Mirion Technologies(MIR) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Unaudited Condensed Financial Statements This section presents the Company's unaudited condensed financial statements and comprehensive notes Unaudited Condensed Balance Sheets Unaudited Condensed Balance Sheets (Selected Data): | ASSETS/LIABILITIES | June 30, 2021 (in millions) | December 31, 2020 (in millions) | | :----------------- | :------------ | :---------------- | | Cash | $0.80 | $0.38 | | Total current assets | $1.25 | $0.98 | | Cash and cash equivalent held in Trust Account | $750.09 | $750.06 | | Total assets | $752.12 | $751.32 | | Accounts payable | $8.36 | $0.97 | | Working capital note | $2.00 | — | | Warrant liability | $62.44 | $71.68 | | Total current liabilities | $72.80 | $73.02 | | Total liabilities | $99.05 | $99.27 | | Class A common stock subject to possible redemption | $750.00 | $750.00 | | Total stockholders' equity/(deficit) | $(96.94) | $(97.95) | Unaudited Condensed Statements of Operations Unaudited Condensed Statements of Operations (Selected Data): | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Dividend income ($) | 11,399 | — | 22,672 | — | | General and administrative expenses ($) | (8,087,655) | (58,661) | (8,755,122) | (58,661) | | Change in fair value of warrant liability ($) | (968,221) | — | 9,232,566 | — | | Income (loss) before income taxes ($) | (9,044,477) | (58,661) | 500,116 | (58,661) | | Net income (loss) ($) | (8,668,666) | (46,399) | 1,013,683 | (46,399) | | Basic and diluted net income (loss) per share, Class A ($) | (0.09) | — | 0.01 | — | | Basic and diluted net income (loss) per share, Class B ($) | (0.09) | 0.00 | 0.01 | 0.00 | Unaudited Condensed Statements of Changes in Stockholders' Equity Unaudited Condensed Statements of Changes in Stockholders' Equity (Selected Data): | Metric | Balance, December 31, 2020 ($) | Net income (loss) (Q1 2021) ($) | Balance, March 31, 2021 ($) | Net loss (Q2 2021) ($) | Balance, June 30, 2021 ($) | | :-------------------- | :------------------------- | :-------------------------- | :---------------------- | :----------------- | :--------------------- | | Class B Common Shares (Amount) | 1,874 | — | 1,874 | — | 1,874 | | Accumulated Deficit | (97,953,505) | 9,682,349 | (88,271,156) | (8,668,666) | (96,939,822) | | Stockholders' Equity | (97,951,631) | 9,682,349 | (88,269,282) | (8,668,666) | (96,937,948) | Unaudited Condensed Statements of Cash Flows Unaudited Condensed Statements of Cash Flows (Selected Data): | Cash Flow Activity | Six months ended June 30, 2021 ($) | Six months ended June 30, 2020 ($) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | 1,013,683 | (46,399) | | Change in fair value of warrant liability | (9,232,566) | — | | Net cash used for operating activities | (1,185,824) | — | | Net cash provided by financing activities | 1,625,000 | 74,261 | | Increase in cash and restricted cash | 439,176 | 74,261 | | Cash and restricted cash at end of period | 750,885,580 | 79,261 | Notes to Condensed Financial Statements Note 1—Description of Organization and Business Operations Details the Company's formation as a SPAC and the proposed business combination with Mirion Technologies - The Company was incorporated on May 31, 2018, as a Delaware corporation, formed to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination[20] - The Company is an emerging growth company as defined in Section 2(a) of the Securities Act of 1933[20] - On June 17, 2021, the Company announced it entered into a Business Combination Agreement with Mirion Technologies (TopCo), Ltd for a proposed business combination[22] Proposed Initial Business Combination - The Company entered into a Business Combination Agreement with Mirion Technologies (TopCo), Ltd on June 17, 2021[22] - The proposed Business Combination is expected to be consummated after required approval by the Company's stockholders and satisfaction of certain other conditions[23] The Business Combination Agreement - The total consideration for the Business Combination is $1.7 billion, to be paid in a combination of equity and cash[24] - The cash consideration will be $1.31 billion, subject to the Minimum Cash Condition[24] - Available Closing Cash includes funds in the trust account, PIPE investment, debt financing, Mirion's cash, and proceeds from a backstop agreement, less Mirion's credit agreement obligations and transaction expenses[24] Covenants - Parties agreed to use reasonable best efforts to obtain necessary regulatory approvals and cooperate on the registration statement, prospectus, and proxy statement[27] - The Company covenanted