References in this report to "we," "us" or the "Company" refer to Tailwind
Acquisition Corp. References to our "management" or our "management team" refer
to our officers and directors, and references to the "Sponsor" refer to Tailwind
Sponsor 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 Form
10-Q. 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 Form 10-Q 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 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 regarding the Nuburu Proposed Business Combination and statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding 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. 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 U.S. Securities and Exchange
Commission (the "SEC ") on March 31, 2022 and the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2022 filed with the SEC on May 16,
2022. 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
May 29, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other 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 Warrants, our capital stock, debt or a combination
of cash, stock and debt.
Recent Developments
On August 5, 2022, we entered into a Merger Agreement, by and among the company,
Merger Sub, and Nuburu. See Note 6 above for a description of the Merger
Agreement and the transactions contemplated thereby.
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As disclosed in the definitive proxy statement filed by Tailwind Acquisition
Corp. the Company with the SEC on August 17, 2022, as supplemented (the "Proxy
Statement"), relating to the special meeting of stockholders (the "Extension
Meeting"), the Sponsor agreed that if the Extension Amendment Proposal (as
defined below) is approved, it or one or more of its affiliates, members or
third-party designees (the "Lender") will contribute to the Company as a loan
$600,000 to be deposited into the trust account established in connection with
the Company's initial public offering (the "Trust Account"). In addition, in the
event the Company does not consummate an initial business combination by the
Charter Extension Date (as defined below), the Lender will contribute to the
Company as a loan up to $150,000 in two equal installments to be deposited into
the Trust Account for each of two one-month extensions following the Charter
Extension Date. Accordingly, on September 9, 2022, the Company issued an
unsecured promissory note in the principal amount of up to $750,000 (the "Note")
to the Sponsor. The Note does not bear interest and matures upon closing of the
Company's initial business combination. In the event that the Company does not
consummate a business combination, the Note will be repaid only from amounts
remaining outside of the Trust Account, if any. The proceeds of the Note have
been deposited in the Trust Account in connection with the Charter Amendment.
The Note may be converted, in whole or in part, at the option of the Lender into
warrants of the Company at a price of $1.00 per warrant, which warrants will be
identical to the private placement warrants issued to the Sponsor at the time of
the initial public offering of the Company. On September 7, 2022, the Company
held the Extension Meeting to amend the Company's certificate of incorporation
(the "Charter Amendment") to extend the date (the "Termination Date") by which
the Company has to consummate a business combination from September 9, 2022 (the
"Original Termination Date") to January 9, 2023 (the "Charter Extension Date")
and to allow the Company, without another stockholder vote, to elect to extend
the Termination Date to consummate a business combination on a monthly basis for
up to two times by an additional one month each time after the Charter Extension
Date, by resolution of the Company's board of directors if requested by the
Sponsor, and upon five days' advance notice prior to the applicable deadlines,
until March 9, 2023, or a total of up to six months after the Original
Termination Date, unless the closing of the Company's initial business
combination shall have occurred prior to such date (the "Extension Amendment
Proposal"). The stockholders of the Company approved the Extension Amendment
Proposal at the Extension Meeting and on September 9, 2022, the Company filed
the Charter Amendment with the Delaware Secretary of State.
In connection with the vote to approve the Charter Amendment, the holders of
30,188,729 shares of Class A common stock of the Company properly exercised
their right to redeem their shares for cash at a redemption price of
approximately $10.03 per share, for an aggregate redemption amount of
$302,873,885.
On October 7, 2022, the Company issued a press release announcing that it will
transfer its listing to the NYSE American LLC ("NYSE American"), where the
Company has been approved for listing. In connection with listing on NYSE
American, the Company will voluntarily delist from The New York Stock Exchange.
Following the transfer of its listing, the Company intends to continue to file
the same periodic reports and other information it currently files with the SEC.
The Company transferred listing to the NYSE American on October 12, 2022.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from May 29, 2020 (inception) through September 30, 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 September 30, 2022, we had a net income of $439,004,
which consists of the interest earned on marketable securities held in Trust
Account of $822,997 and the change in the fair value of warrant liability of
$528,216, offset by operational costs of $749,880 and a provision for income
taxes of $162,329.
For the nine months ended September 30, 2022, we had a net income of
$11,452,684, which consists of the interest earned on marketable securities held
in Trust Account of $1,573,401 and the change in the fair value of warrant
liability of $11,620,745, offset by operational costs of $1,462,117 and a
provision for income taxes of $279,345.
For the three months ended September 30, 2021, we had a net income of
$19,967,579, which consists of the interest earned on marketable securities held
in Trust Account of $ 18,214 and the change in the fair value of warrant
liability of $20,336,305, offset by operational costs of $386,940.
