References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Forum Merger IV Corporation. References to
our "management" or our "management team" refer to our officers and directors,
and references to the "Sponsor" refer to Forum Investors IV 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.
Cautionary 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, 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 filed with 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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
January 15, 2021 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Units, 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 (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our only activities through March 31, 2022 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We generate 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 March 31, 2022, we had a net income of $2,034,355,
which consisted of interest earned on marketable securities held in Trust
Account of $63,402 and a gain on the change in fair value of warrants of
$2,941,301, offset by general and administrative expenses of $970,348.
For the period from January 15, 2021 (inception) through March 31, 2021, we had
a net income of $269,830, which consisted of interest earned on marketable
securities held in Trust Account of $758 and a gain on the change in fair value
of warrants of $692,071, offset by transaction costs allocated to warrants of
$399,286 and formation and operating costs of $23,713.
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Liquidity and Capital Resources
On March 22, 2021, we consummated the Initial Public Offering of 30,000,000
Units at $10.00 per Unit, generating gross proceeds of $300,000,000.
Simultaneously with the closing of the Initial Public Offering, we completed the
private sale of 930,000 Private Placement Units at a price of $10.00 per Private
Placement Unit in which the Sponsor purchased 780,000 Private Placement Units
and Jefferies LLC purchased 150,000 Private Placement Units, generating gross
proceeds of $9,300,000.
On March 30, 2021, in connection with the underwriters' partial exercise of
their over-allotment option, we consummated the sale of an additional 3,601,509
Units at a price of $10.00 per Unit and the sale of an additional 72,301 Private
Placement Units at a price of $10.00 per Private Placement Unit, generating
total gross proceeds of $36,738,100. In connection with the underwriters'
partial exercise of their over-allotment option, the Sponsor purchased an
additional 54,022 Private Placement Units and Jefferies LLC purchased an
additional 18,008 Private Placement Units. Each Private Placement Unit consists
of one share of Class A common stock and one-fourth of one warrant.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Placement Units, a total of
$336,015,090 was placed in the Trust Account. We incurred $18,998,772 in Initial
Public Offering related costs, including $6,720,300 of underwriting fees,
$11,760,528 of deferred underwriting fees and $517,944 of other costs.
For the three months ended March 31, 2022, cash used in operating activities was
$546,575. Net income of $2,034,355 was affected by changes in fair value of
warrant liabilities of $2,941,301 and interest earned on marketable securities
held in Trust Account of $63,402. Changes in operating assets and liabilities
provided $423,773 of cash for operating activities.
For the period from January 15, 2021 (inception) through March 31, 2021, cash
provided by operating activities was $99,995. Net income of $269,830 was
affected by transaction costs allocable to warrants of $399,286, change in fair
value of warrant liabilities of $692,071 and interest earned on marketable
securities held in Trust Account of $758. Changes in operating assets and
liabilities provided $123,708 of cash for operating activities.
As of March 31, 2022, we had marketable securities held in the Trust Account of
$336,104,694 consisting of money market funds. Income on the balance in the
Trust Account may be used by us to pay taxes. 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 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 March 31, 2022, we had cash of $977,606. 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 addition, in order to finance transaction costs in connection with an
intended initial Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors 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 $1,200,000 of such
Working Capital Loans may be convertible into private placement-equivalent Units
at a price of $10.00 per Unit at the option of the lender. Such Units would be
identical to the Private Placement Units, including as to exercise price,
exercisability and exercise period of the underlying warrants. The terms of such
Working Capital Loans by our Sponsor or its affiliates, or our officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans. We do not expect to seek loans from parties other than
our Sponsor or an affiliate of our Sponsor as we do not believe third parties
will be willing to loan such funds and provide a waiver against any and all
rights to seek access to funds in our Trust Account.
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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.
Going Concern
As of March 31, 2022, the Company had $977,606 in its operating bank account,
$336,104,694 in securities held in the Trust Account to be used for a Business
Combination or to repurchase or redeem its common stock in connection therewith
and a working capital of $35,293, which excludes franchise and income taxes
payable as such amounts can be paid from the interest earned in the Trust
Account. As of March 31, 2022, approximately $89,604 of the amount on deposit in
the Trust Account represented interest income, which is available to pay the
Company's tax obligations.
Until the consummation of a Business Combination, the Company will be using the
funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's ASU 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern," the
Company has until March 22, 2023 to consummate a Business Combination. It is
uncertain that the Company will be able to consummate a Business Combination by
this time. Additionally, the Company may not have sufficient liquidity to fund
the working capital needs of the Company until one year from the issuance of
these condensed financial statements. If a Business Combination is not
consummated by this date, there will be a mandatory liquidation and subsequent
dissolution of the Company. Management has determined that the liquidity
condition and mandatory liquidation, should a Business Combination not occur,
and potential subsequent dissolution, raises substantial doubt about the
Company's ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after March 22, 2023. The Company intends to complete a Business
Combination before the mandatory liquidation date.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. 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 purchased any non-financial assets.
