UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Amendment No. 1)
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File Number
(Exact Name of Registrant as Specified in its Charter)
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Name of Each Exchange on Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 October 15, 2021, the registrant had
EXPLANATORY NOTE
References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our company” are to Lazard Growth Acquisition Corp. I., unless the context otherwise indicates.
This Amendment No. 1 to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Lazard Growth Acquisition Corp. I (the “Company”) as of and for the period ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 4, 2021 (the “Q3 2021 Form 10-Q”).
The financial statements included in the Q3 2021 Form 10-Q included Note 2, Revision of Previously Issued Financial Statements (“Note 2”) that described a revision to the Company’s classification of its Class A ordinary shares subject to redemption issued as part of the units sold in the Company’s initial public offering (“IPO”). As described in Note 2, upon its IPO, the Company classified a portion of the Class A ordinary shares as permanent equity to maintain net tangible assets greater than $5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001. The Company’s management re-evaluated the conclusion and determined that the Class A ordinary shares subject to redemption included certain provisions that require classification of the Class A ordinary shares as temporary equity regardless of the minimum net tangible assets required to complete the Company’s initial business combination.
However, the Company determined at the time that this error was not material to its previously filed financial statements and, therefore, in its financial statements for the quarterly period ended September 30, 2021 in its Q3 2021 Form 10-Q, the Company revised the unaudited condensed financial information in Note 2 to its Q3 2021 Form 10-Q as of March 31, 2021 and June 30, 2021 to classify all Class A ordinary shares as temporary equity. Subsequently, as described below, management re-evaluated the Company’s application of ASC 480-10-S99-3A and determined that the prior classification of a portion of the Class A ordinary shares as permanent equity was a material error. Although the qualitative factors that management assessed tended to support a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. The qualitative and quantitative factors support a conclusion that the misstatements are material on a quantitative basis. As such, management re-evaluated the Company’s application of ASC 480-10-S99-3A and determined that the prior classification of a portion of the Class A ordinary shares as permanent equity was a material error.
On December 13, 2021, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued (i) audited balance sheet as of February 12, 2021, filed with the SEC on February 19, 2021, (ii) unaudited condensed interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on May 12, 2021, (iii) unaudited condensed interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 9, 2021 and (iv) Note 2 to the unaudited condensed financial statements included in the Q3 2021 Form 10-Q (collectively, the “Affected Periods”), should be restated to report all of the Company’s Class A ordinary shares as temporary equity and should no longer be relied upon. As a result, the Company is restating its financial statements for the Affected Periods in this Quarterly Report on Form 10-Q/A to indicate that the classification error is a restatement and not a revision.
The Company determined that none of the above changes had any impact on its previously reported total assets, results of operations or cash flows or on its cash position and cash held in the trust account established in connection with the IPO.
After re-evaluation, the Company’s management has concluded that in light of the error described above, a material weakness existed in the Company’s internal control over financial reporting during the Affected Periods and that the Company’s disclosure controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in more detail in Item 4 of Part I to in this Quarterly Report on Form 10-Q/A.
Table of Contents
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PART I. |
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Item 1. |
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1 |
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2 |
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3 |
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4 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
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Item 1. |
27 |
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Item 1A. |
27 |
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Item 2. |
27 |
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Item 3. |
28 |
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Item 4. |
28 |
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Item 5. |
28 |
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Item 6. |
29 |
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30 |
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
LAZARD GROWTH ACQUISITION CORP. I
Condensed Unaudited Balance Sheets
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September 30, 2021 |
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December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash |
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$ |
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$ |
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Prepaid expenses |
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- |
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Total current assets |
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Other assets: |
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Cash held in Trust Account |
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- |
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Deferred offering costs |
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- |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Promissory note payable |
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$ |
- |
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$ |
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Related party loans |
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Accrued offering and formation costs |
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Accrued expenses and payable to affiliate |
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- |
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Total current liabilities |
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Other liabilities: |
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Warrants exercisable for Class A ordinary shares, at fair value |
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- |
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Deferred underwriting commissions |
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- |
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Total liabilities |
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Commitments and contingencies |
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Class A ordinary shares subject to possible redemption; |
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- |
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Shareholders' Equity |
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Preference shares, $ |
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Class A ordinary shares, $ |
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- |
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- |
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Class B ordinary shares, $ |
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Additional paid in capital |
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- |
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Retained earnings (accumulated deficit) |
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( |
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Total shareholders' equity |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
1
LAZARD GROWTH ACQUISITION CORP. I
Condensed Unaudited Statements of Operations
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2021 |
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2021 |
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EXPENSES |
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General and administrative expenses |
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$ |
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$ |
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Total expenses |
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OTHER INCOME (EXPENSE) |
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Expensed offering costs |
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- |
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( |
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Change in fair value of warrant liability |