to convene a stockholder meeting to solicit proxies in favor of the Business Combination[27] - Parties agreed not to solicit, initiate, engage in, or continue discussions regarding any other business combination[27] Conditions to the Consummation of the Transactions - Consummation is subject to conditions including approval by the Company's stockholders and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act[28] - A Minimum Cash Condition requires the Company to have at least $1.31 billion in cash available at Closing[28] Subscription Agreements - PIPE Investors subscribed for 90,000,000 shares of the Company's Class A common stock for an aggregate purchase price of $900 million[29] - The PIPE Investment will be consummated substantially concurrently with the Closing[29] - The Company is required to file a registration statement for the resale of PIPE Shares within 30 calendar days following the Closing Date[30] Sponsor and Financing - The Company's sponsor is GS Sponsor II LLC[33] - The Public Offering of 75,000,000 Units closed on July 2, 2020[33] - $750 million was placed in a U.S based trust account upon the closing of the Public Offering and Private Placement[33] The Trust Account - Proceeds held in the Trust Account are invested in a money market fund[34] - Proceeds will not be released until the earliest of: (i) completion of the Initial Business Combination, (ii) redemption of public shares in connection with certain amendments, or (iii) redemption of all public shares if the Initial Business Combination is not completed within 24 months[35] Trust Account Balance (June 30, 2021): | Metric | Amount ($) | | :----- | :----------- | | Balance in Trust Account | 750,089,714 | | Accrued dividends | 3,758 | Initial Business Combination - The Initial Business Combination must occur with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account[37] - Public stockholders will have the opportunity to redeem all or a portion of their shares upon completion of the Initial Business Combination[38] - If the Company is unable to complete the Initial Business Combination within 24 months, it will redeem public shares and liquidate[41] Note 2—Summary of Significant Accounting Policies Outlines the Company's significant accounting policies for financial statement preparation Basis of Presentation - The unaudited condensed financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information[44] - Interim period operating results may not be indicative of the operating results for a full year[44] Emerging Growth Company - The Company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[48] - This election means the Company adopts new or revised standards at the time private companies adopt them, which may make comparisons with other public companies difficult[48][49] Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, deposits at banking institutions, and highly liquid short-term investments with original maturities of ninety days or less[50] Cash and Cash Equivalents (June 30, 2021): | Account Type | Amount ($) | | :----------- | :----------- | | Custodian account | 799,624 | | Goldman Sachs Financial Square Treasury Instruments Fund (restricted) | 750,085,956 | Redeemable Shares of Class A Common Stock - All 75,000,000 shares of Class A common stock sold in the Public Offering contain a redemption feature[51] - These shares are classified as temporary equity in accordance with ASC 480, 'Distinguishing Liabilities from Equity,' because redemption provisions are not solely within the Company's control[51] Net Income Per Common Share - Net income per share is computed by dividing net income by the weighted average number of common shares outstanding, applying the two-class method[52] - As of June 30, 2021, diluted net income per share is the same as basic net income per share because the exercise of outstanding warrants is contingent upon future events, and there were no other dilutive securities[53] Concentration of Credit Risk - Financial instruments may subject the Company to concentrations of credit risk, as cash accounts in a financial institution may exceed Federal Depository Insurance Coverage of $250,000[56] - Management believes the Company is not exposed to significant risks on such accounts[56] Financial Instruments - The fair value of the Company's financial instruments approximates their carrying amounts, primarily due to their short-term nature[57] Use of Estimates - The preparation of financial statements requires management to make estimates and assumptions, with the determination of the fair value of the warrant liability being one of the