References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Learn CW. References to our "management" or our "management
team" refer to our officers and directors, and references to the "Sponsor" refer
to CWAM LC Sponsor, LLC. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed financial statements and the notes thereto contained
elsewhere in this Quarterly Report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K for the year ending
December 31, 2021 filed with the U.S. Securities and Exchange Commission (the
"SEC") on April 4, 2022. The Company's securities filings can be accessed on the
EDGAR section of the SEC's website at www.sec.gov. Except as expressly required
by applicable securities law, the Company disclaims any intention or obligation
to update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company incorporated on February 2, 2021 as a Cayman
Islands exempted company for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses or entities (the "Business
Combination"). We intend to effectuate our initial business combination using
cash from the proceeds of our Initial Public Offering and the sale of our
shares, debt or a combination of cash, equity and debt. We expect to continue to
incur significant costs in the pursuit of our acquisition plans. We cannot
assure you that our plans to complete a Business Combination will be successful.
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Our registration statement for our Initial Public Offering was declared
effective on October 13, 2021. On October 13, 2021, we consummated our Initial
Public Offering of 23,000,000 units, including the issuance of 3,000,000 units
as a result of the underwriter's full exercise of their over-allotment option,
at $10.00 per Unit, generating gross proceeds of $230,000,000. Each Unit
consisted of one Public Share and one-half of one redeemable Warrant. Each whole
Public Warrant entitles the holder to purchase one Public Share for $11.50 per
share, subject to adjustment. Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 7,146,000 warrants at a
price of $1.00 per Private Placement Warrant in a private placement to CWAM LC
Sponsor, LLC (the "Sponsor") generating gross proceeds of $7,146,000.
Following the closing of the Initial Public Offering on October 13, 2021,
$232,300,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in
the Initial Public Offering and the sale of the Private Placement Warrants was
placed in a non-interest bearing Trust Account (the "Trust Account"), located in
the United States at a nationally recognized financial institution, with U.S.
Bank National Association acting as trustee, and invested only in United States
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations.
Pursuant to the trust agreement, the trustee will not be permitted to invest in
other securities or assets. The Trust Account is intended as a holding place for
funds pending the earliest to occur of either: (i) the completion of the initial
Business Combination; (ii) the redemption of any public shares properly tendered
in connection with a stockholder vote to amend our amended and restated
memorandum and articles of association (A) to modify the substance or timing of
our obligation to provide holders of the Class A ordinary shares the right to
have their shares redeemed in connection with the initial Business Combination
or to redeem 100% of the public shares if the Company does not complete the
initial Business Combination within 18 months from the closing of the Initial
Public Offering or (B) with respect to any other provision relating to the
rights of holders of the Class A ordinary shares; or (iii) absent the completing
an initial Business Combination within 18 months from the closing of the Initial
Public Offering, the return of the funds held in the Trust Account to the public
stockholders as part of the redemption of the public shares. If the Company does
not invest the proceeds as discussed above, the Company may be deemed to be
subject to the Investment Company Act.
If we are unable to complete our initial Business Combination within the
Combination Period or during any Extension Period, we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but no more than ten business days thereafter, redeem the public
shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, divided by the number of then outstanding
public shares, which redemption will completely extinguish public Shareholder's
rights as shareholders (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
remaining shareholders and the Company's board of directors, proceed to commence
a voluntary liquidation and thereby a formal dissolution of the Company, subject
in each case to its obligations under Cayman Islands law to provide for claims
of creditors and the requirements of applicable law.
Results of Operations
Our only activities from inception through September 30, 2022, were those
related to our formation, the preparation for our Initial Public Offering and,
since the closing of the Initial Public Offering, the search for a prospective
initial Business Combination. We have neither engaged in any operations nor
generated any operating revenues to date. We will not generate any operating
revenues until after completion of our initial Business Combination, at the
earliest. We incurred expenses as a result of being a public company (including
for legal, financial reporting, accounting and auditing compliance), as well as
for expenses in connection with searching for a prospective initial Business
Combination.
For the three months ended September 30, 2022, we had a net income of $174,151,
which consisted of operating expenses of $393,261 a change in fair value of the
warrant liability of $559,380, and interest income related to the Trust Account
of $1,126,792.
