308 | |
| Accounts payable | (657) | | | (2,287) | |
| Deferred revenue | 2,672 | | | 1,841 | |
| Accrued expenses and other liabilities | (202) | | | 2,193 | |
| Net cash used in operating activities | (3,843) | | | (20,398) | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| Purchases of property and equipment | (43) | | | (87) | |
| Capitalized software and development costs | (2,169) | | | (2,567) | |
| Purchase of investments | (99,609) | | | (57,577) | |
| Maturities of investments | 102,106 | | | 108,806 | |
| | | |
| | | |
| Business acquisitions, net of cash acquired | — | | | (1,676) | |
| Net cash provided by investing activities | 285 | | | 46,899 | |
| CASH FLOW FROM FINANCING ACTIVITIES: | | | |
| | | |
| | | |
| | | |
| Proceeds from the sales of shares through employee equity incentive plans | 259 | | | 686 | |
| Payments for taxes related to net settlement of equity awards | — | | | (329) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Net cash provided by financing activities | 259 | | | 357 | |
| Net change in cash and cash equivalents | (3,299) | | | 26,858 | |
| Effect of exchange rate changes on cash | (154) | | | 329 | |
| Cash and cash equivalents, at beginning of year | 82,902 | | | 117,128 | |
| Cash and cash equivalents, at end of period | $ | 79,449 | | | $ | 144,315 | |
| | | |
| | | |
| | | |
| | | |
| Supplemental disclosures of non-cash investing and financing information | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Common stock issued in connection with acquisition | $ | — | | | $ | 3,921 | |
| Unpaid cash consideration in connection with acquisition | $ | — | | | $ | 2,434 | |
The accompanying notes
to theare an integral part of these unaudited
interimcondensed consolidated financial statements.
6
GORES HOLDINGS VI,
NOTES TO
THE UNAUDITED, INTERIMCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. OrganizationORGANIZATION AND DESCRIPTION OF BUSINESS
Matterport, Inc., together with its subsidiaries (“Matterport” or the “Company”), is leading the digitization and
Business OperationsOrganizationdatafication of the built world. Matterport’s pioneering technology has set the standard for digitizing, accessing and General
Gores Holdings VI, Inc. (the “Company”)managing buildings, spaces and places online. Matterport’s platform comprised of innovative software, spatial data-driven data science, and 3D capture technology has broken down the barriers that have kept the largest asset class in the world, buildings and physical spaces, offline and underutilized for so long. The Company was incorporated in the state of Delaware on June 29, 2020.in 2011. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businessesis headquartered at Sunnyvale, California.
On July 22, 2021 (the “Business Combination”). The Company has neither engaged in any operations nor generated any revenue to date. The Company’s management has broad discretion with respect to the Business Combination. The Company’s Sponsor is Gores Sponsor VI, LLC, a Delaware limited liability company (the “Sponsor”). The Company has selected December 31st as its fiscal year-end.The Company completed the Public Offering on December 15, 2020 (the “IPO Closing“Closing Date”). The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. Subsequent to the Public Offering,, the Company will generate non-operating incomeconsummated the merger (collectively with the other transactions described in the formMerger Agreement, the “Merger”, “Closing”, or “Transactions”) pursuant to an Agreement and Plan of interest income on cash and cash equivalents from the proceeds derived from the Public Offering and the sale of the Private Placement Warrants (as defined below) held in the Trust Account (as defined below).
Proposed Matterport Business Combination
OnMerger, dated February 7, 2021 the Company entered into a Merger Agreement,(the “Merger Agreement”), by and among the Company
(formerly known as Gores Holdings VI, Inc.), the pre-Merger Matterport, Inc. (now known as Matterport Operating, LLC) (“Legacy Matterport”), Maker Merger Sub, Inc. (“First Merger Sub”), a direct, wholly owned subsidiary of the Company, and Maker Merger Sub II, LLC (“Second Merger Sub”), a direct, wholly owned subsidiary of the Company, pursuant to which First Merger Sub Second Merger Sub,merged with and into Legacy Matterport, which provides for, among other things: (a)with Legacy Matterport continuing as the First Merger;surviving corporation (the “First Merger”), and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, Legacy Matterport merged with and into Second Merger Sub, with Second Merger Sub continuing as the Second Merger. The transactions set forth in the Merger Agreement, including the Mergers, will constitutesurviving entity as a “Business Combination” as contemplated by the Company’s Amended and Restated Certificate of Incorporation.The Merger Agreement and the transactions contemplated thereby were unanimously approved by the Board of Directorswholly owned subsidiary of the Company, on February 7, 2021 andunder the Matterport Board on February 7, 2021.
The Merger Agreement
Merger Consideration
Pursuant to the terms of the Merger Agreement, at the effective time of the First Merger (the “Effective Time”), each share of Matterport’s common stock, par value $0.001 per share (“Matterport Common Stock”), will be converted into the right to receive a number of newly-issued shares of the Company’s Class A common stock, par value $0.0001 per share (“Company Class A common stock”), equal to the Per Share Company Common Stock Consideration (as defined in the Merger Agreement) and each share of Matterport’s preferred stock, par value $0.001 per share (“Matterport Preferred Stock”), will be converted into the right to receive a number of newly-issued shares of Company Class A common stock equal to the Per Share Company Preferred Stock Consideration (as defined in the Merger Agreement)new name “Matterport Operating, LLC”. Pursuant to the terms of the Merger Agreement, the Company is required to use reasonable best efforts to cause the shares of Company Class A common stock to be issued in connection with the transactions contemplated by the Merger Agreement (the “Business Combination”) to be listed on the Nasdaq Capital Market (the “Nasdaq”) atUpon the closing of the Business Combination.
PursuantMerger, we changed our name to Matterport, Inc.
Unless the context otherwise requires, the “Company” refers to the combined company and its subsidiaries following the Merger, “Gores” refers to the Company prior to the Merger
Agreement, the aggregate merger consideration payable at the closing of the Business Combinationand “Legacy Matterport” refers to
all of the stockholders and holders of equity awards of Matterport,
will be an aggregate number of shares, or equity awards exercisable for shares, of Company Class A common stock (deemed to have a value of $10.00 per share) equal to $2,188,750,000, divided by $10.00.In addition to the consideration to be paid at the closing of the Business Combination, stockholders of Matterport will be entitled to receive their pro rata share of an additional number of earn-out shares from the
7
Company, issuable in Company Class A common stock and subject to the terms provided in the Merger Agreement, up to an aggregate of 23,460,000 shares collectively issuable to all Matterport equity holders.
Treatment of Matterport’s Equity Awards
Pursuant to the Merger Agreement, at the closing of the Business Combination, each of Matterport’s stock options, to the extent then outstanding and unexercised, will automatically be converted into (a) an option to acquire a certain number of shares of Company Class A common stock (pursuant to a ratio based on the Per Share Company Common Stock Consideration), at an adjusted exercise price per share and (b) the right to receive a pro rata portion of a number of earn-out shares from the Company, issuable in Company Class A common stock and subject to the terms provided in the Merger Agreement (including that such right to receive earn-out shares is conditional on the holder continuing to provide services to the Company), up to an aggregate of 23,460,000 shares collectively issuable to all Matterport equity holders. Each such converted option will be subject to the same terms and conditions as were applicable immediately prior to such conversion.
Pursuant to the Merger Agreement, at the closing of the Business Combination, each of Matterport’s restricted stock units, to the extent then unvested and outstanding, will automatically be converted into (a) an award of restricted stock units covering a certain number of shares of Company Class A common stock (pursuant to a ratio based on the Per Share Company Common Stock Consideration) and (b) the right to receive a pro rata portion of a number of earn-out shares from the Company, issuable in Company Class A common stock and subject to the terms provided in the Merger Agreement (including that such right to receive earn-out shares is conditional on the holder continuing to provide services to the Company), up to an aggregate of 23,460,000 shares collectively issuable to all Matterport equity holders. Each such converted restricted stock unit will be subject to the same terms and conditions as were applicable immediately prior to such conversion.
Private Placement Subscription Agreements
On February 7, 2021, the Company entered into subscription agreements (each, a “Subscription Agreement” and collectively, the “Subscription Agreements”) with certain investors, including certain individuals (each, an “Individual Investor Subscription Agreement”), institutional investors (each, an “Institutional Investor Subscription Agreement”) and Gores Sponsor VI LLC (the “Sponsor”), pursuant to which the investors have agreed to purchase an aggregate of 29,500,000 shares of Class A common stock in a private placement for $10.00 per share (the “Private Placement”). The proceeds from the Private Placement will remain on the Company’s balance sheet following the consummation of the Business Combination.
Each Subscription Agreement will terminate with no further force and effect upon the earliest to occur of: (a) such date and time as the Merger Agreement is terminated in accordance with its terms; (b) upon the mutual written agreement of the parties to such Subscription Agreement; (c) if any of the conditions to closing set forth in such Subscription Agreement are not satisfied or waived on orInc. prior to the closing and, as a result thereof, the transactions contemplated by such Subscription Agreement are not consummated at the closing; and (d) if the closingMerger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of
the Business Combination shall not have occurred by September 7, 2021. As of the date hereof, the shares of Class A common stock to be issued pursuant to the Subscription Agreements have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). The Company will, within 30 days after the closing, file with the Securities and Exchange Commission (“SEC”) a registration statement (the “Post-Closing Registration Statement”) registering the resale of such shares of Class A Common Stock and will use its commercially reasonable efforts to have such Post-Closing Registration Statement declared effective as soon as practicable after the filing thereof.The subscription agreements are accounted for as equity given that the shares are only contingently issuable. There is no impact on basic or diluted net income/(loss) per share.
Financing
Upon the IPO Closing Date and the sale of the Private Placement Warrants, an aggregate of $345,000,000 was placed in a Trust Account with Continental Stock Transfer & Trust Company (the “Trust Account”) acting as Trustee.
The Company intends to finance the Proposed Business Combination with the net proceeds from its $345,000,000 Public Offering and its sale of $8,900,000 of Private Placement Warrants.
8
Trust Account
Funds held in the Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a‑7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government obligations. As of March 31, 2021, the Trust Account consisted of cash and money market funds.
Significant Accounting Policies
The Company’s amended and restated certificatesignificant accounting policies are discussed in “Note 2 – Summary of incorporation provides that, other than the withdrawal of interest to fund regulatory compliance requirements and other costs related thereto (a “Regulatory Withdrawal”) for a maximum 24 months and/or additional amounts necessary to pay franchise and income taxes, if any, none of the funds held in trust will be released until the earliest of: (i) the completion of the Business Combination; or (ii) the redemption of any public shares of common stock properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timingSignificant Accounting Policies” of the Company’s obligation to redeem 100% of such public shares of common stock ifAnnual Report on Form 10-K for the Company does not complete the Business Combination within 24 months from the IPO Closing Date; or (iii) the redemption of 100% of the public shares of common stock if the Company is unable to complete a Business Combination within 24 months from the IPO Closing Date, subject to the requirements of law and stock exchange rules.Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination. The Business Combination must be with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (less any deferred underwriting commissions and taxes payable on interest income earned) at the time of the Company signing a definitive agreement in connectionfiscal year ended December 31, 2023, which was filed with the Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination, including the Proposed Business Combination.
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount thenSEC on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest income but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest income but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under Nasdaq rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. Currently, the Company will not redeem its public shares of common stock in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its public shares of common stock and the related Business Combination, and instead may search for an alternate Business Combination. For business and other reasons, the Company has elected to provide its stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote to approve the Proposed Business Combination rather than a tender offer.
As a result of the foregoing redemption provisions, the public shares of common stockFebruary 27, 2024. There have been recorded at redemption amount and classified as temporary equity, in accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “no significant changes to these policies during the
Distinguishing Liabilities from Equity” (“ASC 480”) in subsequent periods.9
The Company will have 24three months from the IPO Closing Date to complete its Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest income, but less taxes payable (less up to $100,000 of such net interest income to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which they waived their rights to participate in any redemption with respect to their Founder Shares (as defined below); however, if the Sponsor or any of the Company’s officers, directors or affiliates acquire public shares of common stock, they will be entitled to a pro rata share of the Trust Account in the event the Company does not complete a Business Combination within the required time period.
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the Public Offering.
Emerging Growth Company
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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
2. Significant Accounting Policies
ended March 31, 2024.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosureapplicable rules and regulations of the SEC, regarding interim financial reporting. Certain information and reflectdisclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in the Company’s 2023 Form 10-K for the fiscal year ended December 31, 2023, which provides a more complete discussion of the Company’s accounting policies and certain other information.
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting
of only
of normal recurring adjustments,
which are, in the opinion of management, necessary for a fair
presentationstatement of
theits financial position as of March 31,
20212024, and
theits results of operations
and cash flows for the periods presented. Operating results for the three months ended March 31,
2021 are not necessarily indicative of results that may be expected2024 and 2023, and cash flows for
the full year or any other period. The Company was formed on June 29, 2020. Therefore, these financials statements do not include comparative statements to prior 2020 periods.Net Income/(Loss) Per Common Share
The Company has two classes of shares, which are referred to as Class A Common Stock (the “Common Stock”) and Class F Common Stock (the “Founders Shares”). Earnings and losses are shared pro rata between the two classes of shares. Private and public warrants to purchase
10
11,350,000 shares of Common Stock at $11.50 per share were issued on December 15, 2020. NaN warrants were exercised during the three months ended March 31, 2021.2024 and 2023. The 11,350,000 potential common shares for outstanding warrantscondensed consolidated balance sheet as of December 31, 2023, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Reclassification
Certain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to purchaseconform to the Company’s stock were excluded from diluted earnings per share in 2021 ascurrent period presentation.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company had aand its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the condensed consolidated financial statements and accompanying notes. Significant estimates include assumptions related to the fair value of common stock before the Merger and other assumptions used to measure stock-based compensation, fair value of assets acquired and liabilities assumed in business combinations, fair value of identified intangibles, goodwill impairment, valuation of deferred tax assets, the estimate of net realizable value of inventory, allowance for doubtful accounts, the fair value of warrants liability, loss forcontingencies, and the period.determination of stand-alone selling price of various performance obligations. As a result, diluted net income/(loss) per common sharemany of the Company’s estimates and assumptions require increased judgment and these estimates may change materially in future periods.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and various other factors, including the current economic environment, which management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company adjusts such estimates and assumptions when dictated by facts and circumstances. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the condensed consolidated financial statements in future periods. Actual results may differ materially from those estimates.
Segment Information
The Company has a single operating segment and reportable segment. The Company’s chief operating decision-maker (“CODM”) is
its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. Refer to Note 3 for information regarding the
same as basic net income/(loss) per common share forCompany’s revenue by geography. Substantially all of the
period.Company’s long-lived assets are located in the United States. | | Three Months Ended March 31, 2021 | |
| | Class A | | | Class F | |
Basic and diluted net income/(loss) per share: | | | | | | | | | | |
Numerator: | | | | | | | | | | |
Allocation of net income/(loss) | | $ | | (23,985,731 | ) | | $ | | (5,996,433 | ) |
| | | | | | | | | | |
Denominator: | | | | | | | | | | |
Weighted-average shares outstanding | | | | 34,500,000 | | | | | 8,625,000 | |
Basic and diluted net income/(loss) per share | | $ | | (0.70 | ) | | $ | | (0.70 | ) |
Concentration of Credit Risk
and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, and accounts receivable. The Company maintains its cash balances in aaccounts held by major banks and financial institutioninstitutions located in the United States. Such bank deposits from time to time may be exposed to credit risk in excess of the Federal Deposit Insurance Corporation insurance limit, and the Company considers such risk to be minimal.
We invest only in high-quality credit instruments and maintain our cash and cash equivalents and available-for-sale investments in fixed income securities. Management believes that the financial institutions that hold our investments are financially sound and, accordingly, are subject to minimal credit risk. Deposits held with banks may exceed the amount of insurance provided on such deposits.
The Company’s accounts receivable is derived from customers located both inside and outside the United States. The Company mitigates its credit risks by performing ongoing credit evaluations of the financial condition of its customers and requires advance payment from customers in certain circumstances. The Company generally does not require collateral from its customers.
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
No customer accounted for more than 10% of the Company’s total accounts receivable at March 31, 2024 and December 31, 2023. No customer accounted for more than 10% of the Company’s total revenue for the three months ended March 31, 2024 and 2023.
Accounting Pronouncements – Recently Issued Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the CODM, as well as the Trust Account, which at times, may exceedaggregate amount of other segment items included in the Federal depository insurance coveragereported measure of $250,000. The Company has not experienced losses on these accounts.Financial Instruments
The fair valuesegment profit or loss, the title and position of the Company’s assetsCODM and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) approximatesan explanation of how the carrying amounts represented in the balance sheet.
Offering Costs
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to our Public Offering and were charged to equity upon the completion of our Public Offering.
Redeemable Common Stock
As discussed in Note 4, all of the 34,500,000 Class A Common Stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all Class A Common Stock has been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affectCODM uses the reported amountsmeasure(s) of assetssegment profit or loss. This ASU will be applied retrospectively and liabilitiesis effective for public entities for annual periods beginning after December 15, 2023 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during thefor interim reporting period. One of the more significant accounting estimates included in these financial statementsperiods beginning after December 15, 2024. Early adoption is the determination of the fair value of the warrant liability. Such estimates may be
11
permitted.
subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
For those liabilities or benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax liabilities as income tax expense. NaN amounts were accrued for the payment of interest and penalties at March 31, 2021.
The Company may be subject to potential examination by U.S. federal, states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal, states or foreign tax laws.
The Company is incorporated incurrently assessing the State of Delaware and is required to pay franchise taxes toimpact the State of Delaware on an annual basis.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with and the credit quality of the financial institutions with which it invests. Periodically, the Company may maintain balances in various operating accounts in excess of federally insured limits.
Investments and Cash Held in Trust Account
At March 31, 2021, the Company had $345,022,332 in the Trust Account which may be utilized for Business Combinations. At March 31, 2021, the Trust Account consisted of cash and money market funds.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, none of the funds held in trustguidance will be released until the earlier of: (i) the completion of the Business Combination; (ii) the redemption of any public shares of common stock properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of such public shares of common stock if the Company does not complete the Business Combination within 24 months from the IPO Closing Date; or (iii) the redemption of 100% of the public shares of common stock if the Company is unable to complete a Business Combination within 24 months from the IPO Closing Date, subject to the requirements of law and stock exchange rules.
Warrant Liability
The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in the Company’s the statement of operations. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a
12
component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Recently Issued Accounting Pronouncements Not Yet Adopted
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements basedand disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency, effectiveness and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on current operationsa prospective basis. Early adoption and retrospective application are permitted. The Company is currently assessing the impact the guidance will have on the Company’s financial statements and disclosures.
3. REVENUE
Disaggregated Revenue—The following table shows the revenue by geography for the three months ended March 31, 2024 and 2023, respectively (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Revenue: | | | | | | | |
| United States | $ | 25,899 | | | $ | 24,226 | | | | | |
| International | 13,973 | | | 13,768 | | | | | |
| Total revenue | $ | 39,872 | | | $ | 37,994 | | | | | |
No country other than the United States accounted for more than 10% of the Company.Company’s revenue for the three months ended March 31, 2024 and 2023, respectively. The impactgeographical revenue information is determined by the ship-to address of the products and the billing address of the customers of the services.
