UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No.1)
For the quarterly period ended
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A common stock, par value $0.0001 per share, and one-fourth of one Redeemable Warrant | HCICU | The | ||
| The Nasdaq Stock Market LLC | ||||
| Redeemable Warrants included as part of the Units | HCICW | 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 Date File required to be submitted and 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 definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| 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 December 21, 2021, there were
HENNESSY CAPITAL INVESTMENT CORP. V
EXPLANATORY NOTE
Hennessy Capital Investment Corp. V (the “Company,” “Hennessy V,” “we”, “our” or “us”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q/A (this “Amendment”) to amend its Quarterly Report on Form 10-Q for the period ended September 30, 2020, originally filed with the Securities and Exchange Commission (“SEC”) on November 12, 2021 (the “Original Filing”) to restate its condensed financial statements as of and for the periods ended June 30, 2021 and March 31, 2021 in the accompanying notes to the financial statements included in this Amendment, including describing the restatement and its impact on previously reported amounts. The closing balance sheet as of January 20, 2021 will be restated in a subsequent filing.
In the course of preparing the Original Filing, the Company had determined, in consultation with its accounting consultants and independent registered public accounting firm, that a change was required to be made in the manner in which the Company had previously reported the value of the redeemable Class A common stock issued in connection with the Company’s initial public offering. The Company had previously determined, in consultation with its accounting consultants and independent registered public accounting firm that the aggregate value of such redeemable Class A common stock was equal to their aggregate redemption value after taking into account the prohibition, under the Company’s Amended and Restated Certificate of Incorporation, against the Company repurchasing or redeeming Class A common stock if such transaction would cause the Company’s net tangible assets to fall below $5,000,001. However, in the course of preparing the Original Filing, the Company determined, in consultation with its accounting consultants and independent registered public accounting firm, that, because each share of Class A common stock was, by its terms, redeemable, the aggregate value of the Class A common stock should be equal to their aggregate redemption value without taking into account the prohibition against transactions that would reduce net tangible assets below $5,000,001. The Company adopted this change in the Original Filing by reclassifying the requisite amount of Class A common stock from permanent to temporary equity, with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock. In the Original Filing, the Company also revised its earnings per share calculation to allocate net income (loss) pro rata to Class A and Class B common stock. This presentation contemplates an initial business combination as the most likely outcome, in which case, both classes of common stock share pro rata in the income (loss) of the Company.
The Company presented in the Original Filing the reclassification as a revision, and the change in net income (loss) per share, that did not require the restatement of previously filed financial statements and presented the effect of the reclassification on the Company’s previously issued financial statements in Note 7 to the condensed financial statements. After the filing on November 12, 2021, in November 2021, the Company determined that such revisions, because of their quantitative materiality, should be considered restatements rather than revisions. Upon further review, and in consultation with its accounting consultants and the Company’s Audit Committee, the Company has updated Note 7 to the condensed financial statements in this Amendment to indicate that the error is a restatement and not a revision and also to include in such Note 7 the restatement of net income (loss) per share for the periods ended March 31, 2021 and June 30, 2021 that was not previously presented in the Original Filing.
In addition, the Company's management has concluded that, during the periods referred to above a material weakness exists in the Company’s internal control over financial reporting due to the material weakness in accounting for complex financial instruments and the Company’s disclosure controls and procedures were not effective.
The changes described above did not have any impact on the Company’s cash position or on the balance held in its trust account.
i
HENNESSY CAPITAL INVESTMENT CORP. V
Table of Contents
ii
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HENNESSY CAPITAL INVESTMENT CORP. V
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Investments held in trust account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Note payable to Sponsor | ||||||||
| Deferred compensation | ||||||||
| Accrued income and franchise taxes | ||||||||
| Total current liabilities | ||||||||
| Other liabilities: | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting compensation | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A common stock subject to possible redemption; | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in-capital | - | |||||||
| Retained earnings | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
| (1) |
See accompanying notes to unaudited condensed financial statements
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HENNESSY CAPITAL INVESTMENT CORP. V
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended September 30, 2021 | For the nine months ended September 30, 2021 | |||||||
| Revenues | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income on Trust Account | ||||||||
| Warrant liability issuance costs | ( | ) | ||||||
| Charge associated with issuance of private placement warrants | ( | ) | ||||||
| Change in fair value of warrant liability | ||||||||
| Income (loss) before provision for income tax | ) | |||||||
| Provision for income tax | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Weighted average Class A common shares outstanding - basic and diluted | ||||||||
| Net income (loss) per Class A common share – basic and diluted | $ | $ | ( | ) | ||||
| Weighted average Class B common shares outstanding – basic and diluted | ||||||||
| Net income (loss) per Class B common share – basic and diluted | $ | $ | ( | ) | ||||
See accompanying notes to unaudited condensed financial statements
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HENNESSY CAPITAL INVESTMENT CORP. V
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three and nine months ended September 30, 2021
(unaudited)
For the three months ended September 30, 2021:
| Common Stock | Additional | |||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances, June 30, 2021 (unaudited), as restated | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income, three months ended September 30, 2021 | - | - | ||||||||||||||||||||||||||
