CAPITOL INVESTMENT CORP. V
CONDENSED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
86,962
|
|
|
$
|
632,387
|
|
Prepaid expenses
|
|
|
666,008
|
|
|
|
695,350
|
|
Total Current Assets
|
|
|
752,970
|
|
|
|
1,327,737
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
345,006,438
|
|
|
|
345,012,580
|
|
TOTAL ASSETS
|
|
$
|
345,759,408
|
|
|
$
|
346,340,317
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, TEMPORARY EQUITY AND PERMANENT EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
228,753
|
|
|
$
|
115,461
|
|
Promissory note – related party
|
|
|
400,000
|
|
|
|
—
|
|
Total Current Liabilities
|
|
|
628,753
|
|
|
|
115,461
|
|
|
|
|
|
|
|
|
|
|
Deferred underwriting payable
|
|
|
12,075,000
|
|
|
|
12,075,000
|
|
Warrant liabilities
|
|
|
23,400,000
|
|
|
|
30,680,000
|
|
Total Liabilities
|
|
|
36,103,753
|
|
|
|
42,870,461
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary Equity
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption 30,465,565 shares at redemption value as of March 31, 2021 and 29,846,985 shares at redemption value as of December 31, 2020
|
|
|
304,655,650
|
|
|
|
298,469,850
|
|
|
|
|
|
|
|
|
|
|
Permanent Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A common stock, $0.0001 par value 400,000,000 shares authorized; 4,034,435 issued and outstanding (excluding 30,465,565 shares subject to possible redemption) as of March 31, 2021 and 4,653,015 issued and outstanding (excluding 29,846,985 shares subject to possible redemption) as of December 31, 2020
|
|
|
403
|
|
|
|
465
|
|
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020
|
|
|
863
|
|
|
|
863
|
|
Additional paid-in capital
|
|
|
7,469,090
|
|
|
|
13,654,828
|
|
Accumulated deficit
|
|
|
(2,470,351
|
)
|
|
|
(8,656,150
|
)
|
Total Permanent Equity
|
|
|
5,000,005
|
|
|
|
5,000,006
|
|
TOTAL LIABILITIES, TEMPORARY EQUITY AND PERMANENT EQUITY
|
|
$
|
345,759,408
|
|
|
$
|
346,340,317
|
|
The accompanying notes are an integral part
of the financial statements.
CAPITOL INVESTMENT CORP. V
CONDENSED STATEMENTS OF OPERATIONS
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|
Three Months Ended
March 31,
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|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Formation and operating costs
|
|
$
|
1,139,720
|
|
|
$
|
20
|
|
Loss from operations
|
|
|
(1,139,720
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
47,359
|
|
|
|
—
|
|
Change in fair value of warrant liabilities
|
|
|
7,280,000
|
|
|
|
—
|
|
Unrealized loss on marketable securities held in Trust Account
|
|
|
(1,840
|
)
|
|
|
—
|
|
Other income, net
|
|
|
7,325,519
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,185,799
|
|
|
$
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption
|
|
|
29,846,985
|
|
|
|
—
|
|
Basic and diluted net loss per share, Class A common stock subject to possible redemption
|
|
$
|
0.00
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares, non-redeemable common stock
|
|
|
13,278,015
|
|
|
|
7,500,000
|
|
Basic and diluted net loss per share, non-redeemable common stock(1)
|
|
$
|
0.47
|
|
|
$
|
(0.00
|
)
|
|
(1)
|
At March 31, 2021, excludes an aggregate of 30,465,565 shares subject to possible redemption.
|
The accompanying notes are an integral part
of the financial statements.
CAPITOL INVESTMENT CORP. V
CONDENSED STATEMENTS OF CHANGES IN TEMPORARY
EQUITY AND PERMANENT EQUITY
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|
Class A
|
|
|
Class B
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Common Stock (1)
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Permanent
|
|
|
|
Temporary Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
Balance – December 31, 2020
|
|
|
4,653,015
|
|
|
$
|
465
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
13,654,828
|
|
|
$
|
(8,656,150
|
)
|
|
$
|
5,000,006
|
|
|
|
|
29,846,985
|
|
|
$
|
298,469,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of Class A common stock subject to possible redemption
|
|
|
(618,580
|
)
|
|
|
(62
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,185,738
|
)
|
|
|
—
|
|
|
|
(6,185,800
|
)
|
|
|
|
618,580
|
|
|
|
6,185,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,185,799
|
|
|
|
6,185,799
|
|
|
|
|
—
|
|
|
|
—
|
|
Balance – March 31, 2021
|
|
|
4,034,435
|
|
|
$
|
403
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
7,469,090
|
|
|
$
|
(2,470,351
|
)
|
|
$
|
5,000,005
|
|
|
|
|
30,465,565
|
|
|
$
|
304,655,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Common Stock (1)
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Permanent
|
|
|
|
Temporary Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
Balance – December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
8,625,000
|
|
|
|
863
|
|
|
$
|
24,137
|
|
|
|
(11,142
|
)
|
|
|
13,858
|
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20
|
)
|
|
|
(20
|
)
|
|
|
|
—
|
|
|
|
—
|
|
Balance – March 31, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
24,137
|
|
|
$
|
(11,162
|
)
|
|
$
|
13,838
|
|
|
|
|
—
|
|
|
$
|
—
|
|
|
(1)
|
As of December 31, 2019
and as of March 31, 2020, this number included an aggregate of up to 1,125,000 shares that were subject to forfeiture if the over-allotment
option was not exercised by the underwriters in full. The over-allotment option was exercised by the underwriters in full.
|
The accompanying notes
are an integral part of the financial statements.
