PERSHING SQUARE TONTINE HOLDINGS, LTD. References in this report (the "Quarterly Report") to "we", "us", "our" or the "Company" refer toPershing Square Tontine Holdings, Ltd. , and references to our "management" or our "management team" refer to our officers and directors. 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. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, and including but not limited to statements regarding the Company or the Company's management team's expectations, hopes, beliefs, intentions or strategies regarding the future, included in this Quarterly Report that address activities, events or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company's control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Information concerning these and other factors can be found in the Company's filings with theSEC , including those set forth in the Risk Factors section of the Company's final prospectus for its initial public offering. Copies are available on theSEC's website, www.sec.gov. In light of the significant uncertainties in forward-looking statements, you should not regard such statements as a representation or warranty that the Company will achieve its objectives and plans in any specified timeframe, or at all, and you should not place undue reliance on any forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, except as may be required by law. Overview We are a blank check company incorporated as aDelaware 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 the initial public offering and the private placements of the Sponsor Warrants, Director Warrants and Forward Purchase Units, our capital stock, debt or a combination of cash, stock and debt. Our Initial Business Combination will be a negotiated transaction, not a hostile takeover. The issuance of additional shares of our stock in a business combination, including theForward Purchase Securities : • may significantly dilute the equity interest of investors; • may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; • could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use net operating loss carry forwards, if any, and could result in the resignation or removal of our present directors and officers; • may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and • may adversely affect prevailing market prices for our Class A Common Stock and/or Redeemable Warrants.
Similarly, if we issue debt instruments or otherwise incur significant indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after
our Initial Business Combination are insufficient to repay our debt
obligations;
• acceleration of our obligations to repay the indebtedness even if we
make all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any,
if the debt security is payable on demand;
• our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
• our inability to pay dividends on our common stock;
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• using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for
dividends on our common stock if declared, our ability to pay
expenses, make capital expenditures and acquisitions, and fund other
general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes
in our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in government
regulation; limitations on our ability to borrow additional amounts
for expenses, capital expenditures, acquisitions, debt service
requirements, and execution of our strategy; and
• other purposes and other disadvantages compared to our competitors who
have less debt.
We expect to continue to incur costs in the pursuit of our acquisition plans. We
cannot assure you that our plans to complete our Initial Business Combination
will be successful.
Recent Developments
On June 20, 2021 , the Company entered into a Share Purchase Agreement (the
"Share Purchase Agreement") with Vivendi to purchase a number of ordinary
shares, par value €10 per share, representing approximately 10% of the share
capital and voting rights, on a fully diluted basis, of UMG (the "UMG Shares")
for approximately $4 billion (the "Share Purchase"), with the expectation that
the Company would distribute the UMG Shares to its Public Stockholders (the
"Distribution" and together with the Share Purchase, the "Proposed IBC"). The
Company expected that the Share Purchase would be consummated in the third
quarter of 2021 and the Distribution would occur in November or December 2021 .
In connection with the Proposed IBC, the Company and Vivendi also entered into
an indemnification agreement pursuant to which the Company agreed to indemnify
Vivendi and certain of its related parties for certain potential liabilities in
connection with the Company's redemption tender offer, the warrant exchange
offer and the Distribution (each as further described below).
Also on June 20, 2021 , the Company, the Sponsor, the Pershing Square Funds and
the Company's independent directors entered into the Pershing Entities Letter
Agreement, pursuant to which:
• The Company and the Pershing Square Funds agreed to amend and restate
the Forward Purchase Agreement concurrently with the closing of the
Proposed IBC, pursuant to which the Forward Purchasers would exercise
their right to purchase an aggregate amount of $1.6 billion of Forward
Purchase Units ($1.0 billion of Committed Forward Purchase Units and
$600 million of Additional Forward Purchase Units). The price per
share at which the Pershing Square Funds would have exercised such
amended Forward Purchase Agreement would be equal to RemainCo's net
asset value at the time of such purchase;
• The Company and the Sponsor agreed to amend the Sponsor Warrants
concurrently with the closing of the Proposed IBC, such that the
Sponsor Warrants would not be exercised or otherwise participate in
the Proposed IBC. Instead, they would remain in place, but the
exercise price would be adjusted to equal 120% of RemainCo's net asset
value immediately prior to the time it completed its anticipated
future business combination with an operating business; and
• The Company and its independent directors agreed that the Director
Warrants would not be exercised in connection with the Proposed IBC,
and would be amended concurrently with the closing of the Proposed
IBC. The result of such amendment would have been that, (i) the
holders of the Director Warrants would receive shares in the Company
in exchange for approximately 72% of the fair market value of the
Director Warrants (as determined by a third-party valuation firm), to
compensate for the fact that they would not participate in the
Proposed IBC as originally envisioned, (ii) such shares would
participate in the Distribution and (iii) the roughly 28% of the value
of the Director Warrants would remain in place with their exercise
price adjusted in the same manner as the exercise price of the Sponsor
Warrants as explained above.