The following table shows over time versus point-in-time revenue for the three months ended March 31, 2024 and 2023, respectively (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Over time revenue | $ | 33,118 | | | $ | 28,551 | | | | | |
| Point-in-time revenue | 6,754 | | | 9,443 | | | | | |
| Total | $ | 39,872 | | | $ | 37,994 | | | | | |
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Contract Asset and Liability Balances—Contract assets consist of unbilled accounts receivable and are recorded when revenue is recognized in advance of scheduled billings. Scheduled billings in advance of revenue recognized results in the timing of revenue recognition differing from the timing of invoicing to customers, and this timing difference results in contract liabilities (deferred revenue) on the Company’s condensed consolidated balance sheets. The accounts receivable and contract balances as of March 31, 2024 and December 31, 2023 were as follows (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Accounts receivable, net | $ | 15,835 | | | $ | 15,094 | |
| Unbilled accounts receivable | $ | 2,638 | | | $ | 1,831 | |
| Deferred revenue | $ | 29,107 | | | $ | 26,435 | |
During the three months ended March 31, 2024 and 2023, the Company recognized revenue of $11.1 million and $5.9 million that was included in the deferred revenue balance at the beginning of the fiscal year, respectively. Contracted but unsatisfied performance obligations were $65.1 million at the end of March 31, 2024 and consisted of deferred revenue and backlog.
As of March 31, 2024, the contracted but unsatisfied or partially unsatisfied performance obligations expected to be recognized are as follows (in thousands):
| | | | | | | | |
| | Amount |
| Remaining 2024 | | $ | 40,189 | |
| 2025 | | 14,778 | |
| 2026 | | 7,386 | |
| 2027 | | 2,031 | |
| 2028 | | 722 | |
| Thereafter | | — | |
| Total | | $ | 65,106 | |
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. GOODWILL AND INTANGIBLE ASSETS
Goodwill—As of March 31, 2024 and December 31, 2023, goodwill was $69.6 million. The Company did not recognize any impairment losses on goodwill during the three months ended March 31, 2024 and 2023, respectively.
Purchased Intangible Assets—The following table presents details of the Company’s purchased intangible assets as of March 31, 2024 and December 31, 2023 (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 | |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | |
| Intangible assets subject to amortization: | | | | | | | | | | | | |
| Developed technology | $ | 5,400 | | | $ | (2,415) | | | $ | 2,985 | | | $ | 5,400 | | | $ | (2,146) | | | $ | 3,254 | | |
| Customer relationships | 6,900 | | | (1,208) | | | 5,692 | | | 6,900 | | | (1,034) | | | 5,866 | | |
| Total | $ | 12,300 | | | $ | (3,623) | | | $ | 8,677 | | | $ | 12,300 | | | $ | (3,180) | | | $ | 9,120 | | |
The Company recognized amortization expense of $0.4 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively. The Company did not recognize any impairment losses on intangible assets or other long-lived assets during the three months ended March 31, 2024 and 2023, respectively.
The following table summarizes estimated future amortization expense for the Company’s intangible assets as of March 31, 2024 (in thousands):
| | | | | |
| Amount |
| Remaining 2024 | $ | 1,327 | |
| 2025 | 1,770 | |
| 2026 | 1,770 | |
| 2027 | 705 | |
| 2028 | 690 | |
| 2028 and thereafter | 2,415 | |
| Total future amortization expense | $ | 8,677 | |
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. BALANCE SHEET COMPONENTS
Allowance for Doubtful Accounts—Allowance for doubtful accounts as of March 31, 2024 and 2023 and the rollforward for the three months ended March 31, 2024 and 2023 were as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Balance—beginning of period | $ | (1,155) | | | $ | (1,212) | | | | | |
| Decrease (increase) in reserves | 241 | | | (289) | | | | | |
| Write-offs | 154 | | | 206 | | | | | |
| Balance—end of period | $ | (760) | | | $ | (1,295) | | | | | |
Inventories—Inventories as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Finished goods | $ | 5,157 | | | $ | 6,179 | |
| Work in process | 859 | | | 826 | |
| Purchased parts and raw materials | 2,441 | | | 2,110 | |
| Total inventories | $ | 8,457 | | | $ | 9,115 | |
Property and Equipment, Net—Property and equipment as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Machinery and equipment | $ | 4,091 | | | $ | 4,087 | |
| Furniture and fixtures | 355 | | | 355 | |
| Leasehold improvements | 751 | | | 713 | |
| Capitalized software and development costs | 79,551 | | | 75,123 | |
| Total property and equipment | 84,748 | | | 80,278 | |
| Accumulated depreciation and amortization | (52,940) | | | (47,807) | |
| Total property and equipment, net | $ | 31,808 | | | $ | 32,471 | |
Depreciation and amortization expenses of property and equipment were $5.1 million and $3.9 million for the three months ended March 31, 2024 and 2023, respectively.
Additions to capitalized software and development costs, inclusive of stock-based compensation in the three months ended March 31, 2024 and 2023, was $4.4 million and $5.0 million, respectively. These are recorded as part of property and equipment, net on the condensed consolidated balance sheets.
Amortization expense was $4.9 million and $3.8 million for three months ended March 31, 2024 and 2023, respectively, of which $4.5 million and $3.5 million was recorded to costs of revenue related to subscription and $0.4 million and $0.3 million to selling, general and administrative in the condensed consolidated statements of operations, respectively.
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Accrued Expenses and Other Current Liabilities—Accrued expenses and other current liabilities as of March 31, 2024 and December 31, 2023, consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Accrued compensation | $ | 4,659 | | | $ | 4,362 | |
| Tax payable | 1,133 | | | 1,107 | |
| ESPP contribution | 699 | | | 243 | |
| Short-term operating lease liabilities | 1,155 | | | 1,277 | |
| | | |
| | | |
| Other current liabilities | 5,708 | | | 6,365 | |
| Total accrued expenses and other current liabilities | $ | 13,354 | | | $ | 13,354 | |
6. FAIR VALUE MEASUREMENTS
We categorize assets and liabilities recorded or disclosed at fair value on our condensed consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:
Level 1—Inputs are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The inputs require significant management judgment or estimation.
The Company’s financial assets and liabilities that were measured at fair value on a recurring basis were as follows (in thousands):
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Financial Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 60,556 | | | $ | — | | | $ | — | | | $ | 60,556 | |
| Total cash equivalents | $ | 60,556 | | | $ | — | | | $ | — | | | $ | 60,556 | |
| Short-term investments: | | | | | | | |
| U.S. government and agency securities | $ | 231,393 | | | $ | — | | | $ | — | | | $ | 231,393 | |
| | | | | | | |
| Corporate debt securities | — | | | 13,587 | | | — | | | 13,587 | |
| Commercial paper | — | | | 4,937 | | | — | | | 4,937 | |
| Total short-term investments | $ | 231,393 | | | $ | 18,524 | | | $ | — | | | $ | 249,917 | |
| Long-term investments: | | | | | | | |
| U.S. government and agency securities | $ | 26,287 | | | $ | — | | | $ | — | | | $ | 26,287 | |
| Non-U.S. government and agency securities | — | | | 9,539 | | | — | | | 9,539 | |
| Corporate debt securities | — | | | 53,583 | | | — | | | 53,583 | |
| | | | | | | |
| Total long-term investments | $ | 26,287 | | | $ | 63,122 | | | $ | — | | | $ | 89,409 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total assets measured at fair value | $ | 318,236 | | | $ | 81,646 | | | $ | — | | | $ | 399,882 | |
| | | | | | | |
| Financial Liabilities: | | | | | | | |
| Private warrants liability | $ | — | | | $ | — | | | $ | 410 | | | $ | 410 | |
| Total liabilities measured at fair value | $ | — | | | $ | — | | | $ | 410 | | | $ | 410 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Financial Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 61,090 | | | $ | — | | | $ | — | | | $ | 61,090 | |
| Total cash equivalents | $ | 61,090 | | | $ | — | | | $ | — | | | $ | 61,090 | |
| Short-term investments: | | | | | | | |
| U.S. government and agency securities | $ | 245,447 | | | $ | — | | | $ | — | | | $ | 245,447 | |
| Non-U.S. government and agency securities | — | | | 19,950 | | | — | | | 19,950 | |
| Corporate debt securities | — | | | 23,030 | | | — | | | 23,030 | |
| Commercial paper | — | | | 16,837 | | | — | | | 16,837 | |
| Total short-term investments | $ | 245,447 | | | $ | 59,817 | | | $ | — | | | $ | 305,264 | |
| Long-term investments: | | | | | | | |
| U.S. government and agency securities | $ | 21,323 | | | $ | — | | | $ | — | | | $ | 21,323 | |
| | | | | | | |
| Corporate debt securities | — | | | 13,511 | | | — | | | 13,511 | |
| | | | | | | |
| Total long-term investments | $ | 21,323 | | | $ | 13,511 | | | $ | — | | | $ | 34,834 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total assets measured at fair value | $ | 327,860 | | | $ | 73,328 | | | $ | — | | | $ | 401,188 | |
| | | | | | | |
| Financial Liabilities: | | | | | | | |
| | | | | | | |
| Private warrants liability | $ | — | | | $ | — | | | $ | 290 | | | $ | 290 | |
| | | | | | | |
| Total liabilities measured at fair value | $ | — | | | $ | — | | | $ | 290 | | | $ | 290 | |
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Available-for-sale Debt Securities
The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale debt securities as of March 31, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Investments: | | | | | | | |
| U.S. government and agency securities | $ | 257,740 | | | $ | 62 | | | $ | (122) | | | 257,680 | |
| Non-U.S. government and agency securities | 9,553 | | | — | | | (14) | | | 9,539 | |
| Corporate debt securities | 67,259 | | | 21 | | | (110) | | | 67,170 | |
| Commercial paper | 4,938 | | | — | | | (1) | | | 4,937 | |
| | | | | | | |
| Total available-for-sale investments | $ | 339,490 | | | $ | 83 | | | $ | (247) | | | $ | 339,326 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Investments: | | | | | | | |
| U.S. government and agency securities | $ | 266,339 | | | $ | 444 | | | $ | (13) | | | $ | 266,770 | |
| Non-U.S. government and agency securities | 19,958 | | | — | | | (8) | | | 19,950 | |
| Corporate debt securities | 36,507 | | | 69 | | | (35) | | | 36,541 | |
| Commercial paper | 16,839 | | | 6 | | | (8) | | | 16,837 | |
| | | | | | | |
| Total available-for-sale investments | $ | 339,643 | | | $ | 519 | | | $ | (64) | | | $ | 340,098 | |
As of March 31, 2024, the gross unrealized losses of $0.2 million are substantially all in a continuous unrealized loss position for less than 12 months, which were related to $189.1 million of available-for-sale debt securities. As of December 31, 2023, the gross unrealized losses were not material.
Unrealized losses related to these securities are due to interest rate fluctuations as opposed to credit quality. In addition, we do not intend to sell and it is not likely that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity. We did not recognize any credit losses related to our available-for-sale debt securities during the three months ended March 31, 2024 and 2023.
The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of March 31, 2024, by contractual years-to-maturity (in thousands):
| | | | | | | | | | | |
| March 31, 2024 |
| | Amortized Cost | | Fair Value |
| Due within one year | $ | 249,889 | | | $ | 249,917 | |
| Due between one and three years | 89,601 | | | 89,409 | |
| Total | $ | 339,490 | | | $ | 339,326 | |
7. COMMITMENTS AND CONTINGENCIES
Purchase Obligation—The Company has purchase obligations, which includes agreements and issued purchase orders containing non-cancelable payment terms to purchase goods and services.
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of March 31, 2024, future minimum purchase obligations are as follows (in thousands):
| | | | | | | | | | | |
| | | Purchase
Obligations | | |
| Remainder of 2024 | | | $ | 13,161 | | | |
| 2025 | | | 307 | | | |
| 2026 | | | 53 | | | |
| | | | | |
| | | | | |
| Thereafter | | | — | | | |
| Total | | | $ | 13,521 | | | |
Litigation—The Company is named from time to time as a party to lawsuits and other types of legal proceedings and claims in the normal course of business. The Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any recentlysuch loss.
On July 23, 2021, plaintiff William J. Brown, a former employee and a shareholder of Matterport, Inc. (now known as Matterport Operating, LLC) (“Legacy Matterport”), sued Legacy Matterport, Gores Holdings VI, Inc. (now known as Matterport, Inc.), Maker Merger Sub Inc., Maker Merger Sub II, LLC, and Legacy Matterport directors R.J. Pittman, David Gausebeck, Matt Bell, Peter Hebert, Jason Krikorian, Carlos Kokron and Michael Gustafson (collectively, the “Defendants”) in the Court of Chancery of the State of Delaware. The plaintiff’s initial complaint claimed that Defendants imposed invalid transfer restrictions on his shares of Matterport stock in connection with the merger transactions between Matterport, Inc. and Legacy Matterport (the “Transfer Restrictions”), and that Legacy Matterport’s board of directors violated their fiduciary duties in connection with a purportedly misleading letter of transmittal. The initial complaint sought damages and costs, as well as a declaration from the court that he may freely transfer his shares of Class A common stock of Matterport received in connection with the merger transactions. An expedited trial regarding the facial validity of the Transfer Restrictions took place in December 2021. On January 11, 2022, the court issued accounting standards will be re-evaluateda ruling that the Transfer Restrictions did not apply to the plaintiff. The opinion did not address the validity of the Transfer Restrictions more broadly. Matterport filed a notice of appeal of the court’s ruling on February 8, 2022, and a regular basis or ifhearing was held in front of the Delaware Supreme Court on July 13, 2022, after which the appellate court affirmed the lower court’s ruling. Separate proceedings regarding the plaintiff’s remaining claims are pending. The plaintiff filed a Third Amended Complaint on September 16, 2022, which asserts the causes of action described above but omits as defendants Maker Merger Sub Inc., Maker Merger Sub II, LLC, and Legacy Matterport directors David Gausebeck, Matt Bell, and Carlos Kokron, and adds an additional cause of action alleging that Matterport, Inc. violated the Delaware Uniform Commercial Code by failing to timely register Brown’s requested transfer of Matterport, Inc. shares. The remaining defendants’ answer to the Third Amended Complaint was filed on November 9, 2022, and the parties have completed discovery. Trial was held in November 2023 and a post-trial hearing was held on February 22, 2024.
On February 1, 2024, two stockholders, Laurie Hanna and Vasana Smith (collectively “Plaintiffs”) filed a complaint derivatively on behalf of Matterport, Inc. against R.J. Pittman, Michael Gustafson, Peter Hebert, James Krikorian, James Daniel Fay, David Gausebeck, Japjit Tulsi, Judi Otteson, Jay Remley, and numerous shareholders of Matterport, Inc. (collectively “Defendants”) in the Court of Chancery of the State of Delaware. The complaint alleges that the issuance of 23,460,000 Earn-Out shares worth $225 million was a breach of fiduciary duty and an act of corporate waste, which unjustly enriched recipients of the Earn-Out shares at the expense of Matterport and its common stockholders. Specifically, the Plaintiffs allege that issuance of the Earn-Out Shares violated the February 7, 2021 Agreement and Plan of Merger pursuant to which Legacy Matterport and Gores Holding VI, a publicly listed special purpose acquisition company, and two Gores subsidiaries merged, providing Legacy Matterport shareholders with shares of the surviving public company which took the name Matterport. The complaint seeks disgorgement all unjust enrichment by the Defendants, an award of compensatory damages to Matterport, an award of costs and disbursements to the Plaintiffs, as well as a declaration that Plaintiffs may maintain the action on behalf of Matterport and that Plaintiffs are adequate representatives of Matterport, and a finding that demand on the Matterport board is excused as futile.
On July 20, 2021, the Company, then operating under the name Gores Holdings VI, Inc., held a special meeting of stockholders (the “2021 Special Meeting”) in lieu of the 2021 annual meeting of the Company’s stockholders to approve certain matters relating to its proposed business combination
is completed wherewith Matterport, Inc., Maker Merger Sub, Inc. and Maker Merger Sub II, LLC. One of these matters was a proposal to adopt the
impact could be material.Going Concern Consideration
IfSecond Amended and Restated Certificate of Incorporation of the Company does(the “New Certificate of Incorporation”), which, among other things, increased the total
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
number of authorized shares of the Company’s Class A common stock, par value $0.0001 per share (the “Class A common stock”), from 400,000,000 shares to 600,000,000 shares. The New Certificate of Incorporation was approved by a majority of the shares of Class A common stock and the Company’s Class F common stock, par value $0.0001 per share (the “Class F common stock”), voting together as a single class, that were outstanding as of the record date for the 2021 Special Meeting. After the 2021 Special Meeting, the business combination was consummated and the New Certificate of Incorporation became effective. A December 2022 decision of the Delaware Court of Chancery (the “Court of Chancery”) has created uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (“DGCL”) would have required the New Certificate of Incorporation to be approved by a separate vote of the majority of the Company’s then-outstanding shares of Class A common stock, in addition to a majority of the shares of Class A common stock and Class F common stock voting together. The Company continues to believe that a separate vote of Class A common stock was not completerequired to approve the New Certificate of Incorporation. However, in light of the Court of Chancery decision, on February 16, 2023, the Company filed a petition (the “Petition”) in the Court of Chancery pursuant to Section 205 of the DGCL seeking validation of the New Certificate of Incorporation, and the shares issued in reliance on the effectiveness of the New Certificate of Incorporation to resolve any uncertainty with respect to those matters. Section 205 of the DGCL permits the Court of Chancery, at its Business Combinationdiscretion, to ratify and validate potentially defective corporate acts and stock after considering a variety of factors. On March 14, 2023, the Court of Chancery granted the Petition validating the New Certificate of Incorporation and all shares of capital stock issued in reliance on the effectiveness of the New Certificate of Incorporation. Accordingly, the Company has determined that his matter is now complete.
On May 11, 2020, Redfin Corporation (“Redfin”) was served with a complaint by
DecemberAppliance Computing, Inc. III, d/b/a Surefield (“Surefield”), filed in the United States District Court for the Western District of Texas, Waco Division. In the complaint, Surefield asserted that Redfin’s use of Matterport’s 3D-Walkthrough technology infringes four of Surefield’s patents. Redfin has asserted defenses in the litigation that the patents in question are invalid and have not been infringed upon. We have agreed to indemnify Redfin for this matter pursuant to our existing agreements with Redfin. The parties have vigorously defended against this litigation. The matter went to jury trial in May 2022 and resulted in a jury verdict finding that Redfin had not infringed upon any of the asserted patent claims and that all asserted patent claims were invalid. Final judgment was entered on August 15,
2022. On September 12, 2022, Surefield filed post trial motions seeking to reverse the jury verdict. Redfin has filed oppositions to the motions. In addition, on May 16, 2022, the Company
will (i) cease all operations except forfiled a declaratory judgment action against Appliance Computing III, Inc., d/b/a Surefield, seeking a declaratory judgment that the
purpose of winding up, (ii) as promptly as reasonably possible butCompany had not
more than ten business days thereafter, redeem 100% ofinfringed upon the
common stock sold as part of the unitsfour patents asserted against Redfin and one additional, related patent. The matter is pending in the
Public Offering, at Western District of Washington and captioned Matterport, Inc. v. Appliance Computing III, Inc. d/b/a
per-share price, payable in cash, equalSurefield, Case No. 2:22-cv-00669 (W.D. Wash.). Surefield has filed a motion to
the aggregate amount then on depositdismiss or in the
Trust Account, including interest (which interest shall be net of franchise and income taxes payable and less up to $100,000 of such net interest which may be distributed toalternative transfer the
Company 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 Company’s remaining stockholders and the Company’s Board of Directors, dissolve and liquidate, subject in each case to the
Company’s obligations under Delaware lawUnited States District Court for the Western District of Texas. The Company filed an opposition to
provide for claims of creditors and the
requirements of other applicable law.Inmotion. On August 28, 2023, the event of such distribution, it is possible thatCourt denied Surefield’s motion to dismiss the per share valueWashington case but stayed the action pending the resolution of the residual assets remaining availableTexas case.
