UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant | VOSOU | The | ||
| The Nasdaq Stock Market LLC | ||||
| Warrants, each exercisable for one share Class A Common Stock for $11.50 per share | VOSOW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
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of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☒ | ||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
As of November 16, 2021, there
were
VIRTUOSO ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | |
| Condensed Balance Sheets (Unaudited) | 1 | |
| Condensed Statements of Operations (Unaudited) | 2 | |
| Condensed Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) | 3 | |
| Condensed Statements of Cash Flows (Unaudited) | 5 | |
| Notes to Condensed Financial Statements | 6 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 27 |
| Item 4. | Control and Procedures | 27 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 29 |
| Item 1A. | Risk Factors | 29 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 29 |
| Item 3. | Defaults Upon Senior Securities | 29 |
| Item 4. | Mine Safety Disclosures | 29 |
| Item 5. | Other Information | 29 |
| Item 6. | Exhibits | 30 |
| SIGNATURES | 31 | |
i
PART I. FINANCIAL STATEMENTS
VIRTUOSO ACQUISITION CORP.
CONDENSED BALANCE SHEETS
September 30, 2021 (Unaudited) | December 31, 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | $ | $ | ||||||
| Prepaid expenses – Non-current | ||||||||
| Marketable securities held in trust account | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Franchise tax payable | ||||||||
| Due to related party | ||||||||
| Sponsor loans | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A Common stock subject to possible redemption, | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
VIRTUOSO ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2021 | NINE MONTHS ENDED SEPTEMBER 30, | FOR THE FROM (INCEPTION) TO SEPTEMBER 30, 2020 | ||||||||||
| Formation and operating costs | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income/(expense): | ||||||||||||
| Interest earned on marketable securities held in trust account | ||||||||||||
| Offering expenses related to warrant issuance | ( | ) | ||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||
| Total other income (expense) | ( | ) | ||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||||||
| Basic and diluted net income per share, Class A common stock | $ | $ | ( | ) | $ | |||||||
| Basic and diluted weighted average shares outstanding, Class B common stock | ||||||||||||
| Basic and diluted net income (loss) per share, Class B common stock | $ | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
VIRTUOSO ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
AND FOR THE PERIOD FROM AUGUST 25, 2020 (INCEPTION) TO SEPTEMBER 30, 2020
(UNAUDITED)
| Common Stock | Additional | Total Stockholders’ | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Excess of cash received over initial fair value of private warrants | - | - | ||||||||||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of March 31, 2021 (As Restated-See Note 2) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2021 (As Restated-See Note 2) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
3
VIRTUOSO ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM AUGUST 25, 2020 (INCEPTION) TO SEPTEMBER 30, 2020
(UNAUDITED)
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance as of August 25, 2020 (Inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Class B common stock issued to Sponsor | - | - | - | |||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
VIRTUOSO ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
AND FOR THE PERIOD FROM AUGUST 25, 2020 (INCEPTION) TO SEPTEMBER 30, 2020
(UNAUDITED)
NINE MONTHS ENDED | FOR THE AUGUST 25, (INCEPTION) TO SEPTEMBER 30, | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on trust account | ( | ) | ||||||
| Change in fair value of warrant liabilities | ||||||||
| Offering costs allocated to warrants | ||||||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Franchise tax payable | ||||||||
| Due to related party | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash into trust account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from Initial Public Offering, net of underwriters’ discount | ||||||||
| Proceeds from issuance of Private Placement Warrants | ||||||||
| Repayment of promissory note to related party | ( | ) | ||||||
| Payments of offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ||||||||
| Cash - Beginning | ||||||||
| Cash - Ending | $ | $ | ||||||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||||||
| Initial value of Class A common stock subject to possible redemption | $ | $ | ||||||
| Initial value of warrant liabilities | $ | $ | ||||||
| Deferred underwriters’ discount payable charged to additional paid-in capital | $ | $ | ||||||
| Deferred offering costs paid by Sponsor | $ | $ | ||||||
| Deferred offering costs paid by Sponsor in exchange for issuance of Class B common stock | $ | $ | ||||||
| Deferred offering costs in accrued expenses | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
VIRTUOSO ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Organization and Business Operations
Organization and General
Virtuoso Acquisition Corp. (the “Company”) was incorporated in Delaware on August 25, 2020. The Company, formerly known as Virtucon Acquisition Corp., filed a Certificate of Amendment to their Certificate of Incorporation on November 3, 2020 changing its name to Virtuoso Acquisition Corp. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). The Company has not selected any specific business combination target and the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. The Company has selected December 31 as its fiscal year end. The Company’s sponsor is Virtucon Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
As of September 30, 2021, the Company had not yet commenced any operations. All activity through September 30, 2021, relates to the Company’s formation and the Initial Public Offering (“IPO”) described below, and the search for a business combination target. The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and gains or losses on the change in fair value of warrant liabilities.
Financing
The
registration statement for the Company’s IPO was declared effective on January 21, 2021 (the “Effective Date”). On
January 26, 2021, the Company consummated the IPO of
Simultaneously
with the closing of the IPO, the Company consummated the sale of
Transaction
costs amounted to $
Trust Account
Following
the closing of the IPO on January 26, 2021, an amount of $
6
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds are intended to be generally applied toward consummating a business combination.
The
Company’s business combination must be with one or more target businesses that together have a fair market value equal to at least
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion
of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial business
combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem
their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $
The shares of common stock subject to redemption
is recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed
with a business combination if the Company has net tangible assets of at least $
The
Company will have 24 months from the closing of the IPO (with the ability to extend with stockholder approval) to consummate a business
combination (the “Combination Period”). However, if the Company is unable to complete a business combination within the Combination
Period, the Company will redeem
The Company’s Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares and private placement shares if the Company fails to complete the initial business combination within the Combination Period.
