UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
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Securities registered pursuant to Section 12(b) of the Act:
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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 by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 ☐ |
Smaller reporting company | |
| Emerging growth company |
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). Yes
As of November 17, 2021,
CORAZON CAPITAL V838 MONOCEROS CORP
Quarterly Report on Form 10-Q
For the period from January 29, 2021 (Inception) Through September 30, 2021
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
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Unregistered Sales of Equity Securities and Use of Proceeds from | 32 | |
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34 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CORAZON CAPITAL V838 MONOCEROS CORP
UNAUDITED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2021
Assets |
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Current assets: | |||
Cash | $ | | |
Prepaid expenses |
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Total current assets | | ||
Investments held in Trust Account | | ||
Total Assets | $ | | |
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Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit |
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Current liabilities: | |||
Accrued expenses | $ | | |
Total current liabilities | | ||
Deferred underwriting commissions | | ||
Derivative warrant liabilities |
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Total liabilities |
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Commitments and Contingencies |
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Class A ordinary shares subject to possible redemption; | | ||
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Shareholders' Deficit |
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Preference shares, $ |
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Class A ordinary shares, $ |
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Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( | |
Total shareholders’ deficit |
| ( | |
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
CORAZON CAPITAL V838 MONOCEROS CORP
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND
FOR THE PERIOD JANUARY 29, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
For The | For The Period From | |||||
Three Months Ended | January 29, 2021 (Inception) Through | |||||
September 30, | September 30, | |||||
| 2021 |
| 2021 | |||
General and administrative expenses | $ | | $ | | ||
Administrative expenses - related party | | | ||||
Loss from operations | ( | ( | ||||
Other income (expense) |
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Change in fair value of derivative warrant liabilities | | | ||||
Financing costs - derivative warrant liabilities | | ( | ||||
Net gain from investments held in Trust Account | | | ||||
Net income | $ | | $ | | ||
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Weighted average shares outstanding of Class A ordinary shares, basic and diluted |
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Basic and diluted net income per share, Class A ordinary shares | | | ||||
Weighted average shares outstanding of Class B ordinary shares, basic and diluted |
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Basic and diluted net income per share, Class B ordinary shares | | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
CORAZON CAPITAL V838 MONOCEROS CORP
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND
FOR THE PERIOD JANUARY 29, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
Ordinary Shares | Total | ||||||||||||||||||
Class A | Class B | Additional Paid- | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| in Capital |
| Deficit |
| Deficit | ||||||
Balance — January 29, 2021 (Inception) | | $ | | | $ | | $ | | $ | | $ | | |||||||
Issuance of Class B ordinary shares to Sponsor | | | | | | | |||||||||||||
Excess cash received over the fair value of the private placement warrants | | | | | | | |||||||||||||
Accretion of Class A ordinary shares subject to possible redemption | ( | ( | ( | ||||||||||||||||
Net loss | | | | | | ( | ( | ||||||||||||
Balance — March 31, 2021 (unaudited) (restated) | | | | | | ( | ( | ||||||||||||
Forfeiture of Class B ordinary shares | | | ( | ( | | | |||||||||||||
Subsequent measurement of Class A ordinary shares subject to possible redemption against additional paid-in capital | | | ( | | | ||||||||||||||
Net loss |
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| ( |
| ( | ||||||||||||
Balance — June 30, 2021 (unaudited) (restated) | | | | | | ( | ( | ||||||||||||
Net income | | | | | | | | ||||||||||||
Balance — September 30, 2021 (unaudited) |
| | $ | | | $ | | $ | | $ | ( | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
CORAZON CAPITAL V838 MONOCEROS CORP
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 29, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
Cash Flows from Operating Activities: |
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Net income | $ | | |
Adjustments to reconcile net loss to net cash used in operating activities: |
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General and administrative expenses paid by related party in exchange for issuance of Class B ordinary shares | | ||
Change in fair value of derivative warrant liabilities | ( | ||
Financing costs - derivative warrant liabilities | | ||
Net gain from investments held in Trust Account | ( | ||
Changes in operating assets and liabilities: |
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Prepaid expenses | ( | ||
Accrued expenses | | ||
Net cash used in operating activities |
| ( | |
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Cash Flows from Investing Activities: |
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Cash deposited in Trust Account | ( | ||
Net cash used in investing activities | ( | ||
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Cash Flows from Financing Activities: |
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Repayment of note payable to related party |
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Proceeds received from initial public offering, gross |
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Proceeds received from private placement | | ||
Offering costs paid |
| ( | |
Net cash provided by financing activities |
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Net increase in cash |
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Cash - beginning of the period |
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Cash - end of the period | $ | | |
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Supplemental disclosure of noncash investing and financing activities: |
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Offering costs included in accrued expenses | $ | | |
Offering costs paid by related party under promissory note | $ | | |
Deferred underwriting commissions | $ | | |
Forfeiture of Class B ordinary shares | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description of Organization, Business Operations and Basis of Presentation
Corazon Capital V838 Monoceros Corp (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on January 29, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
As of September 30, 2021, the Company had not yet commenced operations. All activity for the period from January 29, 2021 (Inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below. 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 Initial Public Offering.