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For the nine months ended September 30, 2021, we had a net income of
$17,044,620, which consists of the interest earned on marketable securities held
in Trust Account of $82,072 and the change in the fair value of warrant
liability of $21,656,844, offset by operational costs of $4,694,296.
Liquidity and Capital Resources
On September 9, 2020, we consummated the Initial Public Offering of 33,421,570
Units at a price of $10.00 per Unit, which includes the partial exercise by the
underwriter of its over-allotment option in the amount of 3,421,570 Units,
generating gross proceeds of $334,215,700. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 9,700,000 Private
Placement Warrants at a price of $1.00 per Private Placement Warrant in a
private placement to the Sponsor, generating gross proceeds of $9,700,000.
Following the Initial Public Offering, the partial exercise of the
over-allotment option by the underwriter's and the sale of the Private Placement
Warrants, a total of $334,215,700 was placed in the Trust Account. We incurred
$18,847,894 in transaction costs, including $6,684,314 of underwriting fees,
$11,697,550 of deferred underwriting fees and $466,030 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $801,820. Net income of $11,452,684 was affected by interest earned on
marketable securities held in Trust Account of $1,573,401 and the change in the
fair value of warrant liability of $11,620,745. Changes in operating assets and
liabilities provided $939,642 of cash for operating activities.
For the nine months ended September 30 2021, cash used in operating activities
was $1,535,361. Net income of $17,044,620 was affected by change in fair value
of warrant liabilities of $21,656,844 and interest earned on marketable
securities held in the Trust Account of $82,072. Changes in operating assets and
liabilities provided $3,158,935 of cash for operating activities.
As of September 30, 2022, we had cash held in the Trust Account of $33,034,062.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account 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, 2022, we had $384,522 of cash held outside of the Trust
Account. 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.
On September 9, 2022, the Company issued an unsecured promissory note in the
principal amount of up to $600,000 to the Sponsor. The Company may request an
additional aggregate amount of up to $150,000, which may be drawn down in two
equal tranches. The Note does not bear interest and matures upon closing of the
Company's initial business combination. In the event that the Company does not
consummate a business combination, the Note will be repaid only from amounts
remaining outside of the Trust Account, if any. The proceeds of the Note have
been deposited in the Trust Account in connection with the Charter Amendment.
The Note may be converted, in whole or in part, at the option of the Lender into
warrants of the Company at a price of $1.00 per warrant, which warrants will be
identical to the private placement warrants issued to the Sponsor at the time of
the initial public offering of the Company. As of September 30, 2022, there is
$600,000 outstanding under the Note.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, the sponsor, or certain of the Company's
officers and directors 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 the working capital loans out of the proceeds of the trust account
released to us. Otherwise, the working capital loans would be repaid only out of
funds held outside the trust account. In the event that a business combination
does not close, we may use a portion of proceeds held outside the Trust Account
to repay the working capital loans but no proceeds held in the trust account
would be used to repay the Working Capital Loans. The working capital loans
would either be repaid upon consummation of a business combination, without
interest, or, at the lender's discretion, up to $1,500,000 of such working
capital loans may be convertible into warrants, at a price of $1.00 per warrant,
of the post business combination entity. The warrants would be identical to the
private placement warrants. Except for the foregoing, the terms of such working
capital loans, if any, have not been determined and no written agreements exist
with respect to such loans.
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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 and Liquidity
We have until January 9, 2023 to consummate an initial business combination. It
is uncertain that we will have sufficient liquidity to fund the working capital
needs of the Company until the liquidation date. Additionally, it is uncertain
that we will be able to consummate an initial business combination by this time.
The Company may not have sufficient liquidity to fund the working capital needs
of the Company until one year from the issuance of the financial statements
included in this Report. If an initial business combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution.
Management has determined that the mandatory liquidation, should an initial
business combination not occur, and potential subsequent dissolution raises
substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after January 9, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 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.
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 the Sponsor a monthly fee of $10,000 for office space, utilities
and secretarial, and administrative support services to the Company. We began
incurring these fees on September 9, 2020 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination and the
Company's liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $11,697,550
in the aggregate. The deferred fee will become payable to the underwriter from
the amounts held in the Trust Account solely in the event that the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of condensed consolidated 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 period reported. Actual results could materially
differ from those estimates. We have identified the following critical
accounting policies:
Warrant Liabilities
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
condensed consolidated statements of operations.
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Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." 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
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 common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, the common stock subject
to possible redemption is presented as temporary equity, outside of the
stockholders' deficit section of our condensed consolidated balance sheets.
Net Income Per Common Share
Net income per common stock is computed by dividing net income by the weighted
average number of common stock outstanding for the period. We have 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 earnings per 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 effective January 1, 2021. The adoption of ASU
2020-06 did not have an impact on our condensed consolidated financial
statements.
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 consolidated financial statements.
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