On January 29, 2021, Legacy Matterport received a voluntary request for distribution (including Trust Account assets) will be less thaninformation from the initial public offering price per unitDivision of Enforcement of the SEC relating to certain sales and repurchases of its securities in the Public Offering. In addition,secondary market. We believe we have complied fully with the request. We have not received any updates from the SEC as to the scope, duration or ultimate resolution of the investigation, and accordingly believes this matter is concluded.
The Company monitors developments in these legal matters that could affect the estimate if the Company failshad previously accrued. As of March 31, 2024 and December 31, 2023, there were no amounts accrued that the Company believes would be material to complete its Business Combinationfinancial position.
Indemnification—In the ordinary course of business, the Company enters into certain agreements that provide for indemnification by December 15, 2022, there will be no redemption rights or liquidating distributionsthe Company of varying scope and terms to customers, vendors, directors, officers, employees and other parties with respect to certain matters. Indemnification includes losses from breach of such agreements, services provided by the warrants, which will expire worthless.In addition, atCompany, or third-party intellectual property infringement claims. These indemnities may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments, in some circumstances, are not subject to a cap. As of March 31, 2021 and December 31, 2020, the2024, there were no known events or circumstances that have resulted in a material indemnification liability.
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. STOCKHOLDERS’ EQUITY
The Company had current liabilitiesreserved shares of $48,141,857 and $18,690,703, respectively and working capitalcommon stock for future issuance as of ($47,129,281) and ($17,159,683), the balances of which are primarily related to warrants we have recorded as liabilities as described in Notes 2, 3 and 4. Other amounts related to accrued expenses owed to professionals, consultants, advisors and others who are working on seeking a Business Combination as described in Note 1. Such work is continuing after March 31, 2024 as follows (in thousands):
| | | | | | | |
| March 31,
2024 | | |
| | | |
| Private warrants to purchase common stock | 1,708 | | | |
| Common stock options outstanding and unvested RSUs under the Amended and Restated 2011 Stock Incentive Plan | 61,724 | | | |
| Shares available for future grant under 2021 Employee Stock Purchase Plan | 14,073 | | | |
| Shares available for future grant under 2021 Incentive Award Plan | 15,129 | | | |
| Total shares of common stock reserved | 92,634 | | | |
Accumulated Other Comprehensive Loss
The following table summarizes the changes in accumulated other comprehensive losses by component, net of tax (in thousands):
| | | | | | | | | | | | | | | | | |
| Foreign Currency Translation, Net of Tax | | Unrealized Losses on Available-for-Sale Debt Securities, Net of Tax | | Total |
| Balance at December 31, 2023 | $ | (52) | | | $ | 455 | | | $ | 403 | |
| Net unrealized loss | — | | | (619) | | | (619) | |
| Balance at March 31, 2024 | $ | (52) | | | $ | (164) | | | $ | (216) | |
| | | | | | | | | | | | | | | | | |
| Foreign Currency Translation, Net of Tax | | Unrealized Losses on Available-for-Sale Debt Securities, Net of Tax | | Total |
| Balance at December 31, 2022 | $ | (52) | | | $ | (4,982) | | | $ | (5,034) | |
| Net unrealized gain | — | | | 2,223 | | | 2,223 | |
| Balance at March 31, 2023 | $ | (52) | | | $ | (2,759) | | | $ | (2,811) | |
9. PRIVATE WARRANTS
Prior to the Closing, Gores issued 6,900,000 Public Warrants and amounts are continuing4,450,000 Private Warrants. Each whole warrant entitles the holder to accrue.3. Public Offering
Public Units
On December 15, 2020, the Company sold 34,500,000 units at a price of $10.00 per unit (the “Units”), including 4,500,000 Units as a result of the underwriters’ full exercise of their over-allotment option, generating gross proceeds of $345,000,000. Each Unit consists of 1purchase one share of the Company’s Class A common stock $0.0001 par value, and one-fifthat a price of one redeemable Class A common stock purchase warrant (the “Warrants”). Each Whole Warrant entitles the holder to purchase 1 share of Class A common stock for $11.50 per share. Each Warrant will becomeshare, subject to adjustments. The Warrants became exercisable on the later of 30 days after the completion of the Business Combination or 12 months from the IPO Closing DateDecember 15, 2021 and will expire on July 22, 2026, which is five years after the completion ofClosing.
On January 14, 2022, the Business Combination or earlier upon redemption or liquidation. However, ifPublic Warrants ceased trading on the Company does not complete the Business Combination on or prior to the 24-month period allotted to complete the Business Combination, the Warrants will expire at the end of such period.Nasdaq Global Market. The Public Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company,either exercised or redeemed during the three months ended March 31, 2022 and no Public Warrants remained outstanding thereafter. A total of 1.7 million Private Warrants remained outstanding as warrant agent,of March 31, 2024 and December 31, 2023. No Private Warrants have been exercised during the Company. three months ended March 31, 2024. The Company
did not registerused a Black Scholes model to determine the
shares of common stock issuable upon exercise of the Warrants under the Securities Act or any state securities law. Under the13
terms of the warrant agreement, the Company has agreed to use its best efforts to file a registration statement under the Securities Act following the completion of the Business Combination covering the shares of common stock issuable upon exercise of the Warrants. The Company paid an upfront underwriting discount of 2.00% ($6,900,000) of the per Unit offering price to the underwriters at the IPO Closing Date, with an additional fee (the “Deferred Discount”) of 3.50% ($12,075,000) of the per Unit offering price payable upon the Company’s completion of a Business Combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its Business Combination.
The public warrants issued as part of the Units are accounted for as liabilities as there are terms and features do not qualify for equity classification in ASC Topic 815-40 “Derivatives and Hedging – Contracts in Entity’s Own Equity.” The fair value of the public warrants at December 31, 2020 was a liability of $11,040,000. At March 31, 2021,Private Warrants as Level 3 financial instruments. The primary significant unobservable input used to evaluate the fair value has increasedmeasurement of the Company’s Private Warrants is the expected volatility of the ordinary shares. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement. The Private Warrants were valued at $0.24 per unit as of March 31, 2024.
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table provides the assumptions used to $27,255,000. The change inestimate the fair value of $16,215,000 is reflected as an expense in the statement of operations. All ofPrivate Warrants during the 34,500,000 Class A Common Stock sold as part of the Units in the Public Offering contain a redemption feature which allowsthree months ended
March 31, 2024: | | | | | | | |
| March 31,
2024 | | |
| | | |
| Current stock price | $ | 2.26 | | |
| Strike price | $ | 11.50 | | |
| Expected term (in years) | 2.31 | | |
| Expected volatility | 78.0% | | |
| Risk-free interest rate | 4.4% | | |
| Expected dividend yield | —% | | |
The Private Warrants are measured for
the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Given that the Class A Common Stock was issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A Common Stock classified as temporary equity is the allocated proceeds based on the guidance in ASC 470-20.Our Class A Common Stock are subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemptionfair value at the end of each reporting period.quarter. The following table presents the changes in the warrants liability as of March 31, 2024 (in thousands):
| | | | | | | | | |
| | | | | Total Warrants Liability |
| Fair value at December 31, 2023 | | | | | $ | 290 | |
| Change in fair value | | | | | 120 | |
| | | | | |
| | | | | |
| Fair value at March 31, 2024 | | | | | $ | 410 | |
10. STOCK PLAN
2021 Incentive Award Plan
In connection with the Closing on July 22, 2021, the Company approved the 2021 Incentive Award Plan (the “2021 Plan”), an incentive compensation plan for the benefit of eligible employees, consultants, and directors of the Company and its subsidiaries. The Company has electedconcurrently assumed the Amended and Restated 2011 Stock Incentive Plan (the “2011 Plan”) and all outstanding awards thereunder, effective as of the Closing, and no further awards shall be granted under the 2011 Plan. The 2021 Plan provides that the initial aggregate number of shares of Class A common stock, available for issuance pursuant to recognizeawards thereunder shall be the changes immediately.sum of (a) 10% of the outstanding shares of Class A common stock as of the Closing, which is equivalent to 24.2 million shares of Class A common stock (the “Initial Plan Reserve”), (b) any shares of Class A common stock subject to outstanding equity awards under the amended and restated the 2011 Stock Plan which, following the effective date of the 2021 Plan, become available for issuance under the 2021 Plan and (c) an annual increase on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031 equal to a number of shares equal to 5% of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year. The accretionmaximum aggregate number of shares of common stock that may be issued under the 2021 Plan upon the exercise of ISOs is 181.5 million shares of Class A common stock.
Shares forfeited due to employee termination or remeasurement is treated as a deemed dividend (i.e., a reductionexpiration are returned to retained earnings, the share pool. Similarly, shares withheld upon exercise to provide for the exercise price and/or in absence of retained earnings, additional paid-in capital).taxes due and shares repurchased by the Company are also returned to the pool.
As of March 31, 2024, a total of 15.1 million shares remained available for future grant under the Company’s 2021 Plan. 2021 Employee Stock Purchase Plan
In connection with the Closing on July 22, 2021, the Company approved the 2021 Employee Stock Purchase Plan (“2021 ESPP”). The 2021 ESPP provides that the aggregate number of shares of Class A Common Stock reflectedcommon stock available for issuance pursuant to awards under the 2021 ESPP shall be the sum of (a) 3% of the number of outstanding shares of Class A common stock as of the Closing, which is equivalent to 7.3 million shares of Class A common stock (the “Initial ESPP Reserve”), and (b) an annual increase on the balance sheetfirst day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031 equal to the lesser of (i) 1% of the aggregate number of shares of Class A common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of common
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
stock as may be determined by the Company’s board of directors; provided, however, that the number of shares of common stock that may be issued or transferred pursuant to the rights granted under the 2021 ESPP shall not exceed 15.25% of the outstanding shares of Class A common stock as of the Closing, which is equivalent to 36.9 million shares.
Our 2021 ESPP permits eligible employees to acquire shares of our common stock at 85% of the lower of the fair market value of our common stock on the first trading day of each offering period or on the purchase date. If the fair market value of our common stock on the purchase date is lower than the first trading day of the offering period, the current offering period will be canceled after purchase and a new 24-month offering period will begin. Participants may purchase shares of common stock through payroll deductions of up to 15% of their eligible compensation, subject to purchase limits of 3,000 shares per purchase period, 12,000 per offering period, and $25,000 worth of stock for each calendar year.
The 2021 ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and is comprised of four purchase periods of approximately six months in length. The offering periods are reconciled scheduled to start on the first trading day on or after June 1 and December 1 of each year, except for the first offering period commenced on July 23, 2021 and ended on May 31, 2023. As of March 31, 2024, a total of 14.1 million shares of our common stock remained available for sale under our 2021 ESPP. For the three months ended March 31, 2024, there were no shares of common stock purchased under the 2021 ESPP.
Stock Option Activities—The following table summarizes the stock option activities under the Company’s stock plans for three months ended March 31, 2024(in thousands, except for per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Options Outstanding | | | | |
| Number of
Shares | | Weighted-
Average
Exercise Price Per Share | | Weighted- Average Remaining Contractual Term (Years) | | Aggregate
Intrinsic Value |
| Balance—December 31, 2023 | 27,910 | | | $ | 0.66 | | | 5.3 | | $ | 56,638 | |
| | | | | | | |
| Expired or canceled | (7) | | | 1.14 | | | | |
| Exercised | (939) | | | 0.28 | | | | | $ | 1,954 | |
| Balance—March 31, 2024 | 26,964 | | | $ | 0.67 | | | 5.2 | | $ | 42,763 | |
| Options vested and exercisable—March 31, 2024 | 26,525 | | | $ | 0.67 | | | 5.1 | | $ | 42,241 | |
As of March 31, 2024, unrecognized stock-based compensation expense related to unvested options was $0.2 million, which is expected to be amortized over a weighted-average vesting period of 0.7 years.
RSU and PRSU Activities—The following table summarizes the following table. The accretion of carrying value to redemption value was recognized on December 31, 2020, and there has been $8,130 of additional accretionRSU activity under the Company’s stock plans for the three months ended March 31, 2021:2024(in thousands, except per share data):
| | As of March 31, 2021
| |
Gross proceeds
| | $
| | 345,000,000
| |
Less:
| | | | | |
Proceeds allocated to public warrants
| | $
| | (10,557,000
| )
|
Class A shares issuance costs
| | $
| | (19,266,180
| )
|
Plus:
| | | | | |
Accretion of carrying value to redemption value
| | $
| | (29,823,180
| )
|
Contingently redeemable Class A Common Stock
| | $
| | 345,000,000
| |
| | | | | | | | | | | |
| RSUs and PRSUs |
| Number of
Shares | | Weighted-
Average
Grant-Date Fair Value
Price Per Share |
| Balance—December 31, 2023 | 26,349 | | | $ | 8.81 | |
| Granted | 12,780 | | | 2.30 | |
| Vested | (3,143) | | | 9.81 | |
| Canceled or forfeited | (1,226) | | | 4.13 | |
| Balance—March 31, 2024 | 34,760 | | | $ | 6.49 | |
23
4. Related Party Transactions
Founder Shares
On July 24, 2020,
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Stock-based compensation expense for awards with only service conditions are recognized on a straight-line basis over the Sponsor purchased 17,250,000 shares of Class F Common Stock for $25,000, or approximately $0.001 per share. On October 1, 2020, the Sponsor surrendered 8,625,000 Founder Shares to us for 0 consideration, on October 23, 2020, the Company effected a stock dividend with respect to its Class F Common Stock of 6,468,750 shares thereof and on November 13, 2020 the Sponsor surrendered 6,468,750 Founder Shares to us for 0 consideration, resulting in an aggregate of 8,625,000 outstanding shares of Class F Common Stock. As a result of such surrender, the per-share purchase price increased to approximately $0.003 per share. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20%requisite service period of the outstanding shares upon completion of the Public Offering. On September 11, 2020, the Sponsor transferred 25,000 Founder Shares to each of the independent directors at their original purchase price. related award. The Founder Shares are identical to the common stock included in the Units sold in the Public Offering except that the Founder Shares will automatically convert into shares of Class A common stock at the time of the Business Combination on a 1-for-one basis, subject to adjustment as described in the Company’s amendedperformance-based RSU (“PRSU”) awards have both service-based and restated certificate of incorporation.performance-based vesting conditions. The sale of the Founders Shares is in the scope of ASC 718, “Compensation-Stock Compensation.” Under ASC 718, stock-based compensation associated with equity-classifiedservice-based vesting condition for these awards is measured at fair valuetypically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance-based vesting condition is satisfied upon the grant date. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrenceunder the applicable accounting literature in this circumstance. As of December 31, 2020, the Company determined that a Business Combination is not considered probable, and, therefore, 0 stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of Founders Shares that ultimately vest multiplied times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founders Shares.
Private Placement Warrants
The Sponsor purchased from the Company an aggregate of 4,450,000 warrants at a price of $2.00 per warrant (a purchase price of $8,900,000) in a private placement that occurred simultaneously with the Public Offering (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase 1 share of Class A common stock at $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering to be heldliquidity event, as defined in the Trust Account pending completion of the Business Combination.
Amended and Restated 2011 Stock Plan. The Private Placement Warrants have terms and provisions that are identical to those of the public warrants sold as part of the units in the Public Offering, except that the Private Placement Warrants may be physical (cash) or net share (cashless) settled and are not redeemable so long as they are held by the Sponsor or its permitted transferees.
If the Company does not complete a Business Combination, then the Private Placement Warrants proceeds will be part of the liquidation distribution to the public stockholders and the Private Placement Warrants will expire worthless.Consistent with the public warrants, the private warrants are accounted for as liabilities under ASC Topic 814-40, due to their terms.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants issued upon conversion of working capital loans, if any, have registration rights (in the case of the Founder Shares, only after conversion of such shares to common shares) pursuant to a registration rights agreement entered into by the Company, the Sponsor and the other security holders named therein on December 15, 2020. These holders will also have certain demand
15
and “piggy back” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Sponsor Loan
On July 24, 2020, Company borrowed $300,000 by the issuance of an unsecured promissory note from the Sponsor for $300,000 to cover expenses related to the Public Offering. This Noteperformance based vesting condition was non-interest bearing and payable on the earlier of June 30, 2021 or the completion of the Public Offering. This Note was repaid in fulldeemed satisfied upon the completion of the Public Offering.
On March 19, 2021, the Sponsor made available to the Company a loan of up to $2,000,000 pursuant to a promissory note issued by the Company to the Sponsor. The proceeds from the note will be used for on-going operational expenses and certain other expenses in connection with the Proposed Business Combination. The note is unsecured, non-interest bearing and matures on the earlier of: (i) January 31, 2022 or (ii) the date on which the Company consummates the Proposed Business Combination. Closing.
As of March 31, 2024, unrecognized compensation costs related to unvested RSUs and PRSUs were $199.4 million and $0.5 million, respectively. The remaining unrecognized compensation costs for RSUs and PRSUs are expected to be recognized over a weighted-average period of 1.7 years and 0.7 years, respectively, excluding additional stock-based compensation expense related to any future grants of share-based awards.
Employee Stock Purchase Plan—The fair value of shares issued under our 2021 the amount advanced by Sponsor to the Company was $600,000.Administrative Services Agreement
The Company entered into an administrative services agreement on December 10, 2020, pursuant to which it agreed to pay to an affiliate of the Sponsor $20,000 a month for office space, utilities and secretarial support. Services commencedESPP are estimated on the grant date using the securities were first listed onBlack-Scholes option pricing model. The following table summarizes the Nasdaq Capital Market and will terminate upon the earlierassumptions used to determine fair values of the consummation by the Company of a Business Combination or the liquidation of the Company.
For the three months ended March 31,our 2021 the Company has paid the affiliate $60,000.
5. Deferred Underwriting Compensation
ESPP:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| Expected term | 0.5 – 2.0 years | | 0.5 – 2.0 years |
| Expected volatility | 31.4 – 44.1% | | 35.2 – 48.0% |
| Risk-free interest rate | 2.7 – 5.3% | | 0.4 – 4.7% |
| Expected dividend yield | —% | | —% |
| | | |
The
Company is committed to pay a deferred underwriting discount totaling $12,075,000 or 3.50% of the gross offering proceeds of the Public Offering, to the underwriters upon the Company’s consummation of a Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount, and 0 Deferred Discount is payable to the underwriters if there is no Business Combination.6. Income Taxes
Income tax expense during interim periodsexpected volatility is based on applying an estimated annual effective income tax ratethe average volatility of a peer group of representative public companies with sufficient trading history over the expected term. The expected term represents the term from the first day of the offering period to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interimpurchase dates within each offering period. The Company’s effective tax rates differ from the federal statutory rate primarily due to the fair value on instruments treated as debt for GAAP and equity for tax purposes, whichdividend yield assumption is not deductible for income tax purposes, for 2021.