CAPITOL INVESTMENT CORP. V
CONDENSED STATEMENTS OF CASH FLOWS
|
|
Three Months Ended
|
|
|
|
March
31,
2021
|
|
|
March
31,
2020
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,185,799
|
|
|
$
|
(20
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(47,359
|
)
|
|
|
—
|
|
Change in fair value of warrant liabilities
|
|
|
(7,280,000
|
)
|
|
|
—
|
|
Unrealized loss on marketable securities held in Trust Account
|
|
|
1,840
|
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
29,342
|
|
|
|
—
|
|
Accounts payable and accrued expenses
|
|
|
113,292
|
|
|
|
128
|
|
Net cash (used in) provided by operating activities
|
|
|
(997,086
|
)
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Cash withdrawn from Trust Account for franchise taxes
|
|
|
51,661
|
|
|
|
—
|
|
Net cash provided by investing activities
|
|
|
51,661
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from promissory notes – related party
|
|
|
400,000
|
|
|
|
50,000
|
|
Payment of offering costs
|
|
|
—
|
|
|
|
(128
|
)
|
Net cash provided by financing activities
|
|
|
400,000
|
|
|
|
49,872
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(545,425
|
)
|
|
|
49,980
|
|
Cash – Beginning
|
|
|
632,387
|
|
|
|
26,794
|
|
Cash – Ending
|
|
$
|
86,962
|
|
|
$
|
76,774
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Deferred underwriting fee payable
|
|
$
|
12,075,000
|
|
|
$
|
—
|
|
Change in value of Class A common stock subject to possible redemption
|
|
|
6,185,800
|
|
|
|
|
|
The accompanying notes are an integral part
of the financial statements.
NOTE 1 — DESCRIPTION OF ORGANIZATION
AND BUSINESS OPERATIONS
Capitol Investment
Corp. V (the “Company”) was originally incorporated in the Cayman Islands on May 1, 2017 as a blank check
company. In May 2019, the Company was redomesticated from the Cayman Islands to the state of Delaware. The Company’s objective
is to acquire, through a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar
business combination, one or more businesses or entities (a “Business Combination”).
As of March 31, 2021,
the Company had not commenced any operations. All activity through March 31, 2021 relates to the Company’s formation and the initial
public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating
revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the
form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement
for the Company’s Initial Public Offering was declared effective on December 1, 2020. On December 4, 2020, the Company consummated
the Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the shares of Class A common
stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriters of their
over-allotment option in the amount of 4,500,000 Units, at $10.00 per Unit, generating gross proceeds of $345,000,000, which is described
in Note 3.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the private placement of 5,833,333 warrants (each, a “Private Placement
Warrant” and, collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant
in a private placement to Capitol Acquisition Management V LLC, which is controlled by Mark D. Ein, the Company’s Chief Executive
officer and chairman of the board of directors, and Capitol Acquisition Founder V LLC, which is controlled by L. Dyson Dryden, the President
and Chief Financial Officer and a member of the board of directors (the “Sponsors”), and the independent directors,
generating gross proceeds of $8,750,000, which is described in Note 4.
Transaction costs amounted
to $19,469,085, consisting of $6,900,000 of underwriting fees, $12,075,000 of deferred underwriting fees and $494,085 of other offering
costs. Of the $19,469,085 of transaction costs, $873,424 were allocable to warrant liabilities and expensed.
Following the closing of
the Initial Public Offering on December 4, 2020, an amount of $345,000,000 ($10.00 per Unit) from the net proceeds of the sale of the
Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust
Account”), and may 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 180 days
or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act until the
earlier of (i) the consummation of the Company’s first Business Combination and (ii) the Company’s failure to consummate
a Business Combination within the prescribed time.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the 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 the Company will be able to complete a Business Combination successfully.
Placing funds in the Trust
Account may not protect those funds from third-party claims against the Company. Although the Company will seek to have all vendors, service
providers, prospective target businesses or other entities it engages execute agreements with the Company waiving any claim of any kind
in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The Sponsors have
agreed that they will be liable jointly and severally to the Company if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent,
confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below
the lesser of (i) $10.00 per Public Share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation
of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided
that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all
rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s
indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the “Securities Act”). However, there can be no assurance that they will be able to satisfy those
obligations should they arise. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting
due diligence on prospective acquisitions and continuing general and administrative expenses. In addition, interest income on the funds
held in the Trust Account can be released to the Company to pay the Company’s tax obligations.
