References to "we," "us," "our" or the "Company" are to Queen's Gambit Growth
Capital, except where the context requires otherwise. The following discussion
and analysis of the Company's financial condition and results of operations
should be read in conjunction with the financial statements and related notes
thereto included in Item 1. Financial Statements located elsewhere in this
Annual Report on Form 10-K. Certain information contained in this Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth below includes forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors.
Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K includes forward-looking
statements within the meaning of Section 27A of the Securities Act, and Section
21E of 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. Our forward-looking statements include, but are not
limited to, statements regarding our or our management team's expectations,
hopes, beliefs, intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other characterizations of
future events or circumstances, including any underlying assumptions, are
forward-looking statements. The words "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intend," "may," "might," "plan," "possible,"
"potential," "predict," "project," "should," "would" and similar expressions may
identify forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. Such statements include, but are
not limited to, possible business combinations and the financing thereof, and
related matters, as well as all other statements other than statements of
historical fact included in this Annual Report on Form 10-K. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those
described in our other SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
and formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization with one or more businesses or
entities (the "Business Combination"). The registration statement for our
initial public offering was declared effective on January 19, 2021 (the "Initial
Public Offering"). On January 22, 2021 (the "IPO Closing Date"), we consummated
our Initial Public Offering of 34,500,000 units (the "Units"), including
4,500,000 Units that were issued pursuant to the underwriters' exercise of their
over-allotment option in full. The Units were sold at a price of $10.00 per
Unit, generating gross proceeds to us of $345,000,000.
Simultaneously with the consummation of the Initial Public Offering, our Company
and Queen's Gambit Holdings LLC, a Delaware limited liability company (our
"Sponsor") consummated the Private Placement of the Private Placement Warrants
at a purchase price of $1.50 per Private Placement Warrant (for a purchase price
of approximately $8,900,000), generating gross proceeds to us of approximately
$8,900,000.
Approximately $345,000,000 of the net proceeds from the Initial Public Offering
and the Private Placement with our Sponsor has been deposited in the Trust
Account. The net proceeds from the Initial Public Offering and the Private
Placement of Private Placement Warrants held in the Trust Account have been
invested solely in U.S. government securities having a maturity of 185 days or
less or in money market funds meeting certain conditions under Rule 2a-7 under
the Investment Company Act of 1940, as amended, which invest only in direct U.S.
government treasury obligations.
If we are unable to complete our Business Combination within 24 months we 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
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 earned on the
funds held in the Trust Account and not previously released to us to pay our
income taxes (net of any taxes payable by us and less up to $100,000 of interest
to pay dissolution expenses), divided by the number of then-outstanding public
shares, which redemption will completely
69
--------------------------------------------------------------------------------
extinguish public shareholders' rights as shareholders (including the right to
receive further liquidating distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of our remaining shareholders and our board of directors,
liquidate and dissolve, subject in each case to our obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law.
Recent Developments
Proposed Business Combination
On July 28, 2021, the Company entered into the Business Combination Agreement
("Business Combination Agreement"), by and among the Company, Swvl, Holdings,
Pivotal Merger Sub Company I, a Cayman Islands exempted company with limited
liability and wholly owned subsidiary of Holdings, and BVI Merger Sub. Subject
to the satisfaction or waiver of the conditions to closing of the transactions
contemplated by the Business Combination Agreement (the "Proposed
Transactions"), as described in the Current Report on Form 8-K, filed with the
SEC on July 28, 2021, the Transactions will effect an initial Business
Combination between the Company and Swvl. The Business Combination Agreement and
the Transactions contemplated thereby were unanimously approved by the boards of
directors of each of the Company and Swvl.
In connection with the Proposed Transaction we filed our registration
statement on Form F-4 (File No. 333-259800) , as amended from time to time,
with the SEC, by Holdings, on September 27, 2021 and were declared effective on
March 15, 2022. A definitive prospectus/proxy statement on Form DEF 14A
(File No. 001-39908) was filed by the Company with the SEC on March 15, 2022.
Business Combination Agreement Amendments
On January 31, 2022, the Company, Swvl, Holdings, Cayman Merger Sub and BVI
Merger Sub entered into the First Amendment to the Business Combination
Agreement (the "First Amendment"), pursuant to which, subject to terms and
conditions therein, the parties thereto amended certain terms therein. Further,
on March 3, 2022, the Company, Swvl, Holdings, Cayman Merger Sub and BVI Merger
Sub entered into the Second Amendment to the Business Combination Agreement (the
"Second Amendment"), pursuant to which, subject to the terms and conditions
therein, the parties thereto extended the Outside Date (as defined in the
Business Combination Agreement) to May 31, 2022.
