| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 85-4293042 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one share of Class A one-half of one redeemable | DWACU | The Nasdaq Stock Market LLC | ||
Class A | DWAC | The Nasdaq Stock Market LLC | ||
DWACW | The Nasdaq Stock Market LLC |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
DIGITAL WORLD ACQUISITION CORP.
FORM2022
TABLE OF CONTENTS
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Item 4. | ||||||
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Item | 27 | |||||
Item | 28 | |||||
Item | 28 | |||||
Item | 28 | |||||
Item 4. | Mine Safety Disclosures | 28 | ||||
Item 5. | Other Information | 28 | ||||
Item 6. | Exhibits | 28 | ||||
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | (unaudited) | |||||||
| Current assets | ||||||||
| Cash | $ | 84,766 | $ | 989 | ||||
| Prepaid assets | 75,764 | 168,350 | ||||||
| Total Current Assets | 160,530 | 169,339 | ||||||
| Cash Held in Trust Account | 307,136,113 | 300,330,651 | ||||||
| TOTAL ASSETS | $ | 307,296,643 | $ | 300,499,990 | ||||
| LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | 29,586,907 | $ | 18,054,912 | ||||
| Note payable – Sponsor | 2,875,000 | 2,875,000 | ||||||
| Income taxes payable | 2,767,281 | 979,475 | ||||||
| Franchise tax payable | 582,500 | 400,000 | ||||||
Working capital loans | 1,275,033 | 625,700 | ||||||
| Advances - related parties | 570,835 | 525,835 | ||||||
| Total Current Liabilities | 37,657,556 | 23,460,922 | ||||||
| Deferred underwriter fee payable | 10,062,500 | 10,062,500 | ||||||
| TOTAL LIABILITIES | 47,720,056 | 33,523,422 | ||||||
| Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, $0.0001 par value, 200,000,000 shares authorized; 28,744,342 shares outstanding, at redemption value ($ 10.57 and $10.40 per share) | 303,957,139 | 298,951,176 | ||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,277,234 issued and outstanding, excluding 28,744,342 shares subject to redemption | 127 | 127 | ||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 7,187,500 issued and outstanding | 719 | 719 | ||||||
Additional paid-in capital | — | — | ||||||
| Accumulated deficit | (44,210,591 | ) | (31,975,454 | ) | ||||
| Total Stockholders’ Deficit | (44,209,745 | ) | (31,974,608 | ) | ||||
| TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | $ | 307,296,643 | $ | 300,499,990 | ||||
June 30, 2022 (unaudited) | December 31, 2021 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 2,968 | $ | 327,731 | ||||
Prepaid assets | 240,972 | 240,972 | ||||||
Total Current Assets | 243,940 | 568,703 | ||||||
Prepaid assets | 46,215 | 165,051 | ||||||
Cash Held in Trust Account | 293,682,625 | 293,257,098 | ||||||
TOTAL ASSETS | $ | 293,972,780 | $ | 293,990,852 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accrued expenses | $ | 6,139,539 | $ | 483,535 | ||||
Franchise tax payable | 300,000 | 200,000 | ||||||
Working capital loans | 451,700 | 0— | ||||||
Total Current Liabilities | 6,891,239 | 683,535 | ||||||
Deferred underwriter fee payable | 10,062,500 | 10,062,500 | ||||||
TOTAL LIABILITIES | 16,953,739 | 10,746,035 | ||||||
Commitments and Contingencies | 0 | |||||||
Class A common stock subject to possible redemption, $0.0001 par value, 200,000,000 shares authorized; 28,750,000 shares outstanding, at redemption value | 293,282,625 | 293,250,000 | ||||||
Stockholders’ Deficit | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding | 0— | 0— | ||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,277,234 issued and outstanding, excluding 28,750,000 shares subject to redemption | 127 | 127 | ||||||
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 7,187,500 issued and outstanding | 719 | 719 | ||||||
Additional paid-in capital | 0— | 0— | ||||||
Accumulated deficit | (16,264,430 | ) | (10,006,029 | ) | ||||
Total Stockholders’ Deficit | (16,263,584 | ) | (10,005,183 | ) | ||||
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | $ | 293,972,780 | $ | 293,990,852 | ||||
For the Three months ended | For the Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
| Formation and operating costs | $ | 1,369,406 | $ | 864,594 | $ | 1,591,348 | $ | 1,262,328 | ||||||||
| Regulatory settlement | 10,000,000 | — | — | — | ||||||||||||
| Legal investigations expense | 388,652 | 2,564,737 | 11,057,789 | 5,307,445 | ||||||||||||
| Franchise tax expense | 50,000 | 50,000 | 182,500 | 100,000 | ||||||||||||
