The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Overview
We are a blank check company incorporated on March 26, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar Business
Combination with one or more businesses. We intend to effectuate our initial
Business Combination using cash from the proceeds of our Initial Public Offering
and the private placement of the Private Placement Warrants, the proceeds of the
sale of our shares in connection with our initial Business Combination, 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 registration statement for our Initial Public Offering was declared
effective on May 26, 2020. On May 29, 2020, we completed our Initial Public
Offering of 103,500,000 Units, which includes the full exercise by the
underwriters of the over-allotment option to purchase an additional 13,500,000
units, sold to the public at the price of $10.00 per Unit, generating gross
proceeds of $1,035,000,000. Each Unit consists of one share of our Class A
common stock and one-third of one redeemable warrant. Each whole Public Warrant
entitles the holder to purchase one share of our Class A common stock at an
exercise price of $11.50 per share, subject to adjustment. Simultaneously with
the closing of our Initial Public Offering, we completed the sale to the
sponsors of an aggregate of 15,133,333 Private Placement Warrants at a price of
$1.50 per Private Placement Warrant, generating gross proceeds of approximately
$22,700,000. Each Private Placement Warrant is exercisable for one share of our
Class A common stock at a price of $11.50 per share, subject to adjustment. The
proceeds from the Private Placement Warrants were added to the net proceeds from
the Initial Public Offering held in the Trust Account.
Following our Initial Public Offering, the full exercise of the over-allotment
option and the sale of the Private Placement Warrants, a total of $1,035,000,000
was placed in the Trust Account. We incurred $57,949,954 in transaction costs,
including $20,700,000 of underwriting fees, $36,225,000 of deferred underwriting
fees and $1,024,954 of other offering costs.
We expect to continue to incur significant costs in the pursuit of our initial
Business Combination. We cannot assure you that our plans to complete our
initial Business Combination will be successful.
Restatement
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") has been amended and restated to give effect to the
Restatement of our audited financial statements as of and for the period ended
December 31, 2020 ("Restatement") and the unaudited quarterly information
included in those audited financial statements. The Company has restated its
historical financial results for such periods to reclassify its Warrants and
FPAs as derivative liabilities pursuant to ASC 815-40 rather than as a
components of equity as the Company previously treated the Warrants and FPAs.
The impact of the Restatement is reflected in MD&A below. Other than as
disclosed in the Explanatory Note and with respect to the Restatement, no other
information in this Item 7 has been amended and this Item 7 does not reflect any
events occurring after the Original Form 10-K. The impact of the Restatement is
more fully described in Note 2 to the Company's financial statements included in
Item 15 of Part IV of this Amendment.
Recent Developments
On January 25, 2021, we entered into the Business Combination Agreement by and
among the Company, Alight, Alight Pubco, FTAC Merger Sub, Tempo Merger Sub, the
Blocker Merger Subs and the Tempo Blockers. The Business Combination Agreement
contemplates the consummation of the Pending Business Combination: (i) FTAC
Merger Sub will merge with and into the Company, with the Company being the
surviving corporation in the merger and becoming a subsidiary of Alight Pubco
(the "Pubco Merger") and (ii) Alight Pubco will, through a series of mergers and
related transactions, acquire equity interests in Alight and the Tempo Blockers.
Following the consummation of the Business Combination, the combined company
will be organized in an "Up-C" structure, in which substantially all of the
assets and business of Alight Pubco will be held by Alight. The combined
company's business will continue to operate through the subsidiaries of Alight.
46
The consideration to be paid to the pre-Closing equityholders of Alight and the
pre-Closing equityholders of the Tempo Blockers (in connection with the merger
of the Tempo Merger Sub with and into Alight (the "Tempo Merger") and the merger
of the Tempo Blocker Merger Subs with and into the Tempo Blockers, respectively,
and certain other transactions at the closing of the Busines Combination (the
"Closing") will be a combination of cash and equity consideration.
The Business Combination will be consummated subject to the deliverables and
provisions as further described in the Business Combination Agreement.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities, those
necessary to prepare for our Initial Public Offering and identifying a target
company for our initial Business Combination. We do not expect to generate any
operating revenues until after completion of our initial Business Combination.