The Company further announced that it expected to undertake a 1:4 reverse stock
split following the issuance of the Distributable Tontine Redeemable Warrants,
all warrants in respect of the Forward Purchase Agreement and Director Forward
Purchase Agreements and the Distribution so that its net asset value ("NAV")
would be approximately
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Table of Contents Pursuant the Proposed IBC, following the Distribution, the Company would have continued to exist and it would not have disappeared into UMG nor would it have been liquidated. The Company continuing to exist is referred to herein as "RemainCo". RemainCo would have been the same corporate entity and it would have continued to be namedPershing Square Tontine Holdings, Ltd. The Public Stockholders would have continued to own shares in RemainCo, and it was intended that RemainCo would pursue a traditional business combination with an operating business (RemainCo's "Future Business Combination"). OnJuly 8, 2021 , the Company launched (i) a redemption tender offer which was intended to provide Public Stockholders with the opportunity to exercise their right to redeem their shares of Class A Common Stock in connection with the Proposed IBC and (ii) a warrant exchange offer which provided holders of the Company's currently outstanding Distributable Redeemable Warrants the opportunity to exchange those warrants for shares of Class A Common Stock at a ratio of 0.2650 shares per warrant. OnJuly 19, 2021 , the Company announced that its board of directors unanimously determined not to proceed with the Proposed IBC and the Company had agreed to assign its rights and obligations under the Share Purchase Agreement with Vivendi to Pershing Square Holdings, Ltd. and certain of its affiliates (the "Assignees"). The Assignees agreed to purchase or cause to be purchased at least 5% of the share capital of UMG on the terms and subject to the conditions of the Share Purchase Agreement and Vivendi acknowledged that if the Assignees purchased at least 5% of the share capital of UMG, the Share Purchase Agreement would be of no further force with respect to remaining UMG shares to be purchased under the Share Purchase Agreement. In addition, the Assignees, severally in accordance with their obligations to purchase UMG shares, agreed to assume and reimburse the Company for out-of-pocket expenses incurred to date by the Company in connection with transactions related to the Proposed IBC, which are expected to be approximately$25 million . The Assignees also assumed, severally in accordance with their obligations to purchase UMG shares, the Company's obligations under the indemnification agreement, between the Company and Vivendi. OnJuly 21, 2021 , the Company terminated its redemption tender offer and warrant exchange offer. Given the events ofJuly 19 andJuly 21 , the Company has begun to pursue an alternative initial business combination. OnAugust 10, 2021 , the Assignees completed an initial closing under the Share Purchase Agreement acquiring 128,555,017 UMG shares, or approximately 7.1% of the share capital of UMG, for an aggregate purchase price of$2.8 billion , as a result of which the Company was released from its obligations under the Share Purchase Agreement and the indemnification agreement described above. Also onAugust 10, 2021 , the Company acknowledged and stepped out of the registration rights agreement, transferring it to the Assignees, which now provides, among other things, the Assignees the ability to register UMG in aU.S. initial public offering no earlier than 2023 rather than providing for theU.S. Distribution that the Company envisioned in the Proposed IBC at the end of this calendar year. This Quarterly Report on the 10-Q reflects the position of the Company as ofJune 30, 2021 . The Private Placement Warrants and Forward Purchase Agreements are shown at their fair values as ofJune 30, 2021 , under the Company's Proposed IBC structure. After the Company announced the cancellation of the Proposed IBC onJuly 19, 2021 , the valuation methodologies used to determine the fair values of the Private Placement Warrants and Forward Purchase Agreements reverted to the original methodologies based upon on the Company's agreements prior to the Proposed IBC. Certain Observations During the second quarter of 2021 through to the date of this Quarterly Report, we continued to work on the Proposed IBC with Vivendi, which was subsequently cancelled and assigned to Pershing Square Holdings, Ltd. and certain of its affiliates, as discussed in detail in the preceding section. For the three months endedJune 30, 2021 , we recorded net income of$166,907,336 , which was primarily due to a non-cash GAAP gain of$180,404,206 related to the change in valuations of our Outstanding Warrants andFPA , each of which was previously accounted for as equity on our financial statements throughDecember 31, 2020 . The change in accounting was initiated following publication of a statement by the Staff of theSEC on accounting for SPAC warrants, which impacted nearly all SPACs. As a result of theSEC's public statement, management along with the audit committee reconsidered accounting issues related to these instruments and restated our financial statements atDecember 31, 2020 to account for our Outstanding Warrants andFPA as derivative liabilities. For the three months endedJune 30, 2021 , this accounting treatment has required us to record a large non-cash GAAP gain that does not represent an actual cash gain by the Company, nor do we believe it will