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.
Overview
We are a blank check company incorporated on December 21, 2020 as a Delaware
corporation and formed for the purpose of effecting a Business Combination with
one or more target businesses. We completed our Public Offering on March 25,
2021.
We presently have no revenue, have had losses since inception from incurring
formation costs and have had no operations other than the active solicitation of
a target business with which to complete a business combination.
Recent Developments
Proposed Business Combination
On September 27, 2021, Gores Guggenheim, Inc. (the "Company") entered into a
Business Combination Agreement (the "Business Combination Agreement"), by and
among the Company, Polestar Automotive Holding Limited, a Hong Kong incorporated
company ("Parent"), Polestar Automotive (Singapore) Pte. Ltd., a private company
limited by shares in Singapore ("Polestar Singapore"), Polestar Holding AB, a
private limited liability company incorporated under the laws of Sweden
("Polestar Sweden"), Polestar Automotive Holding UK Limited, a limited company
incorporated under the laws of England and Wales and a direct wholly owned
subsidiary of Parent ("ListCo"), and PAH UK Merger Sub Inc., a Delaware
corporation and a direct wholly owned subsidiary of ListCo ("Merger Sub").
The transactions contemplated by the Business Combination Agreement, including
the Merger (as defined below), and the other transactions contemplated by the
other transaction documents contemplated by the Business Combination Agreement
(collectively, the "Transactions") will constitute a "Business Combination" as
contemplated by the Company's Amended and Restated Certificate of Incorporation.
The Business Combination and the transactions contemplated thereby were
unanimously approved by the board of directors of the Company on September 25,
2021.
The Business Combination Agreement
Pre-Closing Reorganization
In connection with the Merger, prior to the closing of the Transactions (the
"Closing"), Parent will, and will cause ListCo, Polestar Singapore, Polestar
Sweden and their respective subsidiaries to, complete a reorganization, pursuant
to which, among other things, Polestar Singapore, Polestar Sweden and their
respective subsidiaries will become, directly or indirectly, wholly owned
subsidiaries of ListCo (the "Pre-Closing Reorganization"). As consideration for
the Pre-Closing Reorganization, ListCo will issue to Parent a number of class A
ordinary shares in the share capital of ListCo which class A ordinary shares
shall entitle the holder to one vote per share ("ListCo Class A Shares") and
class B ordinary shares in the share capital of ListCo, which class B ordinary
shares shall entitle the holder to ten votes per share ("ListCo Class B Shares,"
and, together with the ListCo Class A Shares, the "ListCo Shares"), such that,
following the Pre-Closing Reorganization, Parent will hold an aggregate number
of ListCo Shares equal to approximately (a) $20,003,000,000 divided by $10.00,
less (b) (i) the aggregate principal amount due in respect of certain
convertible notes of Parent outstanding as of immediately prior to the Closing,
divided by (ii) the applicable conversion price of such notes, less
(c) 49,803,900, which represents the aggregate number of ListCo Preference
Shares (as defined below) issued pursuant to the Volvo Cars Preference
Subscription Agreement (as defined below).
As additional consideration for Parent's contribution to ListCo of all the
issued and outstanding equity securities of Polestar Sweden, Parent will be
entitled to receive, subject to the terms provided in the Business Combination
Agreement, earn out shares from ListCo, issuable in ListCo Class A Shares and
ListCo Class B Shares up to an aggregate number equal to approximately (a) 0.075
multiplied by (b) the number of issued and outstanding ListCo Shares as of
immediately after the Closing (including ListCo Shares issued pursuant to the
Subscription Agreements (as defined below)).
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The Merger
Following the Pre-Closing Reorganization and pursuant to the Business
Combination Agreement, at the Closing, Merger Sub will merge with and into the
Company (the "Merger"), pursuant to which the separate corporate existence of
Merger Sub will cease, with the Company being the surviving corporation and
becoming a wholly owned subsidiary of ListCo.
