References to the "Company," "our," "us" or "we" refer to SilverBox Engaged
Merger Corp I. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
unaudited condensed financial statements and the notes thereto contained
elsewhere in this 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 on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on December 3, 2020 for
the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). Our Sponsor is SilverBox Engaged
Sponsor LLC, a Delaware limited liability company.
The registration statement for our initial public offering ("Initial Public
Offering") was declared effective on February 25, 2021. On March 2, 2021, we
consummated the Initial Public Offering of 34,500,000 units (including 4,500,000
units issued to the Underwriters pursuant to the exercise in full of the
over-allotment option granted to the Underwriters) ("Units" and, with respect to
the Class A common stock included in the Units being offered, the "Public
Shares"), at $10.00 per Unit, generating gross proceeds of $345.0 million, and
incurring offering costs of approximately $19,474,651, inclusive of $12,075,000
in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 6,266,667 warrants at a price of
$1.50 per warrant ("Private Placement Warrants, and together with the warrants
included in the Units, the "Warrants") to the Sponsor, generating gross proceeds
of approximately $9,400,000.
Upon the closing of the Initial Public Offering and the Private Placement on
March 2, 2021, $345.0 million ($10.00 per Unit) of the net proceeds of the sale
of the Units in the Initial Public Offering and the Private Placement were
placed in a trust account ("Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and invested only
in U.S. "government securities," within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
having a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act, which
invest only in direct U.S. government treasury obligations, as determined by the
Company, until the earlier of: (i) the completion of a Business Combination and
(ii) the distribution of the Trust Account as described below.
If we have not completed a Business Combination within 24 months from the
closing of the Initial Public Offering, or March 2, 2021 (or 27 months from the
closing of the Initial Public Offering if we have executed a letter of intent
for an initial Business Combination within 24 months from the closing of the
Initial Public Offering), we 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 us to pay its taxes (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 remaining stockholders
and our board of directors, liquidate and dissolve, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
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Recent Developments
On April 12, 2021, the Staff of the Securities and Exchange Commission ("SEC")
released the Staff Statement on Accounting and Reporting Considerations for
Warrants Issued by Special Purpose Acquisition Companies ("SPACs") (the
"Statement"). The SEC Staff Statement addresses certain accounting and reporting
considerations related to warrants of a kind similar to those issued by the
Company at the time of its initial public offering in March 2021.
The Warrants were classified as equity in the Company's previously issued
audited balance sheet as of March 2, 2021. In light of the Statement and
guidance in Accounting Standards Codification ("ASC") 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", in particular as applicable to
certain provisions in the Warrants related to tender or exchange offer
provisions as well as provisions that provided for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the
warrant, the Company evaluated the terms of the Warrant Agreement entered into
in connection with the Company's IPO and concluded that the Company's Warrants
include provisions that, based on ASC 815-40, preclude the Warrants from being
classified as components of equity. The Warrants are not eligible for an
exception from derivative accounting, and therefore should be classified as a
liability measured at fair value, with changes in fair value reported each
period in earnings.
Results of Operations
For the six months ended June 30, 2021, we had a net income of $7,164,743 . Our
business activities from inception to June 31, 2021 consisted primarily of our
formation and completing our Initial Public Offering, and since the offering,
our activity has been limited to identifying and evaluating prospective
acquisition targets for a Business Combination.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $1.1 million in our operating bank
account and a working capital of approximately $1.4 million.
The Company's liquidity needs up to March 2, 2021 had been satisfied through a
capital contribution from the Sponsor of $25,000 for the founder shares and the
loan under an unsecured promissory note from the Sponsor for $175,000. The
promissory note from the Sponsor was outstanding at March 1, 2021, and paid in
full as of March 2, 2021. Subsequent to the consummation of the Initial Public
Offering, our liquidity needs had been satisfied through the net proceeds from
the consummation of the Private Placement not held in the Trust Account. In
addition, in order to finance offering costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us working capital
loans. As of June 30, 2021, there were no amounts outstanding under any working
capital loan.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, we will be using these funds held outside of the
Trust Account for paying existing accounts payable, identifying and evaluating
prospective initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
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Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Except as set forth below,
there have been no significant changes in our critical accounting policies as
discussed in the final prospectus filed by us with the SEC on March 1, 2021.
Warrants Liability
We evaluated the Warrants in accordance with ASC 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", and concluded that a provision in
the Warrant Agreement related to certain tender or exchange offers as well as
provisions that provided for potential changes to the settlement amounts
dependent upon the characteristics of the holder of the warrant, precludes the
Warrants from being accounted for as components of equity. As the Warrants meet
the definition of a derivative as contemplated in ASC 815 and are not eligible
for an exception from derivative accounting, the Warrants are recorded as
derivative liabilities on the Balance Sheet and measured at fair value at
inception (on the date of the IPO) and at each reporting date in accordance with
ASC 820, "Fair Value Measurement", with changes in fair value recognized in the
Statement of Operations in the period of change.
Forward Purchase Agreement
Special Purpose Acquisition Companies frequently will redeem shares to the
extent that their net tangible assets do not go below $5,000,001. Following
guidance in ASC 480-10-S99-3A, with the commitment of $100,000,000 of equity
funds at the time of the IPO, (which is sufficient funds to redeem all
outstanding redeemable stock) the Company reports all of its Class A common
stock as redeemable stock.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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): 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 GAAP. The ASU also removes certain settlement conditions that are
required for equity-linked contracts to qualify for scope exception, and it
simplifies the diluted earnings per share calculation in certain areas. 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 are currently assessing the impact, if any, that ASU 2020-06 would have on
its financial position, results of operations or cash flows.
Off-Balance Sheet Arrangements
As of June 30, 2021, we
did not have any off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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