The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.
16
The Company has evaluated tax positions taken or expected to be taken in the course of preparing the financial statements to determine if the tax positions are “more likely than not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more likely than not” threshold would be recorded as a tax benefit or expense in the current year. The Company has concluded that there was no impact related to uncertain tax positions on the results of its operations for the period ended March 31, 2021. As of March 31, 2021, the Company has 0 accrued interest or penalties related to uncertain tax positions. 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’s conclusions regarding tax positions will be subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations, and interpretations thereof.
7. Investments and Cash Held in Trust
As of March 31, 2021, investment securities in the Company’s Trust Account consist of $345,022,332 in cash and money market funds.
8. Fair Value Measurement
The Company complies with ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. ASC 820 determines fair value to be the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
Warrants
The Company has determined that warrants issued in connection with its initial public offering in December 2020 are subject to treatment as a liability. The Company utilizes a Monte Carlo simulation methodology to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 1 and Level 2 inputs. The key assumptions in the option pricing model utilized are assumptions related to expected share-price volatility, expected term, risk-free interest rate andour expectations about our anticipated dividend yield. The expected volatility as of the IPO Closing Date was derived from observable public warrant pricing on comparable ‘blank-check’ companies that recently went public in 2020 and 2021. At March 31, 2021, there were observable transactions in the Company’s public warrants and correspondingly an implied volatility.policy. The risk-free interest rate is based on the interpolatedimplied yield available on U.S. Constant Maturity Treasury yield.zero-coupon issues with maturities that approximate the expected term. As of March 31, 2024, unrecognized compensation cost related to the 2021 ESPP was $0.8 million, which is expected to be recognized over the remaining weighted-average service period of 1.2 years.
Stock-based Compensation— The expected termCompany recognizes stock-based compensation expense for awards with only service conditions on a straight-line basis over the requisite service period of the warrantsrelated award and recognizes stock-based compensation expenses for awards with performance conditions on a straight-line basis over the requisite service period for each separate vesting portion of the awards when it is assumedprobable that the performance condition will be achieved. Forfeitures are accounted for in the period in which they occur.
The amount of stock-based compensation related to
be six months untilstock-based awards to employees in the
closeCompany’s consolidated statements of
a Business Combination, and the contractual five year term subsequently. The dividend rate is based on the historical rate, which the Company anticipates to remain at 0.The Warrants were classified as Level 2 at the respective measurement dates.
The key inputs into the option modeloperations for the Private Placement Warrantsthree months ended March 31, 2024 and Public Warrants2023 were as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Costs of revenue | $ | 805 | | | $ | 844 | | | | | |
| Research and development | 6,171 | | | 7,565 | | | | | |
| Selling, general, and administrative | 20,975 | | | 22,665 | | | | | |
| Stock-based compensation, net of amounts capitalized | 27,951 | | | 31,074 | | | | | |
| Capitalized stock-based compensation | 2,260 | | | 2,436 | | | | | |
| Total stock-based compensation | $ | 30,211 | | | $ | 33,510 | | | | | |
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
11. INCOME TAXES
The income tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate as adjusted for discrete items arising in that quarter.
Given the Company has a full valuation allowance recorded against its domestic net deferred tax assets and operating losses in the US, and its foreign subsidiaries are in operating profit, the Company has applied the exception to use a worldwide effective tax rate under ASC 740-270-30-36. The Company used the foreign jurisdiction’s statutory rate as an estimate for the
relevant periods: | As of | |
| December 31, 2020 | | | March 31, 2021 | |
Volatility | | 21.0 | % | | | 13.0 | % |
Risk-free interest rate | | 0.43 | % | | | 1.00 | % |
Warrant exercise price | $ | 11.50 | | | $ | 11.50 | |
Expected term | 5.5 | | | 5.35 | |
Subsequent Measurement
annual effective tax rate (“AETR”). The Warrants are measured at fair value on a recurring basis. The subsequent measurementquarterly tax provision, and estimate of the PublicCompany’s annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how we do business, and Private Warrantstax law developments. The tax expense for the three months ended March 31, 2024 and the tax benefit for three months ended March 31, 2023 was primarily attributable to foreign income taxes. The Company records deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, the Company considered all available positive and negative evidence and continued to conclude that as of March 31, 2021 and December 31, 2020 are classified as Level 2 due2024, it is not more likely than not that the Company will realize the benefits of its remaining net deferred tax assets.
12. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic net loss per share attributable to common stockholders was computed by dividing net loss by the useweighted-average number of both observable inputs in an active market as well as quoted prices in active marketscommon shares outstanding for similar assets and liabilities. As ofthe three months ended March 31, 2021, the aggregate values of the Private Placement Warrants2024 and Public Warrants were $17.6 million and $27.3 million, respectively, based on the closing price of GHVIW on that date of $3.95.
As of December 31, 2020, the aggregate values of the Private Placement Warrants and Public Warrants were $7.1 million and $11.0 million, respectively, based on the closing price of GHVIU on that date of $10.60.
The following table presents the changes in the fair value of warrant liabilities:
| Private placement warrants | | | Public warrants | | | Total warrant liabilities | |
Fair value at December 31, 2020 | $ | 7,120,000 | | | $ | 11,040,000 | | | $ | 18,160,000 | |
Change in fair value | | 10,457,500 | | | | 16,215,000 | | | | 26,672,500 | |
Fair value at March 31, 2021 | $ | 17,577,500 | | | $ | 27,255,000 | | | $ | 44,832,500 | |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized2023 (in thousands, except for per share data). Diluted net loss per share gives effect to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:
| | | | | | | | | | | | Significant | | | Significant | |
| | | | | | | | | | | | Other | | | Other | |
| | | | | | | Quoted Prices in | | | Observable | | | Unobservable | |
| | March 31, | | | Active Markets | | | Inputs | | | Inputs | |
Description | | 2021 | | | (Level 1) | | | (Level 2) | | | (Level 3) | |
Investments and cash held in Trust Account | | | | 345,022,332 | | | | | 345,022,332 | | | | | — | | | | | — | |
Public warrants | | | | 27,255,000 | | | | | — | | | | | 27,255,000 | | | | | — | |
Private placement warrants | | | | 17,577,500 | | | | | — | | | | | 17,577,500 | | | | | — | |
Total | | $ | | 389,854,832 | | | $ | | 345,022,332 | | | $ | | 44,832,500 | | | $ | | — | |
9. Stockholders’ Equity
Common Stock
The Company is authorized to issue 440,000,000all potential shares of common stock, consistingincluding
stock options and RSUs to the extent these are dilutive. We calculated basic and diluted net loss per share attributable to common stockholders as follows (in thousands, except per share amounts): | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2024 | | 2023 | | | | |
| | | | | | | |
| Numerator: | | | | | | | |
| Net loss attributable to common stockholders | $ | (36,128) | | | $ | (53,842) | | | | | |
| | | | | | | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 313,008 | | | 293,074 | | | | | |
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.12) | | | $ | (0.18) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Basic net loss per share is the same as diluted net loss per share for the period we reported a net loss. The following potentially dilutive outstanding securities were excluded from the computation of 400,000,000diluted net loss per share attributable to common stockholders, basic and diluted, because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period (shares in thousands):
| | | | | | | | | | | |
| | As of March 31, |
| | 2024 | | 2023 |
| | | |
| Private warrants | 1,708 | | | 1,708 | |
| | | |
| | | |
| | | |
| | | |
| Common stock options outstanding | 26,964 | | | 32,028 | |
| Unvested RSUs | 34,760 | | | 41,274 | |
| ESPP shares | 1,482 | | | 1,955 | |
| Total potentially dilutive common stock equivalents | 64,914 | | | 76,965 | |
MATTERPORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13. SUBSEQUENT EVENTS
Proposed Merger
On April 21, 2024, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with CoStar Group, Inc., a Delaware corporation (“CoStar”), Matrix Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CoStar (“Merger Sub I”), and Matrix Merger Sub II LLC, a Delaware limited liability company and a wholly owned subsidiary of CoStar (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”). Pursuant to the Merger Agreement, Merger Sub I will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of CoStar (the “First Merger”). Immediately thereafter, subject to the terms of the Merger Agreement and, in certain circumstances, at the discretion of CoStar, the Company will merge with and into Merger Sub II, which will survive the merger as a wholly owned subsidiary of CoStar (the “Second Merger and, together with the First Merger, the “Mergers”).
Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the First Merger (the “First Effective Time”), each share of Class A common stock, par value $0.0001 per share,
and 40,000,000 shares of Class F Common Stock, par value $0.0001 per share. Holders of the
Company’s common stock are entitled to 1 vote for each share of common stockCompany (each a “Matterport Share” and
vote together as a single class. At March 31, 2021, there were 34,500,000 shares of Class A common stock and 8,625,000 shares of Class F Common Stockcollectively, the “Matterport Shares”) issued and outstanding
respectively.18
Preferred Stock
Theimmediately prior to the First Effective Time (other than Matterport Shares held by the Company is authorized(including in treasury), CoStar or their respective subsidiaries and Matterport Shares that are held by stockholders who have perfected and not withdrawn a demand for appraisal rights pursuant to issue 1,000,000Delaware law) will be converted into the right to receive (i) $2.75 in cash (the “Per Share Cash Consideration”) plus (ii) a number of shares of preferredCoStar common stock, par value $0.0001$0.01 per share with such designations, voting and other rights and preferences as may be determined from time(the “CoStar Shares”), equal to time by the Board of Directors. At March 31, 2021, there were 0 shares of preferred stock issued and outstanding.
10. Risk and Contingencies
Management is currently evaluating 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 financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
11. Subsequent Events
Management has performed an evaluation of subsequent events through May 27, 2021 of the financial statements, noting no items which require adjustment or disclosure other than those set forthExchange Ratio (as defined in the preceding notesMerger Agreement), subject to a right to receive cash in lieu of fractional shares (such cash and shares collectively, the financial statements.
19
“Merger Consideration”).
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis
provides information that Matterport’s management believes is relevant to an assessment and understanding of
the Company’s financial condition andMatterport’s condensed consolidated results of operations
and financial condition. The discussion should be read
in conjunctiontogether with our unaudited
interim condensed consolidated financial statements,
the respective notes thereto, and other financial information included elsewhere within this Report. The discussion and analysis should also be read together with the audited consolidated financial statements for the year ended December 31, 2023 and the
related notes
related thereto which are included in
“Item 1. Financial Statements” of this Quarterly Report onthe 2023 Form
10‑Q.Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Quarterly Report on Form 10‑Q including, without limitation, statements under 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, are forward-looking statements. When used in this Quarterly Report on Form 10‑Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such10-K. This discussion contains forward-looking statements are based on the beliefs of management, as well as assumptions made by,upon Matterport’s current expectations, estimates and information currently available to, the Company’s management.projections that involve risks and uncertainties. Actual results could differ materially from those contemplated by theanticipated in these forward-looking statements as a result of certainvarious factors, detailedincluding those discussed under “Risk Factors”, “Forward-Looking Statements” and other disclosures included in our filings withthis Form 10-Q. Unless the SEC. All subsequent writtencontext otherwise requires, all references in this section to “we,” “our,” “us,” “the Company” or oral forward-looking statements attributable“Matterport” refer to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporated on June 29, 2020 asbusiness of Matterport, Inc., a Delaware corporation, and formedits subsidiaries both prior to the consummation of and following the Merger (as defined below).
Overview
Matterport is leading the digitization and datafication of the built world. We were incorporated in 2011 and are headquartered in Sunnyvale, California. Matterport’s website address is www.matterport.com.
Matterport’s pioneering technology platform uses spatial data collected from a wide variety of digital capture devices to transform physical buildings and spaces into dimensionally accurate, photorealistic digital twins that provide our subscribers access to valuable building information and insights. For more than a decade, our platform has set the standard for digitizing, accessing and managing buildings, spaces and places online. This has resulted in the world’s largest and most accurate library of spatial data with more than 40.7 billion square feet digitized to date. We deliver value to our customers by leveraging proprietary artificial intelligence (“AI”) insights to enhance customer experiences, improve operational efficiency, lower costs associated with promoting and operating buildings and accelerate business. We believe the digitization and datafication of the built world will fundamentally change the way people interact with buildings and the physical spaces around them.
The world is rapidly moving from offline to online. Digital transformation has made a powerful and lasting impact across every business and industry today. Nevertheless, the global building stock remains largely offline today, and we estimate that less than 0.1% is penetrated by digital transformation. We were among the first to recognize the increasing need for digitization of the built world and the power of spatial data, the unique details underlying buildings and spaces, in facilitating the understanding of buildings and spaces. With approximately 12.3 million spaces under management as of March 31, 2024, we are continuing to penetrate the estimated $327 trillion global building stock and expand our footprint across various end markets, including residential and commercial real estate, facilities management, retail, architecture, engineering and construction (“AEC”), insurance and repair, and travel and hospitality. We estimate our total addressable market to be more than four billion buildings and 20 billion spaces globally, yielding a more than $240 billion market opportunity.
We believe the total addressable market for the purposedigitization and datafication of effecting a Business Combination with one or more target businesses. We completedthe built world could expand beyond $1 trillion as our Public Offeringspatial data platform continues to grow, powered by the following:
•Bringing offline buildings online: Traditionally, our customers needed to conduct site visits in-person to understand and assess their buildings and spaces. With the AI-powered capabilities of Cortex, our proprietary AI software engine, the world’s building stock can move from offline to online and be accessible to our customers real-time and on December 15, 2020. We intenddemand from anywhere.
•Driven by spatial data: Cortex uses the breadth of the billions of data points we have accumulated over the years to effectuate our Business Combination using cash fromimprove the proceeds3D accuracy of our Public Offeringdigital twins. Our sophisticated algorithms also deliver significant commercial value to our subscribers by generating data-based insights that allow them to confidently make assessments and decisions about their properties. With approximately 12.3 million spaces under management as of March 31, 2024, our spatial data library is the clearinghouse for information about the built world.
•Powered by AI and ML: Artificial intelligence (“AI”) and machine learning (“ML”) technologies effectively utilize spatial data to create a robust virtual experience that is dynamic, realistic, interactive, informative and permits multiple viewing angles. AI and ML also make costly cameras unnecessary for everyday captures—subscribers can now capture their spaces by simply tapping a button on their smartphones. As a result,
Matterport is a device agnostic platform, helping us more rapidly scale and drive towards our mission of digitizing and indexing the built world.
We believe that Matterport has tremendous growth potential ahead. After securing market-leading positions in a variety of geographies and vertical markets, we have demonstrated our repeatable value proposition and the
saleability of our sales growth model to scale. The magnitude of our total addressable market is so large that even with leading market share, we believe our penetration rates today are a small fraction of the
Private Placement Warrants, our capital stock, debt, oropportunity for Matterport. With a
combinationmature and tested go-to-market playbook and team in place, we are focused on scaling execution across a carefully selected set of
cash, stockgrowth vectors, including: scaling the enterprise across industry verticals, expanding internationally, investing in R&D, and
debt.Recent Developments
Proposed Matterport Business Combination
expanding partner integrations and third-party developer platforms.
Overview of Transaction with CoStar Group
On February 7, 2021,April 21, 2024, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with CoStar Group, Inc., a Delaware corporation (“CoStar”), Matrix Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CoStar (“Merger Sub I”), and Matrix Merger Sub II LLC, a Delaware limited liability company and a wholly owned subsidiary of CoStar (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”). Pursuant to the Merger Agreement, byMerger Sub I will be merged with and amonginto the Company, Firstwith the Company surviving as a wholly owned subsidiary of CoStar (the “First Merger”). Immediately thereafter, subject to the terms of the Merger Agreement and, in certain circumstances, at the discretion of CoStar, the Company will merge with and into Merger Sub Second Merger Sub, and Matterport,II, which provides for, among other things: (a)will survive the First Merger; and (b) immediately following the Firstmerger as a wholly owned subsidiary of CoStar (the “Second Merger and, as part of the same overall transaction astogether with the First Merger, the Second Merger. The transactions“Mergers”).
Subject to the terms and conditions set forth in
the Merger Agreement, including the Mergers, will constitute a “Business Combination” as contemplated by the Company’s Amended and Restated Certificate of Incorporation.The Merger Agreement and the transactions contemplated thereby were unanimously approved by the Board of Directors of the Company on February 7, 2021 and the Matterport Board on February 7, 2021.
The Merger Agreement
Merger Consideration
Pursuant to the terms of the Merger Agreement, at the effective time of the First Merger (the “Effective“First Effective Time”), each share of Matterport’s common stock, par value $0.001 per share (“Matterport Common Stock”), will be converted into the right to receive a number of newly-issued shares of the Company’s Class A common stock, par value $0.0001 per share, (“of the Company Class A common stock”(each a “Matterport Share” and collectively, the “Matterport Shares”), equal issued and outstanding immediately prior to the Per ShareFirst Effective Time (other than Matterport Shares held by the Company Common Stock Consideration (as defined(including in the Merger Agreement)treasury), CoStar or their respective subsidiaries and each share of Matterport’s preferred stock, par value $0.001 per share (“Matterport Preferred Stock”),Shares that are held by stockholders who have perfected and not withdrawn a demand for appraisal rights pursuant to Delaware law) will be converted into the right to receive (i) $2.75 in cash (the “Per Share Cash Consideration”) plus (ii) a number of newly-issued shares of Company Class ACoStar common stock, par value $0.01 per share (the “CoStar Shares”), equal to the Per Share Company Preferred Stock ConsiderationExchange Ratio (as defined in the Merger Agreement). Pursuant, subject to a right to receive cash in lieu of fractional shares (such cash and shares collectively, the terms“Merger Consideration”).
The descriptions of the Merger Agreement and the Company is requiredtransactions contemplated thereby contained in this Quarterly Report on Form 10-Q are summaries only and are qualified in their entirety by reference to use reasonable best effortsthe full text of the Merger Agreement, which was included as Exhibit 2.1 to cause the sharesCompany’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2024.
The consummation of
Company Class A common stockthe Mergers are subject to various conditions, including, among others, (i) the adoption of the Merger Agreement by holders of a majority of the Matterport Shares entitled to vote thereon at special meeting of the Company’s stockholders, (ii) the expiration of the applicable waiting period (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of other approvals under specified antitrust and foreign investment laws, (iii) absence of any law or order prohibiting the Mergers, (iv) the approval for listing on Nasdaq of the CoStar Shares to be issued in connection with the
transactions contemplated byMergers, (v) the
Merger Agreement (the Business Combination)effectiveness of a registration statement on Form S-4 to be
listed on Nasdaq atfiled by CoStar registering the
closingCoStar Shares to be issued in connection with the Mergers, (vi) the accuracy of the
Business Combination.20
Pursuant to the Merger Agreement, the aggregate merger consideration payable at the closing of the Business Combination to all of the stockholdersparties’ respective representations and holders of equity awards of Matterport will be an aggregate number of shares, or equity awards exercisable for shares, of Company Class A common stock (deemed to have a value of $10.00 per share) equal to $2,188,750,000, divided by $10.00.
In addition to the consideration to be paid at the closing of the Business Combination, stockholders of Matterport will be entitled to receive their pro rata share of an additional number of earn-out shares from the Company, issuable in Company Class A common stock and subject to the terms providedwarranties in the Merger Agreement, up to an aggregate of 23,460,000 shares collectively issuable to all Matterport equity holders.