Each share of Class A Common Stock of the Company, par value $0.0001 per share
("GG Class A Shares") issued and outstanding immediately prior to the effective
time of the Merger (the "Effective Time"), other than those held in treasury,
will be exchanged for one newly issued American depository share of ListCo
("ListCo Class A ADS") duly and validly issued against the deposit of an
underlying ListCo Class A Share deposited with a bank
("Depositary Bank") in which ListCo has established and sponsored American
depository receipt facilities (each, an "ADR Facility"). Each share of Class F
Common Stock of the Company, par value $0.0001 per share ("GG Class F Shares,"
and together with the GG Class A Shares, the "GG Shares") issued and outstanding
immediately prior to the effective time of the Merger, other than those held in
treasury, will be exchanged for one newly issued ListCo Class A ADS. All GG
Shares held in treasury will be canceled and extinguished without consideration.
Any units of the Company that are outstanding immediately prior to the Effective
Time held by Company stockholders will be automatically separated and the holder
thereof will be deemed to hold one GG Class A Share and one-fifth (1/5) of a
public warrant of the Company ("Public Warrant"), which underlying securities
will be converted as described below.
In the event the Requisite GG Warrantholder Approval (as defined below) is
obtained prior to the Effective Time, each Public Warrant shall be automatically
cancelled and extinguished and converted into the right to receive one American
depository share of ListCo ("ListCo Class C-1 ADS") duly and validly issued
against the deposit of an underlying class C-1 preferred share in the share
capital of ListCo ("ListCo Class C-1 Share") deposited with the Depositary Bank.
Each ListCo Class C-1 Share will be exercisable to acquire a ListCo Class A
Share at an exercise price of $11.50 per share. In addition, each private
placement warrant of the Company ("Private Placement Warrant") will be
automatically cancelled and extinguished and converted into the right to
receive one American depository share of ListCo ("ListCo Class C-2 ADS") duly
and validly issued against the deposit of an underlying class C-2 preferred
share in the share capital of ListCo ("ListCo Class C-2 Share") deposited with
the Depositary Bank. Each ListCo Class C-2 Share will be exercisable to acquire
a ListCo Class A Share at an exercise price of $11.50 per share.
In the event that the Requisite GG Warrantholder Approval is not obtained prior
to the Effective Time, each Public Warrant shall be automatically cancelled and
extinguished and converted into the right to receive one American depository
warrant of ListCo ("ListCo AD Warrant") duly and validly issued against the
deposit of an underlying warrant of ListCo representing the right to
acquire one ListCo Class A Share deposited with the Depositary Bank and
representing the right to acquire one ListCo Class A ADS (or one ListCo Class A
Share if at the time of exercise ListCo no longer uses the ADR Facility) at an
exercise price of $11.50 per ListCo Class A ADS. In addition, each Private
Placement Warrant will be automatically cancelled and extinguished and converted
into the right to receive one ListCo AD Warrant.
Registration Statement/Proxy Statement; Warrantholder Solicitation
In connection with the Transactions, the Company, ListCo, Polestar Singapore,
Polestar Sweden and Parent will prepare, and ListCo will file with the SEC, a
registration statement on Form F-4 (the "Registration Statement/Proxy
Statement"), which will include a prospectus of ListCo and a proxy statement for
the Company's stockholder meeting to solicit the vote of the Company
stockholders to, among other things, adopt the Business Combination Agreement
and approve the Transactions.
In addition, as promptly as reasonably practicable following the date of the
Business Combination Agreement, the Company, ListCo, Polestar Singapore,
Polestar Sweden and Parent will solicit the vote or consent of registered
holders of at least 50% of the outstanding Public Warrants to amend the Warrant
Agreement to permit the conversion or exchange of Public Warrants for
ListCo Class C-1 ADSs and the Private Placement Warrants for
ListCo Class C-2 ADSs (the "Requisite GG Warantholder Approval").
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Representations, Warranties and Covenants
The parties to the Business Combination Agreement have made representations,
warranties and covenants that are customary for transactions of this nature. The
representations and warranties of the respective parties to the Business
Combination Agreement will not survive the Closing. The covenants of the
respective parties to the Business Combination Agreement will also not survive
the Closing, except for those covenants that by their terms expressly apply in
whole or in part after the Closing.
