UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from ____________ to ____________
Commission File Number:
SCION TECH GROWTH I
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, 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 Class A ordinary share, $0.0001 par value, and one-third of one redeemable warrant | SCOAU | The Nasdaq Stock Market LLC | ||
| Redeemable warrants, each warrant exercisable for one Class A ordinary share, each at an exercise price of $11.50 per share | SCOAW | 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 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):
As
of November 15, 2021, there were
SCION TECH GROWTH I
Quarterly Report on Form 10-Q
Table of Contents
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SCION TECH GROWTH I
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | (as restated) (1) | |||||||
| Assets | ||||||||
| Current asset – Cash | $ | $ | ||||||
| Prepaid assets | ||||||||
| Total current assets | ||||||||
| Prepaid assets, non-current | ||||||||
| Cash and securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued offering costs and expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting discount | ||||||||
| Total liabilities | ||||||||
| Commitments | ||||||||
| Class A ordinary shares subject to possible redemption, | ||||||||
| Shareholders’ Deficit: | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
SCION TECH GROWTH I
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| Three months ended | Nine months ended | |||||||
| September 30, 2021 | September 30, 2021 | |||||||
| Formation and operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Bank interest income | ||||||||
| Unrealized gain on change in fair value of warrants | ||||||||
| Trust interest income | ||||||||
| Total other income | ||||||||
| Net income | ||||||||
| Weighted average shares outstanding of Class A common stock | ||||||||
| Basic and diluted net income per share, Class A common stock | $ | $ | ||||||
| Weighted average shares outstanding of Class B common stock | ||||||||
| Basic and diluted net income per share, Class B common stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
SCION TECH GROWTH I
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of December 31, 2020, as restated | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Remeasurement in Class A ordinary shares subject to possible redemption | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance as of March 31, 2021, as restated (1) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement in Class A ordinary shares subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2021, as restated (1) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Remeasurement in Class A ordinary shares subject to possible redemption | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
SCION TECH GROWTH I
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
| For the nine months ended September 30, 2021 | ||||
| Cash flows from Operating Activities: | ||||
| Net income | $ | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on treasury securities held in Trust Account | ( | ) | ||
| Unrealized gain on change in fair value of warrants | ( | ) | ||
| Changes in current assets and current liabilities: | ||||
| Prepaid assets | ||||
| Due to related party | ||||
| Accounts payable | ( | ) | ||
| Net cash used in operating activities | ( | ) | ||
| Net change in cash | ( | ) | ||
| Cash – beginning of the period | ||||
| Cash – end of the period | $ | |||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||
| Remeasurement in Class A ordinary shares subject to possible redemption | $ | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
SCION TECH GROWTH I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
ScION Tech Growth I (the “Company”) was incorporated as a Cayman Islands exempted company on October 7, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). 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”). The Company’s efforts to identify a prospective target business will not be limited to a particular industry or geographic location.
The Company has selected December 31 as its fiscal year end.
As of September 30, 2021, the Company had not yet commenced any operations. All activity for the period from October 7, 2020 (inception) through September 30, 2021 relates to the Company’s formation and the Initial Public Offering (“IPO”) described below, and since the closing of the IPO, the search for a prospective initial Business Combination. 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 will recognize changes in the fair value of warrant liability as other income (expense).
The Company’s sponsor is ScION 1 Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s
IPO was declared effective on December 16, 2020 (the “Effective Date”). On December 21, 2020, the Company consummated the
IPO of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Offering costs amounted to $
Trust Account
Following the closing of the IPO on December
21, 2020, $
5
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO 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 must complete one or more
The Company will provide its public shareholders
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 general meeting called to approve the initial Business Combination or (ii) without a shareholder vote by means
of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their shares
for a pro rata portion of the amount then on deposit in the Trust Account (initially $
The ordinary shares subject to redemption will
be recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Financial Accounting
Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” The Company will not redeem the Public Shares in an amount that would cause the Company to have less than $
If the Company seeks shareholder approval of
a Business Combination and the Company does not conduct redemptions in connection with the Business Combination pursuant to the tender
offer rules, the Company’s amended and restated memorandum and articles of association provide that a public shareholder, together
with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert as a “group” (as
defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate
of
If the Company is unable to complete the initial
Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but not more than ten 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 earned on the funds held in the Trust
Account (less tax payable and up to $
6
The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder 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 shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association, (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any founder shares held by them and any Public Shares purchased during or after the IPO (including in open market and privately-negotiated transactions) in favor of the initial Business Combination.