For the three months ended September 30, 2021, we had a net loss of $0, which
consisted of formation and operating expenses of $0.
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For the nine months ended September 30, 2022, we had a net income of $7,295,588,
which consisted of operating expenses of $1,475,574, a change in fair value of
the warrant liability of $7,486,984, and interest income related to the Trust
Account of $1,284,178.
For the period from February 2, 2021 to September 30, 2021, we had a net loss of
$10,216, which consisted of formation and operating expenses of $10,216.
Liquidity, Capital Resources and Going Concern
On October 13, 2021, the Company consummated the Initial Public Offering of
20,000,000 units, generating gross proceeds of $200,000,00. Simultaneously with
the closing of the Initial Public Offering, the Company consummated a private
placement of 7,146,000 Warrants at a price of $1.00 per Private Placement
Warrant to its Sponsor, generating gross proceeds of $7,146,000. Simultaneously,
the underwriter exercised the over-allotment option and purchased an additional
3,000,000 Over-Allotment Units, generating an aggregate of gross proceeds of
$30,000,000.
Following the consummation of the Initial Public Offering on October 13, 2021,
an amount of $232,300,000 ($10.10 per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering was placed in the Trust Account.
Transaction costs amounted to $12,375,591 consisting of $2,446,000 of
underwriting fees, $9,780,500 of deferred underwriting fees and $930,686 of
other costs.
As of September 30, 2022 and December 31, 2021, we had approximately
$233,587,890 and $232,303,712 cash held in the Trust Account, respectively. We
intend to use substantially all of the funds held the Trust Account. To the
extent that our shares or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the
post-Business Combination entity, make other acquisitions and pursue our growth
strategies.
As of September 30, 2022 and December 31, 2021, we had cash of $841,705 and
$237,363 held outside of the Trust Account, respectively. We intend to use the
funds held outside of the Trust Account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, properties, or similar locations of
prospective target businesses or their representative or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or our officers and directors may
provide us working capital loans ("Working Capital Loans"). On May 3, 2022, the
Sponsor confirmed to the Company that it will provide any such Working Capital
Loans for at least the next twelve months. On May 5, 2022, the Company drew down
and received cash proceeds of $1,050,000. The outstanding balance under this
loan is $1,050,000 as of September 30, 2022. If we complete a Business
Combination, we may repay such loaned amounts out of the proceeds of the Trust
Account released to us. In the event that a 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 $1,050,000 of such loans may be convertible into
warrants, at a price of $1.00 per warrant, at the option of the lender. The
warrants would be identical to the Private Placement Warrants.
In connection with the Company's assessment of going concern considerations in
accordance with the authoritative guidance in Financial Accounting Standard
Board ("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern." The
Company has until April 13, 2023, 18 months from the closing of the IPO, to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by the specified period. If a Business
Combination is not consummated by April 13, 2023 and the Company decides not to
extend the period of time to consummate a Business Combination, there will be a
mandatory liquidation and subsequent dissolution.
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The Company's evaluation of its working capital, along with, the liquidity
condition and date for mandatory liquidation and subsequent dissolution raise
substantial doubt about the Company's ability to continue as a going concern one
year from the date that these condensed financial statements are issued. These
condensed financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities that
might be necessary should the Company be unable to continue as a going concern.
Related Party Transactions
Founder Shares
On February 2, 2021, the Company issued an aggregate of 7,187,000 shares of
Class B ordinary shares (the "Founder Shares") to the Sponsor for an aggregate
purchase price of $25,000. On August 20, 2021 and September 9, 2021, the Sponsor
effected a surrender of 1,287,000 Class B ordinary shares and 150,000 Class B
ordinary shares, respectively, to the Company for no consideration, resulting in
a decrease in the total number of Class B ordinary shares outstanding from
7,187,000 to 5,750,000. The Founder Shares included an aggregate of up to
750,000 shares subject to forfeiture by the Sponsor to the extent that the
underwriter's over-allotment is not exercised in full or in part. The
underwriter's over-allotment option was exercised in full on October 13, 2021,
and these shares are no longer subject to forfeiture.
The sponsor has agreed not to transfer, assign or sell any of its Founder Shares
until two years after the completion of a Business Combination.