more significant estimates[58] - Actual results could differ significantly from these estimates as more current information becomes available[58] Warrant Liability - Warrants are accounted for as derivative liabilities under ASC 815, 'Derivatives and Hedging,' as they do not meet the criteria for equity treatment[59] - The warrants are classified as liabilities at their fair value and adjusted at each reporting period, with any change in fair value recognized in the statement of operations[59] - The fair value of Private Placement Warrants is estimated using a Black-Scholes-Merton model, while Public Warrants are measured based on their listed market price[59] Income Taxes - The Company is taxed as a corporation for U.S federal income tax purposes[60] - Prior to July 2020, the Company was included in consolidated tax returns with The Goldman Sachs Group Inc; since July 2020, it files separate corporate federal and state/local income tax returns[60][62] Deferred Income Taxes - The Company follows the asset and liability method of accounting for income taxes under ASC 740, 'Income Taxes'[65] - Deferred tax assets and liabilities are recognized for temporary differences between financial reporting and tax bases of assets and liabilities, measured using enacted tax rates[65] Unrecognized Tax Benefits - Tax positions are recognized only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority[66] - There were no unrecognized tax benefits or accrued interest and penalties related to income tax matters as of June 30, 2021, and December 31, 2020[66] Profit Interests - Membership interests issued by the Sponsor as profits interests represent compensation for services received by the Company through the closing of the Business Combination[67] - The Company attributes compensation expense equal to the change in the fair value of these arrangements, though there was no impact for the three or six months ended June 2021 or June 2020[67] Subscription Agreements (Accounting Policy) - Subscription Agreements qualify for equity classification under ASC 815, 'Derivatives and Hedging,' because they involve only physical settlement in a fixed number of shares[68] - Therefore, they are not periodically remeasured to fair value[68] Backstop Agreement (Accounting Policy) - The Backstop Agreement is initially and subsequently measured at fair value under ASC 480, 'Distinguishing Liabilities from Equity'[69] - This is due to a conditional obligation that the Company must settle by issuing a variable number of its shares, where the monetary value is predominantly based on variations in something other than the fair value of the Company's shares[69] Recent Accounting Pronouncements - Management does not believe that any recently issued, but not yet effective, accounting pronouncements would have a material effect on the Company's financial statements if currently adopted[70] Note 3—Public Offering Details the Company's Public Offering of 75 million units and the concurrent private placement of warrants - The Company sold 75,000,000 units at an offering price of $10.00 per unit in its Public Offering[72] - The Sponsor purchased 8,500,000 Private Placement Warrants at $2.00 per warrant in a private placement that closed simultaneously with the Public Offering[72] - A Deferred Underwriting Discount of $26.25 million (3.5% of gross proceeds) is payable to the underwriters upon the Company's completion of the Initial Business Combination[74] Public Warrants Fair Value Change: | Metric | December 31, 2020 ($) | June 30, 2021 ($) | Change in Fair Value ($) | | :----- | :---------------- | :------------ | :------------------- | | Fair value of Public Warrants | 48,000,000 | 41,250,000 | (6,750,000) | Note 4—Related Party Transactions Details transactions with related parties, including the Sponsor, covering Founder Shares, warrants, and various agreements Founder Shares - The Sponsor initially purchased 575 Founder Shares, which, after stock splits and forfeitures, resulted in 18,750,000 Founder Shares outstanding[77] - Founder Shares automatically convert into Class A common stock at the time of the Initial Business Combination and are subject to certain transfer restrictions[77][78][79] - The Sponsor purchased 8,500,000 Private Placement Warrants for $17 million, which are non-redeemable and exercisable on a cashless basis if held by the Sponsor or its permitted transferees[80] Private Placement Warrants Fair Value Change: | Metric | December 31, 2020 ($) | June 30, 2021 ($) | Change in Fair Value ($) | | :----- | :---------------- | :------------ | :------------------- | | Fair value of