The Sponsor has agreed that it will be liable
to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective
target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business
Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
On February 1, 2021, the Company announced that, commencing on February 5, 2021, the holders of Units may elect to separately trade the Class A ordinary shares and warrants included in the Units. The Units not separated will continue to trade on the NASDAQ Capital Market under the symbol “SCOAU.” Class A ordinary shares and warrants will separately trade on The Nasdaq Capital Market under the symbols “SCOA” and “SCOAW”, respectively.
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately
$
Prior to the completion of the IPO, the Company’s
liquidity needs were satisfied through a capital contribution from the Sponsor of $
In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 6). To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity 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 — Restatement of Previously Issued Financial Statements
In connection with the preparation of the Company’s
financial statements as of September 30, 2021, management determined it should restate its previously reported financial statements. The
Company previously determined that the Public Shares subject to possible redemption were equal to their redemption value of $
In connection with the change in presentation for the Public Shares, the Company also restated its earnings per share calculation to allocate net income (loss) evenly to the Public Shares and Class B ordinary shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of ordinary shares share pro rata in the income (loss) of the Company.
There has been no change in the Company’s total assets, liabilities or operating results.
7
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Balance Sheet at December 21, 2020 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance Sheet at December 31, 2020 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Operations for the period from October 7, 2020 (inception) through December 31, 2020 | ||||||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares subject to redemption | ||||||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, ordinary shares | ( | ) | ||||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Shareholders’ Equity for the period from October 7, 2020 (inception) through December 31, 2020 | ||||||||||||
| Remeasurement in Class A ordinary shares to redemption value | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Cash Flows for the period from October 7, 2020 (inception) through December 31, 2020 | ||||||||||||
| Initial value of Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Remeasurement in Class A ordinary shares to redemption value | $ | ( | ) | $ | $ | |||||||
| Balance Sheet at March 31, 2021 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Operations for the three months ended March 31, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares subject to redemption | ||||||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, ordinary shares | ( | ) | ||||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Shareholders’ Equity for the three months ended March 31, 2021 | ||||||||||||
| Remeasurement in Class A ordinary shares to reredemption value redemption redemption value | $ | $ | ( | ) | $ | ( | ) | |||||
| Statement of Cash Flows for the three months March 31, 2021 | ||||||||||||
| Initial value of Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Remeasurement in Class A ordinary shares redemption value redemption value | $ | ( | ) | $ | $ | |||||||
| Balance Sheet at June 30, 2021 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Operations for the three months ended June 30, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares subject to redemption | ||||||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, ordinary shares | ( | ) | ||||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Operations for the six months ended June 30, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares subject to redemption | ||||||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, ordinary shares | ( | ) | ||||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | $ | ( | ) | |||||
| Statement of Shareholders’ Equity for the three months ended June 30, 2021 | ||||||||||||
| Remeasurement in Class A ordinary shares to redemption value | $ | $ | ( | ) | $ | ( | ) | |||||
| Statement of Shareholders’ Equity for the six months ended June 30, 2021 | ||||||||||||
| Remeasurement in Class A ordinary shares to redemption value | $ | $ | ( | ) | $ | ( | ) | |||||
| Statement of Cash Flows for the six months ended June 30, 2021 | ||||||||||||
| Initial value of Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Remeasurement in Class A ordinary shares to redemption value | $ | ( | ) | $ | $ | |||||||
8
Note 3 — 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 periods presented. Operating results for the three and nine months ended 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 financial statements and notes thereto included in the Form 10-K/A filed by the Company with the SEC on May 17, 2021.
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 shareholder 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 unaudited 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 the unaudited 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
9
Cash and Securities Held in Trust Account
Securities held in Trust Account consist of United States Treasury securities. The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
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 are included in the “interest income” line item in the statements of operations. Interest income is recognized when earned.
Fair Value Measurements
FASB ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses, due to related parties are estimated to approximate the carrying values as of September 30, 2021 and December 31, 2020 due to the short maturities of such instruments.
The Company’s warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. See Note 7 for additional information on assets and liabilities measured at fair value.
10
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A ordinary shares.
