CM LIFE References to the "Company," "our," "us" or "we" refer to
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Overview
We are a blank check company incorporated as a
The registration statement for our Initial Public Offering was declared
effective on
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the Private Placement of 8,693,333 Private Placement Warrants at a
price of
Upon the closing of the Initial Public Offering and the Private Placement,
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We will have 24 months from the closing of the Initial Public Offering, or
We intend to effectuate our initial Business Combination using cash from the proceeds of the Initial Public Offering and the Private Placement and any forward purchase shares, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection with a business combination to the owners of the target or other investors, including any forward purchase shares:
? may significantly dilute the equity interest of investors in this
offering, which dilution would increase if the anti-dilution provisions in
the Class B common stock resulted in the issuance of Class A common stock
on a greater than one-to-one basis upon conversion of the Class B common
stock;
? may subordinate the rights of holders of Class A common stock if shares of
preferred stock are issued with rights senior to those afforded our Class
A common stock;
? could cause a change in control if a substantial number of shares of our
Class A common stock are issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could
result in the resignation or removal of our present officers and
directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to
obtain control of us; and
? may adversely affect prevailing market prices for our Class A 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 is payable on demand;
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? our inability to obtain necessary additional financing if the debt
contains covenants restricting our ability to obtain such financing while
the debt is outstanding;
? our inability to pay dividends on our Class A 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
Class A common stock if declared, expenses, capital expenditures,
acquisitions and other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
and
? limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, execution
of our strategy and other purposes and other disadvantages compared to our
competitors who have less debt.
Proposed Business Combination
On
The Merger and the other transactions contemplated by the Merger Agreement (collectively, the "EQRx Business Combination") were approved by the boards of directors of each of the Company and EQRx. The EQRx Business Combination is expected to close in the fourth quarter of 2021, following the receipt of the required approval by EQRx's and our stockholders and the satisfaction of certain other customary closing conditions.
Business Combination Consideration
At the effective time of the Merger (the "Effective Time"), each share of EQRx's
common stock and preferred stock (collectively, "EQRx Capital Sock") issued and
outstanding immediately prior to the Effective Time will be cancelled and
automatically deemed for all purposes to represent the right to receive a
portion of the total consideration, with each EQRx's stockholder (as applicable)
being entitled to receive a number of shares of Class A common stock, par value
In addition, at the Effective Time, each outstanding option to purchase EQRx Capital Stock will be rolled over into options to purchase Class A Common Stock, as further set forth in and in accordance with the terms of the Merger Agreement; and each outstanding EQRx restricted stock award will be cancelled and converted into restricted stock awards of Class A Common Stock calculated in accordance with the terms of the Merger Agreement.
Refer to the Company's current report on Form 8-K, filed with the
Liquidity and Capital Resources
As of
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the payment of
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Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Results of Operations
Our entire activity since inception through
For the three months ended
For the period from
Contractual Obligations
Forward Purchase Agreements
On
Registration Rights
The holders of the (i) Founder Shares, (ii) Private Placement Warrants and the shares of Class A common stock underlying such Private Placement Warrants and (iii) Private Placement Warrants that may be issued upon conversion of Working Capital Loans and (iv) any Forward Purchase Shares that are issued in a private placement simultaneously with the closing of the initial Business Combination, had registration rights to require us to register a sale of any of its securities held by them pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the Company's completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the Initial Public
Offering to purchase up to an additional 7,200,000 units to cover
over-allotments, if any. The underwriters exercised the over-allotment option in
full on
The underwriters were entitled to a cash underwriting discount of two percent
(2%) of the gross proceeds of the Initial Public Offering, or approximately
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Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
DerivativeWarrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The warrants issued in connection with the Initial Public Offering (the "Public
Warrants") and the Private Placement Warrants will be recognized as derivative
liabilities in accordance with ASC 815. Accordingly, the Company recognizes the
warrant instruments as liabilities at fair value and adjusts the carrying value
of the instruments to fair value at each reporting period until they are
exercised. The initial fair value of the Public Warrants issued in connection
with the Initial Public Offering were estimated using a
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption
in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities
from Equity." Class A common stock subject to mandatory redemption (if any) is
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A common stock (including Class A common stock
that features redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within the Company's control) are classified as temporary equity. At all other
times, Class A common stock is classified as stockholders' equity. The Company's
Class A common stock feature certain redemption rights that are considered to be
outside of the Company's control and subject to the occurrence of uncertain
future events. Accordingly, as of
Net Income (Loss) Per Share of Common Stock
The Company's condensed consolidated statements of operations include a presentation of net income (loss) per share for Class A common stock subject to possible redemption in a manner similar to the two-class method of net income (loss) per common stock. Net income (loss) per common stock, basic and diluted, for Class A common stock is calculated by dividing the interest income earned on the Trust Account, less interest available to be withdrawn for the payment of taxes, by the weighted average number of Class A common stock outstanding for the periods. Net income (loss) per common stock, basic and diluted, for Class B common stock is calculated by dividing the net income (loss), adjusted for income attributable to Class A common stock, by the weighted average number of Class B common stock outstanding for the periods. Class B common stock include the Founder Shares as these common stocks do not have any redemption features and do not participate in the income earned on the Trust Account.
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The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement Warrants to purchase 19,733,333 shares of the Company's Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants and the conversion of the rights into shares of common stock is contingent upon the occurrence of future events.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.
Recent Accounting Pronouncements
In
Our management does not believe there are any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a material effect on our unaudited condensed consolidated financial statements.
Off-Balance Sheet Arrangements
As of
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