In connection with any proposed
initial Business Combination, the Company will either (1) seek stockholder approval of such initial Business Combination at a meeting
called for such purpose or (2) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a
tender offer (and thereby avoid the need for a stockholder vote), in each case where stockholders may seek to convert their Public Shares
into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid.
If the Company determines to engage in a tender offer, such tender offer will be structured so that each stockholder may tender any or
all of his, her or its Public Shares rather than some pro rata portion of his, her or its shares. In that case, the Company will
file tender offer documents with the U.S. Securities and Exchange Commission (the “SEC”) which will contain substantially
the same financial and other information about the initial Business Combination as is required under the SEC’s proxy rules. The
decision as to whether the Company will seek stockholder approval of a proposed Business Combination or will allow stockholders to sell
their shares to it in a tender offer will be made by the Company based on a variety of factors such as the timing of the transaction or
whether the terms of the transaction would otherwise require it to seek stockholder approval. Notwithstanding the foregoing, if the Company
seeks stockholder approval of an initial Business Combination, a public stockholder, together with any affiliate of his or any other person
with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) will be restricted from seeking redemption rights with respect to 20% or more of the Public Shares without the Company’s
prior written consent. The Company will proceed with a Business Combination only if it has net tangible assets of at least $5,000,001
immediately prior to or upon consummation of the Business Combination and, if the Company seeks stockholder approval, a majority of the
outstanding common stock of the Company voted are voted in favor of the Business Combination. In connection with any stockholder vote
required to approve any Business Combination, the Sponsors and any other initial stockholders of the Company (collectively, the “Initial
Stockholders”) will agree (i) to vote any of their respective shares in favor of the initial Business Combination and (ii) not
to convert any of their respective shares (or sell their shares to the Company in any related tender offer). Holders of warrants sold
as part of the Units will not be entitled to vote on the proposed Business Combination and will have no conversion or liquidation rights
with respect to their common stock underlying such warrants.
The Company’s certificate
of incorporation was amended prior to the Initial Public Offering to provide that the Company will continue in existence only until December
4, 2022 or during any extended time that the Company has to consummate a Business Combination beyond December 4, 2022 as a result of a
stockholder vote to amend its amended and restated certificate of incorporation. If the Company has not completed a Business Combination
by such date, the Company will (i) cease all operations except for the purpose of winding down, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest not previously released to the Company
but net of taxes payable and up to $100,000 of interest to pay dissolution expenses, divided by the number of then-outstanding Public
Shares, which redemption will completely extinguish the rights of public stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the Company’s remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case
of (ii) and (iii) above) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. In the event of a liquidation, the Public Stockholders will be entitled to receive a full pro rata interest
in the Trust Account (initially anticipated to be approximately $10.00 per share, plus any pro rata interest earned on the Trust
Fund not previously released to the Company net of taxes payable).
On March 2, 2021, Capitol
announced that it entered into a definitive merger agreement for its initial business combination with Doma Holdings, Inc., or Doma, a
leading force for disruptive change in the residential real estate industry. Doma uses machine intelligence to replace large portions
of the antiquated residential real estate closing process with instant technology solutions. Doma’s machine intelligence algorithms
are being trained and optimized on 30 years of historical anonymized closing transaction data, allowing Doma to make underwriting decisions
in less than a minute and significantly reduce the time, effort and cost of the entire process. In connection with the transaction, Capitol
entered into various subscription agreements with certain third-party investors (the “PIPE Investors”) pursuant to which the
PIPE Investors have committed to make private investments in public equity in the form of Class A common stock in the aggregate amount
of $300 million, for which the PIPE Investors will receive an aggregate of 30 million shares of common stock in the combined company.
It is expected that Mark D. Ein will join the combined company’s board of directors upon completion of the transaction.
Liquidity
As of March 31, 2021, the
Company had $86,962 in its operating bank accounts, $345,006,438 in marketable securities held in the Trust Account to be used for a Business
Combination or to repurchase or redeem stock in connection therewith, and working capital of $174,217, which excludes franchise and income
taxes payable of $50,000, as such amounts may be paid from interest earned on the Trust Account. For the quarter ended March 31, 2021,
interest income which is available to pay the Company’s tax obligations amounted to approximately $45,160. Through March 31, 2021,
the Company had withdrawn approximately $51,700 from the Trust Account to pay franchise taxes.
In February 2021, the Sponsors
and the independent directors collectively committed to provide the Company an aggregate of $970,000 in loans. In May 2021, the Sponsors
and the independent directors collectively committed to provide the Company an additional $756,000 in loans. The loans, if issued, as
well as any future loans that may be made by the Company’s officers and directors (or their affiliates), will be evidenced by notes
and would either be repaid upon the consummation of a Business Combination or up to $2,000,000 of the notes may be converted into warrants
at a price of $1.50 per warrant at the option of the lender. As of March 31, 2021, the Company had an outstanding balance of $400,000
under such promissory notes. On April 20, 2021, the Company issued an additional $300,000 under such promissory notes. None of the notes
had been converted to warrants.