Private Placement Warrants | 23,676,615 | 21,194,049 | (2,482,566) | Registration Rights - Holders of Founder Shares and Private Placement Warrants are entitled to registration rights to require the Company to register the resale of their securities[87] - The existing Registration Rights Agreement will be amended and restated at the Closing of the Initial Business Combination[88] Subscription Agreements (Related Party) - GSAM Holdings LLC subscribed for 20,000,000 PIPE Shares of the Company's Class A common stock for an aggregate purchase price of $200 million[90] Amended & Restated Sponsor Agreement - The Insiders (Sponsor, GSAM Holdings LLC, GS Employee Participation) agreed to vote their securities in favor of the Business Combination and not to redeem any shares[91] - They also agreed to certain transfer restrictions[91] Backstop Agreement (Related Party) - GSAM Holdings LLC committed to purchase up to 12,500,000 shares of the Company's Class A common stock at $10.00 per share[92] - This commitment is solely to fund any valid redemptions by the Company's stockholders if the Available Closing Cash falls below the required amount[92] Related Party Sponsor Note - An affiliate of the Sponsor loaned the Company $300,000, which was repaid on July 2, 2020[95] - The Sponsor loaned the Company $2,000,000 via a Working Capital Note, which was borrowed as of June 30, 2021[96] - Both notes are non-interest bearing and unsecured[95][96] Administrative Support Agreement - The Company pays an affiliate of the Sponsor $10,000 per month for office space, administrative, and support services[97] Administrative Support Expenses: | Period | Expenses Incurred ($) | | :----- | :---------------- | | Three months ended June 30, 2021 | 30,000 | | Six months ended June 30, 2021 | 60,000 | Underwriting Commission - An affiliate of the Sponsor received $11.25 million of the initial underwriting commission paid at the closing of the Public Offering[98] - An affiliate of the Sponsor is due $19.69 million of the $26.25 million Deferred Underwriting Discount, payable upon completion of the Initial Business Combination[98] Note 5—Stockholders' Equity Outlines the Company's authorized and outstanding common and preferred stock Common Stock - The Company's authorized common stock includes up to 500,000,000 shares of Class A common stock and 50,000,000 shares of Class B common stock[99] Common Stock Issued and Outstanding (June 30, 2021): | Class of Stock | Shares | | :------------- | :----------- | | Class A common stock | 75,000,000 (subject to possible redemption) | | Class B common stock | 18,750,000 | Preferred Stock - The Company is authorized to issue 5,000,000 shares of preferred stock[100] - As of June 30, 2021, there were no shares of preferred stock issued or outstanding[100] Note 6—Fair Value Measurements Explains the fair value hierarchy and details the valuation of assets and liabilities measured at fair value Basis for Fair Value Measurement - The fair value of Public Warrants is measured based on their listed market price (Level 1 measurement)[104] - The estimated fair value of Private Placement Warrants is determined using a Black-Scholes-Merton model with Level 3 inputs[105] Fair Value Measurements (Selected Data): | Asset/Liability | June 30, 2021 ($) | Level | December 31, 2020 ($) | Level | | :-------------------------------- | :------------ | :---- | :---------------- | :---- | | Money market funds held in Trust Account | 750,085,956 | 1 | 750,063,158 | 1 | | Warrant Liability – Public Warrants | 41,250,000 | 1 | 48,000,000 | 1 | | Warrant Liability – Private Placement Warrants | 21,194,049 | 3 | 23,676,615 | 3 | Level 3 Fair Value Measurement Inputs (Private Placement Warrants): | Input | As of June 30, 2021 | As of December 31, 2020 | | :-------------------- | :------------------ | :-------------------- | | Stock price ($) | 10.40 | 10.90 | | Strike Price ($) | 11.50 | 11.50 | | Term (in years) | 5.50 | 5.75 | | Volatility | 28.00% | 28.30% | | Risk-free interest rate | 0.96% | 0.47% | | Dividend yield | 0.00% | 0.00% | | Fair value (per warrant) ($) | 2.49 | 2.79 | Change in Fair Value of Warrant Liability (Level 3 Inputs): | Description | Amount ($) | | :---------------------------------------------------- | :----------- | | Value of warrant liability measured with Level 3 inputs at December 31, 2020 | 23,676,615 | | Change in fair value of warrant liability measured with Level 3 inputs | (2,482,566) | | Value of warrant liability measured with Level 3 inputs at June 30, 2021 | 21,194,049 | Note 7—Subsequent Events Discloses the Sponsor's agreement to cover up to $15 million in additional expenses under certain conditions - On August 12, 2021, the Sponsor agreed to pay any additional expenses incurred by the Company, up to $15 million, if the Business Combination does not close by July 2, 2022, or if the Business Combination Agreement is terminated[109] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's analysis of financial condition, operations, and the proposed business combination Overview - The Company is a blank check company formed to effect an Initial Business Combination[113] - It intends to finance the Initial Business Combination using proceeds from its Public Offering and Private Placement Warrants, and potentially additional equity or debt[114] Selected Financial Position (June 30, 2021): | Metric | Amount ($) | | :---------------- | :----------- | | Current assets | 1,247,124 | | Current liabilities | 72,804,364 | Recent Developments - On June 17, 2021, the Company entered into a Business Combination Agreement with Mirion Technologies (TopCo), Ltd for a proposed business combination[116] - The proposed Business Combination is expected to be consummated after required stockholder approval and satisfaction of certain other conditions[117] Proposed Initial Business Combination - The Company announced its Business Combination Agreement with Mirion Technologies (TopCo), Ltd on June 17, 2021[116] The Business Combination Agreement - The total consideration for the Business Combination is $1.7 billion, payable in a combination of equity and cash[119] - The cash consideration will be $1.31 billion, subject to the Minimum Cash Condition[119] Covenants - The Business Combination Agreement includes customary covenants, such as using reasonable best efforts to obtain regulatory approvals and cooperating on registration statements[120] Conditions to the Consummation of the Transactions - Consummation is subject to conditions including approval by the Company's stockholders and a Minimum Cash Condition of at least $1.31 billion[121] Subscription Agreements - PIPE Investors subscribed for 90,000,000 shares of Class A common stock for an aggregate purchase price of $900 million[122] - The Company is required to file a registration statement for the resale of PIPE Shares within 30 calendar days following the Closing Date[123] Profit Interests - The Sponsor issued 8,100,000 membership interests as profits interests to certain individuals affiliated with or expected to be affiliated with Mirion after the Business Combination[124] - These profits interests are subject to service and performance vesting conditions, including the occurrence of the Closing, and certain forfeiture conditions[124] Results of Operations - The Company's business activities from inception to June 30, 2021, primarily consisted of its formation, Public Offering, and identifying prospective acquisition targets[125] Results of Operations (Six Months Ended June 30): | Metric | 2021 ($) | 2020 ($) | | :------------------------------------ | :----------- | :----------- | | Net income (loss) | 1,013,683 | (46,399) | | Change in fair value of warrant liability | 9,232,566 | — | | General and administrative expenses | (8,755,122) | (58,661) | Liquidity and Capital Resources - Prior to the Public Offering, liquidity came from Founder Shares and a $300,000 promissory note from an affiliate of the Sponsor, which was repaid[126] - $750 million of proceeds from the Public Offering and Private Placement Warrants were placed into a Trust Account[127] - The Sponsor agreed to loan the Company up to $2 million via a non-interest bearing, unsecured Working Capital Note, of which $2 million was borrowed as of June 30, 2021[130] - On August 12, 2021, the Sponsor agreed to pay up to $15 million in additional expenses if the Business Combination does not close by July 2, 2022, or is terminated[131] Liquidity Metrics (June 30, 2021): | Metric | Amount ($) | | :---------------- | :------------ | | Cash in custodian account | 799,624 | | Working capital | (71,557,240) | Off-Balance Sheet Arrangements - The Company has no obligations, assets, or liabilities considered off-balance sheet arrangements[133] - The Company has not entered into any off-balance sheet financing arrangements, established special purpose entities, or guaranteed any debt or commitments of other entities[134] Contractual Obligations - As of June 30, 2021, the Company had no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities[135] - The Company has an administrative support agreement to pay an affiliate of the Sponsor $10,000 per month for services[135] - A deferred underwriting discount of $26.25 