COMMISSION
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | 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
March 31, 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| 85-1023777 | |
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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10019
Title of each class |
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Units, each consisting of one share of Class A common stock, $0.0001 par value, and | CCV.U | The New York Stock Exchange | ||
Shares of Class A common stock | CCV | The New York Stock Exchange | ||
Warrants included as part of the units | CCV WS | The New York Stock Exchange |
Large accelerated filer ☐ ☒ (§☐Accelerated filer ☐ filerfile☒Smaller reporting company ☒ Emerging growth company ☒ November 18, 2021,May 1
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(UNAUDITED)
| | | | | | |
| | September 30, | | December 31, | ||
| | 2021 |
| 2020 | ||
|
| | (Unaudited) | | | (Restated) |
ASSETS | | | | | | |
Current assets | | | | | | |
Cash | | $ | 342,368 | | $ | 1,505,116 |
Prepaid expenses | |
| 473,624 | |
| 22,000 |
Total current assets | | | 815,992 | | | 1,527,116 |
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Marketable securities held in Trust Account | | | 500,110,851 | | | 499,983,052 |
TOTAL ASSETS | | $ | 500,926,843 | | $ | 501,510,168 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
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Current liabilities | | | | | | |
Accrued expenses | | $ | 619,048 | | $ | 52,691 |
Total current liabilities | | | 619,048 | | | 52,691 |
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Convertible promissory note - related party, net of discount | | | 397,898 | | | — |
Conversion option liability | | | 199,480 | | | — |
Warrant liabilities | |
| 31,100,000 | |
| 27,480,000 |
Deferred underwriting fee payable | |
| 17,500,000 | |
| 17,500,000 |
Total liabilities | |
| 49,816,426 | |
| 45,032,691 |
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COMMITMENTS AND CONTINGENCIES | |
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Class A common stock subject to possible redemption, 50,000,000 shares at redemption value as of September 30, 2021 and December 31, 2020 | | | 500,000,000 | | | 499,983,052 |
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Stockholders’ deficit | |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized, 0 shares issued and outstanding | | | — | | | — |
Class A common stock, $0.0001 par value; 400,000,000 shares authorized | |
| — | |
| — |
Class B common stock, $0.0001 par value; 100,000,000 shares authorized; 12,500,000 shares issued and outstanding at September 30, 2021 and December 31, 2020 | |
| 1,250 | |
| 1,250 |
Additional paid-in capital | |
| — | |
| — |
Accumulated deficit | |
| (48,890,833) | |
| (43,506,825) |
Total stockholders’ deficit | |
| (48,889,583) | |
| (43,505,575) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | 500,926,843 | | $ | 501,510,168 |
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 22,947 | $ | 206,841 | ||||
Prepaid expenses | 335,999 | 357,311 | ||||||
Total current assets | 358,946 | 564,152 | ||||||
Cash and marketable securities held in Trust Account | 500,171,592 | 500,030,740 | ||||||
TOTAL ASSETS | $ | 500,530,538 | $ | 500,594,892 | ||||
LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Current liabilities - Accrued expenses | $ | 947,042 | $ | 334,508 | ||||
Convertible promissory note - related party, net of discount | 913,415 | 861,464 | ||||||
Conversion option liability | 6,700 | 145,441 | ||||||
Deferred legal fee | 64,000 | 0 | ||||||
Warrant liabilities | 14,335,000 | 23,140,000 | ||||||
Deferred underwriting fee payable | 17,500,000 | 17,500,000 | ||||||
Total liabilities | 33,766,157 | 41,981,413 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 6) | 0 | 0 | ||||||
Class A common stock subject to possible redemption, 50,000,000 shares at redemption value as of March 31, 2022 and December 31, 2021 | 500,000,000 | 500,000,000 | ||||||
Stockholders’ deficit | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized, 0 shares issued and outstanding | 0— | 0— | ||||||
Class A common stock, $0.0001 par value; 400,000,000 shares authorized 0ne issued or outstanding as of March 31, 2022 and December 31, 2021 (excluding 50,000,000 shares subject to pos redemption)s ible | 0— | 0— | ||||||
Class B common stock, $0.0001 par value; 100,000,000 shares authorized; 12,500,000 shares issued and outstanding a s of March 31, 2022 and December 31, 2021 | 1,250 | 1,250 | ||||||
Additional paid-in capital | 0— | 0— | ||||||
Accumulated deficit | (33,236,869 | ) | (41,387,771 | ) | ||||
Total stockholders’ deficit | (33,235,619 | ) | (41,386,521 | ) | ||||
TOTAL LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | $ | 500,530,538 | $ | 500,594,892 | ||||
For the Period from May 12, 2020 (Inception) Three Months Ended Nine Months Ended through September 30, September 30, September 30, 2021 2020 2021 2020 Operating and formation costs $ 857,031 $ — $ 1,777,481 $ 1,000 Loss from operations (857,031) — (1,777,481) (1,000) Other income (expense): Change in fair value of warrant liabilities 19,180,000 — (3,620,000) — Interest earned on marketable securities held in Trust Account 27,325 — 125,760 — Unrealized gain on marketable securities held in Trust Account 28,921 — 2,039 — Change in fair value of conversion option liability (88,096) (88,096) Interest expense - debt discount (9,282) — (9,282) Other income (expense), net 19,138,868 — (3,589,579) — Net income (loss) $ 18,281,837 $ — $ (5,367,060) $ (1,000) Weighted average shares outstanding of Class A common stock 50,000,000 — 50,000,000 — Basic and diluted net income (loss) income per share, Class A common stock $ 0.29 $ — $ (0.09) $ — Weighted average shares outstanding of Class B common stock 12,500,000 11,250,000 12,500,000 11,250,000 Basic and diluted net income (loss) per share, Class B common stock $ 0.29 $ — $ (0.09) $ — $ 881,740 $ 317,997 8,805,000 (5,475,000 ) 147,809 94,460 (6,957 ) (3,961 ) 138,741 — (51,951 ) — 9,032,642 (5,384,501 ) Basic and diluted weighted average shares outstanding of Class A common stock 50,000,000 50,000,000 Basic and diluted weighted average shares outstanding of Class B common stock 12,500,000 12,500,000
DEFICIT
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
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| | Class A | | Class B | | Additional | | | | | Total | ||||||||
| | Common Stock | | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | |||||||||