The Company may raise additional
capital through loans or additional investments from the Sponsors or its stockholders, officers, directors, or third parties. The Company’s
officers and directors and the Sponsors may, but are not obligated to (except as described above), loan the Company funds, from time to
time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
Based on the foregoing, the
Company believes it will have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or May 17,
2022.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited
condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the
SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of
the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited
condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended
December 31, 2020 as filed with the SEC on May 11, 2021, which contains the audited financial statements and notes thereto. The financial
information as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on
Form 10-K/A for the year ended December 31, 2020. The interim results for the three months ended March 31, 2021 are not necessarily indicative
of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company and Smaller Reporting
Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply
with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging
growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
Additionally, the Company
is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
The Company will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of its Class A
common stock held by non-affiliates exceeds $250 million as of the end of that fiscal year’s second fiscal quarter, or (2) the
Company’s annual revenues exceeded $100 million during such completed fiscal year and the market value of its Class A common
stock held by non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash and Cash Equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not
have any cash equivalents as of March 31, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At March 31, 2021 and December
31, 2020, the assets in the Trust Account were held in cash and U.S. Treasury Bills.
Warrant Liabilities
The Company evaluated the
Public Warrants and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 3, Note 4, Note 7 and
Note 8) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded
that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for
as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as
derivative liabilities on the condensed balance sheet and measured at fair value at inception (on the date of the IPO) and at each reporting
date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the consolidated statement
of operations in the period of change.
Class A Common Stock Subject to Possible
Redemption
The Company accounts for
its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption
rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented
at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.
Income Taxes
The Company follows the asset
and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
FASB ASC 740 prescribes a
recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021 and December 31, 2020.
The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation
from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
Net income (loss)
per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at March 31, 2021
and December 31, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation
of basic net income (loss) per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account
earnings. The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase
17,333,333 shares of common stock in the calculation of diluted loss per share, since the exercise of the warrants into shares of common
stock is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. As a result, diluted
net income (loss) per common share is the same as basic net income (loss) per common share for the period presented.
The Company’s
condensed statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption
in a manner similar to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted, for common
stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held
by the Trust Account by the weighted average number of common stock subject to possible redemption outstanding since the original issuance.
Net income (loss)
per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable
securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock
outstanding for the period. Non-redeemable common stock includes Founder Shares and non-redeemable Class A common stock as these shares
do not have any redemption features. Non-redeemable common stocks participate in the income or loss on marketable securities based on
non-redeemable shares’ proportionate interest.
The following table
reflects the calculation of basic and diluted net income (loss) per common stock (in dollars, except per share amounts):
|
|
Three Months Ended
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
Class A common stock subject to possible redemption
|
|
|
|
|
|
|
Numerator: Earnings allocable to Class A common stock subject to possible redemption
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account, net of franchise taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income allocable to Class A common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
—
|
|
Denominator: Weighted Average Class A common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
29,846,985
|
|
|
|
—
|
|
Basic and diluted net income per share
|
|
$
|
0.00
|
|
|
$
|
—
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to non-redeemable common stock
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,185,799
|
|
|
$
|
(20
|
)
|
Less: Net income allocable to Class A common stock subject to possible redemption
|
|
|
—
|
|
|
|
—
|
|
Non-redeemable net income (loss)
|
|
$
|
6,185,799
|
|
|
$
|
(20
|
)
|
Denominator: Weighted Average Non-redeemable common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
13,278,015
|
|
|
|
7,500,000
|
|
Basic and diluted net income (loss) per share, Non-redeemable common stock
|
|
$
|
0.47
|
|
|
$
|
(0.00
|
)
|
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management
believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The Company follows the guidance
in ASC Topic 820, “Fair Value Measurement”, for its financial assets and liabilities that are re-measured and reported at
fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least
annually.
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
See Note 8 for additional
information on assets and liabilities measured at fair value.
Recent Accounting Standards
Management does not believe
that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold 34,500,000 Units, which included a full exercise by the underwriters of their over-allotment option in the
amount of 4,500,000 Units, at a purchase price of $10.00 per unit. Each unit consists of one share of Class A common stock in the
Company and one third of one redeemable warrant (the “Warrants”). Each whole Warrant entitles the holder to purchase
one share of Class A common stock at a price of $11.50. In addition, if (x) the Company issues additional shares of Class A
common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination
at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective
issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Initial Stockholders
or their respective affiliates, without taking into account any founder shares held by the Initial Stockholders or such affiliates, as
applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances
represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination
on the date of the consummation of the initial Business Combination (net of redemptions) and (z) the volume-weighted average trading
price of the Class A common stock during the ten-trading day period starting on the trading day after the day on which the Company
consummated the initial business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise
price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued
Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the
Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be
equal to the higher of the Market Value and the Newly Issued Price.