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Interest on trust account |
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Total other income (expenses) |
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NET INCOME |
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$ |
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$ |
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Weighted average number of shares outstanding, redeemable Class A ordinary shares |
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Basic and diluted net income per share, redeemable Class A ordinary shares |
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$ |
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$ |
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Weighted average number of shares outstanding, non-redeemable ordinary shares |
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Basic and diluted net income per share, non-redeemable ordinary shares |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
2
LAZARD GROWTH ACQUISITION CORP. I
Condensed Unaudited Statement of Cash Flows
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Nine Months Ended |
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September 30, |
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2021 |
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Cash Flows from Operating Activities: |
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Net Income |
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$ |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Change in fair value of warrant liability |
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( |
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Expensed offering costs |
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Interest on trust account |
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( |
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(Increase) decrease in operating assets and increase (decrease) in operating liabilities: |
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Prepaid expenses |
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( |
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Accrued expenses and payable to affiliates |
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Net Cash used in operating activities |
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( |
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Investing Activities: |
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Cash placed in trust |
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( |
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Cash used in investing activities |
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( |
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Financing Activities: |
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Proceeds from sale of Initial Public Offering Units |
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Proceeds from sale of Private Placement Warrants |
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Payment of underwriting discount |
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( |
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Payment of offering costs |
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( |
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Proceeds from promissory note payable |
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Payment of promissory note payable |
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( |
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Proceeds from related party loans |
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Net cash provided by financing activities |
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Net Change in Cash |
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Cash - Beginning of period |
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Cash - End of period |
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$ |
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Non-cash investing and financing activities: |
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Deferred offering costs included in accrued offering and formation costs |
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$ |
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Deferred underwriting commission |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
3
LAZARD GROWTH ACQUISITION CORP. I
Condensed Unaudited Statement of Changes in Shareholders’ Equity
For the nine months ended September 30, 2021
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Additional |
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Retained Earnings |
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Total |
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Class A Ordinary Shares |
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Class B Ordinary Shares |
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Paid in |
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(Accumulated |
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Shareholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit) |
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Equity |
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Balance, December 31, 2020 |
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- |
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$ |
- |
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$ |
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$ |
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$ |
( |
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$ |
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Class A ordinary shares issued, net of offering costs |
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- |
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- |
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- |
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Proceeds of sale of Private Placement Warrants in excess of fair value |
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- |
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- |
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- |
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- |
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- |
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Net Income |
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- |
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- |
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- |
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- |
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- |
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Class A ordinary shares subject to possible redemption |
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( |
) |
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( |
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- |
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- |
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( |
) |
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$ |
( |
) |
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( |
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Balance, March 31, 2021 - as restated |
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- |
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$ |
- |
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$ |
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$ |
- |
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$ |
( |
) |
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$ |
( |
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Offering costs on Class A ordinary shares issued |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Net Loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Balance, June 30, 2021 - as restated |
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- |
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$ |
- |
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$ |
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$ |
- |
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$ |
( |
) |
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$ |
( |
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Net Income |
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- |
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- |
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- |
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- |
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- |
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Balance, September 30, 2021 |
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- |
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$ |
- |
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$ |
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$ |
- |
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( |
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$ |
( |
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The accompanying notes are an integral part of these condensed financial statements.
