The following discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements reflecting our
current expectations, estimates and assumptions concerning events and financial
trends that may affect our future operating results or financial position.
Actual results and the timing of events may differ materially from those
contained in these forward-looking statements due to a number of factors,
including those discussed in the sections entitled "Risk Factors" and
"Forward-Looking Statements" appearing elsewhere in this Annual Report on Form
10-K.
Overview
We are a blank check company incorporated as a Delaware corporation on June 5,
2020 and formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. Simultaneously with the consummation of
our initial public offering, we consummated the private sale of an aggregate of
5,933,334 warrants, each exercisable to purchase one share of Class A common
stock, par value $0.0001 per share at $11.50 per share, to our Sponsor at a
price of $1.50 per warrant, generating gross proceeds of approximately
$8.9 million. We intend to consummate an initial business combination using cash
from the proceeds of our initial public offering that closed on September 24,
2020 and the Private Placement, and from additional issuances of, if any, our
equity and our debt, or a combination of cash, equity and debt.
At December 31, 2020, we held cash of $1,121,103, current liabilities of
$292,647 and deferred underwriting compensation of $12,075,000. Further, we
expect to continue to incur significant costs in the pursuit of our acquisition
plans. We cannot assure you that our plans to complete an initial business
combination will be successful.
Agreements for Business Combination
On February 12, 2021, we entered into the Merger Agreement with Merger Sub,
Sharecare and the Stockholder Representative. If the Merger Agreement is adopted
by the Company's stockholders, and the transactions contemplated by the Merger
Agreement are consummated, Merger Sub will merge with and into Sharecare, with
the separate corporate existence of Merger Sub ceasing and Sharecare surviving
the merger as a wholly-owned subsidiary of the Company. In addition, in
connection with and following the consummation of the Business Combination, the
Company will be renamed "Sharecare, Inc." and is referred to herein as "New
Sharecare" as of the time following such change of name.
Sharecare, Inc. is a leading digital healthcare company that helps members
consolidate and manage various components of their health in one place,
regardless of where they are on their health journey.
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The aggregate value of the consideration paid in respect of Sharecare is
approximately $3.79 billion. Sharecare stockholders (other than holders of
Sharecare Series D Preferred Stock) will receive consideration in the form of
cash and shares of common stock of New Sharecare. A Sharecare stockholder will
be deemed to have made a proper election to receive cash (A) if such Sharecare
stockholder holds a number of shares of Sharecare common stock that represents
7.75% or more of such holder's Aggregate Equity, with respect to a number of
shares of Sharecare common stock equal to 7.75% of such holder's Aggregate
Equity, and (B) if such Sharecare common stock holds a number of shares of
Sharecare common stock that represents less than 7.75% of such holder's
Aggregate Equity, with respect to all of such holder's Sharecare common stock,
an amount in cash for such cash electing share, without interest, equal to the
Per Share Merger Consideration Value, subject to proration if the aggregate cash
consideration to satisfy all deemed cash elections exceeds the Cash
Consideration. The Cash Consideration is anticipated to be equal to the lesser
of (i) (A) the proceeds available from the Trust Account established in
connection with the Company's initial public offering, after giving effect to
any and all redemptions of public shares and the payment of transaction expenses
and indebtedness, plus (B) the funds received by the Company in the Private
Placement, plus (C) the amount of cash and cash equivalents of Sharecare (less,
if the Strategic Financing is consummated prior to the Closing, the amount of
proceeds of the Strategic Financing) determined in accordance with GAAP as of
11:59 p.m. Eastern Time on the day prior to the Closing Date, minus (D) the
Transaction Bonuses, minus (E) $401.0 million; and (ii) solely to the extent
reasonably necessary, based on the written advice of the Company's nationally
recognized tax counsel, to qualify either (A) the Business Combination as a
reorganization under Section 368(a) of the Internal Revenue Code of 1986 or
(B) the Business Combination and the contributions by the equity investors of
