2023
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification | |||
55 Francisco Street, Suite
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(707) 324-4219 (Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||||||||||
| Emerging growth company | ☒ |
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As of June 30, 2021 (the last business day of the registrant’s second fiscal quarter), the registrant was not a public company and, therefore, cannot calculate the☒
As of March 8, 2022, there were 15,687,500 sharesJune 30, 2023, the last business day of the registrant’s ordinarymost recently completed second fiscal quarter, was $30.9 million based upon the last reported sales price for such date on the Nasdaq Global Market.
Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2023.
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Item 1C. | ||||||||||
| Item 2. |
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| PART II |
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| PART III |
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i
CERTAIN TERMS
Unless otherwise stated in this Annual Report (this “Annual Report”) on Form 10-K, references to:
The forward-looking statements contained in this Annual Report are based on our current expectationsForm 10-K. The results, events and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. Thesecircumstances reflected in the forward-looking statements involve a number of risks, uncertainties (some of which are beyondmay not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the controlforward-looking statements.
Company History
In January 2021, our sponsor purchased an aggregatesteady rise throughout the year, less than 50% of 3,162,500 ordinary shares (our “founder shares”) (after giving effect to a 1.1-for 1 share split we effected on August 30, 2021) for an aggregate purchase price of $25,000, or approximately $0.009 per share. The number of founder shares issued was determinedpeople were back in-office based on the expectation thatKastle “Back to Work Barometer” data study. Beyond the founder shares would represent 20%pet service sector of the issued and outstanding ordinary shares upon completionaddressable market, untapped potential coupled with the continued trend of the initial public offering.
On September 1, 2021, we consummated our initial public offeringhumanization of 12,500,000 units (the “units”), including 1,500,000 units issued pursuantpets may lead to the partial exercise of the underwriters’ over-allotment option. Each unit consists of one ordinary share, and one redeemable warrant of the Company (each, a “warrant”), with each warrant entitling the holder thereof to purchase one ordinary share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $125,000,000.
Simultaneously with the closing of our initial public offering, we completed the private placement sale of 4,238,636 Warrants (the “private placement warrants”) to the Sponsor, generating total proceeds of $4,238,636. The private placement warrants are identical to the warrants sold in our initial public offering except as otherwise disclosed in our registration statement on Form S-1 (File Nos. 333-254422 and 333-259182). No underwriting discounts or commissions were paid with respect to the sale of the private placement warrants. The issuance of the private placement warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
Thirteen qualified institutional buyers or institutional accredited investors which are not affiliated with CHW, the Sponsor, our directors, or any member of our management (the “anchor investors”), each purchased unitsspike in the IPO at varying amounts not exceeding 9.9%pet insurance space. According to an industry report released by the North American Pet Health Insurance Association, there was an increase of the units subjectapproximately 22% from 2021 to the IPO. In conjunction with each anchor investor purchasing 100%2022 of the units allocated to it,insured pets in connection with the closing of the IPO the Sponsor sold 750,000 founder sharesNorth America. While this growth is exciting for Wag!, over 155 million pets in the aggregateUnited States still remain uninsured; leaving approximately 97% of pets in the United States as potential entrants into the market.
Furthermore, simultaneously with the closingquality of life for all pets. To give back to our initial public offering,communities, we completed the private placement sale of 62,500 ordinary shares (the “Representative Shares”) to Chardan Capital Markets, LLC for nominal consideration. We issued the Representative Shares pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
A total of $125,000,000 comprised of the proceeds from our initial public offering after offering expenses anddonate a portion of the proceeds from each walk to local shelters. From our inception through December 2023, we have donated over 17.7 million meals to pets in need through our partnership with the Greater Good Rescue Bank Program. We have also partnered with various pet rescue organizations both large and small across the United States, including pet adoption activation events.
Commencing September 24, 2021, holders. This is an increase of 11% from the previous year, driven largely by the COVID-19 pandemic spike in pet population. The APPA breaks down the pet industry into four categories: (1) Pet Food & Treats; (2) Supplies, Live Animals & OTC Medicine; (3) Vet Care & Product Sales; and (4) Other Services (inclusive of insurance). Wag! enters into 2024 with product offerings in three of the 12,500,000 units soldaforementioned four markets; anchored by our premium subscription service Wag! Premium, which spans across market lines.
1
Proposed Wag! Business Combination
Overview
On February 2, 2022, we entered into a business combination agreement (the “Business Combination Agreement”) with CHW Merger Sub Inc., a Delaware corporation and wholly owned direct subsidiary of CHW (“Merger Sub”), and Wag!, pursuant to which, and subjectAccording to the terms and conditions contained therein,2023-2024 APPA National Pet Owners Survey, 66% of U.S. households own a pet, which equates to 86.9 million homes. According to the business combinationAmerican Veterinary Medical Association, almost 90% of CHW, Merger Sub and Wag! (the “Business Combination”) will be effected. The termsPet Parents consider their pet a member of the Business Combination Agreement, which contain customary representationsfamily. This has led to increases in pet spending by necessity and warranties, covenants, closing conditions, termination provisions, anddesire to provide for their pet as any other terms relating to the Business Combination, are summarized below. The combined company’s business will continue to operate through Wag!. Unless otherwise defined herein, the capitalized terms used below are defined in the Business Combination Agreement.
The Business Combination will be effected in two steps: (i) on the Domestication Closing Date, CHW will domesticate as a Delaware corporation (the “Domestication” and following the Domestication, CHW is referred to herein as “New Wag!”); and (ii) on the Acquisition Closing Date, Merger Sub will merge with and into Wag!, with Wag! surviving the merger as a wholly owned subsidiary of New Wag! (the “Acquisition Merger”).
Concurrently with the Domestication, CHW will adopt and file a certificate of incorporation with the Secretary of Statemember of the Statefamily. In light of Delaware, pursuantthese trends, marketplaces, such as Dog Food Advisor and Petted.com, can provide Pet Parents with both knowledge and power to which CHW will change its nameexecute on that desire with a few simple clicks.
Conversion of Securities
Upon the Domestication Closing, by virtue of the Domestication and without any action on the part of CHW, Merger Sub, Wag!, or the holders of any of CHW’s or Wag!’s securities:
On the Acquisition Closing Date and immediately prior to the Acquisition Merger Effective Time, each then-outstanding share of Wag! preferred stock (excluding Series P Preferred Stock of Wag!) will convert automatically into a number of shares of Wag! common stock at the then-effective conversion rate in accordance with the terms of the existing Wag! charter. Each share of Wag! preferred stock (excluding Series P Preferred Stock of Wag!) is expected to convert in connection with the Conversion on a one-for-one basis into a share of Wag! common stock.
At the Acquisition Merger Effective Time, by virtue of the Acquisition Merger and without any action on the part of New Wag!, Merger Sub, Wag!, or the holders of the following securities:
2
The “Exchange Ratio” means the following ratio (rounded to ten decimal places): (i) the Company Merger Shares divided by (ii) the Company Outstanding Shares.
The consummation of the proposed Wag! Business Combination is subject to certain conditions as further described in the Business Combination Agreement.
In connection with entering into the Business Combination Agreement, on February 2, 2022, CHW and certain stockholders of Wag!! (the “Key Wag! Stockholders”) entered into a Lock-Up Agreement (the “Lock-Up Agreement”). Pursuant to the Lock-Up Agreement, approximately 70% of the aggregate issued and outstanding securities of New Wag! will be subject to the restrictions described below from the Acquisition Closing until the termination of applicable lock-up periods.
At the closing of the Business Combination, New Wag!, the Sponsor, certain other shareholders of CHW and certain stockholders of Wag will enter into an Amended and Restated Registration Rights Agreement (the “Amended and Restated Registration Rights Agreement”). Pursuant to the Amended and Restated Registration Rights Agreement, New Wag! will agree that, within 30 calendar days after the consummation of the Business Combination, it will file with the SEC a registration statement registering the resale of certain securities held by or issuable to the other parties thereto (the “Resale Registration Statement”), and New Wag! will use its commercially reasonable efforts to have such Resale Registration Statement declared effective as soon as reasonably practicable after the filing thereof. In certain circumstances, certain holders can demand up to three underwritten offerings, and certain holders will be entitled to piggyback registration rights.
3
In connection with entering into the Business Combination Agreement, on February 2, 2022, CHW entered into Subscription Agreements (the “Subscription Agreements”) with qualified institutional buyers (the “PIPE and Backstop Investors”), pursuant toservice, which among other things, the PIPE and Backstop Investors agreed to purchase an aggregate of 500,000 shares of common stock of CHW following the Domestication and immediately prior to the Acquisition Merger at a cash purchase price of $10.00 per share, resulting in aggregate proceeds of $5,000,000 million; provided, however, if the PIPE and Backstop Investors acquire shares of common stock of CHW in the open market between the date of the Subscription Agreements and the close of business on the third trading day prior to the special meeting of CHW’s shareholders called in connection with the Business Combination, then the required purchase amount shall be reduced on a share-for-share basis by the number of shares of common stock of CHW so acquired in the open market (the “PIPE and Backstop Investment”).
In connection with the execution of the Business Combination Agreement, on February 2, 2022, the Sponsor, Mark Grundman and Jonah Raskas (collectively, the “CHW Founder Shareholders”) entered into that certain letter agreement (the “CHW Founders Stock Letter”) with CHW and Wag!, pursuant to which, among other things, CHW, Wag!, and the CHW Founder Shareholders agreed, with respect to 360,750 Founder Shares (as defined below) (the “Forfeiture Shares”), during the period commencing on the date of the Business Combination Agreement and ending on the earlier of (A) the date that is three years after the Acquisition Closing, (B) the date on which the Forfeiture Shares are no longer subject to forfeiture, (C) subsequent to the Acquisition Closing, the consummation of a liquidation, merger, share exchange or other similar transaction that results in all of the New Wag! stockholders having the right to exchange their sharescreates potential for cash, securities or other property, and (D) the valid termination of the Business Combination Agreement, the Sponsor will not to (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations of the SEC promulgated thereunder with respect to, any Forfeiture Shares, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Forfeiture Shares, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise or (iii) publicly announce any intention to effect any transaction specified in clauses (i) or (ii), subject to certain exceptions.
Wag! has delivered to CHW the Stockholder Support Agreement, dated February 2, 2022 (the “Stockholder Support Agreement”), pursuant to which, among other things, the Key Wag! Stockholders, whose ownership interests collectively represent the outstanding Wag! common stock and Wag! preferred stock (voting on an as-converted basis) sufficient to approve the Business Combination on behalf of Wag!, will agree to support the approval and adoption of the transactions contemplated by the Business Combination Agreement, including agreeing to execute and deliver the requisite consent of Wag!’s stockholders holding shares of Wag! common stock and Wag! preferred stock sufficient under the Delaware General Corporation Law and Wag!’s certificate of incorporation and bylaws to approve the Business Combination Agreement and the Business Combination, in the form of a written consent executed by the Key Wag! Stockholders, within 48 hours of the Registration Statement on Form S-4 filed with the SEC in connection with the Business Combination becoming effective. The Stockholder Support Agreement will terminate upon the earliest to occur of (a) the Acquisition Merger Effective Time, (b) the date of the termination of the Business Combination Agreement, and (c) the effective date of a written agreement of CHW, Wag!, and the Wag! stockholders party thereto terminating the Stockholder Support Agreement (the “Expiration Time”). The Key Wag! Stockholders also agreed, until the Expiration Time, to certain transfer restrictions (excluding the Conversion).
In connection with entering into the Business Combination Agreement, on February 2, 2022, CHW entered into a definitive commitment letter (the “Commitment Letter”) with Blue Torch Capital LP (together with its affiliated funds and any other parties providing a commitment thereunder, including any additional lenders, agents, arrangers or other parties joined thereto after the date thereof, collectively, the “Debt Financing Sources”), pursuant to which, among other things, the Debt Financing Sources agreed to fund a $30 million senior secured term loan credit facility (the “Credit Facility”). The closing and funding of the Credit Facility will occur in connection with the closing of the transactions contemplated by the Business Combination Agreement, subject to the satisfaction or waiver of the conditions to funding set forth in the Commitment Letter. Upon closing, Wag! will be the primary borrower under the Credit Facility, New Wag! will be a parent guarantor and substantially all of Wag!’s existing and future subsidiaries will be subsidiary guarantors (subject to certain customary exceptions). The Credit Facility will be secured by a first priority security interest in substantially all assets of Wag! and the guarantors (subject to certain customary exceptions).
4
The foregoing description of the Business Combination Agreement, Lock-Up Agreement, Amended and Restated Registration Rights Agreement, PIPE and Backstop Subscription Agreements, CHW Founders Stock Letter, Stockholder Support Agreement and Commitment Letter do not purport to be complete and are qualified in its entirety by the reference to the full text of such documents, copies of which are attached as Exhibits 2.1, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8 to our Current Report on Form 8-K filed with the SEC on February 3, 2022, and are incorporated herein by reference.
The Business Combination Agreement, Lock-Up Agreement, Amended and Restated Registration Rights Agreement, Subscription Agreement, CHW Founders Stock Letter, Stockholder Support Agreement and Commitment Letter (the “Included Agreements”) have been included to provide investors with information regarding their terms. They are not intended to provide any other factual information about CHW, Wag! or their affiliates. The representations, warranties, covenants and agreements contained in each Included Agreement and the other documents related thereto were made only for purposes of such Included Agreement as of the specific dates therein, were solely for the benefit of the parties to such Included Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Included Agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Included Agreements and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Included Agreements, as applicable, which subsequent information may or may not be fully reflected in the our public disclosures.