Forward Purchase Agreement and FPA Termination Agreement
On November 15, 2021, the Company and ACM ARRT VII B, LLC, a Delaware limited
liability company ("Seller"), entered into an agreement (the "Forward Purchase
Agreement") for an OTC Equity Prepaid Forward Transaction (the "Forward Purchase
Transaction") with respect to the Company's Class A ordinary shares and the
Class A ordinary shares, par value $0.0001, of Holdings, ("Holdings Common
Shares A") into which such Class A ordinary shares of the Company were to be
converted in the Proposed Transactions. The Forward Purchase Agreement was
subsequently terminated pursuant to that certain Termination Agreement dated and
effective as of January 30, 2022 ("FPA Termination Agreement"), whereby the
parties agreed that no further payments or deliveries are due by either party in
respect of the Forward Purchase transaction (whether in cash, shares or
otherwise) and agreed to release each other from any and all liabilities arising
from, related to or in connection with the Forward Purchase Agreement, including
with respect to Seller's redemption rights. As a result of the termination of
the Forward Purchase Agreement and pursuant to that FPA Termination Agreement,
the Forward Purchase Agreement is of no further force and effect.
Subscription Agreement and Subscription Termination Agreement
On November 15, 2021, the Company, Swvl, and Holdings, entered into a
subscription agreement (the "Subscription Agreement"), with an investor
affiliated with the Seller (the "Subscriber"), pursuant to which the Subscriber
agreed to purchase, and Holdings agreed to sell to the Subscriber, an aggregate
of 200,000 newly issued Holdings Common Shares A for a purchase price of $10.00
per share and an aggregate purchase price of $2,000,000, in a private placement.
The Subscription Agreement was entered into separately from and independently of
the prior subscription agreements entered into by and between the Company, Swvl,
Holdings, and
70
--------------------------------------------------------------------------------
a number of investors on July 28, 2021. On January 30, 2022, the Company, Swvl,
Holdings, and the Subscriber entered into an agreement to terminate the
Subscription Agreement (the "Subscription Termination Agreement") effective as
of such date. As a result of the termination of the Subscription Agreement
pursuant to the Subscription Termination Agreement, the Subscription Agreement
is of no further force and effect.
Liquidity and Going Concern
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial sale of our Class B ordinary shares to our Sponsor.
On the IPO Closing Date, we consummated our Initial Public Offering of
34,500,000 Units, including 4,500,000 Units that were issued pursuant to the
underwriters' exercise of their over-allotment option in full. The Units were
sold at a price of $10.00 per Unit, generating gross proceeds to us of
approximately $345,000,000. On January 22, 2021, simultaneously with the
consummation of our Initial Public Offering, we completed the private sale of
5,933,333 Private Placement Warrants at a purchase price of $1.50 per Private
Placement Warrant to our Sponsor, generating gross proceeds to us of
approximately $8,900,000. Approximately $345,000,000 of the net proceeds from
the Initial Public Offering and the Private Placement with our Sponsor has been
deposited in the Trust Account. The $345,000,000 of net proceeds held in the
Trust Account includes approximately $10,000,000 of deferred underwriting
discounts and commissions that will be released to the underwriters of the
Initial Public Offering upon completion of our initial Business Combination. Of
the gross proceeds from the Initial Public Offering and the Private Placement
with our Sponsor that were not deposited in the Trust Account, $5,700,000 was
used to pay underwriting discounts and commissions in the Initial Public
Offering, $91,000 was used to repay advances from our Sponsor, and the balance
was reserved to pay accrued offering and formation costs, business, legal and
accounting due diligence expenses on prospective acquisitions and continuing
general and administrative expenses.
As of December 31, 2021, the Company had approximately $675,000 in its operating
bank account and a working capital deficit of approximately $7.0 million.
In connection with our assessment of going concern considerations, management
has determined that if we are unable to complete a Business Combination by
January 23, 2023, then we will cease all operations except for the purpose of
liquidating. The date for mandatory liquidation and subsequent dissolution as
well as our working capital deficit raise substantial doubt about our 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 the
Combination Period. We intend to complete a Business Combination before the
mandatory liquidation date.
Results of Operations
We have neither engaged in any significant operations nor generated any
operating revenue. Our entire activity since December 9, 2020 (inception)
through the IPO Closing Date 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, at the earliest. We generate non-operating income in the form of
investment income on our investments held in the 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 expenses as
we conduct due diligence on prospective Business Combination candidates.
For the year ended December 31, 2021, we had a net loss of approximately $25.0
million which consisted of approximately $8.9 million in non-operating loss from
the change in fair value of derivative warrant liabilities, approximately $9.5
million of general and administrative expenses, approximately $6.1 million of
loss on issuance of private placement warrants, $200,00 in general and
administrative - related party, and $488,000 of financing costs - derivative
warrant, partly offset by approximately $92,000 in income from investment held
in the Trust Account.