Conditions to Closing
The obligations of the parties to the Business Combination Agreement to
consummate the Transactions is conditioned upon (a) the expiration or
termination of the applicable waiting period (and any extension thereof) under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (b) the absence of any
law or other legal restraint or prohibition issued by any court of competent
jurisdiction or other governmental authority preventing the consummation of the
Transactions, (c) the effectiveness under the Securities Act of 1933, as amended
(the "Securities Act"), of the Registration Statement/Proxy Statement and that
no stop order will have been issued by the SEC and remain in effect with respect
to the Registration Statement/Proxy Statement, (d) obtaining, at the meeting of
Company stockholders where a quorum is present, the vote of the holders of a
majority of the outstanding GG Shares entitled to vote thereon to adopt and
approve the Business Combination Agreement, other Transaction Documents (as
defined in the Business Combination Agreement) to which the Company will be a
party and the Transactions, (e) obtaining the requisite vote of the shareholders
of Parent to approve the Business Combination Agreement and the other
transaction documents to which Parent is party and the Transactions, (f) the
Company having at least $5,000,001 of net tangible assets (as determined in
accordance with Rule 3a51-1(g)(1) of the Exchange Act) following the completion
of the redemptions in respect of GG Shares in connection with the Transactions
(the "Stockholder Redemptions"), (g) the approval of ListCo Class A ADSs for
listing on the Nasdaq Stock Market, (h) the approval of the ListCo AD Warrants
or the ListCo Class C-1 ADSs, as applicable, for listing on the Nasdaq Stock
Market and (i) the board of directors of ListCo shall have a number and
composition of directors determined in accordance with the Business Combination
Agreement (and shall include one director reasonably determined by Sponsor (as
defined below) and consented to by Parent (such consent not to be unreasonably
withheld, conditioned or delayed), with the remaining initial directors being
reasonably determined by Parent) as of the Closing.
In addition, the obligations of Parent, Polestar Singapore, Polestar Sweden,
ListCo and Merger Sub to consummate the Transactions is subject to, among other
things, the aggregate amount of cash held in the Company's trust account (after
giving effect to the Stockholder Redemptions, the Sponsor Investment Amount, the
PIPE Investment Amount and the Volvo Cars PIPE Investment Amount (as defined
below)) being no less than $950,000,000, prior to the payment of any unpaid or
contingent liabilities and fees and expenses of the Company (including, as
applicable, any Company Transaction Expenses (as defined in the Business
Combination Agreement)) as of the Closing.
The obligation of the Company to consummate the Transactions is also subject to
the fulfillment of additional closing conditions, including, among other things,
the completion of the Pre-Closing Reorganization.
Termination
The Business Combination Agreement may be terminated at any time prior to the
Closing by mutual written consent of the Company and Parent and in certain other
circumstances, including if the Closing has not occurred on or prior to May 27,
2022 and the primary cause of the failure for the Closing to have occurred on or
prior to such date is not due to a breach of the Business Combination Agreement
by the party seeking to terminate.
Subscription Agreements
PIPE Subscription Agreements
Concurrently with the execution and delivery of the Business Combination
Agreement, the Company and ListCo entered into subscription agreements (the
"PIPE Subscription Agreements") with certain investors (the "PIPE Investors"),
pursuant to which the PIPE Investors have agreed to purchase, substantially
concurrently with the Closing, an aggregate of 7.43 million ListCo Class A ADSs
(the "PIPE Shares") for a purchase price of $9.09 per share in a private
placement, for an aggregate amount of $67,500,000 (the "PIPE Investment
Amount").
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The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is
contingent upon, among other customary closing conditions, the substantially
concurrent consummation of the Business Combination. Pursuant to the PIPE
Subscription Agreements, ListCo agreed to file with the U.S. Securities and
Exchange Commission (the "SEC") (at ListCo's sole cost and expense), within 30
calendar days after the date of Closing, a registration statement registering
the resale of the PIPE Shares, and to use its commercially reasonable efforts to
have the registration statement declared effective as soon as practicable after
the filing thereof.
