This Annual Report on form 10-K includes "forward-looking statements" 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 Annual Report on Form
10-K including, without limitation, 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 "Cautionary
Note Regarding Forward-Looking Statements and Risk Factor Summary", "Item 1A.
Risk Factors" and elsewhere in this Annual Report on Form 10-K. 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 incorporated in Delaware on December 21, 2020 and
formed for the purpose of entering into a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses, which we refer to throughout this report as our initial
business combination. We are an early stage and emerging growth company and, as
such, are subject to all of the risks associated with early stage and emerging
growth companies. We intend to effectuate our "initial business combination"
using cash from the proceeds of our initial public offering and the private
placement of the private placement warrants, the proceeds of the sale of our
shares in connection with our initial business combination (pursuant to forward
purchase agreements or backstop agreements we may enter into), shares issued to
the owners of the target, debt issued to bank or other lenders or the owners of
the target, or a combination of the foregoing.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the year ended December 31, 2021 and for the period from
December 21, 2020 (inception) through December 31, 2020 were organizational
activities, those necessary to prepare for the initial public offering,
described below, and since the closing of the initial public offering, the
search for a prospective initial 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 cash and cash equivalents held after the initial public offering. We
incur expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as due diligence
expenses.
For the year ended December 31, 2021, we had net income of $17,203,381, which
resulted from a gain on the change in fair value of warrant liabilities of
$20,225,521, a change in the fair value of the over-allotment option liability
of $99,884, interest income on investments held in the trust account in the
amount of $23,976, and a gain on the expiration of the over-allotment liability
of $17,404, partially offset by expensed offering costs of $1,323,595, operating
and formation costs of $1,666,061 and franchise tax expense of $173,749. The
gains on the change in fair value of warrant liabilities was due in large part
to the decrease in the public traded price of the public warrants.
For the period from December 21, 2020 (inception) through December 31, 2020, we
had a net loss of $1,000, which resulted entirely from formation costs.
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Liquidity, Going Concern and Capital Resources
On March 4, 2021, we consummated an initial public offering of 45,000,000 units
generating gross proceeds to the Company of $450,000,000. Simultaneously with
the closing of our initial public offering, we completed the private sale of
7,333,333 private placement warrants to our sponsor at a purchase price of $1.50
per warrant, generating gross proceeds of $11,000,000.
On March 4, 2021, the underwriters notified us of their intention to exercise
their over-allotment option. As such, on March 5, 2021, we consummated the sale
of an additional 1,393,299 Units, at $10.00 per unit, and the sale of an
additional 185,774 private placement warrants, at $1.50 per private placement
warrant, generating total gross proceeds of $14,211,651. A total of $13,932,990
of the net proceeds was deposited into a trust account, bringing the aggregate
proceeds held in the trust account to $463,932,990.
For the year ended December 31, 2021, net cash used in operating activities was
$1,381,087, which was due to non-cash adjustments to net income related to a
change in fair value of warrant liabilities of $20,225,521, a change in the fair
value of the over-allotment option liability of $99,884, interest income on
investments held in the trust account of $23,976, and a gain on the expiration
of the over-allotment liability of $17,404, partially offset by net income of
$17,091,917, expensed offering costs added back to net income of $1,323,595, and
changes in working capital of $458,723.
For the year ended December 31, 2021, net cash used in investing activities of
$463,932,990 was the result of the amount of net proceeds from our initial
public offering being deposited to the trust account.
For the year ended December 31, 2021 net cash provided by financing activities
of $465,437,231 was comprised of $454,654,330 in proceeds from the issuance of
units in our initial public offering net of underwriter's discount paid,
$11,278,661 in proceeds from the issuance of warrants in a private placement to
our sponsor, proceeds from the advance from a related party of $922,339 and
proceeds from the issuance of a promissory note to our sponsor of $165,058,
partially offset by the repayment of advance to a related party of $922,339,
payment of $488,260 for offering costs associated with the initial public
offering and repayment of the outstanding balance on the promissory note to our
sponsor of $172,558.
For the period from December 21, 2020 (inception) through December 31, 2020 net
cash used in operating activities was $0, which was due to changes in working
capital of $1,000, fully offset by net loss of $1,000.
As of December 31, 2021 and December 31, 2020, we had cash of $123,154 and $0,
respectively, held outside 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.
Our liquidity needs prior to the consummation of our initial public offering
were satisfied through the proceeds of $25,000 from the sale of our founder
shares, and a loan of $300,000 under an unsecured and non-interest bearing
promissory note. Subsequent to the consummation of our initial public offering,
our liquidity will be satisfied through the net proceeds from the private
placement held outside of the trust account and proceeds available to us under
the working capital loan with TCW Asset Management Company LLC ("TAMCO"), an
affiliate of our sponsor. On January 6, 2022 and February 16, 2022, we drew
$300,000 and $200,000, respectively, from the working capital loan with TAMCO.
In addition, on March 31, 2022, TAMCO signed a commitment letter (the
"Commitment Letter") pursuant to which TAMCO committed to sustaining us, at a
minimum, for a period of one year from March 31, 2022 by providing cash
infusions for working capital shortfalls, as necessary.
We will have until March 4, 2023 to complete a business combination, which
period can be extended to (i) June 4, 2023 if an agreement in principle or a
definitive agreement for a business combination is in place as of March 4, 2023
or (ii) any extended period of time that we may have to consummate a business
combination as a result of an amendment to the amended and restated certificate
of incorporation. If a business combination is not consummated by March 4, 2023
and an extension has not been effected as described above, there will be a
mandatory liquidation and subsequent dissolution of our company.