Contractual Obligations
71
--------------------------------------------------------------------------------
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and securities that
may be issued upon conversion of Working Capital Loans, if any, are entitled to
registration rights pursuant to a registration rights agreement.
These holders were entitled to make up to three demands, excluding short form
demands, that we register such securities. In addition, these holders will have
certain "piggy-back" registration rights with respect to registration statements
filed subsequent to the completion of the initial Business Combination. We will
bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating
to the Initial Public Offering to purchase up to 4,500,000 Over-Allotment Units,
if any, at the Initial Public Offering price less the underwriting discounts and
commissions. On January 22, 2021, in connection with the Initial Public Offering
closing, the underwriters fully exercised their over-allotment option.
The underwriters did not receive any underwriting discounts or commissions on
the Affiliated Units. With respect to the remaining Units offered in the Initial
Public Offering, the underwriters were entitled to an underwriting discount of
$0.20 per unit, or $5.7 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately $10.0
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.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these consolidated
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities in our consolidated financial
statements. On an ongoing basis, we evaluate our estimates and judgments,
including those related to fair value of financial instruments and accrued
expenses. We base our estimates on historical experience, known trends and
events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. We have identified the following as our critical
accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge our exposures to cash flow,
market, or foreign currency risks. We evaluate all of our financial instruments,
including issued warrants to purchase its Class A ordinary shares, to determine
if such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
The Public Warrants and the Private Placement Warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjusts the carrying value
of the instruments to fair value at each reporting period until they are
exercised. The fair value of the Public Warrants issued in connection with the
Initial Public Offering were initially measured at fair value using a Monte
Carlo simulation model, and subsequently measured by their listed trading price.
The fair value of the Private Placement Warrants was initially and subsequently
estimated using a Modified Black-Scholes model. The determination of the fair
value of the warrant liability may be subject to change as more current
information becomes available and accordingly the actual results could differ
significantly. Derivative warrant liabilities are classified as non-current
liabilities as their liquidation is not reasonably expected to require the use
of current assets or require the creation of current liabilities.
72
--------------------------------------------------------------------------------
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that feature redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) are classified as temporary equity. At all other
times, Class A ordinary shares are classified as shareholders' equity. Our Class
A ordinary shares feature certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, as of the Initial Public Offering, 34,500,000 Class A ordinary
shares subject to possible redemption are presented as temporary equity, outside
of the shareholders' equity section of our consolidated balance sheets.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of the Class A ordinary shares subject to possible redemption
to equal the redemption value at the end of each reporting period. Effective
with the closing of the Initial Public Offering (including exercise of the
over-allotment option), we recognized the accretion from initial book value to
redemption amount, which resulted in charges against additional paid-in capital
(to the extent available) and accumulated deficit.
Net Income (loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of ordinary shares, which are referred
to as Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of ordinary shares. Net income (loss)
per ordinary share is calculated by dividing the net income (loss) by the
weighted average shares of ordinary shares outstanding for the respective
period.
The calculation of diluted net income per ordinary share does not consider the
effect of the warrants issued in connection with the Initial Public Offering and
the Private Placement to purchase an aggregate of 17,433,333 Class A ordinary
shares in the calculation of diluted income per share, because their exercise is
contingent upon future events, and their inclusion would be anti-dilutive under
the treasury stock method. As a result, diluted net income (loss) per share is
the same as basic net income (loss) per share for the year ended December 31,
2021. Accretion associated with the redeemable Class A ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
73
--------------------------------------------------------------------------------
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of December 31, 2021.
JOBS Act
On April 5, 2012, JOBS Act was signed into law. The JOBS Act contains provisions
that, among other things, relax certain reporting requirements for qualifying
public companies. We qualify as an "emerging growth company" under the JOBS Act
and are allowed to comply with new or revised accounting pronouncements based on
the effective date for private (not publicly traded) companies. We elected 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, our consolidated financial statements may not be comparable to
companies that comply with new or revised accounting pronouncements as of public
company effective dates.
As an "emerging growth company", we are not 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 Public Company
Accounting Oversight Board (United States) 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 chief executive officer'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.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, which simplifies accounting for
convertible instruments by removing major separation models required under
current GAAP. ASU 2020-06 also removes certain settlement conditions that are
required for equity-linked contracts to qualify for the derivative scope
exception, and it simplifies the diluted earnings per share calculation in
certain areas. We adopted ASU 2020-06 on January 1, 2021. We elected the
modified retrospective method for transition. Adoption of the ASU did not have a
material impact on our financial position, results of operations or cash flows.
We do not believe that any other recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.
© Edgar Online, source Glimpses
QUES GAMB 