Related Party Transactions
Founder Shares
On January 15, 2021, the Sponsor purchased 8,625,000 shares of our Class B
common stock for an aggregate price of $25,000. The Founder Shares included an
aggregate of up to 1,125,000 shares of Class B common stock subject to
forfeiture by the Sponsor to the extent that the underwriters' over-allotment
was not exercised in full or in part, so that the Sponsor will own, on an
as-converted basis, 20% of our issued and outstanding shares after the Initial
Public Offering (assuming the Sponsor does not purchase any Public Shares in the
Initial Public Offering and excluding the Private Placement Shares). As a result
of the underwriters' election to partially exercise their over-allotment option
on March 30, 2021, a total of 224,623 Founder Shares were forfeited and 900,377
Founder Shares are no longer subject to forfeiture, resulting in an aggregate of
8,400,377 Founder Shares issued and outstanding.
The Sponsor has agreed, subject to certain limited exceptions, not to transfer,
assign or sell any of its Founder Shares until the earlier to occur of: (A) one
year after the completion of a Business Combination or (B) subsequent to a
Business Combination, (x) if the closing price of the Class A common stock
equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 150 days after a
Business Combination, or (y) the date on which we complete a liquidation,
merger, capital stock exchange or other similar transaction that results in all
of our stockholders having the right to exchange their shares of common stock
for cash, securities or other property.
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Administrative Support Agreement
The Company entered into an agreement, commencing on March 17, 2021, to pay an
affiliate of the Sponsor a total of $30,000 per month for 24 months, or $720,000
in the aggregate, for office space, utilities and secretarial and administrative
support (which payments will be accelerated if the Company consummates its
initial Business Combination prior to the end of its 24-month term, or $720,000
in the aggregate). Such payments will be accelerated if the Company consummates
its initial Business Combination prior to the end of its 24-month term. For the
three months ended March 31, 2022, the Company incurred $90,000 and paid $90,000
in fees for these services. For the period from January 15, 2021 (inception)
through March 31, 2021, the Company incurred $8,000 and paid $4,000 in fees for
these services.
Related Party Loans
On January 28, 2021, the Sponsor agreed to loan us an aggregate of up to
$300,000 to cover expenses related to the Initial Public Offering pursuant to
the Promissory Note. The Promissory Note was non-interest bearing and payable on
the earlier of December 31, 2021 or the completion of the Initial Public
Offering. The outstanding balance under the Promissory Note of $110,000 was
repaid at the closing of the Initial Public Offering on March 22, 2021.
Borrowings under the Promissory Note are no longer available to us.
Due to Sponsor
The Sponsor advanced $675,038 to us in anticipation of the amount to be paid for
the purchase of additional Private Placement Units in the event the
underwriters' exercise their over-allotment option. The advance is non-interest
bearing and due on demand. As of March 31, 2022, $34 remains outstanding.
Other Contractual Obligations
Other than as described herein, we do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
Registration Rights Agreement
Pursuant to a registration rights agreement entered into on March 17, 2021, the
holders of the Founder Shares (including any shares of Class A common stock
issuable upon conversion of the Founder Shares), Private Placement Units,
Private Placement Shares, Private Placement Warrants (and any shares of Class A
common stock issuable upon the exercise of the Private Placement Warrants), and
securities that may be issued upon conversion of Working Capital Loans are
entitled to registration rights requiring us to register such securities for
resale (in the case of the Founder Shares, only after conversion to Class A
common stock). The holders of these securities will be entitled to make up to
three demands, excluding short form demands, that we register such securities
for sale under the Securities Act. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of a Business Combination and rights to require us
to register for resale such securities pursuant to Rule 415 under the Securities
Act. Notwithstanding the foregoing, the underwriters may not exercise their
demand and "piggyback" registration rights after five and seven years after the
effective date of the registration statement related to the Initial Public
Offering and may not exercise their demand rights on more than one occasion. We
will bear the expenses incurred in connection with the filing of any such
registration statements.
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Underwriting Agreement
We granted the underwriters a 45-day option from the date of the Initial Public
Offering to purchase up to 4,500,000 additional Units to cover over-allotments,
if any, at the Initial Public Offering price less the underwriting discounts and
commissions. On March 30, 2021, the underwriters elected to partially exercise
their over-allotment option to purchase an additional 3,601,509 Units and
forfeited their option to purchase an additional 898,491 Units.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$11,760,528 in the aggregate. The deferred fee will be forfeited by the
underwriters solely in the event that we fail to 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
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. We account for the 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. 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 Private Placement Warrants and
the Public Warrants for periods where no observable traded price was available
are valued using a Monte Carlo simulation. 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 480. Shares of Class A common stock subject
to mandatory redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including common stock
that feature redemption rights that is 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 public 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,
shares of Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' deficit section of our balance
sheet.
Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding for the period. The Company has two
classes of shares, which are referred to as Class A common stock and Class B
common stock. Income and losses are shared pro rata between the two classes of
shares. Accretion associated with the redeemable shares of Class A common stock
is excluded from income per common share as the redemption value approximates
fair value.
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Recent Accounting Standards
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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