References to the "Company," "PWP Forward Acquisition Corp. I," "PWP Forward
Acquisition," "our," "us" or "we" refer to PWP Forward Acquisition Corp. I. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited interim
condensed financial statements and the notes thereto contained elsewhere in this
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 on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
U.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on September 9, 2020. We
were formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses (the "Business Combination"). We are an emerging growth
company and, as such, we are subject to all of the risks associated with
emerging growth companies.
Our sponsor is PWP Forward Sponsor I, LLC, a Delaware limited liability company
(our "Sponsor"). Our registration statement for our Initial Public Offering (the
"Initial Public Offering") became effective on March 9, 2021. On March 12, 2021,
we consummated our Initial Public Offering of 20,000,000 units (the "Units" and,
with respect to the Class A common stock included in the Units being offered,
the "Public Shares"), at $10.00 per Unit, generating gross proceeds of $200.0
million, and incurring offering costs of approximately $11.9 million, of which
$7.0 million and approximately $378,000 was for deferred underwriting
commissions and deferred legal fees, respectively. On March 16, 2021, the
underwriters partially exercised the over-allotment option, forfeited the
remaining option and on March 18, 2021, purchased an additional 1,163,433 Units
(the "Over-Allotment Units") generating gross proceeds of approximately $11.6
million and incurring additional offering costs of approximately $640,000, of
which approximately $407,000 was for deferred underwriting fees (the
"Over-Allotment").
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 4,000,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $1.50 per Private Placement Warrant with the Sponsor, generating
gross proceeds of $6.0 million. Simultaneously with the closing of the
Over-Allotment on March 18, 2021, we consummated the second closing of the
Private Placement, resulting in the purchase of an aggregate of an additional
155,124 Private Placement Warrants by the Sponsor, generating gross proceeds to
us of approximately $233,000.
Upon the closing of the Initial Public Offering, the Over-Allotment and the
Private Placement, $211.6 million ($10.00 per Unit) of the net proceeds of the
sale of the Units in the Initial Public Offering and the Private Placement were
placed in a trust account ("Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and have been, and
will continue to be invested only in U.S. "government securities," within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended
(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, as determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust
Account as described below.
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Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination. There is no
assurance that we will be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on the income
earned on the Trust Account) at the time of the agreement to enter into the
initial Business Combination. However, we only intend to complete a Business
Combination if the post-transaction company owns or acquires 50% or more of the
issued and outstanding voting securities of the target or otherwise acquires a
controlling interest in the target sufficient for it not to be required to
register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or March 12, 2023 (the "Combination
Period"), and our stockholders have not amended the Certificate of Incorporation
to extend such Combination Period, we will (1) cease all operations except for
the purpose of winding up; (2) as promptly as reasonably possible but not more
than 10 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, including interest (less up to $100,000 of interest to pay
dissolution expenses and which interest shall be net of taxes payable), divided
by the number of then issued and outstanding Public Shares, which redemption
will completely extinguish Public Stockholders' rights as stockholders
(including the right to receive further liquidating distributions, if any); and
(3) as promptly as reasonably possible following such redemption, subject to the
approval of the remaining stockholders and our board of directors, liquidate and
dissolve, subject in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
On April 29, 2021, the Company announced that, commencing on April 30, 2021, the
holders of the Company's Units may elect to separately trade the shares of Class
A common stock and Public Warrants. Any Units not separated continue to trade on
Nasdaq under the symbol "FRWAU." Any underlying shares of Class A common stock
and Public Warrants that were separated trade on Nasdaq under the symbols "FRW"
and "FRWAW," respectively. No fractional warrants were issued upon separation of
the Units and only whole warrants trade.