| Loss from operation costs | (11,808,058 | ) | (3,479,331 | ) | (12,831,637 | ) | (6,669,773 | ) | ||||||||
| Other income and expenses: | ||||||||||||||||
| Interest earned on cash held in Trust Account | 3,618,804 | 395,996 | 6,805,462 | 425,527 | ||||||||||||
| Loss before income taxes | (8,189,254 | ) | (3,083,355 | ) | (6,026,175 | ) | (6,244,246 | ) | ||||||||
| Income tax expense | (904,513 | ) | (33,614 | ) | (1,787,806 | ) | (33,614 | ) | ||||||||
| Net loss | $ | (9,093,767 | ) | $ | (3,116,949 | ) | $ | (7,813,981 | ) | $ | (6,277,860 | ) | ||||
| Weighted average shares outstanding of Class A common stock | 30,021,576 | 30,027,234 | 30,021,576 | 30,027,234 | ||||||||||||
| Basic and diluted net income (loss) per Class A common stock | $ | (0.24 | ) | $ | (0.08 | ) | $ | (0.21 | ) | $ | (0.17 | ) | ||||
| Weighted average shares outstanding of Class B common stock | 7,187,500 | 7,187,500 | 7,187,500 | 7,187,500 | ||||||||||||
| Basic and diluted net income (loss) per Class B common stock | $ | (0.24 | ) | $ | (0.08 | ) | $ | (0.21 | ) | $ | (0.17 | ) | ||||
♦ | ||||||||||||||||
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2023 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (31,975,454 | ) | $ | (31,974,608 | ) | ||||||||||||||
| Net income | — | — | — | — | — | 1,279,786 | 1,279,786 | |||||||||||||||||||||
| Remeasurement of Class A common stock to redemption value | — | — | — | — | — | (2,170,865 | ) | (2,170,865 | ) | |||||||||||||||||||
| Balance March 31, 2023 | 1,277,234 | 127 | 7,187,500 | 719 | — | (32,866,533 | ) | (32,679,800 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (9,093,767 | ) | (9,093,767 | ) | |||||||||||||||||||
| Fair value of Private Placement Units issued for legal services | 414,000 | 414,000 | ||||||||||||||||||||||||||
| Remeasurement of Class A common stock to redemption value | — | — | — | — | — | (2,664,291 | ) | (2,664,291 | ) | |||||||||||||||||||
| Balance June 30, 2023 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (44,210,591 | ) | $ | (44,209,745 | ) | ||||||||||||||
Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | |||||||
Formation and operating costs | $ | 4,702,670 | $ | 740 | ||||
Loss from operation costs | (4,702,670 | ) | (740 | ) | ||||
Other income and expenses: | ||||||||
Interest earned on cash held in Trust Account | 395,996 | — | ||||||
Loss before income taxes | (4,306,674 | ) | (740 | ) | ||||
Income tax expense | (34,713 | ) | — | |||||
Net loss | $ | (4,341,387 | ) | $ | (740 | ) | ||
Weighted average shares outstanding of Class A common stock | 30,027,234 | — | ||||||
Basic and diluted net income per Class A common stock | $ | (0.12 | ) | $ | (0.00 | ) | ||
Weighted average shares outstanding of Class B common stock | 7,187,500 | 7,500,000 | ||||||
Basic and diluted net income per Class B common stock | $ | (0.12 | ) | $ | (0.00 | ) | ||
Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |||||||
Formation and operating costs | $ | 6,616,590 | $ | 1,225 | ||||
Loss from operation costs | (6,616,590 | ) | (1,225 | ) | ||||
Other income and expenses: | ||||||||
Interest earned on cash held in Trust Account | 425,527 | — | ||||||
Loss before income taxes | (6,191,063 | ) | (1,225 | ) | ||||
Income tax expense | (34,713 | ) | — | |||||
Net loss | $ | (6,225,776 | ) | $ | (1,225 | ) | ||
Weighted average shares outstanding of Class A common stock | 30,027,234 | — | ||||||
Basic and diluted net income per Class A common stock | $ | (0.17 | ) | $ | (0.00 | ) | ||
Weighted average shares outstanding of Class B common stock | 7,187,500 | 7,500,000 | ||||||
Basic and diluted net income per Class B common stock | $ | (0.17 | ) | $ | (0.00 | ) | ||
Class A | Class B | Additional | Total | |||||||||||||||||||||||||
Common Stock | Common Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance - January 1, 2022 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (10,572,814 | ) | $ | (10,571,968 | ) | ||||||||||||||
| Net loss | (3,160,911 | ) | (3,160,911 | ) | ||||||||||||||||||||||||
| Balance - March 31, 2022 | 1,277,234 | 127 | 7,187,500 | 719 | — | (13,733,725 | ) | (13,732,879 | ) | |||||||||||||||||||
| Net loss | (3,116,949 | ) | (3,116,949 | ) | ||||||||||||||||||||||||
| Remeasurement of Class A common stock to | — | — | — | — | — | (99,011 | ) | (99,011 | ) | |||||||||||||||||||
| Balance - June 30, 2022 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (16,949,685 | ) | $ | (16,948,839 | ) | ||||||||||||||