The Warrants are exercisable
commencing on the later of 30 days after the Company’s completion of a Business Combination and 12 months from the closing
of the Initial Public Offering and expire five years from the completion of a Business Combination. Only whole Warrants are exercisable.
No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade.
Redemption of Warrants
When the Price Per Share of Class A Common Stock Equals or Exceeds $18.00. Once the Warrants become exercisable, the Company
may call the Warrants for redemption:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at a price of $0.01 per Warrant;
|
|
|
|
|
●
|
upon not less than 30 days’ prior written notice of redemption to each Warrant holder; and
|
|
|
|
|
●
|
if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) for any 20 trading days within a 30-trading day period ending three business days before the Company sends to the notice of redemption to the Warrant holders.
|
The Company will not redeem
the Warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A
common stock issuable upon a cashless exercise of the Warrants is then effective and a current prospectus relating to those shares of
Class A common stock is available throughout the 30-day redemption period, except if the Warrants may be exercised on a cashless
basis and such cashless exercise is exempt from registration under the Securities Act.
Redemption of Warrants
When the Price Per Share of Class A Common Stock Equals or Exceeds $10.00. Once the Warrants become exercisable, the
Company may redeem the outstanding Warrants:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their Warrants prior to redemption and receive a number of shares based on the redemption date and the “fair market value” of Class A common stock except as otherwise described below;
|
|
|
|
|
●
|
if, and only if, the last reported sale price of Class A common stock equals or exceeds $10.00 per share (as adjusted per stock splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) on the trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders; and
|
|
|
|
|
●
|
if, and only if, the last reported sale price of Class A common stock
is less than $18.00 per share (as adjusted for stock for stock splits, stock dividends, reorganizations, recapitalizations and the like
and for certain issuances of Class A common stock and equity-linked securities), the Private Placement Warrants are also concurrently
called for redemption on the same terms as the outstanding Warrants, as described above.
|
The “fair market value”
of Class A common stock will mean the volume-weighted average price of the Class A common stock for the ten trading days immediately
following the date on which the notice of redemption is sent to the holders of Warrants. In no event will the Warrants be exercisable
in connection with this redemption feature for more than 0.361 shares of Class A common stock per Warrant (subject to adjustment).
In no event will the Company
be required to net cash settle any warrant. If the Company is unable to complete a Business Combination and the Company liquidates the
funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they
receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly,
the Warrants may expire worthless.
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing
of the Initial Public Offering, the Company’s Sponsors and independent directors purchased 5,833,333 Private Placement Warrants
at $1.50 per warrant (for an aggregate purchase price of $8,750,000) from the Company. $6,900,000 of the proceeds received from the Private
Placement Warrants purchases were placed in the Trust Account. The Private Placement Warrants are identical to the Warrants included in
the Units sold in the Initial Public Offering, except that the Private Placement Warrants: (i) will not be redeemable by the Company
and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted
transferees. Additionally, the holders of the Private Placement Warrants have agreed not to transfer, assign or sell any of the Private
Placement Warrants, including the shares of common stock issuable upon exercise of the Private Placement Warrants (except to certain permitted
transferees), until 30 days after the completion of the Company’s initial Business Combination.
NOTE 5 — RELATED PARTY TRANSACTIONS
Administrative Services Agreement
The Company presently
occupies office space provided by two affiliates of the Company’s executive officers. Such affiliates have agreed that, until the
Company consummates a Business Combination, they will make such office space, as well as certain office and secretarial services, available
to the Company, as may be required by the Company from time to time. The Company agreed, commencing on December 1, 2020, to pay such affiliates
an aggregate of up to $20,000 per month for such services. For the quarter ended March 31, 2020, the Company incurred $60,000 in fees
for these services, of which is included in accounts payable and accrued expenses in the accompanying condensed balance sheets.
Promissory Notes — Related Party
The Company issued an aggregate
of $150,000 principal amount unsecured promissory notes to the Sponsors on October 20, 2017, as amended on February 21, 2020. On February
21, 2020, the Company issued an aggregate of $50,000 principal amount unsecured promissory notes to the Sponsors, of which $50,000 was
funded on such date. On November 3, 2020, the Company amended and restated the October 20, 2017 promissory notes and the February
21, 2020 promissory notes, and issued an additional aggregate of $50,000 principal amount unsecured promissory notes to the Sponsors,
for a total of $250,000 aggregate principal amount of promissory notes (the “Promissory Notes”). The Promissory
Notes were non-interest bearing and payable on the earliest to occur of (i) October 20, 2021, (ii) the consummation of the Initial
Public Offering and (iii) the abandonment of the Initial Public Offering. The outstanding balance under the Promissory Notes of $250,000
was repaid at the closing of the Initial Public Offering on December 4, 2020.