cash to the Company in exchange for the Company's common stock through the
Equity Financing pursuant to, and in accordance with the terms of the Merger
Agreement and the Subscription Agreements, together as an integrated transaction
described under Section 351 of the Internal Revenue Code of 1986, such amount
designated by Sharecare to the Company not less than three days prior to the
Closing (provided that under no circumstances shall the Cash Consideration be
less than $0). Cash Consideration is calculated in this manner in order to
ensure that, after satisfying the Company's redemption obligations, paying
transaction expenses and indebtedness, $401.0 million in cash is first retained
on the balance sheet of New Sharecare before any cash is used to fund cash
consideration to Sharecare stockholders. Although Sharecare currently has
sufficient liquidity to fund its future operations, the Balance Sheet Threshold
was mutually agreed upon between the Company and Sharecare based upon, among
other things, considerations such as the amount of cash liquidity reasonably
necessary to fund growth initiatives, support marketing efforts, provide
additional working capital and for general corporate purposes. If the Balance
Sheet Threshold is not satisfied, all consideration to Sharecare stockholders
will be in the form of shares of common stock of New Sharecare. If the Cash
Consideration exceeds the aggregate amount of cash which the Sharecare
stockholders elect to receive, the amount of such excess shall remain at
Sharecare. Holders of the Sharecare Series D Preferred Stock will receive shares
of New Sharecare Series A Preferred Stock as consideration.
It is estimated that Cash Consideration will be approximately $275 million if
there are no redemptions and $0 if maximum redemptions occur while still
permitting the Company to satisfy its closing conditions. See "Sources and Uses
of Funds for the Business Combination" on page 30 for more information. At the
effective time of the Business Combination, the stock consideration to be issued
to the then current holders of stock in Sharecare will be in the form of common
stock of New Sharecare.
At the effective time, each Sharecare option that is outstanding and unexercised
immediately prior to the effective time, whether or not then vested or
exercisable, will be assumed by New Sharecare and shall be converted into a
closing New Sharecare option with the original option terms provided that the
number of shares of underlying such New Sharecare option will be determined by
multiplying the number of shares of Sharecare common stock subject to such
option immediately prior to the effective time, by the Exchange Ratio, which
product shall be rounded down to the nearest whole number of shares, and the per
share exercise price of such New Sharecare option will be determined by dividing
the per share exercise price immediately prior to the effective time by the
Exchange Ratio, which quotient shall be rounded down to the nearest whole cent.
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At the effective time, each holder of Sharecare options entitled to receive
closing New Sharecare options will also receive an additional number of
contingent options equal to the product of (i) the number of Sharecare options
held by such holder, and (ii) Earnout Ratio, which product will be rounded down
to the nearest whole number of shares. Each contingent option will have the same
per share exercise price as each closing New Sharecare option and will be
subject to the original option terms. Each contingent option will become vested
and exercisable on the later of the date set forth in the original option terms
and, with respect to one half of the contingent options, the achievement of
certain earnout conditions and, with respect to the remaining half of the
contingent option, the achievement of the remaining earnout conditions, provided
that the holder of the contingent option remains employed by New Sharecare or
its subsidiary through such date. Any contingent options that have not vested
and become exercisable on the fifth anniversary of the Closing Date shall
automatically be cancelled and terminate on the following day and the holder
thereof will have no rights with respect to such contingent options thereafter.
Notwithstanding anything to the contrary, if a contingent option is forfeited
because a holder of the contingent option does not remain employed by, or in the
service of, New Sharecare or its subsidiary through an applicable vesting date,
the shares of New Sharecare common stock underlying such contingent option shall
revert back to the earnout escrow account for release, if applicable, to the
stockholder earnout group.