For the Six months ended June 30, | ||||||||
2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (7,813,981 | ) | $ | (6,277,860 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Interest earned on cash and marketable securities held in Trust Account | (6,805,462 | ) | (425,527 | ) | ||||
| Fair value of Private Placement Units issued for legal services | 414,000 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued expenses and income taxes payable | 13,319,801 | 5,586,968 | ||||||
| Prepaid insurance | 118,836 | 118,837 | ||||||
| Prepaid expenses | (26,250 | ) | — | |||||
| Franchise tax payable | 182,500 | 100,000 | ||||||
| Net cash used in operating activities | (610,556 | ) | (897,582 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from working capital loan | 649,333 | 451,700 | ||||||
| Advances - related parties | 45,000 | 121,120 | ||||||
| Net cash provided by financing activities | 694,333 | 572,820 | ||||||
| Net change in cash | 83,777 | (324,762 | ) | |||||
| Cash at beginning of period | 989 | 327,731 | ||||||
| Cash at end of period | $ | 84,766 | $ | 2,969 | ||||
Non-cash investing and financing activities: | ||||||||
| Remeasurement of Class A common stock | $ | 4,835,156 | $ | 99,011 | ||||
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance - December 31, 2021 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | 0— | $ | (10,006,029 | ) | $ | (10,005,183 | ) | ||||||||||||||
Net loss | — | — | — | — | — | (1,884,389 | ) | (1,884,389 | ) | |||||||||||||||||||
Balance - March 31, 2022 | 1,277,234 | 127 | 7,187,500 | 719 | 0— | (11,890,418 | ) | (11,889,572 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (4,341,387 | ) | (4,341,387 | ) | |||||||||||||||||||
Remeasurement of Class A common stock to redemption value | — | — | — | — | — | (32,625 | ) | (332,625 | ) | |||||||||||||||||||
Balance - June 30, 2022 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | — | $ | (16,264,430 | ) | $ | (16,263,584 | ) | ||||||||||||||
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance - December 31, 2020 | — | — | — | 0— | 0— | 0— | 0— | |||||||||||||||||||||
Issuance of Class B common stock to sponsor (1)(2) | — | $ | — | 7,187,500 | $ | 719 | $ | 24,281 | $ | — | $ | 25,000 | ||||||||||||||||
Net loss | — | — | — | — | — | (485 | ) | (485 | ) | |||||||||||||||||||
Balance - March 31, 2021 | 1,277,234 | 127 | 7,187,500 | 719 | 24,281 | (485 | ) | 24,515 | ||||||||||||||||||||
Net loss | — | — | — | — | — | (740 | ) | (740 | ) | |||||||||||||||||||
Balance - June 30, 2021 | 1,277,234 | $ | 127 | 7,187,500 | $ | 719 | $ | 24,281 | $ | (1,225 | ) | $ | 23,775 | |||||||||||||||
Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (6,225,776 | ) | $ | (1,225 | ) | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Interest earned on cash and marketable securities held in Trust Account | (425,527 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Accrued expenses paid by promissory note | — | 485 | ||||||
Accrued expenses | 5,656,004 | — | ||||||
Prepaid insurance | 118,836 | — | ||||||
Franchise tax payable | 100,000 | — | ||||||
Net cash used in operating activities | (776,463 | ) | (740 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from working capital loan | 451,700 | — | ||||||
Proceeds from issuance of Class B common stock to Sponsor | — | 25,000 | ||||||
Net cash provided by financing activities | 451,700 | 25,000 | ||||||
Net change in cash | (324,763 | ) | 24,260 | |||||
Cash at beginning of period | 327,731 | — | ||||||
Cash at end of period | $ | 2,968 | $ | 24,260 | ||||
Non-cash investing and financing activities: | ||||||||
Accrued deferred offering costs | $ | — | $ | 82,460 | ||||
| Remeasurement of Class A common stock | $ | 32,625 | — | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
References in this report (the “Quarterly Report”) to “we,” “us,” “Digital World” or the “Company” refer to Digital World Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to ARC Global Investments II LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report (as defined below), including, without limitation, statements under “Item 2. Management’s Discussion and analysis set forth belowAnalysis of Financial Condition and Results of Operations,” includes forward-looking statements that involve risks and uncertainties.
