DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND LIQUIDITY |
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND LIQUIDITY Priveterra Acquisition Corp. II (the “Company” or “TMKR”) is a blank check company incorporated in Delaware on August 10, 2020 with the name “Tastemaker Acquisition Corp.” The Company changed its name on July 6, 2023 to Priveterra Acquisition Corp. II. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an “Initial Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating an Initial Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. As of June 30, 2023, the Company has not commenced any operations. All activity from August 10, 2020 (inception) through June 30, 2023 relates to the Company’s formation, the initial public offering (“Initial Public Offering”) as described below, and since the closing of the Initial Public Offering, the search for and consummation of a prospective Initial Business Combination. The Company will not generate any operating revenues until after the completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income or gains on investments on the cash and investments held in a Trust Account (as defined below) from the proceeds derived from the Initial Public Offering, and potential gains from changes in the fair value of warrant liabilities and convertible promissory notes. The Company’s sponsor is Priveterra Sponsor LLC II, a Delaware corporation, which changed its name from Tastemaker Sponsor LLC on July 6, 2023 (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on January 7, 2021. On January 12, 2021, the Company consummated the Initial Public Offering of 27,600,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, including 3,600,000 Units issued pursuant to the exercise of the underwriter’s over-allotment option in full, generating gross proceeds of $276,000,000, which is discussed in Note 3. Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 8,700,000 Private Placement Warrants (as defined in Note 4) in the Private Placement (as defined in Note 4) at a price of $1.00 per Private Placement Warrant to the Sponsor generating gross proceeds of $8,700,000, which is described in Note 4. Following the closing of the Initial Public Offering on January 12, 2021, an amount of $278,760,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering, the exercise of the underwriter’s over-allotment option in full, and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with maturities of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of an Initial Business Combination or (ii) the distribution of the funds in the Trust Account. On January 11, 2023 , to mitigate the risk of the Company being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, the Company instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in an interest bearing demand deposit account at a bank until the earlier of the consummation of our Initial Business Combination or liquidation. Transaction costs related to the issuances described above amounted to $15,057,447, consisting of $5,520,000 of cash underwriting fees, $10,350,000 of deferred underwriting fees, and $539,847 of other offering costs, partially offset by reimbursed offering costs of $1,352,400. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating an Initial Business Combination. The Company must complete an Initial Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80% of the value of the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an Initial Business Combination. The Company will only complete an Initial Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect an Initial Business Combination. The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of an Initial Business Combination either (i) in connection with a stockholder meeting called to approve the Initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of an Initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of an Initial Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption were recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). The Company will proceed with the Initial Business Combination only if, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Initial Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, including any amendments thereto (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing an Initial Business Combination. If, however, stockholder approval of the Initial Business Combination is required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with an Initial Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving an Initial Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed Initial Business Combination or do not vote at all. Notwithstanding the above, if the Company seeks stockholder approval of an Initial Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company. The Sponsor has agreed to waive (i) redemption rights with respect to any Founder Shares and Public Shares held in connection with the completion of an Initial Business Combination, (ii) redemption rights with respect to any Founder Shares and Public Shares held in connection with a stockholder vote to approve an amendment to the Certificate of Incorporation to modify the substance or timing of our obligation to allow redemption in connection with an Initial Business Combination or to redeem 100% of Public Shares if the Company has not consummated an Initial Business Combination within the applicable deadline or with respect to any other provisions relating to stockholders’ rights or pre-Initial Business Combination activity and (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held if the Company fails to complete an Initial Business Combination within 24 months from the closing of the Initial Public Offering or any extended period of time that the Company may have to consummate an Initial Business Combination. The Company previously had until January 12, 2023 to complete an Initial Business Combination. On December 12, 2022, the Company filed the Extension Amendment (as defined below) to the Certificate of Incorporation with the Secretary of State of the State of Delaware. The Extension Amendment extended the date by which the Company must consummate its Initial Business Combination from January 12, 2023 to July 12, 2023 on a month-by-month basis (the “Combination Period”). The Company deposited $146,346, or $0.05 