The Company’s sponsor is Corazon V838 Monoceros Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on March 23, 2021. On March 26, 2021, the Company consummated its Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon the closing of the Initial Public Offering and the Private Placement, $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
5
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will provide its holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($
These Public Shares were recorded at a redemption value and classified as temporary equity, in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
Notwithstanding the foregoing, the Company’s Amended and Restated Memorandum and Articles of Association will provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Company’s Sponsor, executive officers, directors and director nominees agreed not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association that would affect the substance or timing of the Company’s obligation to provide for the redemption of its Public Shares in connection with a Business Combination or to redeem
6
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If the Company is unable to complete a Business Combination within
In connection with the redemption of
The Initial Shareholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $
On May 14, 2021, holders of the Company’s Units became able to elect to separately trade the Class A ordinary shares and warrants included in the Units. Any Units not separated will continue to trade on the Nasdaq Capital Market.
7
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Liquidity and Capital Resources
As of September 30, 2021, the Company had $
The Company’s liquidity needs to date have been satisfied through a contribution of $
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the three months ended September 30, 2021 and for the period from January 29, 2021 (Inception) through September 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited condensed financial statements and notes thereto included in the final prospectus filed by the Company with the SEC on March 25, 2021.
8
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Restatement to Previously Reported Financial Statements
In preparation of the Company’s unaudited condensed financial statements for the quarterly period ended September 30, 2021, the Company concluded it should restate its previously issued financial statements to classify all Class A ordinary shares subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A ordinary shares in permanent equity. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $
The impact of the restatement to the Post-IPO Balance Sheet is an increase to Class A ordinary shares subject to possible redemption of approximately $
IPO Balance Sheet - As Revised |
| As Reported, |
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As of March 26, 2021 |
| As Restated |
| Adjustment |
| As Restated |
| % Change | ||||
Total assets | $ | |
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| $ | |
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Total liabilities | $ | |
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| $ | |
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Class A ordinary share subject to redemption |
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| |
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| | % | |||
Preference shares |
| — |
| — |
| — |
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Class A ordinary shares |
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| ( |
| — |
| ( | % | |||
Class B ordinary shares |
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| — |
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Additional paid-in captial |
| |
| ( |
| — |
| ( | % | |||
Accumulated deficit |
| ( |
| ( |
| ( |
| | % | |||
Total shareholders' equity | $ | | $ | ( | $ | ( |
| ( | % | |||
Total Liabilities, Class A ordinary share Subject to Possible Redemption and shareholders' Equity (Deficit) | $ | | $ | — | $ | |
|
|
The impact of the restatement on the balance sheets and statements of operations for the Affected Quarterly Periods is presented below.