our ability to complete the Business Combination or the PIPE;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following the Business Combination;
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving the Business Combination, as a result of which they would then receive expense reimbursements;
our potential ability to obtain additional financing to complete the Business Combination;
the competitive environment in which our successor will operate following the Business Combination;
our public securities’ potential liquidity and trading;
the lack of a liquid market for our securities;
the use of proceeds not held in the Trust Account or available to us from interest income on the Trust Account balance; or
our financial performance.
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, and uncertainties (some of which are beyond our control) or other assumptions that couldmay cause actual results or performance to differbe materially different from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans, objectives of management for future operations and the proposed Transactions with TMTG (as described below), areexpressed or implied by these forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future eventsShould one or future performance, but reflect management’s current beliefs, based on information currently available. A numbermore of factors could cause actual events, performancethese risks or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could causeuncertainties materialize, or should any of our assumptions prove incorrect, actual results to differ materiallymay vary in material respects from those anticipatedprojected in the these forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 8, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
TMTG Business Combination using cash from the proceeds of our initial public offering (the “Initial Public Offering”) and the sale of the private placement units (the “Private Placement Units”), our capital stock, debt or a combination of cash, stock and debt.
On October 20, 2021, (as amended by the First Amendment towe entered into a Merger Agreement and Plan of Merger, dated May 11, 2022, and as it may be further amended or supplemented from time to time) with Merger Sub, TMTG, the Sponsorour sponsor, in the capacity as theour representative for certain stockholders, of the Company, and TMTG’s General Counsel,Chief Legal Officer, in the capacity as the representative for stockholders of TMTG. Subject
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”),Closing, Merger Sub will merge with and into TMTG, (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”), with TMTG continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Company. In the Merger, (i) all shares of TMTG common stock (together, “TMTG Stock”)Stock issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”)Effective Time (other than those properly exercising any applicable
Consummation of the TransactionsTMTG Business Combination is subject to customary conditions of the respective parties, including regulatory approval and the approval of the TransactionsMerger by the Company’sour stockholders in accordance with the Company’s Amendedour amended and Restated Certificaterestated certificate of Incorporationincorporation and the completion of a redemption offer whereby the Companywe will be providing itsour public stockholders with the opportunity to redeem their shares of our Class A common stock for cash equal to their pro rata share of the aggregate amount on deposit in the Company’s Trust Account.our trust account. The Merger Agreement can be terminated by
22
either party if any of the Merger Agreement, the majority stockholder of TMTG entered into a voting agreementclosing conditions have not been satisfied or waived by September 20, 2022, which has been extended to June 8, 2023 (the “Voting Agreement”“Outside Date”) with, provided that the Company and TMTG. Undershall have the Voting Agreement,right to extend the TMTG Stockholder agreed to vote all of his shares of TMTG Stock in favorOutside Date if it obtains an extension of the Merger Agreementdeadline by which it must complete its business combination (an “Extension”) for the shortest of (i) three months, (ii) the period ending on the last day for the Company to consummate a business combination after such Extension and related transactions and to otherwise take certain other actions(iii) such period as determined by the Company.