For more information about the Business Combination Agreement and the proposed Wag! Business Combination, see our Current Report on Form 8-K filed with the SEC on February 3, 2022 and the Wag! Disclosure Statement that we will file with the SEC. Unless specifically stated, this Annual Report does not give effect to the proposed Wag! Business Combination and does not contain the risks associated with the proposed Wag! Business Combination. Such risks and effects relating to the proposed Wag! Business Combination will be included in a Registration Statement on Form S-4 that we will file with the SEC relating to our proposed business combination with Wag!
Additional Disclosures
Initial Business Combination
Nasdaq listing rules require that our initial business combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting fees and taxes payable on the income earned on the Trust Account). We refer to this as the 80% fair market value test. If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. We do not currently intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination, although there is no assurance that will be the case.
5
We anticipate structuring our initial business combination so that the post-transaction company in which our Public Shareholders own shares will own or acquire 100% of the issued and outstanding equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders prior to our initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in our initial business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the issued and outstanding capital stock, shares or other equity securities of a target business or issue a substantial number of new shares to third-parties in connection with financing our initial business combination. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% fair market value test. If our initial business combination involves more than one target business, the 80% fair market value test will be based on the aggregate value of all of the target businesses. Notwithstanding the foregoing, if we are not then listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
We have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
Corporate Information
Our executive offices are located at 2 Manhattanville Road, Suite 403, Purchase, NY 10577, and our telephone number is (914) 603-5016.
We are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Law. As an exempted company, we have received a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”personalized pet recommendations including but not limited to age, breed, average walk distance and photos.
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Travel and Local (Google Play) and Travel (iOS) categories for key search terms through App Store optimization and strong consumer rankings and reviews. In addition, Section 107our website saw more than five million visitors per month from direct or unpaid traffic sources in 2023, the majority of which came from our search engine optimization efforts. In 2023, we saw an average of 80% organic customer acquisition.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b)discount trials, partnerships, display advertising, billboards, radio, video, television, direct mail, social media, email, podcasts, hiring and classified advertisement websites, mobile “push” communications, search engine optimization, and paid keyword search campaigns.
Additionally, we arediverse backgrounds and experiences;
Evaluation of a Target Business and Structuring of Our Initial Business Combination
In evaluating a prospective target business, we expect to conduct a due diligence review which may encompass, among other things, (i) meetings with incumbent management and their advisors (if applicable); (ii) document reviews; (iii) interviews with various stakeholders,procedures, including but not limited to reviewing job descriptions for inclusive language, sourcing from wide talent pools and a structured interview process; and
| Board | Leadership | Non-Leadership | ||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| American Indian or Alaska Native | — | % | — | % | — | % | — | % | 2 | % | 2 | % | ||||||||||||||||||||||||||
| Asian | 33 | % | 33 | % | 9 | % | 5 | % | 14 | % | 16 | % | ||||||||||||||||||||||||||
| Black or African American | 17 | % | 17 | % | 5 | % | 5 | % | 8 | % | 6 | % | ||||||||||||||||||||||||||
| Hispanic or Latino | — | % | — | % | — | % | — | % | 19 | % | 16 | % | ||||||||||||||||||||||||||
| Two or More Races | — | % | — | % | 5 | % | 5 | % | 8 | % | 8 | % | ||||||||||||||||||||||||||
| White | 50 | % | 50 | % | 81 | % | 85 | % | 49 | % | 52 | % | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||
| 24 years and younger | 1 | % | 4 | % | ||||||||||
| 25-29 years | 15 | % | 24 | % | ||||||||||
| 30-34 years | 37 | % | 32 | % | ||||||||||
| 35-39 years | 11 | % | 8 | % | ||||||||||
| 40-49 years | 25 | % | 22 | % | ||||||||||
| 50+ years | 11 | % | 10 | % | ||||||||||
Theus relating to privacy, data protection, and cybersecurity may evolve in a manner that relates to our practices or the features of our mobile applications or website. We may need to take additional measures to comply with new and evolving legal obligations and to maintain and improve our cybersecurity posture in an effort to reduce cybersecurity incidents or avoid breaches affecting personal information or other sensitive or proprietary data. For additional information, see “
Lack of Business Diversification
For an indefinite period of time after the completion ofbusiness.
7
Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s managementintellectual property rights, they may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Conflicts of Interest
Certain of our officers and directors presently have, andrespected in the future anyor may be invalidated, circumvented, or challenged.
Human Capital Management
We currently have four executive officers and we do not intend to have any full time employees prior to the completion of our initial business combination. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on the status of the proposed Wag! business combination and, if the proposed Wag! business combination is not consummated, whether a different target business has been selected for our initial business combination and the current stage of the business combination process.
Factors
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For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated August 30, 2021. See also the Risk Factors that will be set forth in our preliminary prospectus/proxy statement to be included in a Registration Statement on Form S-4 that we will file with the SEC relating to our proposed business combination with Wag!
Comments
will be available as needed.
ToProceedings
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Securities
On March 9, 2022,13, 2024, there was 1 holder of record of our units, 24were 126 holders of record of our ordinary sharescommon stock and 26 holders of record of our public warrants.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers or other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
None.
On September 1, 2021, simultaneously with the closing of the initial public offering, and in accordance with the Private Placement Warrants Purchase Agreement, the Company completed the private placement sale of 4,238,636 warrants (the “private placement warrants”) to the Sponsor, generating total proceeds of $4,238,636. The private placement warrants are identical to the warrants sold in the initial public offering, except as otherwise disclosed in the registration statement on Form S-1 (File Nos. 333-254422 and 333-259182). No underwriting discounts or commissions were paid with respect to the sale of the private placement warrants. The issuance of the private placement warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On September 1, 2021, simultaneously with the closing of the initial public offering, and in accordance with the Underwriting Agreement, the Company completed the private placement sale of 62,500 ordinary shares (the “representative shares”) to Chardan for nominal consideration. The Company issued the representative shares pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
None.
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On September 1, 2021, we consummated our initial public offering of 12,500,000 units, including 1,500,000 units issued pursuant to the partial exercise of the underwriters’ over-allotment option. Each unit consists of one ordinary share and one redeemable warrant, with each warrant entitling the holder thereof to purchase one ordinary share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $125,000,000.
A total of $125,000,000 of the proceeds from the initial public offering (which amount includes $4,375,000 of the underwriters’ deferred discount) and the sale of the Private Placement Warrants, was placed in a U.S.-based trust account maintained by Wilmington, acting as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended.
Item 6. [RESERVED.]
[Reserved.]
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations, should be read in conjunction withcash requirements, financial condition, contractual restrictions and other factors that our audited financial statementsBoard may deem relevant.
All statements other than statements of historical fact included in this Annual Report including, without limitation, statements under “Management’sAffiliated Purchasers
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| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Platform Participants (as of period end) | 600 | 434 | 166 | 38.2 | % | |||||||||||||||||||||
| Revenues | $ | 83,916 | $ | 54,865 | 29,051 | 52.9 | % | |||||||||||||||||||
| Net loss | $ | (13,317) | $ | (38,567) | 25,250 | (65.5) | % | |||||||||||||||||||
| Net loss margin | (15.9) | % | (70.3) | % | ||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (6,465) | $ | (2,803) | (3,662) | 130.6 | % | |||||||||||||||||||
| Adjusted EBITDA (loss)(1) | $ | 722 | $ | (3,872) | 4,594 | * | ||||||||||||||||||||
| Adjusted EBITDA (loss) margin(1) | 0.9 | % | (7.1) | % | ||||||||||||||||||||||
Overview
the quarter. Services include dog walking, sitting, boarding, drop-ins, training, premium telehealth services, wellness plans, and pet insurance plan comparison.
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||
| Net loss | $ | (13,317) | $ | (38,567) | ||||||||||
| Interest expense, net | 6,510 | 2,470 | ||||||||||||
| Income taxes | 93 | 13 | ||||||||||||
| Depreciation and amortization | 1,673 | 571 | ||||||||||||
| Stock-based compensation | 4,712 | 24,492 | ||||||||||||
| Integration and transaction costs associated with acquired business | 189 | 220 | ||||||||||||
| Severance costs | 199 | — | ||||||||||||
| Legal settlements | 663 | — | ||||||||||||
| Change in fair value of derivative liability | — | 4,958 | ||||||||||||
| Issuance of Community Shares | — | 1,971 | ||||||||||||
| Adjusted EBITDA (loss) | $ | 722 | $ | (3,872) | ||||||||||
| Revenues | $ | 83,916 | $ | 54,865 | ||||||||||
| Adjusted EBITDA (loss) margin | 0.9 | % | (7.1) | % | ||||||||||
| Year Ended December 31, | Change | |||||||||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Revenues | $ | 83,916 | $ | 54,865 | 29,051 | 52.9 | % | |||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 5,477 | 4,024 | 1,453 | 36.1 | % | |||||||||||||||||||||
| Platform operations and support | 12,475 | 13,825 | (1,350) | (9.8) | % | |||||||||||||||||||||
| Sales and marketing | 50,523 | 35,156 | 15,367 | 43.7 | % | |||||||||||||||||||||
| Royalty | 1,791 | — | 1,791 | 100.0 | % | |||||||||||||||||||||
| General and administrative | 19,223 | 32,415 | (13,192) | (40.7) | % | |||||||||||||||||||||
| Depreciation and amortization | 1,673 | 571 | 1,102 | 193.0 | % | |||||||||||||||||||||
| Total costs and expenses | 91,162 | 85,991 | 5,171 | 6.0 | % | |||||||||||||||||||||
| Interest expense | 7,417 | 2,886 | 4,531 | 157.0 | % | |||||||||||||||||||||
| Interest income | (907) | (416) | (491) | 118.0 | % | |||||||||||||||||||||
| Other expense, net | 21 | 4,958 | (4,937) | (99.6) | % | |||||||||||||||||||||
| Loss before income taxes and equity in net earnings of affiliate | (13,777) | (38,554) | 24,777 | (64.3) | % | |||||||||||||||||||||
| Income taxes | 93 | 13 | 80 | 615.4 | % | |||||||||||||||||||||
| Equity in net earnings of equity method investment | 553 | — | 553 | 100.0 | % | |||||||||||||||||||||
| Net loss | $ | (13,317) | $ | (38,567) | 25,250 | (65.5) | % | |||||||||||||||||||
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 nor generated any operating revenues to date. Our only activities from inception throughyear ended December 31, 2021 were organizational activities and those necessary2022 to prepare$83.9 million for the IPO, described below, and since the IPO, the search and initiation ofyear ended December 31, 2023. The increase was primarily attributable to a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We expect to generate non-operating income$19.9 million increase in the form of interest income from the proceeds of the IPO placed in the Trust Account. We expect that we will incur increased expensesWellness revenue as a result of increased activity and a $6.6 million increase in Pet Food & Treats revenue as a result of our acquisition of Dog Food Advisor in the first quarter of 2023 and launch of Cat Food Advisor in the third quarter of 2023. The increase also includes a $2.6 million increase in Services revenue from increased Pet Parents’ engagement of Pet Caregivers to provide pet care services as a result of increased return-to-office, and growth in ancillary services such as Wag! Premium subscriptions and Wag! products.
For the period January 12,2021 (inception) toyear ended December 31, 2021, we had a net loss2022 to $1.7 million for the year ended December 31, 2023. The increase was primarily attributable to the acquisitions of $829,563, which primarily consistsDog Food Advisor and Maxbone in 2023 and the related amortization of operating expenses of $832,564, partially offset by Income on investments held in Trust Account of $3,001.
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LiquidityInterest expense, net was as follows:
| Year Ended December 31, | Change | |||||||||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Interest expense | $ | 7,417 | $ | 2,886 | 4,531 | 157.0 | % | |||||||||||||||||||
| Interest income | (907) | (416) | (491) | 118.0 | % | |||||||||||||||||||||
| Interest expense, net | $ | 6,510 | $ | 2,470 | 4,040 | 163.6 | % | |||||||||||||||||||
On September 1, 2021, we consummated our IPO of 12,500,000 Units, which includes 1,500,000 Units from the underwriters’ partial exercise of their over-allotment option, at $10.00 per Unit, generating gross proceeds of $125,000,000. SimultaneouslyWarrant Agreement entered into in connection with the closing of the IPOBusiness Combination with CHW, partially offset by an increase in interest income on our cash and cash equivalents due to a higher interest rate environment.
Forfactors described in Part I, Item 1A,
| Year Ended December 31, | Change | |||||||||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Net cash provided by (used in): | ||||||||||||||||||||||||||
| Operating activities | $ | (6,465) | $ | (2,803) | (3,662) | 130.6 | % | |||||||||||||||||||
| Investing activities | (12,261) | 1,835 | (14,096) | (768.2) | % | |||||||||||||||||||||
| Financing activities | (1,917) | 37,089 | (39,006) | (105.2) | % | |||||||||||||||||||||
| Net change in cash and cash equivalents | $ | (20,643) | $ | 36,121 | (56,764) | (157.1) | % | |||||||||||||||||||
AtEconomic Security Act, of which $3.5 million was subsequently forgiven. The PPP Loan matures on August 5, 2025 and bears interest at a fixed rate of 1.00%. Principal and interest payments are payable monthly, and as of December 31, 2021, we had cash2023, the amount outstanding under the PPP Loan was $0.8 million.
At December 31, 2021, we had cash of $687,581 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 diligencethis Annual Report 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.
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. The Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Form 10-K.
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2021. We do not participate in transactions that create relationships with 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
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The underwriters were paid a cash underwriting discount of $0.175 per unit, or $2,187,500 in the aggregate at the closing of the IPO (which includes amounts related to the partial exercise of the over-allotment option). In addition, the underwriters are entitled to a deferred underwriting commissions of $0.35 per unit, or $4,375,000 in the aggregate from the closing of the IPO (which includes amounts related to the partial exercise of the over-allotment option).