have any effect on our ability to consummate an initial business combination on attractive terms. The revised accounting methodology relates to certain features of the Outstanding Warrants and ourFPA (the terms of which entitle the Sponsor and directors to receive warrants in addition to common stock) that are designed to protect the holders of warrants by entitling them to be exchanged for cash in certain events. The revised accounting requires that we account for the Outstanding Warrants andFPA as liabilities equal to their fair value at the end of each reporting period. The impact of this accounting treatment is highly volatile as it is driven by changes in our stock price. If our stock price increases over a given measurement period, the fair values of our warrants andFPA will also increase in value and result in a larger liability being recorded on our balance sheet and a larger non-cash GAAP loss recorded in our earnings statement for the period, all other things being equal. Conversely, if our stock price declines over a measurement period, we will record a smaller liability on our balance sheet and report a non-cash GAAP gain in our earnings statement, notwithstanding that our stockholders will be holding shares that have declined in value over the measurement period. Non-cash GAAP gains or losses due to changes in the fair value of such instruments have no impact on our business or our cash balances - including the more than$4 billion we hold in a trust account at J.P. Morgan - and the minimum CommittedFPA of$1 billion , nor do we expect the change in accounting to have any impact on our ability to consummate a potential initial business combination. Results of Operations All activities throughJune 30, 2021 were related to the Company's organizational activities, preparation for the Company's initial public offering, identifying a target company for a business combination, and activities in connection with the Proposed IBC. We will not generate any operating revenues until after completion of our Initial Business Combination. We generate non-operating income in the form of interest and dividends on cash and cash equivalents, and marketable securities held in the trust account. We incur ongoing expenses as a result of being a public company for legal, financial reporting, accounting and auditing compliance, as well as for due diligence and Initial Business Combination related transaction expenses. For the three months endedJune 30, 2021 , we had net income of$166,907,336 , which consisted of a change in the fair value of Forward Purchase Agreement liabilities of$17,364,600 , a change in the fair value of Outstanding Warrant liabilities of$163,039,606 , income earned on marketable securities held in the trust account of$92,038 , dividends earned on marketable securities held in the operating account of$433 , offset by legal, insurance, research, franchise tax and other expenses totaling$13,552,437 , and provision for income taxes of$36,904 . For the six months endedJune 30, 2021 , we had net income of$503,903,717 , which consisted of a change in the fair value of Forward Purchase Agreement liabilities of$285,985,720 , a change in the fair value of Outstanding Warrant liabilities of$236,032,187 , income earned on marketable securities held in the trust account of$990,316 , dividends earned on marketable securities held in the operating account of$1,071 , offset by legal, insurance, research, franchise tax and other expenses totaling$18,880,034 , and provision for income taxes of$225,543 . For the period fromMay 4, 2020 (inception) throughJune 30, 2022 , we had a net loss of$12,882 , which represented formation and organizational costs of the Company. 23
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Table of Contents Non-GAAP Financial Measures As noted above, the Company was 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. As such, we believe the amount of committed capital available for an Initial Business Combination is critical to our success as a blank check company. See Liquidity and Capital Resources below for further information on our unrestricted cash balances and funds held in the trust account as ofJune 30, 2021 . In addition, we report adjusted net loss, which is a non-GAAP financial measure that is not required by, or presented in accordance with, GAAP. Management uses this non-GAAP measure to evaluate results as it reduces the volatility of operations due to the accounting for our warrants and forward purchase agreements, which are more fully described in Note 2 of the Notes to Unaudited Condensed Financial Statements included herein, and which do not have an impact on the funds held in the trust account or committed capital available for an Initial Business Combination. We believe this information is useful to investors for these reasons. This non-GAAP measure should not be considered a substitute for the most directly comparable GAAP measures, which are reconciled below. Further, this measure has limitations as an analytical tool, and when assessing our operating performance, you should not consider this measure in isolation or as a substitute for GAAP measures. We may calculate or present this non-GAAP financial measure differently than other companies who report measures with the same or similar names, and as a result, the non-GAAP measure we report may not be comparable. Adjusted net loss represents our net income excluding the change in fair value of forward purchase agreement liabilities and the change in fair value of Outstanding Warrant liabilities, which are