| Balances, September 30, 2021 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the nine months ended September 30, 2021:
| Common Stock | Additional | |||||||||||||||||||||||||||
| Class A Shares | Amount | Class B Shares | Amount | Paid-in Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||||||||
| Balances, December 31, 2020 (1) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Accretion for Class A common subject to redemption to redemption amount | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss, nine months ended September 30, 2021 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances, September 30, 2021 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| (1) |
See accompanying notes to unaudited condensed financial statements
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HENNESSY CAPITAL INVESTMENT CORP. V
CONDENSED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2021
(unaudited)
| Cash flows from operating activities: | ||||
| Net loss | $ | ( | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Interest income retained in Trust Account | ( | ) | ||
| Warrant liability issuance costs | ||||
| Charge associated with issuance of private placement warrants | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Changes in operating assets and liabilities: | ||||
| Increase in prepaid expenses | ( | ) | ||
| Increase in accounts payable (excluding offering costs of $ | ||||
| Increase in accrued liabilities | ||||
| Increase in deferred compensation | ||||
| Increase in accrued income and franchise taxes and rounding | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash flows from investing activities: | ||||
| Cash deposited in Trust Account | ( | ) | ||
| Net cash used in investing activities | ( | ) | ||
| Cash flows from financing activities: | ||||
| Proceeds from sale of Units to the public | ||||
| Proceeds from sale of Private Placement Warrants | ||||
| Payment of underwriting discounts | ( | ) | ||
| Payment of offering costs | ( | ) | ||
| Payment of Note payable to Sponsor | ( | ) | ||
| Net cash provided by financing activities | ||||
| Net increase (decrease) in cash | ||||
| Cash at beginning of period | ||||
| Cash at end of period | $ | |||
| Supplemental disclosure of non-cash financing activities: | ||||
| Deferred underwriters’ compensation | $ | |||
| Offering costs included in accounts payable | $ | |||
See accompanying notes to unaudited condensed financial statements
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HENNESSY CAPITAL INVESTMENT CORP. V
Notes to Condensed Financial Statements
(unaudited)
NOTE 1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General:
Hennessy Capital Investment Corp. V (the “Company”) was incorporated in Delaware on October 6, 2020 as Hennessy Capital Acquisition Corp. V and changed its name to Hennessy Capital Investment Corp. V on November 19, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At September 30, 2021, the Company had not commenced any operations. All activity for the period from October 6, 2020 (inception) to September 30, 2021 relates to the Company’s formation and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and completing a suitable Business Combination. The Company will not generate any operating revenues until after 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 Public Offering. The Company has selected December 31 as its fiscal year end.
All dollar amounts are rounded to the nearest thousand dollars.
Sponsor and Financing:
The Company’s sponsor is Hennessy Capital
Partners V LLC, a Delaware limited liability company (the “Sponsor”). The Company intends to finance a Business Combination
with proceeds from the $
The Trust Account:
The funds in the Trust Account are invested only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the initial Business Combination or (ii) the distribution of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate
of incorporation provides that, other than the withdrawal of interest to pay tax obligations, if any (less up to $
Business Combination:
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants, although
substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination
with (or acquisition of) a Target Business. As used herein, “Target Business” is one or more target businesses that together
have a fair market value equal to at least
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The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the
opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote)
for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek
stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the
Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms
of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by the rules of the Nasdaq
Capital Market. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding
shares of Class A and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the
Company redeem its public shares in an amount that would cause its net tangible assets to be less than $
If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A common stock are recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account was initially $10.00 per public common share ($345,000,000 held in the Trust Account divided by 34,500,000 public shares).
The Company will only have 24 months from the
closing date of the Public Offering, or until January 20, 2023, to complete its initial Business Combination. If the Company does not
complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding
up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A
common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $
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 less than the price per Unit in the Public Offering.
NOTE 2 – TERMINATION OF MERGER AGREEMENT AND PLAN OF REORGANIZATION
As previously disclosed, on May 7, 2021, Hennessy Capital Investment Corp. V (“HCIC”) entered into a Merger Agreement and Plan of Reorganization (as amended and restated on June 19, 2021, the “Merger Agreement”) with PlusAI Corp, an exempted company incorporated with limited liability in the Cayman Islands (“Plus”), Plus Inc., an exempted company incorporated with limited liability in the Cayman Islands (“PubCo”), Prime Merger Sub I, Inc., an exempted company incorporated with limited liability in the Cayman Islands and a direct, wholly-owned subsidiary of PubCo, Prime Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of PubCo, and Plus Holdings Ltd., an exempted company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus, to effect HCIC’s initial business combination with Plus. In light of recent developments in the regulatory environment outside of the United States, Plus is pursuing a potential restructuring of certain aspects of its business. Subsequent to September 30, 2021 and given the November 8, 2021 “outside date” set forth in the Merger Agreement, HCIC and Plus have mutually agreed to terminate the Merger Agreement effective as of November 8, 2021.