7
Going Concern Consideration
As
of September 30, 2021, the Company had approximately $
Until the consummation of a business combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the business combination. The Company may need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. The Company’s ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.
Note 2 - Restatement of Previously Issued Financial Statements
In
the Company’s previously issued financial statements, a portion of the public shares were classified as permanent equity to maintain
stockholders’ equity greater than $
However, in light of recent comment letters issued by the U.S. Securities and Exchange Commission (“SEC”) to several special purpose acquisition companies, management re-evaluated the Company’s application of ASC 480-10-S99 to its accounting classification of public shares. Upon re-evaluation, management determined that the public shares include certain provisions that require classification of the public shares as temporary equity regardless of the minimum net tangible asset required by the Company to complete its initial business combination.
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 Company evaluated the changes and has determined that the related impacts were material to any previously presented financial statements. Therefore, the Company, in consultation with its audit committee, concluded that its previously issued financial statements impacted should be restated to report all public shares as temporary equity. As such the Company is restating those periods in this quarterly report on the Form 10-Q (the “Quarterly Report”).
8
Impact of the Restatement
The impacts to the balance sheet as of January 26, 2021, the balance sheets as of March 31, 2021 and June 30, 2021, the statements of operations for the three months ended March 31 2021 and the three and six months ended June 30, 2021, the statements of changes in stockholders’ equity for the three months ended March 31, 2021 and for the three months ended June 30, 2021, and the Statements of Cash Flows for the three months ended March 31, 2021 and the six months ended June 30, 2021 is presented below:
| As Previously | Restatement | |||||||||||
| Reported | Adjustment | As Restated | ||||||||||
| Balance Sheet as of January 26, 2021 (as revised in Footnote 2 to the Financial Statements included in the Company’s quarterly report on Form 10-Q for the quarterly period ended on March 31, 2021 and filed with the SEC on June 3, 2021 (“2021 Q1 Financials”)) | ||||||||||||
| Class A common stock, $ |
$ | $ | $ | |||||||||
| Stockholders’ equity (deficit): | ||||||||||||
| Class A common stock - $ |
( |
) | ||||||||||
| Additional paid-in capital | ( |
) | ||||||||||
| Retained Earnings (Accumulated Deficit) | ( |
) | ( |
) | ( |
) | ||||||
| Total stockholders’ equity (deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Shares subject to possible redemption | ||||||||||||
| Shares of Class A common stock issued and outstanding | ( |
) | ||||||||||
| Balance Sheet as of March 31, 2021 (per 2021 Q1 Financials) | ||||||||||||
| Class A common stock, $ |
$ | $ | $ | |||||||||
| Stockholders’ equity (deficit): | ||||||||||||
| Class A common stock - $ |
( |
) | ||||||||||
| Additional paid-in capital | ( |
) | ||||||||||
| Retained Earnings (Accumulated Deficit) | ( |
) | ( |
) | ||||||||
| Total stockholders’ equity (deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Shares subject to possible redemption | ||||||||||||
| Shares of Class A common stock issued and outstanding | ( |
) | ||||||||||
| Balance Sheet as of June 30, 2021 (per 2021 Q1 Financials included in the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2021 and filed with the SEC on August 17, 2021 (“2021 Q2 Financials”) | ||||||||||||
| Class A common stock, $ |
$ | $ | $ | |||||||||
| Stockholders’ equity (deficit) | ||||||||||||
| Class A common stock - $ |
( |
) | ||||||||||
| Additional paid-in-capital | ( |
) | ||||||||||
| Retained Earnings (Accumulated Deficit) | ( |
) | ( |
) | ( |
) | ||||||
| Total stockholders’ equity (deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Shares subject to possible redemption | ||||||||||||
| Shares of Class A common stock issued and outstanding | ( |
) | ||||||||||
9
| Statement of Operations for the three months ended March 31, 2021 (per 2021 Q1 Financials) | ||||||||||||
| Weighted average shares outstanding, Class A common stock subject to possible redemption | ( | ) | ||||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Weighted average shares outstanding, non-redeemable common stock | ( | ) | ||||||||||
| Basic and diluted net income per share, non-redeemable common stock | $ | $ | ( | ) | $ | |||||||
| Statement of Operations for the three months ended June 30, 2021 (per 2021 Q2 Financials) | ||||||||||||
| Weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||||||
| Basic and diluted net loss per share, Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | ( | ) | |||||
| Weighted average shares outstanding, non-redeemable common stock | ( | ) | ||||||||||
| Basic and diluted net loss per share, non-redeemable common stock | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Operations for the six months ended June 30, 2021 (per 2021 Q2 Financials) | ||||||||||||
| Weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||||||
| Basic and diluted net loss per share, Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | ( | ) | |||||
| Weighted average shares outstanding, non-redeemable common stock | ( | ) | ||||||||||
| Basic and diluted net loss per share, non-redeemable common stock | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2021 (per 2021 Q1 Financials) | ||||||||||||
| Sale of Units in Initial Public Offering, less fair value of public warrants, net of offering expenses, plus excess of cash received over initial fair value of private warrants | $ | $ | ( | ) | $ | |||||||
| Class A common stock subject to possible redemption | ( | ) | ||||||||||
| Excess of cash received over initial fair value of private warrants | ||||||||||||
| Accretion of Class A common stock subject to possible redemption | $ | ( | ) | $ | ( | ) | ||||||
| Statement of Changes in Stockholders’ Equity for the three months ended June 30, 2021 (per 2021 Q2 Financials) | ||||||||||||
| Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Statement of Cash Flows for the three months ended March 31, 2021 (per 2021 Q1 Financials) | ||||||||||||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||||||||||
| Initial value of Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of Class A common stock subject to possible redemption | ( | ) | ||||||||||
| Statement of Cash Flows for the six months ended June 30, 2021 (per 2021 Q2 Financials) | ||||||||||||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||||||||||
| Initial value of Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of Class A common stock subject to possible redemption | ( | ) | ||||||||||
10
Note 3 – Basis of Presentation and 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 (“US 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 US 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 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 accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on January 26, 2021, as well as the Company’s Current Reports on Form 8-K. 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 interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), 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 auditor attestation requirements of Section 404 of 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 nonbinding 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 Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that 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 condensed financial statements 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 condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2021 and December 31, 2020, the Company had no cash equivalents.
