September
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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Registrant’s telephone number, including area code: ( |
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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. Yes ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Date 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 and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
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As of November 15, 2021, there were
MCAP ACQUISITION CORPORATION
TABLE OF CONTENTS
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Notes to Condensed Consolidated Financial Statements (Unaudited) | 5 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | |
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i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MCAP ACQUISITION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETs
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
(Unaudited) | ||||||
ASSETS | ||||||
Current Assets | ||||||
Cash | $ | $ | | |||
Prepaid expenses | — | |||||
Total current assets | | |||||
Deferred offering costs | — | | ||||
Other assets | — | |||||
Cash and marketable securities held in Trust Account | — | |||||
Total assets | $ | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities | ||||||
Accounts payable and accrued expenses | $ | $ | | |||
Promissory note payable - related party | — | | ||||
Total current liabilities |
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Warrant liability | — | |||||
Deferred underwriting fee payable |
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Total liabilities |
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Common Stock subject to possible redemption, | — | |||||
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Stockholders’ Equity |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total Stockholders’ Equity |
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$ | $ | | ||||
| (1) | The shares and the associated amounts have been retroactively restated to reflect the stock dividend of |
See accompanying notes to the condensed consolidated financial statements.
1
MCAP ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three | For the | |||||
Three Months Ended | Nine Months Ended | |||||
September 30, | September 30, | |||||
| 2021 |
| 2021 | |||
Formation costs and other operating expenses |
| $ | |
| $ | |
Loss from operations | ( | ( | ||||
Other Income (Loss): |
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Warrant issuance costs | — | ( | ||||
Interest income | | | ||||
Change in fair value of warrant liability | ( | ( | ||||
Net loss | $ | ( | $ | ( | ||
Weighted average shares outstanding of Class A redeemable common stock, basic and diluted | | | ||||
Basic and diluted net loss per share of Class A redeemable common stock | $ | ( | $ | ( | ||
Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted | | | ||||
Basic and diluted net loss per share of Class B non-redeemable common stock | ( | ( | ||||
See accompanying notes to the condensed consolidated financial statements.
2
MCAP ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
Class A | Class B | Additional | Total | ||||||||||||||||
Common Stock | Common Stock | Paid in | Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||||
Balance - December 31, 2020 | — | $ | — | | $ | | $ | | $ | ( | $ | | |||||||
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Sale of | | | — | | | ||||||||||||||
Common stock subject to redemption | ( | ( | — | — | ( | ( | ( | ||||||||||||
Net income |
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Balance - June 30, 2021 |
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Common stock subject to redemption | — | — | — | — | | ( | ( | ||||||||||||
Net loss | — | — | — | — | | ( | ( | ||||||||||||
Balance - September 30, 2021 | | $ | — | | $ | | $ | | $ | ( | $ | ( | |||||||
| (1) |
See accompanying notes to the condensed consolidated financial statements.
3
MCAP ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
Cash flow from operating activities: |
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Net loss | $ | ( | |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Interest earned in Trust Account | ( | ||
Change in fair value of warrant liability | | ||
Transaction costs allocable to warrant liability | | ||
Changes in operating assets and liabilities: | |||
Prepaid expenses | ( | ||
Accounts payable and accrued expenses |
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Net cash used in operating activities |
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Cash flows from investing activities: | |||
Investment of cash in Trust Account | ( | ||
Net cash used in financing activities | ( | ||
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Cash flows from financing activities: |
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Proceeds from sale of Units, net of underwriting discounts paid |
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Proceeds from promissory note - related party | | ||
Proceeds from sale of Private Placement Warrants | | ||
Repayment of promissory note - related party |
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Payments of deferred offering costs |
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Net cash provided by financing activities |
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Net change in cash |
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Cash at the beginning of the period |
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Cash at the end of the period | $ | | |
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Non-Cash investing and financing activities: |
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Initial classification of Class A common stock shares subject to possible redemption | $ | | |
Change in value of class A common stock shares subject to possible redemption | | ||
Deferred underwriting fee payable | | ||
Initial measurement of warrants issued in connection with the Initial Public Offering accounted for as liabilities | |
See accompanying notes to the condensed consolidated financial statements.