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be 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 such, our financial statements may not be comparable to companies that comply with 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 control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (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 executive compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of AmericaEstimates
Warrant Liabilities
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 valuestock price on the date of issuance,grant. The fair values of equity awards are recognized as compensation expense over the requisite service period or over the period in which the related services are received (generally the vesting period) using the straight-line method. We account for forfeitures as they occur.
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Ordinary Shares Subject to Possible Redemption
The Company accounts for its Ordinary Shares subject to possible redemptionincome taxes using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity”. Ordinary shares subject to mandatory redemption, if any, are classified as a liability instrument and is measured at fair value. Conditionally redeemable Ordinary Shares (including Ordinary Shares that features redemption rights that are either within the controlfinancial statements or tax returns. The measurement of the holderdeferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting basis and the tax basis of assets and liabilities result in a deferred tax asset, the Company evaluates the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that either some portion or subjectthe entire deferred tax asset will not be realized. The Company records a valuation allowance to redemption uponreduce the occurrencedeferred tax assets to the amount of uncertain eventsfuture tax benefit that is more likely than not solely within the Company’s control) are classified as temporary equity. At all other times, Ordinary Shares are classified as shareholders’ equity. The Company’s Public Shares features certain redemption rights that are considered to be outsiderealized. We regularly review the deferred tax assets for recoverability based on historical taxable income or loss, projected future taxable income or loss, the expected timing of the Company’s controlreversals of existing temporary differences and subjecttax planning strategies. Our judgment regarding future profitability may change due to occurrence ofmany factors, including future market conditions and the ability to successfully execute the business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, our income tax provision would increase or decrease in the period in which the assessment is changed.
Net Loss per Ordinary Share
Net loss per share is computed by dividing net loss by the weighted average number of shares of ordinary share outstanding during the period, excluding shares of ordinary share subject to forfeiture by the Sponsor. At December 31, 2021, thebeing recognized upon settlement. The Company did not haverecognize any dilutive securities and/or other contracts that could, potentially, be exercised or converted into shares of ordinary sharetax benefits from uncertain tax positions during the years ended December 31, 2023 and then share2022.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-06, Debt -Debtextended transition period. Accordingly, our consolidated financial statements may not be comparable to companies that comply 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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 12, 2021, with no impact upon adoption. The Company’s management does not believe that any other recently issued, but not yet effective,new or revised accounting pronouncements if currently adopted, would have a material effect on the Company’s financial statement.
Management does not believe that any other recently issued, but not yetas of public company effective accounting standards, if currently adopted, would have a material effect on our financial statements
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Through December 31, 2021, our efforts have been limited to organizational activities, activities relating to our initial public offering and since the initial public, the search for a target business with which to consummate an initial business combination. We have engaged in limited operations and have not generated any revenues. We have not engaged in any hedging activities since our inception on January 12, 2021. We do not expect to engage in any hedging activities with respectdates.
The net proceeds of the initial public offering and the sale of the private placement warrants heldConsolidated Financial Statements included in the trust account have been invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Part II, Item 8. 8,
Reference is made to pages F-1 through F-18 comprising a portionData
Item 9. Changes in and Disagreements with Accountants10-K for information on Accounting and Financial Disclosure.
None.
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Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of December 31, 2021, pursuant to Rule 13a-15(b) under the Exchange Act.
Based upon that evaluation, our Certifying Officers concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective due toAs a material weakness in internal controls over financialsmaller reporting related to the lack of ability to account for complex financial instruments. Management identified errors in its historical financial statements related to the accounting for the public shares and other reclassification adjustments on the balance sheet. Because the public shares issued in the IPO can be redeemed or become redeemable subject to the occurrence of future events considered outside of the company’s control, the company, should have classified all of these redeemable shares in temporary equity and remeasured these redeemable shares to their redemption value (i.e., $10.00 per share) as of the end of the first reporting period after the date of the company’s IPO. This material weakness resulted in the restatement of our previously filed balance sheet as of July 20, 2021 included in exhibit 99.1 to our Current Report on Form 8-K filed on September 8, 2021. See Note 2 of the notes to the financial statements included in our Quarterly Report on Form 10-Q filed on November 24, 2021.
To address this material weakness, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting and to provide processes and controls over the internal communications within the company, financial advisors and independent registered public accounting firm. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. Other than this issue, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls over Financial Reporting
This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
As of the date of this Annual Report, our directors and officers are as follows:
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The experience of our directors and executive officers is as follows:
Paul Norman has served as our President since February 2021. Mr. Norman is a global consumer products leader with over 30 years of experience creating brand and shareholder value. He currently serves on the boards of directors of Hearthside Food Solutions, a contract food manufacturer, Jones Soda Company (OTC:JSDA), a beverage company, and PureK Holdings (TSX-V: PKAN), a CBD retail products company. From 2019 to 2020, he served as chairman and CEO of HeavenlyRx, a privately held CBD wellness company. Prior to HeavenlyRx, Mr. Norman spent three decades at Kellogg, the $11 billion multinational food-manufacturing company, where his tenure was defined by transformation, profitable growth and shareholder value creation through strategic portfolio management, innovation and diverse talent development and leadership. He has deep experience in building brands while successfully navigating complex regulatory environments where challenges around marketing and nutrition/ ingredient labeling restrictions are constantly evolving. As president of Kellogg’s $9 billion North American business from 2015 to 2018, Mr. Norman led initiatives such as the exit of Direct Store Delivery, which transformed US Snacks to a warehouse pull model. He was instrumental in accelerating mergers and acquisitions activity at Kellogg, including Kellogg’s acquisition of RX bar in 2017 for $600 million. In his role, Mr. Norman interacted regularly with the Kellogg board of directors, attending all board meetings and collaborating closely with several sub-committees. He also participated in analyst and investor calls for the company. Prior to serving as president of Kellogg’s North American business in 2015, Mr. Norman served as the company’s chief growth officer from 2013 to 2015, where he developed the Kellogg global category operating model. In that role he focused on long-term innovation, building sales and marketing capability, and long-term strategy for the company’s breakfast and snacks categories. Concurrent with the chief growth officer role, Mr. Norman served as interim president of the U.S. Morning Foods business, which generated approximately $3 billion in revenues. In 2008, he was promoted to president of Kellogg International, where he built a team and platform to support international growth, a key pillar of the company’s growth plan. As part of that team, Mr. Norman helped to facilitate the acquisition of Pringles® in 2012, which was key to the company’s plans for global expansion and growth. In 2012, he led the integration of Pringles® and the restructuring of Kellogg’s European business to implement the new “Wired to Win” operating model, which resulted in significantly improved European top and bottom line performance. From 2004 to 2008, Mr. Norman led U.S. Morning Foods, which included cereal, PopTarts®, the Kashi Company, and the frozen foods division, to five years of sequential profitable sales and share growth. He was named managing director of Kellogg’s U.K./ Republic of Ireland business in 2002, where he successfully led a turnaround in sales performance and helped to grow the company’s cereal market share for the first time in 11 years. In 2000, Mr. Norman became president of Kellogg Canada Inc. and from 1989 to 2000, he held progressively more senior marketing roles at U.S. Morning Foods across France, Canada, Latin America and the U.S. In addition to his time at Kellogg, from 2016 to 2018 Mr. Norman served as a member of the Grocery Manufacturers Association board of directors, where he served on the executive committee. He also served as a Trustee of the Food Marketing Institute Foundation board, from 2016 to 2018. Mr. Norman received a bachelor’s degree with honors in French from Portsmouth Polytechnic.
Jonah Raskas has served as our Co-Chief Executive Officer and a member of our board of directors since January 2021. Since 2016, Mr. Raskas has worked in the consumer industry, as brand manager at GlaxoSmithKline plc, or GSK, and has led several business lines for the company. All business lines he has led sell millions of products on an annual basis. At GSK, Mr. Raskas has focused on
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digital, e-commerce, innovation profit and loss management, and overall strategy. Most recently, he led all e-commerce and digital for the first prescription to over-the-counter in the pain category in more than 20 years. There are, on average, only one to two prescription switches annually in the consumer industry and Mr. Raskas led one of them in 2020. He is also part of the US Consumer Healthcare Emerging Leaders Program at GSK. In March 2021, Mr. Raskas was appointed as a member of the Innovation Advisory Council of Brand Innovators, a brand marketing organization that provides programming and networking opportunities. From 2008 to 2010, he was an investment banker at Rodman and Renshaw, a mid-tier investment bank. Mr. Raskas was primarily focused on initial public offerings and secondary offerings, giving him capital market and public market exposure. Mr. Raskas started his career in 2007 working in the White House in the Speechwriting Office for President George W. Bush. There, he focused on market research and reviewing speeches that were written for President Bush and Vice President Dick Cheney. Mr. Raskas also graduated summa cum laude with a MBA from the Gabelli School of Business at Fordham University with a focus on Accounting and Marketing.
Mark Grundman has served as our Co-Chief Executive Officer and a member of our board of directors since January 2021. Mr. Grundman brings direct experience within a range of businesses, such as helipads, chemical plants, packaged consumer goods, and janitorial services. In early 2020, he established his own firm, MJG Partners, LLC, which focuses on small business investing and investment advising. From 2018 to 2019, he served as president of VPG International, LLC, a newly-acquired framed art business within a portfolio of investor-owned companies. From 2006 to 2016, Mr. Grundman worked at GAMCO Investors, Inc. (NYSE: GBL), a leading institutional asset management firm. From 2013 to 2014, he took a leave of absence to attend Columbia Business School, where he received his MBA. After graduating from Columbia, he rejoined the company to focus on building out a sell-side special situations department. During his tenure at GAMCO, Mr. Grundman held various roles including trading desk analyst, focusing on special situation investing, including merger arbitrage, spinoffs, special purpose acquisition companies, liquidations, and other arbitrage opportunities, ultimately reporting directly to Mario Gabelli, Chairman and Chief Investment Officer of GAMCO. In addition to his investing focus, Mr. Grundman was responsible for presenting and reviewing the portfolio strategy and performance to the board of directors and major investors of GAMCO’s publicly traded mutual funds as well as the separately managed accounts and sub accounts of the firm. Mr. Grundman brings a unique and valuable perspective to our strategic approach, in terms of public market reception, operational excellence, and sustainability.
Stephen Katchur has served as our Chief Financial Officer since March 2021. Mr. Katchur has also served as President of Blue Ribbon CFOs, a Delaware Limited Liability Company providing outsourced CFO solutions and business consulting since 2019. Mr. Katchur has also served as Chief Financial Officer of Advanced Merger Partners, Inc., a special purpose acquisition corporation, since January 2021. Previously, Mr. Katchur was Chief Financial Officer and Chief Compliance Officer for Land & Buildings Investment Management LLC, an activist real estate-focused manager where he was responsible for all non-investment operations including, accounting, finance, investor relations, marketing, and regulatory compliance. From 2011 to 2014, Mr. Katchur was Chief Financial Officer of Wolfacre Global Management LLC and later for North Oak Capital Advisors LLC, both investment managers affiliated with Tiger Management LP. In these positions, Mr. Katchur oversaw all day-to-day non-investment functions. Mr. Katchur began his career in Hedge Fund Administration where he led teams supporting several large investment managers. Mr. Katchur holds an undergraduate degree in Finance from the University of Central Florida and an MBA from New York University, Stern School of Business with specializations in Finance and Financial Instruments & Markets.
Victor Herrero has served as the chairman of our board of directors since August 30, 2021. Mr. Herrero has extensive experience in corporate management and business operations in the consumables industry. From 2015 to 2019, Mr. Herrero served as the chief executive officer and director of Guess Inc., which is principally engaged in designing, marketing, distributing and licensing a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products around the world. Prior to joining Guess Inc., Mr. Herrero served as the head of Asia Pacific and managing director of Greater China of Industria de Diseño Textil, S.A. (Inditex Group), an international fashion retailer with brands including Zara, Massimo Dutti, Pull & Bear, Bershka and Stradivarius. In addition to Active International, Mr. Herrero is a board member of Global Fashion Group S.A., (e-commerce fashion site operator and owner of Zalora and The Iconic among others, the shares of which are listed on the Frankfurt stock exchange), G-III Apparel Group, Ltd (U.S. manufacturer and distributor operating through a portfolio of brands, the shares of which are listed on NASDAQ) and Gruppo Coppel (Mexican consumer finance and retail conglomerate) and Clarks (British based international shoe manufacturer and retailer). Mr. Herrero graduated with a Master of Business Administration from Kellogg School of Management at Northwestern University. He obtained a Bachelor’s Degree in Business Administration from ESCP Europe in Paris, France in 1992 and a Bachelor of Law Degree from the University of Zaragoza in Spain in 1993. He was also awarded “Best CEO in the Sustainable Apparel Industry” in 2018 by European CEO Magazine.
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M. Carl Johnson, III has served as a member of our board of directors since August 30, 2021. Mr. Johnson is currently Chairman of the Board of Nautilus, Inc. (NYSE:NLS), a fitness solutions company, and has served in this capacity since 2010. He also served as interim chief executive officer of Nautilus from March 2019 through July 2019. From 2011 to 2015, he served as group executive vice president/brands and chief growth officer of Del Monte Foods (2011-2014) and chief growth officer and executive vice president, marketing, for Big Heart Pet Brands, the successor company to Del Monte Foods (2014- 2015), and senior advisor, J. M. Smucker Co., following its acquisition of Big Heart Pet Brands (2015). From 2001 to 2011, Mr. Johnson served as senior vice president and chief strategy officer for Campbell Soup Company. From 1992-2001, he served in various roles at Kraft Food Group, Inc.: Vice President, Strategy, Kraft USA (1992-93); EVP & General Manager, Specialty Products Division, Kraft USA (1993-94); EVP & General Manager, Meals Division, Kraft Foods, N.A.; EVP & President, New Meals Division, Kraft Foods, N.A. (1997-2001). Prior to that, Mr. Johnson held roles at Marketing Corp. of America, Polaroid Corp., and Colgate-Palmolive. Mr. Johnson brings a broad set of skills to our board of directors, which he developed through helping lead iconic American companies such as Campbell Soup Company, Kraft, Polaroid, Colgate-Palmolive, managing multi-billion dollar businesses, and serving on c-suite leadership teams.