Treatment of Matterport’s Equity Awards
Pursuant to(vii) compliance and performance by the Merger Agreement, at the closing of the Business Combination, each of Matterport’s stock options, to the extent then outstanding and unexercised, will automatically be converted into (a) an option to acquire a certain number of shares of Company Class A common stock (pursuant to a ratio based on the Per Share Company Common Stock Consideration), at an adjusted exercise price per share and (b) the right to receive a pro rata portion of a number of earn-out shares from the Company, issuable in Company Class A common stock and subject to the terms providedparties with their respective covenants in the Merger Agreement (including that such right to receive earn-out shares is conditional onin all material respects, and (viii) the holder continuing to provide services to the Company), up to an aggregate of 23,460,000 shares collectively issuable to all Matterport equity holders. Each such converted option will be subject to the same terms and conditions as were applicable immediately prior to such conversion.
Pursuant to the Merger Agreement, at the closing of the Business Combination, each of Matterport’s restricted stock units, to the extent then unvested and outstanding, will automatically be converted into (a) an award of restricted stock units covering a certain number of shares of Company Class A common stock (pursuant to a ratio based on the Per Share Company Common Stock Consideration) and (b) the right to receive a pro rata portionabsence of a number of earn-out shares from the Company, issuable in Company Class A common stock and subject to the terms providedmaterial adverse effect (as defined in the Merger Agreement (including that such rightAgreement) with respect to receive earn-out shares is conditionalMatterport or CoStar on or after the holder continuing to provide services to the Company), up to an aggregate of 23,460,000 shares collectively issuable to all Matterport equity holders. Each such converted restricted stock unit will be subject to the same terms and conditions as were applicable immediately prior to such conversion.
Private Placement Subscription Agreements
On February 7, 2021, the Company entered into subscription agreements (each, a “Subscription Agreement” and collectively, the “Subscription Agreements”) with certain investors, including certain individuals (each, an “Individual Investor Subscription Agreement”), institutional investors (each, an “Institutional Investor Subscription Agreement”) and Gores Sponsor VI LLC (the “Sponsor”), pursuant to which the investors have agreed to purchase an aggregate of 29,500,000 shares of Class A common stock in a private placement for $10.00 per share (the “Private Placement”). The proceeds from the Private Placement will remain on the Company’s balance sheet following the consummationdate of the Business Combination.
Each Subscription Agreement will terminate with no further forceMerger Agreement.
Impacts of Macroeconomic and effect upon the earliest to occur of: (a) such dateGeopolitical Conditions and time as the Merger Agreement is terminated in accordance with its terms; (b) upon the mutual written agreement of the parties to such Subscription Agreement; (c) if any of theOther Factors on our Business
We are being impacted by uncertain macroeconomic and geopolitical conditions. These conditions to closing set forth in such Subscription Agreementinclude but are not satisfiedlimited to inflation, foreign currency fluctuations, slowing of economic activity around the globe, unstable global credit markets and financial conditions, in part due to rising interest rates, and cautious consumer spending. In addition, the escalating tensions between Taiwan and China, the war in Ukraine and the Israeli-Palestinian military conflict have further increased existing global economic challenges, including supply chain, logistics, and inflationary challenges. Such global or waivedregional economic and political conditions adversely affect demand for our products. These conditions could have an impact on or prior to the closingour suppliers, causing increases in cost of materials and higher shipping and transportation rates, and as a result thereof,impact the transactions contemplatedpricing of our products. We purchase certain products and key hardware components from a limited number of sources, including in some cases only a single supplier for some products and components, and depend on the supply chain,
including freight, to receive components, transport finished goods and deliver our products across the world. The industry-wide global supply chain challenges, including with respect to manufacturing, transportation and logistics, could impact our operational and financial performance adversely, including impacts on our subscribers and their spending habits, could impact our marketing efforts, and affect our suppliers. If macroeconomic and geopolitical conditions do not improve or if they worsen, then our results of operations may be negatively impacted. Our recent cost-restructuring efforts are helping us to improve our operational excellence and to mitigate the impact of these macroeconomic and geopolitical conditions.
Our Business Model
We generate revenue by selling subscriptions to our AI-powered spatial data platform to customers, licensing our data to third parties, selling capture devices (including our Pro3 and Pro2 cameras) and by providing services to customers from our technicians and through in-application purchases. We are focused on driving substantial annual growth in subscription revenue and maintaining modest growth in license, product and services revenue.
We serve customers of all sizes, at every stage of maturity, from individuals to large enterprises, and we see opportunities for growth across all of our customer segments. We are particularly focused on increasing sales efficiency, driving customer growth and recurring revenue growth from large enterprises.
Subscription Revenue
Our AI-powered spatial data platform creates high-fidelity and high-accuracy digital twins of physical spaces and generates valuable data analytics and insights for customers. We derive subscription revenue from the sale of subscription plans to subscribers of all sizes ranging from individuals to large enterprises.
Our subscription plans are priced from free to custom plans tailored to meet the needs of larger-scale businesses. Our standard subscription plans for individuals and small businesses range from a free online Matterport account with a single user and a single active space that can be captured with an iPhone or an Android smartphone to multiple-user accounts that provide for the capture of unlimited active spaces. The pricing of our subscription plans increases as the number of users and active spaces increase. The wide variety and flexibility of our subscription plans enable us to retain existing subscribers and grow our subscriber base across diverse end markets, with particular focus on large enterprise subscribers. Subscription revenue accounted for approximately 60% and 52% of our total revenue for the three months ended March 31, 2024 and 2023, respectively.
The majority of our subscription services are billed either monthly or annually in advance and are typically non-refundable and non-cancellable. Consequently, for month-to-month subscriptions, we recognize the revenue monthly, and for annual or longer subscriptions, we record deferred revenue on our condensed consolidated balance sheet and recognize the deferred revenue ratably over the subscription term.
Services Revenue
Most of our customers are able to utilize the Pro3 Camera, Pro2 Camera or other compatible capture devices to capture digital twins without external assistance, as the camera is relatively easy to configure and requires minimal training. However, our customers sometimes may also request professional assistance with the data capture process. We generate professional services revenue from Matterport Capture Services, a fully managed solution for enterprise subscribers worldwide that require on-demand scheduling of experienced and reliable Matterport professionals to capture their properties. In addition, we derive services revenue from in-app purchases, made by subscribers using our smartphone applications or by logging in to their subscriber account. In July 2022, we completed the acquisition of VHT, Inc., known as VHT Studios (“VHT”), a U.S.-based real estate marketing company that offers brokerages and enterprise digital solutions to promote and sell properties, which expands Matterport Capture Services by bringing together Matterport digital twins with professional photography, drone capture, and marketing services. Services revenue accounted for approximately 23% and 23% of our total revenue for the three months ended March 31, 2024 and 2023, respectively.
Product Revenue
We offer a comprehensive set of solutions designed to provide our customers with access to state-of-the-art capture technology that produces the high-quality data necessary to process images into dimensionally accurate digital twins. We
derive product revenue from sales of our innovative 3D capture product. Our product line includes the Pro3 Camera, Pro2 Camera, and Matterport Axis.
Pro3 Camera: In August 2022, we launched and began shipment of our Pro3 Camera along with major updates to our industry-leading digital twin cloud platform. The Matterport Pro3 Camera is an advanced 3D capture device, which includes faster boot time, swappable batteries, and a lighter design. The Pro3 camera can perform both indoors and outdoors and is designed for speed, fidelity, versatility, and accuracy. Along with our Pro2 Camera, we expect that future sales of our Pro3 Camera will continue to drive increased adoption of our solutions.
Pro2 Camera: The Pro 2 Camera has played an integral part in shaping the 3D building and property visualization ecosystem, which has driven adoption of our solutions and has generated the unique high-quality and scaled data set that has enabled Cortex to become the pioneering software engine for digital twin creation.
Matterport Axis: A cost-effective, hands-free motor-mount accessory for smartphones.
Product revenue accounted for approximately 17% and 25% of our total revenue for the three months ended March 31, 2024 and 2023, respectively.
Key Metrics
We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, analysts, investors and other industry participants.
Spaces Under Management
We track the number of spaces that have been captured and filed on the Matterport platform, which we refer to as spaces under management, because we believe that the number of spaces under management is an indicator of market penetration and the growth of our business. A space can be a single room or building, or any one contiguous capture of a discrete area, and is composed of a collection of imagery and spatial data that is captured and reconstructed in a dimensionally accurate digital twin of the captured space. For tracking purposes, we treat each captured and filed space as a unique file or model. We have a history of growing the number of our spaces under management and, as of March 31, 2024, we had approximately 12.3 million spaces under management. The scale of our spaces under management allows us to directly monetize each space managed for our paid subscribers as well as increase our ability to offer new and enhanced services to subscribers, which in turn provides us with an opportunity to convert subscribers from free subscription plans to paid plans. We believe our spaces under management will continue to grow as our business expands with our current customers and as we add new free and paid subscribers.
The following chart shows our spaces under management for each of the periods presented (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Spaces under management | 12.3 | | 9.9 | | | | |
Total Subscribers
We believe that our ability to increase the number of subscribers on our platform is an indicator of market penetration, growth of our business and future revenue trends. For purposes of our business, a “subscriber” is an individual or entity that has signed up for a Matterport account during the applicable measurement period. We include both free and paid subscribers in our total subscriber count. We refer to a subscriber that has signed up for a free account and typically captures only one free space allocated to the account as a “free subscriber.” We refer to a subscriber that has signed up for one of our paid subscription levels and typically captures at least one space as a “paid subscriber.” Our paid subscribers typically enter into monthly subscriptions with us. We generally consider a single organization to be a single subscriber if the organization has entered into a discrete enterprise agreement with us, even if the organization includes multiple divisions, segments or subsidiaries that utilize our platform. If multiple individuals, divisions, segments or subsidiaries within an organization have each entered into a discrete subscription with us, we consider each individual account to be a separate subscriber.
We believe the number of paid subscribers on our platform is an important indicator of future revenue trends, and we believe the number of free subscribers on our platform is important because free subscribers may over time become paid subscribers on our platform and are therefore another indicator of our future revenue trend. We continue to demonstrate strong growth in the number of free and paid subscribers on our platform as indicated by our results for the three months ended March 31, 2024.
The following chart shows the number of our free subscribers, paid subscribers and total subscribers for each of the periods presented (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Free subscribers | 931 | | | 704 | | | | | |
| Paid subscribers | 74 | | | 67 | | | | | |
| Total subscribers | 1,005 | | | 771 | | | | | |
Net Dollar Expansion Rate
We believe our ability to retain and grow the subscription revenue generated by our existing subscribers is an important measure of the health of our business and our future growth prospects. We track our performance in this area by measuring our net dollar expansion rate from the same set of customers across comparable periods. We calculate this metric on a quarterly basis by comparing the aggregate amount of subscription revenue attributable to a subscriber cohort for the most recent quarter divided by the amount of subscription revenue attributable to the same subscriber cohort for the same quarter in the previous fiscal year. Our calculation for the applicable quarter includes any subscriber in the cohort that upgrades or downgrades the subscriber’s respective subscription level or churns. Our net dollar expansion rate can fluctuate from quarter to quarter due to a number of factors, including, but not limited to, the number of subscribers that upgrade or downgrade their respective subscription levels or a higher or lower churn rate during any given quarter.
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| Net dollar expansion rate | 107 | % | | 103 | % |
Factors Affecting Our Performance
We believe that our growth and financial performance are dependent upon many factors, including the key factors described below, which are in turn subject to significant risks and challenges.
Penetrating a Largely Undigitized Global Property Market
Despite the rapid pace of digital transformation in today’s world, the massive global building stock, estimated by Savills to be $327 trillion in total property value, remains largely undigitized today, and we estimate that less than 0.1% is penetrated by digital transformation. As a first mover in digital twin creation and spatial data library construction, we see significant opportunities to continue leading the digitization and datafication of the built world. We estimate that there are more than 4 billion buildings and 20 billion spaces in the world globally, yielding a more than $240 billion market opportunity. We believe that as Matterport’s unique spatial data library and property data services continue to grow, this opportunity could increase to more than $1 trillion based on the size of the building stock and the untapped value creation available to buildings worldwide. Property digitization and datafication are expected to accelerate on a global basis in both frequency and magnitude as the visually immersive and dimensionally accurate digital twins help increase productivity and reduce costs for our customers with the solutions that we have developed for diverse markets over the past decade.
Through providing a comprehensive set of solutions from cutting-edge capture technology and high-accuracy digital twins to valuable property insights, our AI-powered platform delivers value across the property lifecycle to subscribers from various end markets, including residential and commercial real estate, facilities management and retail, AEC, insurance and repair, and travel and hospitality. As of March 31, 2024, we had over 1,005,000 subscribers on our platform and approximately 12.3 million spaces under management, and we aim to continue scaling our platform and strengthen our foothold in various end markets and geographies to deepen our market penetration. With the acquisition of VHT (“VHT Acquisition”) completed in July 2022, we were able to service more property listings and position ourselves to increase adoption of digital twin technology and expand further into the residential real estate industry while adding marketing services for other vertical markets such as commercial real estate, travel and hospitality, and the retail sector. We believe that the breadth and depth of the Matterport platform along with the strong network effect from our growing spatial data library will lead to increased adoption of our solutions across diverse end markets, enabling us to drive further digital transformation of the built world.
Adoption of our Solutions by Enterprise Subscribers
We are pioneering the transformation of the built world from offline to online. We provide a complete, data-driven set of solutions for the digitization and datafication of the built world across a diverse set of use cases and industries. We take a largely offline global property market to the online world using a data-based approach, creating a digital experience for subscribers to interact with buildings and spaces and derive actionable insights. Our Cortex AI-driven engine and software platform uses the breadth of the billions of data points we have accumulated over the years to improve the 3D accuracy of our digital twin models. Our ML algorithms also deliver significant commercial value to our subscribers by generating data-based insights that allow them to confidently make assessments and decisions about their properties. We
provide enterprise subscribers with a comprehensive solution that includes all of the capture, design, build, promote, insure, inspect and manage functionality of our platform.
We believe that our scale of data, superior capture technology, continued focus on innovation and considerable brand recognition will drive a continued adoption of our all-in-one platform by enterprise subscribers.
We are particularly focused on acquiring and retaining large enterprise subscribers because of the significant opportunities to expand our integrated solutions to different parts of an organization and utilize digital twins for more use cases within an organization. In January 2023, we announced that our customer selected Matterport’s digital twin platform and 3D capture technology to build a virtual Operations Center for remote management of over 60 facilities across North America, South America, Europe and Asia. Matterport’s platform creates simulated digital replicas of the manufacturing facilities, where teams can remotely track progress, plan for site changes, and collaborate remotely. In September 2023, we announced our latest collaboration with a leading global provider of construction management software, expanding Matterport’s platform ecosystem support for design and construction management software services. Users can now use features directly within Matterport’s photorealistic 3D digital twins, creating a visual system-of-record for site conditions, centralizing record-keeping and enabling better progress tracking, quality control, and more efficient closeout processes. In November 2023, we announced a new partnership intended to deliver 3D digital twin-powered connectivity solutions for facilities management across industrial automation, smart buildings, and broadband with a leading global supplier of network infrastructure and digitization solutions. We also announced a multi-year partnership with a leading vacation rental management platform to leverage Matterport’s Digital Twin Platform and Capture Services to more efficiently and effectively capture, document and promote each of its listings. As of March 31, 2024, 26% of Fortune 1000 companies use Matterport to manage their enterprise facilities, real estate portfolios, factories, offices, and retail locations. We will continue improving our proprietary spatial data library and AI-powered platform to strengthen our long-term relationships and commitments with large enterprise customers streamlining our sales and marketing resources to enhance enterprise adoption of our solutions.
Retention and Expansion of Existing Subscribers
Our ability to increase revenue depends in part on retaining our existing subscribers and expanding their use of our platform. We offer an integrated, comprehensive set of solutions including spatial data capturing, digital twin creation, publication, vertical-market specific content, and property analytics. We have a variety of subscription plans to meet the needs of every subscriber, including free subscription plans and several standard paid subscription plans, and we are able to provide customized subscription plans tailored to the specific needs of large enterprises. As we seek to develop long-term subscriber relationships, our value proposition to subscribers is designed to serve the entirety of the property lifecycle, from design and build to maintenance and operations, promotion, insure, repair, restore, secure and finance. As a result, we believe we are uniquely positioned to grow our revenue with our existing subscribers as our platform helps them discover opportunities to drive both short and long term returns on their property investments.
Given the all-in-one nature of our platform and its ease of use, we are also able to drive adoption of our solutions across various parts of an organization. For example, we established our long-term relationship with large commercial real estate clients which included being engaged to create digital twins for available office spaces for promotion and leasing, working with the subscriber’s construction team to redesign office spaces through integrating our digital twins with the construction team’s design software, and conducting due diligence of potential real property acquisitions.
As a result of our long-term focus and expansion strategy, we have been able to retain our subscribers and drive increased usage of our platform. Our net dollar expansion rate of 107% and 103% for the three months ended March 31, 2024 and 2023, respectively, demonstrates the stickiness and growth potential of our platform. We continued to see expansion with our enterprise customers in the three months ended March 31, 2024. On a combined basis, growth in enterprise customers remains and trends in small and medium size business cohorts improved in the quarter ended March 31, 2024 as customers large and small continue to experience the efficiencies, insight, and cost-saving power of Matterport.
Scaling Across Various Industry Verticals
Matterport’s fundamental go-to-market model is built upon a subscription first approach. We have invested aggressively to unlock a scalable and cost-effective subscription flywheel for customer adoption. With our large spatial data library and pioneering AI-powered capabilities, we pride ourselves on our ability to deliver value across the property lifecycle to subscribers from various end markets, including residential and commercial real estate, facilities management
and retail, AEC, insurance and repair, and travel and hospitality. We focus on industry-specific sales and marketing initiatives to increase sales efficiency and drive subscriber and recurring revenue growth. We will continue to improve our spatial data library and AI-powered platform to address the workflows of the industries we serve, while expanding our solutions and reaching new real estate segments.
International Expansion
We are focused on continuing to expand our AI-powered spatial data platform to all corners of the world. Given that the global building stock remains largely undigitized today and with the vast majority of the world’s buildings located outside of the United States, we expect significant opportunities in pursuing the digitization and datafication of the building stock worldwide. We use a “land and expand” model to capitalize on the potential for geographic expansion. We continue to seek to further penetrate our existing geographies in order to add their spatial data to our platform. In June 2023, we partnered with one of the largest value-added distributors (“VAD”), significantly expanding our presence in Latin America. With a network of more than 2,000 resellers, this partnership will provide Matterport’s digital twin solutions to two of the largest property markets in the region, Mexico and Colombia. In July 2023, we partnered with a distributor of global technologies and managed security services to offer Matterport’s digital twin platform to Government, Enterprise and SMB customers out of its offices in the United Arab Emirates, India, Oman, Saudi Arabia, and South Africa. Subscribers outside the United States accounted for approximately 43% of our subscription revenues for three months ended March 31, 2024. Given the flexibility and ease of use of our platform and capture device agnostic data capture strategy, we believe that we are well-positioned to further penetrate existing and additional geographies with our existing multiple sales attachment points and a global marketing effort in place.