In February 2021, the Sponsors
and the independent directors collectively committed to provide the Company an aggregate of $970,000 in loans. In May 2021, the Sponsors
and the independent directors collectively committed to provide the Company an additional $756,000 in loans. The loans, if issued, as
well as any future loans that may be made by the Company’s officers and directors (or their affiliates), will be evidenced by notes
and would either be repaid upon the consummation of a Business Combination or up to $2,000,000 of the notes may be converted into warrants
at a price of $1.50 per warrant at the option of the lender. As of March 31, 2021, the Company had an outstanding balance of $400,000
under such promissory notes. On April 20, 2021, the company issued an additional $300,000 under such promissory notes. None of the notes
had been converted to warrants.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration
rights agreement entered into on December 1, 2020, the holders of the shares of Class B common stock, Private Placement Warrants
and any warrants that may be issued upon conversion of working capital loans (and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans) will be entitled
to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that
the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to the completion of an initial Business Combination and rights to require the Company to
register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain
liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
Contingent Fee Arrangement
The Company has entered into
a fee arrangement with a service provider pursuant to which certain fees incurred by the Company will be deferred and become payable only
if the Company consummates a Business Combination. If a Business Combination does not occur, the Company will not be required to pay these
contingent fees. As of March 31, 2021, the amount of these contingent fees was approximately $1,708,000. There can be no assurances that
the Company will complete a Business Combination.
Related Party Loans
In order to fund working
capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Company’s Sponsors,
officers and directors or their respective affiliates may, but are not obligated to, loan the Company funds as may be required on a non-interest
bearing basis. If the Company completes its initial Business Combination, the Company would repay such loaned amounts. In the event that
the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to
repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $2,000,000 of such loans may
be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender. Such
warrants would be identical to the Private Placement Warrants.
Underwriting Agreement
The underwriters are entitled
to a deferred underwriting discount of 3.5% of the gross proceeds of the Initial Public Offering or an aggregate of $12,075,000, which
were placed in the Trust Account.
Consulting Agreements
In December 2020, subsequent
to the consummation of the Initial Public Offering, the Company entered into three consulting arrangements for services to help identify
and introduce the Company to potential targets and provide assistance with due diligence, deal structuring, documentation and obtaining
shareholder approval for an initial Business Combination. These agreements provide for an aggregate monthly fee of $62,500 and aggregate
success fees of $1,100,000 payable upon the consummation of an initial Business Combination. The accrual amount under these agreements
was zero and approximately $38,300 as of March 31, 2021 and December 31, 2020, respectively.
NOTE 7 — PERMANENT EQUITY AND TEMPORARY
EQUITY
Preferred Stock
The Company is
authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences
as may be determined from time to time by the Company’s board of directors. As of March 31, 2021, and December 31, 2020, there
were no shares of preferred stock issued or outstanding.
Common Stock
The Company is
authorized to issue 400,000,000 shares of Class A common stock and 50,000,000 shares of Class B common stock, both with a par
value of $0.0001 per share.
In connection with
the organization of the Company, in May 2017, a total of 8,625,000 shares of Class B common stock were sold to the Sponsors
at a price of approximately $0.003 per share, or $25,000, after giving retroactive effect to the dividend of approximately 0.17 shares
for each share of Class B common stock outstanding in October 2017, the dividend of one share for each share of Class B common
stock outstanding effectuated by the Company in May 2019. On November 3, 2020, the Company effected an approximately 0.8571-for-1 reverse
stock split with respect to its Class B common stock, resulting in the Sponsors holding an aggregate of 8,625,000 founder shares. All
share and per share amounts have been retroactively restated to reflect the stock dividends and the reverse stock split. This number included
an aggregate of 1,125,000 shares of Class B common stock that are subject to forfeiture if the over-allotment option is not exercised
by the underwriters. As a result of the underwriters’ election to fully exercise their over-allotment option, a total of 1,125,000
founder shares are no longer subject to forfeiture.
The holders of
the founder shares have agreed that the founder shares will not be transferred, assigned or sold until one year after the date of the
consummation of an initial Business Combination or earlier if, subsequent to an initial Business Combination, (i) the last sales
price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing at least 150 days after
the initial Business Combination or (ii) the Company consummates a subsequent liquidation, merger, stock exchange or other similar
transaction which results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities
or other property.
The Class B common stock
will automatically convert into Class A common stock on the first business day following the consummation of the Company’s
initial Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common
stock, or equity-linked securities convertible or exercisable for shares of Class A common stock, are issued or deemed issued in
excess of the amounts offered in the Initial Public Offering and related to the closing of an initial Business Combination, the ratio
at which the Class B common stock will convert into Class A common stock will be adjusted so that the number of shares of Class A
common stock issuable upon conversion of such Class B common stock will equal, in the aggregate, 20% of the sum of the shares of
common stock outstanding upon the completion of the Initial Public Offering plus the number of shares of Class A common stock and
equity-linked securities issued or deemed issued in connection with the initial Business Combination (net of redemptions), excluding any
shares of Class A common stock or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination
and any Private Placement Warrants.
As of March 31, 2021, and
December 31, 2020, there were 4,034,435 shares and 4,653,015 shares of Class A common stock issued and outstanding, respectively,
excluding 30,465,565 shares and 29,846,985 shares of Class A common stock subject to possible redemption, respectively. As of March
31, 2021, and December 31, 2020, there was 8,625,000 shares of Class B common stock issued and outstanding.