We have determined that, solely due to the mandatory liquidation and subsequent
dissolution should a business combination or extension not occur by March 4,
2023, there is substantial doubt about our ability to continue as a going
concern for a period of time within one year after the date that these financial
statements are issued. We plan to address this uncertainty through a business
combination or extension as discussed above. There is no assurance that our
plans to consummate a business combination or extension will be successful. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2021 and
December 31, 2020.
Contractual Obligations
Registration Rights
The holders of the founder shares, private placement warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any Class A common
stock issuable upon the exercise of the private placement warrants) have
registration rights to require us to register a sale of any of its securities
held by them pursuant to a registration rights agreement. The holders of these
securities are entitled to make up to three demands, excluding short form
demands, that we register such securities. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of a business combination. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 6,750,000
additional units to cover over-allotments at the initial public offering price,
less the underwriting discounts and commissions. On March 5, 2021 the
underwriters purchased an additional 1,393,299 units at an offering price of
$10.00 per unit, generating additional gross proceeds of $13,932,990 to us.
The underwriters were paid a cash underwriting fee of $0.20 per unit, or
$9,278,660 in the aggregate. In addition, $0.35 per unit, or $16,237,655 in the
aggregate will be payable to the underwriters for deferred underwriting
commissions. The deferred fee will become payable to the underwriters from the
amounts held in the trust account solely in the event that we complete a
business combination, subject to the terms of the underwriting agreement.
Financial Advisory Agreement
On August 9, 2021, we entered into an agreement with TAMCO, an affiliate of our
sponsor, to provide strategic advice and assistance to us in connection with a
business combination, including providing assistance in connection with the
financing of the business combination. As consideration for the services to be
rendered, we have agreed to pay TAMCO (a) a transaction fee equal to 50% of the
aggregate merger & acquisition financial advisory fees paid or payable in
connection with a business combination, payable at or promptly following the
closing of a business combination; and (b) a placement fee equal to 20% of the
aggregate placement fees paid or payable in connection with any Private
Investment in Public Equity ("PIPE") financing raised as part of a business
combination, payable at or promptly following the closing of a business
combination. In addition to such fees, we will reimburse TAMCO for TAMCO's
reasonable, documented and customary out-of-pocket expenses (including
reasonable legal and other professional fees, expenses and disbursements)
incurred in connection with the services to be provided by TAMCO, up to an
amount not to exceed $50,000. If we do not complete a business combination
within the combination period, neither we nor TAMCO shall have any liability or
continuing obligation to the other party except for any fees accrued and
expenses incurred by TAMCO. There were no costs accrued under the advisory
agreement as of December 31, 2021.
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Contingent Warrants
In December 2021, our board of directors approved an amendment to a contract to
increase the number of warrants issuable to a person affiliated with us from
100,000 warrants to 600,000 warrants. The warrant issuance is contingent upon
our completion of a business combination. Accordingly, no expense has been
recorded as of December 31, 2021.
Critical Accounting Policies and Estimates
The preparation of 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 and
estimates:
Warrant Liabilities
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Accounting Standards Codification ("ASC")
ASC 480, Distinguishing Liabilities from Equity("ASC 480") and ASC Topic 815,
Derivatives and Hedging ("ASC 815"). The assessment considers whether the
warrants are freestanding financial instruments pursuant to ASC 480, meet the
definition of a liability pursuant to ASC 480, and whether the warrants meet all
of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to our own common stock, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The initial fair value of the public warrants was
estimated using a Monte Carlo simulation approach and the fair value of the
private placement warrants was estimated using a Modified Black-Scholes model.
Common stock subject to possible redemption
All of the 46,393,299 shares of Class A common stock sold as part of the units
in our initial public offering contain a redemption feature which allows for the
redemption of such shares of Class A common stock in connection with our
liquidation, if there is a stockholder vote or tender offer in connection with
our business combination and in connection with certain amendments to our second
amended and restated certificate of incorporation. In accordance with SEC and
its staff's guidance on redeemable equity instruments, which has been codified
in ASC 480-10-S99, redemption provisions not solely within the control of us
require common stock subject to redemption to be classified outside of permanent
equity. Therefore, all Class A common stock has been classified outside of
permanent equity.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of redeemable common stock to equal the redemption value at
the end of each reporting period. Increases or decreases in the carrying amount
of redeemable common stock are affected by charges against additional paid in
capital and accumulated deficit.
Net Income Per Share of Common Stock
Net income (loss) per share of common stock is computed by dividing net income
(loss) by the weighted-average number of shares of common stock outstanding
during the period. The remeasurement of Class A common stock subject to
redemption to redemption value is excluded from the earnings per share as the
redemption value approximates fair value. Class B common stock subject to
forfeiture is included in the calculation of basic income (loss) per share as of
the date that the forfeiture contingency has lapsed. Class B common stock
subject to forfeiture is included in the calculation of diluted income (loss)
per share as of the beginning of the interim period in which the forfeiture
contingency lapsed. We have not considered the effect of the public warrants and
private placement warrants to purchase an aggregate of 22,983,540 shares in the
calculation of diluted income (loss) per share, since the exercise of the
warrants are contingent upon the occurrence of future events.
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, 2024 for emerging growth companies and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. We early adopted ASU 2020-06 effective
January 1, 2021 using the modified retrospective method of transition. The
adoption of ASU 2020-06 did not have a material impact on the financial
statements for the fiscal year ended December 31, 2021.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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