Promissory Note - Related Party
On February 18, 2021, the sponsor agreed to loan the Company an aggregate of up
to $300,000 to cover expenses related to the Proposed Offering pursuant to a
promissory note (the "Note"). On March 25, 2021, the Company borrowed $300,000
on the Note to cover expenses related to the Proposed Offering. On September 7,
2021, the sponsor and the company agreed to amend and restate the Note (the
"Amended and Restated Note") to extend the maturity date. The Amended and
Restated Note was non-interest bearing and was paid in full on October 26, 2021.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination,
the 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 $1,050,000 of notes may be converted upon consummation of a
Business Combination into warrants at a price of $1.00 per warrant. The warrants
will be identical to the Private Placement Warrants. In the event that a
Business Combination does not close, the Company may use a portion of proceeds
held outside the Trust Account to repay the Working Capital Loans but no
proceeds held in the Trust Account would be used to repay the Working Capital
Loans. As of September 30, 2022 and December 31, 2021, the Company has drawn
$1,050,000 and $0 on this loan, respectively.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of September 30, 2022 and December 31, 2021, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did
not have any commitments or contractual obligations other than obligations
disclosed herein.
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Contractual Obligations
Registration and Shareholders Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of the Working Capital Loans (and in each
case holders of their component securities, as applicable) will be entitled to
registration rights pursuant to a registration rights agreement signed
simultaneously with the Initial Public Offering, requiring the Company to
register such securities for resale (in the case of the Founder Shares, only
after conversion to our Class A ordinary shares). The holders of the majority of
these securities are entitled to make up to three demands, excluding short form
demands, that the Company register such securities. In addition, the holders
have certain "piggy-back" registration rights with respect to registration
statements filed subsequent to the consummation of a Business Combination and
rights to require the Company to register for resale such securities pursuant to
Rule 415 under the Securities Act. The Company will bear the expenses incurred
in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,780,500
in the aggregate, and a discretionary deferred fee of $2,000,000. The deferred
fee will become payable to the underwriter 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.
Softbank and Sponsor Investors Investment
A fund managed by SB Management Limited, a 100% directly owned subsidiary of
SoftBank Group Corp., and certain members of our sponsor, in the aggregate, have
purchased $100.0 million of units (or 10,000,000 units) and $7.7 million of
units (or 770,000 units), respectively, in the Initial Public Offering. The
underwriter is entitled to an underwriting discount of $0.35 per unit for every
unit purchased by Softbank, the payment of which has been deferred and will
become payable to the underwriter from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination. The
underwriter has not received any underwritten discount for any unit purchased by
the sponsor investors.
Critical Accounting Estimates
The preparation of condensed 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 condensed financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates.
Derivative Financial Instruments
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and 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" ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own ordinary shares, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the 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, the 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 the warrants are recognized as a non-cash gain or
loss on the statements of operations. The fair value of the warrants was
estimated using a Monte Carlo simulation model. The more significant estimates
made by management in these fair value determinations are around the inputs used
in the fair value model, with volatility being the most judgmental of those
inputs. A 1% increase in volatility input would increase the Company's warrant
liability by approximately $1,700,000.
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The Company accounts for its convertible promissory note under Accounting
Standards Codification ("ASC") 815, Derivatives and Hedging ("ASC 815"). Under
815-15-25, the election can be at the inception of a financial instrument to
account for the instrument under the fair value option under ASC 825. The
Company has made such election for its convertible promissory note. Using the
fair value option, the convertible promissory note is required to be recorded at
its initial fair value on the date of issuance, and each balance sheet date
thereafter. The Company deemed the fair value of the promissory note to be at
par. Changes in the estimated fair value of the notes are recognized as a
non-cash gain or loss on the condensed statements of operations.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption
permitted. The Company is currently evaluating the impact this guidance will
have on its financial statements.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. 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 an
election to opt out is irrevocable. We have elected to irrevocably 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,
we will adopt the new or revised standard at the time public companies adopt the
new or revised standard. This may make comparison of our financial statements
with another emerging growth company that has not opted out of using the
extended transition period difficult or impossible because of the potential
differences in accountant standards used.
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.
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