11
Marketable Securities Held in Trust Account
At
September 30, 2021, the Trust Account had $
At
other times, the Company may hold U.S Treasury bills with a maturity of 185 days or less.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion is included in the “interest income” line item in the statements of operations. Interest income is recognized when earned. The Company held no U.S Treasury Securities at September 30, 2021.
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 Coverage of $
Common Stock Subject to Possible Redemption
All of the Class A common stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, all shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ 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 and accumulated deficit.
Net Income (Loss) per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net loss per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The Company has two classes of shares, Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The Company’s condensed statement of operations applies the two-class method in calculating net income per share. Basic and diluted net income per common share for Class A common stock and Class B common stock is calculated by dividing net income attributable to the Company by the weighted average number of shares of Class A common stock and Class B common stock outstanding, allocated proportionally to each class of common stock.
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The Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income per share is the same as basic income per share for the period presented.
Reconciliation of Net Income (Loss) per Common Share
The Company’s net income (loss) is adjusted for the portion of net income (loss) that is allocable to each class of common stock. The allocable net income is calculated by multiplying net income by the ratio of weighted average number of shares outstanding attributable to Class A and Class B common stock to the total weighted average number of shares outstanding for the period. Accordingly, basic and diluted income per common share is calculated as follows:
| Three Months Ended September 30, 2021 | Nine
Months | The
Period | ||||||||||
| Class A Common Stock | ||||||||||||
| Allocation of net income (loss) to Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Basic and diluted weighted average shares outstanding, Class A common stock | ||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | ( | ) | $ | |||||||
| Class B Common Stock | ||||||||||||
| Allocation of net income (loss) to Class B common stock | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, Class B common stock | ||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | ( | ) | $ | ( | ) | |||||
Offering Costs
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses
of Offering”. Offering costs totaling $
The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common stock.
Warrant liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
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The
Company accounts for its
Fair Value of Financial Instruments
The Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The carrying amounts reflected in the balance sheet for cash, prepaid expenses and accounts payable and accrued expenses approximate fair value due to their short-term nature.
Level 1 - Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 - Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
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 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 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s condensed financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021. 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 has identified the United States as its only “major” tax jurisdiction.
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The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Standards
In August 2020, the FASB issued the 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. 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 is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Note 4 - Initial Public Offering
Pursuant
to the Initial Public Offering, the Company sold
Warrants
Each whole warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s Sponsor or its affiliates, without taking into account any founder shares held by the Company’s Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the initial business combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. The warrants will become exercisable on the later of 12 months from the closing of this offering or 30 days after the completion of its initial business combination, and will expire five years after the completion of the Company’s initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
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Once the warrants become exercisable, the Company may call the warrants for redemption for cash:
If the Company calls the warrants for redemption as described above, the management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” If the management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Note 5 - Private Placement Warrants
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of
The private placement warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. If the private placement warrants are held by holders other than the Sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering.
The
Company’s Sponsor has agreed to (i) waive its redemption rights with respect to its founder shares and public shares in connection
with the completion of the Company’s initial business combination, (ii) waive its redemption rights with respect to its founder
shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate
of incorporation (A) to modify the substance or timing of the Company’s obligation to offer redemption rights in connection with
any proposed initial business combination or certain amendments to the Company’s charter prior thereto or to redeem
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Note 6 - Related Party Transactions
Founder Shares
On
August 28, 2020 the Sponsor purchased
The
Sponsor has agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned, sold or released
from escrow until the earlier of (A) one year after the completion of a Business Combination or (B) subsequent to a Business
Combination. Notwithstanding the foregoing, if the last reported sale price of the shares of our Class A common stock equals or
exceeds $
Promissory Note - Related Party
On
September 2, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an
aggregate principal amount of $
Administrative Support Agreement
Commencing
on January 21, 2021, the Company has agreed to pay the Sponsor a total of $
Working Capital Loans
In
order to finance transaction costs in connection with a Business Combination, the initial stockholders or an affiliate of the initial
stockholders or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be
required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working
Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid
only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion
of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used
to repay the Working Capital Loans. Except for the foregoing, 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 $
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Note 7 - Commitments & Contingencies
Registration Rights
The holders of the founder shares, private placement warrants, and warrants that may be issued upon conversion of working capital loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
Underwriters Agreement
On
January 26, 2021, the Company paid a fixed underwriting discount of $
Note 8 - Stockholder’s Equity
Preferred
Stock - The Company is authorized to issue a total of
Class
A Common Stock - The Company is authorized to issue a total of
Class
B Common Stock - The Company is authorized to issue a total of
The Company’s initial stockholders have agreed not to transfer, assign or sell their founder shares until the earlier to occur of (A) one year after the completion of the Company’s initial business combination or (B) subsequent to the Company’s initial business combination, (x) if the last reported sale price of the Company’s 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 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial business combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property.