4
MCAP ACQUISITION CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Note 1 — Description of Organization and Business Operations
MCAP Acquisition Corporation (the “Company”) is a blank check company incorporated in Delaware on November 12, 2020. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with
The accompanying condensed consolidated financial statements includes the Company and its wholly owned subsidiaries GRNT Merger Sub 1 LLC, GRNT Merger Sub 2 LLC, GRNT Merger Sub 3 LLC, and GRNT Merger Sub 4 LLC.
As of September 30, 2021, the Company had not yet commenced any operations. All activity for the period November 12, 2020 (inception) through September 30, 2021 relates to the Company’s formation, initial public offering (the “Initial Public Offering”) and search to effectuate a Business Combination. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on February 25, 2021. On March 2, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Following the closing of the Initial Public Offering on March 2, 2021, an amount of $
Transaction costs of the Initial Public Offering amounted to $
Following the closing of the Initial Public Offering $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least
Note 1 — Description of Organization and Business Operations (Continued)
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
The Company will have until March 2, 2023 to consummate a Business Combination. If the Company is unable to complete a Business Combination within
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
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Note 1 — Description of Organization and Business Operations (Continued)
Going Concern and Management’s Plans
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2021, we had incurred accumulated losses of approximately $
The Company’s management believes that its operations may not be sufficient to fund operating cash needs for at least 12 months from the issuance of these financial statements. The Company has no significant assets and has no revenue generating operations. There can be no assurance however that the Company will be able to raise additional capital when needed, or at terms deemed acceptable, if at all. These factors raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the unaudited condensed financial statements are issued.
The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statement. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission.
In preparation of the Company’s unaudited condensed consolidated financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it will restate its financial statements to classify all Class A common shares as Class A common stock subject to possible redemption in temporary equity as of September 30, 2021 (see Note 11).
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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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Note 2 — Summary of Significant Accounting Policies (Continued)
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 the balance sheet in conformity with 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 revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. The Company had $
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to 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 recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were
The provision for income taxes was deemed to be immaterial for the three and nine months ended September 30, 2021.
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Note 2 — Summary of Significant Accounting Policies (Continued)
Class A Common Stock Subject to Possible Redemption
The Company accounts for its shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, shares are classified as stockholders’ equity. The Company’s shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2021,
Cash Held in Trust Account
At September 30, 2021, the assets held in the Trust Account were invested in a money market fund.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $
Net Loss Per Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net loss per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. The Company has two classes of shares, Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of common stock. The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase common stock in the calculation of diluted income per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted net loss per common share is the same as basic net loss per share for the period presented.
The Company’s condensed statement of operations applies the two-class method in calculating net income per share. Basic and diluted net loss per share for Class A common stock and Class B common stock is calculated by dividing net loss attributable to the Company by the weighted average number of shares of Class A common stock and Class B common stock outstanding, allocated proportionally to each class of common stock.