New PIPE Subscription Agreements
In connection with the PIPE Assignment, on December 17, 2021, the Company and
ListCo entered into subscription agreements (the "New PIPE Subscription
Agreements") with the New PIPE Investors, which include certain affiliates and
employees of Sponsor. Pursuant to the New PIPE Subscription Agreements, the New
PIPE Investors have agreed to collectively subscribe for approximately 14.3
million ListCo Class A ADSs (the "New PIPE Shares") for an average price of
approximately $9.54 per ListCo Class A ADS, reflecting an aggregate investment
amount of approximately $136.0 million. The New PIPE Subscription Agreements are
substantially similar to the PIPE Subscription Agreements. The aggregate amount
of the PIPE investment and number of ListCo Class A ADSs to be purchased
pursuant thereto remains unchanged.
Sponsor Subscription Agreement
On December 17, 2021, (i) the Sponsor assigned a portion of its commitment to
purchase ListCo Class A ADSs, in an aggregate investment amount equaling
approximately $63.0 million (the "Sponsor Assignment"), to certain investors and
(ii) the Company, ListCo and Sponsor amended the Sponsor Subscription Agreement
to reflect the Sponsor Assignment. As a result, pursuant to the Sponsor
Subscription Agreement, as amended, Sponsor has agreed to subscribe for
approximately 2.15 million ListCo Class A ADSs for a purchase price of $9.09 per
ListCo Class A ADS on the date of Closing, for an aggregate investment of
approximately $19.5 million. The Sponsor Subscription Agreement, as amended, is
substantially similar to the PIPE Subscription Agreements (as defined below),
except with regards to purchase price and that the Sponsor has the right to
assign its commitment to purchase the ListCo Class A ADSs under the Sponsor
Subscription Agreement in advance of the closing of the Business Combination.
Volvo Cars Subscription Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, the Company and ListCo entered into a subscription agreement (the
"Volvo Cars Subscription Agreement," and, together with the PIPE Subscription
Agreements and the Sponsor Subscription Agreement, the "Subscription
Agreements") with Snita Holding B.V., a corporation organized under the laws of
Netherlands ("Snita") and a wholly owned indirect subsidiary of Volvo Car AB
(publ) ("Volvo Cars"). Pursuant to the Volvo Cars Subscription Agreement, Snita
agreed to subscribe for an additional 10 million ListCo Class A ADSs for a
purchase price of $10.00 per share on the date of Closing. The Volvo Cars
Subscription Agreement is substantially similar to the PIPE Subscription
Agreements, except with regards to purchase price. Snita may, in accordance with
the terms of the Volvo Cars Subscription Agreement, syndicate its commitment to
acquire the ListCo Class A ADSs to be purchased under the Volvo Cars
Subscription Agreement in advance of the closing of the Business Combination. On
December 17, 2021 (i) Snita assigned a portion of its commitment to purchase
ListCo Class A ADSs, in an aggregate investment amount equaling approximately
$73.0 million (the "Volvo Assignment," and together with the Sponsor Assignment,
the "PIPE Assignment") to purchase the ListCo Class A ADSs to certain investors
(the investors who were assigned commitments pursuant to the PIPE Assignment,
collectively, the "New PIPE Investors") and (ii) the Company, ListCo and Snita
amended the Volvo Car Subscription Agreement to reflect the Volvo Assignment. As
a result, pursuant to the Volvo Cars Subscription Agreement, as amended, Snita
has agreed to subscribe for approximately 2.70 million ListCo Class A ADSs for a
purchase price of $10.00 per ListCo Class A ADS on the date of Closing, for an
aggregate investment of approximately $27.0 million. The Volvo Cars Subscription
Agreement, as amended, is substantially similar to the PIPE Subscription
Agreements, except with regards to purchase price and that Snita may, in
accordance with the terms of the Volvo Cars Subscription Agreement, assign its
commitment to purchase the ListCo Class A ADSs under the Volvo Cars Subscription
Agreement in advance of the closing of the Business Combination.