The
shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time
of its initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations,
recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A
common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related
to the closing of the initial business combination, the ratio at which shares of Class B common stock shall convert into shares
of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock
agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common
stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, with each share of common stock entitling the holder to one vote.
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Note 9 - Fair Value Measurements
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Quoted | Significant | Significant | ||||||||||||||
| Prices In | Other | Other | ||||||||||||||
| Active | Observable | Unobservable | ||||||||||||||
| September 30, | Markets | Inputs | Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Description | ||||||||||||||||
| Warrant liabilities - Public warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liabilities - Private warrants | ||||||||||||||||
| Total | $ | $ | $ | |||||||||||||
The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The Public Warrants transferred to Level 1 when they began trading separately on March 15, 2021. The subsequent measurement of the Public Warrants as of September 30, 2021, is classified as Level 1 due to the use of an observable market quote in an active market.
The Company utilizes a Modified Black-Scholes model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the Private Placement warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
There were no transfers between Levels 1, 2 or 3 during the nine months ended September 30, 2021, other than the transfer of Public warrants liabilities from Level 3 to Level 1
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our liabilities classified as Level 3:
| Warrant | ||||
| Liability | ||||
| Fair value at December 31, 2020 | $ | |||
| Initial value of public and private warrant liabilities | ||||
| Public warrants transferred to level 1 | ( | ) | ||
| Change in fair value of private warrant liabilities | ||||
| Fair Value at June 30, 2021 | $ | |||
| Change in fair value of private warrant liabilities | ( | ) | ||
| Fair Value at September 30, 2021 | $ | |||
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The following table provides quantitative information regarding Level 3 fair value measurements:
| At | ||||||||
| January 26, | ||||||||
|
2021 (Initial |
At September 30, |
|||||||
| Measurement) | 2021 | |||||||
| Stock price | $ | |
$ | |||||
| Strike price | $ | $ | ||||||
| Term (in years) | ||||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
Note 10 – Pending Merger
On
May 28, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company,
Wejo Group Limited, a company incorporated under the laws of Bermuda (the “Wejo Group”), Yellowstone Merger Sub, Inc., a
Delaware corporation and direct, wholly-owned Subsidiary of the Company (“Merger Sub”), Wejo Bermuda Limited, a Bermuda private
company limited by shares, (“Limited”), and Wejo Limited, a private limited company incorporated under the laws of England
and Wales (“Wejo”). Pursuant to the Merger Agreement, the parties thereto will enter into a business combination transaction
(the “Business Combination”) pursuant to which, among other things, (i) Merger Sub will merge with and into the Company,
with the Company being the surviving corporation in the merger and a direct, wholly-owned subsidiary of the Wejo Group (the “Merger”,
and together with the transactions contemplated by the Merger Agreement and the other related agreements entered into in connection therewith,
the “Transactions”); and (ii) all Wejo shares will be purchased by the Wejo Group in exchange for common shares of the Wejo
Group, par value $
Consummation of the Business Combination is subject to customary conditions, representations, warranties and covenants in the Merger Agreement, including, among others, approval by our stockholders, the effectiveness of a registration statement to be filed with the SEC in connection with the Business Combination, and other customary closing conditions, including the receipt of certain regulatory approvals.
On July 16, 2021, Wejo Group filed the registration on Form S-4 with the SEC, which includes the preliminary proxy statement to be distributed to holders of the Company’s common stock in connection with the Company’s solicitation for proxies for the vote by the Company’s stockholders in connection with the proposed business combination and other matters as described in the registration statement on Form S-4, as well as a prospectus of Wejo Group relating to the offer of the securities to be issued in connection with the completion of the business combination. After the Form S-4 has been declared effective by the SEC, the definitive proxy statement/prospectus will be mailed to the Company’s stockholders as of a record date to be disclosed for voting on the proposed business combination. The Business Combination is expected to close in the fourth quarter of 2021.
In
connection with the execution of the Merger Agreement, the Company and Wejo Group entered into certain subscription agreements (the “Subscription
Agreements”) with certain investors pursuant to which, Wejo Group has agreed to issue and sell to the PIPE Investors, in the aggregate,
$
On October 22, 2021, the SEC declared Wejo Group’s registration statement on Form S-4 effective and the Company filed its definitive proxy statement/prospectus relating to the Business Combination. See Note 11 for additional information.
We have received four demand letters from putative stockholders of Virtuoso dated August 6, 2021, October 29, 2021, November 3, 2021, and November 4, 2021 (together, the “Demands”) generally alleging that the proxy statement/prospectus forming part of the registration statement on Form S-4 that Wejo Group filed with the SEC on July 16, 2021, as amended on October 22, 2021, omits material information with respect to our proposed business combination with Wejo. The Demands seek the issuance of corrective disclosures in an amendment or supplement to the proxy statement/prospectus. We additionally received an unfiled complaint from one of the putative stockholders, which was enclosed with the demand letter dated October 29, 2021 (the “Draft Complaint”). The Draft Complaint generally alleges that the proxy statement/prospectus is materially incomplete and misleading, and asserts claims under Sections 14(a) and 20(a) of the Exchange Act against the Company and the Company’s Board of Directors. The Draft Complaint seeks, among other things, an order enjoining the proposed business combination, damages, and an award of attorneys’ fees (see Note 11).