On December 4, 2021, in support of the Merger Agreement and related transactions andTMTG Business Combination, the other matters submittedCompany entered into certain SPAs with certain PIPE Investors, pursuant to which the PIPE Investors agreed to purchase up to an aggregate of 1,000,000 shares of the Company’s Series A Convertible Preferred Stock for a purchase price of $1,000 per share for an aggregate commitment of up to $1,000,000,000 in a PIPE to be consummated concurrently with the TMTG Stockholders for their approval.
As indicated in the Company for cash, securities or other property: (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contractaccompanying financial statements, on June 30, 2023, we had approximately $84,766 in cash. We have incurred and continue to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any restricted securities, (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 the restricted securities, or (iii) publicly disclose the intention to do any of the foregoing.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through June 30, 20222023 were organizational activities and those necessary to prepare for the Initial Public Offeringinitial public offering and the search for targets for our initial Business Combination,business combination, including the proposed Merger with TMTG. We do not expect to generate any operating revenues until after the completion of our initial Business Combination.business combination. We generate
For the three months ended June 30, 2023, we had a net loss of $993,767, which consists of general and administrative costs of $11,808,058 and income tax expense of $904,513, partially offset by $3,618,804 of interest earned on cash held in Trust Account.
For the three months ended June 30, 2022, we had a net loss of $4,341,387,$3,116,949, which consists primarily of general and administrative costs of $4,702,670.
For the six months ended June 30, 2023, we had a net loss of $7,813,981, which consists of general and administrative costs of $12,831,637 and income tax expense of $1,787,806, partially offset by $3,186,658 of interest earned on cash held in Trust Account.
For the six months ended June 30, 2022, we had a net loss of $6,225,776,$6,277,860, which consists primarily of general and administrative costs of $6,616,590.$6,669,773, partially offset by interest earned on the cash held in the Trust Account of $425,527.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, the pending legal proceedings against us, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
23
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering,initial public offering, our only source of liquidity was an initial purchase of Class B common stock by the Sponsorour sponsor and loans from our Sponsor.
On September 8, 2021, we consummated the Initial Public Offeringinitial public offering of 28,750,000 Units,units, at a price of $10.00 per Unit,unit, generating gross proceeds of $287,500,000. Simultaneously with the closing of the Initial Public Offering,initial public offering, we consummated the sale of 1,133,484 Placement Unitsplacement units at a price of $10.00 per Placement Unitplacement unit in a private placement to our Sponsor,sponsor, generating gross proceeds of $11,334,840.
Following the Initial Public Offeringinitial public offering and the sale of the Placement Units,placement units, a total of $293,250,000 was placed in a U.S.-based trust account, (“Trust Account”), maintained by Continental, Stock Transfer & Trust Company, acting as trustee. We incurred $15,668,029 in transaction costs, including $3,593,750 of underwriting fees, $10,062,500 of deferred underwriting fees, fair value of representative shares of $1,437,500 and $574,279 of other offering costs.
For the six months ended June 30, 2023, net increase in cash was $83,777 and was comprised of net cash used in operating activities of $610,556 and net cash provided by financing activities of $694,333. Net cash used in operating activities of $610,556 consisted of a net loss of $7,813,981 and a change of accrued expense of $13,319,801, partially offset by interest earned on assets held in the Trust Account of $6,805,462. Net cash provided by financing activities of $694,333,000 consisted of proceeds from working capital loans and advances from related parties.
