References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Churchill Capital Corp V. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Churchill Sponsor V LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K/A for the year ended
December 31, 2020 filed with the U.S. Securities and Exchange Commission (the
"SEC"). The Company's securities filings can be accessed on the EDGAR section of
the SEC's website at www.sec.gov. Except as expressly required by applicable
securities law, the Company disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new information,
future events or otherwise.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of December 31, 2020, March 31, 2021 and June 30,
2021. Management identified errors made in its historical financial statements
where, at the closing of our Initial Public Offering, we improperly valued our
Class A common stock subject to possible redemption. We previously determined
the Class A common stock subject to possible redemption to be equal to the
redemption value of $10.00 per share of Class A common stock while also taking
into consideration a redemption cannot result in net tangible assets being less
than $5,000,001. Management determined that the Class A common stock issued
during the Initial Public Offering can be redeemed or become redeemable subject
to the occurrence of future events considered outside of the Company's control.
Therefore, management concluded that the redemption value should include all
Class A common stock subject to possible redemption, resulting in the Class A
common stock subject to possible redemption being equal to its redemption value.
As a result, management has noted a classification error related to temporary
equity and permanent equity. This resulted in a restatement to the initial
carrying value of the Class A common stock subject to possible redemption with
the offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
for the purpose of effecting a merger, share exchange, asset acquisition, stock
purchase, recapitalization, reorganization or other similar business combination
with one or more businesses or entities. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering and identifying a
target company for our Business Combination. We do not expect to generate any
operating revenues until after the completion of our Business Combination. We
generate
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non-operating income in the form of interest income on marketable securities
held in the Trust Account. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the three months ended September 30, 2021, we had net income of $18,281,837,
which consists of a change in the fair value of warrant liabilities of
$19,180,000, an unrealized gain on marketable securities held in Trust Account
of $28,921 and interest earned on marketable securities held in the Trust
Account of $27,325, offset by operating costs of $857,031, change in fair value
of conversion option liability of $88,096, interest expense of $9,282.
For the nine months ended September 30, 2021, we had a net loss of $5,367,060,
which consists of operating costs of $1,777,481, a change in the fair value of
warrant liabilities of $3,620,000, change in fair value of conversion option
liability $88,096, and interest expense of $9,282, offset by an unrealized gain
on marketable securities held in our Trust Account of $2,039 and interest income
on marketable securities held in the Trust Account of $125,760.
For the period from May 12, 2020 (inception) through September 30, 2020, we had
a net loss of $1,000, which consists of operating costs of $1,000.
Liquidity and Capital Resources
On December 18, 2020, we consummated the Initial Public Offering of 50,000,000
Units at a price of $10.00 per Unit, which includes the full exercise by the
underwriters of the over-allotment option, at $10.00 per Unit, generating gross
proceeds of $500,000,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 11,000,000 Private Placement Warrants to
the Sponsor at a price of $1.00 per warrant, generating gross proceeds of
$11,000,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $500,000,000 was
placed in the Trust Account. We incurred $26,982,949 in transaction costs,
including $8,950,000 of underwriting fees, $17,500,000 of deferred underwriting
fees and $532,949 of other costs.
As of September 30, 2021, we had cash and marketable securities held in the
Trust Account of $500,110,851 consisting of U.S. Treasury Bills with a maturity
of 185 days or less. Interest income on the balance in the Trust Account may be
used by us to pay taxes. Through September 30, 2021, there were no withdrawals
made to pay our income taxes and for permitted withdrawals.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,662,748. Net loss of $5,367,060 was affected by interest earned on
marketable securities held in the Trust Account of $125,760, an unrealized gain
on of marketable securities of $2,039, a change in the fair value of warrant
liabilities of $3,620,000, change in value of conversion option liability of
$88,096, and amortization of debt discount of $9,282. Changes in operating
assets and liabilities provided $114,733 of cash for operating activities.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
deferred underwriting commissions and income taxes payable), to complete our
Business Combination. To the extent that our capital stock or debt is used, in
whole or in part, as consideration to complete our Business Combination, the
remaining proceeds held in the Trust Account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
As of September 30, 2021, we had cash of $342,368. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the initial stockholders or their
affiliates may, but are not obligated to, loan us funds as may be required. If
we complete a Business Combination, we would repay such loaned amounts. In the
event that a Business Combination does not close, we may use a portion of the
working capital held outside the Trust Account to repay such loaned amounts but
no proceeds from our Trust Account would be used for such repayment. Up to
$1,500,000 of such loans may be convertible into warrants identical to the
Private Placement Warrants, at a price of $1.00 per warrant at the option of the
lender.
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We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate 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. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements at or for the three and nine
months period ending September 30, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of one of our executive officers a monthly fee of $30,000 for office
space, utilities and secretarial and administrative support. We began incurring
these fees on December 18, 2020 and will continue to incur these fees monthly
until the earlier of the completion of the Business Combination and our
liquidation.
The underwriters are entitled to a deferred fee of $17,500,000 in the aggregate.
The deferred fee will be waived by the underwriters in the event that we do not
complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
The Company accounts for the Warrants in accordance with the guidance contained
in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, the Company
classifies the Warrants as liabilities at their fair value and adjust the
Warrants to fair value at each reporting period. This liability is subject to
re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our statements of operations. The Public Warrants
and the Private Placement Warrants for periods where no observable traded price
was available are valued using a Monte Carlo simulation and modified Black
Scholes model, respectively. For periods subsequent to the detachment of the
Public Warrants from the Units, the Public Warrant quoted market price was used
as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible conversion in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption is classified as a liability instrument and
measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders' equity section of our
condensed balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period. We
apply the two-class method in calculating income (loss) per common share.
Remeasurement
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adjustment associated with the redeemable shares of Class A common stock is
excluded from income (loss) per common share as the redemption value
approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. We adopted ASU 2020-06 on January 1,2021. The adoption of ASU
2020-06 did not have an impact on our financial statements.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting standards, if currently adopted, would have a
material effect on our condensed financial statements.
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