4
LAZARD GROWTH ACQUISITION CORP. I
Notes to Unaudited Condensed Financial Statements
Note 1 - Organization and Plan of Business Operations
Lazard Growth Acquisition Corp. I is a blank check company, incorporated as a Cayman Islands exempted company on
As of September 30, 2021, the Company had not commenced any operations. The Company’s business activities for the nine months ended September 30, 2021, primarily related to completing its initial public offering and identifying and evaluating prospective acquisition targets for an initial Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Initial Public Offering became effective on February 9, 2021. On February 12, 2021, the Company consummated the Initial Public Offering of
Substantially all of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants are intended to be applied generally toward consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide the holders of the public shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination, either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, based on a variety of factors. The Public Shareholders will be entitled to redeem their public shares, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination (initially anticipated to be $
5
The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Sponsor and each of our officers and directors have agreed to waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with (i) the completion of a Business Combination and (ii) a shareholder vote to approve an amendment to the Amended and Restated Memorandum and Articles of Association that (A) modify the substance or timing of the Company’s obligation to allow redemption of Class A ordinary shares in connection with the Company’s initial Business Combination or to redeem
The Company has until
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respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The underwriter has agreed to waive its rights to deferred underwriting commissions (see Note 9) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the public shares. In the event of such redemption, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 global pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity
On March 26, 2021, the Sponsor committed $
Note 2 - Restatement of Previously Issued Financial Statements
In accordance with the terms of the Amended and Restated Memorandum and Articles of Association, the Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
7
The impact of the restatement on the Company’s financial statements is reflected in the following tables.
8
BALANCE SHEETS |
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February 12, 2021 |
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As previously reported |
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Restatement Adjustment |
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As Restated |
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Temporary Equity: |
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Class A ordinary shares subject to possible redemption |
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$ |
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$ |
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$ |
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Permanent Equity: |
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Class A ordinary shares |
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$ |
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$ |
( |
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$ |
- |
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Class B ordinary shares |
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- |
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Additional paid in capital |
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( |
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- |
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Retained earnings (accumulated deficit) |
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( |
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( |
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( |
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Total Shareholders' Equity |
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$ |
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$ |
( |
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$ |
( |
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March 31, 2021 |
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As previously reported |
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Restatement Adjustment |
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As Restated |
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Temporary Equity: |
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Class A ordinary shares subject to possible redemption |
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$ |
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$ |
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$ |
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Permanent Equity: |
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Class A ordinary shares |
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$ |
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$ |
( |
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$ |
- |
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Class B ordinary shares |
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- |
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Additional paid in capital |
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( |
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- |
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Retained earnings (accumulated deficit) |
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( |
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( |
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Total Shareholders' Equity |
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$ |
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$ |
( |
) |
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$ |
( |
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June 30, 2021 |
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As previously reported |
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Restatement Adjustment |
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As Restated |
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Temporary Equity: |
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Class A ordinary shares subject to possible redemption |
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$ |
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$ |
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$ |
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|
Permanent Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
- |
|
Class B ordinary shares |
|
|
|
|
|
|
- |
|
|
|
|
|
Additional paid in capital |
|
|
|
|
|
|
( |
) |
|
|
- |
|
Retained earnings (accumulated deficit) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Shareholders' Equity |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
9
STATEMENTS OF OPERATIONS |
|
|||||||||||
|
|
Three Months March 31, 2021 |
|
|||||||||
|
|
As previously reported |
|
|
Restatement Adjustment |
|
|
As Restated |
|
|||
Weighted average number of shares outstanding, redeemable Class A ordinary shares |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share, redeemable Class A ordinary shares |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Weighted average number of shares outstanding, non-redeemable ordinary shares |
|
|
|
|
|
|
( |
) |
|
|
|
|
Basic and diluted net income per share, non-redeemable ordinary shares |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|||||||||
|
|
As previously reported |
|
|
Restatement Adjustment |
|
|
As Restated |
|
|||
Weighted average number of shares outstanding, redeemable Class A ordinary shares |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, redeemable Class A ordinary shares |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average number of shares outstanding, non-redeemable ordinary shares |
|
|
|
|
|
|
( |
) |
|
|
|
|
Basic and diluted net loss per share, non-redeemable ordinary shares |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
|
|||||||||
|
|
As previously reported |
|
|
Restatement Adjustment |
|
|
As Restated |
|
|||
Weighted average number of shares outstanding, redeemable Class A ordinary shares |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, redeemable Class A ordinary shares |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average number of shares outstanding, non-redeemable ordinary shares |
|
|
|
|
|
|
( |
) |
|
|
|
|
Basic and diluted net loss per share, non-redeemable ordinary shares |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY |
|
|||||||||||
|
|
Three Months Ended March 31, 2021 |
|
|||||||||
|
|
As previously reported |
|
|
Restatement Adjustment |
|
|
As Restated |
|
|||
Change in Class A ordinary shares subject to possible redemption |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|||||||||
|
|
As previously reported |
|
|
Restatement Adjustment |
|
|
As Restated |
|
|||
Change in Class A ordinary shares subject to possible redemption |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
- |
|
10
Note 3 - Significant Accounting Policies
Basis of Presentation
The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC for interim financial information and the instructions to Form 10-Q. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC. These unaudited condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim period presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s final prospectus for the Initial Public Offering filed with the SEC on February 11, 2021, as well as the Company’s annual audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have a material impact on the financial statements.