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| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
Balance — January 1, 2021, as restated | | — | | $ | — | | 12,500,000 | | $ | 1,250 | | $ | — | | $ | (43,506,825) | | $ | (43,505,575) |
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Remeasurement adjustment on redeemable common stock (see Note 2) | | — | | | — | | — | | | — | | | — | | | (16,948) | | | (16,948) |
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Net loss |
| — | |
| — | | — | | | — | |
| — | |
| (5,702,498) | |
| (5,702,498) |
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Balance — March 31, 2021, as restated |
| 0 | | $ | — | | 12,500,000 | | | 1,250 | | | — | | | (49,226,271) | | | (49,225,021) |
| | | | | | | | | | | | | | | | | | | |
Net loss | | — | | | — | | — | | | — | | | — | | | (17,946,399) | | | (17,946,399) |
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Balance – June 30, 2021, as restated | | — | | $ | — | | 12,500,000 | | $ | 1,250 | | $ | — | | $ | (67,172,670) | | $ | (67,171,420) |
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Net income |
| — | |
| — | | — | | | — | |
| — | |
| 18,281,837 | |
| 18,281,837 |
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Balance – September 30, 2021 |
| — | | $ | — | | 12,500,000 | | $ | 1,250 | | $ | — | | $ | (48,890,833) | | $ | (48,889,583) |
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance — January 1, 2022 | 0 | $ | 0 | 12,500,000 | $ | 1,250 | $ | 0 | $ | (41,387,771 | ) | $ | (41,386,521 | ) | ||||||||||||||
Net income | — | — | — | — | — | 8,150,902 | 8,150,902 | |||||||||||||||||||||
Balance — March 31, 2022 | 0 | $ | 0 | 12,500,000 | $ | 1,250 | $ | 0 | $ | (33,236,869 | ) | $ | (33,235,619 | ) | ||||||||||||||
THROUGH SEPTEMBER 30, 2020
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| | Class A | | Class B | | Additional | | | | | Total | ||||||||
| | Common Stock | | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | |||||||||
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| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance — May 12, 2020 (Inception) | | 0 | | $ | 0 | | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
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Issuance of Class B common stock to Sponsor | | — | | | — | | 12,937,500 | | | 1,294 | | | 23,706 | | | — | | | 25,000 |
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Net loss |
| — | |
| — | | — | | | — | |
| — | |
| (1,000) | |
| (1,000) |
| | | | | | | | | | | | | | | | | | | |
Balance — June 30, 2020 | | — | | $ | — | | 12,937,500 | | $ | 1,294 | | $ | 23,706 | | $ | (1,000) | | $ | 24,000 |
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Net loss | | — | | | — | | — | | | — | | | — | | | — | | | — |
| | | | | | | | | | | | | | | | | | | |
Balance — September 30, 2020 |
| — | | $ | — | | 12,937,500 | | $ | 1,294 | | $ | 23,706 | | $ | (1,000) | | $ | 24,000 |
THREE MONTHS ENDED MARCH 31, 2021
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance — January 1, 2021 | 0 | $ | 0 | 12,500,000 | $ | 1,250 | $ | 0 | $ | (43,506,825 | ) | $ | (43,505,575 | ) | ||||||||||||||
Remeasurement adjustment on redeemable common stock | — | — | — | — | — | (16,948 | ) | (16,948 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (5,702,498 | ) | (5,702,498 | ) | |||||||||||||||||||
Balance — March 31, 2021 | 0 | $ | 0 | 12,500,000 | $ | 1,250 | $ | 0 | $ | (49,226,271 | ) | $ | (49,225,021 | ) | ||||||||||||||
| | | | | | |
| | | | | For the Period | |
| | | | | from May 12, | |
| | | | | 2020 (Inception) | |
| | Nine Months Ended | | Through | ||
| | September 30, | | September 30, | ||
|
| 2021 |
| 2020 | ||
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (5,367,060) | | $ | (1,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
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Change in fair value of warrant liabilities | | | 3,620,000 | | | — |
Amortization of debt discount | | | 9,282 | | | — |
Interest earned on investments held in Trust Account | | | (125,760) | | | — |
Unrealized loss on marketable securities held in Trust Account | |
| (2,039) | |
| — |
Change in value of conversion option liability | | | 88,096 | | | — |
Changes in operating assets and liabilities: | |
| | |
| |
Prepaid expenses | | | (451,624) | | | — |
Accrued expenses | | | 566,357 | | | 1,000 |
Net cash used in operating activities | |
| (1,662,748) | |
| — |
| | | | | | |
Cash flows from financing activities: | | | | | | |
Proceeds from issuance of Class B common stock to Sponsor | |
| — | |
| 25,000 |
Proceeds from promissory note - related party | |
| 500,000 | |
| 150,000 |
Payment of offering costs | |
| — | |
| (127,292) |
Net cash provided by financing activities | |
| 500,000 | |
| 47,708 |
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Net change in cash | |
| (1,162,748) | |
| 47,708 |
Cash – Beginning of period | |
| 1,505,116 | |
| — |
Cash – End of period | | $ | 342,368 | | $ | 47,708 |
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Non-cash investing and financing activities: | |
| | |
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Remeasurement adjustment on redeemable common stock | | $ | 16,948 | | $ | — |
Deferred offering costs included in accrued offering costs | | | — | | $ | 200,000 |
For the Three Months Ended | For the Three Months Ended | |||||||
March 31, | March 31, | |||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 8,150,902 | $ | (5,702,498 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Change in fair value of warrant liabilities | (8,805,000 | ) | 5,475,000 | |||||
Amortization of debt discount | 51,951 | — | ||||||
| Interest earned on marketable securities held in Trust Account | (147,809 | ) | (94,460 | ) | ||||
Unrealized loss on marketable securities held in Trust Account | 6,957 | 3,961 | ||||||
Change in value of conversion option liability | (138,741 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 21,312 | (626,854 | ) | |||||
Accrued expenses | 676,534 | 87,749 | ||||||
Net cash used in operating activities | (183,894 | ) | (857,102 | ) | ||||
Net change in cash | (183,894 | ) | (857,102 | ) | ||||
Cash – Beginning of period | 206,841 | 1,505,116 | ||||||
Cash – End of period | $ | 22,947 | $ | 648,014 | ||||
Non-cash investing and financing activities: | ||||||||
Remeasurement adjustment on redeemable common stock | $ | 0 | $ | 16,948 | ||||
SEPTEMBER 30, 2021
(UNAUDITED)
3. The remaining 1,750,000 shares of the over-allotment option was forfeited on the day of the partial exercise of the underwriters’ over-allotment.