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HCIC and Plus may enter into discussions with respect to a potential new business combination transaction following any such restructuring, though they are under no obligation to do so and there can be no assurance that any such discussions would result in the parties reaching a definitive agreement with respect to a potential new business combination.
Neither party will be required to pay the other a termination fee as a result of the mutual decision to terminate the Merger Agreement.
Plus is a global provider of self-driving truck technology aimed at making trucks safer, more efficient, more comfortable, and better for the environment using its autonomous driving solution PlusDrive advanced sensing technologies, including radar, lidar, and cameras to provide a 360-degree sensing system. Plus plans to begin mass production of PlusDrive, starting in 2021 with FAW, a heavy-truck manufacturer. Plus is headquartered in Cupertino, California.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Restatement of Previously Issued Financial Statements:
See Note 7 regarding the restatement of the Company’s previously issued condensed financial statements as of and for the periods ended March 31, 2021 and June 30, 2021. The restatement relates to accounting for all of the Class A common stock as temporary equity (Class A common stock subject to redemption) instead of including a portion in permanent equity. This change was originally presented in our Original Filing as a revision of previously issued financial statements, butafter the Original Filing management determined that this change should be reported as a restatement, see Note 7.
Basis of Presentation:
The accompanying unaudited condensed interim financial statements of the Company are presented in U.S. dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of September 30, 2021, and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year.
The accompanying unaudited condensed interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s final prospectus dated January 14, 2021.
Liquidity and Capital Resources:
At September 30, 2021, the Company has approximately
$
Emerging Growth Company:
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial 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.
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Net Income (Loss) Per Common Share:
Net income (loss) per common share is computed
by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the
period as calculated using the treasury stock method. The Company has not considered the effect of the warrants sold in the Public Offering
and the Private Placement to purchase an aggregate of
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of stock, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of stock. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding during the respective period.
The following table reflects the earnings per share after allocating income between the shares based on outstanding shares.
| For the three months ended September 30, 2021 | For the nine months ended September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | ( | ) | ( | ) | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
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
Deposit Insurance Corporation maximum coverage of $
Financial Instruments:
The fair value of the Company’s assets and liabilities (excluding the warrant liability), which qualify as financial instruments under FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed financial statements primarily due to their short-term nature.
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Use of Estimates:
The preparation of condensed financial statements in conformity with U.S. 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 condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The Company complies with the requirements of
the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering.” Costs incurred
in connection with preparation for the Public Offering were approximately $
Income Taxes:
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three and nine months ended September 30, 2021, and December 31, 2020 the Company recorded
income tax expense of approximately $-0- in both periods because the cost of deductible franchise taxes exceeded the interest income earned
on the Trust Account so there was no income for tax purposes. The Company’s effective tax rate for the three and nine months ended
September 30, 2021 was approximately -0-% in both periods which differs from the expected income tax rate due to the start-up costs (discussed
above) which are not currently deductible and business combination and warrant costs which may not be deductible. At September 30, 2021
and December 31, 2020, the Company has a deferred tax asset of approximately $
FASB ASC 740 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 no unrecognized tax benefits as of September 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Redeemable Common Stock:
As discussed in Note 4, all of the
9
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases
in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly, at September
30, 2021,
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the warrants was estimated in the initial periods using a Monte Carlo simulation approach for the public and private warrants and in the current period based upon, or derived from, the public trading warrants in an active, open market.
Recent Accounting Pronouncements:
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact that the pronouncement will have on the financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Subsequent Events:
Management has evaluated subsequent events and transactions that occurred after the balance sheet date and up to the date that the financial statements were issued and has concluded that all such events that would require adjustment or disclosure have been recognized or disclosed, including the restatement discussed in Note 7.
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NOTE 4 – PUBLIC OFFERING
On January 20, 2021, the Company completed the
sale of
The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates or any anchor investors, without taking into account any founder shares or warrants held by our initial stockholders or such affiliates, as applicable, or our anchor investors, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00. Once the Warrants become exercisable, the Company may redeem the outstanding warrants for cash (except as described herein with respect to the Private Placement 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; and |
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Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00. Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at $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 determined by reference to an agreed table based on the redemption date and the fair market value of the shares of Class A common stock; and |
| ● | if, and only if, the closing price of the shares of Class A common stock equals or exceeds $10.00 per public share (as adjusted) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; |
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination by January 20, 2023, 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.