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 $
Ordinary Shares Subject to Possible Redemption
All of the
In accordance with ASC 480-10-S99-3A(15), there are two alternative methods that an entity can apply when subsequently measuring redeemable public shares:
| 1. | Remeasure the redeemable public shares to their redemption amount immediately as if the end of the first reporting period after the IPO was the redemption date. |
| 2. | Accrete changes in the difference between the initial carrying amount and the redemption amount from the IPO date to the redemption date. |
The Company has decided to apply the first method above. As of September 30, 2021, the Class A ordinary shares reflected on the balance sheet are reconciled in the following table:
| Gross proceeds from IPO | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A ordinary shares issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption | $ |
11
Net Income per Ordinary Share
The
Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are
shared pro rata between the two classes of shares. The
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income 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 consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis compared to total proceeds received. Offering costs associated with warrant liabilities is expensed, and offering costs associated with the Class A ordinary share are charged to the shareholders’ equity.
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 condensed 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 unaudited 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 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is a Cayman Islands exempted company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
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Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the Company’s financial statements 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 operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 4 — Initial Public Offering
Pursuant to the IPO, the Company sold
Warrants
Each whole warrant entitles the holder to purchase
one Class A ordinary share at a price of $
The warrants will become exercisable on the later of 12 months from the closing of the IPO 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 Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to Class A ordinary shares 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 a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share 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 Class A ordinary share underlying such unit.
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Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and |
Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $10.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.10 per warrant; upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares, based on the redemption date and the “fair market value” (as defined below) of Class A ordinary shares except as otherwise described below; and |
| ● | if, and only if, the closing price of Class A ordinary shares equals or exceeds $10.00 per share, subject to adjustment, for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and |
In addition, if a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering each such warrant for that number of shares of the Company’s Class A ordinary shares equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied the excess of the “fair market value” over the exercise price of the warrants by (y) the fair market value and (B) 0.361. The “fair market value” shall mean the average reported closing price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
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Note 5 — Private Placement
Simultaneously with the closing of the IPO, the
Sponsor purchased an aggregate of
The Private Placement warrants are identical to the warrants sold in the IPO, except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the Company’s initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to certain registration rights.
The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor. 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 the IPO.
The 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 initial Business Combination, (ii)
waive its redemption rights with respect to its founder shares and Public Shares in connection with a shareholder vote to approve an amendment
to the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s
obligation to allow redemption in connection with the initial Business Combination or to redeem
Note 6 — Related Party Transactions
Founder Shares
On October 7, 2020, the Sponsor paid $
The initial shareholders have agreed not to transfer,
assign or sell any of their founder shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur
of: (i) one year after the completion of the initial Business Combination, or (ii) the date on which the Company completes a liquidation,
merger, share exchange or other similar transaction after the initial Business Combination that results in all of the Company’s
shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property; except to certain permitted
transferees and under certain circumstances (the “lock-up”). Notwithstanding the foregoing, if (1) the closing price of Class
A ordinary shares equals or exceeds $
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Promissory Note — Related Party
On October 9, 2020, the Sponsor agreed to loan
the Company up to $
Due to Related Parties
The balance of $
Related Party Loans
In order to finance transaction costs in connection
with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes
the initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans
but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
Administrative Service Fee
Commencing on the Effective Date of the registration
statement, the Company has agreed to pay the Sponsor $
Forward Purchase Agreement
On December 16, 2020, the Company entered into
a forward purchase agreement pursuant to which an affiliate of the Sponsor committed that it will purchase from the Company
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Note 7 — Recurring Fair Value Measurements
Securities Held in Trust Account
As of September 30, 2021 and December 31, 2020,
investment in the Company’s Trust Account consisted of $
The carrying value, excluding gross unrealized holding gain and fair value of held to maturity securities on September 30, 2021 are as follows:
| Carrying Value/Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of September 30, 2021 | |||||||||||||
| U.S. Money Market | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The carrying value, excluding gross unrealized holding gain and fair value of held to maturity securities on December 31, 2020 are as follows:
| Carrying Value/Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of December 31, 2020 | |||||||||||||
| U.S. Money Market | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Warrant Liability
At September 30, 2021 and December 31, 2020, the
Company’s warrants liability was valued at $
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Recurring Fair Value Measurements
The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| September 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities held in Trust Account | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private Placement Warrants | $ | |||||||||||||||
| Public Warrants | $ | |||||||||||||||
| Forward Purchase Warrants | $ | |||||||||||||||
| Warrant Liability | $ | $ | $ | $ | ||||||||||||
| December 31, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2020 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities held in Trust Account | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private Placement Warrants | $ | |||||||||||||||
| Public Warrants | $ | |||||||||||||||
| Forward Purchase Warrants | $ | |||||||||||||||
| Warrant Liability | $ | $ | $ | $ | ||||||||||||
Warrants
The Warrants (Public, Private and FPA) are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Balance Sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Statement of Operations.