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Note 11 – Subsequent Events
On October 22, 2021, the SEC declared effective Wejo Group’s registration on Form S-4. The Company filed its definitive proxy statement/prospectus providing for a meeting on November 16, 2021 on which the shareholders of record as of October 14, 2021 will consider and vote upon (i) the approval of the Business Combination, including the adoption of the Merger Agreement, the issuance of the Virtuoso Class C Common Stock and the other transactions contemplated by the Merger Agreement and related agreements described in definitive proxy statement/prospectus, (ii) the adoption of the Second Amended and Restated Certificate of Incorporation in the form attached as Annex B of the definitive proxy statement/prospectus; and (iii) on a non-binding advisory basis, certain governance provisions of the Wejo Group Bye-laws. The Business Combination is expected to close on or about November 18, 2021.
On November 10, 2021, each of Apollo A-N Credit Fund (Delaware), L.P., Apollo Atlas Master Fund, LLC, Apollo Credit Strategies Master Fund Ltd., Apollo PPF Credit Strategies, LLC and Apollo SPAC Fund I, L.P. (each a “Seller”) entered into an agreement, on a several and not joint basis, with Wejo Group (the “Forward Purchase Agreement”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). Each Seller intends, but is not obligated, to purchase shares of our Class A common stock (the “VOSO Shares”) from holders of VOSO Shares, including holders (other than the Company or affiliates of the Company) who have redeemed VOSO Shares or indicated an interest in redeeming VOSO Shares pursuant to the redemption rights set forth in Company’s Certificate of Incorporation in connection with the Business Combination (such redeemed or redeeming holders, the “Redeeming Holders”). Pursuant to the terms of the Forward Purchase Agreement, each Seller has agreed to waive any redemption rights with respect to any such VOSO Shares purchased from the Redeeming Holders in connection with the Business Combination.
At any time, and from time to time, after the closing of the Business Combination, each Seller may sell FPA Shares at its sole discretion in one or more transactions, publicly or privately and, in connection with such sales, terminate the Forward Purchase Transaction in whole or in part in an amount corresponding to the number of FPA Shares sold (the “Terminated Shares”) with notice required to Wejo Group within one business day following any such sale. On the settlement date of any such early termination, such Seller will pay to Wejo Group a pro rata portion of the Prepayment Amount representing the Forward Price for the Terminated Shares. At the Maturity Date, each Seller will transfer any remaining FPA Shares to Wejo Group in satisfaction of its obligations under the Forward Purchase Agreement.
Wejo Group may deliver a written notice to each Seller requesting partial settlement of the transaction subject to there being a remaining percentage of the FPA Shares (the “Excess Shares”) that has not become Terminated Shares within a six month or one year period. The amount paid in such early settlement to Wejo Group is equal to the lesser of (i) the number of such Excess Shares sold in the early settlement multiplied by the Forward Price and (ii) the net sale proceeds received by such Seller for such Excess Shares sold in the early settlement. In certain circumstances, Wejo Group may also request that each Seller transfers such Excess Shares to a designee of Wejo Group rather than selling such shares in the market.
Also on November 10, 2021,
the Company and Wejo Group entered into one additional subscription agreement (“Additional Subscription Agreement”)
with an investor (“Additional Investor”), pursuant to which the Company and Wejo Group agreed to sell to the Additional
Investor an additional aggregate amount of $
We have received four demand letters from putative stockholders of Virtuoso dated August 6, 2021, October 29, 2021, November 3, 2021, and November 4, 2021 (together, the “Demands”) generally alleging that the proxy statement/prospectus forming part of the registration statement on Form S-4 that Wejo Group filed with the SEC on July 16, 2021, as amended on October 22, 2021, omits material information with respect to our proposed business combination with Wejo. The Demands seek the issuance of corrective disclosures in an amendment or supplement to the proxy statement/prospectus. We additionally received an unfiled complaint from one of the putative stockholders, which was enclosed with the demand letter dated October 29, 2021 (the “Draft Complaint”). The Draft Complaint generally alleges that the proxy statement/prospectus is materially incomplete and misleading, and asserts claims under Sections 14(a) and 20(a) of the Exchange Act against the Company and the Company’s Board of Directors. The Draft Complaint seeks, among other things, an order enjoining the proposed business combination, damages, and an award of attorneys’ fees.
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements other than those provided above.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this 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 and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
The forward-looking statements with respect to the Transactions (as defined below) and the PIPE Investment (as defined below) involve significant risks and uncertainties that could cause the actual results to differ materially, and potentially adversely, from those expressed or implied in the forward-looking statements. Most of these factors are outside the Company’s and Wejo’s (as defined below) control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (i) the occurrence of any event, change, or other circumstances that could give rise to the termination of the Merger Agreement (as defined below); (ii) the outcome of any legal proceedings that may be instituted against the Company and/or Wejo following the announcement of the Merger Agreement and the transactions contemplated therein; (iii) the inability to complete the proposed business combination, including due to failure to obtain approval of the stockholders of the Company, certain regulatory approvals, or the satisfaction of other conditions to closing in the Merger Agreement; (iv) the occurrence of any event, change, or other circumstance that could give rise to the termination of the Merger Agreement or could otherwise cause the transaction to fail to close; (v) the impact of the COVID-19 pandemic on Wejo’s business and/or the ability of the parties to complete the proposed business combination; (vi) the inability to obtain or maintain the listing of Wejo Group’s (as defined below) common shares on the Nasdaq following the proposed business combination; (vii) the risk that the proposed business combination disrupts current plans and operations as a result of the announcement and consummation of the proposed business combination; (viii) the ability to recognize the anticipated benefits of the proposed business combination, which may be affected by, among other things, competition, the ability of Wejo to grow and manage growth profitably, and retain its key employees; (ix) costs related to the proposed business combination; (x) changes in applicable laws or regulations; and (xi) the possibility that Wejo, Wejo Group or the Company may be adversely affected by other economic, business, and/or competitive factors. The foregoing list of factors is not exclusive. Additional information concerning certain of these and other risk factors is contained in the Company’s most recent filings with the SEC and will be contained in the Form S-4, including the proxy statement/prospectus expected to be filed in connection with the proposed business combination. All subsequent written and oral forward-looking statements concerning Wejo, Wejo Group or the Company, the transactions described herein or other matters and attributable to the Company or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Each of Wejo, Wejo Group and the Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with respect thereto or any change in events, conditions, or circumstances on which any statement is based, except as required by law.