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Volvo Cars Preference Subscription Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, ListCo entered into a subscription agreement (the "Volvo Cars
Preference Subscription Agreement") with Snita (the "Volvo Cars Preference
Subscriber"). Pursuant to the Volvo Cars Preference Subscription Agreement, the
Volvo Cars Preference Subscriber agreed to subscribe for mandatory convertible
preference shares of ListCo (the "ListCo Preference Shares") for an aggregate
subscription price of $10.00 per share, for an aggregate investment amount equal
to approximately $500,000,000 (the "Volvo Cars PIPE Investment Amount"). The
proceeds of such subscription will be used to satisfy certain accounts payable
that are or will be due and payable by certain subsidiaries of Parent to Volvo
Cars. As of the date hereof, it is currently anticipated that all of the ListCo
Preference Shares will convert into ListCo Class A Shares at Closing, in
accordance with, and subject to, the terms of the ListCo Preference Shares.
Parent Lock-Up Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, Parent, ListCo and the other Parent shareholders party thereto (the
"Parent Shareholders"), have entered into that Parent Lock-Up Agreement (the
"Parent Lock-Up Agreement"). Pursuant to the Parent Lock-Up Agreement, each
Parent Shareholder has, subject to certain exceptions, among other things,
agreed to not transfer any equity security of ListCo issued to them pursuant to
the Business Combination Agreement or other transaction documents contemplated
by the Business Combination Agreement during the period commencing the date of
Closing and ending 180 days following the date of the Closing, in each case
subject to the terms and conditions set forth therein.
Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, Sponsor, the Company, Parent, ListCo and certain of the Company's
directors, executive officers and affiliates (such individuals, the "Supporting
Sponsor Stockholders") have entered into a Sponsor and Supporting Sponsor
Stockholders Lock-Up Agreement (the "Sponsor and Supporting Sponsor
Stockholders Lock-Up Agreement").
Pursuant to the Sponsor and Supporting Stockholders Lock-Up Agreement, the
Sponsor and each Supporting Sponsor Stockholders has, among other things, agreed
to (i) support and vote in favor of all proposals included in the Registration
Statement/Proxy Statement; (ii) waive all adjustments to the conversion ratio
set forth in the Company's amended and restated certificate of incorporation
with respect to the GG Class F Shares; (iii) be bound by certain transfer
restrictions with respect to their GG Shares, Public Warrants and Private
Placement Warrants; and (iv) not to transfer any ListCo Class A ADSs issued
pursuant to the Business Combination Agreement during the period beginning the
date of Closing and ending 180 days following the date of the Closing, in each
case subject to the terms and conditions set forth therein. In addition, the
Sponsor has agreed to the forfeiture of up to 1,501,651 GG Class F Shares.
Amendment to the Sponsor and Supporting Stockholders Lock-Up Agreement
On December 17, 2021, the parties to the Sponsor and Supporting Sponsor
Stockholders Lock-Up Agreement entered into Amendment No. 1 to the Sponsor and
Supporting Sponsor Stockholders Lock-Up Agreement (the "Lock-Up Agreement
Amendment"). The Lock-Up Agreement Amendment provides for amendments to the
Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement to increase the
amount of the Company's Class F Common Stock ("Company Class F Common Stock")
that will be cancelled by the Company in connection with the Closing from
1,501,651 shares of Company Class F Common Stock to 1,533,873 shares of Company
Class F Common Stock.
The foregoing description of the Lock-Up Agreement Amendment does not purport to
be complete and is qualified in its entirety by the terms and conditions of the
Lock-Up Agreement Amendment, a copy of which is attached hereto as Exhibit 10.3
and is incorporated herein by reference.
Registration Rights Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, ListCo, Parent, the Parent Shareholders, Sponsor and the independent
directors of the Company (such persons, together with Sponsor and the Parent
Holders, the "Holders"), have entered into a registration rights agreement (the
"Registration Rights Agreement") which provides customary demand and piggyback
registration rights. Pursuant to the Registration Rights Agreement, ListCo
agreed that, as soon as practicable, and in any event within 30 days after the
Closing, ListCo will file
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with the SEC a shelf registration statement. In addition, ListCo will use its
reasonable best efforts to have the registration statement declared effective as
soon as practicable after the filing thereof, but no later than the 60th day (or
the 90th day if the registration statement is reviewed by, and received comments
from, the SEC) following the filing deadline, in each case subject to the terms
and conditions set forth therein.