Recent Developments
On October 28, 2022, the Company filed a preliminary proxy statement in
connection with a special meeting to be held on November 28, 2022 (the "Special
Meeting") for the purpose of voting on: (i) a proposal to approve the adoption
of an amendment (the "First Amendment") to the Certificate of Incorporation to
change the date (the "Original Termination Date") by which the Company must
either (A) consummate the initial Business Combination, or (B) if the Company
fails to complete such initial Business Combination by the Original Termination
Date, cease all operations, except for the purpose of winding up, and, subject
to and in accordance with the Certificate of Incorporation, redeem all of its
Public Shares. The proposed First Amendment shall change the Original
Termination Date from March 12, 2023 to November 29, 2022 (such date, the
"Amended Termination Date," and such proposal, the "First Amendment Proposal");
(ii) a proposal to approve the adoption of an amendment to the Certificate of
Incorporation to eliminate from the Certificate of Incorporation the limitation
that the Company may not redeem Public Shares to the extent that such redemption
would result in the Company having net tangible assets (as determined in
accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001
(the "Redemption Limitation") in order to allow the Company to redeem Public
Shares irrespective of whether such redemption would exceed the Redemption
Limitation (such proposal, the "Second Amendment Proposal," and together with
the First Amendment Proposal, "Amendment Proposals"); and (iii) a proposal to
approve the adjournment of the Special Meeting from time to time to solicit
additional proxies in favor of the Amendment Proposals or if otherwise
determined by the chairperson of the Special Meeting to be necessary or
appropriate.
Liquidity, Capital Resources and Going Concern
Prior to the completion of the Initial Public Offering, our liquidity needs were
satisfied through the payment by our Sponsor of $25,000 for certain offering
costs on our behalf in exchange for the issuance of the Founder Shares (as
defined below), and loan proceeds from our Sponsor of $300,000. The loan was
repaid in full with the proceeds from the Initial Public Offering and Private
Placement. Subsequent to the consummation of the Initial Public Offering and
Private Placement, our liquidity needs were satisfied with the proceeds from the
consummation of the Private Placement not held in the Trust Account. In
addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor may, but is not obligated to, provide the Company
Working Capital Loans (as defined below). To date, there are no amounts
outstanding under any Working Capital Loans.
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In connection with the Company's assessment of going concern considerations in
accordance with the Financial Accounting Standards Board's ("FASB's") Accounting
Standards Codification ("ASC") Topic 205-40, "Presentation of Financial
Statements - Going Concern," management has determined that the liquidity
condition, mandatory liquidation and subsequent dissolution raises substantial
doubt about the Company's ability to continue as a going concern one year from
the date these financial statements are issued. Management has also determined
that if the Company is unable to raise additional funds to alleviate liquidity
needs as well as complete a Business Combination by March 12, 2023, then the
Company will cease all operations except for the purpose of liquidating. The
liquidity condition and the date for mandatory liquidation and subsequent
dissolution raise substantial doubt about the Company's ability to continue as a
going concern. No adjustments have been made to the carrying amounts of assets
or liabilities should we be required to liquidate after March 12, 2023. The
financial statements do not include any adjustment that might be necessary if
the Company is unable to continue as a going concern.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that although it is reasonably possible that the pandemic could have a
negative effect on our financial position, results of our operations and/or
search for a target company, the specific impact is not readily determinable as
of the date of the financial statements. Accordingly, the financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its stockholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing corporations are
permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the "Treasury") has been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax. Any share redemption or other share repurchase that occurs after December
31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent we would
be subject to the excise tax in connection with a Business Combination,
extension vote or otherwise will depend on a number of factors, including (i)
the fair market value of the redemptions and repurchases in connection with a
Business Combination, extension or otherwise, (ii) the structure of a Business
Combination, (iii) the nature and amount of any "PIPE" or other equity issuances
in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a
Business Combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by us
and not by the redeeming stockholder, the mechanics of any required payment of
the excise tax have not been determined. The foregoing could cause a reduction
in the cash available on hand to complete a Business Combination and in our
ability to complete a Business Combination. The full impact of the "IR Act" on
the Company's financial condition, results of operations, and cash flows is not
determinable as of the date of these financial statements.
Results of Operations
Our entire activity since inception through September 30, 2022 related to our
formation, the preparation for the 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 revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of interest earned on cash equivalents held in Trust Account.
We expect to incur increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses.
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For the three months ended September 30, 2022, we had net income of
approximately $1.0 million, primarily consisting of income from investments held
in the Trust Account of approximately $957,000 and a gain of approximately
$503,000 resulting from the change in fair value of derivative warrant
liabilities. These were partially offset by income tax expense of approximately
$190,000 and a loss from operations of approximately $220,000 (including general
and administrative expenses of approximately $140,000, related party expenses of
$30,000, and $50,000 of franchise tax expense).