NOTE 8 — FAIR VALUE MEASUREMENTS
The following tables
present information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2021 and at December
31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
March 31,
2021
|
|
Assets:
|
|
|
|
|
|
Marketable securities held in Trust Account (1)
|
|
1
|
|
$
|
345,006,438
|
|
Liabilities:
|
|
|
|
|
|
|
Private Placement Warrants (2)
|
|
2
|
|
|
7,875,000
|
|
Public Warrants (2)
|
|
1
|
|
|
15,525,000
|
|
Description
|
|
Level
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
Marketable securities held in Trust Account (1)
|
|
1
|
|
$
|
345,012,580
|
|
Liabilities:
|
|
|
|
|
|
|
Private Placement Warrants (2)
|
|
3
|
|
|
10,325,000
|
|
Public Warrants (2)
|
|
3
|
|
|
20,355,000
|
|
|
(1)
|
The fair value of the marketable securities held in Trust account
approximates the carrying amount primarily due to their short-term nature.
|
|
(2)
|
Measured at fair value on a recurring basis.
|
Warrants
The Warrants are accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed balance sheet. The warrant
liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair
value of warrant liabilities in the condensed statement of operations.
Subsequent Measurement
The Warrants are measured
at fair value on a recurring basis and were initially measured at fair value as Level 3 financial
liabilities using a Monte Carlo simulation model through December 31, 2020. The subsequent measurement of the Public Warrants
as of March 31, 2020 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker CAP.WS.
As the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result
in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value
of each Private Placement Warrant is equivalent to that of each Public Warrant, with an insignificant adjustment for short-term marketability
restrictions. As such, the Private Placement Warrants are classified as Level 2.
As of March 31, 2021, and
December 31, 2020, the aggregate fair values of the Private Placement Warrants were $7.9 million and $10.3 million, respectively, and
Public Warrants were $15.5 million and $20.4 million, respectively.
The following table presents the changes in the
fair value of warrant liabilities:
|
|
Private Placement
|
|
|
Public
|
|
|
Warrant Liabilities
|
|
Fair value as of December 31, 2020
|
|
$
|
10,325,000
|
|
|
$
|
20,355,000
|
|
|
$
|
30,680,000
|
|
Change in valuation inputs or other assumptions(1)(2)
|
|
|
(2,450,000
|
)
|
|
|
(4,830,000
|
)
|
|
|
(7,280,000
|
)
|
Fair value as of March 31, 2021
|
|
$
|
7,875,000
|
|
|
$
|
15,525,000
|
|
|
$
|
23,400,000
|
|
(1)
|
Changes in valuation inputs or other assumptions are recognized in change in fair value of warrant liabilities in the condensed statement of operations.
|
(2)
|
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 measurement and the estimated fair value of the Private Placement Warrants transferred from a Level 3 measurement to a Level 2 measurement during the three months ended March 31, 2021 when the Public Warrants were separately listed and traded.
|
NOTE 9 — SUBSEQUENT EVENTS
On April 20, 2021, the Company
issued an aggregate of $300,000 of convertible promissory notes pursuant to the existing commitment letters made by Capitol Acquisition
Management V LLC, an affiliate of Mark D. Ein, Capitol Acquisition Founder V LLC, an affiliate of L. Dyson Dryden, and Lawrence Calcano,
Richard C. Donaldson, Raul J. Fernandez and Thomas S. Smith, Jr., each a member of the board of directors of the Company, to evidence
loans in such amount made by the lenders.
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon
this review, other than as described in these financial statements, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the financial statements.
Item 2. Management’s Discussion and Analysis
References in this report
(the “Quarterly Report”) to “we,” “us” or the “Company” refer to Capitol Investment Corp.
V. 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 the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Forward-Looking Statements
All statements other than
statements of historical fact included in this Form 10-Q including, without limitation, statements under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans
and objectives of management for future operations, are forward looking statements. When used in this Form 10-Q, words such “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our
management, identify forward looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited
to, those described in our other SEC filings. References to “we”, “us”, “our” or the “Company”
are to Capitol Investment Corp. V, except where the context requires otherwise. Such forward looking statements are based on the beliefs
of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that
results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause
them to differ materially. The cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to
all forward-looking statements whenever they appear herein. For these statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by
the forward looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission. All
subsequent written or oral forward looking statements attributable to us or persons acting on our behalf are qualified in their entirety
by this paragraph.
Overview
We are a blank check company
formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses or entities. We are not limited to any particular industry or geographic location in selecting a target business
with which to engage in a business combination.
We consummated the Offering
on December 4, 2020. All activity through December 4, 2020 relates to our formation, the Offering (as defined below) and simultaneous
private placement of private placement warrants, as described below, our search for a target business with which to complete an initial
business combination and activities in connection with the proposed business combination with Doma Holdings, Inc. (“Doma”).