On December 17, 2021, the parties to the Registration Rights Agreement entered
into Amendment No. 1 to the Registration Rights Agreement (the "Registration
Rights Agreement Amendment"), to provide for certain administrative changes to
reflect the BCA Amendment and the New PIPE Subscription Agreements. The
foregoing description of the Registration Rights Agreement Amendment does not
purport to be complete and is qualified in its entirety by the terms and
conditions of the Registration Rights Agreement Amendment, a copy of which is
attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Warrant Assumption Agreement
In the event that the Requisite GG Warrantholder Approval is not obtained prior
to the Effective Time, the Company, ListCo and Computershare Trust Company, N.A.
(the "Warrant Agent") will enter into a Warrant Assignment, Assumption and
Amendment Agreement (the "Warrant Assumption Agreement") prior to the Closing.
The Warrant Assumption Agreement will amend the Warrant Agreement,
dated March 22, 2021, by and among the Company and the Warrant Agent (the
"Warrant Agreement") to provide that at the Effective Time, each Public Warrant
and Private Placement Warrant will be assumed by ListCo and be converted into
the right to receive a ListCo AD Warrant, subject to the terms and conditions
set forth therein. In addition, under the Warrant Assumption Agreement, the
Company will assign to ListCo all of its rights, interests, and obligations in
and under the Warrant Agreement as of the effective time of the Merger, subject
to the terms and conditions set forth therein.
Results of Operations
For the period from January 1, 2021 to December 31, 2021, we had a net loss of
($81,941,027), of which 72,750,000 is a non-cash expense related to the change
in fair value of the warrant liability. Our business activities during the year
mainly consisted of identifying and evaluating prospective acquisition
candidates for a Business Combination. We believe that we have sufficient funds
available to complete our efforts to effect a Business Combination with an
operating business by March 25, 2023. However, if our estimates of the costs of
identifying a target business, undertaking in-depth due diligence and
negotiating a Business Combination are less than the actual amount necessary to
do so, we may have insufficient funds available to operate our business prior to
our Business Combination.
As indicated in the accompanying unaudited financial statements, at December 31,
2021, we had $302,504 in cash and deferred offering costs of $28,000,000.
Further, we expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure investors that our plans to complete our
Business Combination will be successful.
Liquidity and Capital Resources
On February 10, 2021, the Sponsor purchased 21,562,500 Founder Shares for
$25,000, or approximately $0.001 per share. On April 8, 2021, the Sponsor
forfeited 1,562,500 Founder Shares for no consideration, resulting in an
aggregate of 20,000,000 outstanding Founder Shares. The number of Founder Shares
issued was determined based on the expectation that such Founder Shares would
represent 20% of the outstanding shares upon completion of the Public Offering.
On March 22, 2021, the Sponsor transferred 25,000 Founder Shares to each of the
independent directors at their original purchase price.
On March 25, 2021, we consummated our Public Offering of 75,000,000 Units at a
price of $10.00 per Unit, generating gross proceeds of $750,000,000. On the IPO
Closing Date, we completed the private sale of an aggregate of 8,500,000 Private
Placement Warrants, each exercisable to purchase one share of Common Stock at
$11.50 per share, to our Sponsor, at a price of $2.00 per Private Placement
Warrant, generating gross proceeds, before expenses, of $17,000,000. After
deducting the underwriting discounts and commissions (excluding the Deferred
Discount, which amount will be payable upon consummation of the Business
Combination, if consummated), the total net proceeds from our Public Offering
and the sale of the Private Placement Warrants were $752,000,000, of which
$750,000,000 (or $10.00 per share sold in the Public Offering) was placed in the
Trust Account. The amount of proceeds not deposited in the Trust Account was
$2,000,000 at the closing of our Public Offering. On April 22, 2021, the
underwriters partially exercised their over-allotment option to purchase
5,000,000 newly issued units, and the closing of the sale of the
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additional Units pursuant to such exercise occurred on April 22, 2021. The
issuance by the Company of 5,000,000 Over-Allotment Option Units at a price of
$10.00 per unit resulted in gross proceeds of $50,000,000 placed in the Trust
Account. On April 22, 2021, substantially concurrently with the sale of the
Over-allotment Option Units, the Company completed a private placement with the
Sponsor for an additional 500,000 warrants at a price of $2.00 per warrant,
generating gross proceeds of $1,000,000 used to pay the additional Deferred
Discount. The remainder of the over-allotment option expired on May 9, 2021.