4.
5
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares in connection with a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then on deposit in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest, net of permitted withdrawals). The
6
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
The Sponsor has agreed to waive its right to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Window. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Window. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7)6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Window and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the funds on deposit in the Trust Account remaining available for distribution will be less than the Initial Public Offering price per Unit of $10.00 in the Initial Public Offering.
Risks
Management continuesGoing Concern
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparationprospective target businesses or their representatives or owners, review corporate documents and material agreements of the Company's condensed financial statements as of September 30, 2021prospective target businesses, and for the periods ended December 31, 2020, March 31, 2021,structure, negotiate and June 30, 2021, the Company’s management became aware of informal communications between the staff of the SEC and certain other registrants and their independent registered public accounting firm. Once aware of these communications, the Company’s management re-evaluated the Company’s application of Accounting Standards Codification Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) to its accounting classification of the redeemable shares of Class A Common Stock issued as part of the units sold in the Initial Public Offering. The Company had previously classifiedcomplete a portion of the Public Shares in permanent equity because, although the Company did not specify a maximum redemption threshold, the Company’s Amended and Restated Certificate of Incorporation provides that the Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. Based on such re-evaluation, the Company’s management determined that, in accordance with the ASC 480, redemption provisions not solely within the control of the Company would require common stock subject to redemption to be classified outside of permanent equity and therefore all of the Public Shares subject to redemption should be classified outside of permanent equity. The Company’s management has also determined that the shares of Class A Common Stock issued in connection with the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control.
Therefore, the Company’s management has concluded that temporary equity should include all the shares of Class A Common Stock subject to possible redemption, resulting in the shares of Class A Common Stock subject to possible redemption being equal to their redemption value. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the
7
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
Company evaluated the changes and has determined that the related impact was material to previously presented financial statements. As a result, management has noted a classification error related to temporary equity and permanent equity. This resulted in a restatement of previously issued financial statements to adjust the initial carrying value of the shares of Class A Common Stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and the shares of Class A Common Stock.
8
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
There has been no change in the Company’s total assets, liabilities or operating results.
The impact of the restatement on the Company’s financial statements is reflected in the following table:
| | | | | | | | | |
Balance Sheet as of December 18, 2020 |
| As Previously |
| Adjustment |
| As Restated | |||
Class A common stock subject to possible redemption | | $ | 455,666,050 | | $ | 44,333,950 | | $ | 500,000,000 |
Class A common stock | | $ | 443 | | $ | (443) | | $ | — |
Additional paid-in capital | | $ | 5,678,325 | | $ | (5,678,325) | | $ | — |
Accumulated deficit | | $ | (680,017) | | $ | (38,655,182) | | $ | (39,335,199) |
Total stockholders' equity (deficit) | | $ | 5,000,001 | | $ | (44,333,950) | | $ | (39,333,949) |
Number of shares subject to redemption | | | 45,566,605 | | | 4,433,395 | | | 50,000,000 |
| | | | | | | | | |
Balance Sheet as of December 31, 2020 | | | | | | | | | |
Class A common stock subject to possible redemption | | $ | 451,477,475 | | $ | 48,505,577 | | $ | 499,983,052 |
Class A common stock | | $ | 485 | | $ | (485) | | $ | — |
Additional paid-in capital | | $ | 9,866,857 | | $ | (9,866,857) | | $ | — |
Accumulated deficit | | $ | (4,868,590) | | $ | (38,638,235) | | $ | (43,506,825) |
Total stockholders' equity (deficit) | | $ | 5,000,002 | | $ | (48,505,577) | | $ | (43,505,575) |
Number of shares subject to redemption | | | 45,149,278 | | | 4,850,722 | | | 50,000,000 |
| | | | | | | | | |
Condensed Balance Sheet as of March 31, 2021 (unaudited) | | | | | | | | | |
Class A common stock subject to possible redemption | | $ | 445,774,975 | | $ | 54,225,025 | | $ | 500,000,000 |
Class A common stock | | $ | 543 | | $ | (543) | | $ | — |
Additional paid-in capital | | $ | 15,569,299 | | $ | (15,569,299) | | $ | — |
Accumulated deficit | | $ | (10,571,088) | | $ | (38,655,183) | | $ | (49,226,271) |
Total stockholders' equity (deficit) | | $ | 5,000,004 | | $ | (54,225,025) | | $ | (49,225,021) |
Number of shares subject to redemption | | | 44,570,941 | | | 5,429,059 | | | 50,000,000 |
| | | | | | | | | |
Condensed Balance Sheet as of June 30, 2021 (unaudited) | | | | | | | | | |
Class A common stock subject to possible redemption | | $ | 427,828,570 | | $ | 72,171,430 | | $ | 500,000,000 |
Class A common stock | | $ | 722 | | $ | (722) | | $ | — |
Additional paid-in capital | | $ | 33,515,525 | | $ | (33,515,525) | | $ | — |
Accumulated deficit | | $ | (28,517,487) | | $ | (38,655,183) | | $ | (67,172,670) |
Total stockholders' equity (deficit) | | $ | 5,000,010 | | $ | (72,171,430) | | $ | (67,171,420) |
Number of shares subject to redemption | | | 42,782,857 | | | 7,217,143 | | | 50,000,000 |
| | | | | | | | | |
Condensed Statement of Changes in Stockholders' Equity (Deficit) as of December 31, 2020 | | | | | | | | | |