The Company granted the underwriters a 45-day
option to purchase up to
The Company intends to finance a Business Combination
with proceeds from the $
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NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
In October 2020 the Sponsor purchased
The Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s initial Business Combination, or (B), subsequent to the Company’s initial Business Combination, if (x) the last reported sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial Business Combination or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
The Sponsor and certain funds and accounts managed by subsidiaries of BlackRock, Inc. and D. E. Shaw Valence Portfolios, L.L.C. (collectively, the “Direct Anchor Investors”) purchased from the Company an aggregate of 6,933,333 warrants at a price of $1.50 per warrant (a purchase price of $10,400,000), in a private placement that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”). The Sponsor purchased 4,853,333 Private Placement Warrants and the Direct Anchor Investors purchased 2,080,000 Private Placement Warrants. Each Private Placement Warrant entitles the holder to purchase one share of Class A common stock at $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering held in the Trust Account pending completion of the Company’s initial Business Combination. The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination and they will be non-redeemable so long as they are held by the Sponsor, the Direct Anchor Investors or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, the Direct Anchor Investors or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants included in the Units being sold in the Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Warrants being sold as part of the Units in the Public Offering and have no net cash settlement provisions.
In addition, if the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at a newly issued price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to its initial stockholders or their affiliates or any anchor investors, without taking into account any founder shares or warrants held by our initial stockholders or such affiliates, as applicable, or our anchor investors, prior to such issuance) (the “newly issued price”), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the newly issued price.
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If the Company does not complete a Business Combination, then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the public stockholders and the Private Placement Warrants issued to the Sponsor and the Direct Anchor Investors will expire worthless.
Registration Rights
The Company’s initial stockholders and the holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement signed on the date of the prospectus for the Public Offering. These holders are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the registration rights agreement.
Related Party Loans
In October 2020,
Administrative Support Agreement
The Company has agreed to pay $15,000 a month for office space, utilities and secretarial and administrative support to an affiliate of the Sponsor, Hennessy Capital Group LLC. Services commenced on the date the securities were first listed on the Nasdaq Capital Market and will terminate upon the earlier of the consummation by the Company of an initial Business Combination or the liquidation of the Company. Approximately $45,000 and 128,000, respectively, was charged to general and administrative expenses in the three and nine months ended September 30, 2021.
NOTE 6 – TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
Upon the closing of the Public Offering and the
Private Placement, a total of $
At September 30, 2021, the proceeds of the Trust
Account were invested primarily in money market funds meeting certain conditions described above yielding interest of less than
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The following table presents information about the Company’s assets 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 the Company utilized to determine such fair value. Since all of the Company’s permitted investments at September 30, 2021 consisted of U.S. government treasury bills and money market funds that invest only in U.S. government treasury bills, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities as follows:
| Description | Carrying value at September 30, 2021 | Gross Unrealized Holding Gains | Quoted Price Prices in Active Markets (Level 1) | |||||||||
| Assets: | ||||||||||||
| Money market funds | $ | $ | $ | |||||||||
There were
NOTE 7 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Class A Common Stock Subject to Redemption
The Company has determined that since all of the
Class A common stock is redeemable all such shares should be accounted for as redeemable in such companies’ financial statements.
Previously, most SPACs, including the Company, accounted for all but the amount necessary to have $
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As a result of the above, the Company has recorded all outstanding Class A common stock as Class A common stock subject to redemption in the September 30, 2021 condensed balance sheet and restated net income (loss) per share to allocate net income (loss) pro rata to Class A and Class B common stock in the condensed financial statements contained in the Original Filing. The effect of these changes on the Company’s previously issued financial statements is as follows:
| As Previously | Adjustment | As Restated | ||||||||||
| Condensed Balance Sheet at March 31, 2021 (unaudited) | ||||||||||||
| Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Additional paid-in-capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ equity | $ | $ | ( | ) | $ | ( | ) | |||||
| Condensed Statement of Operations for the three months ended March 31, 2021 (unaudited) | ||||||||||||
| Net loss per Class A common share – basic and diluted | $ | $ | ( | ) | $ | ( | ) | |||||
| Net loss per Class B common share – basic and diluted | $ | ( | ) | $ | $ | ( | ) | |||||
| Weighted average Class A common stock outstanding – basic and diluted | ( | ) | ||||||||||
| Condensed Statement of Cash Flows for the three months ended March 31, 2021 (unaudited) | ||||||||||||
| Initial value of Class A common shares subject to redemption, as restated | $ | $ | $ | |||||||||
| Condensed Balance Sheet at June 30, 2021 (unaudited) | ||||||||||||
| Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Additional paid-in-capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ equity | $ | $ | ( | ) | $ | ( | ) | |||||
| Condensed Statement of Operations for the three months ended June 30, 2021 (unaudited) | ||||||||||||
| Net loss per Class A common share – basic and diluted | $ | $ | ( | ) | $ | ( | ) | |||||
| Net loss per Class B common share – basic and diluted | $ | ( | ) | $ | $ | ( | ) | |||||
| Condensed Statement of Operations for the six months ended March 31, 2021 (unaudited) | ||||||||||||
| Net loss per Class A common share – basic and diluted | $ | $ | ( | ) | $ | ( | ) | |||||
| Net loss per Class B common share – basic and diluted | $ | ( | ) | $ | $ | ( | ) | |||||
| Weighted average Class A common stock outstanding – basic and diluted | ( | ) | ||||||||||
| Condensed Statement of Cash Flows for the six months ended June 30, 2021 (unaudited) | ||||||||||||
| Initial value of Class A common shares subject to redemption, as restated | $ | $ | $ | |||||||||
| Change in value of Class A common shares subject to redemption | $ | $ | ( | ) | $ | |||||||
The Company’s accounting for all of the Class A common stock as redeemable instead of including a portion in stockholders’ equity did not have any effect on the Company’s previously reported operating expenses, cash flows or cash.