Gary Tickle has served as a member of our board of directors since August 30, 2021. Mr. Tickle is an industry leader with 30 years of global experience successfully driving growth and transformation in consumer packaged goods, or CPG, businesses. He held leadership roles across various functions including supply chain, manufacturing, finance, sales and marketing. Mr. Tickle has had twenty years of c-suite responsibility, including turnaround assignments, innovation and global strategy development, particularly focused on nutrition, health and wellness. His broad category experience includes coffee, confectionery, snacks, dairy, infant nutrition, milk modifiers, cereals, foodservice, personal care, tea, soups and cooking aids. In January 2021, Mr. Tickle joined Sustainable Beverage Technologies (SBT) as its Global CEO. From 2019 to 2020, Mr. Tickle served as chief executive officer at Shiftlineup, a software as a service human capital management company. From 2016 to 2019 Mr. Tickle was the chief executive officer of Hain Celestial North America, a NASDAQ-listed natural and organic food company. Prior to that, he had an extensive international career with Nestle spanning over 25 years, starting in 1987. Mr. Tickle was the global strategic business unit head of infant nutrition where led the successful global acquisition and integration of Wyeth Nutrition, before coming to the United States to serve as president and chief executive officer of Nestle Nutrition North America. Mr. Tickle was also regional business head of South Asia, based in New Delhi, India, and chief executive officer of Nestle New Zealand for five years. He has held a number of industry leadership roles, including chairman of the infant Nutrition Council of America and vice chairman of the Food and Grocery Council in New Zealand. He also served as a Board Member of Buckley Country Day School in New York and today is an external advisor on the AT Kearney Consumer Industries and Retail Panel. Mr. Tickle also serves as a mentor on the Denver Small Business Development Council. Mr. Tickle holds an MBA with Distinction from Deakin University in Australia, a Bachelor of Business in Operations Management/Human Resource Management and Post Graduate Degree in Finance.
Deb Benovitz has served as a member of our board of directors since August 30, 2021. Ms. Benovitz has more than 30 years of consumer experience in leading consumer-focused companies. Her particular area of expertise is in brand transformation. She has played a key role in the transformation of major brands such as LEGO, Dove (via the Campaign for Real Beauty) and Pepsi. Ms. Benovitz currently serves as senior vice president, global marketing/competitive intelligence and human truths for WW (formerly Weight Watchers), a position she has held since September 2014. She sits on the executive committee at WW, reporting to the chief executive officer. In her role, she delivers strategic consumer insights to drive business growth, manages the global consumer insights department, and spearheads WW’s goal of democratizing wellness and making it accessible to all. In addition, Ms. Benovitz is responsible for ensuring that all innovation, brand, science and tech design work, begins with a consumer need, and stays true to the consumer throughout the process. She led WW’s wellness agenda and was part of a small team that crafted the company’s wellness vision and mission. From 2009 to 2014, she was vice president of global consumer insights at PepsiCo, where she led their cutting-edge, future-focused insights department serving 30 markets around the world. Ms. Benovitz has extensive experience in brand, consumer, competitive intelligence, shopper and tech user experience research among adults and children, including innovation, trend tracking, new product and concept research, advertising assessment, segmentation research, brand equity and tracking research, usage and attitude work, needs identification, consumer journey mapping, creative insight generation, and analytics. Ms. Benovitz holds a B.A. from Barnard College, Columbia University, and an MBA from the University of Wisconsin.
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Jason Reiser has served as a member of our board of directors since August 30, 2021. Mr. Reiser has over 35 years of retail and healthcare experience, spanning operations, government relations, compliance, merchandizing, global sourcing, and digital tools across multiple retail channels including mass (Wal-Mart), value (Family Dollar and Dollar General), and specialty (Vitamin Shoppe). From 2017 to 2020, he served as the executive vice president, chief merchandising officer for Dollar General with responsibility for merchandising, marketing, digital tools, sourcing and in-store experience. From 2016 to 2017, Mr. Reiser served as the chief operating officer of the Vitamin Shoppe with responsibilities for merchandising, supply chain, operations, marketing, digital and real estate. Prior to that he served as chief merchandising officer for Family Dollar from 2013 to 2016, with responsibility for merchandising, marketing, digital, sourcing and merchandising operations. Additionally, he also served as a board member for privately-held Slim Fast from 2014 to 2016. Mr. Reiser began his retail career working as a teenager in his family owned pharmacy, which led him to become a Registered Pharmacist, graduating from Northeastern University in 1993 with a B.S. in Pharmacy.
Deborah Weinswig has served as a member of our board of directors since August 30, 2021. Since February 2018, Ms. Weinswig has served as the chief executive officer and founder of Coresight Research, or Coresight, an international research and advisory firm that focuses on the intersection of retail and technology. Coresight’s areas of expertise include global cross-border ecommerce, startup innovation, emerging markets, digital transformation, and all things consumer. In addition, since October 2018, she has served on the board of directors for Guess?, Inc. (NYSE:GES), Kiabi, and Xcel Brands, Inc. (NASDAQ:XELB). From 2014 to early 2018, Ms. Weinswig served as the founding Managing Director of Fung Global Retail and Technology, the research arm and Think Tank for The Fung Group, a leading trading and supply chain management company based in Hong Kong. In this role, she helped identify early-stage companies to partner with The Fung Group, played a key role in opening The Explorium Innovation Lab, an innovation hub focused on the global supply chain, and helped build an entire research platform from production to publication. Ms. Weinswig’s deep understanding of global retail and emerging technology trends was developed through her extensive banking career, which included 12 years as head of the global staples and consumer discretionary team at Citi Research, as well as senior research positions at Bear Stearns and Morgan Stanley. She sits on the boards of directors for philanthropic organizations including Goodwill Industries New York/New Jersey, and in 2020 she founded RetailersUnited, a nonprofit dedicated to small- to mid-size enterprise retailers and fashion brands impacted by the coronavirus pandemic. Ms. Weinswig is a certified public accountant and holds an MBA from the University of Chicago Booth School of Business.
Number and Terms of Office of Officers and Directors
CHW’s board of directors consists of eight members and is divided into three classes, with only one class of directors being appointed in each year, and with each class (except for those directors appointed prior to CHW’s first annual general meeting) serving a three-year term. In accordance with the Nasdaq corporate governance requirements, we are not required to hold an annual general meeting until one year after our first fiscal year end following our listing on Nasdaq.
Prior toprovide the completion of an initial business combination, any vacancy on the board of directors may be filledinformation required by a nominee chosen by holders of a majority of our founder shares. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors for any reason.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate. Our amended and restated memorandum and articles of association provide that our officers may consist of one or more chairman of the board, chief executive officer, president, chief financial officer, vice presidents, secretary, treasurer and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
Pursuant to Nasdaq rules, our board of directors has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, the rules of Nasdaq and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of Nasdaq require that the compensation committee of a listed company be comprised solely of independent directors.
21
Audit Committee
Messrs. Johnson and Reiser and Ms. Weinswig serve as members of our audit committee. Mr. Johnson serves as the chairman of the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent, subject to certain phase-in provisions. Each such person meets the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that Mr. Johnson qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We adopted an audit committee charter, which details the purpose and principal functions of the audit committee, including:
22
Compensation Committee
Ms. Benovitz and Mr. Tickle serve as members of our compensation committee. Mr. Tickle serves as the chairman of the compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent, subject to certain phase-in provisions. Each such person meets the independent director standard under Nasdaq listing standards applicable to members of the compensation committee.
We adopted a compensation committee charter, which details the purpose and principal functions of the compensation committee, including:
Notwithstanding the foregoing, as indicated above, other than reimbursement of expenses and as set forth below, no compensation of any kind, including finder’s, consulting or other similar fees, will be paid to any of our existing shareholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to complete the consummation of a business combination although we may consider cash or other compensation to officers or advisors we may hire subsequent to this offering to be paid either prior to or in connection with our initial business combination.
Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
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Director Nominations
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees are Ms. Benovitz, Messrs. Reiser and Tickle, and Ms. Weinswig. In accordance with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.
Code of Ethics
We have adopted a code of ethics and business conduct, which we refer to as the Code of Ethics, applicable to our directors, officers and employees. We have filed a copy of our form of Code of Ethics, audit committee charter and compensation committee charter as exhibits to our registration statement on Form S-1 (File Nos. 333-254422 and 333-259182). You may review these documents by accessing our public filings at the SEC’s web site at sec.report. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. See “Additional Information.”
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our ordinary shares and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all reports applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act.
Item 11. Executive Compensation
Compensation Discussion and Analysis
None of our officers or directors have received or, prior to our initial business combination, will receive any cash compensation for services rendered to us. We pay our sponsor up to $10,000 per month for office space, administrative and support services. Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or any of their affiliates.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation from the combined company. All compensation will be fully disclosed to shareholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our shareholders in connection with a proposed business combination. It is unlikely the amount of such compensation will be known at the time, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our officers after the completion of our initial business combination will be determined by a compensation committee constituted solely by independent directors.
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We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment. The existence or terms of any such employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we do not believe that the ability of our management to remain with us after the completion of our initial business combination should be a determining factor in our decision to proceed with any potential business combination.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of March 9, 2022 based on information obtained from the persons named below, with respect to the beneficial ownership of ordinary shares, by:
In the table below, percentage ownership is based on 15,687,500 shares (including 12,500,000 public shares, 3,125,000 founder shares and 62,500 representative shares) issued and outstanding as of March 9, 2022. The table below does not include the ordinary shares underlying the private placement warrants held or to be held by our officers or sponsor because these securities are not exercisable within 60 days of this Annual Report.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them.
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| Ordinary Shares(2) | ||
| | Number of | | |
| | Shares | | Approximate |
| | Beneficially | | Percentage |
Name and Address of Beneficial Owner (1) |
| Owned |
| of Outstanding Shares |
Directors and Executive Officers |
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Deb Benovitz |
| — |
| — |
Mark Grundman (3) |
| 2,405,000 |
| 15.3 |
Victor Herrero |
| — |
| — |
M. Carl Johnson, III |
| — |
| — |
Stephen Katchur |
| — |
| — |
Paul Norman |
| — |
| — |
Jonah Raskas(3) |
| 2,405,000 |
| 15.3 |
Jason Reiser |
| — |
| — |
Gary Tickle | | — | | — |
Deborah Weinswig | | — | | — |
All Directors and Executive Officers as a Group (Eight Individuals) |
| 2,405,000 |
| 15.3 |
Five Percent Holders |
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|
CHW Acquisition Sponsor LLC (3) |
| 2,405,000 |
| 15.3 |
ATW SPAC Management LLC(4) |
| 1,050,000 |
| 6.7 |
MM Asset Management Inc. (5) |
| 1,050,000 |
| 6.7 |
Tenor Opportunity Master Fund, Ltd. (6) |
| 1,050,000 |
| 6.7 |
Boothbay Fund Management, LLC (7) |
| 1,050,000 |
| 6.7 |
Polar Asset Management Partners Inc. (8) |
| 1,050,000 |
| 6.7 |
Periscope Capital Inc.(9) | | 794,900 | | 5.1 |
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Securities Authorized for Issuance under Equity Compensation Table
None.
Changes in Control
None.
Item 13. Certain Relationships and Related Transactions, and Director Independence
On January 18, 2021, the Sponsor paid $25,000, or approximately $0.009 per share, in consideration 2,875,000 ordinary shares, par value $0.0001. In connection with the upsized deal terms, on August 30, 2021, CHW issued an additional 287,500 ordinary shares to the Sponsor, resulting in the Sponsor owning 3,162,500 founder shares. Up to 412,500 founder shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters exercised their over-allotment option in connection with CHW’s initial public offering. As a result of the underwriters’ election to partially exercise their over-allotment option on September 1, 2021, only 37,500 founder shares were forfeited. The founder shares may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
The Sponsor purchased, pursuant to a written agreement, an aggregate of 4,238,636 private placement warrants for a purchase price of $1.00 per whole warrant in a private placement that occurred concurrently with the closing of the initial public offering. Each private placement warrant entitles the holder to purchase one ordinary share at $11.50 per share, subject to adjustment. The private placement warrants (including the ordinary shares issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of an initial business combination.
CHW currently maintains its executive offices at 2 Manhattanville Road, Suite 403, Purchase, New York 10577. The cost for CHW’s use of this space is included in the $10,000 per month fee CHW pays to an affiliate of the Sponsor for office space and secretarial and administrative services. Upon completion of an initial business combination or CHW’s liquidation, CHW will cease paying these monthly fees.
No compensation of any kind, including finder’s and consulting fees, will be paid to the Sponsor, officers and directors, or their respective affiliates, for services rendered prior to or in connection with the completion of an initial business combination. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on CHW’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. CHW’s audit committee will review on a quarterly basis all payments that were made by CHW to the Sponsor, officers, directors or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on CHW’s behalf.
On January 18, 2021, CHW issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which CHW could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2021 and (ii) the completion of the initial public offering. The Promissory Note will be repaid from the funds deposited into the operating account.