Interest earned on the funds held in the Trust Account may be released to us to
fund our Regulatory Withdrawals, subject to an annual limit of $900,000, for a
maximum of 24 months and/or additional amounts necessary to pay our franchise
and income taxes.
Prior to the completion of the Public Offering, Company borrowed $300,000 by the
issuance of an unsecured promissory note from the Sponsor for $300,000 to cover
expenses related to the Public Offering. This Note was non-interest bearing and
payable on the earlier of February 28, 2022 or the completion of the Public
Offering. This Note was repaid in full upon the completion of the Public
Offering.
On April 20, 2021, the Sponsor made available to the Company a loan of up to
$4,000,000 pursuant to a promissory note issued by the Company to the Sponsor.
The proceeds from the note will be used for ongoing operational expenses and
certain other expenses in connection with the Business Combination. The note is
unsecured, non-interest bearing and matures on the earlier of: (i) March 11,
2023 or (ii) the date on which the Company consummates the Business Combination.
As of December 31, 2021, the amount advanced by Sponsor to the Company was
$2,000,000.
As of December 31, 2021 and December 31, 2020, we had cash held outside of the
Trust Account of $302,504 and $0, respectively, which is available to fund our
working capital requirements. Additionally, interest earned on the funds held in
the Trust Account may be released to us to fund our Regulatory Withdrawals, for
a maximum of 24 months and/or additional amounts necessary to pay our franchise
and income taxes.
In addition, at December 31, 2021 and December 31, 2020, the Company had current
liabilities of $104,929,383 and $1,782 and working capital of ($103,149,599) and
($1,782), respectively, the balances of which are primarily related to warrants
we have recorded as liabilities as described in Notes 2 and 3. Other amounts are
related to accrued expenses owed to professionals, consultants, advisors and
others who are working on seeking a Business Combination as described in Note 1.
Such work is continuing after December 31, 2021 and amounts are continuing to
accrue. Additionally, the warrant liability will not impact the Company's
liquidity until a Business Combination has been consummated, as they do not
require cash settlement until such event has occurred.
We intend to use substantially all of the funds held in the Trust Account,
including interest (which interest shall be net of Regulatory Withdrawals and
taxes payable) to consummate our Business Combination. Moreover, we may need to
obtain additional financing either to complete a Business Combination or because
we become obligated to redeem a significant number of shares of our Class A
Common Stock upon completion of a Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our 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 Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to consummate our Business Combination, the remaining
proceeds held in our Trust Account, if any, will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategy. Following the closing of a Business
Combination, we do not expect there to be remaining proceeds in our Trust
Account.
As of December 31, 2021, we did not have any long-term debt obligations, capital
lease obligations, operating lease obligations, purchase obligations or
long-term liabilities. In connection with the Public Offering, we entered into
an administrative services agreement to pay monthly recurring expenses of
$20,000 to The Gores Group for office space, utilities and secretarial support.
The administrative services agreement terminates upon the earlier of the
completion of a Business Combination or the liquidation of the Company.
The underwriters are entitled to underwriting discounts and commissions of 5.5%
($44,000,000), of which 2.0% ($18,000,000) was paid upon close of the Public
Offering, and 3.5% ($28,000,000) was deferred. The Deferred Discount will become
payable to the underwriters from the amounts held in the Trust Account solely in
the event that the
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Company completes a Business Combination, subject to the terms of the
underwriting agreement. The underwriters are not entitled to any interest
accrued on the Deferred Discount.
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 ("U.S.
GAAP") and pursuant to the accounting and disclosure rules and regulations of
the Securities and Exchange Commission ("SEC"), and reflect all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial position as of
December 31, 2021 and the results of operations and cash flows for the periods
presented. Operating results for the period ended December 31, 2021 are not
necessarily indicative of results that may be expected for the full year or any
other period.