For the three months ended September 30, 2021, we had net income of
approximately $1.5 million, which primarily consisted of a gain of approximately
$1.9 million resulting from the change in fair value of derivative warrant
liabilities and income from investments held in Trust Account of approximately
$3,000. These were partially offset by a loss from operations of approximately
$386,000 (including general and administrative expenses of approximately
$308,00, $30,000 of related party expenses, and approximately $48,000 in
franchise tax expense).
For the nine months ended September 30, 2022, we had net income of approximately
$6.0 million, primarily consisting of a gain resulting from the change in fair
value of derivative warrant liabilities of approximately $5.7 million and
approximately $1.2 million of income from investments held in the Trust Account.
These were partially offset by income tax expense of approximately $186,000 and
a loss from operations of approximately $784,000 (including general and
administrative expenses of approximately $544,000, related party expenses of
$90,000, and $150,000 of franchise tax expense).
For the nine months ended September 30, 2021, we had net income of approximately
$2.6 million, which primarily consisted of a gain of approximately $4.5 million
resulting from the change in fair value of derivative warrant liabilities and
income from investments held in Trust Account of approximately $7,000. These
were partially offset by a loss from operations of approximately $1.5 million
(including general and administrative expenses of approximately $1.3 million,
related parted expenses of $70,000, and approximately $146,000 of franchise tax
expenses) and non-operating expenses of approximately $397,000 for offering
costs associated with derivative warrant liabilities.
Commitments and Contingencies
Administrative Services Agreement
Commencing on the date that our securities were first listed on the Nasdaq
through the earlier of consummation of the initial Business Combination or our
liquidation, we agreed to pay an entity related to the Sponsor a total of
$10,000 per month for office space, administrative and support services.
During the three months ended September 30, 2022 and 2021, the Company incurred
$30,000 and $30,000, respectively, for these support services. During the nine
months ended September 30, 2022 and 2021, the Company incurred $90,000 and
$70,000, respectively, for these support services. Approximately $190,000 and
$100,000 are included in accounts payable on the balance sheet as of September
30, 2022, and December 31, 2021, respectively.
The Sponsor, officers and directors, or any of their respective affiliates, will
be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable Business Combinations. Our audit committee
will review on a quarterly basis all payments that were made by us to the
Sponsor, directors, officers or us or any of their affiliates.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any (and any shares of
common stock issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares), are entitled to registration rights pursuant to a
registration rights agreement signed upon the consummation of the Initial Public
Offering. These holders are entitled to certain demand and "piggyback"
registration rights. However, the registration rights agreement provides that we
would not be required to effect or permit any registration or cause any
registration statement to become effective until termination of the applicable
lock-up period. We will bear the expenses incurred in connection with the filing
of any such registration statements.
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Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final
prospectus relating to the Initial Public Offering to purchase up to 3,000,000
additional Units to cover over-allotments, if any, at the Initial Public
Offering price, less underwriting discounts and commissions. On March 16, 2021,
the underwriters partially exercised the over-allotment option, purchased an
additional 1,163,433 Units and forfeited the remainder of the option.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$4.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. An additional fee of $0.35 per Unit, or $7.0 million in the aggregate
will be payable to the underwriters for deferred underwriting commissions. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete a Business Combination,
subject to the terms of the underwriting agreement.
In connection with the closing of the Over-Allotment on March 18, 2021, the
underwriters were entitled to an additional fee of approximately $233,000 paid
upon closing, and approximately $407,000 in deferred underwriting commissions.
Deferred Legal Fees
We engaged outside legal counsel for legal advisory services, and the legal
counsel agreed to defer a portion of their fees ("Deferred Legal Fees"). The
deferred fee will become payable in the event that we complete a Business
Combination. As of September 30, 2022 and December 31, 2021, deferred legal fees
were approximately $1.5 million and $1.4 million, respectively, in connection
with such services.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. A summary of our significant accounting
policies is included in Note 2 to our condensed financial statements in Part I,
Item 1 of this Quarterly Report. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our financial statements and require significant, difficult or complex
judgments, often employing the use of estimates about the effects of matters
that are inherently uncertain. Such policies are summarized in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
in our 2021 Annual Report on Form 10-K filed with the SEC on March 31, 2022.
There have been no significant changes in the application of our critical
accounting policies during the nine months ended September 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed financial statements included in Part I,
Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
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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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