million is payable to the underwriters upon the completion of the Initial Business Combination[136] Critical Accounting Policies/Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts and disclosures[137] Net Income Per Common Share - Net income per share is computed using the two-class method, with accretion associated with redeemable Class A common stock excluded[138] - Diluted net income per common share is the same as basic net income per common share as of June 30, 2021, because warrant exercise is contingent upon future events[139] Redeemable Shares of Class A Common Stock - All 75,000,000 shares of Class A common stock sold in the Public Offering contain a redemption feature and are classified outside of permanent equity in accordance with ASC 480[140] Warrant Liability - Warrants are classified as derivative liabilities under ASC 815 and are re-measured at fair value each reporting period, with changes recognized in the statement of operations[141] - Fair value for Private Placement Warrants is estimated using a Black-Scholes-Merton model, and for Public Warrants, it's based on the listed market price[141] Profit Interests - Membership interests issued by the Sponsor as profits interests represent compensation for services, with the Company attributing compensation expense equal to the change in their fair value[142] Subscription Agreements - Subscription Agreements qualify for equity classification under ASC 815 due to physical settlement in a fixed number of shares, thus not requiring periodic re-measurement to fair value[143] Backstop Agreement - The Backstop Agreement is initially and subsequently measured at fair value under ASC 480, as it involves a conditional obligation to issue a variable number of shares where monetary value is predominantly based on factors other than the Company's share fair value[144] Recent Accounting Pronouncements - Management does not believe that any recently issued, but not yet effective, accounting pronouncements would have a material effect on the Company's financial statements if currently adopted[144] Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company was not subject to material market or interest rate risk due to its short-term investments - As of June 30, 2021, the Company was not subject to any material market or interest rate risk[145] - The net proceeds in the Trust Account are invested in short-term money market funds, limiting exposure to interest rate risk[145] - The Company has not engaged in any hedging activities since its inception and does not expect to[146] Item 4. Control and Procedures Discloses a material weakness in internal controls leading to ineffective disclosure procedures - The Company's disclosure controls and procedures were not effective as of June 30, 2021[148] - A material weakness was identified in internal control over financial reporting concerning the interpretation and accounting for certain complex features of Class A common stock and Warrants[148] - This material weakness resulted in the restatement of the Company's financial statements for the year ended December 31, 2020, and interim financial statements[148] - There has been no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting during the most recently completed fiscal quarter[149] PART II – OTHER INFORMATION Item 1. Legal Proceedings The Company reported no legal proceedings - The Company has no legal proceedings[150] Item 1A. Risk Factors Refers to risk factors disclosed in the Company's restated Annual Report with no material changes - Refers to risk factors described in the restated Annual Report on Form 10-K/A for the year ended December 31, 2020[151] - As of the date of this Quarterly Report, there have been no material changes to the disclosed risk factors[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - Not applicable[153] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - None[154] Item 4. Mine Safety Disclosures This item is not applicable for the current reporting period - Not applicable[155] Item 5. Other Information The Company reported no other information - None[156] Item 6. Exhibits Lists the exhibits filed as part of the Form 10-Q, including agreements and certifications - Exhibits include a Letter Agreement (10.1), Certifications of Principal Executive Officer and Principal Financial Officer (31.1, 32.1), and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[157] SIGNATURES The report was duly signed on August 13, 2021, by the Chief Executive Officer - The report was signed on August 13, 2021, by Tom Knott, Chief Executive Officer, Chief Financial Officer, and Secretary[162]