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Note 2 — Summary of Significant Accounting Policies (Continued)
The following table reflects the calculation of basic and diluted net loss per ordinary share (in dollars, except per share amounts):
For the Three | For the | |||||
Three Months Ended | Nine Months Ended | |||||
September 30, | September 30, | |||||
| 2021 |
| 2021 | |||
Class A common stock | ||||||
Net loss allocable to Class A common stock | $ | ( | $ | ( | ||
Basic and average shares outstanding | | | ||||
Basic and loss per share | ( | ( | ||||
Non-Redeemable Class B common stock | ||||||
Net loss allocable to Class B common stock | $ | ( | $ | ( | ||
Basic and average shares outstanding | | | ||||
Basic and loss per share | ( | ( | ||||
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Initial Public Offering
Pursuant to the Initial Public Offering, the Company sold
10
Note 4 — Private Placement
Simultaneously with the Initial Public Offering, the Sponsor purchased an aggregate of
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
Note 5 — Related Party Transactions
Founder Shares
On December 21, 2020, the Company issued an aggregate of
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A)
Promissory Note — Related Party
On December 21, 2020, the Sponsor committed to loan the Company an aggregate of up to $
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Administrative Support Agreement
Commencing on the date of the prospectus and until completion of the Company’s Business Combination or liquidation, the Company may reimburse an affiliate of the Sponsor up to an amount of $
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Note 6 — Commitments
Registration Rights
Pursuant to a registration rights agreement entered into on February 25, 2021, the holders of the Founder Shares, Private Placement Warrants and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) are entitled to registration rights. The holders of a majority of these securities are entitled to make up to
Underwriters Agreement
The Company granted the underwriter a
The underwriter was paid a cash underwriting discount of two percent (
Note 7 — Warrant Liability
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a)
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than business days after the closing of its initial Business Combination, it will use its best efforts to file with the SEC, and within business days following its initial Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the
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Note 7 — Warrant Liability (Continued)
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ |
If and when the Public Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
The Company accounts for the
The Company believes that the adjustments to the exercise price of the warrants is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40, and thus the warrants are not eligible for an exception from derivative accounting. The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company will classify each warrant as a liability at its fair value and the warrants will be allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject to re-measurement at each balance sheet date. With each such remeasurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
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Note 8 – Stockholders’ Equity
Preferred Stock — The Company is authorized to issue
Class A Common Stock — The Company is authorized to issue up to
Class B Common Stock — The Company is authorized to issue up to
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law; provided that only holders of Class B common stock have the right to vote for the election of directors prior to the Company’s initial Business Combination.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like. In the case that additional shares of Class A common stock, or equity linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as converted basis,
The Company may issue additional common stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.
Note 9 — Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
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Note 9 – Fair Value Measurements (Continued)
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
September 30, | |||||
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| 2021 | ||
Assets: |
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Cash and marketable securities held in Trust Account |
| 1 | $ | | |
Liabilities: |
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Public Warrants |
| 1 | $ | | |
Private Placement Warrants |
| 3 | $ | | |
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.
Initial Measurement
The Company established the initial fair value for the Warrants on March 2, 2021, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of common stock and one-third of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of common stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to common stock subject to possible redemption, and common stock based on their relative fair values at the initial measurement date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants and Public Warrants were as follows at initial measurement:
| March 2, |
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Input |
| 2021 |
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Risk-free interest rate |
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Expected term (years) |
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Expected Volatility |
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Exercise Price | $ | | ||
Stock price | $ | | ||
On March 2, 2021, the Private Placement Warrants and Public Warrants were determined to be $
Subsequent Measurement
The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of September 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker MACQW.
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Note 9 – Fair Value Measurements (Continued)
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at September 30, 2021:
September 30, |
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Input |
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Risk-free interest rate |
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Expected term (years) |
| | ||
Expected Volatility |
| | % | |
Exercise Price | $ | | ||
Stock price | $ | | ||
On September 30, 2021, fair value of the Private Placement Warrants and Public Warrants were determined to be $
The following table presents the changes in the fair value of warrant liabilities:
| Private |
|
| Warrant | |||||
| Placement |
| Public |
| Liabilities | ||||
Fair value | $ | | $ | | $ | | |||
Initial Measurement on March 2, 2021 |
| |
| |
| | |||
Change in valuation inputs or other assumptions(1)(2) |
| |
| ( |
| | |||
Fair value as of September 30, 2021 | $ | | $ | | $ | | |||
| (1) |
| (2) |
Note 10 — Business Combination
On July 27, 2021, MCAP Acquisition Corporation (“MCAP”), GRNT Merger Sub 1 LLC, a Delaware limited liability company (“Merger Sub 1”), GRNT Merger Sub 2 LLC, a Delaware limited liability company (“Merger Sub 2”), GRNT Merger Sub 3 LLC, a Delaware limited liability company (“Merger Sub 3”), GRNT Merger Sub 4 LLC, a Delaware limited liability company (“Merger Sub 4” and together with Merger Sub 1, Merger Sub 2 and Merger Sub 3, the “Merger Sub Entities”), H.I.G. Growth – AdTheorent Intermediate, LLC, a Delaware limited liability company (the “Blocker”), H.I.G. Growth – AdTheorent, LLC, a Delaware limited liability company (the “Blocker Member”), and AdTheorent Holding Company, LLC, a Delaware limited liability company (the “AdTheorent”), entered into a business combination agreement (the “Business Combination Agreement”) pursuant to which, among other things, the AdTheorent will merge with and into Merger Sub 4 and become a wholly owned subsidiary of MCAP. The terms of the Business Combination Agreement, which contains customary representations and warranties, covenants, closing conditions, termination fee provisions and other terms relating to the Mergers and the other transactions.