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Financing
The registration statement for the Company’s IPO was declared effective on January 21, 2021 (the “Effective Date”). On January 26, 2021, the Company consummated the IPO of 23,000,000 units (the “Units” and, with respect to the common stock included in the Units being offered, the “public share”), at $10.00 per Unit, generating gross proceeds of $230,000,000, which is discussed in Note 4.
Simultaneously with the closing of the IPO, the Company consummated the sale of 6,600,000 warrants (the “Private Placement Warrant”), at a price of $1.00 per Private Placement Warrant, which is discussed in Note 5.
Transaction costs amounted to $13,109,495 consisting of $4,600,000 of underwriting fee, $8,050,000 of deferred underwriting fee and $459,495 of other offering costs. Of the total transaction cost $529,112 was expensed as non-operating expenses in the statement of operations with the remaining balance of $12,580,383 recorded as a component of stockholders’ equity. The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common stock.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our initial public offering and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held in the trust account and gains and losses on change in fair value of warrant liabilities. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the nine months ended September 30, 2021, we had a net loss of $7,498,549. We incurred $850,359 of formation and operating costs consisting mostly of general and administrative expenses. We had investment income of $34,922 on our amounts held in Trust. A portion of the offering costs associated with the IPO was charged to expense in the amount of $529,112 based on a relative fair value basis.
For the three months ended September 30, 2021, we had a net income of $10,213,053. We incurred $255,906 of formation and operating costs consisting mostly of general and administrative expenses. We had investment income of $2,959 on our amounts held in Trust.
We classify the warrants issued in connection with our initial public offering and private placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. For the three and nine months ended September 30, 2021, the change in fair value of warrants was an increase in the liability of $10,466,000 and a decrease in the liability of $6,154,000, respectively.
For the period from August 25, 2020 (inception) through September 30, 2020, we had a net loss of $683 from our formation costs incurred.
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Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately $0.68 million in cash and working capital of approximately $0.63 million, which would be reduced by expenses incurred working on a business combination after the balance sheet date.
For the nine months ended September 30, 2021, we had a net increase in cash of approximately $0.7 million, comprised of cash provided by financing activities of approximately $231.6 million, offset by cash used in investing activities of approximately $230.0 million and cash used in operating activities of approximately $0.9 million. For the period from August 25, 2020 (inception) through September 30, 2020, we had no cash flows, only accrued offering costs and expenses and offering costs paid by our Sponsor.
Until the consummation of a business combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the business combination.
The Company may need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Pending Merger
On May 28, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Wejo Group Limited, a company incorporated under the laws of Bermuda (the “Wejo Group”), Yellowstone Merger Sub, Inc., a Delaware corporation and direct, wholly-owned Subsidiary of the Company (“Merger Sub”), Wejo Bermuda Limited, a Bermuda private company limited by shares, (“Limited”), and Wejo Limited, a private limited company incorporated under the laws of England and Wales (“Wejo”). Pursuant to the Merger Agreement, the parties thereto will enter into a business combination transaction (the “Business Combination”) pursuant to which, among other things, (i) Merger Sub will merge with and into the Company, with the Company being the surviving corporation in the merger and a direct, wholly-owned subsidiary of the Wejo Group (the “Merger”, and together with the transactions contemplated by the Merger Agreement and the other related agreements entered into in connection therewith, the “Transactions”); and (ii) all Wejo shares will be purchased by the Wejo Group in exchange for common shares of the Wejo Group, par value $0.001 (the “Wejo Group Common Shares”). The proposed Business Combination is expected to be consummated after the required approval by the stockholders of the Company and the satisfaction of certain other conditions.
Consummation of the Business Combination is subject to customary conditions, representations, warranties and covenants in the Merger Agreement, including, among others, approval by our stockholders, the effectiveness of a registration statement to be filed with the Securities and Exchange Commission (the “SEC”) in connection with the Business Combination, and other customary closing conditions, including the receipt of certain regulatory approvals.
On July 16, 2021, Wejo Group filed the registration statement on Form S-4 with the SEC, which includes the preliminary proxy statement to be distributed to holders of the Company’s common stock in connection with the Company’s solicitation for proxies for the vote by the Company’s stockholders in connection with the proposed business combination and other matters as described in the Form S-4, as well as a prospectus of Wejo Group relating to the offer of the securities to be issued in connection with the completion of the business combination. On October 22, 2021, the registration statement on Form S-4 was declared effective by the SEC. On the same day, the Company filed its definitive proxy statement/prospectus providing for a meeting on November 16, 2021 on which the shareholders of record as of October 14, 2021 will consider and vote upon (i) the approval of the Business Combination, including the adoption of the Merger Agreement, the issuance of the Virtuoso Class C Common Stock and the other transactions contemplated by the Merger Agreement and related agreements described in definitive proxy statement/prospectus, (ii) the adoption of the Second Amended and Restated Certificate of Incorporation in the form attached as Annex B of the definitive proxy statement/prospectus; and (iii) on a non-binding advisory basis, certain governance provisions of the Wejo Group Bye-laws. The Business Combination is expected to close on or about November 18, 2021.