In addition, in order to finance transaction costs in connection with an intended initial business combination, the Sponsor or an affiliate of the Sponsor or certain of CHW’s officers and directors may, but are not obligated to, loan CHW funds as may be required (the “Working Capital Loans”). If CHW completes an initial business combination, it may repay such loaned amounts out of the proceeds of the Trust Account released to CHW. In the event that the initial business combination does not close, CHW may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but No proceeds from the Trust Account would be used for such repayment. Except for the foregoing, the terms of the Working Capital Loans, if any, have not been determined and no written agreements exist with respect to 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 the Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the private placement warrants. As of December 31, 2021, there were no amounts outstanding under the Working Capital Loans. CHW does not expect to seek loans from parties other than the Sponsor, its affiliates or its management team as it does 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 the Trust Account.
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In connection with the initial public offering, CHW entered into a registration and shareholder rights agreement pursuant to which our initial shareholders are entitled to certain registration rights with respect to the founder shares, the private placement warrants, the warrants issuable upon conversion of working capital loans (if any) and the ordinary shares issuable upon exercise of the foregoing, as long as the initial shareholders hold any securities covered by the registration and shareholder rights agreement. CHW will bear the expenses incurred in connection with the filing of any such registration statements.
Policy for Approval of Related Party Transactions
The audit committee of CHW’s board of directors has adopted a charter providing for the review, approval and/or ratification of “related party transactions,” which are those transactions required to be disclosed pursuant to Item 404 of Regulation S-K as promulgated by the SEC, by the audit committee. At its meetings, the audit committee shall be provided with the details of each new, existing, or proposed related party transaction, including the terms of the transaction, any contractual restrictions that CHW has already committed to, the business purpose of the transaction, and the benefits of the transaction to CHW and to the relevant related party. Any member of the committee who has an interest in the related party transaction under review by the committee shall abstain from voting on the approval of the related party transaction, but may, if so requested by the chairman of the committee, participate in some or all of the committee’s discussions of the related party transaction. Upon completion of its review of the related party transaction, the committee may determine to permit or to prohibit the related party transaction.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board has determined that Ms. Benovitz, Messrs. Johnson, Reiser, and Tickle, and Ms. Weinswig are independent directors as defined in the Nasdaq listing standards and under applicable SEC rules. Our audit committee is entirely composed of independent directors meeting Nasdaq’s additional requirements applicable to members of the audit committee. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Item 14. Principal Accountant Fees and Services.
The following is a summary of fees paid or to be paid to Marcum LLP for services rendered.
Audit Fees. Audit fees consist of fees for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum LLP in connection with regulatory filings. The aggregate fees of Marcum LLP for professional services rendered for the audit of our financial statements and other required filings with the SEC for the period ended December 31, 2021 totalled approximately $97,335. The amount includes interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the period ended December 31, 2021, we did not pay Marcum LLP any audit-related fees.
Tax Fees. We did not pay Marcum LLP for tax services, planning or advice for the period ended December 31, 2021.
All Other Fees. We did not pay Marcum LLP for any other services for the period ended December 31, 2021.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
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INDEX TO FINANCIAL STATEMENTS
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes beginning on F-1 on this report.
We hereby file as part of this Annual Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
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EXHIBIT INDEX
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Item 16. Form 10-K Summary
Not applicable.
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INDEX TO FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm – BDO USA, LLP (PCAOB |
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CHW Acquisition Corporation
Wag! Group Co.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2021 are not sufficient to complete its planned activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Marcum LLP
New York, NY
March 9, 2022
F-1
CHW ACQUISTION CORP
BALANCE SHEET
| | | |
|
| December 31, 2021 | |
ASSETS | | | |
CURRENT ASSETS | | | |
Cash | | $ | 687,581 |
Due from Related Party | | | 68,591 |
Prepaid expenses and Other assets | |
| 286,687 |
Total current assets | | | 1,042,859 |
| | | |
Prepaid expenses- non current | | | 191,429 |
Cash and marketable securities held in Trust Account | | | 125,002,997 |
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TOTAL ASSETS | | $ | 126,237,285 |
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LIABILITIES, REDEEMABLE ORDINARY SHARES, AND SHAREHOLDERS’ DEFICIT | |
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CURRENT LIABILITIES | | | |
Accounts payable | | $ | 583,331 |
Total current liabilities | | | 583,331 |
| | | |
Deferred underwriting fee payable | |
| 4,375,000 |
Total liabilities | |
| 4,958,331 |
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COMMITMENTS AND CONTINGENCIES (Note 6) | |
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REDEEMABLE ORDINARY SHARES | | | |
Ordinary shares subject to possible redemption, $0.0001 par value, 12,500,000 shares at redemption value of $10.00 per share. | | | 125,000,000 |
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SHAREHOLDERS’ DEFICIT | |
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Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | |
| — |
Ordinary shares; $0.0001 par value; 110,000,000 shares authorized; 3,187,500 shares issued and outstanding (excluding 12,500,000 shares subject to possible redemption) | |
| 318 |
Additional paid-in capital | |
| — |
Accumulated deficit | | | (3,721,364) |
| | | |
Total Shareholders’ Deficit | |
| (3,721,046) |
| | | |
TOTAL LIABILITIES, REDEEMABLE ORDINARY SHARES, AND SHAREHOLDERS' DEFICIT | | $ | 126,237,285 |
The
F-2
CHW ACQUISTION CORP
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 12, 2021 (INCEPTION) TO DECEMBER 31, 2021
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The accompanying notes are an integral part of these financial statements
F-3
CHW ACQUISTION CORP
STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE PERIOD JANUARY 12, 2021 (INCEPTION) TO DECEMBER 31, 2021
| | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | Total | ||
| | Ordinary Shares | | paid-in | | Accumulated | | shareholders’ | ||||||
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| Shares |
| Amount |
| capital |
| deficit |
| deficit | ||||
Balance, January 12, 2021 (inception) | | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
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Issuance of Ordinary shares to Sponsor | | 3,162,500 | | | 316 | | | 24,684 | | | — | | | 25,000 |
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Sale of private placement warrants (net of offering costs) | | — | | | — | | | 4,213,632 | | | — | | | 4,213,632 |
| | | | | | | | | | | | | | |
Proceeds from issuance of Public Warrants (net of offering Costs) | | — | | | — | | | 15,605,934 | | | — | | | 15,605,934 |
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Issuance of representative shares | | 62,500 | | | 6 | | | 460,119 | | | — | | | 460,125 |
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Accretion to Non-Redeemable Ordinary shares to redemption value |
| — | | | — | |
| (20,304,373) | |
| (2,891,801) | |
| (23,196,174) |
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Forfeiture of founder shares |
| (37,500) | | | (4) | |
| 4 | |
| — | |
| — |
| | | | | | | | | | | | | | |
Net loss | | — | | | — | | | — | | | (829,563) | | | (829,563) |
| | | | | | | | | | | | | | |
Balance, December 31, 2021 | | 3,187,500 | | $ | 318 | | $ | (0) | | $ | (3,721,364) | | $ | (3,721,046) |
The accompanying notes are an integral part of these financial statements
F-4
CHW ACQUISTION CORP
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 12, 2021 (INCEPTION) TO DECEMBER 31, 2021
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net Loss | | $ | (829,563) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
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Interest income on investments held in Trust Account | | | (2,997) |
Changes in operating assets and liabilities: | | | |
Prepaid expenses and other assets | | | (478,116) |
Due from related party | | | (68,591) |
Accounts payable | | | 583,330 |
Net cash flows used in operating activities | |
| (795,937) |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Cash deposited to Trust Account | | | (125,000,000) |
Net cash flows paid in investing activities | | | (125,000,000) |
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CASH FLOWS FROM FINANCING ACTIVITIES | |
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Proceeds from Initial public offering, net of underwriting fee | |
| 122,812,500 |
Proceeds from private placement warrants | | | 4,238,636 |
Proceeds from issuance of ordinary shares to Sponsor | | | 25,000 |
Payment of offering costs | | | (592,618) |
Net cash flows provided by financing activities | |
| 126,483,518 |
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NET CHANGE IN CASH | |
| 687,581 |
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CASH, BEGINNING OF PERIOD | |
| 0 |
| | �� | |
CASH, END OF PERIOD | | $ | 687,581 |
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Supplemental disclosure of noncash activities: | | | |
Initial value of ordinary shares subject to possible redemption | | $ | 125,000,000 |
Deferred underwriting commissions payable charged to additional paid in capital | | $ | 4,375,000 |
The accompanying notes are an integral part of these financial statements
F-5
CHW ACQUISTION CORPNOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021
Note 1 — Description of Organization and Business Operations and Liquidity
CHW Acquisition CorporationWag! Group Co. (the “Company”, “CHW”) was incorporated in the Cayman Islands on January 12, 2021. The Company was formed for the purpose of effecting a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with 1 or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2021,2022, the related consolidated statement of operations, statement of redeemable preferred stock and stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company had not commenced any operations. All activity from January 12, 2021 (inception) throughat December 31, 2021 relates to2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Simultaneously withconsolidated financial statements. Our audit also included evaluating the closingaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the IPO, the Company consummated the sale of 4,000,000 warrants (“Private Placement Warrants”) atconsolidated financial statements. We believe that our audit provides a price of $1.00 per Private Placement Warrant in a private placement toreasonable basis for our opinion.
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands, except par value amounts) | ||||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 18,323 | $ | 38,966 | ||||||||||
| Accounts receivable, net | 10,023 | 5,872 | ||||||||||||
| Prepaid expenses and other current assets | 3,428 | 2,585 | ||||||||||||
| Total current assets | 31,774 | 47,423 | ||||||||||||
| Property and equipment, net | 347 | 88 | ||||||||||||
| Operating lease right-of-use assets | 1,045 | 695 | ||||||||||||
| Intangible assets, net | 8,828 | 2,590 | ||||||||||||
| Goodwill | 4,646 | 1,451 | ||||||||||||
| Other assets | 57 | 64 | ||||||||||||
| Total assets | $ | 46,697 | $ | 52,311 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 9,919 | $ | 7,174 | ||||||||||
| Accrued expenses and other current liabilities | 4,015 | 4,765 | ||||||||||||
| Deferred revenue | 1,781 | 2,232 | ||||||||||||
| Deferred purchase consideration – current portion | 547 | 750 | ||||||||||||
| Operating lease liabilities – current portion | 386 | 306 | ||||||||||||
| Notes payable – current portion | 1,751 | 1,264 | ||||||||||||
| Total current liabilities | 18,399 | 16,491 | ||||||||||||
| Operating lease liabilities – non-current portion | 816 | 435 | ||||||||||||
| Notes payable – non-current portion, net of debt discount and warrant allocation of $4,563 and $7,008 as of December 31, 2023 and December 31, 2022, respectively | 25,664 | 24,970 | ||||||||||||
| Deferred purchase consideration – non-current portion | — | 493 | ||||||||||||
| Other non-current liabilities | 172 | — | ||||||||||||
| Total liabilities | 45,051 | 42,389 | ||||||||||||
| Commitments and contingencies (Note 9) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
| Common stock, $0.0001 par value; 110,000 shares authorized as of both December 31, 2023 and December 31, 2022; 39,597 and 36,849 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | 4 | 4 | ||||||||||||
| Additional paid-in capital | 163,376 | 158,335 | ||||||||||||
| Accumulated deficit | (161,734) | (148,417) | ||||||||||||
| Total stockholders’ equity | 1,646 | 9,922 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 46,697 | $ | 52,311 | ||||||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenues | $ | 83,916 | $ | 54,865 | ||||||||||
| Costs and expenses: | ||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 5,477 | 4,024 | ||||||||||||
| Platform operations and support | 12,475 | 13,825 | ||||||||||||
| Sales and marketing | 50,523 | 35,156 | ||||||||||||
| Royalty | 1,791 | — | ||||||||||||
| General and administrative | 19,223 | 32,415 | ||||||||||||
| Depreciation and amortization | 1,673 | 571 | ||||||||||||
| Total costs and expenses | 91,162 | 85,991 | ||||||||||||
| Interest expense | 7,417 | 2,886 | ||||||||||||
| Interest income | (907) | (416) | ||||||||||||
| Other expense, net | 21 | 4,958 | ||||||||||||
| Loss before income taxes and equity in net earnings of equity method investment | (13,777) | (38,554) | ||||||||||||
| Income taxes | 93 | 13 | ||||||||||||
| Equity in net earnings of equity method investment | 553 | — | ||||||||||||
| Net loss | $ | (13,317) | $ | (38,567) | ||||||||||
| Loss per share, basic and diluted | $ | (0.35) | $ | (2.07) | ||||||||||
| Weighted-average common shares outstanding used in computing loss per share, basic and diluted | 38,402 | 18,641 | ||||||||||||
| Redeemable Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | — | $ | — | 36,849 | $ | 4 | $ | 158,335 | $ | (148,417) | $ | 9,922 | |||||||||||||||||||||||||||||||||||
| Issuance of common stock from exercise of stock options and restricted stock units | 2,699 | — | 104 | 104 | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 4,712 | 4,712 | |||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for acquisition | 49 | — | 225 | 225 | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | (13,317) | (13,317) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | — | $ | — | 39,597 | $ | 4 | $ | 163,376 | $ | (161,734) | $ | 1,646 | |||||||||||||||||||||||||||||||||||
| Redeemable Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | 24,545 | $ | 110,265 | 6,297 | $ | 1 | $ | 3,736 | $ | (109,850) | $ | (106,113) | |||||||||||||||||||||||||||||||||||
| Reverse recapitalization (Note 3) | (686) | — | (176) | — | — | ||||||||||||||||||||||||||||||||||||||||||
| As adjusted, beginning of period | 23,859 | 110,265 | 6,121 | 1 | 3,736 | (109,850) | (106,113) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series P preferred stock, net of issuance costs | 1,100 | 10,925 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from exercise of stock options and restricted stock units | 171 | — | 17 | 17 | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 24,492 | 24,492 | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | (24,959) | (121,190) | 24,959 | 2 | 121,188 | 121,190 | |||||||||||||||||||||||||||||||||||||||||
| Business Combination with CHW, net of transaction costs and other related shares | 6,646 | 1 | 10,546 | 10,547 | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of Community Shares | 300 | — | 1,971 | 1,971 | |||||||||||||||||||||||||||||||||||||||||||
| Settlement of Forward Share Purchase Agreements | (1,438) | (3,898) | (3,898) | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for acquisition | 90 | 283 | 283 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (38,567) | (38,567) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | — | $ | — | 36,849 | $ | 4 | $ | 158,335 | $ | (148,417) | $ | 9,922 | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Cash flow from operating activities: | ||||||||||||||
| Net loss | $ | (13,317) | $ | (38,567) | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Stock-based compensation | 4,712 | 24,492 | ||||||||||||
| Non-cash interest expense | 2,506 | 1,115 | ||||||||||||
| Depreciation and amortization | 1,673 | 571 | ||||||||||||
| Reduction in carrying amount of operating lease right-of-use assets | 333 | 366 | ||||||||||||
| Change in fair value of derivative liability | — | 4,958 | ||||||||||||
| Issuance of Community Shares | — | 1,971 | ||||||||||||
| Equity in net earnings of equity method investments | (553) | — | ||||||||||||
| Other | 12 | — | ||||||||||||
| Changes in operating assets and liabilities, net of effect of acquired business: | ||||||||||||||
| Accounts receivable | (4,083) | (3,234) | ||||||||||||
| Prepaid expenses and other current assets | (395) | 534 | ||||||||||||
| Operating lease liabilities | (208) | (334) | ||||||||||||
| Other assets | 7 | — | ||||||||||||
| Accounts payable | 3,995 | 4,853 | ||||||||||||
| Accrued expenses and other current liabilities | (841) | 128 | ||||||||||||
| Deferred revenue | (478) | 344 | ||||||||||||
| Other non-current liabilities | 172 | — | ||||||||||||
| Net cash used in operating activities | (6,465) | (2,803) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Proceeds from sale and maturity of short-term investments | — | 2,550 | ||||||||||||
| Cash paid for acquisitions, net of cash acquired | (10,430) | 54 | ||||||||||||
| Cash paid for equity method investment | (1,470) | — | ||||||||||||
| Purchase of property and equipment | (361) | (51) | ||||||||||||
| Other | — | (718) | ||||||||||||
| Net cash provided by (used in) investing activities | (12,261) | 1,835 | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from exercises of stock options | 104 | 17 | ||||||||||||
| Proceeds from debt, net of discount | — | 24,123 | ||||||||||||
| Repayment of debt | (1,264) | (565) | ||||||||||||
| Proceeds from issuance of Series P preferred stock, net of issuance costs | — | 10,925 | ||||||||||||
| Proceeds from Business Combination with CHW, net of transaction costs | — | 2,589 | ||||||||||||
| Other | (757) | — | ||||||||||||
| Net cash provided by (used in) financing activities | (1,917) | 37,089 | ||||||||||||
| Net change in cash and cash equivalents | (20,643) | 36,121 | ||||||||||||
| Cash and cash equivalents, beginning of period | 38,966 | 2,845 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 18,323 | $ | 38,966 | ||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||
| Interest paid | $ | 4,982 | $ | 2,470 | ||||||||||
| Income taxes paid | $ | 40 | $ | — | ||||||||||
| Noncash investing and financing activities: | ||||||||||||||
| Conversion of preferred stock to common stock | $ | — | $ | 121,188 | ||||||||||
| Forward Share Purchase Agreements | $ | — | $ | 4,958 | ||||||||||
the United States.