11
Cash and Cash Held in Trust Account
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of ninety (90) days or less. As of September 30, 2021, the Company held deposits of $
Deferred Offering Costs
Deferred offering costs consist of legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Initial Public Offering. These costs, together with the upfront underwriting discounts, the deferred underwriting commissions and the financial advisory fee in connection with the Initial Public Offering, were allocated between the Public Shares and the Public Warrants and charged to shareholders’ equity and operating expenses, respectively, upon the completion of the Initial Public Offering.
Warrants Exercisable for Class A Ordinary Shares
The Company accounts for the warrants issued in connection with the Initial Public Offering in accordance with ASC 480-10, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which provides that the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, in accordance with ASC Topic 815, and any change in fair value is recognized in the Company’s statement of operations.
Income Taxes
The Company accounts for income taxes under ASC 740, "Income Taxes." ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC Topic 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. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2021 and December 31, 2020 there were
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was
Redeemable Shares of Class A Ordinary Shares
As discussed in Note 1, all of the
12
Net Income (Loss) Per Ordinary Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares issued and outstanding during the period. As of September 30, 2021 the Company had outstanding warrants to purchase up to
The Company’s statement of operations includes a presentation of income (loss) per share for ordinary shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per share, basic and diluted, for redeemable Class A ordinary shares is calculated by dividing the investment income earned on the Trust Account by the weighted average number of redeemable Class A ordinary shares outstanding. Net income (loss) per share, basic and diluted, for non-redeemable ordinary shares is calculated by dividing the net income (loss), adjusted for income attributable to redeemable Class A ordinary shares, by the weighted average number of non-redeemable ordinary shares outstanding for the period. Non-redeemable ordinary shares include the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value measurements and disclosures,” approximates the carrying amounts represented in the accompanying balance sheets primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
In August 2020, the Financial Accounting Standards Board 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 assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Note 4 - Initial Public Offering
On February 12, 2021, pursuant to the Initial Public Offering, the Company sold
13
Transaction costs amounted to $
Note 5 - Private Placement
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
The proceeds from the sale of the Private Placement Warrants of $
Note 6 - Related Party Transactions
Founder Shares
On December 17, 2020, the Sponsor paid $
On February 5, 2021, the Sponsor transferred
Effective May 11, 2021, a member of the Company’s board of directors (the “Board”) resigned his position as a member of the Board and subsequently transferred back to the Sponsor the
The Sponsor and each of the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (i) one year after the completion of a Business Combination and (ii) subsequent to a Business Combination, (A) if the closing price of the Class A ordinary shares equals or exceeds $
14
completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
IPO Promissory Note
On December 17, 2020, the Sponsor agreed to loan the Company an aggregate amount of up to $
Related Party Loans
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor has committed $
Advisory Services
Lazard Frères & Co. LLC, an affiliate of the Company, is acting as the Company’s independent financial advisor as defined under Financial Industry Regulatory Authority (“FINRA”) Rule 5110(j)(9), to provide independent financial consulting services, consisting of a review of deal structure and terms and related structuring advice in connection with the Initial Public Offering and the consummation of the Business Combination. Upon the completion of the Initial Public Offering, Lazard Frères & Co. LLC received a financial advisory fee of $
Administrative Support Agreement
The Company agreed, commencing on the date that the Company’s securities are first listed on the Nasdaq Capital Market, which was February 10, 2021, and through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay an affiliate of the Sponsor a total of $
Note 7 - Fair Value Measurements
Fair Value Hierarchy of Assets and Liabilities—The Company categorizes its warrants exercisable for Class A ordinary shares, which are recorded at fair value into a three-level fair value hierarchy as follows:
Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.
15
Level 2. Assets and liabilities whose values are based on (i) quoted prices for similar assets or liabilities in an active market, or quoted prices for identical or similar assets or liabilities in non-active markets, or (ii) inputs other than quoted prices that are directly observable or derived principally from, or corroborated by, market data.
Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability
The Company’s Public Warrants exercisable for Class A ordinary shares began trading on Nasdaq in April 2021 and have been reclassified from Level 3 to Level 1. Their fair value at September 30, 2021 is based on an observable market quote. The fair value of the Public Warrants prior to the commencement of trading and the fair value of the Private Warrants is based on a valuation model that utilizes both observable and unobservable inputs. Observable inputs include market prices of warrants issued by other SPACs and unobservable inputs include model adjustments for valuation uncertainty pertaining to the probability of the Company consummating a Business Combination.
The following table presents, as of September 30, 2021, the classification of assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy.
|
|
September 30, 2021 |
|
|||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
NAV |
|
|
Total |
|
|||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Held in Trust Account |
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable for Class A ordinary shares |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
The following tables provide a summary of the changes in fair value of the Company’s Level 3 liabilities for the three months and nine months ended September 30, 2021.
|
|
Three Months ended September 30, 2021 |
|
|||||||||||||||||
|
|
Beginning Balance |
|
|
Initial Fair Value |
|
|
Changes in Fair Value of Warrant Liabilities |
|
|
Transfers |
|
|
Ending Balance |
|
|||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Warrants exercisable for Class A ordinary shares |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
Total Level 3 Liabilities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
|
|
Nine Months ended September 30, 2021 |
|
|||||||||||||||||
|
|
Beginning Balance |
|
|
Initial Fair Value |
|
|
Changes in Fair Value of Warrant Liabilities |
|
|
Transfers |
|
|
Ending Balance |
|
|||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Warrants exercisable for Class A ordinary shares |
|
$ |
- |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
- |
|
Private Warrants exercisable for Class A ordinary shares |
|
|
- |
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
Total Level 3 Liabilities |
|
$ |
- |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
16
Note 8 - Derivatives
The Company’s derivative instruments pertain to the Public Warrants and Private Placement Warrants, and are stated at their fair values and are included in “warrants exercisable for Class A ordinary shares” on the condensed unaudited balance sheets.
The following table provides a summary of the changes in fair value of the Company’s derivative instruments for the nine months ended September 30, 2021.
|
|
Warrants Exercisable for Class A Ordinary Shares |
|
|||||||||
|
|
Public |
|
|
Private |
|
|
Total |
|
|||
Balance January 1, 2021 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Initial Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value as of March 31, 2021 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value as of June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value as of September 30, 2021 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Note 9 - Commitments and Contingencies
Registration and Shareholders Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and the warrants that may be issued upon conversion of the Working Capital Loans) will be entitled to registration rights pursuant to a registration and shareholder rights agreement executed in connection with the Initial Public Offering. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination. However, the registration and shareholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period, which occurs (i) in the case of the Founder Shares, as described in Note 6, and (ii) in the case of the Private Placement Warrants and the respective Class A ordinary shares underlying such warrants,
Underwriting Agreement
The Company granted the underwriter a
The underwriter received a cash underwriting discount of $
Note 10 - Shareholders’ Equity
Preference Shares
The Company is authorized to issue
17
Class A Ordinary Shares
The Company is authorized to issue
Class B Ordinary Shares
The Company is authorized to issue
Only holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except (i) as required by law and (ii) with respect to the election of directors.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.
Warrants Exercisable for Class A Ordinary Shares
Public Warrants may only be exercised for a whole number of shares.
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company
18
may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company has failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
|
• |
in whole and not in part; |
|
• |
at a price of $ |
|
• |
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
|
• |
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
|
• |
in whole and not in part; |
|
• |
at $ |
|
• |
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 based on the redemption date and the fair market value of the Class A ordinary shares; |
|
• |
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $10.00 per public share (as adjusted) on the trading day prior to the date the Company sends the notice of redemption to the warrant holders. |
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis.” The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except in certain circumstances, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
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The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except in certain circumstances, so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers 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 Public Warrants.
Note 11 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review the Company did not identify any subsequent events that would have required adjustment or disclosure in these financial statements.
* * * * *
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the Company’s condensed financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”), as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in the Company’s Annual Report on Form 10-K for the period from December 10, 2020 (inception) through December 31, 2020 (the “Form 10-K”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this Form 10-Q including statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the SEC on February 11, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company, incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Lazard Ltd, an affiliate of our Sponsor, intends to use resources across its international financial advisory and asset management businesses to source and evaluate attractive, high growth private companies. Although we are not limited to a particular industry or geographic region in our identification and acquisition of a target company, we believe the growth-oriented subsectors of the healthcare, technology, energy transition, financial and consumer sectors present particularly attractive investment opportunities.