Sale of 50,000,000 Units, net of underwriting discounts and offering expenses | | $ | 461,321,067 | | | (461,321,067) | | | — |
Class A common stock subject to redemption | | $ | (451,477,475) | | | 451,477,475 | | | — |
Remeasurement for Class A common stock to redemption amount | | $ | — | | | (38,661,985) | | | (38,661,985) |
| | | | | | | | | |
Condensed Statement of Changes in Stockholders' Equity (Deficit) as of March 31, 2021 (unaudited) | | | | | | | | | |
Change in value of common stock subject to redemption | | $ | 5,702,501 | | | (5,702,501) | | | — |
Remeasurement for Class A common stock to redemption amount | | $ | — | | | (16,948) | | | (16,948) |
| | | | | | | | | |
Condensed Statement of Changes in Stockholders' Equity (Deficit) as of June 30, 2021 (unaudited) | | | | | | | | | |
Change in value of common stock subject to redemption | | $ | 17,946,405 | | | (17,946,405) | | | — |
| | | | | | | | | |
Statement of Cash Flows for the Period from May 12, 2020 (inception) to December 31, 2020 (audited) | | | | | | | | | |
Remeasurement for Class A common stock subject to possible redemption | | $ | 455,666,050 | | $ | 44,333,950 | | $ | 500,000,000 |
Remeasurement adjustment on redeemable common stock | | $ | (4,188,575) | | | 4,171,627 | | | (16,948) |
| | | | | | | | | |
Statement of Cash Flows for the three months ended March 31, 2021 (unaudited) | | | | | | | | | |
Remeasurement adjustment on redeemable common stock | | $ | 5,702,500 | | | (5,702,500) | | | — |
| | | | | | | | | |
Statement of Cash Flows for the three months ended June 30, 2021 (unaudited) | | | | | | | | | |
Remeasurement adjustment on redeemable common stock | | $ | (23,648,906) | | | 23,648,906 | | | — |
9
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company also restated its income (loss) per common share calculated to allocate net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock share pro rata in the income (loss) of the Company. There is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss). The impact of this restatement on the Company’s financial statements is reflected in the following table:
| | | | | | | | | |
Statement of Operations for the period from May 12, 2020 (inception) to December 31, 2020 |
| As Previously |
| Adjustment |
| As Restated | |||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption |
| | 45,566,605 | | $ | (45,566,605) | | $ | — |
Basic and diluted net loss per common share, Class A common stock | | $ | — | | $ | — | | $ | — |
Basic and diluted weighted average shares outstanding, Class B common | |
| 11,568,466 | |
| (11,568,466) | |
| — |
Basic and diluted net loss per common share, Class B common stock | | $ | (0.42) | | $ | 0.42 | | $ | — |
Weighted average shares outstanding of Class A common stock | |
| — | |
| 2,801,724 | |
| 2,801,724 |
Basic and diluted net income (loss) income per share, Class A common stock | | $ | — | | $ | (0.34) | | $ | (0.34) |
Weighted average shares outstanding of Class B common stock | |
| — | |
| 11,320,043 | |
| 11,320,043 |
Basic and diluted net income (loss) per share, Class B common stock | | $ | — | | $ | (0.34) | | $ | (0.34) |
| | | | | | | | | |
Statement of Operations for the three months ended March 31, 2021 (unaudited) | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 45,149,278 | | $ | (45,149,278) | | $ | — |
Basic and diluted net loss per common share, Class A common stock | | $ | — | | $ | — | | $ | — |
Basic and diluted weighted average shares outstanding, Class B common | |
| 17,350,722 | |
| (17,350,722) | |
| — |
Basic and diluted net loss per common share, Class B common stock | | $ | (0.33) | | $ | 0.33 | | $ | — |
Weighted average shares outstanding of Class A common stock | |
| — | |
| 50,000,000 | |
| 50,000,000 |
Basic and diluted net income (loss) income per share, Class A common stock | | $ | — | | $ | (0.09) | | $ | (0.09) |
Weighted average shares outstanding of Class B common stock | |
| — | |
| 12,500,000 | |
| 12,500,000 |
Basic and diluted net income (loss) per share, Class B common stock | | $ | — | | $ | (0.09) | | $ | (0.09) |
| | | | | | | | | |
Statement of Operations for the three months ended June 30, 2021 (unaudited) | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 44,570,941 | | $ | (44,570,941) | | $ | — |
Basic and diluted net loss per common share, Class A common stock | | $ | — | | $ | — | | $ | — |
Basic and diluted weighted average shares outstanding, Class B common | |
| 17,929,059 | |
| (17,929,059) | |
| — |
Basic and diluted net loss per common share, Class B common stock | | $ | (1.00) | | $ | 1.00 | | $ | — |
Weighted average shares outstanding of Class A common stock | |
| — | |
| 50,000,000 | |
| 50,000,000 |
Basic and diluted net income (loss) income per share, Class A common stock | | $ | — | | $ | (0.29) | | $ | (0.29) |
Weighted average shares outstanding of Class B common stock | |
| — | |
| 12,500,000 | |
| 12,500,000 |
Basic and diluted net income (loss) per share, Class B common stock | | $ | — | | $ | (0.29) | | $ | (0.29) |
| | | | | | | | | |
Statement of Operations for the six months ended June 30, 2021 (unaudited) | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 44,858,512 | | $ | (44,858,512) | | $ | — |
Basic and diluted net loss per common share, Class A common stock | | $ | — | | $ | — | | $ | — |
Basic and diluted weighted average shares outstanding, Class B common | |
| 17,641,488 | |
| (17,641,488) | |
| — |
Basic and diluted net loss per common share, Class B common stock | | $ | (1.34) | | $ | 1.34 | | $ | — |
Weighted average shares outstanding of Class A common stock | |
| — | |
| 50,000,000 | |
| 50,000,000 |
Basic and diluted net income (loss) income per share, Class A common stock | | $ | — | | $ | (0.38) | | $ | (0.38) |
Weighted average shares outstanding of Class B common stock | |
| — | |
| 12,500,000 | |
| 12,500,000 |
Basic and diluted net income (loss) per share, Class B common stock | | $ | — | | $ | (0.38) | | $ | (0.38) |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of
10
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act 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 registration statement under the Securities Act 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 a 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 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 statement with another public company which is neither an emerging growth company nor an emerging growth company which 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 the condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. 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 the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