Offering costs for the IPO and underwriters’ partial exercise of the over-allotment option amounted to $13,130,743, consisting of $2,187,500 of underwriting fees, $4,375,000 of deferred underwriting fees payable (which are held in the Trust Account (defined below)CHW Merger Sub, Inc. (“Merger Sub”), $5,975,625 for the fair value of shares issued to the anchor investors and representative shares (see Note 3 and Note 6) and $592,618 of other costs. As described in Note 6, the $4,375,000 of deferred underwriting fee payable is contingent upon the consummation of a Business Combination by December 1, 2022, subject pursuant to the terms of the underwriting agreement.
FollowingBusiness Combination Agreement and Plan of Merger (the “CHW Business Combination Agreement”) dated February 2, 2022, completed the closingbusiness combination of Legacy Wag! and CHW which was effected by the merger of Merger Sub with and into Legacy Wag!, with Legacy Wag! surviving the Merger as a wholly-owned subsidiary of CHW (the “Merger,” and, together with the other transactions contemplated by the CHW Business Combination Agreement, the “CHW Business Combination”). Upon completion of the IPOMerger on September 1, 2021, an amount of $125,000,000 ($10.00 per Unit) fromAugust 9, 2022, following the net proceedsapproval at the extraordinary general meeting of the salestockholders of the Units in the IPO and the Private Placement Warrants was placed in a trust account (“Trust Account”) and will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amendedCHW held on July 28, 2022 (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, 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.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete 1 or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target
F-6
or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights with respect to the Company’s warrants.
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in Accounting Standards Codification (“ASC”) 480-10-S99, redemption provisions not solely within the control of a company require ordinary shares subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the Public Shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Public Shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001 either immediately prior to or upon consummation of the Business Combination, the Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place.
Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination. If the Company seeks shareholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required by law or share exchange rule. If a shareholder vote is not required by applicable law or share exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required by applicable law or share exchange listing requirements, or the Company decides to obtain shareholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Subsequent to the consummation of the IPO, the Company will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the initial shareholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
F-7
Notwithstanding the foregoing, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Ordinary shares sold in the IPO, without the prior consent of the Company.
The Company’s Sponsor, officers and directors (the “Initial Shareholders”) have agreed not to propose an amendment to the Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their shares of Ordinary shares in conjunction with any such amendment.
If the Company is unable to complete a Business Combination by December 1, 2022, 15 months from the closing of the IPO (the “Combination Period”“Special Meeting”), the Company will (i) ceasechanged its name to Wag! Group Co. (“Post-Combination Company”) and effectively assumed all operations exceptof CHW’s material operations. Refer to Note 3, Business Combination with CHW, for more information regarding the purposeMerger.
The Initial Shareholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a CHW Business Combination. See Note 3,
Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the world. As of the date theconsolidated financial statements were issued, there was considerable uncertainty around the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19 pandemic and the Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on closing a Business Combination, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
F-8
Liquidity and Going Concern
As of December 31, 2021, the Company had $687,581 in its operating bank accounts, $125,002,997 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its Ordinary Shares in connection therewith and working capital of $459,528. As of December 31, 2021, approximately $3,000 of the amount on deposit in the Trust Account represented interest income.
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. The Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102 (b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities atas of the date of the financial statements. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of theconsolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which management considered in formulating its estimate, could change inform the near term due to one or more future confirming events.basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses. Actual results could differ from those estimates.
F-9
CashSignificant items subject to estimates and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchasedassumptions include, but are not limited to, be cash equivalents. The Company did 0t have any cash equivalents as of December 31, 2021.
Investments Held in Trust Account
At December 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s 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 investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying statements of operations. The estimated fair values of investments heldfinancial instruments, assumptions used in Trust Account are determined using available market information.
Offering Costs associated with the Initial Public Offering
Offering costs, including additional underwriting fees associated withvaluation of common and preferred stock, valuation of intangible assets acquired, valuation of stock-based compensation and warrants, and the underwriters’ exercise of the over-allotment option, consist principally of legal, accounting, underwriting fees and other costs directly relatedvaluation allowance for deferred income taxes. Actual results may differ from these estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. At December 31, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets and liabilities were deemed to be de minimis as of December 31, 2021.
FASB ASC 740, “Income Taxes”, prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were 0 unrecognized tax benefits as of December 31, 2021. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company is not currently aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company is subject to tax examinations by major taxing authorities since inception. There is currently no taxation imposed by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
F-10
The Company has no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. Consequently, income taxes are not reflected in the Company’s financial statements.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its Ordinary Shares subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption, if any, are classified as a liability instrument and is measured at fair value. Conditionally redeemable Ordinary Shares (including Ordinary Shares 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 the Company’s control) are classified as temporary equity. At all other times, Ordinary Shares are classified as shareholders’ equity. The Company’s Public Shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2021, 12,500,000 shares of Ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of the redeemable ordinary shares are affected by charges against additional paid-in capital and accumulated deficit.
At December 31, 2021, the redeemable ordinary share subject to possible redemption reflected in the balance sheet is reconciled in the following table:
| | | |
Gross proceeds |
| $ | 125,000,000 |
Less: | |
|
|
Proceeds allocated to Public Warrants at issuance | |
| (16,548,464) |
Redeemable ordinary share issuance costs | |
| (6,647,710) |
Plus: Accretion of carrying value to redemption value | |
| 23,196,174 |
Redeemable ordinary shares subject to possible redemption | | $ | 125,000,000 |
Net Loss per Ordinary Share
The Company has 2 classes of shares, which are referred to as Redeemable Ordinary Shares (the “Ordinary Shares”) and Non-Redeemable Ordinary Shares (the “Founder Shares”). Earnings and losses are shared pro rata between the 2 classes of shares. Public and private warrants to purchase 16,738,636 Ordinary Shares at $11.50 per share were issued on September 1, 2021. At December 31, 2021, 0 warrants have been exercised. The 16,738,636 potential Ordinary shares for outstanding warrants to purchase the Company’s stock were excluded from diluted earnings per share for the period ended December 31, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income/(loss) per common share is the same as basic net income/(loss) per common share for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share for each class of ordinary share.
| | | | | | |
| | For the period January 12, | ||||
| | 2021 (inception) through | ||||
| | December 31, | ||||
| | 2021 | ||||
|
| Ordinary Shares |
| Founder Shares | ||
Basic and diluted net loss per share: | | | | | | |
Numerator: | |
| | |
| |
Allocation of net loss | | $ | (478,012) | | $ | (351,551) |
| | | | | | |
Denominator: | |
| | |
| |
Weighted average shares outstanding | | | 4,284,703 | | | 3,171,069 |
| | | | | | |
Basic and dilution net loss per share | | $ | (0.11) | | $ | (0.11) |
F-11
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
RecentRecently Adopted Accounting Pronouncements
statements.
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Property and equipment, at cost: | ||||||||||||||
| Equipment | $ | 240 | $ | 200 | ||||||||||
| Internal-use software | 762 | 460 | ||||||||||||
| Total property and equipment, at cost | 1,002 | 660 | ||||||||||||
| Less: accumulated depreciation and amortization | (655) | (572) | ||||||||||||
| Property and equipment, net | $ | 347 | $ | 88 | ||||||||||
Note 3 — Initial Public Offeringestimated fair value of the asset.
Pursuanttrademarks. The fair value of these assets is determined primarily using the income approach, which requires management to project future cash flows and apply an appropriate discount rate. Intangible assets with finite lives are amortized on a straight-line basis over the estimated useful lives of the related assets. Estimates are based upon assumptions believed to be reasonable but which are inherently uncertain. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur and could result in future impairment charges that could be material to the IPO,Company’s results of operations.
NaN qualified institutional buyers or institutional accredited investors which are not affiliated withequity method investment within the Company’s consolidated statement of operations, as the Company had less than 50% ownership and did not control the Sponsor,entity. During the Company’s directors, or any memberyear ended December 31, 2023, the Company recognized $1.8 million of Royalty expenses within its consolidated statements of operations related to fees payable to the equity method investee.
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and partially exercised 1,500,000 Units and the remaining Units went un-exercised on expiry of 45 days. Accordingly, on September 1, 2021, the Company consummated the sale of an additional 1,500,000 Units to the public, at $10.00 per Unitlimited liability company for an aggregate purchase price of $15,000,000.
Note 4 — Private Placement Warrants
Concurrentlyapproximately $2.2 million. The Company accounted for the transaction as an asset acquisition using the cost accumulation model to determine the cost to be allocated to the assets acquired, which resulted in the derecognition of royalties payable to the equity method investee of approximately $1.8 million and the recognition of intangible assets acquired of approximately $0.2 million and cash acquired of $2.5 million. As a result of the transaction, the limited liability company became a wholly-owned subsidiary of the Company and the Company began consolidating the entity as part of its consolidated financial statements.
F-12
On August 30, 2021,The Company sells gift cards that can be redeemed by Pet Parents through the underwriters notified the Company of their intention to partially exercise their over-allotment option and partially exercised 1,500,000 Units and the remaining Units went un-exercised on expiry of 45 days. On September 1, 2021, the Company consummatedplatform. Proceeds from the sale of an additional 238,636 Private Placement Warrants, at $1.00 per Private Placement Warrant for an aggregate purchase price of $238,636.
Note 5 — Related Party Transactions
Founder Shares
On January 18, 2021,gift cards are deferred and recorded as contract liabilities in Deferred revenue within the Sponsor paid $25,000Company’s consolidated balance sheets until Pet Parents use the card to place orders on our platform. When gift cards are redeemed, revenue is recognized on a net basis as the difference between the amounts collected from the purchaser less amounts remitted to PCGs. Unused gift cards are included in exchange for 2,875,000 ordinary shares (the “Founder Shares”). On August 30, 2021,Deferred revenue within the Company’s consolidated balance sheets.
On August 30, 2021,form of discounts that reduce the underwriters notifiedprice Pet Parents pay PCGs for services. These promotions result in a lower fee earned by the Company from the PCG. Accordingly, the Company records the cost of their intention to partially exercise their over-allotment option and partially exercised 1,500,000 Units andthese promotions as a reduction of revenues. Discounts on services offered through our subscription program are also recorded as a reduction of revenues.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) six months after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the shares of Ordinary shares equals or exceeds $12.50two-class method when computing loss per share (as adjusted)when shares issued meet the definition of participating securities. The two-class method determines loss per share for any 20 trading days within any 30-trading dayeach class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to stockholders for the period commencing at least 150 days after a Business Combination, or (y)to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the date onperiod had been distributed.