9
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The table below present the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of March 31, 2021:
As of March 31, 2021 |
| As Reported |
| Adjustment |
| As Restated |
| % Change | ||||
Total assets | $ | |
| $ | |
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Total liabilities | $ | |
| $ | |
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Class A ordinary share subject to redemption |
| |
| |
| |
| | % | |||
Preference shares |
| — |
| — |
| — |
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Class A ordinary shares |
| |
| ( |
| — |
| ( | % | |||
Class B ordinary shares |
| |
| — |
| |
|
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Additional paid-in captial |
| |
| ( |
| — |
| ( | % | |||
Accumulated deficit |
| ( |
| ( |
| ( |
| | % | |||
Total shareholders' equity | $ | | $ | ( | $ | ( |
| ( | % | |||
Total Liabilities, Class A ordinary share Subject to Possible Redemption and shareholders' Equity (Deficit) | $ | | $ | — | $ | |
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|
The table below present the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the period from January 29, 2021 (inception) through March 31, 2021:
Form 10-Q: for the period from January 29, 2021 (inception) through March 31, 2021 | |||||||||
| As Reported |
| Adjustment |
| As Restated | ||||
Cash Flow from Operating Activities | $ | ( | $ | — | $ | ( | |||
Cash Flows from Investing Activities | $ | ( | $ | — | $ | ( | |||
Cash Flows from Financing Activities | $ | | $ | — | $ | | |||
Supplemental Disclosure of Noncash Financing Activities |
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Offering costs included in accounts payable | $ | | $ | | |||||
Offering costs included in accrued expenses | $ | | $ | — | $ | | |||
Offering costs paid by related party under promissory note | $ | | $ | — | $ | | |||
Deferred underwriting commissions | $ | | $ | — | $ | | |||
Initial value of Class A ordinary shares subject to possible redemption | $ | | $ | ( | $ | — | |||
Change in value of Class A ordinary shares subject to possible redemption | $ | | $ | ( | $ | — |
The table below present the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of June 30, 2021:
As of June 30, 2021 |
| As Reported |
| Adjustment |
| As Restated |
| % Change | ||||
Total assets | $ | |
| $ | |
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Total liabilities | $ | |
| $ | |
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Class A ordinary share subject to redemption |
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| |
| |
| | % | |||
Preference shares |
| — |
| — |
| — |
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Class A ordinary shares |
| |
| ( |
| — |
| ( | % | |||
Class B ordinary shares |
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| — |
| |
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Additional paid-in captial |
| |
| ( |
| — |
| ( | % | |||
Accumulated deficit |
| ( |
| ( |
| ( |
| | % | |||
Total shareholders' equity | $ | | $ | ( | $ | ( |
| ( | % | |||
Total Liabilities, Class A ordinary share Subject to Possible Redemption and shareholders' Equity (Deficit) | $ | | $ | — | $ | |
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|
10
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The table below present the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the period from January 29, 2021 (inception) through June 30, 2021:
Form 10-Q: for the period from January 29, 2021 (inception) through June 30, 2021 | |||||||||
| As Reported |
| Adjustment |
| As Restated | ||||
Cash Flow from Operating Activities | $ | ( | $ | — | $ | ( | |||
Cash Flows from Investing Activities | $ | ( | $ | — | $ | ( | |||
Cash Flows from Financing Activities | $ | | $ | — | $ | | |||
Supplemental Disclosure of Noncash Financing Activities |
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Offering costs included in accrued expenses | $ | | $ | — | $ | | |||
Offering costs paid by related party under promissory note | $ | | $ | — | $ | | |||
Deferred underwriting commissions | $ | | $ | — | $ | | |||
Initial value of Class A ordinary shares subject to possible redemption | $ | | $ | ( | $ | — | |||
Change in value of Class A ordinary shares subject to possible redemption | $ | | $ | ( | $ | — |
11
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In connection with the change in presentation for the Class A ordinary shares subject to possible redemption, the Company has revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company. The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per common share is presented below for the Affected Quarterly Periods:
EPS for Class A ordinary share (redeemable) | |||||||||
| As Reported |
| Adjustment |
| As Adjusted | ||||
Form 10-Q (March 31, 2021) - for the period from January 29, 2021 (inception) through March 31, 2021 |
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Net loss | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
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| ( |
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Basic and diluted earnings per share | | ( | ( | ||||||
Form 10-Q (June 30, 2021) - three months ended June 30, 2021 |
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Net loss | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
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Basic and diluted earnings per share | | ( | ( | ||||||
Form 10-Q (June 30, 2021) - for the period from January 29, 2021 (inception) through June 30, 2021 |
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Net loss | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
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| ( |
| | |||
Basic and diluted earnings per share | | ( | ( |
| EPS for Class B ordinary share (non-redeemable) | ||||||||
| As Reported |
| Adjustment |
| As Adjusted | ||||
Form 10-Q (March 31, 2021) - for the period from January 29, 2021 (inception) through March 31, 2021 |
| ||||||||
Net loss | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
| |
| ( |
| | |||
Basic and diluted earnings per share | ( | | ( | ||||||
Form 10-Q (June 30, 2021) - three months ended June 30, 2021 |
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Net loss | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
| |
| ( |
| | |||
Basic and diluted earnings per share | ( | | ( | ||||||
Form 10-Q (June 30, 2021) - for the period from January 29, 2021 (inception) through June 30, 2021 |
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Net loss | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
| |
| ( |
| | |||
Basic and diluted earnings per share | ( | | ( |
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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 of 2002, 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 shareholder approval of any golden parachute payments not previously approved.