Marketable Securities Held in the Trust Account
At September 30, 2021 and December 31, 2020, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. Through September 30, 2021, the Company had not withdrawn any amount to pay income taxes or permitted withdrawals. All of the Company's investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance
11
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
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 the Trust Account are included in interest earned on marketable securities held in the Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Warrant Liabilities
The Company accounts for the Public Warrants (as defined in Note 4) and Private Placement Warrants (together with the Public Warrants, the “Warrants”) in accordance with the guidance contained in ASC 815-40, under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value in respect of each reporting period. This liability is subject to re-measurement at each balance sheet date until the Warrants are exercised, and any change in fair value is recognized in the statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a modified Black-Scholes valuation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and is measured at redemption 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 the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features contain certain redemption rights that are considered to be outside of the Company’s 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’ (deficit) equity section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital (to the extent available) and accumulated deficit.
At September 30, 2021 and December 31, 2020, the Class A common stock reflected in the condensed balance sheets are reconciled in the following table:
| | | |
Gross proceeds |
| $ | 500,000,000 |
Less: |
| |
|
Proceeds allocated to Public Warrants | | $ | (12,375,000) |
Class A common stock issuance costs | | $ | (26,303,933) |
Plus: | |
|
|
Remeasurement of carrying value to redemption value | | $ | 38,661,985 |
Class A common stock subject to redemption, December 31, 2020 | | $ | 499,983,052 |
Plus: | |
|
|
Remeasurement of carrying value to redemption value | | $ | 16,948 |
Class A common stock subject to possible redemption, September 30, 2021 | | $ | 500,000,000 |
| | | |
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities
12
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were 0 unrecognized tax benefits and 0 amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. The effective tax rate differs from the statutory tax rate of 21% for the three months ended September 30, 2021 due to the valuation allowance recorded on the Company’s net operating losses and permanent differences. As of September 30, 2021, all deferred tax assets resulting from net operating losses were fully offset by a valuation allowance.
On March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits.
Net income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. The Company applies the two-class method in calculating net income (loss) per common share. Remeasurement adjustment associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement to purchase an aggregate of 23,500,000 shares of common stock in the calculation of diluted income (loss) per common share, since the exercise of the warrants is contingent upon the occurrence of future events. As of September 30, 2021 and 2020, the Company did not have any dilutive securitiesfund working capital deficiencies or other contracts that could potentially be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted net income (loss) per common stock is the same as basic net income (loss) per common share for the periods presented.
The following table reflects the calculation of basic and diluted net loss per common stock (in dollars, except per share amounts).
13
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
| | | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
|
| |
| For the Period from | |||
| | Three Months Ended | | Nine Months Ended | | May 12, 2020 (Inception) | |||||||||||
| | September 30, 2021 | | September 30, 2021 | | through September 30, 2020 | |||||||||||
|
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B | |||||
Basic and diluted net income (loss) per common share |
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
Numerator: |
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
Allocation of net income (loss), as adjusted | | $ | 14,625,470 | | $ | 3,656,367 | | $ | (4,293,648) | | $ | (1,073,412) |
| — |
| | (1,000) |
Denominator: | |
|
| |
|
| |
|
| |
|
|
|
|
| |
|
Basic and diluted weighted average stock outstanding | |
| 50,000,000 | |
| 12,500,000 | |
| 50,000,000 | |
| 12,500,000 |
| |
| | 11,250,000 |
Basic and diluted net income (loss) per common share | | $ | 0.29 | | $ | 0.29 | | $ | (0.09) | | $ | (0.09) |
| — | | $ | — |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature, except for the Company’s warrants liabilities and conversion option liability (see Notes 5 and 10).
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 on January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 4. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 50,000,000 Units, at a purchase price of $10.00 per Unit, which includes the full exercise by the underwriter of its option to purchase an additional 5,000,000 Units at $10.00 per Unit. Each Unit consists of 1 share of Class A common stock and one-fourth of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase 1 share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 9).
14
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 11,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $ 11,000,000 . Each Private Placement Warrant is exercisable to purchase 1 share of Class A common stock at a price of $11.50 per share. The proceeds from the sale of the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Window, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private Placement Warrants (see Note 9).