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NOTE 8 – ACCOUNTING FOR WARRANT LIABILITY, FAIR VALUE MEASUREMENT
At September 30, 2021, there were
The Company accounts for its warrants outstanding consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “Staff Statement”) issued on April 12, 2021 by the staff (the “Staff”) of the Division of Corporation Finance of the SEC. The Staff Statement, among other things, highlights the potential accounting implications of certain terms that are common in warrants issued in connection with the initial public offerings of special purpose acquisition companies (“SPAC”) such as the Company. The Staff Statement reflects the Staff’s view that in many cases, warrants issued by SPACs should be characterized as liabilities for accounting purposes, rather than as equity securities, unless certain conditions are met. As a result of this guidance, the Company’s management further evaluated its warrants under ASC Subtopic 815-40, Contracts in Entity’s Own Equity, including the assistance of accounting and valuation consultants and concluded that the Company’s warrants are not indexed to the Company’s shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares.
The Company has recorded approximately $
The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Description | September 30, 2021 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Warrant Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | - | |||||||||||
| Private Placement Warrants | $ | $ | $ | $ | - | |||||||||||
| Warrant liability at September 30, 2021 | $ | $ | $ | $ | - | |||||||||||
At September 30, 2021, the Company valued its
Public Warrants based on publicly observable inputs (Level 1 inputs) from the trading in the Public Warrants ($
Prior to September 30, 2021, the Company utilized an independent valuation consultant that used a Monte Carlo simulation model with Geometric Brownian motion to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability was determined using Level 3 inputs. Inherent in a Monte Carlo simulation options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the volatility of its shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipated to remain at zero. During the three months ended September 30, 2021, the Company transferred the Public Warrants from Level 3 to Level 1 and the Private Placement Warrants from Level 3 to Level 2.
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The warrant liabilities are not subject to qualified hedge accounting.
The following table provides quantitative information regarding Level 3 fair value measurements used prior to September 30, 2021:
| At June 30, 2021 | At January 20, 2021 (Initial Measurement) | |||||||
| Stock price | $ | $ | ||||||
| Strike price | $ | $ | ||||||
| Term (in years) | ||||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Probability of acquisition | % | % | ||||||
| Fair value of warrants | $ | $ | ||||||
The following table presents the changes in the fair value of warrant liabilities:
| Public | Private Placement | Warrant Liabilities | ||||||||||
| Fair value at January 1, 2021 | ||||||||||||
| Initial measurement on January 20, 2021 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of March 31, 2021 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ||||||||||||
| Fair value at June 30, 2021 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ( | ) | |||||||
| Fair value as of September 30, 2021 | $ | $ | $ | |||||||||
None of the warrant liabilities are classified as level 3 in the fair value hierarchy at September 30, 2021.
NOTE 9 – STOCKHOLDERS’ EQUITY
Common Stock
The authorized common stock of the Company is
The
18
Preferred Stock
The Company is authorized to issue
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Business Combination Costs
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, the Company has entered into, and expects to enter into additional, engagement letters or agreements with various consultants, advisors, professionals and others. The services under these engagement letters and agreements are material in amount and in some instances include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Risks and Uncertainties – COVID-19
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 pandemic could have an effect on the Company’s financial position, results of its operations, and/or search for a target company and/or a target company’s financial position and results of its operations, and the closing of a business combination, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
Overview
We are a blank check company incorporated as a Delaware corporation on October 6, 2020. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Initial Business Combination”). We intend to effectuate our Initial Business Combination using cash from the proceeds of our initial public offering that was completed in January 2021 (the “Public Offering”) and the sale of warrants in a private placement (the “Private Placement”) that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”), our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in an Initial Business Combination:
| ● | may significantly dilute the equity interest of our stockholders; |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change in control if a substantial number of shares of our common stock is 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 stock ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
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Similarly, if we issue debt securities or incur other indebtedness to finance our Initial Business Combination, 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; |
| ● | our inability to obtain necessary additional financing if the debt security or other indebtedness contains covenants restricting our ability to obtain such financing while the debt security or other indebtedness is outstanding; |
| ● | our inability to pay dividends on our common stock; |
| ● | 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 common stock if declared, or limit our ability to pay expenses, make capital expenditures and acquisitions and fund 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; |
| ● | 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. |
At September 30, 2021, we had approximately $1,015,000 in cash outside of the Trust Account. We are incurring and expect to incur significant costs in the pursuit of an Initial Business Combination and we cannot assure you that our plans to complete an Initial Business Combination will be successful.