Investing in Research and Innovation for Growth
We continuously evaluate our focus in research and development to improve Cortex, expand our solutions portfolio, and support seamless integration of our platform with third-party software applications. We plan to concentrate on in-house innovation and expect to consider acquisitions on an opportunistic basis. Since the launch of Matterport for iPhone, we have been continuously developing a robust pipeline of new product releases, including releasing the Android Capture app, collaborating with Facebook AI (now known as Meta) to release the world’s largest dataset of 3D spaces, and launching Notes and Matterport for Mobile. In February 2023, we launched Digital Pro, an all-in-one marketing solution for real estate agents. Digital Pro combines the innovation of Matterport’s 3D digital twin technology with integrated marketing and content production services to create the industry’s most affordable, comprehensive marketing package to help real estate professionals manage more listings and sell homes faster. In June 2023, we announced Genesis, a new initiative that aims to deliver generative AI across its digital twin platform for customers looking to bolster the efficiency and profitability of their property portfolios worldwide. Genesis combines Matterport’s stable of DL and computer vision innovations, including Cortex AI and Property Intelligence, with generative AI to deliver a new generation of digital twins. Combining generative AI and property insights, Matterport’s digital twin platform aims to reshape the real estate landscape, optimizing interior design, space utilization, energy efficiency, safety, and accessibility while transforming property marketing strategies. In September 2023, we announced the launch of a beta program for the next generation of intelligent digital twins with powerful new capabilities fueled by the Company’s rapid advancements in AI and data science. Customers can access automated measurements, layouts, editing, and reporting capabilities generated from their digital twins. Property Intelligence is now available worldwide. While we plan to concentrate on in-house innovation, we may also pursue acquisitions of products, teams and technologies on an opportunistic basis to further expand the functionality of and use cases for our platform. Our philosophy is to adopt a long-term perspective in the evaluation of acquisition opportunities in order to ensure sustainable value creation for our customers.
Expanding Partner Integrations and Third-Party Developer Platform
We aim to foster a strong network of partners and developers around our Matterport platform. Through integration with our open, scalable and secure enterprise platform, organizations across numerous industries have been able to automate workflows, enhance subscriber experiences and create custom extensions for high-value vertical applications. In March 2023, we announced a new integration with Autodesk Construction Cloud, a portfolio of software and services that combines advanced technology, a builders network and predictive insights for construction teams, making it easier for project teams using Matterport and Autodesk Build ® to collaborate within critical project management workflows. This new integration allows project stakeholders to enhance the “Request for Information” (RFI) process in Autodesk Build, moving from traditional methods of communication to immersive digital twin technology, powered by Matterport. In April 2023, we announced the general availability of new integrations with IoT TwinMaker, enabling enterprise customers to
seamlessly connect Internet of Things (IoT) data into visually immersive and dimensionally accurate Matterport digital twins. Our solution that is integrated with Amazon Web Services (AWS) IoT TwinMaker makes it easier for developers to create digital twins of real-world systems such as buildings, factories, industrial equipment, and production lines. This new offering from Matterport supports enterprise digital transformation efforts by providing customers with an efficient and cost-effective solution to remotely optimize building operations, increase production output, improve equipment performance, and increase environmental health and safety at their facilities. In November 2023, we announced in advance of Autodesk University, a new Computer-Aided Design (“CAD”) file add-on that will enable the simple creation of CAD files directly from Matterport digital twins to speed up design workflows using Matterport. The Matterport CAD file add-on is now available.
We believe that our future growth and scale depend partially upon our ability to develop a strong ecosystem of partners and developers which can augment the value of our platform. Going forward, we plan to establish additional strategic partnerships with leading software providers through the Matterport Platform Partner Program, in which our industry partners and developers can build, develop, and integrate with our spatial data library. We will also invest in the Matterport Developer Program to enlarge our marketplace of value-added third-party applications built on top of the Matterport platform. We expect that monetization opportunities from partner integrations and the third-party developer marketplace will allow us to drive subscriber growth and develop a more loyal subscriber base, and the revenue derived from the marketplace will grow over time.
Components of Results of Operations
Revenue
Our revenue consists of subscription revenue, license revenue, services revenue and product revenue.
Subscription Agreementrevenue — We provide our software as a service on our Matterport platform. Subscribers use our platform under different subscription levels based on the number of active spaces. We typically bill our subscribers monthly or annually in advance based on their subscription level and recognize revenue from subscriptions for our services over the term of the subscription.
Services revenue — Services revenue consists of capture services and add-on services. Capture services consist of professional services in which aMatterport-qualified third-party technician will provide on-site digital capture services for the customer. Our extensive capture solutions also include photos, videos, drone imaging and digital marketing services. Under the capture service arrangements, we pay the third-party technician and bill the customer directly. Add-on services consist of additional software features that the customer can purchase. These services are not consummatedtypically provided by third parties under our direction and oversight, and we pay the third party and bill the subscriber directly for the provisions of such services.
Product revenue — Product revenue consists of revenue from the sale of capture devices, including our Pro3 and Pro2 Cameras, Matterport Axis, and out-of-warranty repair fees. Customers place orders for our products, and we fulfill the orders and ship the devices directly to the customer or, in some cases, we arrange for the shipment of devices from third parties directly to the customer. We recognize product revenue associated with a sale in full at the closing;time of shipment of the product. In some cases, customers prepay for the ordered device and, (d)in other cases we bill the customer upon shipment of the device. Customers purchasing capture devices from us also typically subscribe to the Matterport platform for use with their captured spaces. However, we do not require Pro3 or Pro2 Camera owners to have a subscription when purchasing a Pro3 or Pro2 Camera. We will also repair Pro3 and Pro2 Cameras for a fee if the closingnature of the Business Combination shall not have occurredrepair is outside the scope of the applicable warranty.
Cost of Revenue
Cost of revenue consists of cost of subscription revenue, cost of license revenue, cost of services revenue, and cost of product revenue. Restructuring costs are also included in cost of revenue in the individual categories.
Cost of subscription revenue—Cost of subscription revenue consists primarily of costs associated with hosting and delivery services for our platform to support our subscribers and other users of our subscribers’ spatial data, along with our customer support operations. Cost of subscription revenue also includes amortization of internal-use software and stock-based compensation.
Cost of services revenue — Cost of services revenue consists primarily of costs associated with capture services and costs for add-on features. Costs for capture services are primarily attributable to services rendered by September 7, 2021.third-party technicians that digitally capture spaces on behalf of the applicable customer, as well as administration and support costs associated with managing the program. Costs for add-on features are primarily attributable to services rendered by third-party contractors that develop the floor plans or other add-ons applications purchased by our subscribers as well as support costs associated with delivering the applications.
Cost of product revenue — Cost of product revenue consists primarily of costs associated with the manufacture of our Pro3 and Pro2 Cameras, warranty and repair expenses relating to Pro3 and Pro2 Cameras and personnel-related expenses associated with manufacturing employees including salaries, benefits, bonuses, overhead and stock-based compensation. Cost of product revenue also includes depreciation of property and equipment, costs of acquiring third-party capture devices, and costs associated with shipping devices to customers.
Operating Expenses
Our operating expenses consist primarily of research and development expenses, selling, general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include overhead costs and restructuring costs.
Research and development expenses—Research and development expenses consist primarily of personnel-related expenses associated with our research and development employees, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include third-party contractor or professional services fees, and software and subscription services dedicated for use by our research and development organization. In addition, research and development expenses that qualify as internal-use software development costs are capitalized.
Selling, general and administrative expenses—Selling, general, and administrative expenses consist primarily of personnel-related expenses associated with our sales and marketing, finance, legal, information technology, human resources, facilities, and administrative employees, including salaries, benefits, bonuses, sales commissions, and stock-based compensation. We capitalize and amortize commissions associated with attracting new paid subscribers and services revenue over a period of three years, which is the estimated period for which we expect to benefit from the sales commissions. Selling, general and administrative expenses also include external legal, accounting, and other professional services fees, software and subscription services, and other corporate expenses.
Interest Income
Interest income consists of interest income earned on our cash and cash equivalents and investments.
Change in Fair Value of Warrants Liability
The private warrants are subject to fair value remeasurement at each balance sheet date if outstanding, or upon the time immediately before the exercise or redemption. As of March 31, 2024, there were 1.7 million Private Warrants outstanding. Matterport expects to incur incremental income (expense) in the date hereof,condensed consolidated statements of operations for the sharesfair value change for the outstanding private warrants liability going forward at the end of Class A common stockeach reporting period or through the exercise of such warrants.
Other Expense, net
Other expense, net consists primarily of amortization of investment premium.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. We record income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. We recognize the effect on deferred income taxes of a change in tax rates in income in the period that includes the enactment date.
We record a valuation allowance to reduce our deferred tax assets and liabilities to the net amount that we believe is more likely than not to be issued pursuantrealized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.
RESULTS OF OPERATIONS
The following table sets forth our results of operations for the periods presented based on our condensed consolidated statements of operations data (in thousands, except percentages). The period-to-period comparison of results is not necessarily indicative of results for future periods.
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| Three Months Ended March 31, | | Change | | |
| 2024 | | 2023 | | Amount | | % | | | | |
| Revenue: | | | | | | | | | | | |
| Subscription | $ | 24,015 | | | $ | 19,874 | | | $ | 4,141 | | | 21 | % | | | | |
| | | | | | | | | | | |
| Services | 9,103 | | | 8,704 | | | 399 | | | 5 | % | | | | |
| Product | 6,754 | | | 9,416 | | | (2,662) | | | (28) | % | | | | |
| Total revenue | 39,872 | | | 37,994 | | | 1,878 | | | 5 | % | | | | |
| Costs of revenue: | | | | | | | | | | | |
| Subscription | 7,643 | | | 6,962 | | | 681 | | | 10 | % | | | | |
| | | | | | | | | | | |
| Services | 6,375 | | | 6,244 | | | 131 | | | 2 | % | | | | |
| Product | 6,262 | | | 8,376 | | | (2,114) | | | (25) | % | | | | |
| Total costs of revenue | 20,280 | | | 21,582 | | | (1,302) | | | (6) | % | | | | |
| Gross profit | 19,592 | | | 16,412 | | | 3,180 | | | 19 | % | | | | |
| Gross margin | 49% | | 43% | | | | | | | | |
| Operating expenses: | | | | | | | | | | | |
| Research and development | 14,900 | | | 18,273 | | | (3,373) | | | (18) | % | | | | |
| Selling, general, and administrative | 45,476 | | | 54,933 | | | (9,457) | | | (17) | % | | | | |
| Total operating expenses | 60,376 | | | 73,206 | | | (12,830) | | | (18) | % | | | | |
| Loss from operations | (40,784) | | | (56,794) | | | 16,010 | | | (28) | % | | | | |
| Other income (expense): | | | | | | | | | | | |
| Interest income | 2,264 | | | 1,471 | | | 793 | | | 54% | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Change in fair value of warrants liability | (120) | | | 222 | | | (342) | | | (154) | % | | | | |
| | | | | | | | | | | |
| Other income, net | 2,553 | | | 1,183 | | | 1,370 | | | 116% | | | | |
| Total other income | 4,697 | | | 2,876 | | | 1,821 | | | 63% | | | | |
| Loss before provision for income taxes | (36,087) | | | (53,918) | | | 17,831 | | | (33)% | | | | |
| Provision for (benefit from) income taxes | 41 | | | (76) | | | 117 | | | (154)% | | | | |
| Net loss | $ | (36,128) | | | $ | (53,842) | | | $ | 17,714 | | | (33)% | | | | |
Revenues
Total revenue increased by $1.9 million, or 5%, to $39.9 million during the three months ended March 31, 2024, from $38.0 million during the three months ended March 31, 2023. The increase in revenue is attributable to growth primarily driven by subscription and services revenue, partially offset by a decrease in product revenue.
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| Three Months Ended March 31, | | | | | | | | | | |
| 2024 | | 2023 | | Change | | | | | | |
| Amount | | Amount | | Amount | | % | | | | | | | | |
| (dollars in thousands) |
| Subscription | $ | 24,015 | | | $ | 19,874 | | | $ | 4,141 | | | 21 | % | | | | | | | | |
| | | | | | | | | | | | | | | |
| Services | 9,103 | | | 8,704 | | | 399 | | | 5 | % | | | | | | | | |
| Product | 6,754 | | | 9,416 | | | (2,662) | | | (28) | % | | | | | | | | |
| Total revenue | $ | 39,872 | | | $ | 37,994 | | | $ | 1,878 | | | 5 | % | | | | | | | | |
Subscription revenue increased for the three months ended March 31, 2024 compared to the Subscription Agreements have not been registered undersame period in 2023, primarily due to higher volume of subscription plans from new subscribers, expanded use of the Securities Act.subscription by existing subscribers, and a subscription price increase implemented since the third quarter in the fiscal year of 2023. Of the $4.1 million increase, approximately $2.7 million was attributable to the higher volume of subscription plans from additional new subscribers during the three months ended March 31, 2024 and approximately $1.4 million was attributable to additional sales to existing customers during that period.
Services revenue increased for the three months ended March 31, 2024 compared to the same period in 2023. The
Company will, within 30 days after the closing, file with the SEC a registration statement (the “Post-Closing Registration Statement”) registering the resaleincrease was primarily attributable to increased sales of
such shares of Class A Common Stockcapture services and
will use its commercially reasonable efforts to have such Post-Closing Registration Statement declared effective as soon as practicable after the filing thereof.Recent Stockholder Action
21
The Companyup-scaled add-on services, primarily driven by our investment in growing our capture services business and the members of its Board of Directors have been named as defendants in a putative stockholder action filedincrease in the Supreme Courtnumber of our subscribers.
Product revenue decreased for the Statethree months ended March 31, 2024 compared to the same period in 2023, primarily due to lower sales volume of New York, Countyour Pro2 camera.
Costs of New York, captioned Jamin Quimby v. Gores Holdings VI, Inc.Revenue
Our cost of revenue consists of cost of subscription revenue, cost of license revenue, cost of services revenue and cost of product revenue.
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| Three Months Ended March 31, | | | | | | | | | | |
| 2024 | | 2023 | | Change | | | | | | |
| Amount | | Amount | | Amount | | % | | | | | | | | |
| (dollars in thousands) |
| Cost of subscription revenue | $ | 7,643 | | | $ | 6,962 | | | $ | 681 | | | 10 | % | | | | | | | | |
| | | | | | | | | | | | | | | |
| Cost of services revenue | 6,375 | | | 6,244 | | | 131 | | | 2 | % | | | | | | | | |
| Cost of products revenue | 6,262 | | | 8,376 | | | (2,114) | | | (25) | % | | | | | | | | |
| Total cost of revenue | $ | 20,280 | | | $ | 21,582 | | | $ | (1,302) | | | (6) | % | | | | | | | | |
Total cost of revenue decreased by $1.3 million, or 6%, et al.to $20.3 million for the three months ended March 31, 2024, from $21.6 million for the three months ended March 31, 2023. The decrease was primarily attributable to a decrease in cost of products revenue.
Cost of subscription revenue increased by $0.7 million or 10%, Index No. 652761/2021,to $7.6 million for the three months ended March 31, 2024 from $7.0 million for the three months ended March 31, 2023, primarily attributable to the increased spending in connection withhosting and delivery services for our platform to enhance our processing efficiency and better support our expanding digital twins for subscription services provided.
Cost of services revenue increased by $0.1 million or 2%, to $6.4 million for the proposed business combinationthree months ended March 31, 2024 from $6.2 million for the three months ended March 31, 2023, primarily attributable to an increase in volume of capture services sold.
Cost of products revenue decreased by $2.1 million or 25%, to $6.3 million for the Company with Matterport, Inc. (the “Proposed Transaction”)three months ended March 31, 2024 from $8.4 million for the three months ended March 31, 2023, primarily attributable to lower volume.
Gross Profit and Gross Margin
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
| 2024 | | 2023 | | | | | | | | |
| (dollars in thousands) |
| Gross profit | $ | 19,592 | | | $ | 16,412 | | | | | | | | | |
| Gross margin | 49% | | 43% | | | | | | | | |
Gross margin increased to 49% during the three months ended March 31, 2024 from 43% during the three months ended March 31, 2023. The complaint generally alleges breach of fiduciary dutyincrease was primarily driven by the improved margin in subscription and aiding and abetting claims relatingservices revenue primarily attributable to among other things, alleged misstatements and omissionscost efficiencies resulting from the 2023 restructuring plan implemented in the Form S-4 registration statement filedsecond half of fiscal year 2023.
Research and Development Expenses
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| Three Months Ended March 31, | | | | | | | | | | |
| 2024 | | 2023 | | Change | | | | | | |
| Amount | | Amount | | Amount | | % | | | | | | | | |
| (dollars in thousands) |
| Research and development expenses | $ | 14,900 | | | $ | 18,273 | | | $ | (3,373) | | | (18) | % | | | | | | | | |
Research and development expenses decreased by $3.4 million, or 18%, to $14.9 million for the Company withthree months ended March 31, 2024 from $18.3 million for the SECthree months ended March 31, 2023.The decrease was primarily attributable to a $1.4 million decrease in stock-based compensation, a $1.3 million decrease in salary compensation expenses, and a $0.4 million decrease in professional services, including consulting services.
Selling, General and Administrative Expenses
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| Three Months Ended March 31, | | | | | | | | | | |
| 2024 | | 2023 | | Change | | | | | | |
| Amount | | Amount | | Amount | | % | | | | | | | | |
| (dollars in thousands) |
| Selling, general and administrative expenses | $ | 45,476 | | | $ | 54,933 | | | $ | (9,457) | | | (17) | % | | | | | | | | |
Selling, general and administrative expenses decreased by $9.5 million, or 17%, to $45.5 million for the three months ended March 31, 2024, from $54.9 million for the three months ended March 31, 2023. The decrease was primarily attributable to a $4.7 million decrease in salary compensation expenses, a $1.7 million decrease in stock-based compensation, a $1.5 million decrease in professional services as we continue to mitigate our spending and drive efficiency, and a $1.4 million decrease in legal fees.
Interest Income
| | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
| 2024 | | 2023 | | | |
| (dollars in thousands) |
| Interest income | $ | 2,264 | | | $ | 1,471 | | | | |
Interest income increased to $2.3 million for the three months ended March 31, 2024, from $1.5 million for the three months ended March 31, 2023. The increase was primarily attributable to interest earned on April 6, 2021our cash equivalents and investments during the three months ended March 31, 2024.
Change in connection withFair Value of Warrants Liability
| | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
| 2024 | | 2023 | | | |
| (dollars in thousands) |
| Change in fair value of warrants liability | $ | (120) | | | $ | 222 | | | | |
We recognized a change in fair value of warrants liability of $0.1 million during the Proposed Transaction (the “Registration Statement”). The complaint seeks, among other things, injunctive relief and an award of attorneys’ fees. The Company believes three months ended March 31, 2024 due to the claims assertedincrease in the Quimby matter are without merit, and intendsfair value of our outstanding Private Warrants. As of March 31, 2024, there were 1.7 million Private Warrants outstanding.
Other Income, Net
| | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
| 2024 | | 2023 | | | |
| (dollars in thousands) |
| Other income, net | $ | 2,553 | | | $ | 1,183 | | | | |
Other expense increased by $1.4 million, or 116%, to
vigorously defend against them. Results$2.6 million for the three months ended March 31, 2024 from $1.2 million for the three months ended March 31, 2023. The increase was primarily due to accretion of Operations
discounts, net of amortization related to investments premiums.