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In connection with the execution of the Merger Agreement, the Company and Wejo Group entered into certain subscription agreements (the “Subscription Agreements”) with certain investors pursuant to which, Wejo Group has agreed to issue and sell to the PIPE Investors, in the aggregate, $100 million of Wejo Group Common Shares at a purchase price of $10.00 per share. On June 25, 2021 and on November 10, 2021, additional strategic investors and an investor, respectively, (collectively with all other investors who entered into Subscription Agreements, the “PIPE Investors”) entered into Subscription Agreements purchasing an incremental $25 million and $3.5 million, respectively, of Wejo Group Common Shares on substantially the same terms as other PIPE Investors, for a total investment in Wejo Group Common Shares of $128.5 million (the “PIPE Investment”). The closing of the PIPE Investment is conditioned on all conditions set forth in the Merger Agreement having been satisfied or waived and other customary closing conditions, and it is expected that the Transactions will be consummated immediately following the closing of the PIPE Investment. The Subscription Agreements will terminate upon the earliest to occur of (i) the termination of the Merger Agreement, (ii) the mutual written agreement of the parties thereto, (iii) Wejo Group’s notification to the PIPE Investor in writing that it has abandoned its plans to move forward with the Transactions and/or terminates the PIPE Investor’s obligation’s with respect to the subscription without the delivery of shares having occurred, (iv) if conditions to the closing are not satisfied at or are not capable of being satisfied on or prior to closing and the transactions contemplated by the subscription agreement are not consummated at closing, or (v) the closing has not occurred by March 31, 2022.
On November 10, 2021, each of Apollo A-N Credit Fund (Delaware), L.P., Apollo Atlas Master Fund, LLC, Apollo Credit Strategies Master Fund Ltd., Apollo PPF Credit Strategies, LLC and Apollo SPAC Fund I, L.P. (each a “Seller”) entered into an agreement, on a several and not joint basis, with Wejo Group (the “Forward Purchase Agreement”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). Each Seller intends, but is not obligated, to purchase shares of our Class A common stock (the “VOSO Shares”) from holders of VOSO Shares, including holders (other than the Company or affiliates of the Company) who have redeemed VOSO Shares or indicated an interest in redeeming VOSO Shares pursuant to the redemption rights set forth in Company’s Certificate of Incorporation in connection with the Business Combination (such redeemed or redeeming holders, the “Redeeming Holders”). Pursuant to the terms of the Forward Purchase Agreement, each Seller has agreed to waive any redemption rights with respect to any such VOSO Shares purchased from the Redeeming Holders in connection with the Business Combination.
Subject to certain termination provisions, the Forward Purchase Agreement provides that on the 2-year anniversary of the effective date of the Forward Purchase Transaction (the “Maturity Date”), each Seller will sell to Wejo the number of shares purchased by such Seller (up to a maximum of 7,500,000 shares across all Sellers) of VOSO Shares (or any shares received in a share-for-share exchange pursuant to the Business Combination) (the “FPA Shares”) at a price equal to the per share redemption price of VOSO Shares calculated pursuant to Section 9.2 of Virtuoso’s Certificate of Incorporation (the “Forward Price”). In consideration for such sale, one business day following the closing of the Business Combination, such Seller will be paid an amount equal to the Forward Price multiplied by the number of FPA Shares underlying the Transaction between such Seller and Wejo (the “Prepayment Amount”).
At any time, and from time to time, after the closing of the Business Combination, each Seller may sell FPA Shares at its sole discretion in one or more transactions, publicly or privately and, in connection with such sales, terminate the Forward Purchase Transaction in whole or in part in an amount corresponding to the number of FPA Shares sold (the “Terminated Shares”) with notice required to Wejo Group within one business day following any such sale. On the settlement date of any such early termination, such Seller will pay to Wejo Group a pro rata portion of the Prepayment Amount representing the Forward Price for the Terminated Shares. At the Maturity Date, each Seller will transfer any remaining FPA Shares to Wejo Group in satisfaction of its obligations under the Forward Purchase Agreement.
Wejo Group may deliver a written notice to each Seller requesting partial settlement of the transaction subject to there being a remaining percentage of the FPA Shares (the “Excess Shares”) that has not become Terminated Shares within a six month or one year period. The amount paid in such early settlement to Wejo Group is equal to the lesser of (i) the number of such Excess Shares sold in the early settlement multiplied by the Forward Price and (ii) the net sale proceeds received by such Seller for such Excess Shares sold in the early settlement. In certain circumstances, Wejo Group may also request that each Seller transfers such Excess Shares to a designee of Wejo Group rather than selling such shares in the market.
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Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Except as set forth below, there have been no significant changes in our critical accounting policies as discussed in the final prospectus filed by us with the SEC on January 26, 2021.
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
We issued an aggregate of 18,100,000 warrants in connection with our initial public offering and private placement, which, as a result of the restatement described in Note 2 “Restatement of Previously Issued Financial Statements” to the condensed financial statements included herein, are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrants as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of September 30, 2021 used the observable market quote in the active market. The Company utilizes a Modified Black-Scholes model to value the Private Placement Warrants for the initial valuation and at September 30, 2021.