At September 30, 2021, we had cash of $55,637 and cash held in a Trust Account of $575,021,845, current liabilities of $1,523,824, deferred underwriting commission payable of $20,125,000 and warrants for the purchase of Class A ordinary shares of $16,630,000. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial Business Combination will be successful.
Results of Operations
For the three months ended September 30, 2021, we had net income of $5,928,183, which consisted of a change in the fair value of warrants exercisable for Class A ordinary shares of $6,405,000 and interest income of $9,989 earned on funds held in the Trust Account. This income was partially offset by general and administrative fees of $486,806. Interest earned on the Trust Account is restricted to the redemption or liquidation of Class A ordinary shares and cannot be used for the Company’s business activities. Our business activities for the three months ended September 30, 2021 primarily related to identifying and evaluating prospective acquisition targets for an initial Business Combination.
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For the nine months ended September 30, 2021, we had net income of $3,553,486, which consisted of a change in the fair value of warrants exercisable for Class A ordinary shares of $5,560,000 and interest income of $21,845 earned on funds held in the Trust Account. This income was partially offset by general and administrative fees of $1,313,865 and offering costs that were expensed of $714,494 related to the closing of our Initial Public Offering. Interest earned on the Trust Account is restricted to the redemption or liquidation of Class A ordinary shares and cannot be used for the Company’s business activities. Our business activities for the nine months ended September 30, 2021 included completing our Initial Public Offering, and since the offering, our activity has been limited to identifying and evaluating prospective acquisition targets for an initial Business Combination.
We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to continue to generate non-operating income in the form of interest income on cash held in the Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
Liquidity and Capital Resources
On February 12, 2021, we consummated our Initial Public Offering of 57,500,000 of our Units, including 7,500,000 Units sold upon exercise in full of the underwriter’s over-allotment option. Each Unit consists of one Class A ordinary share of the Company, $0.0001 par value per share, and one-fifth of one Public Warrant, with each whole Public Warrant entitling the holder thereof to purchase one Class A ordinary share at an exercise price of $11.50 per share, subject to adjustment. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $575,000,000. Goldman Sachs & Co. LLC acted as Book-Running Manager. The securities sold in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-252408), which was declared effective by the SEC on February 9, 2021.
Simultaneously with the consummation of the Initial Public Offering and the issuance and sale of the Units, the Company consummated the sale to the Sponsor of 9,000,000 Private Placement Warrants, with each Private Placement Warrant exercisable to purchase one Class A ordinary share at $11.50 per share subject to adjustment, at a price of $1.50 per Private Placement Warrant, generating total proceeds of $13,500,000. The Private Placement Warrants are identical to the Public Warrants, except that, so long as they are held by the Sponsor or its permitted transferees, (i) they will not be redeemable by us, (ii) they (including the Class A ordinary shares issuable upon exercise of these Private Placement Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of our initial Business Combination, (iii) they may be exercised by the holders on a cashless basis and (iv) they will be entitled to registration rights.
A total of $575,000,000, comprised of $563,500,000 of the proceeds from the Initial Public Offering and $11,500,000 of the proceeds from the sale of the Private Placement Warrants, was placed in the Trust Account. Transaction costs amounted to $32,476,988, consisting of $11,500,000 of underwriting fees (a net underwriting fee of $8,500,000 after giving effect to the underwriter’s reimbursement of the Company for $3,000,000 of financial advisory fees payable by the Company to Lazard Frères & Co. LLC), $20,125,000 of deferred underwriting fees (as may be reduced as a result of the underwriter’s reimbursement to the Company for certain financial advisory fees payable by the Company to Lazard Frères & Co. LLC) and $851,988 of other offering costs.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions), to complete our initial Business Combination. We may withdraw interest income (if any) to pay taxes, if any. Any remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor has, as of August 5, 2021, amended the working capital loan to increase the borrowing limit from $1,300,000 to $2,000,000 to be provided to us to fund our expenses relating to investigating and selecting a target business and other working capital requirements prior to our initial Business Combination. In addition, the Sponsor or an affiliate of the Sponsor may, but is not obligated to, loan us additional funds as may be required. If we complete our initial Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that our initial Business Combination does not close, we may use a
22
portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $2,000,000 of such loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such additional loans have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial Business Combination, we do not expect to seek loans from parties other than our Sponsor or its affiliates as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
We may need to obtain additional financing to complete our initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in the Trust Account, or because we become obligated to redeem a significant number of our public shares upon completion of the Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we have not consummated our initial Business Combination within the required time period because we do not have sufficient funds available to us, we would be forced to cease operations and liquidate the Trust Account.