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Note 11 — Restatement of Previously Issued Financial Statements
The Company has concluded it will restate its financial statements to classify all Class A common stock subject to possible redemption in temporary equity as of September 30, 2021. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, ASC 480, paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock in permanent equity, or total stockholders’ equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $
As a result of the above, the Company should have classified all of it Class A common stock as Class A common stock subject to possible redemption in temporary equity in its previously issued financial statement.
The Company’s accounting for the Class A common stock as a component of equity instead of as Class A common stock subject to possible redemption in temporary equity did not have any effect on the Company’s previously reported investments held in trust, operating expenses, cash flows or cash.
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Note 11 — Restatement of Previously Issued Financial Statements (Continued)
The following tables are a summary of certain financial data for the period ended March 2, 2021 and for the quarters ended March 31, 2021 and June 30, 2021.
As Previously | |||||||||
| Restated |
| Adjustments |
| As Restated | ||||
| March 2, 2021 |
|
|
| March 2, 2021 | ||||
Total assets | $ | | $ | — | $ | | |||
Total liabilities |
| |
| — |
| | |||
Temporary equity (Class A ordinary shares subject to possible redemption) |
| |
| |
| | |||
Permanent equity: | |||||||||
Preferred stock | — | — | — | ||||||
Class A common stock | | ( | — | ||||||
Class B common stock | | — | | ||||||
Additional paid-in capital | | ( | — | ||||||
Accumulated deficit | | ( | ( | ||||||
Total permanent equity | | ( | ( | ||||||
March 31, 2021 | March 31, 2021 | ||||||||
Total assets | $ | | $ | — | $ | | |||
Total liabilities | | — | | ||||||
Temporary equity (Class A ordinary shares subject to possible redemption) | | | | ||||||
Permanent equity: | |||||||||
Preferred stock | — | — | — | ||||||
Class A common stock | | ( | — | ||||||
Class B common stock | | — | | ||||||
Additional paid-in capital | | ( | — | ||||||
Accumulated deficit | ( | ( | ( | ||||||
Total permanent equity | | ( | ( | ||||||
Redeemable Class A common stock | |||||||||
Numerator: | |||||||||
Allocation of loss to redeemable Class A common stock | $ | | $ | ( | $ | ( | |||
Denominator: weighted average redeemable Class A common stock shares | |||||||||
Redeemable Class A common stock shares, basic and diluted | | ( | | ||||||
Earnings per share basic and diluted redeemable Class A common stock | $ | — | $ | ( | $ | ( | |||
Non-Redeemable Class common stock | |||||||||
Numerator: | |||||||||
Allocation of loss to non-redemable Class B common stock | $ | ( | $ | | $ | ( | |||
Denominator: weighted average non-redeemable Class A and B common stock | |||||||||
Non-Redeemable Class B common stock shares, basic and diluted | | ( | | ||||||
Loss per share and non-redeemable B common stock | $ | ( | $ | | $ | ( | |||
June 30, 2021 | June 30, 2021 | ||||||||
Total assets | $ | | $ | — | $ | | |||
Total liabilities | | — | | ||||||
Temporary equity (Class A ordinary shares subject to possible redemption) | | | | ||||||
Permanent equity: |
|
| |||||||
Preferred stock | — | — | — | ||||||
Class A common stock | | ( | — | ||||||
Class B common stock | | — | | ||||||
Additional paid-in capital | | ( | — | ||||||
Accumulated deficit | | ( | ( | ||||||
Total permanent equity | | ( | ( | ||||||
Three Months Ended June 30, 2021 | |||||||||
Redeemable Class A common stock | |||||||||
Numerator: | |||||||||
Allocation of loss to redeemable Class A common stock | $ | | $ | | $ | | |||
Denominator: weighted average redeemable Class A common stock shares | |||||||||
Redeemable Class A common stock shares, basic and diluted | | | | ||||||
Earnings per share basic and diluted redeemable Class A common stock | $ | — | $ | | $ | | |||
Non-Redeemable Class common stock | |||||||||
Numerator: | |||||||||
Allocation of loss to non-redemable Class B common stock | $ | | $ | ( | $ | | |||
Denominator: weighted average non-redeemable Class A and B common stock | |||||||||
Non-Redeemable Class B common stock shares, basic and diluted | | ( | | ||||||
Loss per and non-redeemable Class B common stock | $ | | $ | ( | $ | | |||
Six Months Ended June 30, 2021 | |||||||||
Redeemable Class A common stock | |||||||||
Numerator: | |||||||||