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Common Stock Subject to Possible Redemption
All of the Class A common stock sold as part of the Units in our Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the our second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at September 30, 2021 and December 31, 2020, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets, respectively.
We recognize 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 and accumulated deficit.
Net Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net loss per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The Company has two classes of shares, Class A Common Stock and Class B Common Stock. Earnings and losses are shared pro rata between the two classes of shares. The Company’s condensed statement of operations applies the two-class method in calculating net income per share. Basic and diluted net income per common share for Class A common stock and Class B common stock is calculated by dividing net income attributable to the Company by the weighted average number of shares of Class A common stock and Class B common stock outstanding, allocated proportionally to each class of common stock.
The Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income per share is the same as basic income per share for the period presented.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Administrative Support Agreement
Commencing on January 21, 2021, we have agreed to pay the Sponsor a total of $10,000 per month for office space and administrative support services. Upon completion of the Initial Business Combination or liquidation, we will cease paying these monthly fees. For the three and nine months ended September 30, 2021, we have incurred and recorded $30,000 and $83,226, respectively, of administrative support expense which is accrued as payable to our Sponsor.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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As required by Rules 13a-15 and 15d-15 under the Exchange Act, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021-. Controls and Procedures included in our Quarterly Report on Form 10-Q as filed with the SEC on June 3, 2021, and due to the restatements of our January 26, 2021, March 31, 2021, and June 30, 2021 financial statements (the "restatements") regarding the classification of redeemable Class A Shares, as described below, which combined, constitutes a material weakness in our internal control over financial reporting. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Regarding the restatements to the March 31, 2021, and June 30, 2021 quarterly financial statements included in the Company's Form 10-Qs, as filed with the SEC on June 3, 2021 and August 17, 2021, respectively, as well as the Company's balance sheet included on the Company's Form 8-K, as filed with the SEC on February 1, 2021, and restated on the Form 10-Q filed with the SEC on June 3, 2021, certain redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the Class A common stock subject to possible redemption in permanent equity. The Company restated its financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity.
It is noted that the non-cash adjustments to the financial statement do not impact the amounts previously reported for our cash and cash equivalents or total assets. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended on September 30, 2021 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Remediation Plan
As a newly created organization, we are currently in the process of implementing our financial reporting processes and will incorporate enhanced communication and documentation procedures between our operations team and the individuals responsible for preparation of financial statements. These controls are expected to include the implementation of additional supervision and review activities by qualified personnel, and the development and use of checklists and research tools to assist in compliance with GAAP. We intend to complete the enhancement of our financial reporting processes during fiscal year 2021. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments. Additionally, we must expend resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We have received four demand letters from putative stockholders of Virtuoso dated August 6, 2021, October 29, 2021, November 3, 2021, and November 4, 2021 (together, the “Demands”) generally alleging that the proxy statement/prospectus forming part of the registration statement on Form S-4 that Wejo Group filed with the SEC on July 16, 2021, as amended on October 22, 2021, omits material information with respect to our proposed business combination with Wejo. The Demands seek the issuance of corrective disclosures in an amendment or supplement to the proxy statement/prospectus. We additionally received an unfiled complaint from one of the putative stockholders, which was enclosed with the demand letter dated October 29, 2021 (the “Draft Complaint”). The Draft Complaint generally alleges that the proxy statement/prospectus is materially incomplete and misleading, and asserts claims under Sections 14(a) and 20(a) of the Exchange Act against the Company and the Company’s Board of Directors. The Draft Complaint seeks, among other things, an order enjoining the proposed business combination, damages, and an award of attorneys’ fees
ITEM 1A. RISK FACTORS.
An investment in our securities involves a high degree of risk. Our potential investors should consider carefully all of the risks described below, together with the other information contained in this Quarterly Report, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and our investors could lose all or part of their investments. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. For additional risk factors not presently known to us or that we currently deem immaterial or that may also impair our business or results of operations, please see our final prospectus dated January 21, 2021 filed with the SEC and in our quarterly report on Form 10-Qs dated June 3, 2021 and August 17, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Use of Proceeds
On January 26, 2021, we consummated our initial public offering of 23,000,000 units, including 3,000,000 units issued pursuant to the exercise of the underwriters’ over-allotment option in full. Each unit consists of one share of Class A common stock, par value $0.0001 per share, and one-half of one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $230,000,000. On January 26, 2021, simultaneously with the consummation of our initial public offering, we completed the private sale of an aggregate of 6,600,000 warrants at a purchase price of $1.00 per private placement warrant, to Virtuoso Sponsor LLC (“Sponsor”), generating gross proceeds of $6,600,000.
Following the closing of our initial public offering on January 26, 2021, a total of $230,000,000 comprised of $225,400,000 of the net proceeds from the IPO and $4,600,000 consisting of a portion of the proceeds of the sale of the Private Placement Warrants, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as amended.
There has been no material change in the planned use of the proceeds from our initial public offering and the private placement as is described in the Company’s final prospectus related to our initial public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| 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 Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| ** | Furnished. |
| (1) | Incorporated by reference to the Company’s Form S-1, filed with the SEC on December 29, 2020, as amended. |
| (2) | Incorporated by reference to the Company’s Form S-1, filed with the SEC on December 29, 2020, as amended. |
| (3) | Incorporated by reference to the Company’s 8-K, filed with the SEC on May 28, 2021. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: November 16, 2021 | VIRTUOSO ACQUISITION CORP. | |
| By: | /s/ Jeffrey D. Warshaw | |
| Jeffrey D. Warshaw | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: November 16, 2021 | By: | /s/ Michael O. Driscoll |
| Michael O. Driscoll | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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