Provision for (Benefit from) Income Taxes
| | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
| 2024 | | 2023 | | | |
| (dollars in thousands) |
| Provision for (benefit from) income taxes | $ | 41 | | | $ | (76) | | | | |
For the three months ended March 31,
2021, we had a net loss2024 and 2023, our provision for income taxes reflects an effective tax rate of
($29,974,034)(0.11)% and 0.14%,
of which ($26,672,500) are non-cash losses related to the change in fair value of the warrant liability.respectively. Our
business activities during the quarter mainly consisted of identifying and evaluating prospective acquisition candidates for a Business Combination. We believe that we have sufficient funds available to complete our efforts to effect a Business Combination with an operating business by December 15, 2022. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination.As indicated in the accompanying unaudited financial statements, at March 31, 2021, we had $176,595 in cash and deferred offering costs of $12,075,000. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our Business Combination will be successful.
Liquidity and Capital Resources
On July 24, 2020, the Sponsor purchased 17,250,000 shares of Class F Common Stock for $25,000, or approximately $0.001 per share. On October 1, 2020, the Sponsor surrendered 8,625,000 Founder Shares to us for no consideration, on October 23, 2020, the Company effected a stock dividend with respect to its Class F Common Stock of 6,468,750 shares thereof and on November 13, 2020 the Sponsor surrendered 6,468,750 Founder Shares to us for no consideration, resulting in an aggregate of 8,625,000 outstanding shares of Class F Common Stock. As a result of such surrenders and stock dividend, the per-share purchase price increased to approximately $0.003 per share. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares upon completion of the Public Offering. On September 11, 2020, the Sponsor transferred 25,000 Founder Shares to each of the independent directors at their original purchase price.
On December 15, 2020, the Company consummated its Public Offering of 34,500,000 Units at a price of $10.00 per Unit, including 4,500,000 Units as a result of the underwriters’ full exercise of their over-allotment option, generating gross proceeds of $345,000,000. On the IPO Closing Date, we completed the private sale of an aggregate of 4,450,000 Private Placement Warrants, each exercisable to purchase one share of Common Stock at $11.50 per share, to our Sponsor, at a price of $2.00 per Private Placement Warrant, generating gross proceeds, before expenses, of $8,900,000. After deducting the underwriting discounts and commissions (excluding the Deferred Discount, which amount will be payable upon consummation of the Business Combination, if consummated) and the estimated offering expenses, the total net proceeds from our Public Offering and the sale of the Private Placement Warrants were $346,055,000, of which $345,000,000 (or $10.00 per share sold in the Public Offering) was placed in the Trust Account. The amount of proceeds not deposited in the Trust Account was $1,055,000 at the closing of our Public Offering. Interest earned on the funds held in the Trust Account may be released to us to fund our Regulatory Withdrawals, for a maximum of 24 months and/or additional amounts necessary to pay our franchise and income taxes.
On July 24, 2020, Company borrowed $300,000 by the issuance of an unsecured promissory note from the Sponsor for $300,000 to cover expenses related to the Public Offering. This Note was non-interest bearing and payable on the earlier of June 30, 2021 or the completion of the Public Offering. This Note was repaid in full upon the completion of the Public Offering.
22
On March 19, 2021, the Sponsor made available to the Company a loan of up to $2,000,000 pursuant to a promissory note issued by the Company to the Sponsor. The proceeds from the note will be used for on-going operational expenses and certain other expenses in connection with the Proposed Business Combination. The note is unsecured, non-interest bearing and matures on the earlier of: (i) January 31, 2022 or (ii) the date on which the Company consummates the Proposed Business Combination. As of March 31, 2021, the amount advanced by Sponsor to the Company was $600,000.
At March 31, 2021 and December 31, 2020, we had cash held outside of the Trust Account of approximately $176,595 and $633,266, respectively, which is available to fund our working capital requirements.Additionally, interest earned on the funds held in the Trust Account may be released to us to fund our Regulatory Withdrawals, for a maximum of 24 months and/or additional amounts necessary to pay our franchise and income taxes.
At March 31, 2021 and December 31, 2020, the Company had current liabilities of $48,141,857 and $18,690,703, respectively, and working capital of ($47,129,281) and ($17,159,683), respectively, the balances of which are primarily related to warrants we have recorded as liabilities. Other amounts related to accrued expenses owed to professionals, consultants, advisors and others who are working on seeking a Business Combination.
We intend to use substantially all of the funds held in the Trust Account, including interest (which interest shall be net of Regulatory Withdrawals and taxes payable) to consummate our Business Combination. Moreover, we may need to obtain additional financing either to complete a Business Combination or because we become obligated to redeem a significant number of shares of our Common Stock upon completion of a Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations. To the extent that our capital stock or debt is used, in whole or in part, as consideration to consummate our Business Combination, the remaining proceeds held in our Trust Account, if any, will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategy.
Contractual Obligations
As of March 31, 2021 and December 31, 2020, we did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities. In connection with the Public Offering, we entered into an administrative services agreement to pay monthly recurring expenses of $20,000 to The Gores Group for office space, utilities and secretarial support. The administrative services agreement terminates upon the earlier of the completion of a Business Combination or the liquidation of the Company.
The underwriters are entitled to underwriting discounts and commissions of 5.5% ($18,975,000), of which 2.0% ($6,900,000) was paid at the IPO Closing Date, and 3.5% ($12,075,000) was deferred. The Deferred Discount will become payable to 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. The underwriters are not entitled to any interest accrued on the Deferred Discount.
Recently Issued Accounting Pronouncements Not Yet Adopted
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements based on current operations of the Company. The impact of any recently issued accounting standards will be re-evaluated on a regular basis or if a business combination is completed where the impact could be material.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange
23
rates, commodity prices and/or equity prices. Our business activitiestax rate for the three months ended March 31, 2021 consisted solely2024 and 2023, differs from the U.S. federal statutory tax rate of organizational21% primarily due to losses that cannot be benefited from as a result of the valuation allowance on the U.S. entity’s deferred tax assets and liabilities, foreign earnings being taxed at different tax rates and stock-based compensation activities.
Non-GAAP Financial Measures
In addition to our results of operations below, we report certain financial measures that are not required by, or presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income. We may calculate or present our non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures we report may not be comparable with those of companies in our industry or in other industries.
Non-GAAP Loss from Operations
We calculate non-GAAP loss from operations as GAAP loss from operations excluding share-based compensation related charges (including share-based payroll tax expense), acquisition transaction costs related to the planned acquisition, and amortization of acquired intangible assets, which we do not consider to be indicative of our overall operating performance. We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business.
The following table presents our non-GAAP loss from operations for each of the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, | | | | |
| 2024 | | 2023 | | | | | | | | |
| GAAP loss from operations | $ | (40,784) | | | $ | (56,794) | | | | | | | | | |
| Add back: stock-based compensation expense, net | 30,727 | | | 33,111 | | | | | | | | |
| Add back: acquisition-related costs | 1,007 | | | — | | | | | | | | | |
| Add back: amortization expense of acquired intangible assets | 443 | | | 443 | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Non-GAAP loss from operations | $ | (8,607) | | | $ | (23,240) | | | | | | | | | |
Free Cash Flow
We calculate free cash flow as net cash used in operating activities less purchases of property and equipment and capitalized software and development costs. We believe this metric provides our management and investors with an important indicator of the ability of our business to generate additional cash from our business operations or our need to access additional sources of cash, in order to fund our operations and investments.
The following table presents our free cash flow for each of the periods presented (in thousands):
| | | | | | | | | | | |
| Three months ended March 31, |
| 2024 | | 2023 |
| Net cash used in operating activities | $ | (3,843) | | | $ | (20,398) | |
| Less: purchases of property and equipment | 43 | | | 87 | |
| Less: capitalized software and development costs | 2,169 | | | 2,567 | |
| Free cash flow | $ | (6,055) | | | $ | (23,052) | |
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Our capital requirements will depend on many factors, including the growth and expansion of our paid subscribers, development of our technology and software platform (including research and development efforts), expansion of our sales and marketing activities and activities relating to our Public Offeringsales, general and the identification of a target company for our Business Combination.administrative expenses. As of March 31, 2021, $345,022,332 (including accrued interest2024, we had cash, cash equivalents and dividendsinvestments of approximately $418.8 million. Our cash equivalents primarily consist of cash on hand and subjectamounts on deposit with financial institutions. To date, our principal sources of liquidity have been proceeds received from the issuance of equity, proceeds from the Merger and proceeds from warrant and option exercises for cash.
| | | | | | | | | | | |
| | | |
| March 31, 2024 | | December 31, 2023 |
| (dollars in thousands) |
| Cash, cash equivalents, and investments: | | | |
| Cash and cash equivalents | $ | 79,449 | | | $ | 82,902 | |
| | | |
| Investments | 339,326 | | | 340,098 | |
| Total cash, cash equivalents, and investments | $ | 418,775 | | | $ | 423,000 | |
We have incurred negative cash flows from operating activities and significant losses from operations in the past. We expect to reduction bycontinue to incur operating losses at least for the Deferred Discountnext 12 months due to the investments that we intend to make in our business. As a result, we may require additional capital resources to grow our business. Our future capital requirements will depend on many factors, including increase in our customer base, the timing and extent of spend to support the expansion of sales, marketing and development activities. Management believes that its current financial resources are sufficient to continue operating activities for at least one year past the consummationissuance date of the Business Combination) was heldfinancial statements.
Other commitments
There have been no material changes to our material cash requirements or non-cancellable contractual commitments, including as a result of our restructuring plan. We lease office space under operating leases for our U.S. headquarters and
other locations in the Trust Account for the purposes of consummating our Business Combination. United States that expire at various dates through 2025. In addition, we have purchase obligations, which include contracts and issued purchase orders containing non-cancellable payment terms to purchase third-party goods and services. As of March 31, 2021, investment securities in the Company’s Trust Account consists of $345,022,332 in money market funds. As2024, our 12-month lease obligations (through March 31, 2025) totaled approximately $1.2 million. Our non-cancellable purchase obligations as of March 31, 2021,2024 totaled approximately $13.5 million and are due through the effective annualized rateyear ending December 31, 2024.
Cash Flows
The following table set forth a summary of returnour cash flows for the three months ended March 31, 2024 and 2023 (in thousands):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| Cash provided by (used in): | | | |
| Operating activities | $ | (3,843) | | | $ | (20,398) | |
| Investing activities | $ | 285 | | | $ | 46,899 | |
| Financing activities | $ | 259 | | | $ | 357 | |
Net Cash Used in Operating Activities
Net cash used in operating activities was $3.8 million for the three months ended March 31, 2024. This amount primarily consisted of a net loss of $36.1 million, offset by non-cash charges of $30.6 million, and a change in net operating assets and liabilities of $1.6 million. The non-cash charges primarily consisted of $28.0 million of stock-based compensation expense and $5.6 million of depreciation and amortization expense, partially offset by $2.9 million accretion of discounts, net of amortization premiums. Changes in net operating assets and liabilities primarily consisted of an increase in deferred revenue and a decrease in inventory and prepaid expenses and other assets, partially offset by an increase in accounts receivable and a decrease in accounts payable and accrued expenses and other liabilities.
Net cash used in operating activities was $20.4 million for the three months ended March 31, 2023. This amount primarily consisted of a net income of $53.8 million, offset by non-cash charges of $34.9 million, and a change in net operating assets and liabilities of $1.5 million. The non-cash gains primarily consisted of $31.1 million of stock-based compensation expense and $4.4 million of depreciation and amortization expense, partially offset by $0.7 million of accretion of discounts, net of amortization premiums and $0.2 million of change in fair value of warrants liability. Changes in net operating assets and liabilities primarily consisted of an increase in accounts receivable, inventory, and a decrease in accounts payable, which was partially offset by an increase in accruals and other liabilities and deferred revenue.
Net Cash Provided by Investing Activities
Net cash provided by investing activities was $0.3 million for the three months ended March 31, 2024. This amount primarily consisted of maturities of marketable securities investments of $102.1 million., partially offset by investments in available-for-sale securities of $99.6 million, and capitalized software and development costs of $2.2 million.
Net cash used in investing activities was $46.9 million for the three months ended March 31, 2023. This amount primarily consisted of maturities of marketable securities investments of $108.8 million, partially offset by investments in available-for-sale securities of $57.6 million, capitalized software and development costs of $2.6 million, consideration paid (net of cash acquired) for business acquisitions of $1.7 million, and purchases of property and equipment of $0.1 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $0.3 million for the three months ended March 31, 2024. This amount consisted of $0.3 million of proceeds from the sale of shares through employee equity incentive plans.
Net cash provided by financing activities was $0.4 million for the three months ended March 31, 2023. This amount primarily consisted of $0.7 million of proceeds from the sale of shares through employee equity incentive plans, partially offset by a $0.3 million payment for taxes related to the net settlement of equity awards.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. We evaluated the development and selection of our critical accounting policies and estimates and believe that the following involve a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position and are therefore discussed as critical.
We believe that the critical accounting estimates discussed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K for the fiscal year ended December 31, 2023 reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. There have been no material changes to our critical accounting estimates as filed in such report. Refer to Note 2. “Summary of Significant Accounting Policies” in Part I, Item 1 of this Report for more information on our adoption of new accounting guidance.
Recent Accounting Pronouncements
For a discussion of the recent accounting pronouncements, refer to “Accounting Pronouncements” in Note 2. “Summary of Significant Accounting Policies” in Part I, Item 1 of this Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Matterport is subject to market risk, primarily relating to potential losses arising from adverse changes in foreign currency exchange rates.
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Currently, our revenue is primarily generated
byin U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our
investments was approximately 0.0015%.Weoperations, which are primarily in the United States, the United Kingdom (U.K.), Japan and Singapore. However, there has been, and may continue to be, significant volatility in global stock markets and foreign currency exchange rates that result in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. The strengthening of the U.S. dollar may potentially decrease our revenue given our prices are fixed in foreign currencies for some of our end-customers outside of the United States, and to the extent that our customers pay for our products and services in currencies other than the U.S. dollar. If the U.S. dollar continues to strengthen, this could adversely affect our operations and cash flows in the future. In addition, the increase of non-U.S. dollar denominated contracts and the growth of our international entities in the future may result in greater foreign currency denominated sales, which would increase our foreign currency risk. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our consolidated financial statements as of March 31, 2024. To date, we have not engaged in any hedging activities duringstrategies. As our international operations grow, we will continue to reassess our approach to manage the three months ended March 31, 2021. risk relating to fluctuations in currency rates.
Inflation Risk
We do not expectbelieve that inflation has had a material effect on our business, financial condition, or results of operations. If our costs become subject to engage in any hedging activities with respectsignificant inflationary pressures, we may not be able to the market riskfully offset such higher costs through price increases. Our inability or failure to which we are exposed.do so could harm our business, financial condition and operating results.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,
are controls” as defined in Rule 13a–15(e) and
other proceduresRule 15d–15(e) under the Exchange Act that are designed to
ensureprovide reasonable assurance that information required to be disclosed
by us in
ourthe reports
filedthat we file or
submittedsubmit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensureprovide reasonable assurance that information required to be disclosed
by us in
companythe reports
filedthat we file or
submittedsubmit under the Exchange Act is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. Based upon their evaluation at that earlier time, our Chief Executive Officer and Chief Financial Officer had concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective. Subsequently, our
Our management,
re-evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of our disclosure controls and procedures as of March 31,
2021.2024. Based
upon thaton the evaluation
of our disclosure controls and
in lightprocedures as of
the SEC Staff Statement on April 12, 2021,March 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that,
due to the industry-wide issues and related insufficient risk assessmentas of
the underlying accounting for certain instruments resulting in the Company’s restatement of its financial statements,such date, our disclosure controls and procedures were
not effective
as of March 31, 2021. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementingat the
accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer noreasonable assurance
that these initiatives will ultimately have the intended effects.level.
Changes in Internal Control over Financial Reporting
This Quarterly Report on Form 10-Q does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies; however,
There was no change in
light of management’s conclusion, following a review of the warrants in connection with the SEC Staff Statement, to reclassify the Company’s warrants, our internal control over financial reporting
did not resultidentified in
sufficient risk assessment ofconnection with the
underlying accounting for certain financial instruments which we determined to be a material weakness.Duringevaluation required by Rules 13a-15(d) and 15d-15(d) under the most recently completed fiscal quarter, there has been no changeExchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations on Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Inherent limitations in all control systems include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
PART II—OTHER INFORMATION
collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.
Part II - Other Information
None.
Item 1. Legal Proceedings
None.
On July 23, 2021, plaintiff William J. Brown, a former employee and a shareholder of Matterport, Inc. (now known as Matterport Operating, LLC) (“Legacy Matterport”), sued Legacy Matterport, Gores Holdings VI, Inc. (now known as Matterport, Inc.), Maker Merger Sub Inc., Maker Merger Sub II, LLC, and Legacy Matterport directors R.J. Pittman, David Gausebeck, Matt Bell, Peter Hebert, Jason Krikorian, Carlos Kokron and Michael Gustafson (collectively, the “Defendants”) in the Court of Chancery of the State of Delaware. The plaintiff’s initial complaint claimed that Defendants imposed invalid transfer restrictions on his shares of Matterport stock in connection with the merger transactions between Matterport, Inc. and Legacy Matterport (the “Transfer Restrictions”), and that Legacy Matterport’s board of directors violated their fiduciary duties in connection with a purportedly misleading letter of transmittal. The initial complaint sought damages and costs, as well as a declaration from the court that he may freely transfer his shares of Class A common stock of Matterport received in connection with the merger transactions. An expedited trial regarding the facial validity of the Transfer Restrictions took place in December 2021. On January 11, 2022, the court issued a ruling that the Transfer Restrictions did not apply to the plaintiff. The opinion did not address the validity of the Transfer Restrictions more broadly. Matterport filed a notice of appeal of the court’s ruling on February 8, 2022, and a hearing was held in front of the Delaware Supreme Court on July 13, 2022, after which the appellate court affirmed the lower court’s ruling. Separate proceedings regarding the plaintiff’s remaining claims are pending. The plaintiff filed a Third Amended Complaint on September 16, 2022, which asserts the causes of action described above but omits as defendants Maker Merger Sub Inc., Maker Merger Sub II, LLC, and Legacy Matterport directors David Gausebeck, Matt Bell, and Carlos Kokron, and adds an additional cause of action alleging that Matterport, Inc. violated the Delaware Uniform Commercial Code by failing to timely register Brown’s requested transfer of Matterport, Inc. shares. The remaining defendants’ answer to the Third Amended Complaint was filed on November 9, 2022, and the parties have completed discovery. Trial was held in November 2023 and a post-trial hearing was held on February 22, 2024.
On February 1, 2024, two stockholders, Laurie Hanna and Vasana Smith (collectively “Plaintiffs”) filed a complaint derivatively on behalf of Matterport, Inc. against R.J. Pittman, Michael Gustafson, Peter Hebert, James Krikorian, James Daniel Fay, David Gausebeck, Japjit Tulsi, Judi Otteson, Jay Remley, and numerous shareholders of Matterport, Inc. (collectively “Defendants”) in the Court of Chancery of the State of Delaware. The complaint alleges that the issuance of 23,460,000 Earn-Out shares worth $225 million was a breach of fiduciary duty and an act of corporate waste, which unjustly enriched recipients of the Earn-Out shares at the expense of Matterport and its common stockholders. Specifically, the Plaintiffs allege that issuance of the Earn-Out Shares violated the February 7, 2021 Agreement and Plan of Merger pursuant to which Legacy Matterport and Gores Holding VI, a publicly listed special purpose acquisition company, and two Gores subsidiaries merged, providing Legacy Matterport shareholders with shares of the surviving public company which took the name Matterport. The complaint seeks disgorgement all unjust enrichment by the Defendants, an award of compensatory damages to Matterport, an award of costs and disbursements to the Plaintiffs, as well as a declaration that Plaintiffs may maintain the action on behalf of Matterport and that Plaintiffs are adequate representatives of Matterport, and a finding that demand on the Matterport board is excused as futile.