Allocation of loss to redeemable Class A common stock | $ | | $ | | $ | | |||
Denominator: weighted average redeemable Class A common stock shares | |||||||||
Redeemable Class A common stock shares, basic and diluted | | ( | | ||||||
Earnings per share basic and diluted redeemable Class A common stock | $ | — | $ | | $ | | |||
Non-Redeemable Class common stock | |||||||||
Numerator: | |||||||||
Allocation of loss to non-redemable Class B common stock | $ | | $ | ( | $ | | |||
Denominator: weighted average non-redeemable Class A and B common stock | |||||||||
Non-Redeemable Class B common stock shares, basic and diluted | | — | | ||||||
Loss per and non-redeemable Class B common stock | $ | | $ | ( | $ | | |||
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Note 12 — Subsequent Events
Management of the Company evaluates events that have occurred after the balance sheet date of September 30, 2021 through the date these financial statements were issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “us,” “our” or “we” refer MCAP Acquisition Corporation. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements under “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. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of March 31, 2021 and June 30, 2021. Management identified errors made in its historical financial statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its Class A common stock subject to possible redemption. The Company previously classified as temporary equity the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in permanent equity being less than $5,000,001. Accordingly, a certain amount of Class A common stock was classified in stockholders’ equity in order to meet this interpretation of net tangible assets. In the current quarter, Management determined that the Class A common stock 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 shares of Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
Overview
The Company is a blank check company formed under the laws of the State of Delaware on November 12, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company intends to effectuate its initial Business Combination using cash from the proceeds of Public Offering and the Private Placement, the proceeds of the sale of our securities in connection with our initial Business Combination, our shares, debt or a combination of cash, stock and debt.
The issuance of additional shares in connection with an initial Business Combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
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| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to continue to incur significant costs in the pursuit of our initial Business Combination plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception to September 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering (“Initial Public Offering”) and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held after the Initial Public Offering. We expect that we will 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 in connection with completing a business combination.
For the three and nine months ended September 30, 2021, we had a net loss of $4,600,253 and $2,896,263, which consisted of operating costs of $504,323 and $1,312,020, warrant issuance costs of $0 and $832,378, accrued interest income of $4,070 and $20,386 on marketable securities held in our Trust Account (as defined below) and loss related to the change in the fair value of warrant liability of $4,100,000 and $772,251, respectively.
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Liquidity and Capital Resources
On March 2, 2021, we consummated the Initial Public Offering of 31,625,000 Units, which includes the full exercise by the underwriter of the over-allotment option to purchase 4,125,000 Units at $10.00 per Unit, generation gross proceeds of $316,250,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 5,983,333 Private Placement Warrants at $1.50 per Private Placement Warrant to our Sponsor, generation gross proceeds of $8,975,000.
Transaction costs of the Initial Public Offering amounted to $17,853,629 consisting of $6,325,000 of underwriting fees, $11,068,750 of deferred underwriting fees (see Note 6) and $459,879 of other costs. Total offering costs of $832,378 were expensed as a cost of the warrant liability. In addition, following the closing of the Initial Public Offering $2,431,242 of cash was held outside of the Trust Account and is available for working capital purposes.