Off-balance Sheet Financing Arrangements
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 non-financial agreements involving 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. On February 10, 2021, we entered into an administrative support agreement pursuant to which we have agreed to pay an affiliate of the Sponsor a total of $20,000 per month for office space, administrative and support services. Upon the earlier of the completion of the Initial Business Combination and the Company’s liquidation, we will cease paying these monthly fees.
The underwriter of the Initial Public Offering received a cash underwriting discount of $0.20 per Unit, or $11,500,000 in the aggregate, upon the closing of the Initial Public Offering. In addition, the underwriter will be entitled to deferred commissions of $0.35 per Unit, or $20,125,000 in the aggregate. The deferred underwriting discount will be paid to the underwriter solely in the event that the Company completes a Business Combination within the time required, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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 condensed financial statements, and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Net Income Per Ordinary Share
We comply with accounting and disclosure requirements of ASC Topic 260, Earnings Per Share. Net income per share of ordinary shares is computed by dividing net income by the weighted average number of common shares outstanding during the period. We apply the two-class method in calculating earnings per share. Adjustments associated with the redeemable shares of Class A ordinary shares under ASC Topic 480-S993 are excluded from
23
earnings per share as the redemption value approximates fair value and we elect to reflect changes in redemption value immediately as they occur through Additional-Paid-In-Capital.
As of September 30, 2021, we had outstanding warrants to purchase of up to 20,500,000 shares of Class A ordinary shares. The weighted average of these shares was excluded from the calculation of diluted net income per share of ordinary shares since the exercise of the warrants is contingent upon the occurrence of future events. As of September 30, 2021, we did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into shares of ordinary shares and then share in our earnings. As a result, diluted income per common share is the same as basic income per common share for the period.
Deferred Offering Costs
We comply with the requirements of the ASC Topic 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A —“Expenses of Offering.” We incurred offering costs in connection with our Initial Public Offering of $851,988. These costs, together with the upfront underwriter discount and deferred discount of $31,625,000, were charged to the shares of our Class A ordinary shares and warrants upon the closing of our Public Offering.
Warrants
Under ASC Topic 815, we have classified issued warrants as liabilities remeasured at fair value, with changes in fair value each period reported to earnings.
Class A Ordinary Shares Subject to Possible Redemption
In accordance with the terms of the Amended and Restated Memorandum and Articles of Association, the Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001. Previously, the Company reported as temporary equity the amount of Class A ordinary shares subject to redemption that included the total number of shares able to be redeemed that would comply with the provision in the Amended and Restated Memorandum and Articles of Association and underwriting agreement and that would not preclude a Business Combination and shareholder redemptions from occurring. Management determined that the ordinary shares issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all ordinary shares subject to possible redemption, resulting in the ordinary shares subject to possible redemption being equal to their redemption value. The Class A ordinary shares subject to possible redemption included in temporary equity at September 30, 2021, represent 100% of the outstanding Class A ordinary shares.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of September 30, 2021, we were not subject to any market or interest rate risk.
Item 4. Controls and Procedures.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal quarter ended September 30, 2021. Based upon this evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021, due solely to a material weakness in our internal control over financial reporting. A
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material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, our management has concluded that our control around the interpretation and accounting for certain complex financial instruments was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of February 12, 2021 and its interim financial statements for the quarters ended March 31, 2021 and June 30, 2021. This material weakness is further described below in “Changes in Internal Control Over Financial Reporting.”