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On May 13, 2020, the Sponsor purchased 8,625,000 shares of the Company’s Class B common stock for an aggregate price of $25,000 (the “Founder Shares” or, individually, a “Founder Share”). On October 19, 2020, the Company effected a stock dividend of one-third of one Founder Share for each outstanding Founder Share and on December 15, 2020, the Company effected a dividend of 0.125 of one Founder Share for each outstanding Founder Share, resulting in 12,937,500 Founder Shares being issued and outstanding. All share and per-share amounts have been retroactively adjusted to reflect in the share capitalizations. The Founder Shares included an aggregate of up to 1,687,500 shares that were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised, so that the number of Founder Shares would equal, on an as-converted basis, approximately twenty percent (20%) of the Company’s issued and outstanding common stock after the completion of the Initial Public Offering. In connection with the underwriters’ partial exercise of the over-allotment option and the forfeiture of the remaining over-allotment option, 437,500 Founder Shares were forfeited and 1,250,000 Founder Shares are no longer subject to forfeiture resulting in an aggregate of 12,500,000 Founder Shares outstanding at September 30, 2021.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one (1) year after the completion of a Business Combination and (B) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or similar transaction after a Business Combination that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30)-trading day period commencing at least one-hundred-fifty (150) days after a Business Combination, the Founder Shares will be released from the lock-up.
Administrative Support Agreement
The Company has agreed, commencing on December 18, 2020 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay an affiliate of the Sponsor a total of $30,000 per month for office space, administrative and support services. For the three and nine months ended September 30, 2021, the Company incurred and paid $90,000 and $270,000 in fees for these services, respectively.
On November 16, 2021, the Company amended the terms of the administrative services agreement between the Company and an affiliate of the Sponsor (the “Amendment”) to reflect that, effective January 1, 2022, the $30,000 monthly payments from Company to an affiliate of the Sponsor will no longer be payable by Company but will accrue as a contingent liability, payable upon completion of an initial business combination.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsorinitial stockholders or the Company’s directors and officerstheir affiliates may, but are not obligated to, loan the Companyus funds as may be required (the “Working Capital
15
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
Loans”).required. If the Company completeswe complete a Business Combination, such loaned amounts would be repaid using proceeds from the Company would repay the Working Capital Loans outtrust as part of the proceedsclosing of the Trust Account released to the Company.Business Combination or converted into warrants if loan contains a convertible feature. In the event that a Business Combination does not close, the Companywe may use a portion of proceedsthe working capital held outside the Trust Account to repay the Working Capital Loans,such loaned amounts but no proceeds held in thefrom our Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. 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 at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
repayment.
Gross proceeds | $ | 500,000,000 | ||
Less: | ||||
Proceeds allocated to Public Warrants | $ | (12,375,000 | ) | |
Class A common stock issuance costs | $ | (26,303,933 | ) | |
Plus: | ||||
Remeasurement of carrying value to redemption value | $ | 38,661,985 | ||
| Class A common stock subject to possible redemption, December 31, 2020 | $ | 499,983,052 | ||
Plus: | ||||
Remeasurement of carrying value to redemption value | $ | 16,948 | ||
Class A common stock subject to possible redemption, December 31, 2021 | $ | 500,000,000 | ||
Plus: | ||||
Remeasurement of carrying value to redemption value | $ | 0 | ||
Class A common stock subject to possible redemption, March 31, 2022 | $ | 500,000,000 |
The Company assessed23,500,000 shares of common stock in the provisionscalculation of diluted net income (loss) per common share, since the exercise of the Convertible Promissory Note under ASC 470-20. The derivative componentwarrants is contingent upon the occurrence of future events. As of March 31, 2022 and 2021, the Company did not have any dilutive securities or other contracts that could potentially be exercised or converted into shares of common stock and then share in the earnings of the obligationCompany. As a result, diluted net income (loss) per common share is initially valued and classifiedthe same as a derivative liability. The conversion option was valued usingbasic net income (loss) per common share for the Black-Scholes option pricing formula, which is considered to be a Level 3 fair value measurement and based on the following assumptions (see Note 9):
| | | | | | | |
|
| | |
| August 30, |
| |
| | | | | 2021 | | |
| | September 30, | | (Initial | | ||
|
| 2021 |
| Measurement) | | ||
Underlying warrant value | | $ | 0.3990 | | $ | 0.2228 |
|
Exercise price | | $ | 1.00 | | $ | 1.00 |
|
Holding period | |
| 0.25 | |
| 0.25 |
|
Risk-free rate | % |
| 1.13 | % |
| 0.91 | % |
Volatility | % |
| 19.5 | % |
| 17.7 | % |
Dividend yield | % |
| 0.0 | % |
| 0.0 | % |
periods presented.
For The Three Months Ended March 31, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income (loss) per common share | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income (loss), as adjusted | $ | 6,520,722 | $ | 1,630,180 | $ | (4,561,998 | ) | $ | (1,140,500 | ) | ||||||
Denominator: | ||||||||||||||||
Basic and diluted weighted average stock outstanding | 50,000,000 | 12,500,000 | 50,000,000 | 12,500,000 | ||||||||||||
Basic and diluted net income (loss) per common share | $ | 0.13 | $ | 0.13 | $ | (0.09 | ) | $ | (0.09 | ) | ||||||
| | | |
Fair value as of January 1, 2021 |
| $ | — |
Initial measurement on August 30, 2021 |
| | 111,384 |
Change in fair value |
| | 88,096 |
Fair value as of September 30, 2021 | | $ | 199,480 |
all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, discounttogether with the stated interest on the instrument, is being amortized over the life of the instrument through periodic charges to interest expense asexpense.