On July 20, 2021, the Company, then operating under the name Gores Holdings VI, Inc., held a special meeting of stockholders (the “2021 Special Meeting”) in lieu of the 2021 annual meeting of the Company’s stockholders to approve certain matters relating to its proposed business combination with Matterport, Inc., Maker Merger Sub, Inc. and Maker Merger Sub II, LLC. One of these matters was a proposal to adopt the Second Amended and Restated Certificate of Incorporation of the Company (the “New Certificate of Incorporation”), which, among other things, increased the total number of authorized shares of the Company’s Class A common stock, par value $0.0001 per share (the “Class A common stock”), from 400,000,000 shares to 600,000,000 shares. The New Certificate of Incorporation was approved by a majority of the shares of Class A common stock and the Company’s Class F common stock, par value $0.0001 per share (the “Class F common stock”), voting together as a single class, that were outstanding as of the record date for the 2021 Special Meeting. After the 2021 Special Meeting, the business combination was consummated and the New Certificate of Incorporation became effective. A December 2022 decision of the Delaware Court of Chancery (the “Court of Chancery”) has created uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (“DGCL”) would have required the New Certificate of Incorporation to be approved by a separate vote of the majority of the Company’s then-outstanding shares of Class A common stock, in addition to a majority of the shares of Class A common stock and Class F common stock voting together. The Company continues to believe that a separate vote of Class A common stock was not required to approve the New Certificate of Incorporation. However, in light of the Court of Chancery decision, on February
16, 2023, the Company filed a petition (the “Petition”) in the Court of Chancery pursuant to Section 205 of the DGCL seeking validation of the New Certificate of Incorporation, and the shares issued in reliance on the effectiveness of the New Certificate of Incorporation to resolve any uncertainty with respect to those matters. Section 205 of the DGCL permits the Court of Chancery, at its discretion, to ratify and validate potentially defective corporate acts and stock after considering a variety of factors. On March 14, 2023, the Court of Chancery granted the Petition validating the New Certificate of Incorporation and all shares of capital stock issued in reliance on the effectiveness of the New Certificate of Incorporation. Accordingly, the Company has determined that this matter is now complete.
On May 11, 2020, Redfin Corporation (“Redfin”) was served with a complaint by Appliance Computing, Inc. III, d/b/a Surefield (“Surefield”), filed in the United States District Court for the Western District of Texas, Waco Division. In the complaint, Surefield asserted that Redfin’s use of Matterport’s 3D-Walkthrough technology infringes four of Surefield’s patents. Redfin has asserted defenses in the litigation that the patents in question are invalid and have not been infringed upon. We have agreed to indemnify Redfin for this matter pursuant to our existing agreements with Redfin. The parties have vigorously defended against this litigation. The matter went to jury trial in May 2022 and resulted in a jury verdict finding that Redfin had not infringed upon any of the asserted patent claims and that all asserted patent claims were invalid. Final judgment was entered on August 15, 2022. On September 12, 2022, Surefield filed post trial motions seeking to reverse the jury verdict. Redfin has filed oppositions to the motions. In addition, on May 16, 2022, the Company filed a declaratory judgment action against Appliance Computing III, Inc., d/b/a Surefield, seeking a declaratory judgment that the Company had not infringed upon the four patents asserted against Redfin and one additional, related patent. The matter is pending in the Western District of Washington and captioned Matterport, Inc. v. Appliance Computing III, Inc. d/b/a Surefield, Case No. 2:22-cv-00669 (W.D. Wash.). Surefield has filed a motion to dismiss or in the alternative transfer the case to the United States District Court for the Western District of Texas. The Company filed an opposition to the motion. On August 28, 2023, the Court denied Surefield’s motion to dismiss the Washington case but stayed the action pending the resolution of the Texas case.
On January 29, 2021, Legacy Matterport received a voluntary request for information from the Division of Enforcement of the SEC relating to certain sales and repurchases of its securities in the secondary market. We believe we have complied fully with the request. We have not received any updates from the SEC as to the scope, duration or ultimate resolution of the investigation, and accordingly believes this matter is concluded.
Item 1A. Risk Factors
Factors that could cause our actual
Our operating and financial results are subject to differ materially fromvarious risks and uncertainties including those in this report are any ofdescribed under the risks describedsection titled “Risk Factors” in our prospectus filed with the SEC on December 14, 2020and our Annual Report on Form 10-K/A10-K for the year ended December 31, 2023 filed with the SECSecurities and Exchange Commission (the “SEC”) on May 18, 2021. AnyFebruary 27, 2024 and the updated risk factors described below, together with all of thesethe other information in this report, including the Condensed Consolidated Financial Statements and the related notes included elsewhere in this report. The risks and uncertainties described in our 2023 Form 10-K and below are not the only ones that may impact our operating and financial results. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected, which could result in a decrease in the market price of our common stock.
The following risk factors amend and supplement the “Risks Related to Our Business” subsection contained under Part I, Item 1A. Risk Factors in our 2023 Form 10-K.
Risk Factors related to the Proposed Mergers
The proposed Mergers are subject to approval of our stockholders as well as the satisfaction of other closing conditions, including government approvals, some or all of which may not be satisfied or completed within the expected timeframe, if at all.
Completion of the Mergers is subject to a number of closing conditions, including obtaining the approval of our stockholders, the expiration of the applicable waiting period (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of other approvals under specified antitrust and foreign investment laws; the absence of any law or order prohibiting the Mergers; the approval for listing on Nasdaq of the CoStar Shares to be issued in connection with the Mergers; the effectiveness of a registration statement on Form S-4 to be filed by CoStar registering the CoStar Shares to be issued in connection with the Mergers; and other customary closing conditions. We can provide no assurance that all required approvals will be obtained or that all closing conditions will otherwise be satisfied
(or waived, if applicable), and, even if all required approvals can be obtained and all closing conditions are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such approvals or the timing of the completion of the Mergers. Certain of the conditions to completion of the Mergers are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, if applicable). Any adverse consequence of the pending Mergers could be exacerbated by any delays in completion of the Mergers or a termination of the Merger Agreement.
Each party’s obligation to consummate the Merger is also subject to the accuracy of the representations and warranties of the other party (subject to customary materiality qualifications) and compliance in all material respects with the covenants and agreements contained in the Merger Agreement as of the closing of the Merger, including, with respect to us, covenants to conduct our business and operations in the ordinary course of business consistent with past practice and to not engage in certain kinds of material transactions prior to closing. In addition, the Merger Agreement may be terminated under certain specified circumstances, including, but not limited to, in connection with a change in the recommendation of our Board of Directors to enter into an agreement for a Superior Proposal (as defined in the Merger Agreement).. The obligations of the financing parties are subject to a number of customary conditions that must be satisfied prior to the completion of the Merger. As a result, we cannot assure you that the Merger will be completed, even if our stockholders approve the Merger, or that, if completed, it will be exactly on the terms set forth in the Merger Agreement or within the expected time frame.
We may not complete the proposed Mergers within the time frame we anticipate or at all, which could have an adverse effect on our stock price as well as our business, financial results and/or operations.
The proposed Mergers may not be completed within the expected timeframe, or at all, as a result of various factors and conditions, some of which may be beyond our control. If the Mergers are not completed for any reason, including as a result of our stockholders failing to adopt the Merger Agreement, then our stockholders will not receive any payment for their shares of our common stock in connection with the Merger. Instead, we will remain a public company, our common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act of 1934, as amended, and we will be required to continue to file periodic reports with the SEC. Moreover, our ongoing business may be materially adversely affected, and we would be subject to risks, including the following:
•We may experience negative reactions from the financial markets, including reactions that could have a negative impact on our stock price, and it is uncertain when, if ever, the price of the shares would return to the price at which the shares currently trade;
•we may experience negative publicity, which could have an adverse effect on our ongoing operations including, but not limited to, retaining and attracting employees, customers, partners, suppliers and others with whom we do business;
•we will be required to pay certain significant costs relating to the Mergers, such as legal, accounting, financial advisory, printing and other professional services fees, which may relate to activities that we would not have undertaken other than in connection with the Mergers;
•we may be required to pay a cash termination fee to CoStar, as required under the Merger Agreement under certain circumstances;
•while the Merger Agreement is in effect, we are subject to restrictions on our business activities, including, among other things, restrictions on our ability to enter into, modify, amend, renew or terminate certain kinds of material contracts, which could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, and may as a result materially adversely affect our business, results of operations and financial condition;
•matters relating to the Mergers require substantial commitments of time and resources by our management, which could result in the distraction of management from ongoing business operations and pursuing other opportunities that could have been beneficial to us; and
•we may commit significant time and resources to defending against any litigation that may be filed related to the Mergers.
•If the Merger is not consummated, the risks described above may materialize, and they may have a material adverse effect on our business operations, financial results and stock price; particularly to the extent that the current market price of our common stock reflects an assumption that the Merger will be completed.
We will be subject to various business uncertainties while the Mergers are pending that may cause disruption.
Our efforts to complete the Merger could cause disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operationsoperation and our business. Uncertainty as to whether the Mergers will be completed may affect our ability to recruit prospective employees or financial condition. Additional risk factors not presently known to retain and motivate existing employees. Employee retention may be particularly challenging while the Mergers are pending because employees may experience uncertainty about their roles following the Mergers. A substantial amount of our management’s and key employees’ attention is being directed toward the completion of the Mergers and thus is being diverted from our day-to-day operations. Uncertainty as to our future could adversely affect our business and our relationship with existing and potential customers, patients and suppliers. For example, customers, suppliers and other third parties may defer decisions concerning working with us or seek to change existing business relationships with us. Changes to or termination of existing business relationships could adversely affect our revenue, earnings and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the Mergers could be exacerbated by any delays in completion of the Mergers or termination of the Merger Agreement.
The Merger Agreement may be terminated under various circumstances, including in connection with a superior proposal, and we would incur fees and expenses in connection with such termination.
Under the terms of the Merger Agreement, we may be required to pay CoStar a termination fee under specified conditions, including in the event the Company terminates the Merger Agreement before receipt of our stockholders’ approval due to a change in recommendation or withdrawal of a recommendation by our Board of Directors, or in the event the Company terminates the Merger Agreement to enter into a Superior Proposal (as defined in the Merger Agreement). This payment could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us and could discourage a third party from making a competing acquisition proposal, including a proposal that would be more favorable to our stockholders than the Mergers.
We have incurred, and will continue to incur, direct and indirect costs as a result of the Merger.
We have incurred, and will continue to incur, significant costs and expenses, including regulatory costs, fees for professional services and other transaction costs in connection with the Mergers, for which we will have received little or no benefit if the Mergers are not completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses. Many of these fees and costs will be payable by us even if the Mergers are not completed and may relate to activities that we currently deem immaterialwould not have undertaken other than to complete the Mergers.
Litigation challenging the Merger Agreement may
also impair our business or results of operations.Asbe costly, distract management’s attention from the day-to-day operations of the datebusiness, and could prevent the Merger from being consummated within the expected timeframe or at all.
Lawsuits may be filed against us, our Board of
this Quarterly Report on Form 10-Q, there have been no material changesDirectors or other parties to the
risk factors disclosedMerger Agreement, challenging our acquisition by CoStar and/or making other claims in
connection therewith. Such lawsuits may be brought by our
prospectus filed withstockholders and may seek, among other things, to enjoin consummation of the
SECMergers. One of the conditions to the consummation of the Mergers is that the consummation of the Mergers is not restrained, enjoined or prohibited by any law or order that is continuing and remains in effect of a court of competent jurisdiction or any other governmental entity. As such, if the plaintiffs in such potential lawsuits are successful in obtaining an injunction prohibiting the defendants from completing the Mergers on
December 14, 2020the agreed upon terms, then such injunction may prevent the Mergers from becoming effective, or
from becoming effective within the expected timeframe. Regardless of the outcome of any litigation related to the Mergers, such litigation may be time-consuming and expensive and may distract our
Annual Report on Form 10-K/A filed on May 18, 2021; however, we may disclose changes to such factors or disclose additional factorsmanagement from
time to time inrunning the day-to-day operations of our
future filings with the SEC.business.
Item 2. Unregistered Sales of Equity Securities,
and Use of Proceeds,
Unregistered Sales
On July 24, 2020, the Sponsor purchased 17,250,000 shares and Issuer Purchases of Class F Common Stock for $25,000, or approximately $0.001 per share. On October 1, 2020, the Sponsor surrendered 8,625,000 Founder Shares to us for no consideration, on October 23, 2020, the Company effected a stock dividend with respect to its Class F Common Stock of 6,468,750 shares thereof and on November 13, 2020 the Sponsor surrendered 6,468,750 Founder Shares to us for no consideration, resulting in an aggregate of 8,625,000 outstanding shares of Class F Common Stock. As a result of such surrender, the per-share purchase price increased to approximately $0.003 per share. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares upon completion of the Public Offering. On September 11, 2020, the Sponsor transferred 25,000 Founder Shares to each of the independent directors at their original purchase price.Our Public Offering was consummated on December 15, 2020.
Prior to the IPO Closing Date, we completed the private sale of an aggregate of 4,450,000 Private Placement Warrants to our Sponsor at a price of $2.00 per Private Placement Warrant, generating total proceeds, before expenses, of $8,900,000. The Private Placement Warrants have terms and provisions that are identical to those of the public warrants sold as part of the units in the IPO, except that the Private Placement Warrants may be physical (cash) or net share (cashless) settled and are not redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by holders other than our Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Warrants.
The sales of the above securities by the Company were exempt from registration in reliance on Section 4(a)(2) of theEquity Securities Act as transactions by an issuer not involving a public offering.
Use of Proceeds
On December 10, 2020, our registration statement on Form S‑1 (File No. 333-249312) was declared effective by the SEC for the Public Offering pursuant to which we sold an aggregate of 34,500,000 Units at an offering price to the public of $10.00 per Unit, including 4,500,000 Units as a result of the underwriters’ full exercise of its over-allotment option, generating gross proceeds of $345,000,000.
After deducting the underwriting discounts and commissions (excluding the Deferred Discount, which amount will be payable upon the consummation of our Business Combination, if consummated) and the estimated
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offering expenses, the total net proceeds from our Public Offering and the sale of the Private Placement Warrants were $346,055,000, of which $345,000,000 (or $10.00 per share sold in the Public Offering) was placed in the Trust Account in the United States maintained by the trustee.
Through March 31, 2021, we incurred approximately $7,799,078 for costs and expenses related to the Public Offering. At the closing of the Public Offering, we paid a total of $6,900,000 in underwriting discounts and commissions. In addition, the underwriters agreed to defer $12,075,000 in underwriting commissions, which amount will be payable upon consummation of our Business Combination, if consummated. There has been no material change in the planned use of proceeds from our Public Offering as described in our final prospectus dated December 14, 2020 which was filed with the SEC.
Our Sponsor, executive officers and directors have agreed, and our second amended and restated certificate of incorporation provides, that we will have only 24 months from the IPO Closing Date to complete our Business Combination. If we are unable to complete our Business Combination within such 24‑month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable, and 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 our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
As of March 31, 2021, after giving effect to our Public Offering and our operations subsequent thereto, approximately $345,022,332 was held in the Trust Account, and we had approximately $176,595 of unrestricted cash available to us for our activities in connection with identifying and conducting due diligence of a suitable Business Combination, and for general corporate matters.
None.
Item 3. Defaults Upon Senior Securities
None
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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During the three months ended March 31, 2024, no director or Section 16 officer of the Company adopted or terminate a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
and Financial Statement Schedules.
The following exhibits arefinancial statements filed as part of this registration statement are listed in the index to the financial statements immediately preceding such financial statements, which index to the financial statements is incorporated herein by reference.
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Exhibit
Number | | Description | Form | File No. | Exhibit | Filing Date | Filed Herewith |
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| 2.1† | | Agreement and Plan of Merger, dated as of February 7, 2021, by and among Gores Holdings VI, Inc., Maker Merger Sub, Inc., Maker Merger Sub II, LLC and Matterport, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2021). | 8-K | 001-39790 | 2.1 | 7/28/2021 | |
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| 3.1 | | | 8-K | 001-39790 | 3.1 | 7/28/2021 | |
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| 3.2 | | | 8-K | 001-39790 | 3.2 | 7/28/2021 | |
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| 4.1 | | | 8-K | 001-39790 | 4.1 | 12/16/2020 | |
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| 4.2 | | | 8-K | 001-39790 | 4.3 | 7/28/2021 | |
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| 31.1 | | | | | | | * |
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| 31.2 | | | | | | | * |
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| 32.1 | | | | | | | * |
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| 32.2 | | | | | | | * |
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| 101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document. | | | | | * |
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| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document. | | | | | * |
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| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | | | | * |
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| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | | | | * |
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| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | | | | * |
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| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | | | | * |
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| Exhibit 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | | | | | |
_____________* Filed herewith
† Indicates a management contract or incorporated by reference into,compensatory plan, contract or arrangement.
† The schedules to this Quarterly Report on Form 10‑Q.Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon its request. Exhibit
Number
| | Description
|
2.1
| | Agreement and Plan of Merger, dated as of February 7, 2021, by and among Gores Holdings VI, Inc., Maker Merger Sub, Inc., Maker Merger Sub II, LLC and Matterport, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2021).
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3.1
| | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2020).
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3.2
| | Bylaws (incorporated by reference to Exhibit 3.3 filed with the Form S-1 filed by the Registrant on December 7, 2020).
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4.1
| | Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 filed with the Form S-1 filed by the Registrant on December 7, 2020).
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4.2
| | Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 filed with the Form S-1 filed by the Registrant on December 7, 2020).
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4.3
| | Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 filed with the Form S-1 filed by the Registrant on December 7, 2020).
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4.4
| | Warrant Agreement, dated December 15, 2020, between the Company and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2020).
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31.1*
| | Certification of Principal Executive Officer Pursuant to Rules 13a‑14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2*
| | Certification of Principal Financial Officer Pursuant to Rules 13a‑14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1*
| | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2*
| | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Exhibit 101
| | The following financial statements from the Quarterly Report on Form 10-Q of Gores Holdings VI, Inc. for the quarter ended March 31, 2021, formatted in inline eXtensible Business Reporting Language (iXBRL): (i) Balance Sheets, (ii) Statement of Income, (iii) Statement of Changes in Stockholders’ Equity, (iv) Statement of Cash Flows and (v) Notes to Financial Statements.
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Exhibit 104
| | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | GORES HOLDINGS VI, | | | | | | | | | |
| | MATTERPORT, INC. |
| | | |
| Date: May 8, 2024 | | By: | | /s/ R.J. Pittman |
| Date: May 27, 2021
| By:
| /s/ Mark Stone
R.J. Pittman |
| | | Mark Stone
|
| | | Chief Executive Officer |
| | | (Duly Authorized Officer and Principal Executive Officer) |
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