12
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s unaudited condensed financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2021, the Company did have any cash equivalents.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
13
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
As of September 30, 2021, the carrying values of cash, prepaid expenses, and accrued expenses approximate their fair values due to the short-term nature of the instruments. The Company’s investments held in Trust Account are comprised of investments in U.S. Treasury securities with an original maturity of
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the Class A ordinary shares issued were charged against the carrying value of Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering and the Over-Allotment.
Derivative 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 FASB ASC 815, “Derivatives and Hedging” (“ASC 815”). 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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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering were initially measured at fair value using a binomial / lattice model, which assumes optimal exercise of the Company's redemption option, including the make whole table, at the earliest possible date. Subsequently, the fair value of Public Warrants issued in connection with the Initial Public Offering have been measured based on the listed market price of such warrants. The fair value of the Private Placement Warrants have been estimated using the Black Scholes Option Pricing Model at each measurement date.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021,
Effective with the closing of the Initial Public Offering and the Over-Allotment, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Income Taxes
FASB ASC Topic 740, “Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
15
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Net Income (Loss) Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income per ordinary share is calculated by dividing the net income by the weighted average shares of ordinary shares outstanding for the respective period. The calculation of diluted net income (loss) does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering, the Over-Allotment and the Private Placement Warrants to purchase an aggregate of
The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of ordinary shares:
For the Period From | ||||||||||||
January 29, 2021 | ||||||||||||
For the Three Months | (Inception) Through | |||||||||||
Ended September 30, 2021 | September 30, 2021 | |||||||||||
| Class A |
| Class B |
| Class A |
| Class B | |||||
Basic and diluted net income per ordinary share: | ||||||||||||
Numerator: | ||||||||||||
Allocation of net income | | | | | ||||||||
Denominator: | ||||||||||||
Basic and diluted weighted average ordinary shares outstanding |
| | |
| | | ||||||
Basic and diluted net income per ordinary share | | | | |
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 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 the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 29, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 3—Initial Public Offering
On March 26, 2021, the Company consummated its Initial Public Offering of
Each Unit consists of
Note 4—Private Placement
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of
Each whole Private Placement Warrant is exercisable for
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until
Note 5—Related Party Transactions
Founder Shares
On February 2, 2021, the initial shareholders paid an aggregate of $
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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Initial Shareholders agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A)
Related Party Loans
On February 2, 2021, the Sponsor agreed to loan the Company up to $
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any of their affiliates 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Administrative Agreement
Commencing on the date that the Company’s securities were first listed on Nasdaq through the earlier of consummation of the initial Business Combination and the liquidation, the Company agreed to pay an affiliate of the Sponsor a total of $
In addition, the Sponsor, directors and officers, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made by us to the Sponsor, directors, officers or the Company’s or any of their affiliates.
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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 6—Commitments and Contingencies
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
The underwriters were entitled to an underwriting discount of $
Upon the consummation of the Over-Allotment on March 31, 2021, the underwriters were entitled to an aggregate of approximately $
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 7—Class A Ordinary Shares Subject to Possible Redemption
The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue
Class A ordinary shares subject to possible redemption reflected on the condensed balance sheet is reconciled on the following table:
Gross proceeds |
| $ | |
Less: |
|
| |
Proceeds allocated to public warrants |
| ( | |
Class A ordinary share issuance costs |
| ( | |
Plus: |
|
| |
Accretion of Class A ordinary shares subject to possible redemption |
| | |
Class A ordinary share subject to possible redemption | $ | |
Note 8—Derivative Warrant Liabilities
As of September 30, 2021, the Company had
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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a)
The warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until
21
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
● | in whole and not in part; |
● | at a price of $ |
● | upon not less than |
● | if, and only if, the last reported sale price (the “closing price”) of Class A ordinary shares equals or exceeds $ |
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
● | in whole and not in part; |
● | at $ |
● | if, and only if, the closing price of Class A ordinary shares equals or exceeds $ |
The “fair market value” of Class A ordinary shares for the above purpose shall mean the volume weighted average price of Class A ordinary shares during the
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 9—Shareholders’ Deficit
Preference Shares—The Company is authorized to issue
Class A Ordinary Shares—The Company is authorized to issue
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CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class B Ordinary Shares—The Company is authorized to issue