As of September 30, 2021, we have available to us $797,602 of cash on our balance sheet and a working capital surplus of $706,131. We will use these funds primarily to evaluate target businesses, perform business, legal, and accounting due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination. The interest income earned on the investments in the Trust Account are unavailable to fund operating expenses.
In order to finance transaction costs in connection with the Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes the Business Combination, the Company would repay such loaned amounts. In the event that the Business Combination does not close, the Company may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from the trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants issued to the Sponsor. The terms of such loans by the Company’s officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The Company does not expect to seek loans from parties other than the Sponsor or its directors or officers or their respective affiliates as it does 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 the trust account.
On July 27, 2021, MCAP Acquisition Corporation (“MCAP”), GRNT Merger Sub 1 LLC, a Delaware limited liability company (“Merger Sub 1”), GRNT Merger Sub 2 LLC, a Delaware limited liability company (“Merger Sub 2”), GRNT Merger Sub 3 LLC, a Delaware limited liability company (“Merger Sub 3”), GRNT Merger Sub 4 LLC, a Delaware limited liability company (“Merger Sub 4” and together with Merger Sub 1, Merger Sub 2 and Merger Sub 3, the “Merger Sub Entities”), H.I.G. Growth – AdTheorent Intermediate, LLC, a Delaware limited liability company (the “Blocker”), H.I.G. Growth – AdTheorent, LLC, a Delaware limited liability company (the “Blocker Member”), and AdTheorent Holding Company, LLC, a Delaware limited liability company (the “AdTheorent”), entered into a business combination agreement (the “Business Combination Agreement”) pursuant to which, among other things, the AdTheorent will merge with and into Merger Sub 4 and become a wholly owned subsidiary of MCAP. The terms of the Business Combination Agreement, which contains customary representations and warranties, covenants, closing conditions, termination fee provisions and other terms relating to the Mergers and the other transactions contemplated thereby, are summarized in Form 8-K, which was filed on July 27, 2021.
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 any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered any non-financial assets.
22
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. Commencing on the date of the completion of the Company’s IPO and until completion of the Company’s Business Combination or liquidation, the Company may reimburse an affiliate of the Sponsor up to an amount of $10,000 per month for office space, secretarial and administrative support.
The Underwriter was paid a cash underwriting fee of 2% of gross proceeds of the Public Offering, or $6,325,000. In addition, the Underwriter is entitled to aggregate deferred underwriting commissions of $11,068,750 consisting of (i) 3.5% of the gross proceeds of the Public Offering. The deferred underwriting commissions will become payable to the Underwriter from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting policies:
Net Loss Per Share of Common Stock
Basic loss per share of common stock is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Consistent with FASB 480, shares subject to possible redemption, as well as their pro rata share of undistributed trust earnings consistent with the two-class method, have been excluded from the calculation of loss per share of common stock for the three and nine months ended September 30, 2021. Such shares, if redeemed, only participate in their pro rata share of trust earnings. Diluted loss per share includes the incremental number of shares of common stock to be issued to settle warrants, as calculated using the treasury method. For the three and nine months ended September 30, 2021, the Company did not have any dilutive warrants, securities or other contracts that could potentially, be exercised or converted into common stock. As a result, diluted loss per share of common stock is the same as basic loss per share of common stock for all periods presented.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2021, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
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Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we do not believe that there will be an associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting described below in “Changes in Internal Control Over Financial Reporting”. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
The Company has begun to develop a remediation plan which is more fully described below.