We generate non-operating income in the form of interest income on marketable
securities held in the Trust Account. We incur expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as expenses as we conduct due diligence on prospective
Business Combination candidates.
For the period from March 26, 2020 (inception) through December 31, 2020, we had
a net loss of $114,432,650, which consists of non-cash losses of $57,599,000 and
$54,277,110 related to changes in the fair value of the Warrants and FPAs,
respectively, formation and operating costs of $3,258,112 and a provision for
income taxes of $147,695, offset by interest income on marketable securities
held in the Trust Account of $849,267.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, the Company's only source
of liquidity was an initial purchase of Class B common shares by our sponsor and
loans from our sponsor.
For the period from March 26, 2020 (inception) through December 31, 2020, cash
used in operating activities was $503,575. Net loss of $114,432,650 was affected
by the non-cash loss on the change in fair value of the Warrants of $57,599,000,
non-cash loss on the change in fair value of the FPAs of $54,277,110, interest
earned on marketable securities held in the Trust Account of $849,267 and
changes in operating assets and liabilities, which provided $2,902,232 of cash
from operating activities.
As of December 31, 2020, we had cash and marketable securities of $1,035,849,267
held in the Trust Account. We intend to use substantially all of the funds held
in the Trust Account, including any amounts representing interest earned on the
Trust Account (less taxes paid and deferred underwriting commissions) to
complete our initial Business Combination. We may withdraw interest to pay
taxes. During the period ended December 31, 2020, we did not withdraw any
interest earned on the Trust Account. To the extent that our capital stock or
debt is used, in whole or in part, as consideration to complete our initial
Business Combination, the remaining proceeds held in the Trust Account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
As of December 31, 2020, we had cash of $496,471 outside of the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, review corporate documents and material agreements of
prospective target businesses, and structure, negotiate and complete our initial
Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial Business Combination, our sponsor or an affiliate of
our sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. If we complete our initial Business
Combination, we would repay such loaned amounts. In the event that our initial
Business Combination does not close, we may use a portion of the working capital
held outside the Trust Account to repay such loaned amounts but no proceeds from
our Trust Account would be used for such repayment. Up to $1,500,000 of such
loans may be convertible into warrants identical to the Private Placement
Warrants, at a price of $1.50 per warrant at the option of the lender.
In May 2020, the Company entered into the FPAs with each of Cannae Holdings,
Inc. and THL FTAC LLC. Pursuant to each agreement, Cannae Holdings, Inc. and THL
FTAC LLC have each agreed to purchase shares of the Company's Class A common
stock in an aggregate share amount equal to 15,000,000 shares of the Company's
Class A Common stock (or a total of 30,000,000 shares of the Company's Class A
common stock), plus an aggregate of 5,000,000 redeemable warrants (or a total of
10,000,000 redeemable warrants) to purchase one share of the Company's Class A
common stock at $11.50 per share, for an aggregate purchase price of
$150,000,000 (or a total of $300,000,000), or $10.00 for one share of the
Company's Class A common stock and one-third of one warrant, in a private
placement to occur concurrently with the closing of a Business Combination. The
warrants to be sold as part of the FPAs will be identical to the warrants
underlying the Units sold in the Initial Public Offering.