non-cash items. As ofJune 30, 2021 , our unaudited condensed balance sheets reflect a liability of$534,580,097 (December 31, 2020 :$1,056,598,004 ) related to liabilities which do not impact the funding available for an Initial Business Combination. As can be observed, the value of the liabilities relating to these instruments under GAAP (and the related income/(loss) that flows through the statements of operations) can swing significantly when in fact no economic changes have occurred. For the Three For the Months Ended Six Months Ended June 30, 2021 June 30, 2021 Net income$ 166,907,336 $ 503,903,717 Less: Change in fair value of Forward Purchase Agreement liabilities 17,364,600 285,985,720 Change in fair value of Outstanding Warrant liabilities 163,039,606 236,032,187 Adjusted net loss$ (13,496,870) $ (18,114,190) Liquidity and Capital Resources Our liquidity needs had been satisfied prior to the consummation of the initial public offering through a capital contribution of$25,000 by our Sponsor in exchange for 100 shares of Class B Common Stock, and interest-bearing loans of$1,121,120 from our Sponsor under an unsecured promissory note covering expenses related to the initial public offering. The loan was repaid in full onJuly 24, 2020 , inclusive of interest. As ofJune 30, 2021 andDecember 31, 2020 ,$378,880 was left under the promissory note to be drawn down, and there were no borrowings outstanding, respectively. OnJuly 24, 2020 , we consummated the initial public offering of 200,000,000 Units, at$20.00 per unit, generating gross proceeds of$4,000,000,000 . Simultaneously with the closing of the initial public offering, we consummated a$67,837,500 sale of Sponsor Warrants and Director Warrants in private placements. Following the initial public offering and the private placements of Sponsor Warrants and Director Warrants, a total of$4,000,000,000 was placed into the trust account. We incurred$94,623,187 in offering costs, including$35,000,000 of underwriting fees,$56,250,000 of deferred underwriting fees and$3,373,187 of other offering costs. The per share amount to be distributed to Public Stockholders who properly redeem their Public Shares will not be reduced by the deferred underwriting fees (further discussed below). As ofJune 30, 2021 , we had an unrestricted cash balance of$25,023,579 in the operating account, held outside the trust account to fund our ongoing expenses, as well as cash and marketable securities held in the trust account of$4,002,224,637 . Interest and dividend income earned on the balance in the trust account will be used to pay taxes on such income. During the three months endedJune 30, 2021 , we withdrew$433,770 of income earned on the trust account to pay our income tax obligations. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest and dividends earned on the trust account (less taxes payable and deferred underwriting fees), and the proceeds from the sale of the Forward Purchase Units to complete an Initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the Initial Business Combination, the remaining proceeds held in the trust account will be used as 24
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Table of Contents working capital to finance the operations of the target business or businesses, make other acquisitions, and pursue our growth strategies. In order to fund working capital deficiencies or finance transaction costs in connection with an Initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be needed. If we complete the Initial Business Combination, we would repay such loaned amounts. In the event that the 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. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our Initial 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. 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 the shares of our Public Shares upon completion 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. Contractual Obligations We do not have any long-term debt, capital lease obligations, and operating lease obligations as ofJune 30, 2021 . The underwriters are entitled to a deferred fee of$0.28 per Unit, or$56,250,000 in the aggregate. The aggregate deferred underwriting fees includes (i) the deferral of any underwriting fees, other than the retail selling concessions, in excess of$30,000,000 (a deferral of$12,500,000 ), plus (ii) a 2.0% rate applied to the gross offering proceeds, subject to a$56,250,000 cap on the amount of such aggregate deferred underwriting fees. If the amount of proceeds from the trust account paid in connection with the redemption rights of Public Stockholders, together with the amount of any capital raised in private placements in connection with the Initial Business Combination from investors other than Sponsor or its affiliates (the "Net Redemptions"), results in us having less than$2,000,000,000 of cash available upon consummation of the Initial Business Combination, only 25% of the aggregate deferred underwriting fees will be payable. If such amount of cash available is$2,000,000,000 or greater, 50% of the aggregate deferred underwriting fees will be payable, and the remaining 50% of the aggregate deferred underwriting fees will be subject to a pro-rata reduction based on the amount of Net Redemptions as a percentage of the total public proceeds of the initial public offering. The deferred underwriting fees will be waived by the underwriters solely in the event that we do not complete a business combination, subject to the terms of the underwriting agreement. Critical Accounting Policies The