References to "we", "us", "our" or the "Company" are to SCVX Corp., except where
the context requires otherwise. The following discussion should be read in
conjunction with our financial statements and related notes thereto included
elsewhere in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
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. 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 SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on November 15, 2019. We were 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 (the "Business
Combination"). Although we are not limited to a particular industry or sector
for purposes of consummating a Business Combination, we intend to focus our
search for a target business in the cybersecurity sector. 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 SCVX USA LLC, a Delaware limited
liability company.
The registration statement for our Initial Public Offering was declared
effective on January 23, 2020. On January 28, 2020, we consummated the Initial
Public Offering of 23,000,000 Units, including the issuance of 3,000,000 Units
as a result of the underwriters' exercise of their over-allotment option in
full, at $10.00 per Unit, generating gross proceeds of $230.0 million, and
incurring offering costs of approximately $13.3 million, inclusive of $8.1
million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 6,600,000 Private Placement Warrants to our Sponsor at
a purchase price of $1.00 per Private Placement Warrant, generating gross
proceeds to us of $6.6 million, and incurring offering costs of approximately
$21,000.
Upon the closing of the Initial Public Offering and the Private Placement,
$230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in the
Trust Account, located in the United States, with Continental Stock Transfer &
Trust Company acting as trustee, and was invested only in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by us meeting the
conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the
Investment Company Act, as determined by us, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust
Account as described below. 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.
We have until July 28, 2022 to consummate a Business Combination (the
"Combination Period"). If we are unable to complete a Business Combination
within the Combination Period, 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 (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 outstanding Public Shares, which redemption will completely
extinguish Public Shareholders' rights as shareholders (including the right to
receive further liquidation distributions, if any); 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 the case of clauses (ii) and (iii) to our obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law.
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On January 25, 2022, we held an Extraordinary General Meeting (the
"Extraordinary General Meeting"). At the Extraordinary General Meeting, the
shareholders approved to extend the date, from January 28, 2022 to July 28,
2022, by which we much either (a) consummate a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses or entities or (b) (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 (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 outstanding Public Shares, which redemption will
completely extinguish Public Shareholders' rights as shareholders (including the
right to receive further liquidation distributions, if any); 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 the case of clauses (ii) and (iii) to our obligations under
Cayman Islands law to provide for claims of creditors and the requirements of
other applicable law. In connection with the vote to approve the extension
proposal, the holders of 19,207,987 Class A ordinary shares properly exercised
their right to redeem their shares for cash at a redemption price of
approximately $10.02 per share, for an aggregate redemption amount of
approximately $192.5 million. As such, approximately 84% of the Class A ordinary
shares were redeemed and approximately 16% of the Class A ordinary shares remain
outstanding. After the satisfaction of such redemptions, the balance in our
trust account will be approximately $38.0 million.
Termination of Proposed Business Combination
On May 15, 2021, we entered into an Agreement and Plan of Merger (the "Merger
Agreement"), by and among the Company, Bloom Merger Sub Inc., a Delaware
corporation and a wholly owned direct subsidiary of the Company ("Merger Sub"),
and Bright Machines, Inc., a Delaware corporation ("Bright Machines"). On
December 11, 2021, the Company and Bright Machines entered into a Mutual
Termination of Merger Agreement (the "Termination Agreement") pursuant to which
the parties agreed to mutually terminate the Merger Agreement. Pursuant to the
Termination Agreement, Bright Machines agreed and paid us approximately $71,000,
representing 50% of the fees and expenses incurred in connection with the
preparation and filing of the registration statement.
Results of Operations
Our entire activity had been related to our formation, Initial Public Offering,
which was consummated on January 28, 2020, and since the Initial Public
Offering, our activity has been limited to the search for a prospective Initial
Business Combination, and we will not be generating any operating revenues until
the closing and completion of our Initial Business Combination. 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.
For the year ended December 31, 2021, we had net income of approximately $22.4
million, which consisted of an approximately $25.1 million gain from changes in
fair value of warrant liabilities, approximately $71,000 gain on termination of
the proposed business combination agreement and approximately $15,000 in
interest earned from investments held in the Trust Account, partially offset by
approximately $2.6 million in general and administrative expenses and $120,000
of related party administrative fees.