In conjunction with each anchor investor purchasing 100% of the Units allocated to it, in connection with the closing of the IPO the Sponsor sold 60,000 Founder Shares (or 30,000 Founder Shares, as applicable) to each anchor investor (750,000 founder shares in the aggregate) at their original purchase price totalling to $6,750; provided, however, that in the event that an anchor investor sells any of Units or Ordinary Shares purchased in the IPO within 30 days following the closing of the IPO, the number of Founder Shares transferred to such anchor investor would be reduced to 50,000 Founder Shares (or 25,000 Founder Shares, as applicable). The Company estimated the excess aggregate fair value over the amount paid by the anchor investors of the Founder Shares attributablepurchase consideration to the Anchor Investors to be $5,515,500, or $7.362 per share.tangible and intangible assets acquired and liabilities assumed at estimated fair values on the acquisition date. The excess of the fair value of the Founder Sharespurchase consideration over the purchase pricevalues of $6,750 was determinedthese identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes to be reasonable, but which are inherently uncertain and, as a contributionresult, actual results may differ from estimates. After the purchase accounting is finalized, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.
Promissory Note — Related Party
On January 18, 2021, the Company issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000.consolidated financial statements on a recurring basis (at least annually). As of December 31, 2021, there was 0 amount outstanding under2023 and 2022, the Promissory Note.
Related Party Loans
In ordercarrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximated their fair values due to finance transaction costs in connection with a Business Combination, the Sponsor, or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company 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. Except for the foregoing,their relatively short maturities. Management believes the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such 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
F-13
warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of December 31, 2021, the Company had 0 outstanding borrowings under the Working Capital Loans.
Due from related party
As of December 31, 2021, the Sponsor held $68,591 from the closing of the IPO that will be deposited as soon as practical from the Company’s operating account.
Administrative Services Fee
The Company entered into an agreement, commencing on the effective date of the IPO through the earlier of the consummation of a Business Combination and the Company’s liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services. As of December 31, 2021, $40,000 has been paid under this arrangement.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Ordinary shares) pursuant to a registration rights agreement dated September 1, 2021. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the final prospectus relating to the IPO to purchase up to 1,650,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions.
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and partially exercised 1,500,000 Units and the remaining Units went un-exercised on expiry of 45 days. Accordingly, on September 1, 2021, the Company consummated the sale of an additional 1,500,000 Units to the public, at $10.00 per Unitits long-term variable-rate debt reflect current market conditions for an aggregate purchase price of $15,000,000.
The underwriters were paid a cash underwriting discount of $0.175 per unit, or $2,187,500 ininstrument with similar terms and maturity; as such, the aggregate at the closing of the IPO (which includes amounts related to the partial exercise of the over-allotment option). In addition, the underwriters are entitled to a deferred underwriting commissions of $0.35 per unit, or $4,375,000 in the aggregate from the closing of the IPO ((which includes amounts related to the partial exercise of the over-allotment option). The deferred fee will become payable to the underwriters 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.
Representative Shares
In September 2021, the Company issued to the designees of the underwriter 62,500 ordinary shares (the “Representative Shares”). The Company accounted for the Representative Shares as an offering cost of the IPO, with a corresponding credit to shareholders’ equity. The Company estimated the fair value of the Representative Shares to be $7.362 per share ($460,125 in the aggregate) based upon the price of the Founder Shares issued to the anchor investors (see Note 5). The holders of the Representative Shares have agreed not to transfer, assign, or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
Please see Note 9 for valuation methodology and assumptions of the Representative Shares.
F-14
Note 7 - Shareholders’ Deficit
Preference Shares—The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2021, there were 0 preference shares issued or outstanding.
Ordinary shares — The Company is authorized to issue 110,000,000 shares of Founder Shares with a par value of $0.0001 per share. As of December 31, 2021, there were 3,187,500 shares of Ordinary shares outstanding (excluding 12,500,000 shares subject to redemption) and after giving affect to the forfeiture of 37,500 Ordinary shares since the underwriters’ did not exercise of the over-allotment option.
Note 8 - Warrants
Public Warrants may only be exercised for a whole number of shares. NaN fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) the completion of a Business Combination and (b) 12 months from the closing of the IPO. The Public Warrants will expire five years from the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. NaN warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. NaN warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem the warrants:
F-15
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger, or consolidation. However, except as described below, the warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.50 per Public Share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.50 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price and the $16.50 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 165% of the greater of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable, or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
The Company has determined that warrants issued in connection with its IPO in September 2021 are subject to treatment as equity. In order to account for the fair value the public warrants on IPO, the Company used Black Scholes Model to allocate cost to Public warrants on IPO. The key assumptions in the option pricing model utilized are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The expected volatility as of the IPO Closing Date was derived from observable public warrant pricing on comparable 'blank check' companies that recently went public in 2020 and 2021. The risk-free interest rate is based on the interpolated U.S. Constant Maturity Treasury yield. The expected term of the warrants is assumed to be six months until the close of a Business Combination, and the contractual five-year term subsequently. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The following table provides quantitative information regarding fair value measurements at issuance on September 1, 2021.
| | | | |
|
| September 1, 2021 |
| |
Share Price | | $ | 10.00 | |
Exercise Price | | $ | 11.50 | |
Redemption Trigger Price | | $ | 16.50 | |
Term (years) | |
| 5 | |
Probability of Acquisition | |
| 80 | % |
Volatility | |
| 22 | % |
Risk Free Rate | |
| 1.31 | % |
Dividend Yield | |
| 0.00 | % |
The fair value of the Public Warrants as on September 1, 2021, was $1.32. As of December 31, the Company has 12,500,000 of Public Warrants and 4,238,636 of Private Warrants outstanding respectively.
F-16
Note 9 — Fair Value Measurements
The faircarrying value of the Company’s financial assetsdebt, excluding the disclosed amount of debt discount and warrant allocation, approximated its fair value.
At December 31, 2021, the assets held in the Trust Account were held in treasury funds. All
| Reverse Recapitalization | ||||||||
| (in thousands) | ||||||||
| Cash – CHW’s trust (net of redemptions) | $ | 28,330 | ||||||
| Cash – PIPE and Backstop Investor | 5,202 | |||||||
| Payment of transaction costs and other related expenses | (12,488) | |||||||
| Payment of deferred transaction costs | (9,318) | |||||||
| Proceeds from merger with CHW, net of issuance costs as of the Merger Date | 11,726 | |||||||
| Reversal of APIC impact recorded upon issuance of Forward Share Purchase Agreements (“FSPAs”) in August 2022 | (23,203) | |||||||
| Cash received from FSPA at Put Date | 9,837 | |||||||
| APIC impact of FSPA at Put Date, net of cash received | 4,229 | |||||||
| Proceeds from merger with CHW, net of issuance costs as of December 31, 2022 | $ | 2,589 | ||||||
| Number of Shares | ||||||||
| (in thousands) | ||||||||
| CHW public shares, prior to redemptions(1) | 12,500 | |||||||
| Less redemption of CHW shares | (9,594) | |||||||
| CHW public shares, net of redemptions | 2,906 | |||||||
| Sponsor Shares | 3,118 | |||||||
| PIPE and Backstop Shares | 500 | |||||||
| CHW Business Combination and Financing Shares | 6,524 | |||||||
| Other share activity (Analyst Shares(2), Warrant Exercises) | 122 | |||||||
| CHW Business Combination, Financing Shares and Other Related Shares | 6,646 | |||||||
| Legacy Wag! Shares(3) | 31,100 | |||||||
| Total shares of common stock immediately after CHW Business Combination | 37,746 | |||||||
equity transactions at initial issuance and at settlement when and if the triggering conditions are met. The Earnout Shares are equity-classified since they do not meet the liability classification criteria outlined in FASB ASC Topic 480,
, and are both (i) indexed to the Company’s own shares and (ii) meet the criteria for equity classification. Until the shares are issued upon a Triggering Event, the Earnout Shares are not included in shares outstanding. As of the date of the CHW Business Combination, the Earnout Share awards had a total fair value of $23.9 million determined using a Monte Carlo fair value methodology in each of the $12.50, $15.00, and $18.00 Earnout tranches multiplied by the number of Earnout Shares allocated to each individual pursuant to the calculation defined in the CHW Business Combination Agreement. The following table presentsprovides a range of assumptions used to determine fair value:
| Stock Price | Dividend Yield | Volatility | Risk-Free Interest Rate | Expected Term | ||||||||||||||||||||||||||||
| Earnout Shares | $ | 8.28 | — | % | 44.00 | % | 3.20 | % | 3 years | |||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Money market funds | $ | 11,388 | $ | — | $ | — | $ | 11,388 | ||||||||||||||||||
| Total cash equivalents | 11,388 | — | — | 11,388 | ||||||||||||||||||||||
| Total assets at fair value | $ | 11,388 | $ | — | $ | — | $ | 11,388 | ||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Money market funds | $ | 31,690 | $ | — | $ | — | $ | 31,690 | ||||||||||||||||||
| Total cash equivalents | 31,690 | — | — | 31,690 | ||||||||||||||||||||||
| Total assets at fair value | $ | 31,690 | $ | — | $ | — | $ | 31,690 | ||||||||||||||||||
| | | | | | | | | | | | |
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| Significant Other | | Significant Other | |||
| | | | | Active Markets | | Observable Inputs | | Unobservable Inputs | |||
| | Level |
| (Level 1) | | (Level 2) |
| (Level 3) | ||||
Assets: | | | | | | | | | | | | |
Investment held in Trust Account | | | 1 | | $ | 125,002,997 | | | — | | | — |
As such, there are no unrealized gains or losses related to the Company’s cash equivalents.
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Lease cost: | ||||||||||||||
| Fixed operating lease cost | $ | 399 | $ | 369 | ||||||||||
| Short-term lease cost | — | 567 | ||||||||||||
| Variable lease cost(1) | 8 | 184 | ||||||||||||
| Total lease cost | $ | 407 | $ | 1,120 | ||||||||||
| Amount | ||||||||
| (in thousands) | ||||||||
| 2024 | $ | 414 | ||||||
| 2025 | 424 | |||||||
| 2026 | 216 | |||||||
| 2027 | 175 | |||||||
| 2028 | 163 | |||||||
| Total lease payments | 1,392 | |||||||
| Less: imputed interest | (190) | |||||||
| Present value of lease liabilities | $ | 1,202 | ||||||
The following table provides quantitativelease liabilities are as follows:
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Weighted-average remaining lease term | 3.8 years | 2.3 years | ||||||||||||
| Weighted-average discount rate | 7.8 | % | 8.6 | % | ||||||||||
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F-17
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash flows for operating leases | $ | 281 | $ | 370 | ||||||||||
| Right-of-use assets obtained in exchange for new lease liabilities: | ||||||||||||||
| Operating leases | $ | 676 | $ | 514 | ||||||||||
Note 10 — Subsequent Events
The Company has evaluated subsequent events through the date these financial statements were issued and determined that there were no subsequent events that would require adjustment or disclosure except for the following.
On February 2, 2022, the Company, CHW Merger Sub Inc., a Delaware corporation and wholly owned direct subsidiary of the Company and Wag Labs, Inc., a Delaware corporation, entered into a Business Combination Agreement.
The Business Combination will be effected in two steps: (i) on the Domestication Closing Date, CHW will domesticate as a Delaware corporation; and (ii) on the Acquisition Closing Date, Merger Sub will merge with and into Wag, with Wag surviving the merger as a wholly owned subsidiary of New Wag.
Concurrently with the Domestication, CHW will adopt and file a certificate of incorporation with the Secretary of State of the State of Delaware, pursuant to which CHW will change its name to Wag! Group Co. and adopt bylaws. At least one business day, but no more than two business days, after the Domestication, and no later than three business days following the satisfaction or waiver of the conditions set forth in the Business Combination Agreement (other than those conditions that by their nature are to be satisfied at the Acquisition Closing, but subject to the satisfaction or waiver of those conditions at such time), the Acquisition Merger will be consummated by the filing of a certificate of merger with the Secretary of State of the State of Delaware.
