References to the "Company," "our," "us" or "we" refer to FirstMark Horizon
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the audited consolidated financial statements and the notes related thereto
which are included in "Item 8. Consolidated financial statements and
Supplementary Data" of this Annual Report on Form 10-K. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth in the Starry Disclosure Statement. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Cautionary Note Regarding Forward-Looking
Statements and Risk Factor Summary," "Item 1A. Risk Factors" and elsewhere in
this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated in Delaware on August 13, 2020 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"). Our sponsor is FirstMark Horizon
Sponsor LLC, a Delaware limited liability company (the "Sponsor").
The registration statements for our initial public offering ("Initial Public
Offering") became effective on October 5, 2020. On October 8, 2020, we
consummated the Initial Public Offering of 41,400,000 units (the "Units" and,
with respect to the Class A common stock included in the Units being offered,
the "Public Shares"), including 5,400,000 Units to cover over-allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of $414.0
million, and incurring offering costs of approximately $23.3 million, inclusive
of approximately $14.5 million in deferred underwriting commissions.
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Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 6,853,333 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to our Sponsor, generating
proceeds of approximately $10.3 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$414.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was held in a
trust account ("Trust Account") located in the United States with Continental
Stock Transfer & Trust Company acting as trustee, and invested only in U.S.
"government securities," within the meaning of Section 2(a)(16) of the
Investment Company Act, having a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act, which invest only in direct U.S. government treasury
obligations, 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.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or October 8, 2022, (the "Combination
Period") and our stockholders have not amended the Amended and Restated
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.
Proposed Business Combination
On October 6, 2021, we entered into the Merger Agreement with Merger Sub, Starry
and Holdings. Pursuant to the Merger Agreement, and subject to the terms and
conditions contained therein, the business combination will be effected in two
steps: (a) we will merge with and into Holdings in the SPAC Merger at the SPAC
Merger Effective Time, with New Starry surviving as a publicly traded entity,
and becoming the sole owner of Merger Sub; and (b) at least twenty-four (24)
hours, but no more than forty-eight (48) hours, after the SPAC Merger Effective
Time, Merger Sub will merge with and into Starry in the Acquisition Merger, with
Starry surviving the Acquisition Merger as a wholly owned subsidiary of New
Starry. New Starry will have a dual-class share structure with super voting
rights for Starry's co-founder and Chief Executive Officer, Chaitanya Kanojia.
Liquidity and Going Concern
As of December 31, 2021, we had approximately $0.5 million in our operating bank
account, approximately $32,000 of interest income available in the Trust Account
to pay the Company's franchise and income tax obligations and working capital
deficit of approximately $2.6 million. Further, we have incurred and expect to
continue to incur significant costs in pursuit of our acquisition plans.
Our liquidity needs to date have been satisfied through the $25,000 capital
contribution to purchase founder shares by our Sponsor, the loan proceeds under
a promissory note of $167,000 from our Sponsor to cover the Company's offering
costs in connection with the Initial Public Offering, and the net proceeds from
the consummation of the Private Placement not held in the Trust Account. The
balance of the promissory note was fully repaid on October 8, 2020 We intend to
use substantially all of the funds held in the Trust Account, including any
amounts representing interest earned on the Trust Account (less income taxes
payable), to complete our initial business combination. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our initial business combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies. We do believe we will need to raise additional funds in order to
meet the expenditures required for operating our business prior to or in
connection with our initial business combination. In order to finance
transaction costs in connection with a Business Combination, our Sponsor or an
affiliate of our Sponsor, or certain of our officers and directors may, but are
not obligated to, provide us Working Capital Loans. As of December 31, 2021 and
2020, there were no Working Capital Loans outstanding.
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In connection with the Company's assessment of going concern considerations in
accordance with FASB Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that the Company has and will continue to incur
significant costs in pursuit of its acquisition plans which raises 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 the
Company be required to liquidate after October 8, 2022. The consolidated
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 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.
Results of Operations
Our entire activity since inception through December 31, 2021 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 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.
For the year ended December 31, 2021, we had net income of approximately $25.5
million, which consisted of a non-operating gain resulting from the change in
fair value of derivative warrant liabilities of approximately $30.8 million and
interest and dividends on investments held in the Trust Account of approximately
$26,000, partially offset by approximately $5.3 million of operating expenses.
Total operating expenses for the year ended December 31, 2021 were comprised of
approximately $4.9 million of general and administrative costs, $120,000 of
administrative services expenses to related parties, and approximately $198,000
of franchise tax expense.
For the period from August 13, 2020 (inception) through December 31, 2020, we
had a net loss of approximately $19.9 million, which consisted of approximately
$17.3 million loss from changes in fair value of derivative warrant liabilities,
financing costs of approximately $1.3 million, approximately $1.0 million loss
on sale of fair value Private Placement Warrants, approximately $146,000 in
general and administrative expenses, $28,000 in general and administrative
expenses to related parties and approximately $77,000 of franchise tax expense,
which was partially offset by approximately $6,000 of interest earned on cash
equivalents held in the Trust Account.
Related Party Transactions
Founder Shares
On August 18, 2020, our Sponsor purchased 8,625,000 shares of the Company's
Class B common stock, par value $0.0001 per share, (the "Founder Shares") for an
aggregate price of $25,000. The Company transferred an aggregate of 120,000
Founder Shares to certain members of our management team. On October 5, 2020,
the Company effected a 1:1.2 stock split of its Class B common stock, resulting
in our Sponsor holding an aggregate of 10,230,000 Founder Shares and there being
an aggregate of 10,350,000 Founder Shares outstanding. All shares and associated
amounts have been retroactively restated to reflect the stock split. Our Sponsor
agreed to forfeit up to 1,350,000 Founder Shares to the extent that the
over-allotment option is not exercised in full by the underwriters, so that the
Founder Shares would represent 20.0% of the Company's issued and outstanding
shares after the Initial Public Offering. The underwriter exercised its
over-allotment option in full on October 6, 2020; thus, the 1,350,000 Founder
Shares were no longer subject to forfeiture.