reflect that, effective January 1, 2022, the
16
SEPTEMBER
March 31, 2022 | December 31, 2021 | October 22, 2021 Borrowing (Initial Measurement) | August 30, 2021 Borrowing (Initial Measurement) | |||||||||||||
Underlying warrant value | $ | 0.0067 | $ | 0.1454 | $ | 0.1607 | $ | 0.2228 | ||||||||
Exercise price | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||
Holding period | 0.29 | .29 | 0.25 | 0.25 | ||||||||||||
Risk-free rate % | 2.40 | % | 1.34 | % | 1.33 | % | 0.91 | % | ||||||||
Volatility % | 8.1 | % | 14.7 | % | 15.5 | % | 17.7 | % | ||||||||
Dividend yield % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
(UNAUDITED)
Fair value as of January 1, 2022 | $ | 145,441 | ||
Change in fair value | (138,741 | ) | ||
Fair value as of March 31, 2022 | $ | 6,700 |
There are 0 penalty provisions for the registration rights and therefore there is no liability to be accounted for.
The remaining 1,750,000 shares of the over-allotment option was forfeited on the day of the partial exercise of the underwriters’ over-allotment.
Legal
17
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
The shares of the Class B common stock will automatically convert into the shares of Class A common stock at the time of the completion of a Business Combination on a
As of September 30, 20218 — WARRANTS
if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share for any twenty (20)-trading days within a thirty (30)-trading day period ending on the third business day prior to the notice of redemption to the Public Warrant holders; and |
18
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
As of September 30,
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
19
CHURCHILL CAPITAL CORP V
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021March 31, 2022 and December 31, 20202021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | | | | | | | |
|
| |
| September 30, |
| December 31, | ||
Description | | Level | | 2021 | | 2020 | ||
Assets: | | | | | | | | |
Cash and marketable securities held in Trust Account |
| 1 | | $ | 500,110,851 | | $ | 499,983,052 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Warrant liability – Public Warrants | | 1 | | | 16,250,000 | | | — |
Warrant liability – Public Warrants | | 3 | | | — | | | 14,500,000 |
Warrant liability – Private Placement Warrants | | 3 | | | 14,850,000 | | | 12,980,000 |
Description | Level | March 31, 2022 | December 31, 2021 | |||||||||
Assets: | ||||||||||||
Marketable securities held in Trust Account | 1 | $ | 500,171,592 | $ | 500,030,740 | |||||||
Liabilities: | ||||||||||||
Warrant liabilities – Public Warrants | 1 | 7,625,000 | 12,250,000 | |||||||||
Warrant liabilities – Private Placement Warrants | 3 | 6,710,000 | 10,890,000 | |||||||||
Convertible Option Liability | 3 | 6,700 | 145,441 | |||||||||
For subsequent measurements of the Private Warrants after detachment a Modified Black Scholes Option Pricing model was used. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the common stock. The expected volatility was implied from the Company’s own Public Warrant pricing. Other key assumptions used in connection with the Modified Black Scholes model were expected life, risk free rate, and dividend yield, which were based on market conditions, management assumptions, and terms of the warrant agreement.
| | | | | | | | | |
| | Private Warrants | | Private Warrants |
| Public Warrants | |||
| | As of | | As of | | As of | |||
|
| September 30, 2021 |
| December 31, 2020 |
| December 31, 2020 | |||
Exercise price | | $ | 11.50 | | $ | 11.50 | | $ | 11.50 |
Stock price | | $ | 9.78 | | $ | 10.21 | | $ | 10.22 |
Volatility |
| | 19.5% | |
| 19.7% | |
| 19.7% |
Probability of completing a Business Combination | | | 80.0% | |
| 80.0% | |
| 80.0% |
Term | | | 5.25 | | | 5.33 | | | 5.33 |
Risk-free rate | | | 1.13% | | | 0.54% | | | 0.11% |
Dividend yield | | | 0.0% | |
| 0.0% | |
| 0.0% |
20
Private Placement Public Warrant Liabilities January 1, 2021 $ 12,980,000 $ 14,500,000 $ 27,480,000 Change in valuation inputs or other assumptions 3,850,000 1,625,000 5,475,000 Fair value as of March 31, 2021 16,830,000 16,125,000 32,955,000 Change in valuation inputs or other assumptions 7,700,000 9,625,000 17,325,000 Fair value as of June 30, 2021 24,530,000 $ 25,750,000 $ 50,280,000 Change in valuation inputs or other assumptions (9,680,000) (9,500,000) (19,180,000) Fair value as of September 30, 2021 $ 14,850,000 16,250,000 31,100,000 Private Placement Public January 1, 2021 $ 12,980,000 $ 14,500,000 Change in valuation inputs or other assumptions 1,870,000 — Transfer out of level 3 — (14,500,000) Value of level 3 liabilities as of September 30, 2021 $ 14,850,000 $ — SEPTEMBER 30,
As of March 31, 2022
As of
December 31, 2021 $ 11.50 $ 11.50 $ 9.86 $ 9.85 8.1 % 14.7 % 0 % 0 % 5.29 5.29 2.40 % 1.34 % 0.0 % 0.0 % (UNAUDITED)
Placement
Liabilities $ 10,890,000 12,250,000 23,140,000 (4,180,000 ) (4,625,000 ) (8,805,000 ) 6,710,000 7,625,000 14,335,000 Transfers$ 10,890,000 (4,180,000 ) $ 6,710,000 from Levels 1, 2 and 3 are recognized at the endto account for them as free-standing derivative financial instruments.period. Followingdate. The Compound Option model’s primary unobservable input utilized in determining the detachmentfair value of the warrantsconversion option liability is the expected volatility of the common stock. The expected volatility was implied from Unitsthe Company’s own Public Warrant pricing. Other key assumptions used in connection with the Compound Option model were holding period, risk free rate, dividend yield, exercise price, and underlying warrant value, which were based on February 5, 2021,market conditions, management assumptions, and terms of the Public Warrants were transferred from Level 3 to Level 1.11.10. SUBSEQUENT EVENTSstatements other than the below.On October 22, 2021 the Company borrowed $500,000 against the Convertible Promissory Note disclosed in note 6. the principal balance of the Promissory Note amounted to an aggregate of $1,000,000. As of this filing there is $500,000 available for withdrawal under the Convertible Promissory Note.On November 16, 2021, the Company entered into a promissory note (the “Promissory Note”), bearing interest of 1.0% per annum with the sponsor, pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $1,000,000. The Promissory Note is attached as Exhibit 10.1 to this Form 10-Q and is incorporated herein by reference. Any borrowed amounts against the Promissory Note are due upon a successful Business Combination or SPAC dissolution, if funds are available. As of this filing, there is $1,000,000 available for withdrawal under the Promissory Note.On November 16, 2021, the Company amended the terms of the administrative services agreement between the Company and an affiliate of the Sponsor (the “Amendment”) to reflect that, effective January 1, 2022, the $30,000 monthly payments from Company to an affiliate of the Sponsor will no longer be payable by Company but will accrue as a contingent liability, payable upon completion of an initial business combination. The Amendment is attached as Exhibit 10.2 to this Form 10-Q and is incorporated herein by reference.21
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of December 31, 2020, March 31, 2021 and June 30, 2021. Management identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our Class A common stock subject to possible redemption. We previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management concluded that the redemption value should include all Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to its redemption value. As a result, management has noted a classification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
22
non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
$51,951.