Subject to certain exceptions, at the effective time, each Sharecare warrant
that is issued and outstanding immediately prior to the effective time and not
expired or terminated pursuant to its terms, and held by a Specified
Warrantholder, by virtue of the Business Combination and without any action on
the part of New Sharecare, Sharecare or the holder of any such Sharecare
warrant, will be converted into the right to receive a number of shares of New
Sharecare common stock equal to (i) the Per Share Merger Consideration,
multiplied by (ii) the number of shares of Sharecare capital stock issuable upon
the exercise of such Sharecare warrant on a net exercise basis, less applicable
taxes required to be withheld with respect to such payment. For the avoidance of
doubt, any Sharecare warrant which has a per share exercise price that is
greater than or equal to the Per Share Merger Consideration Value shall be
cancelled at the effective time for no consideration or payment. As of the
effective time, all Sharecare warrants shall no longer be outstanding and each
former holder of a Sharecare warrant shall cease to have any rights with respect
to such warrant. (except as described in the following sentence).
Notwithstanding the foregoing, as of the effective time, by virtue of the
Business Combination and without any action on the part of New Sharecare,
Sharecare or the parties thereto, New Sharecare shall assume (i) certain
contractual arrangements with Sharecare customers and other parties that provide
for the issuance of Sharecare warrants upon achievement of certain milestones
and (ii) certain unvested warrants to purchase Sharecare capital stock and other
Sharecare warrants held by holders that are not Specified Warrantholders.
The Business Combination also calls for additional agreements, including, among
others, the Subscription Agreements, Registration Rights Agreement, Sponsor
Agreement, Non-Redemption Agreements, Sharecare Support Agreements and Acquiror
Support Agreement as described elsewhere in the preliminary proxy
statement/prospectus that we filed with the SEC on February 16, 2021.
Results of Operations
For the period from June 5, 2020 (inception) through December 31, 2020, we
incurred a loss from operations of $224,785. Through December 31, 2020, our
efforts have been limited to organizational activities, activities relating to
the initial public offering, activities relating to identifying and evaluating
prospective acquisition candidates and activities relating to general corporate
matters. We have not generated any revenue, other than interest income earned on
the proceeds held in the Trust Account. As of December 31, 2020, $345,082,119
was held in the Trust Account (including $12,075,000 of deferred underwriting
discounts and commissions and approximately $8.9 million from the Private
Placement) and we had cash outside of trust of $1,121,103 and $292,647 in
accounts payable and accrued expenses.
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Except for the withdrawal of interest to pay taxes, if any, the Charter provides
that none of the funds held in trust will be released from the Trust Account
until the earlier of (i) the completion of an initial business combination;
(ii) the redemption of any of the shares of Class A common stock included in the
units sold in the initial public offering (the "Units") properly submitted in
connection with a stockholder vote to amend the Charter to modify the substance
or timing of the Company's obligation to redeem 100% of the common stock
included in the Units being sold in the initial public offering if the Company
does not complete an initial business combination by September 24, 2022 or with
respect to any other material provisions relating to stockholders' rights or
pre-initial business combination activity or (iii) the redemption of 100% of the
shares of Class A common stock included in the Units sold in the initial public
offering if the Company is unable to complete a Business Combination by
September 24, 2022. Through December 31, 2020, we have not withdrawn any funds
from interest earned on the trust proceeds. Other than the deferred underwriting
discounts and commissions, no amounts are payable to the underwriters of the
initial public offering in the event of a business combination.
We have also agreed to reimburse an affiliate of the Sponsor for office space,
secretarial and administrative services provided to members of our management
team, in an amount not to exceed $15,000 per month in the event that such space
and/or services are utilized and we do not pay a third party directly for such
services. Upon completion of our initial business combination or our
liquidation, we will cease paying these monthly fees. The administrative
services fee commenced on September 25, 2020. For the period from June 5, 2020
(inception) through December 31, 2020, the Company incurred $48,000 under this
agreement. As of December 31, 2020, $12,000 is included in prepaid expenses in
the accompanying balance sheet.