For the six months ended June 30, 2022, net decrease in cash was $324,763$324,762 and was comprised of net cash used in operating activities of $776,463$897,582 and net cash provided by financing activities of $451,700
As of June 30, 2022,2023, we had cash of $293,682,625$307,136,113 held in the Trust Account.trust account. We intend to use substantially all of the funds held in the Trust Account,trust account, including any amounts representing interest earned on the Trust Accounttrust account to complete our initial Business Combination.business combination. We may withdraw interestcash to pay taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination,business combination, the remaining proceeds held in the Trust Accounttrust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
On April 21, 2023, the Company issued two promissory notes (one for $625,700 and the other for $500,000) in the aggregate principal amount of $1,125,700 to the sponsor to pay costs and expenses in connection with completing an initial business combination. Each of the two notes bears no interest and is repayable in full upon the earlier of (i) the date on which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective. At the election of the sponsor and subject to certain conditions, all of the unpaid principal amount of each of the two notes may be converted into units of the Company (the “Conversion Units”) immediately prior to the consummation of an initial business combination with the total Conversion Units so issued equal to: (x) the portion of the principal amount of the respective note being converted divided by (y) the conversion price of ten dollars ($10.00), rounded up to the nearest whole number of units. The issuances of the two notes were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
As of June 30, 2022,2023, we had cash of $2,968$84,766 outside of the Trust Account.trust account. We intend to use the funds held outside the Trust Accounttrust account primarily to complete the TMTG Business Combination, or if the TMTG Business is not consummated, identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.business combination.
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In order to fund working capital deficiencies or finance transaction costs in connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Account Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us fundsGoing Concern” as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Initially up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Placement Units.
Off-Balance
We did not have any
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Working Capital Loans, and each of Renatus and an affiliate of our Sponsorsponsor a monthly fee of $15,000 for office space, administrative and support services to us. We will incur these fees monthly until the earlier of the completion of our initial Business Combinationbusiness combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $10,062,500 in the aggregate. The deferred fee will become payable to the underwriters solely in the event that the Company completes a Business Combination,business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity. Our shares of Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed interim balance sheets.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertaintyHedging”. Derivative instruments are initially recorded at fair value on the grant date and volatilityre-valued at each reporting date, with changes in the financial markets, manyfair value reported in the statements of whichoperations. Derivative assets and liabilities are beyond our control. Our businessclassified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be impacted by, among other things, downturnsrequired within 12 months of the balance sheet date. The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40. The Company has determined that the warrants qualify for equity treatment in the Company’s financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules2022.2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to the Company’s material weaknesses in accounting for accruals our disclosure controls and procedures (as defined in Ruleseffective.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
To address this material weakness, we are assessing our resource needs as well as roles and responsibilities with a particular focus on accounting and financial reporting staff and will make changes as needed.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Except as indicated below, to the knowledge of our management team, there is no litigation currently pending or contemplated against us, or against any of our property.
We are cooperating with a Financial Industry Regulatory Authority, Inc. (“FINRA”)FINRA inquiry concerning events (specifically, a review of trading) that preceded the public announcement of the Merger Agreement. According to FINRA’s request, the inquiry should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection upon the merits of the securities involved or upon any person who effected transactions in such securities.
On October 20, 2023, Robert Lowinger (the “Plaintiff”) filed a complaint against Rocket One Capital, LLC (“Rocket One”), Michael Shvartsman, Bruce Garelick, and the evaluation of potential targets, including TMTG; communications relating to TMTG; agreements with and payments made to certain advisors; investors, including investor meetings and agreements; the appointment of certain of our officers and directors; policies and procedures relating to trading; and documents sufficient to identify banking, telephone, and email addresses; our due diligence regarding TMTG, communications regarding and due diligence of potential targets other than TMTG; and relationships between and among Digital World (and/or certain of Digital World’s officers and directors) and other entities (including the Sponsor and certain advisors, including Digital World’s underwriter and financial advisor in its Initial Public Offering). According to the SEC’s request and subpoena, the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of us or any person, entity, or security. Any resolution of the inquiry or investigation, as well as proceedings by the SEC, FINRA, or other governmental or regulatory authorities, could resultCompany in the imposition of significant fines, penalties, injunctions, prohibitions on the conduct of our business, damage to our reputation and other sanctions against us, including restrictions on our activities.