Recent Developments – COVID-19
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has spread throughout other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic.” COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our ability to close a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, our ability to consummate a business combination may be materially adversely affected.
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Recent Developments – Termination of Merger Agreement and Plan of Reorganization
As previously disclosed, on May 7, 2021, Hennessy Capital Investment Corp. V (“HCIC”) entered into a Merger Agreement and Plan of Reorganization (as amended and restated on June 19, 2021, the “Merger Agreement”) with PlusAI Corp, an exempted company incorporated with limited liability in the Cayman Islands (“Plus”), Plus Inc., an exempted company incorporated with limited liability in the Cayman Islands (“PubCo”), Prime Merger Sub I, Inc., an exempted company incorporated with limited liability in the Cayman Islands and a direct, wholly-owned subsidiary of PubCo, Prime Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of PubCo, and Plus Holdings Ltd., an exempted company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus, to effect HCIC’s initial business combination with Plus. In light of recent developments in the regulatory environment outside of the United States, Plus is pursuing a potential restructuring of certain aspects of its business. Subsequent to September 30, 2021 and given the November 8, 2021 “outside date” set forth in the Merger Agreement, HCIC and Plus have mutually agreed to terminate the Merger Agreement effective as of November 8, 2021.
HCIC and Plus may enter into discussions with respect to a potential new business combination transaction following any such restructuring, though they are under no obligation to do so and there can be no assurance that any such discussions would result in the parties reaching a definitive agreement with respect to a potential new business combination.
Neither party will be required to pay the other a termination fee as a result of the mutual decision to terminate the Merger Agreement.
Plus is a global provider of self-driving truck technology aimed at making trucks safer, more efficient, more comfortable, and better for the environment using its autonomous driving solution PlusDrive advanced sensing technologies, including radar, lidar, and cameras to provide a 360-degree sensing system. Plus plans to begin mass production of PlusDrive, starting in 2021 with FAW, a heavy-truck manufacturer. Plus is headquartered in Cupertino, California.
Results of Operations
For the period from October 6, 2020 (date of inception) to September 30, 2021, our activities consisted of formation and preparation for the Public Offering and, subsequent to completion of the Public Offering on January 20, 2021, identifying and completing a suitable Initial Business Combination. As such, in 2021 we had no operations or significant operating expenses until after the completion of the Public Offering in January 2021.
Our normal operating costs since January 20, 2021 include costs associated with our search for an Initial Business Combination (see below), costs associated with our governance and public reporting (see below), state franchise taxes of approximately $17,000 per month (see below), a charge of $15,000 per month from our Sponsor for administrative services and $29,000 per month ($14,000 of which is deferred as to payment until closing of our Initial Business Combination) for compensation to each of our Chief Operating Officer and Chief Financial Officer. Our costs in the three and nine months ended September 30, 2021 also include professional and consulting fees and travel associated with evaluating various Initial Business Combination candidates, as well as the costs of our public reporting and other costs, subsequent to the Public Offering. Professional and consulting fees, regulatory and travel costs associated with investigating potential Initial Business Combination candidates were approximately $1,020,000 and $7,330.000, respectively, for the three and nine months ended September 30, 2021. As we identified our Initial Business Combination candidate, our costs have increased significantly in connection with negotiating and executing a definitive agreement and related agreements as well as additional professional, due diligence and consulting fees and travel costs required in connection with an Initial Business Combination. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $237,000 and $411,000 for the three and nine months ended September 30, 2021. In addition, since our operating costs are not expected to be deductible for federal income tax purposes, we are subject to federal income taxes on the interest income earned from the Trust Account less taxes. Such federal income taxes were $-0-, for both the three and nine months ended September 30, 2021 because the cost of deductible franchise taxes exceeded the interest income earned on the Trust Account. We are permitted to withdraw interest earned from the Trust Account for the payment of taxes to the extent of interest income earned. We did not withdraw any interest from the Trust Account in the three and nine months ended September 30, 2021.
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The Public Offering and the Private Placement closed on January 20, 2021 as more fully described in “Liquidity and Capital Resources” below. At that time, the proceeds in the Trust Account were initially invested in a money market fund that invested solely in direct U.S. government obligations meeting the applicable conditions of Rule 2a-7 of the Investment Company Act of 1940. At September 30, 2021, proceeds in the Trust Account continue to be invested in such money market fund. As a result of market conditions occurring in connection with the Covid-19 pandemic, interest rates on available investments are low (less than 0.1%) and at that level are insufficient to cover our franchise tax obligations. It is unclear how long this condition will persist, or whether it could worsen.