Ordinary shareholders of record are entitled to
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination, or earlier at the option of the holder, on a
Note 10—Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Quoted Prices in Active | Significant Other | Significant Other | ||||||
Markets | Observable Inputs | Unobservable Inputs | |||||||
Description |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
Assets: | |||||||||
Investments held in Trust Account |
| $ | |
| $ | | $ | | |
Liabilities: | |||||||||
Derivative warrant liabilities -Public | $ | | $ | | | ||||
Derivative warrant liabilities - Private | $ | — | $ | | $ | |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants of approximately $
Level 1 assets include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
23
CORAZON CAPITAL V838 MONOCEROS CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The fair value of the Public Warrants issued in connection with the Public Offering were initially measured at fair value using a binomial / lattice model, which assumes optimal exercise of the Company’s redemption option, including the make whole table, at the earliest possible date. Subsequently, the fair value of Public Warrants issued in connection with the Initial Public Offering have been measured based on the listed market price of such warrants. The fair value of the Private Placement Warrants have been estimated using the Black Scholes Option Pricing Model at each measurement date. For the period January 29, 2021 (Inception) through September 30, 2021, the Company incurred a non-operating income resulting from a decrease in the fair value of derivative warrant liabilities of approximately $
The estimated fair value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in the Black Scholes Option Pricing Model and a binomial / lattice model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical volatility of implied volatility from comparable publicly-traded 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 remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| As of March 26,2021 |
| As of September 30,2021 | |||||
Volatility |
| | % |
| | % | ||
Stock price | $ | | $ | | ||||
Expected life of the options to convert | |
| | |||||
Risk-free rate | | % | | % | ||||
Dividend yield | | % |
| | % |
The change in the fair value of the derivative warrant liabilities as classified in Level 3 for the period from January 29, 2021 (Inception) through September 30, 2021 is summarized as follows:
Level 3- Derivative warrant liabilities at January 29, 2021 (Inception) |
| $ | |
Issuance of derivative warrant liabilities |
|
| |
Change in fair value of derivative warrant liabilities | ( | ||
Level 3 -Derivative warrant liabilities at March 31, 2021 | | ||
Change in fair value of derivative warrant liabilities | | ||
Transfer of Public Warrants out of Level 3 | ( | ||
Level 3 -Derivative warrant liabilities at June 30, 2021 |
| | |
Change in fair value of derivative warrant liabilities | ( | ||
Level 3 -Derivative warrant liabilities at September 30, 2021 | $ | |
Note 11—Subsequent Events
Management has evaluated subsequent events and transactions that occurred after the balance sheet date through the date the unaudited condensed financial statements were available for issuance. Based upon this review, the Company did not identify any subsequent events other than noted below that would have required adjustment or disclosure in the unaudited condensed financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Corazon Capital V838 Monoceros Corp The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated on January 29, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”), that we have not yet identified. We will not be limited to a particular industry or geographic region in our identification and acquisition of a target company.
Our sponsor is Corazon V838 Monoceros Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on March 23, 2021. On March 26, 2021, we consummated its Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $200.0 million, and incurring offering costs of approximately $11.6 million, of which $7.0 million was for deferred underwriting commissions. We granted the underwriter a 45-day option to purchase up to an additional 3,000,000 Units at the Initial Public Offering price to cover over-allotments, if any. On March 29, 2021, the underwriters sent a notice to partially exercise the over-allotment option, and on March 31, 2021 purchased an additional 379,900 Units, generating gross proceeds of approximately $3.8 million (the “Over-Allotment”). We incurred additional offering costs of approximately $209,000, of which approximately $133,000 was for deferred underwriting fees.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 4,666,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $7.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $200.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, or the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
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Our management has broad discretion with respect to the specific application of the net proceeds of our Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time we sign a definitive agreement in connection with the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company.
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 26, 2023 (the “Combination Period”), we will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Liquidity and Capital Resources
As of September 30, 2021, we had $1.5 million in our operating bank account and working capital of approximately $1.9 million.
Our liquidity needs to date have been satisfied through a contribution of $25,000 from our Sponsor to cover for certain expenses in exchange for the issuance of the Founder Shares, the loan of approximately $87,000 from our Sponsor pursuant to a Note, and the proceeds from the consummation of the Private Placement not held in the Trust Account. We fully repaid the Note as of March 29, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. As of September 30, 2021, there were no amounts outstanding under the Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Results of Operations
Our entire activity from January 29, 2021 (Inception) through September 30, 2021, was in preparation for the Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective Initial Business Combination. We will not generate any operating revenues until the closing and completion of our Initial Business Combination.