Liquidity and Capital Resources
For the period from June 5, 2020 (inception) through December 31, 2020, we
incurred an aggregate of $306,904 for merger expenses, legal, accounting, and
filing fees relating to our SEC reporting obligations and general corporate
matters, and miscellaneous operating expenses.
We believe that we do have sufficient liquidity to meet our current obligations
and allow us to operate through September 24, 2022, assuming that an initial
business combination is not consummated during that time. Over this time period,
we currently anticipate incurring expenses for the following purposes:
? due diligence and investigation of prospective target businesses;
? legal and accounting fees relating to our SEC reporting obligations and general
corporate matters;
? structuring and negotiating an initial business combination, including the
making of a down payment or the payment of exclusivity or similar fees and
expenses; an
? other miscellaneous expenses.
As indicated in the accompanying financial statements, at December 31, 2020, we
had cash outside of the trust in the amount of $1,121,103 and $292,647 in
accounts payable and accrued expenses.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements. We do not participate in transactions that
create relationships with unconsolidated entities or financial partnerships,
often referred to as variable interest entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or entered into any non-financial agreements involving assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities other than an administrative agreement to
reimburse the Sponsor for office space, secretarial and administrative services
provided to members of our management team by the Sponsor, members of the
Sponsor, and our management team or their affiliates in an amount not to exceed
$15,000 per month in the event such space and/or services are utilized and we do
not pay a third party directly for such services, from the date of closing of
the Public Offering. Upon completion of a business combination or our
liquidation, we will cease paying these monthly fees.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. The
Company has identified the following as its critical accounting policies:
Offering Costs
We comply with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin Topic 5 A, "Expenses of Offering." We incurred offering costs in
connection with our initial public offering of approximately $19,498,140,
consisting principally of underwriter discounts of $18,975,000 (including
approximately $12,075,000 of which payment is deferred) and approximately
$523,140 of professional, printing, filing, regulatory and other costs were
charged to stockholders' equity upon completion of the initial public offering.
Investments Held in Trust
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. The investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in gain on marketable securities,
dividends and interest held statements of operations. The estimated fair values
of investments held in the Trust Account are determined using available market
information.
Class A Common Stock Subject to Possible Redemption
All of the 34,500,000 shares of Class A Common Stock included in the Units sold
as part of the Public Offering contain a redemption feature as described in the
prospectus for the Public Offering. In accordance with FASB ASC 480,
"Distinguishing Liabilities from Equity," redemption provisions not solely
within the control of the Company require the security to be classified outside
of permanent equity. The Charter provides a minimum net tangible asset threshold
of $5,000,001. The Company recognizes changes in redemption value immediately as
they occur and will adjust the carrying value of the security at the end of each
reporting period. Increases or decreases in the carrying amount of redeemable
shares will be affected by charges against additional paid-in capital.
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Net Income (Loss) Per Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for the periods. The
Company has not considered the effect of the warrants sold in the Public
Offering (including the over-allotment) and Private Placement Warrants to
purchase approximately 11,500,000 and 5,933,334 shares of the Company's Class A
common stock, respectively, in the calculation of diluted income per share,
since their inclusion would be anti-dilutive under the treasury stock method.
The Company's statements of operations include a presentation of net income
(loss) per share for common shares subject to redemption in a manner similar to
the two-class method of net income (loss) per share. Net income (loss) per
common share for basic and diluted Class A common stock for the period from
June 5, 2020 (inception) through December 31, 2020, is calculated by dividing
the interest income earned on the Trust Account of $82,119, net of franchise
taxes of $82,119, and income taxes of nil by the weighted average number of
Class A common stock since issuance. Net loss per common share for basic and
diluted for Class B common stock is calculated by dividing the net loss, which
excludes income attributable to Class A common stock, by the weighted average
number of Class B common stock outstanding for the periods.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.
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