The mid-point of the Forward Purchase Agreement
($
Initial Measurement
The Company established the initial fair value for the Warrants on December 16, 2020, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model for the Public Warrants, and the Black-Sholes Model for Private Placement Warrants and Forward Purchase Warrants based on their relative fair values at the initial measurement date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
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The key inputs into the Monte Carlo simulation model and Black-Scholes Model were as follows:
| Input | December 16, 2020 (Initial Measurement) | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Input | December 31, 2020 | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
Subsequent Measurement
As at September 30, 2021, the Public Warrants are measured at the observable quoted price in active markets for Public Warrants. The Private Placement Warrants and Forward Purchase Warrants were measured at the Observable Quoted Price in active markets for Public Warrants.
The change in the fair value of the derivative warrant liabilities measured utilizing Level 1 and Level 3 inputs for the nine months ended September 30, 2021 is summarized as follows:
| Derivative warrant liabilities at January 1, 2021 - Level 3 | $ | |||
| Issuance of Derivative Warrants - Level 3 | ||||
| Transfer of Public Warrants to Level 1 | ( | ) | ||
| Transfer of Private Placement Warrants and Forward Purchase Warrants to Level 2 | ( | ) | ||
| Change in fair value of derivative warrant liabilities - Level 3 | ||||
| Derivative warrant liabilities at March 31, 2021 - Level 3 | $ | |||
| Change in fair value of derivative warrant liabilities - Level 3 | ||||
| Derivative warrant liabilities at June 30, 2021 - Level 3 | $ | |||
| Change in fair value of derivative warrant liabilities - Level 3 | ||||
| Derivative warrant liabilities at September 30, 2021 - Level 3 | $ |
Note 8 — Commitments
Registration Rights
The holders of the founder shares, Private Placement Warrants, the forward purchase warrants which will be issued in a private placement concurrently with the closing of the initial Business Combination and the Class A ordinary shares underlying such Private Placement Warrants and forward purchase securities, and Private Placement Warrants, Forward Purchase 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 signed on December 16, 2020. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s 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 December 21, 2020 to purchase up to an additional
On December 21, 2020, the Company paid a fixed
underwriting discount of $
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Note 9 — Shareholders’ Equity
Preference shares—The Company
is authorized to issue
Class A Ordinary Shares—The
Company is authorized to issue
Class B Ordinary Shares—The
Company is authorized to issue
Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class, with each share entitling the holder to one vote, on any other matter submitted to a vote of the Company’s shareholders, including any vote in connection with the Company’s initial Business Combination, except as required by law; provided that only holders of the Class B ordinary shares have the right to appoint directors in any election held prior to or in connection with the completion of the initial Business Combination.
The Class B ordinary shares will automatically
convert into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination on
a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the
like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares or equity-linked securities
are issued or deemed issued in connection with the initial Business Combination, the number of Class A ordinary shares issuable upon conversion
of all founder shares will equal, in the aggregate,
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the 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,” “ScION Tech Growth I,” “our,” “us” or “we” refer to ScION Tech Growth I. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this 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. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated on October 7, 2020 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. We have not selected any specific Business Combination target and we have not, nor has anyone on our behalf, engaged in any substantive discussions directly or indirectly, with any Business Combination target with respect to an initial Business Combination with us. While we may pursue an initial Business Combination target in any industry, we intend to focus our search on global technology, software and FinTech opportunities businesses. We intend to effectuate our initial Business Combination using cash from the proceeds of the initial public offering, the private placement of the Private Placement Warrants and the forward purchase securities, the proceeds of the sale of our shares in connection with our initial Business Combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, other securities issuances, or a combination of the foregoing.