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For the three months ended September 30, 2021, we had net income of approximately $3.1 million, which consisted of non-operating income of approximately $3.3 million for the change in fair value of derivative warrant liabilities and approximately $3,000 in net gain from investments held in Trust Account, partially offset by approximately $96,000 in general and administrative expenses and $30,000 in administrative expenses – related party.
For the period from January 29, 2021 (Inception) through September 30, 2021, we had net income of approximately $2.4 million, which consisted of non-operating income of approximately $3.3 million for the change in fair value of derivative warrant liabilities and approximately $10,000 in net gain from investments held in Trust Account, partially offset by approximately $408,000 in general and administrative expenses, $60,000 in administrative expenses – related party and approximately $428,000 in financing costs for derivative warrant liabilities.
Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities were entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of this prospectus to purchase up to 3,000,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. On March 29, 2021, the underwriters sent a notice to partially exercise the over-allotment option, and on March 31, 2021 purchased an additional 379,900 Units.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or $7.0 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Upon the consummation of the Over-Allotment on March 31, 2021, the underwriters were entitled to an aggregate of approximately $76,000 in fees, paid upon closing and an additional deferred underwriting commission of approximately $133,000.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the accompanying unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
27
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our 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 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. The Company has identified the following as its critical accounting policies:
Derivative 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 the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC 815, “Derivatives and Hedging” (“ASC 815”). 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.
The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering were initially measured at fair value using a binomial / lattice model, which assumes optimal exercise of the Company’s redemption option, including the make whole table, at the earliest possible date. Subsequently, the fair value of Public Warrants issued in connection with the Initial Public Offering have been measured based on the listed market price of such warrants. The fair value of the Private Placement Warrants have been estimated using the Black Scholes Option Pricing Model at each measurement date.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021, 20,379,900 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of our condensed balance sheet.
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Effective with the closing of the Initial Public Offering and the Over-allotment, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income per ordinary share is calculated by dividing the net income by the weighted average shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering, the Over-allotment and the Private Placement Warrants to purchase an aggregate of 11,459,967 Class A ordinary shares in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. We have considered the effect of Class B ordinary shares that were excluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of over-allotment option by the underwriters. Since the contingency was satisfied, we have included these shares in the weighted average number as of the beginning of the interim period to determine the dilutive impact of these shares. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 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 the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2021, because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex features of the Class A ordinary shares and warrants issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of March 26, 2021 and its interim financial statements for the quarters ended March 31, 2021 and June 30, 2021. Additionally, this material weakness could result in a misstatement of the warrant liability, Class A ordinary shares and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis.
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.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting except for the below:
The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of the Class A ordinary shares and warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC on March 25, 2021, except for the below risk factors. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Our Warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on warrants that have certain settlement terms and provisions related to certain tender offers or warrants which do not meet the criteria to be considered indexed to an entity’s own stock, which terms are similar to those contained in the warrant agreement governing our Warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our Public Warrants and Private Placement Warrants, and determined that the Warrants should be reclassified as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our balance sheet as of September 30, 2021 contained in the report are derivative liabilities related to embedded features contained within our Warrants. ASC 815 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following issuance of the SEC Staff Statement on April 12, 2021, and after consultation with our independent registered public accounting firm, our management and our audit committee concluded that, in light of the SEC Statement, it was appropriate to restate our previously issued audited balance sheet as of March 26, 2021 to account for the warrants as liabilities measured at fair value, rather than equity securities (the “Restatement”). See “—Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” As a result of these events, which led to the Restatement, we have identified a material weakness in our internal control over financial reporting.
Additionally, our management re-evaluated our application of ASC 480-10-S99-3A to our accounting classification of public shares. After consultation with our independent registered public accounting firm, our management and our audit committee concluded that it was appropriate to restate our previously issued Restated Balance Sheet and unaudited interim financial statements included in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021, filed with the SEC on May 28, 2021 and August 16, 2021, respectively. As part of such process, we identified an additional material weakness in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Management is implementing remediation steps to address the material weakness and to improve our internal control over financial
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reporting. Specifically, we are expanding and improving our review process for complex securities and related accounting standards. We continue to evaluate steps to remediate the material weakness. If we identify any new material weakness in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and the price of our securities may decline as a result. 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 avoid potential future material weaknesses.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits.
Exhibit | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
**These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
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SIGNATURES
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 thereunto duly authorized on this 17th day of November, 2021.
CORAZON CAPITAL V838 MONOCEROS CORP | ||
By: | /s/ Sam Yagan | |
Name: | Sam Yagan | |
Title: | Chief Executive Officer |
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