As discussed further in Note 7 to the condensed financial statements, the Company accounts for its outstanding public and private warrants as components as derivative liabilities in the accompanying unaudited condensed financial statements. As a result, the Company is required to measure the fair value of the public and private warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for each current period. The condensed statement of operations for the three and nine months ended September 30, 2021 reflects other income from change in fair value of the warrant liability of approximately $13,224,000 and $5,757,000, respectively, and charges to other expense aggregating approximately $-0- and $1,471,000, respectively, for warrant liability transaction costs (approximately $639,000) and transaction date expenses related to the issuance of the Private Placement Warrants (approximately $832,000).
Liquidity and Capital Resources
On January 20, 2021, we consummated the Public Offering of an aggregate of 34,500,000 Units at a price of $10.00 per unit generating gross proceeds of approximately $345,000,000 before underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the Private Placement of 6,933,333 Private Placement Warrants, each exercisable to purchase one share of our Class A common stock at $11.50 per share, to the Sponsor and certain funds and accounts managed by subsidiaries of BlackRock, Inc. and D.E. Shaw Valance Portfolios,L.L.C. (collectively, the “Direct Anchor Investors”), at a price of $1.50 per Private Placement Warrant, generating gross proceeds, before expenses, of approximately $10,400,000.
The net proceeds from the Public Offering and Private Placement were approximately $347,776,000, net of the non-deferred portion of the underwriting commissions of $6,900,000 and offering costs and other expenses of approximately $724,000. $345,000,000 of the proceeds of the Public Offering and the Private Placement have been deposited in the Trust Account and are not available to us for operations (except amounts to pay taxes). At September 30, 2021, we had approximately $1,015,000 of cash available outside of the Trust Account to fund our activities until we consummate an Initial Business Combination.
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Until the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of shares of our Class B common stock for $25,000 by the Sponsor, and a total of $150,000 loaned by the Sponsor against the issuance of an unsecured promissory note (the “Note”). The Note was non-interest bearing and was paid in full on January 20, 2021 in connection with the closing of the Public Offering.
At September 30, 2021, the Company has approximately $1,015,000 in cash, approximately $7,238,000 of current liabilities and approximately $6,223,000 in negative working capital. The Company has incurred and expects to continue to incur significant costs in pursuit of its Business Combination. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful within the period allotted to complete the Business Combination. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The preponderance of the current liabilities (approximately $6,740,000) results from amounts accrued as payable to professional service firms who indicated their intention to accept deferred payment terms, or success fees, that are payable at the closing of the proposed Business Combination. As a result, the Company believes, but cannot assure, that it has the liquidity to complete a Business Combination.
The Company has only until January 20, 2023 to complete an Initial Business Combination. If the Company does not complete an Initial Business Combination by January 20, 2023, the Company will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A common stock for a pro rata portion of the Trust Account, including interest, but less taxes payable (and less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as reasonably possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The initial stockholders have waived their redemption rights with respect to their founder shares; however, if the initial stockholders or any of the Company’s officers, directors or their affiliates acquire shares of Class A common stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete an Initial Business Combination within the required time period.
In the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per unit in the Public Offering.
Off-balance sheet financing arrangements
As of September 30, 2021, we have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any agreements for non-financial assets.
Contractual obligations
At September 30, 2021, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with the Public Offering, we entered into an Administrative Support Agreement with Hennessy Capital Group LLC, an affiliate of our Sponsor, pursuant to which the Company pays Hennessy Capital Group LLC $15,000 per month for office space, utilities and secretarial and administrative support.
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Also, commencing on the date the securities are first listed on the Nasdaq Capital Market, the Company has agreed to compensate each of its President and Chief Operating Officer as well as its Chief Financial Officer $29,000 per month prior to the consummation of the Company’s initial Business Combination, of which $14,000 per month is payable upon the completion of the Company’s initial Business Combination and $15,000 per month is payable currently for their services. During the three and nine months ended September 30, 2021, approximately $90,000 and $256,000 was paid and approximately $239,000 was included in current liabilities as deferred compensation at September 30, 2021 for these obligations.
Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying or accruing these monthly fees.
In connection with identifying an Initial Business Combination candidate and negotiating an Initial Business Combination, the Company may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an Initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an Initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting policies:
Emerging Growth Company:
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial 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.
Net Income (Loss) Per Common Share:
Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period as calculated using the treasury stock method. The Company has not considered the effect of the warrants sold in the Public Offering and the Private Placement to purchase an aggregate of 15,558,333 shares of Class A common stock in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per common share is the same as basic loss per common share for the period.
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The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of stock, which are referred too as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of stock. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding during the respective period.
