DPCM CAP References in this report (the "Quarterly Report") to "we," "us," "our" or the
"Company" refer to
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the completion of the Proposed Transaction (as defined and described 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 Transaction 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 this Quarterly Report and the Company's Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission (the "SEC") onMarch 15, 2022 (the "Form 10-K"). The Company's securities filings can be accessed on the EDGAR section of theSEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the
We intend to effectuate our initial Business Combination using cash from the proceeds of our initial public offering ("Initial Public Offering") and the sale of the private placement warrants (the "Private Placement Warrants") that occurred simultaneously with the completion of the Initial Public Offering (the "Private Placement"), our capital stock, debt or a combination of cash, stock and debt. We are incurring and expect to continue to incur significant costs in the pursuit of our acquisition plans, including in connection with the Proposed Transaction. We cannot assure you that our plans to complete the Proposed Transaction, or any other initial Business Combination, will be successful.
Proposed Transaction
OnFebruary 7, 2022 , we entered into a transaction agreement (the "Transaction Agreement") with D-WaveQuantum Inc. , aDelaware corporation and our direct, wholly-owned subsidiary ("NewCo"),DWSI Holdings Inc. , aDelaware corporation and a direct, wholly-owned subsidiary of NewCo ("Merger Sub"), DWSI Canada Holdings ULC, aBritish Columbia unlimited liability company and a direct, wholly-owned subsidiary of NewCo ("CallCo"), D-WaveQuantum Technologies Inc. , aBritish Columbia corporation and a direct, wholly-owned subsidiary of CallCo ("ExchangeCo"), andD-Wave Systems Inc. , aBritish Columbia company ("D-Wave"), relating to a proposed Business Combination between the Company and D-Wave (the "Proposed Transaction"). In connection with the Proposed Transaction, NewCo filed a registration statement on Form S-4 (File No. 333-263573) with theSEC onMarch 15, 2022 (the "NewCo Form S-4") that includes a preliminary prospectus with respect to NewCo's securities to be issued in connection with the Proposed Transaction and a preliminary proxy statement with respect to the meeting of our stockholders to vote on the Proposed Transaction. There can be no assurance as to whether or when the Proposed Transaction will be completed.
Transaction Agreement
Pursuant to the Transaction Agreement, among other things, (a) on the date of the closing of the Proposed Transaction (the "Closing", and such date, the "Closing Date"), Merger Sub will merge with and into the Company (the "Merger"), with the Company continuing as the surviving company after the Merger, as a result of which we will become a direct, wholly owned subsidiary of NewCo, with our stockholders receiving shares of NewCo common stock, par value$0.01 per share ("NewCo Common Shares"), in the Merger; and (b) immediately following the Merger, by means of a statutory plan of arrangement under the Business Corporations Act (British Columbia ) (the "Plan of Arrangement"), (i) CallCo will acquire a portion of the issued and outstanding share capital of D-Wave ("D-Wave Shares") from certain holders in exchange for NewCo Common Shares (the "NewCo Share Exchange"), (ii) CallCo will contribute such D-Wave Shares to ExchangeCo in exchange for shares of ExchangeCo's non-par value common stock ("ExchangeCo Common Shares"), (iii) following the NewCo Share Exchange, ExchangeCo will acquire the remaining issued and outstanding D-Wave Shares from the remaining holders of D-Wave Shares in exchange for the exchangeable shares in the capital of ExchangeCo (the "Exchangeable Shares") and (iv) as a result of the foregoing, D-Wave will become a wholly-owned subsidiary of ExchangeCo. The holders of the Exchangeable Shares will have certain rights as specified in the Exchangeable Share Term Sheet (as defined in the Transaction Agreement), including the right to exchange Exchangeable Shares for NewCo Common Shares.
The Proposed Transaction is structured to provide our public stockholders that do not redeem their shares of our Class A common stock with a pro rata right to a pool of an additional 5,000,000 NewCo Common Shares, subject to a redemption cap of 63.3%. None of the holders of the Founder Shares (as defined below) will get the benefit of such additional shares. Upon the Closing, the public stockholders that do not elect to redeem their shares of our Class A common stock in connection with the Proposed Transaction will receive a number of NewCo Common Shares for each share of Class A common stock equal to the to the lower of: (A) 1.4541326; and (B) (1) (x) the Post-Redemption DPCM Share Number (as defined below), plus (y) 5,000,000 divided by (2) the Post-Redemption DPCM Share Number (the lower of (A) and (B), the "Exchange Ratio"). Additionally, upon the Closing, all of our outstanding warrants will be converted into the right to receive warrants of NewCo ("NewCo Warrants"). Each such NewCo Warrant will be exercisable for a number of NewCo Common Shares equal to the Exchange Ratio, at any time commencing 30 days after the Closing. As used herein, the "Post-Redemption DPCM Share Number" means the aggregate number of shares of our Class A common stock outstanding (other than any Excluded Shares (as defined in the Transaction Agreement)) at the Closing after giving effect to any redemptions by our public stockholders.
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The Transaction Agreement contains customary representations and warranties, covenants and closing conditions, including, but not limited to, approval by our stockholders of the Transaction Agreement and the Proposed Transaction. The terms of the Transaction Agreement and other related ancillary agreements entered into or to be entered into in connection with the Closing of the Proposed Transaction, including those briefly described below, are summarized in more detail in the NewCo Form S-4.