per Public Share that was not redeemed in connection with the Extension Meeting (as defined below), into the Trust Account to extend the Combination Period until July 12, 2023 on a month-by-month basis. On July 11, 2023, the Company filed the Second Extension and Redemption Limitation Amendment (as defined below) to the Certificate of Incorporation with the Secretary of State of the State of Delaware. The Second Extension and Redemption Limitation Amendment extends the Combination Period from July 12, 2023 to January 12, 2024 (See Note 10). If the Company is unable to complete an Initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (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 liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete an Initial Business Combination within the Combination Period. The underwriter has agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete an Initial Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00). Termination of Quality Gold Business Combination Agreement On October 20, 2022, the Company, Quality Gold Holdings, Inc. (“New Parent”), five newly incorporated subsidiaries of New Parent: Tastemaker Merger Sub, Inc., a Delaware Corporation (“Merger Sub I”), QGM Merger Sub, Inc., an Ohio corporation (“Merger Sub II”), J&M Merger Sub, Inc., a Delaware corporation (“Merger Sub III”), L&L Merger Sub, Inc., an Ohio corporation (“Merger Sub IV”), and Quality Gold Merger Sub, Inc., an Ohio corporation (“Merger Sub V” and together with Merger Sub I, Merger Sub II, Merger Sub III and Merger Sub IV, the “Merger Subs”), and the Quality Gold Companies (as defined below) entered into a business combination agreement (the “Quality Gold Business Combination Agreement”) pursuant to which New Parent, the Company and four operating companies affiliated with each other and New Parent: Quality Gold, Inc., an Ohio corporation (“Quality Gold”), QGM, LLC, an Ohio limited liability company (“QGM”), J & M Group Holdings Inc., a Delaware corporation (“J&M”), and L & L Group Holdings, LLC, an Ohio limited liability company (“L&L,” and together with Quality Gold, QGM, and J&M, the “Quality Gold Companies”) would enter into an Initial Business Combination resulting in each of the Quality Gold Companies and the Company becoming direct, wholly-owned subsidiaries of New Parent. The proposed Initial Business Combination transactions involving the Company and the Quality Gold Companies, including all of the transactions contemplated by the Quality Gold Business Combination Agreement, are referred to as the “Quality Gold Business Combination.” The consideration payable under the Quality Gold Business Combination Agreement to the equity holders of the Quality Gold Companies consisted of a combination of cash and shares of New Parent and the stockholders and warrant holders of the Company would receive shares and warrants of New Parent. On June 21, 2023, the Business Combination Agreement was terminated, effective as of June 21, 2023 (the “Termination”). The Termination also terminates and makes void the Support Agreement (as defined in the Quality Gold Business Combination Agreement) and the Sponsor Letter Agreement (as defined in the Quality Gold Business Combination Agreement), which were executed concurrently with the Business Combination Agreement. As a result, there was no financial impact due to the termination. Amendments to Certificate of Incorporation On December 12, 2022, the Company convened a special meeting of stockholders (the “Extension Meeting”). At the close of business on the record date of the Extension Meeting, there were 27,600,000 Public Shares and 6,900,000 Founder Shares (as defined in Note 5) outstanding, each of which was entitled to one vote with respect to the proposal. Holders of a total of 25,924,166 Public Shares and Founder Shares, representing approximately 75.1% of the outstanding shares entitled to vote at the Extension Meeting, were present in person or by proxy, constituting a quorum. The stockholders of the Company voted on and approved a proposal to amend the Certificate of Incorporation to extend the date by which the Company must consummate an Initial Business Combination from January 12, 2022 on a monthly basis to July 12, 2023. Stockholders holding 24,673,073 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $251.6 million (approximately $10.20 per share) was removed from the Trust Account to pay such redeeming holders, and approximately $29.8 million (approximately $10.20 per share) remained in the Trust Account. On December 12, 2022, the Company filed an amendment (the “Extension Amendment”) to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware. The Extension Amendment extends the date by which the Company must consummate its Initial Business Combination from January 12, 2023 on a monthly basis to July 12, 2023. On July 10, 2023, the Company convened a special meeting of stockholders (the “Second Extension Meeting”). The only proposal submitted for a vote of the stockholders at the Second Extension Meeting was the approval of the adjournment of such meeting. The reconvened Special Meeting (the “Reconvened Meeting”) was held on July 11, 2023. At the close of business on the record date of the Second Extension Meeting and the Reconvened Meeting, there were 2,926,927 Public Shares and 6,900,000 Founder Shares outstanding, each of which was entitled to one vote with respect to each of the proposals. Holders of a total of 8,766,221 Public Shares and Founder Shares, representing approximately 89.2% of the outstanding shares entitled to vote at the Second Extension Meeting, were present in person or by proxy, constituting a quorum. At the Reconvened Meeting, the Company’s stockholders voted on and approved a proposal to amend the Company’s Certificate of Incorporation to extend the date by which it has to consummate a business combination from July 12, 2023 (the date which is 30 months from the closing date of the Company’s initial public offering of the units) to January 12, 2024 (the date which is 36 months from the closing date of the Company’s initial public offering of the units). In addition, the Company’s stockholders voted on and approved a proposal to amend the Company’s Certificate of Incorporation to eliminate the limitation that the Company may not redeem public shares to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (or any successor rule)) of less than $5,000,001 in order to allow the Company to redeem public shares irrespective of whether such redemption would exceed such limitation. Stockholders holding 1,004,971 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $10.8 million (approximately $10.73 per share) was removed from the Trust Account to pay such redeeming holders, and approximately $20.6 million (approximately $10.73 per share) remained in the Trust Account. On July 17, 2023, the Sponsor deposited $57,659 into the Trust Account in respect of Public Shares outstanding following the redemption of shares in connection with the Reconvened Meeting. On July 11, 2023, the Company filed an amendment (the “Second Extension and Redemption Limitation Amendment”) to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware. The Second Extension and Redemption Limitation Amendment extends the date by which the Company must consummate its Initial Business Combination from July 12, 2023 to January 12, 2024 and eliminates the limitation that the Company may not redeem public shares to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (or any successor rule)) of less than $5,000,001 (See Note 10). Indemnity In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.10 per Public Share or (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay the Company’s taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Liquidity and Going Concern Consideration As of June 30, 2023, the Company had $221 in cash held outside of the Trust Account and a working capital deficit of $3,039,672 (excluding income tax payable and franchise tax payable). The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $25,000 from the sale of the Founder Shares, and a loan of $300,000 under an unsecured and non-interest bearing promissory note (see Note 6). Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity was satisfied through the net proceeds from the Private Placement held outside of the Trust Account and proceeds from the Sponsor Working Capital Loans (as defined in Note 5). The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. The Company anticipates that the cash held outside of the Trust Account as of June 30, 2023, will not be sufficient to allow the Company to operate until January 12, 2024, the date at which the Company must complete an Initial Business Combination, which is less than one year from the issuance of the condensed financial statements. Management plans to address this uncertainty through the Initial Business Combination as discussed above. There is no assurance that the Company’s plans to consummate an Initial Business Combination will be successful or successful within the Combination Period. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. If an Initial Business Combination is not consummated by January 12, 2024, there will be a mandatory liquidation and subsequent dissolution of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Risks and Uncertainties The United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the recent invasion of Ukraine by Russia in February 2022. In response to such invasion, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine during the ongoing military conflict, increasing geopolitical tensions with Russia. The invasion of Ukraine by Russia and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing military conflict in Ukraine is highly unpredictable, the conflict could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. Additionally, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. In addition, the recent invasion of Ukraine by Russia, and the impact of sanctions against Russia and the potential for retaliatory acts from Russia, could result in increased cyber-attacks against U.S. companies. Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine and subsequent sanctions, could adversely affect the Company’s search for an Initial Business Combination and any target business with which the Company may ultimately consummate an Initial Business Combination. The extent and duration of the Russian invasion of Ukraine, resulting sanctions and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale. Any such disruptions may also have the effect of heightening many of the other risks described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K. If these disruptions or other matters of global concern continue for an extensive period of time, the Company’s ability to consummate an Initial Business Combination, or the operations of a target business with which the Company may ultimately consummate an Initial Business Combination, may be materially adversely affected. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law, which, among other things, imposes a 1% excise tax on the fair market value of stock repurchased by a domestic corporation beginning in 2023, with certain exceptions (the “Excise Tax”). Because the Company is a Delaware corporation, it will be a “covered corporation” within the meaning of the IR Act, and while not free from doubt, it is possible that, unless an exemption is available, the Company (or any post-combination company) will be subject to the Excise Tax as a result of any redemptions by the Company of its common stock that occurs after December 31, 2022, including redemptions in connection with an Initial Business Combination. Whether and to what extent the Company would be subject to the Excise Tax in connection with an Initial Business Combination would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Initial Business Combination, (ii) the structure of the Initial Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the Initial Business Combination (or otherwise issued not in connection with the Initial Business Combination but issued within the same taxable year of the Initial Business Combination) and (iv) the content of regulations and other guidance from the U.S. Treasury. In addition, because the Excise Tax would be payable by the Company, and not by the redeeming stockholder, the mechanics of any required payment of the Excise Tax have not been determined. The foregoing could cause a reduction in the per-share amount that the public stockholder would otherwise be entitled to receive or reduce the cash available on hand to complete an Initial Business Combination.
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