The following table reflects the earnings per share after allocating income between the shares based on outstanding shares.
| For the three months ended September 30, 2021 | For the nine months ended September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | 9,312,800 | 2,328,200 | (3,547,232 | ) | (947,768 | ) | ||||||||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding | 34,500,000 | 8,625,000 | 31,972,527 | 8,542,582 | ||||||||||||
| Basic and diluted net income (loss) per share | $ | 0.27 | $ | 0.27 | $ | (0.11 | ) | $ | (0.11 | ) | ||||||
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 Deposit Insurance Corporation maximum coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet primarily due to their short-term nature.
Use of Estimates:
The preparation of condensed financial statements in conformity with U.S. 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 condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering.” Costs incurred in connection with preparation for the Public Offering were approximately $19,689,000, including the underwriters discount of $18,975,000. Such costs were allocated among the equity and warrant liability components based on their fair values and approximately $19,050,000 of such costs have been charged to temporary equity and the remainder, approximately $639,000, have been charged to the condensed statement of operations upon completion of the Public Offering in January 2021.
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Income Taxes:
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company’s currently taxable income consists of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. During the three and nine months ended September 30, 2021, the Company recorded income tax expense of approximately $-0- in both periods because the cost of deductible franchise taxes exceeded the interest income earned on the Trust Account. The Company’s effective tax rate for the three and nine months ended September 30, 2021 was approximately -0-% in both periods which differs from the expected income tax rate due to the start-up costs (discussed above) which are not currently deductible. At September 30, 2021 and December 31, 2020, the Company has a deferred tax asset of approximately $280,000 and $-0-, respectively, primarily related to start-up costs. Management has determined that a full valuation allowance of the deferred tax asset is appropriate at this time.
FASB ASC 740 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 no unrecognized tax benefits as of September 30, 2021 or December 31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2021 or December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Redeemable Common Stock:
As discussed in Note 4, all of the 34,500,000 public shares sold as part of Units in the Public Offering contain a redemption feature which allows for the redemption of public shares if the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001 upon the closing of a Business Combination. However, because all of the shares of Class A common stock are redeemable, all of the shares are recorded as Class A common stock subject to redemption on the enclosed balance sheet. See also, Note 7, regarding a revision to the presentation of redeemable shares in these financial statements and the effect on previously reported financial statements.
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The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly, at September 30, 2021, all of the 34,500,000 public shares were classified outside of permanent equity. At December 31, 2020, there were no shares of Class A common stock outstanding or redeemable.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the warrants was estimated using a Monte Carlo simulation approach.
Recent Accounting Pronouncements:
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We were incorporated in Delaware on October 6, 2020 for the purpose of effecting an Initial Business Combination. As of September 30, 2021, we had not commenced any operations or generated any revenues. All activity through September 30, 2021 relates to our formation and our Public Offering and subsequent to the Public Offering identifying and completing a suitable Initial Business Combination. $345,000,000 of the net proceeds of the Public Offering and the Private Placement that closed on January 20, 2021 were deposited into a Trust Account and invested in a money market fund meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U. S. government obligations. At September 30, 2021, the Trust Account remains invested in such money market fund. At September 30, 2021, there was approximately $345,028,000 in the Trust Account.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the 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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
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Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers 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/A 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.
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/A 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 including making greater use of 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. We believe our efforts will enhance our controls relating to accounting for complex financial transactions, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practices may evolve over time.
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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 has not, except as disclosed below, been a change to the risk factors disclosed in our Prospectus filed with the SEC on January 19, 2021 and in our Quarterly Reports on Form 10-Q for the three months ended March 31, 2021 and June 30, 2021 filed with the SEC. 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. We may disclose changes to such risk factors or disclose additional risk 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 as of September 30, 2021. 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.
We have identified, in light of the prior reclassification of warrants from equity to liability (which has since been remediated), as well as the reclassification of our redeemable Class A common stock as temporary equity and the need to restate net income (loss) per share, a material weakness in our internal controls over financial reporting relating to our accounting for complex financial instruments. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Measures to remediate material weaknesses may be time-consuming and costly and there is no assurance that such initiatives will ultimately have the intended effects. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and adversely affect our business and operating results. We plan to remediate this weakness by placing greater focus on complex financial transactions and increasing the utilization of consulting accountants to help guide our decisions. We believe our efforts will enhance our controls relating to accounting for complex financial transactions, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practices may evolve over time. 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
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| * | Furnished herewith |
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SIGNATURES
In accordance with 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.
| HENNESSY CAPITAL INVESTMENT CORP. V | ||
| Dated: December 21, 2021 | /s/ Daniel J. Hennessy | |
| Name: | Daniel J. Hennessy | |
| Title: | Chairman of the Board of Directors and | |
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: December 21, 2021 | /s/ Nicholas A. Petruska | |
| Name: | Nicholas A. Petruska | |
| Title: | Executive Vice President, Chief | |
| Financial Officer and Secretary | ||
| (Principal Financial and Accounting Officer) | ||
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