Remediation of a Material Weakness in Internal Control over Financial Reporting
After identifying the material weakness, we have commenced our remediation efforts by taking the following steps:
| ● | We have expanded and improved our review process for complex securities and related accounting standards. |
| ● | We have increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. |
| ● | We have also retained the services of a valuation expert to assist in valuation analysis of the Warrants on a quarterly basis. |
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| ● | We are establishing additional monitoring and oversight controls designed to ensure the accuracy and completeness of our financial statements and related disclosures. |
Changes in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the restatement of our financial statements described in this Form 10-Q had not yet been identified. We have identified a material weakness in our internal control over financial reporting. The material weakness was due to management’s review of the of the accounting treatment for the financial instruments issued in the initial public offering and sold in the concurrent private placement. Management’s review was insufficient to identify a classification error that led to our restatement of our financial statements, as described in Note 10 to the Notes to Financial Statements entitled “Restatement of Previously Issued Balance Sheet.” In light of the restatement, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing management enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Except as set forth below, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our final prospectus dated February 25, 2021 filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Staff of the U.S. Securities and Exchange Commission (the “SEC”) issued “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Statement”) discussing the accounting implications of certain terms that are common in warrants issued by special purpose acquisition companies (“SPACs”). In light of the Statement and guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” our management evaluated the terms of the Warrant Agreement entered into in connection with our initial public offering, and concluded that our Public Warrants and Private Placement Warrants (together, the “Warrants”) include provisions that, based on the Statement, preclude the Warrants from being classified as components of equity. As a result, we have re-classified the Warrants as liabilities. Under this accounting treatment, we are required to measure the fair value of the Warrants at the end of each reporting period and recognize changes in the fair value from the prior period in our operating results for the current period. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside of our control. We expect that we will recognize non-cash gains or losses due to the quarterly fair valuation of our Warrants and that such gains or losses could be material.
We have determined that a material weakness existed in our internal control over financial reporting as of March 2, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following the issuance of the SEC Statement, on May 12, 2021, our management and our audit committee, determined that the Company’s audited balance sheet as of March 2, 2021, filed as an exhibit to its Current Report on Form 8-K filed on March 8, 2021, should be restated. See “—Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” In connection with the restatement, we identified a material weakness in our internal controls over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we conclude that a material weakness occurred or is occurring, we expect to evaluate and pursue 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.
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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 our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
Following the issuance of the Statement and our subsequent restatement, our management and our audit committee determined that a material weakness existed in our internal controls over financial reporting.
If we conclude that a material weakness has occurred or is occurring, or as a result of the change in accounting for the Warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from any restatement and material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute arising due to restatement or material weakness of our internal controls over financial reporting. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a business combination.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
On March 2, 2021 we completed the private sale of an aggregate of 5,983,333 Private Placement warrants at a price of $1.50 per Placement Warrant to the Sponsor generating gross proceeds to the Company of $8,975,000. This purchase took place on a private placement basis simultaneously with the completion of our Initial Public Offering. No underwriting discounts or commissions were paid with respect to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
Use of Proceeds from the Public Offering
On March 2, 2021, we consummated our Initial Public Offering of 31,625,000 units (the “Units”), including 4,125,000 Units issued pursuant to the exercise in full of the underwriter’s over-allotment option. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share, and one-third of one redeemable warrant of the Company (the “Warrants”), with each whole Warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $316,250,000.
The securities sold in the Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-252607). The SEC declared the registration statement effective on February 25, 2021.
Of the gross proceeds received from the Initial Public Offering and the Private Placement Warrants, $316,250,000 was placed in a Trust Account. We paid a total of $6,325,000 in underwriting discounts and commissions and $459,879 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $11,068,750 in underwriting discounts and commission.
Item 3. Defaults Upon Senior Securities
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.
No. |
| Description of Exhibit |
31.1* |
| |
31.2* |
| |
32.1** |
| |
32.2** |
| |
101.INS* |
| Inline XBRL Instance Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
*Filed herewith.
**Furnished.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MCAP ACQUISITION CORPORATION | |
|
|
|
Date: November 15, 2021 | /s/ Theodore L. Koenig | |
| Name: | Theodore L. Koenig |
| Title: | Chairman and Chief Executive Officer |
| (Principal Executive Officer | |
|
| |
Date: November 15, 2021 | /s/ Scott A. Marienau | |
| Name: | Scott A. Marienau |
| Title: | Chief Financial Officer |
| (Principal Financial and Accounting Officer) | |
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