In connection with entering into the Business Combination Agreement, on February 2, 2022, CHW entered into Subscription Agreements (the “Subscription Agreements”) with qualified institutional buyers (the “PIPE and Backstop Investors”), pursuant to which, among other things, the PIPE and Backstop Investors agreed to purchase an aggregate of 500,000 shares of common stock of CHW following the Domestication and immediately prior to the Acquisition Merger at a cash purchase price of $10.00 per share, resulting in aggregate proceeds of $5,000,000 million; provided, however, if the PIPE and Backstop Investors acquire shares of common stock of CHW in the open market between the date of the Subscription Agreements and the close of business on the third trading day prior to the special meeting of CHW’s shareholders calledGoodwill recorded in connection with the Business Combination, thenCompany’s acquisitions is primarily attributable to the required purchase amount shall be reducedassembled workforce and anticipated operational synergies. Goodwill is reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill was $4.6 million and $1.5 million as of December 31, 2023 and 2022, respectively. The increase in goodwill during the year ended December 31, 2023 was due to the acquisitions of businesses during 2023 as further discussed in Note 15, Acquisitions.
| December 31, 2023 | ||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Finite-lived intangible assets: | ||||||||||||||||||||
| Customer relationships and licenses | $ | 7,686 | $ | (1,550) | $ | 6,136 | ||||||||||||||
| Media brand | 1,250 | (52) | 1,198 | |||||||||||||||||
| Developed technology | 1,073 | (479) | 594 | |||||||||||||||||
| Trademarks | 1,052 | (201) | 851 | |||||||||||||||||
| Pharmacy board licenses | 5 | (5) | — | |||||||||||||||||
| Total finite-lived intangible assets | 11,066 | (2,287) | 8,779 | |||||||||||||||||
| Indefinite-lived intangible assets | 49 | — | 49 | |||||||||||||||||
| Total intangible assets | $ | 11,115 | $ | (2,287) | $ | 8,828 | ||||||||||||||
| December 31, 2022 | ||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Finite-lived intangible assets: | ||||||||||||||||||||
| Customer relationships and licenses | $ | 2,166 | $ | (422) | $ | 1,744 | ||||||||||||||
| Developed technology | 783 | (226) | 557 | |||||||||||||||||
| Trademarks | 291 | (56) | 235 | |||||||||||||||||
| Pharmacy board licenses | 5 | — | 5 | |||||||||||||||||
| Total finite-lived intangible assets | 3,245 | (704) | 2,541 | |||||||||||||||||
| Indefinite-lived intangible assets | 49 | — | 49 | |||||||||||||||||
| Total intangible assets | $ | 3,294 | $ | (704) | $ | 2,590 | ||||||||||||||
| Amount | ||||||||
| (in thousands) | ||||||||
| 2024 | $ | 2,190 | ||||||
| 2025 | 2,067 | |||||||
| 2026 | 1,360 | |||||||
| 2027 | 1,209 | |||||||
| 2028 | 632 | |||||||
| Thereafter | 1,321 | |||||||
| Total | $ | 8,779 | ||||||
In connection with the execution of the Business Combination Agreement, on February 2, 2022, the Sponsor, Mark GrundmanCompany repaid a total amount of $0.5 million and Jonah Raskas (collectively,$0.4 million, respectively, on amounts outstanding under the “CHW Founder Shareholders”) entered into that certain letter agreement (the “CHW Founders Stock Letter”) with CHWPPP Loan. As of December 31, 2023 and Wag!, pursuant to which, among other things, CHW, Wag!,December 31, 2022, the amount outstanding under the PPP Loan was $0.8 million and $1.2 million, respectively.
Wag! has delivered to CHW the Stockholder Support Agreement, dated February 2, 2022 (the “Stockholder Support Agreement”), pursuant to which, among other things, the Key Wag! Stockholders, whose ownership interests collectively represent the outstanding Wag! common stock and Wag! preferred stock (voting on an as-converted basis) sufficient to approve the Business Combination on behalf of Wag!, will agree to support the approval and adoption of the transactions contemplated by the Business Combination Agreement, including agreeing to execute and deliver the requisite consent of Wag!’s stockholders holding shares of Wag! common stock and Wag! preferred stock sufficient under the Delaware General Corporation Law and Wag!’s certificate of incorporation and bylaws to approve the Business Combination Agreement and the Business Combination, in the form of a written consent executed by the Key Wag! Stockholders, within 48 hours of the Registration Statement on Form S-4 filed with the SEC in connection with the Business Combination becoming effective. The Stockholder Support Agreement will terminate upon the earliest to occur of (a) the Acquisition Merger Effective Time, (b) the date of the termination of the Business Combination Agreement, and (c) the effective date
F-18
of a written agreement of CHW, Wag!, and the Wag! stockholders party thereto terminating the Stockholder Support Agreement (the “Expiration Time”). The Key Wag! Stockholders also agreed, until the Expiration Time, to certain transfer restrictions (excluding the Conversion).
In connection with entering into the Business Combination Agreement, on February 2, 2022, CHWCompany entered into a definitive commitment letter (the “Commitment Letter”)financing agreement and warrant agreement with Blue Torch Capital LPFinance, LLC (together with its affiliated funds and any other parties providing a commitment thereunder, including any additional lenders, agents, arrangers or other parties joined thereto after the date thereof, collectively, the “Debt Financing Sources”“Blue Torch”), pursuant to which, among other things, the Debt Financing SourcesBlue Torch agreed to fund a $30extend an approximately $32.2 million senior secured term loan credit facility (the “Credit Facility”“Financing Agreement”). The closing and funding of the Credit Facility will occur in connection with the closing of the transactions contemplated by the Business CombinationFinancing Agreement subject to the satisfaction or waiver of the conditions to funding set forth in the Commitment Letter. Upon closing, Wag! will be the primary borrower under the Credit Facility, New Wag! will be a parent guarantor and substantially all of Wag!’s existing and future subsidiaries will be subsidiary guarantors (subject to certain customary exceptions). The Credit Facility will beis secured by a first priority security interest in substantially all assets of Wag!the Company and its subsidiaries.
F-19
| Amount | ||||||||
| (in thousands) | ||||||||
| 2024 | $ | 1,751 | ||||||
| 2025 | 30,227 | |||||||
| Total principal payments | $ | 31,978 | ||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Services revenue | $ | 24,422 | $ | 21,823 | ||||||||||
| Wellness revenue | 52,922 | 33,042 | ||||||||||||
| Pet food & treats revenue | 6,572 | — | ||||||||||||
| Total revenues | $ | 83,916 | $ | 54,865 | ||||||||||
| Number of Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life | Aggregate Intrinsic Value(1) | |||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||
| Outstanding as of December 31, 2022 | 7,194 | $ | 0.40 | 7.19 years | $ | 19,292 | ||||||||||||||||||||
| Granted | — | $ | — | |||||||||||||||||||||||
| Exercised | (1,010) | $ | 0.10 | |||||||||||||||||||||||
| Forfeited or expired | (21) | $ | 2.75 | |||||||||||||||||||||||
| Outstanding as of December 31, 2023 | 6,163 | $ | 0.44 | 6.06 years | $ | 8,934 | ||||||||||||||||||||
| Exercisable as of December 31, 2023 | 6,021 | $ | 0.44 | 6.06 years | $ | 8,715 | ||||||||||||||||||||
| Vested and expected to vest as of December 31, 2023 | 6,163 | $ | 0.44 | 6.06 years | $ | 8,934 | ||||||||||||||||||||
| Number of Shares | Weighted-Average Grant Date Fair Value Per Share | |||||||||||||
| (in thousands) | ||||||||||||||
| Outstanding and nonvested as of December 31, 2022 | 4,195 | $ | 2.44 | |||||||||||
| Granted | 2,000 | $ | 2.34 | |||||||||||
| Vested | (1,692) | $ | 2.44 | |||||||||||
| Forfeited | (181) | $ | 2.40 | |||||||||||
| Outstanding and nonvested as of December 31, 2023 | 4,322 | $ | 2.39 | |||||||||||
| Expected to vest as of December 31, 2023 | 4,322 | $ | 2.39 | |||||||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Platform operations and support | $ | 1,025 | $ | 2,991 | ||||||||||
| Sales and marketing | 739 | 2,138 | ||||||||||||
| General and administrative | 2,948 | 19,363 | ||||||||||||
| Total stock-based compensation expense | $ | 4,712 | $ | 24,492 | ||||||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Current tax expense: | ||||||||||||||
| Federal | $ | — | $ | — | ||||||||||
| State | 93 | 34 | ||||||||||||
| Total current tax expense | 93 | 34 | ||||||||||||
| Deferred: | ||||||||||||||
| Federal | — | (20) | ||||||||||||
| State | — | (1) | ||||||||||||
| Total deferred tax expense | — | (21) | ||||||||||||
| Total tax expense | $ | 93 | $ | 13 | ||||||||||
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating loss carryforwards | $ | 58,042 | $ | 54,628 | ||||||||||
| Capitalized research and development costs | 56 | 1,249 | ||||||||||||
| Stock-based compensation | 334 | 205 | ||||||||||||
| Accrued expenses | 421 | 591 | ||||||||||||
| Charitable contributions | 445 | 416 | ||||||||||||
| Operating lease liabilities | 308 | 218 | ||||||||||||
| Other | 2,061 | 868 | ||||||||||||
| Gross deferred tax assets | 61,667 | 58,175 | ||||||||||||
| Less: valuation allowance | (60,916) | (57,271) | ||||||||||||
| Total deferred tax assets | 751 | 904 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Intangible assets | 483 | 713 | ||||||||||||
| Operating lease right-of-use assets | 268 | 191 | ||||||||||||
| Total deferred tax liabilities | 751 | 904 | ||||||||||||
| Total net deferred tax assets | $ | — | $ | — | ||||||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Tax expense at United States statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| Increase (decrease) in tax resulting from: | ||||||||||||||
| State taxes, net of federal effect | 2.8 | % | 1.4 | % | ||||||||||
| Change in valuation allowance | (21.5) | % | (9.1) | % | ||||||||||
| Stock-based compensation | (1.0) | % | (12.3) | % | ||||||||||
| Change in fair value of derivative liability | — | % | (2.7) | % | ||||||||||
| Transaction costs – success-based | — | % | 1.8 | % | ||||||||||
| Other | (2.0) | % | (0.1) | % | ||||||||||
| Total | (0.7) | % | — | % | ||||||||||
| January 5, 2023 | ||||||||
| (in thousands) | ||||||||
| Intangible assets | $ | 5,950 | ||||||
| Goodwill | 3,050 | |||||||
| Total purchase consideration | $ | 9,000 | ||||||
| January 5, 2023 | Estimated Weighted-Average Useful Life | |||||||||||||
| (in thousands) | ||||||||||||||
| Developed technology and website content | $ | 1,950 | 5 years | |||||||||||
| Strategic customer relationships and subscriber lists | 3,600 | 8 years | ||||||||||||
| Trademarks | 400 | 10 years | ||||||||||||
| Total intangible assets | $ | 5,950 | 7 years | |||||||||||
| December 15, 2023 | Estimated Weighted-Average Useful Life | |||||||||||||
| (in thousands) | ||||||||||||||
| Media brand | $ | 1,250 | 2 years | |||||||||||
| Total intangible assets | $ | 1,250 | 2 years | |||||||||||
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Earnout Shares | 15,000 | 15,000 | ||||||||||||
| Options and RSUs issued and outstanding | 10,485 | 11,389 | ||||||||||||
| Warrants issued and outstanding | 18,292 | 18,292 | ||||||||||||
| Shares related to acquisition indemnification holdback | 51 | — | ||||||||||||
| Total | 43,828 | 44,681 | ||||||||||||
| Incorporated by Reference | ||||||||||||||||||||||||||
| Exhibit Number | Description | Form | Exhibit | Filing Date | ||||||||||||||||||||||
| 2.1† | 8-K | 2.1 | 2/3/2022 | |||||||||||||||||||||||
| 3.1 | 8-K | 3.1 | 3/8/2024 | |||||||||||||||||||||||
| 3.2 | 8-K | 3.2 | 8/15/2022 | |||||||||||||||||||||||
| 4.1 | S-4 | 4.1 | 9/2/2021 | |||||||||||||||||||||||
| 4.2 | S-1 | 4.2 | 9/14/2022 | |||||||||||||||||||||||
| 4.3 | S-1 | 4.3 | 9/14/2022 | |||||||||||||||||||||||
| 4.4* | ||||||||||||||||||||||||||
| 4.5 | 8-K | 10.6 | 2/3/2022 | |||||||||||||||||||||||
| 4.6 | 8-K | 10.2 | 8/15/2022 | |||||||||||||||||||||||
| 4.7 | 8-K | 10.3, 10.4, 10.5 | 2/3/2022 | |||||||||||||||||||||||
| 10.1# | S-1 | 10.16 | 9/14/2022 | |||||||||||||||||||||||
| 10.2# | S-1 | 10.17 | 9/14/2022 | |||||||||||||||||||||||
| 10.3# | S-1 | 10.18 | 9/14/2022 | |||||||||||||||||||||||
| 10.4# | S-1 | 10.19 | 9/14/2022 | |||||||||||||||||||||||
| 10.5# | S-1 | 10.15 | 9/14/2022 | |||||||||||||||||||||||
| 10.6#* | ||||||||||||||||||||||||||
| 10.7#* | ||||||||||||||||||||||||||
| 10.8# | S-8 | 99.2 | 12/1/2022 | |||||||||||||||||||||||
| 10.9# | S-1 | 10.14 | 9/14/2022 | |||||||||||||||||||||||
| 10.10# | S-1 | 10.13 | 9/14/2022 | |||||||||||||||||||||||
| 10.11# | S-1 | 10.12 | 9/14/2022 | |||||||||||||||||||||||
| 10.12† | 8-K | 10.6 | 8/15/2022 | |||||||||||||||||||||||
| 10.13† | 8-K | 10.8 | 8/15/2022 | |||||||||||||||||||||||
| 10.14† | 8-K | 10.7 | 8/15/2022 | |||||||||||||||||||||||
| 10.15 | 8-K | 10.1 | 8/8/2022 | |||||||||||||||||||||||
| 16.1 | 8-K | 16.1 | 9/12/2023 | |||||||||||||||||||||||
| 21.1* | ||||||||||||||||||||||||||
| 23.1* | ||||||||||||||||||||||||||
| 23.2* | ||||||||||||||||||||||||||
| 24.1* | ||||||||||||||||||||||||||
| 31.1* | ||||||||||||||||||||||||||
| 31.2* | ||||||||||||||||||||||||||
| 32.1** | ||||||||||||||||||||||||||
| 97.1* | ||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||
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| /s/ GARRETT SMALLWOOD | Chief Executive Officer and Chairman | March 20, 2024 |
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| /s/ KIMBERLY A. BLACKWELL | Director | March 20, 2024 | |||||||||||||
| Kimberly A. Blackwell | |||||||||||||||
| /s/ MELINDA CHELLIAH | Director | March 20, 2024 | |||||||||||||
Melinda Chelliah | |||||||||||||||
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| /s/ JOCELYN MANGAN | Director | March 20, 2024 | |||||||||||||
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| /s/ SHEILA LIRIO MARCELO | Director | March 20, 2024 | |||||||||||||
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