We do not currently believe we will need to raise additional funds in order to
meet the expenditures required for operating our business. However, if our
estimate of the costs of identifying a target business, undertaking in-depth due
diligence and negotiating our initial Business Combination is less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our initial Business Combination. Moreover, we may
need to obtain additional financing either to complete our initial Business
Combination or because we become obligated to redeem a significant number of our
Public Shares upon consummation of our initial Business Combination, in which
case we may issue additional securities or incur debt in connection with such
Business Combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
initial Business Combination. If we are unable to complete our initial Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Account. In addition,
following our initial Business Combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
47
In March 2020, the World Health Organization classified the COVID-19 outbreak as
a pandemic, based on the rapid increase in exposure globally. The full impact of
the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak
on our results of operations, financial position and cash flows will depend on
future developments, including the duration and spread of the outbreak, related
advisories and restrictions, and the availability of a vaccine. These
developments and the impact of the COVID-19 outbreak on the financial markets
and the overall economy are highly uncertain and cannot be predicted. If the
financial markets and/or the overall economy continue to be impacted for an
extended period, our ability to complete our initial Business Combination may be
materially adversely affected due to significant governmental measures being
implemented to contain the COVID-19 outbreak or treat its impact, including
travel restrictions, and the shutdown of businesses and quarantines, among
others, which may limit our ability to have meetings with potential investors or
affect the ability of a potential target company's personnel, vendors and
service providers to negotiate and consummate our initial Business Combination
in a timely manner.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements within the meaning of the applicable SEC rules as
of December 31, 2020. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often
referred to as variable interest entities, which would have been established for
the purpose of facilitating off-balance sheet arrangements. We have not entered
into any off-balance sheet financing arrangements, established any special
purpose entities, guaranteed any debt or commitments of other entities, or
purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of our sponsors a monthly fee up to $5,000 for office space and
administrative support services. We began incurring these fees on May 26, 2020
and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$36,225,000 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
We entered into the FPAs with each of Cannae Holdings, Inc. and THL FTAC LLC.
Pursuant to each agreement, Cannae Holdings, Inc. and THL FTAC LLC have each
agreed to purchase shares of our Class A common stock in an aggregate share
amount equal to 15,000,000 shares of our Class A Common stock (or a total of
30,000,000 shares of the our Class A common stock), plus an aggregate of
5,000,000 redeemable warrants (or a total of 10,000,000 redeemable warrants) to
purchase one share of the Company's Class A common stock at $11.50 per share,
for an aggregate purchase price of $150,000,000 (or a total of $300,000,000), or
$10.00 for one share of our Class A common stock and one-third of one warrant,
in a private placement to occur concurrently with the closing of a Business
Combination. The warrants to be sold as part of the FPAs will be identical to
the warrants underlying the Units sold in the Initial Public Offering.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant and FPA Liabilities
The Company accounts for the Warrants and FPAs as either equity-classified or
liability-classified instruments based on an assessment of the specific terms of
the Warrants and FPAs and the applicable authoritative guidance in Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives
and Hedging ("Warrants and FPAs ASC 815"). The assessment considers whether the
are freestanding financial instruments pursuant to ASC 480, meet the definition
of a liability pursuant to ASC 480, and meet all of the requirements for equity
classification under ASC 815, including whether the Warrants and FPAs are
indexed to the Company's own common shares and whether the holders of the
Warrants could potentially require "net cash settlement" in a circumstance
outside of the Company's control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of issuance of the Warrants and execution of
the FPAs and as of each subsequent quarterly period end date while the Warrants
and FPAs are outstanding. For issued or modified warrants that meet all of the
criteria for equity classification, such warrants are required to be recorded as
a component of additional paid-in capital at the time of issuance. For issued or
modified warrants that do not meet all the criteria for equity classification,
such warrants are required to be recorded at their initial fair value on the
date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of liability-classified warrants are recognized as a
non-cash gain or loss on the statements of operations.
We account for the Warrants and FPAs in accordance with ASC 815-40 under which
the Warrants and FPAs do not meet the criteria for equity classification and
must be recorded as liabilities. The fair value of liability-classified Public
Warrants has been estimated using the Public Warrants' quoted market price. The
Private Placement Warrants are valued using a Modified Black Scholes Option
Pricing Model. The fair value of the FPAs has been estimated using a an adjusted
net assets method. See Note 9 to the Company's financial statements included in
Item 15 of Part IV of this Amendment for further discussion of the pertinent
terms of the Warrants and Note 11 to those financial statements for further
discussion of the methodology used to determine the value of the Warrants and
FPAs.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that feature redemption rights that is either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
shares of Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' equity section of our balance
sheet.
48
Net Income (Loss) per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable taxes, by the weighted average number of shares of Class A redeemable
common stock outstanding for the period. Net loss per common share, basic and
diluted for and Class B non-redeemable common stock is calculated by dividing
net income less income attributable to Class A redeemable common stock, by the
weighted average number of shares of Class B non-redeemable common stock
outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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