For the year ended December 31, 2020 we had net loss of approximately $13.1
million, which consisted of approximately $2.9 million in general and
administrative expenses, $120,000 of related party administrative fees,
approximately $9.9 million of change in fair value, and approximately $791,000
of offering costs associated with issuance of the warrants, offset by
approximately $549,000 in interest income from investments held in the Trust
Account.
Going Concern
As of December 31, 2021, we had approximately $146,000 in our operating bank
account and working capital deficit of approximately $2.8 million.
Prior to the completion of the Initial Public Offering, our liquidity needs were
satisfied through a capital contribution of $25,000 from the Sponsor in exchange
for the issuance of the Founder Shares, and a loan of approximately $139,000
from the Sponsor pursuant to a promissory note originally issued on November 19,
2019 (the "Note"). We fully repaid the Note on January 28, 2020. Subsequent to
the consummation of the Initial Public Offering on January 28, 2020, the
liquidity needs have been satisfied through the net proceeds from the
consummation of the Private Placement not held in the Trust Account. In
addition, our officers, directors and initial shareholders may, but are not
obligated to, provide us loans in order to finance transaction costs in
connection with a Business Combination (the "Working Capital Loans"). To date,
there were no amounts outstanding under any Working Capital Loans.
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In connection with our assessment of going concern considerations in accordance
with the Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification ("ASC") Topic 205-40, "Presentation of Financial Statements - Going
Concern," we have determined that the mandatory liquidation and subsequent
dissolution raises 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 July 28, 2022. The
financial statements do not include any adjustment that might be necessary if we
are unable to continue as a going concern.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the balance sheet. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Related Party Transactions
Founder Shares
In November 2019, the Sponsor purchased 5,750,000 Founder Shares for an
aggregate price of $25,000. In December 2019, the Sponsor transferred an
aggregate of 1,092,500 Founder Shares to members of our management team. The
holders of the Founder Shares have agreed to forfeit up to an aggregate of
750,000 Founder Shares, on a pro rata basis, to the extent that the
over-allotment option was not exercised in full by the underwriters. On January
28, 2020, the over-allotment option was exercised in full. Accordingly, no
Founder Shares were forfeited.
The initial shareholders agreed, subject to limited exceptions, not to transfer,
assign or sell any of their Founder Shares until the earlier to occur of: (1)
one year after the completion of the initial Business Combination and (2) the
date on which we consummates a liquidation, merger, share exchange,
reorganization, or other similar transaction after the initial Business
Combination that results in all of our shareholders having the right to exchange
their ordinary shares for cash, securities or other property. Notwithstanding
the foregoing, if the last reported sale price of our Class A ordinary shares
equals or exceeds $12.00 per share (as adjusted for share splits, share
dividends, rights issuances, subdivisions, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the initial Business Combination, the Founder
Shares will be released from the lock-up.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor
purchased an aggregate of 6,600,000 Private Placement Warrants at a price of
$1.00 per Private Placement Warrant, generating gross proceeds of $6.6 million
and incurring offering costs of approximately $21,000. Each whole Private
Placement Warrant is exercisable for one whole Class A ordinary share at a price
of $11.50 per share. Certain proceeds from the Private Placement Warrants were
added to the proceeds from the Initial Public Offering held in the Trust
Account. If we do not complete a Business Combination within the Combination
Period, the Private Placement Warrants will expire worthless. The Private
Placement Warrants will be non-redeemable and exercisable on a cashless basis so
long as they are held by the Sponsor or its permitted transferees.
The Sponsor and our officers and directors agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants until 30 days after the completion of the initial Business Combination.
Related Party Loans
On November 19, 2019, the Sponsor agreed to loan us an aggregate of up to
$300,000 to cover expenses pursuant to the Note. This loan was non-interest
bearing and payable upon the completion of the Initial Public Offering. We
borrowed approximately $139,000 under the Note and fully repaid this amount on
January 28, 2020.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors, may, but are not obligated to, loan us the Working
Capital Loans. If we complete a Business Combination, we would repay the Working
Capital Loans out of the proceeds of the Trust Account released to us.
Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the Trust Account. In the event that a Business Combination does not
close, we 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. Except for the foregoing, the terms of
such Working Capital Loans, if any, have not been determined and no written
agreements exist with respect to such loans. The Working Capital Loans would
either be repaid upon consummation of a Business Combination, without interest,
or, at the lender's discretion, up to $1.5 million of such Working Capital Loans
may be convertible into warrants of the post-Business Combination entity at a
price of $1.00 per warrant. The warrants would be identical to the Private
Placement Warrants. As of December 31, 2021 and 2020, we had no borrowings under
any Working Capital Loans.
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Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants 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
will be entitled to certain demand and "piggyback" registration rights. However,
the registration rights agreement provides that we will not permit any
registration statement filed under the Securities Act to become effective until
the termination of the applicable lock-up period for the securities to be
registered. 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 3,000,000 additional Units to
cover over-allotments at the Initial Public Offering price less the underwriting
discounts and commissions. The underwriters fully exercised their over-allotment
option on January 28, 2020.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$4.6 million in the aggregate, which was paid upon the closing of the Initial
Public Offering. In addition, $0.35 per unit, or approximately $8.1 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.
Administrative Support Agreement
Commencing on the date that our securities were first listed on the NYSE, we
agreed to pay the Sponsor a total of $10,000 per month for office space,
administrative and support services. Upon completion of the Initial Business
Combination or the liquidation, we will cease paying these monthly fees. We
incurred $120,000 in expenses in connection with such services during the years
ended December 31, 2021 and 2020, as reflected in the accompanying consolidated
statements of operations. As of December 31, 2021 and 2020, an aggregate of
$240,000 and $120,000, respectively, in accrued expenses with related party was
outstanding, as reflected in the accompanying consolidated balance sheets.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with U.S. 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 the reported
amounts of income and expenses during the periods reported. Actual results could
materially differ from those estimates. We have identified the following as our
critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to FASB ASC
Topic 480 "Distinguishing Liabilities from Equity" and FASB ASC Topic 815,
"Derivatives and Hedging" ("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.
We account for the warrants issued in connection with its Initial Public
Offering (the "Public Warrants") and Private Placement as derivative warrant
liabilities in accordance with ASC 815. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjust the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our consolidated statements of operations. The fair value of the
Private Placement Warrants has been estimated using Monte-Carlo simulations at
each balance sheet date. The fair value of the Public Warrants was initially
measured using a Monte-Carlo simulation model at each measurement date and
subsequently been measured based on the market price when separately listed and
traded.
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Class A Ordinary Shares Subject to Possible Redemption
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 occurrence of uncertain future events. Accordingly,
all of our Class A ordinary shares subject to possible redemption are presented
at redemption value as temporary equity, outside of the shareholders' equity
section of our consolidated balance sheets.
Under ASC 480, we have elected to recognize changes in the redemption value
immediately as they occur and adjust the carrying value of the security to equal
the redemption value at the end of each reporting period. This method would view
the end of the reporting period as if it were also the redemption date for the
security. Immediately upon the closing of the Initial Public Offering, we
recognized the accretion from initial book value to redemption amount value. The
change in the carrying value of the redeemable Class A ordinary shares 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 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 shares. Net income (loss) per
ordinary share is calculated by dividing the net income (loss) by the weighted
average number of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary share does not
consider the effect of the warrants underlying the Units sold in the Initial
Public Offering and the Private Placement Warrants to purchase 18,100,000 Class
A ordinary shares 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 years ended December 31, 2021 and 2020. Accretion
associated with the redeemable Class A ordinary shares is excluded from earnings
per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
The Company's management does not believe that any recently issued, but not yet
effective, accounting standards updates, if currently adopted, would have a
material effect on the accompanying consolidated financial statements.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2021 and 2020, 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.
JOBS Act
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, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
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 of the
Sarbanes-Oxley Act, (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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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU No.
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):
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity
("ASU 2020-06"), which simplifies accounting for convertible instruments by
removing major separation models required under current GAAP. The ASU 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. Adoption of the ASU did not impact our financial position,
results of operations or cash flows.
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
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