Settlement in Principle
As previously disclosed in the Company’s Form 8-K filed with the SEC on July 3, 2023, the Company was the subject of an investigation (the “Investigation”) by the SEC with respect to certain statements, agreements and the timing thereof included in the Company’s registration statements on Form S-1 (the “Form S-1”) in connection with its IPO and Form S-4 relating to the business combination between the Company and TMTG.
On July 3, 2023, the Company reached an agreement in principle (the “Settlement in Principle”) in connection with the Investigation. The Settlement in Principle was subject to approval by the SEC.
On July 20, 2023, the SEC approved the Settlement in Principle, announcing settled charges against Digital World and its directors. Certain current and former TMTG personnel have also recently received individual grand jury subpoenas.
Section 5.2 of the Merger Agreement provides that without the prior written consent of TMTG (such consent not to be unreasonably withheld, conditioned or delayed) the Company shall not settle or compromise any claim, action or proceeding, including any suit, action, claim, proceeding or investigation relating to the Merger Agreement or the transactions contemplated thereby, in excess of $100,000. As such, the Company has kept TMTG appraised of the discussions with the SEC and the U.S. Department of Justice, can be expectedSettlement in Principle. Nevertheless, TMTG is not a party to delay effectivenessthe Settlement in Principle or any related negotiation and it has not provided its consent to such settlement. Although the Company believes that it has complied with Section 5.2 of the Form
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Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Quarterly Report. However, as of the date of this Quarterly Report, except as set forth below, there have been no material changes from the riskpartial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations, previously disclosed in our final prospectus dated September 2, 2021 and filed with the SECAnnual Report on September 8, 2021, our annual report on Form
The ability of our stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the Business Combination or optimize our capital structure.
Unless extended, the Merger Agreement may be terminated at any time in accordance with its terms, including by either us or TMTG after December 31, 2023, the SPAs may be terminated upon the termination of the Merger Agreement, and you may not have the chance to vote on the Business Combination or redeem our shares until the liquidation date.
We have not obtained an opinion from an independent investment banking firm or another independent firm, and consequently, you may have no assurance from an independent source that the terms of the Business Combination are fair to our stockholders from a financial point of view.
You may be unable to ascertain the merits or risks of TMTG’s operations.
There is no assurance that our diligence will reveal all material risks that may be present with regard to TMTG.
We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate and to consummate the initial business combination; our executive officers and directors also allocate their time to other businesses, thereby causing potential conflicts of interest that could have a negative impact on our ability to complete the initial business combination.
If the conditions to the Merger are not met, the Business Combination may not occur.
The process of taking a company public by means of a business combination with a special purpose acquisition company is different from taking a company public through an underwritten offering and may create risks for our unaffiliated investors. You may not have the same benefits as an investor in an underwritten public offering.
There are risks to our stockholders who are not affiliates of the Sponsor of becoming stockholders of the combined entity through the Business Combination rather than acquiring securities of TMTG directly in an underwritten public offering, including no independent due diligence review by an underwriter and conflicts of interest of the Sponsor.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
Even if we consummate the Business Combination, there is no guarantee that the warrants will ever be in the money; they may expire worthless or the terms of warrants may be amended.
The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Merger Agreement may result in a conflict of interest when determining whether such changes to the terms of the Merger Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.
If the funds held outside of our Trust Account are insufficient to allow it to operate until at least September 8, 2024, our ability to complete an initial business combination may be adversely affected.
We may not have sufficient funds to satisfy indemnification claims of its directors and executive officers.
For the complete list of risks relating to our operations, the Business Combination and the PIPE, see the section titled “Risk Factors” contained in our (i) Registration Statement on Form
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form
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| 101.INS* | Inline XBRL Instance 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 Labels Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File. | |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DIGITAL WORLD ACQUISITION CORP. | ||||||
| Date: | By: | /s/ | ||||
| Name: | ||||||
| Title: | Interim Chief Executive Officer and Director (Principal Executive Officer) | |||||
| Date: November 13, 2023 | By: | /s/ Katherine Chiles | ||||
| Name: | Katherine Chiles | |||||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |||||
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