Changes in Internal Control Over Financial Reporting
Except as set forth below, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter of 2021 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Our internal control over financial reporting did not result in the proper classification of all redeemable Class A ordinary shares as temporary equity within our previously issued financial statements. Historically, a portion of our Class A ordinary shares was classified as permanent equity to maintain net tangible assets greater than $5,000,000 on the basis that we will consummate our initial Business Combination only if we have net tangible assets of at least $5,000,001. In preparation of the Q3 2021 Form 10-Q, the Company re-evaluated the Company’s application of ASC 480-10-S99-3A to its accounting classification of its Class A ordinary shares. Pursuant to such re-evaluation, the Company’s management determined that our Class A ordinary shares include certain provisions that require classification of the Class A ordinary shares as temporary equity regardless of the minimum net tangible assets required to complete our initial Business Combination. The Company determined at the time that this error was not material to previously filed financial statements and, therefore, in its financial statements in the Q3 2021 Form 10-Q, the Company revised its financial statements as of March 31, 2021 and June 30, 2021 to classify all Class A ordinary shares as temporary equity. Subsequently, as described below, management re-evaluated the Company’s application of ASC 480-10-S99-3A and determined that the prior classification of a portion of the Class A ordinary shares as permanent equity was a material error.
Therefore, in consultation with the Audit Committee, on December 13, 2021, we concluded that our previously issued (i) audited balance sheet as of February 12, 2021, filed with the SEC on February 19, 2021, (ii) unaudited condensed interim financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 filed with the SEC on May 12, 2021, (iii) unaudited condensed interim financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 9, 2021 and (iv) Note 2 to the unaudited condensed financial statements included in the Q3 2021 Form 10-Q, should be restated to report all of the Company’s Class A ordinary shares as temporary equity and should no longer be relied upon. As a result, the Company is restating its financial statements for the Affected Periods in this Quarterly Report on Form 10-Q/A to indicate that the classification error is a restatement and not a revision. As such, we have restated our financial statements for the Affected Periods in this Quarterly Report, as described in Note 2 of the notes to the financial statements included herein.
Notwithstanding the identified material weakness, management believes that the financial statements and related financial information included in this Quarterly Report fairly present, in all material respects, our balance sheets, statements of operations and cash flows as of and for the periods presented.
Remediation Plan
Following the identification of the material weakness described above with respect to the accounting treatment of our Class A ordinary shares, our principal executive officer and principal financial and accounting officer performed additional accounting and financial analyses related to the classification of our Class A ordinary shares as temporary equity versus permanent equity, including consulting with subject matter experts. We are in the process of evaluating whether additional remediation measures should be implemented with respect to such material weakness.
As we continue to evaluate and improve our financial reporting process, we may take additional actions to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken
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to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, there were no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the period ended December 31, 2020, except for the below risk factor. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
We have identified a material weakness in our internal control over financial reporting. 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.
As described elsewhere in this Quarterly Report on Form 10-Q/A, we have identified a material weakness in our internal control over financial reporting related to the Company’s accounting and reporting of complex financial instruments, including application of ASC 480-10-S99-3A to its accounting classification of public shares. As a result of the material weakness, our management has concluded that our disclosure controls and procedures were not effective as of September 30, 2021. See “Note 2-Restatement of Previously Issued Financial Statements” to the accompanying financial statements, as well as Part I. Item 4. Controls and Procedures included in this Quarterly Report on Form 10-Q/A. We have taken a number of measures to remediate the material weakness described herein. However, if we are unable to remediate our material weakness in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities. The existence of a material weakness in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our securities. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these 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 the price of our securities may decline as a result. We cannot assure you that 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.
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None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit Number |
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Description |
1.1 |
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Underwriting Agreement, dated February 9, 2021, between the Company and Goldman Sachs & Co. LLC.(1) |
3.1 |
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Amended and Restated Memorandum and Articles of Association.(1) |
4.1 |
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4.2 |
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4.3 |
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4.4 |
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Warrant Agreement between Continental Stock Transfer & Trust Company and the Company. (1) |
10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6 |
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10.7 |
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10.8 |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS |
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Inline XBRL Instance Document |
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File |
* |
Filed herewith. |
** |
Furnished. |
(1) |
Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 12, 2021. |
(2) |
Incorporated by reference to the Company’s Registration Statement on Form S-1 (SEC File No. 333-252408). |
(3) |
Incorporated by reference to the Company’s Annual Report on Form 10-K filed on March 31, 2021. |
(4) |
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2021. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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LAZARD GROWTH ACQUISITION CORP. I |
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Date: December 17, 2021 |
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By: |
/s/ Eyal Ofir |
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Eyal Ofir |
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Chief Executive Officer |
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Date: December 17, 2021 |
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By: |
/s/ Mary Ann Deignan |
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Mary Ann Deignan |
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Chief Financial Officer |
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