For the period from May 12, 2020 (inception) through September 30, 2020, we had a net loss of $1,000, which consists of operating costs of $1,000.
$94,460.
and Going Concern
working capital purposes.
23
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking
Off-Balance Sheet Arrangements
We did Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our initial Business Combination because we do not have any sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account upon expiration of the completion window. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
purpose of facilitating
Warrant Liabilities
The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The Public Warrants and the Private Placement Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation and modified Black Scholes model, respectively. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
24
adjustment associated with the redeemable shares of Class A common stock is excluded from net income (loss) per common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the The Company complies with accounting and disclosure requirements of Financial Accounting Standards Board (“FASB”) issuedASC 260, “Earnings Per Share.”
Management has implemented remediation steps to improve our disclosure controls and procedures and internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
There were no
25
InSEC announcing that it has entered into an agreement with the target company (or companies) to engage in an initial business combination no later than 18 months after the effective date of the SPAC’s registration statement for its initial public offering. The SPAC would then be required to complete its initial business combination no later than 24 months after the effective date of its registration statement for its initial public offering. Although the 2022 Proposed Rules, including the proposed safe harbor rule, have not yet been adopted, there is uncertainty in the SEC’s view of the applicability of the Investment Company Act to a SPAC that does not complete its initial business combination within the proposed time frame set forth in the proposed safe harbor rule or otherwise falls outside of the other provisions of the safe harbor.
After consultation with our independent registered public accounting firmtrust account and our management team,warrants will expire worthless. In certain circumstances, our audit committee concluded that it was appropriate to restate our previously issued audited balance sheet aspublic stockholders may receive less than $10.00 per share on the redemption of December 18, 2021 and our financial statements for the periods ended December 31, 2020, March 31, 2021, and June 30, 2021. As part of such process,their shares if we identified a material weakness in our internal control over financial reporting, solely related to our accounting for complex financial instruments.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We expect to take steps to remediate the material weakness, but there is no assurance that any remediation efforts will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence incomplete our financial reporting and our stock price may decline as a result. We cannot assure you thatinitial business combination within the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
None
26
On November 16, 2021, the Company issued an unsecured promissory note (the “Note”) in the principal amount of $1,000,000 to the Sponsor, which may be drawn down by the Company from time to time upon written notice to the Sponsor. The Note does bears interest of 1.0% per annum and is repayable in full upon the earlier of (i) the date of consummation of the Company’s initial business combination, and (ii) the winding up of the Company. The Note is subject to customary events of default, the occurrence of which automatically triggers the unpaid principal balance of the Note and all other sums payable with regard to the Note becoming immediately due and payable.The issuance of the Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.The disclosure set forth herein is intended to be a summary only and is qualified in its entirety by reference to the Note, which is attached as Exhibit 10.1 to this Form 10-Q and is incorporated herein by reference.On November 16, 2021, the Company amended the terms of the administrative services agreement between the Company and an affiliate of the Sponsor (the “Amendment”) to reflect that, effective January 1, 2022, the $30,000 monthly payments from Company to an affiliate of the Sponsor will no longer be payable by Company but will accrue as a contingent liability, payable upon completion of an initial business combination. The Amendment is attached as Exhibit 10.2 to this Form 10-Q and is incorporated herein by reference.
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No. |
| Description of Exhibit | |
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| 31.2* | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| 32.1** |
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| 32.2** |
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| 101.INS | XBRL Instance | ||
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| 101.SCH | XBRL Taxonomy Extension Schema Document | ||
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| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
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| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
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| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
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| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||
| Exhibit 104 |
| Cover Page Interactive Data | |
| * | Filed herewith. |
*Filed herewith.
**Furnished herewith.
| ** | Furnished herewith. |
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SIGNATURES
CHURCHILL CAPITAL CORP V | |||||||
Date: |
| By: | /s/ Michael Klein | ||||
| Name: | Michael Klein | |||||
|
| Title: | Chief Executive Officer and President | ||||
| (Principal Executive Officer) | |||||||
Date: |
| By: | /s/ Jay Taragin | ||||
| Name: | Jay Taragin | |||||
| Title: | Chief Financial Officer | |||||
| (Principal Accounting | |||||||
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