The issuance of additional shares in connection with a Business Combination to the owners of the target or other investors, including the forward purchase securities:
| ● | may significantly dilute the equity interest of investors in the IPO, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| ● | may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares; |
| ● | could cause a change in control if a substantial number of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A ordinary shares and/or warrants. Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in: |
| ● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
21
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our Class A ordinary shares; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to continue to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
Our entire activity since inception up to September 30, 2021 relates to our formation, the IPO and, since the closing of the IPO, a search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the three months ended September 30, 2021, we had net income of $9,607,603, which consisted of $194,853 in general and administrative expenses and $9,753,333 in unrealized gain on change in fair value of warrants, $49,114 other income earned from investments held in the Trust Account and $9 from bank interest.
For the nine months ended September 30, 2021, we had net income of $3,175,267, which consisted of $623,749 in general and administrative expenses and $3,640,000 in unrealized gain on change in fair value of warrants, $158,977 other income earned from investments held in the Trust Account and $39 from bank interest.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $0.3 million in our operating bank account, and working capital of approximately $0.7 million.
Prior to the completion of the IPO, our liquidity needs were satisfied through a capital contribution from the Sponsor of $25,000, to cover certain offering costs, for the founder shares, and the loan under an unsecured promissory note from the Sponsor of $222,583. The promissory note from the Sponsor was paid in full on December 22, 2020. Subsequent to the consummation of the IPO and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we 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.
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Critical Accounting Policies and Estimates
The preparation of the unaudited 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as our critical accounting policies:
Ordinary Shares Subject to Possible Redemption
All of the 57,500,000 Class A ordinary shares sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association. 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 ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all Class A ordinary shares have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
Net Income per Ordinary Share
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The 28,166,667 potential ordinary shares for outstanding warrants to purchase the Company’s shares were excluded from diluted earnings per share for the three and nine months ended September 30, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are derivative instruments.
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 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, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
23
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 independent registered public accounting firm’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 report of the independent registered public accounting firm 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 IPO or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021, we were not subject to any market or interest rate risk. The net proceeds of our initial public offering, including amounts in the trust account, may be invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there is no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021, due to the material weakness in accounting for complex financial instruments. 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 periods presented.
It is noted that the non-cash adjustments to the financial statements 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 was no change in our internal control over financial reporting that occurred during the fiscal quarter of 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. In light of the material weakness, we have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1a. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K/A filed with the SEC on May 17, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Except as described below, 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 Annual Report on Form 10-K/A filed with the SEC on May 17, 2021. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. 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 on a timely basis.
We identified a material weakness in our internal control over financial reporting related to the accounting for complex financial instruments. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of September 30, 2021.
To respond to this material weakness, we have devoted significant effort and resources to the remediation and improvement of our internal control over financial reporting. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
We can give no assurance that the measures we have taken or that our plans to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to annually furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm may be required to attest to the effectiveness of our internal control over financial reporting depending on our reporting status. We will be required to disclose changes made in our internal control and procedures on a quarterly basis.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
In October 2020, we issued to the Sponsor an aggregate of 14,375,000 founder shares in exchange for a capital contribution of $25,000. Up to 1,875,000 founder shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. In connection with the underwriters’ full exercise of their over-allotment option on December 21, 2020, the 1,875,000 shares were no longer subject to forfeiture, resulting in the Sponsor holding 14,375,000 founder shares. The foregoing issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Use of Proceeds
On December 21, 2020, we consummated our initial public offering of 57,500,000 units, including the issuance of 7,500,000 units as a result of the underwriters’ exercise of their over-allotment option in full. The units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $575,000,000. UBS Securities LLC and Citigroup Global Markets Inc. acted as book-running managers. The securities sold in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-251036). The SEC declared the registration statement effective on December 16, 2020.
Simultaneously with the consummation of the initial public offering, we consummated the private placement of 9,000,000 Private Placement Warrants to the Sponsor at a purchase price of $1.50 per Private Placement Warrant, generating gross proceeds of $13,500,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are the same as the warrants sold as part of the units sold in the initial public offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the private warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
Of the gross proceeds received from the initial public offering and private placement of Private Placement Warrants, $575,000,000 was placed in a trust account.
We paid a total of $11,500,000 in underwriting fees and $587,884 for other costs and expenses related to the initial public offering. In addition, the underwriters agreed to defer $20,125,000 in underwriting fees.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SCION TECH GROWTH I | ||
| Date: November 15, 2021 | /s/ Alex Triplett | |
| Name: | Alex Triplett | |
| Title: | Chief Financial Officer and Director (Principal Financial and Accounting Officer) | |
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