Sponsor Support Agreement Concurrently with the execution of the Transaction Agreement, we entered into a sponsor support agreement (the "Sponsor Support Agreement") with the Sponsor, NewCo and D-Wave, pursuant to which, among other things, the Sponsor agreed to (i) vote in favor of the Transaction Agreement and the Proposed Transaction, (ii) a certain number of NewCo Common Shares becoming subject to certain vesting conditions immediately prior to, and contingent upon, the Closing, (iii) reimburse or otherwise compensate the Company for certain expenses in excess of our permitted expenses under the Transaction Agreement and (iv) the forfeiture of certain Founder Shares.
Pursuant to the terms of the Sponsor Support Agreement, immediately prior to the
Closing, the Sponsor has agreed to forfeit 1,196,663 Founder Shares, and to
potentially forfeit an additional 906,563 Founder Shares depending on the
Proposed Transaction-related expenses and amount of redemptions by our public
stockholders in connection with the Proposed Transaction. The Sponsor will also
subject 1,813,125 NewCo Common Shares (the "Earn-out Shares") it receives in the
Proposed Transaction to an earn-out based on the price of the NewCo Common
Shares following the Closing, as follows: if, at any time during the period
following the Closing and expiring on the fifth anniversary of the Closing Date,
the last reported sales price of the NewCo Common Shares equals or exceeds an
amount equal to (x)(1)
Transaction Support Agreements
Concurrently with the execution of the Transaction Agreement, we entered into the transaction support agreements with D-Wave and certain D-Wave shareholders (collectively, the "Supporting Shareholders"), pursuant to which each such Supporting Shareholder agreed to, among other things, support and vote in favor of the Company Arrangement Resolution (as defined in the Transaction Agreement).
PIPE Subscription Agreements
Concurrently with the execution of the Transaction Agreement, we entered into
subscription agreements with NewCo and certain investors (collectively, the
"
Registration Rights and
Lock-Up
Agreement
At the Closing of the Proposed Transaction, NewCo, the Sponsor, the other
holders of Founder Shares and each
D-Wave
shareholder party thereto will, pursuant to the Plan of Arrangement, become
parties to a registration rights and
lock-up
agreement, pursuant to which, among other things, each of the Sponsor, the other
holders of Founder Shares and such
D-Wave
shareholders (a) will agree not to effect any sale or distribution of certain
equity securities of NewCo held by any of them during the
lock-up
period described therein and (b) will be granted certain registration rights
with respect to their respective NewCo Common Shares, in each case, on the terms
and subject to the conditions set forth therein.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities throughMarch 31, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, since the Initial Public Offering, our activity has been limited to identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the trust account established for the benefit of our public stockholders in connection with the Initial Public Offering (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 in connection with searching for, and completing, a Business Combination, including the Proposed Transaction.
For the three months ended
For the three months ended
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of shares of Class B common stock, par value
On
Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of
For the three months ended
For the three months ended
As of
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 initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial 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
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In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor or an affiliate of the
Sponsor or certain of our directors and officers or their affiliates may, but
are not obligated to, loan us funds as may be required. If we complete our
initial Business Combination, we would repay such loaned amounts. In the event
that our initial 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
On
Subsequent to the period covered by this Quarterly Report, on
We may need to raise additional capital through loans or additional investments from the Sponsor or an affiliate of the Sponsor or certain of our directors and officers. The Sponsor or an affiliate of the Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses. Other than the Sponsor Affiliate Note and the Sponsor Note described above, we cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
In connection with our assessment of going concern considerations in accordance withFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 205-40, "Basis of Presentation - Going Concern," management has determined that the expected shortfall in working capital over the period of time between the date the financial statements are issued and our estimated initial Business Combination date raises substantial doubt about our ability to continue as a going concern until the earlier of the consummation of our initial Business Combination or the date we are required to liquidate. Based on the above factors, management determined there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern. The Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as ofMarch 31, 2022 .
Contractual Obligations
Other than the Sponsor Affiliate Note and the Sponsor Note described above, we
do not have any long-term debt obligations, capital lease obligations, operating
lease obligations, purchase obligations or long-term liabilities, other than an
agreement to pay the Sponsor a monthly fee of
The underwriter of the Initial Public Offering is entitled to a deferred fee of
We are also party to the Transaction Agreement and related ancillary agreements, as described above.
Critical Accounting Policies and Estimates
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in
Warrant Liabilities
We account for our warrants in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Placement Warrants and the public warrants for periods where no observable traded price was available are valued using a binomial lattice model. 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 redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." 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' deficit. 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' deficit section of our condensed balance sheets.
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Net Income (Loss) Per Common Stock
Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. We apply the two-class method in calculating income (loss) per common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common stock as the redemption value approximates fair value.
Recent Accounting Standards
InAugust 2020 , the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies accounting for convertible instruments by removing major separation models required under current accounting principles generally accepted inthe United States of America ("GAAP"). ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning afterDecember 15, 2023 , including interim periods within those fiscal years, with early adoption permitted.
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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