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1,
"Other Assets and Deferred Costs - SEC Materials" ("ASC 340-10-S99") and SEC
Staff Accounting Bulletin (SAB) Topic 5A - "Expenses of Offering". Offering
costs were $44,757,840 (including $44,000,000 in underwriters' fees) consisting
principally of professional and registration fees incurred through the balance
sheet date that are related to the Public Offering and are charged to equity
upon the completion of the Public Offering. Since the Company is required to
classify the warrants as derivative liabilities, offering costs totaling
$832,496 are reflected as an expense in the statements of operations.
Income Taxes
The Company follows the asset and liability method of accounting for income
taxes under ASC 740, "Income Taxes." Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
For those liabilities or 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
liabilities as income tax expense. No amounts were accrued for the payment of
interest and penalties at December 31, 2021.
The Company may be subject to potential examination by U.S. federal, states or
foreign jurisdiction authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the
nexus of income amounts in various tax jurisdictions and compliance with U.S.
federal, states or foreign tax laws.
The Company is incorporated in the State of Delaware and is required to pay
franchise taxes to the State of Delaware on an annual basis.
Recently issued accounting pronouncements not yet adopted
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 based on current operations of the
Company. The impact of any recently issued accounting standards will be
re-evaluated on a regular basis or if a business combination is completed where
the impact could be material.
Going Concern Consideration
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If the Company does not complete its Business Combination by March 25, 2023, the
Company will (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but not more than ten business days
thereafter, redeem 100% of the common stock sold as part of the units in the
Public Offering, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest (which interest
shall be net of franchise and income taxes payable and less up to $100,000 of
such net interest which may be distributed to the Company to pay dissolution
expenses), divided by the number of then outstanding public shares, which
redemption will completely extinguish public stockholders' rights as
stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company's remaining
stockholders and the Company's Board of Directors, dissolve and liquidate,
subject in each case to the Company's obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
In the event of such distribution, it is possible that the per share value of
the residual assets remaining available for distribution (including Trust
Account assets) will be less than the initial public offering price per unit in
the Public Offering. In addition, if the Company fails to complete its Business
Combination by March 25, 2023, there will be no redemption rights or liquidating
distributions with respect to the warrants, which will expire worthless.
In addition, at December 31, 2021 and December 31, 2020, the Company had current
liabilities of $104,929,383 and $1,782 and working capital of ($103,149,599) and
($1,782), respectively, the balances of which are primarily related to warrants
we have recorded as liabilities as described in Notes 2 and 3. Other amounts are
related to accrued expenses owed to professionals, consultants, advisors and
others who are working on seeking a Business Combination as described in Note 1.
Such work is continuing after December 31, 2021 and amounts are continuing to
accrue. Additionally, the warrant liability will not impact the Company's
liquidity until a Business Combination has been consummated, as they do not
require cash settlement until such event has occurred.
Critical Accounting Policies and Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires our 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 consolidated financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following as our critical
accounting policies:
Net loss per common share
The Company has two classes of shares, which are referred to as Class A Common
Stock and the Founders Shares. Net income/(loss) per common share is computed
utilizing the two-class method. The two-class method is an earnings allocation
formula that determines earnings per share separately for each class of common
stock based on an allocation of undistributed earnings per the rights of each
class. At December 31, 2021, the Company did not have any dilutive securities or
other contracts that could, potentially, be exercised or converted into common
stock and then share in the earnings of the Company under the treasury stock
method. As a result, diluted net income/(loss) per common share is the same as
basic net income/(loss) per common share for the period.
Warrant Liability
We account for the warrants issued in connection with our initial public
offering in accordance with the guidance contained in ASC 815-40 under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The Company utilizes a Monte Carlo simulation methodology to value
the warrants at each reporting period, with changes in fair value recognized in
the statement of operations. The key assumptions in the option pricing model
utilized are assumptions related to expected share-price volatility, expected
term, risk-free interest rate and dividend yield. The expected volatility as of
the IPO Closing Date was derived from observable public warrant pricing on
comparable 'blank-check' companies that recently went public in 2020 and 2021.
The risk-free interest rate is based on the interpolated U.S. Constant Maturity
Treasury yield. The expected term of the warrants is assumed to be six months
until the closing of a Business Combination, and the
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contractual five year term subsequently. The dividend rate is based on the
historical rate, which the Company anticipates to remain at zero.
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