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The initial stockholders agreed, subject to limited exceptions, not to transfer,
assign or sell any of the Founder Shares until the earlier to occur of: (A) one
year after the completion of the initial Business Combination; and (B)
subsequent to the initial Business Combination (x) if the last reported sale
price of Class A common stock equals or exceeds $12.00 per share (as adjusted
for stock splits, stock dividends, 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 or (y) the date on which
we complete a liquidation, merger, stock exchange, reorganization or other
similar transaction that results in all of the Public Stockholders having the
right to exchange their shares of Class A common stock for cash, securities or
other property. Any permitted transferees will be subject to the same
restrictions and other agreements of the initial stockholders with respect to
any Founder Shares.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 6,853,333 Private Placement Warrants, at a price of
$1.50 per Private Placement Warrant to the Sponsor, generating proceeds of
approximately $10.3 million.
Each Private Placement Warrant is exercisable for one whole share of Class A
common stock at a price of $11.50 per share. A portion of the proceeds from the
sale of the Private Placement Warrants to the Sponsor were added to the net
proceeds from the Initial Public Offering held in the Trust Account. If the
Company does not complete a Business Combination within the Combination Period,
the Private Placement Warrants will expire worthless. The Private Placement
Warrants will be non-redeemable (except as described below in Note 7 under
"Warrants - Redemption of warrants when the price per share of Class A common
stock equals or exceeds $10.00") so long as they are held by the initial
purchasers or their permitted transferees.
The purchasers of the Private Placement Warrants agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants (except to permitted transferees) until 30 days after the completion of
the initial Business Combination.
Related Party Loans
On August 18, 2020, our Sponsor agreed to loan us an aggregate of up to $300,000
to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). This loan was non-interest bearing and payable
upon the completion of the Initial Public Offering. The Company fully borrowed
$167,000 under the Note. We repaid the Note in full on October 8, 2020.
On December 6, 2021, our Sponsor agreed to loan us an aggregate of up to
$1,500,000 to cover expenses related to the Business Combination pursuant to a
promissory note (the "Second Note"). This loan was non-interest bearing and
payable upon the completion of the Business Combination. We borrowed $1.2
million under the Second Note and the amount is outstanding at December 31,
2021.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans"). If we complete a Business Combination, we
will repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. 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. The Working
Capital Loans would either be repaid upon consummation of a Business Combination
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 $1.50 per warrant. The warrants would be identical to the Private
Placement Warrants. 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. To date, we have no borrowings under the Working Capital
Loans.
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Administrative Services Agreement
We entered into an agreement that provides that, commencing on October 6, 2020,
through the earlier of consummation of the initial Business Combination and the
Company's liquidation, we will pay an affiliate of the Sponsor a total of
$10,000 per month for office space, administrative and support services.
Our 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 the Company's 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 our Sponsor, directors, officers or the Company's or any of their
affiliates.
Contractual Obligations
Registration Rights
The initial stockholders and holders of the Private Placement Warrants are
entitled to registration rights pursuant to a registration rights agreement. The
initial stockholders and holders of the Private Placement Warrants will be
entitled to make up to three demands, excluding short form registration demands,
that we register such securities for sale under the Securities Act. In addition,
these holders will have "piggy-back" registration rights to include their
securities in other registration statements filed by us. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The underwriter was entitled to an underwriting discount of $0.20 per share, or
approximately $8.28 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per share, or approximately $14.5
million in the aggregate will be payable to the underwriter for deferred
underwriting commissions. The deferred fee will become payable to the
underwriter 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 and Estimates
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of 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 investments in
money market funds that invest in U.S. government securities, or a combination
thereof. Our investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these investments are included in interest earned from
investments held in Trust Account in the consolidated statements of operations.
The estimated fair values of investments held in the Trust Account are
determined using available market information, other than for investments in
open-ended money market funds with published daily net asset values ("NAV"), in
which case the Company uses NAV as a practical expedient to fair value. The NAV
on these investments is typically held constant at $1.00 per unit.
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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." Shares of Class A common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
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,
shares of Class A common stock are classified as stockholders' equity. Our Class
A common stock features certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, since the Initial Public Offering, a total of 41,400,000 shares of
Class A common stock subject to possible redemption are presented at redemption
value as temporary equity, outside of the stockholders' equity section of our
consolidated balance sheets.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of the Class A common stock 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, 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 Loss Per Common 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 common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average shares of
common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock 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 20,653,333 shares of Class
A common stock in the calculation of diluted income (loss) 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 and for the period from August 13, 2020 (inception)
through December 31, 2020. Accretion associated with the redeemable Class A
common stock is excluded from earnings per share as the redemption value
approximates fair value.
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 ASC 480
and ASC 815-15. 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 issued 13,800,000 warrants to purchase Class A common stock to investors in
our Initial Public Offering and issued 6,853,333 Private Placement Warrants. All
of our outstanding warrants are recognized as derivative liabilities in
accordance with ASC 815-40. 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 warrants issued in
connection with the Initial Public Offering and Private Placement were initially
and subsequently measured at fair value using a Binomial Lattice simulation
model at each measurement date. The fair value of Warrants issued in connection
with our Initial Public Offering have subsequently been measured based on the
listed market price of such warrants. 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.
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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 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 consolidated 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, (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 consolidated 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.
Recent Accounting Pronouncements
In August 2020, the 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, 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 also simplifies the diluted earnings per share calculation in
certain areas. We early adopted the ASU 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 consolidated financial statements.
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