preparation of the unaudited condensed financial statements and related disclosures in conformity with GAAP 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: 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 ASC Topic 480 "Distinguishing Liabilities from Equity." The Company's conditionally redeemable Class A Common Stock features certain redemption rights that are considered to be outside of its control and subject to the occurrence of uncertain future events. Accordingly, atJune 30, 2021 andDecember 31, 2020 , 200,000,000 shares of Class A Common Stock subject to possible redemption were presented at redemption value as temporary equity, respectively, outside of the stockholders' equity section of the Company's condensed balance sheets. The Company adjusts the carrying value of redeemable common stock to equal the redemption value of the cash held in the Trust Account net of income taxes payable at the end of each reporting period. Outstanding Warrants and FPA Liabilities We account for our Outstanding Warrants andFPA in accordance with the guidance contained in ASC 815-40, under which the Outstanding Warrants andFPA do not meet the criteria for equity treatment and must be recorded as derivative liabilities. Accordingly, we classify the Outstanding Warrants andFPA as liabilities with changes in fair value reflected on the Company's condensed statement of operations at each reporting period. The fair value of the Public Warrants was initially measured using a 25
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Table of Contents modified Black-Scholes pricing model and subsequently measured at the closing quoted market price. The Private Placement Warrants andFPA are valued using a modified Black-Scholes pricing model. See Note 7 of the Notes to Unaudited Condensed Financial Statements included herein for further information on the significant inputs to the models utilized to determine the fair values of the Outstanding Warrants andFPA liabilities. Net Income (Loss) per Common Share We apply the two-class method of calculating earnings per share. Net income (loss) per common share, basic and diluted, for Class A Common Stock subject to possible redemption is calculated by dividing the allocable income earned on the Trust Account, net of applicable income taxes, by the weighted-average number of Class A Common Stock subject to possible redemption outstanding for the period. Net income (loss) per share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income (loss) attributable to Class A Common Stock subject to possible redemption, by the weighted-average number of Class B non-redeemable common stock outstanding for the period. Off-Balance Sheet Arrangements. As ofJune 30, 2021 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Recent Accounting Pronouncements. Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on the Company's unaudited condensed financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk As ofJune 30, 2021 , we were not subject to any material market or interest rate risk. Following the consummation of our initial public offering, the net proceeds of our initial public offering and the private placements of the Sponsor Warrants and Director Warrants that are held in the trust account have been invested inU.S. Treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in directU.S. Treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. However, if the interest rates ofU.S. Treasury obligations become negative, we may have less proceeds held in the trust account than initially deposited. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer (our "Certifying Officers"), the effectiveness of our disclosure controls and procedures as ofJune 30, 2021 , pursuant to Rule 13a-15(b) under the Exchange Act. Based on their evaluation, our Certifying Officers have concluded that, solely due to the circumstance that led to the restatement of ourDecember 31, 2020 financial statements to reclassify our Outstanding Warrants andFPA as described in the Explanatory Note to our Form 10-K/A filed with theSEC inMay 2021 , our disclosure controls and procedures were not effective as ofJune 30, 2021 . We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Management's Report on Internal Controls Over Financial Reporting This Quarterly Report on Form 10-Q does not include a report of management's assessment regarding internal control over 26
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Table of Contents financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of theSEC for newly public companies. Changes in Internal Control Over Financial Reporting During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In light of the restatement of ourDecember 31, 2020 financial statements inMay 2021 , management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards, including the identification of third-party professionals with whom to consult regarding the application of complex accounting matters, and engaged third-party valuation specialists to assist management in determining the fair values of the Sponsor Warrants, Director Warrants, andFPA . While we believe that these remediation actions will improve the effectiveness of our internal control over financial reporting, which began in the second quarter of 2021, the material weakness identified will not be considered remediated until the controls operate for a sufficient period of time, and we can offer no assurance that these initiatives will ultimately have the intended effects. 27
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