Recent Developments
Doma
On March 2, 2021, we entered
into a definitive merger agreement (the “Merger Agreement”) with Capitol V Merger Sub, Inc., a Delaware corporation and our
direct wholly owned subsidiary (“Merger Sub”), and Doma. The Merger Agreement, among other things, provides that:
|
●
|
we will amend and restate our amended and restated
certificate of incorporation to, among other things, change the name of the Company to Doma Holdings, Inc.;
|
|
●
|
we will replace our bylaws by adopting amended
and restated bylaws for the post-combination company;
|
|
●
|
we have entered into various subscription agreements
with certain third-party investors (the “PIPE Investors”) pursuant to which the PIPE Investors have committed to make private
investments in public equity in the form of Class A common stock in the aggregate amount of $300 million, for which the PIPE Investors
will receive an aggregate of 30 million shares of common stock in the combined company (“New Doma Common Stock”); and
|
|
●
|
(i) without any action on the part of any holder
of our warrant, each warrant that is issued and outstanding immediately prior to the closing of the initial business combination with
Doma will become a warrant of the post-combination company, exercisable for New Doma Common Stock in accordance with its terms; and (ii)
without any action on the part of the holders of our Class B common stock, each share of Class B common stock that is issued and outstanding
immediately prior to the closing of the initial business combination with Doma will automatically convert into one share of New Doma Common
Stock.
|
The business combination with
Doma will be consummated subject to certain conditions as further described in the Merger Agreement.
Doma is a leading force for
disruptive change in the residential real estate industry. Doma uses machine intelligence to replace large portions of the antiquated
residential real estate closing process with instant technology solutions. Doma’s machine intelligence algorithms are being trained
and optimized on 30 years of historical anonymized closing transaction data, allowing Doma to make underwriting decisions in less than
a minute and significantly reduce the time, effort and cost of the entire process. It is expected that Mark D. Ein will join the combined
company’s board of directors upon completion of the transaction.
Additional information regarding
Doma and the potential business combination with Doma is available in the proxy statement/prospectus most recently filed by the Company
with the SEC.
Promissory Notes
On March 12, 2021 and April
20, 2021, the directors of the Company agreed to loan the Company an aggregate of $400,000 and $300,000, respectively, for an aggregate
of $700,000. The promissory notes are provided to cover certain expenses related to the business combination pursuant to a promissory
note (the “Note”). Each Promissory Note is non-interest bearing and is payable at the consummation by the Company of a business
combination. Upon consummation of a business combination, the lenders will have the option to convert up to $2,000,000 of the principal
balance of such Promissory Notes into warrants at a price of $1.50 per warrant. The terms of any such warrants would be identical to the
warrants issued by the Company in the Offering except that such warrants will be non-redeemable by the Company and will be exercisable
for cash or on a “cashless” basis, in each case, so long as such warrants are held by the initial holder or such holder’s
permitted transferees. If a business combination is not consummated, all outstanding amounts under any Promissory Notes issued to the
lenders will be forgiven except to the extent that the Company has funds available to it outside of its trust account established in connection
with the Offering to repay such amounts.
Results of Operations
We will not generate any operating
revenues until the closing and completion of our business combination. We are incurring 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 three months ended
March 31, 2021, we had net income of $6,185,799, which consists of interest income on marketable securities held in the trust account
of $47,359 and a gain from the change in fair value of warrant liabilities of $7,280,000, offset by an unrealized loss on marketable securities
held in the trust account of $1,840 and operating costs of $1,139,720.
For the three months ended
March 31, 2020, we had a net loss of $20, which consists of operating costs.
Liquidity and Capital Resources
Until the consummation of
the Offering, our only source of liquidity was an initial purchase of ordinary shares by Capitol Acquisition Management V LLC and Capitol
Acquisition Founder V LLC (collectively, the “Sponsors”), and loans and advances from related parties.
On December 4, 2020, we consummated
our initial public offering (the “Offering”) of 34,500,000 Units. 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 Offering on December 4, 2020, we completed a private
placement of 5,833,333 private placement warrants at a purchase price of $1.50 per private placement warrant, to our Sponsors and our
independent directors, generating gross proceeds to us of $8,750,000. Approximately $338.1 million of the net proceeds from the Offering
and $6.9 million of the proceeds from the sale of the private placement warrants have been deposited in a trust account maintained by
Continental Stock Transfer & Trust Company, acting as trustee, established for the benefit of our public stockholders. After paying
expenses associated with the Offering and the private placement, we had approximately $1.0 million of cash held outside the trust account
for working capital.
Except for the withdrawal
from the trust account of interest earned on the funds held therein necessary to pay taxes, if any, the funds in the trust account will
not be released to us until the earlier of the completion of a business combination or our liquidation upon our failure to consummate
a business combination within the required time period (which may not occur until December 4, 2022).
For the three months ended
March 31, 2021, cash used in operating activities was $997,086. Net income of $6,185,799 was affected by interest earned on marketable
securities held in the trust account of $47,359, an unrealized loss on marketable securities of $1,840, a gain from the change in fair
value of warrant liabilities of $7,280,000 and changes in operating assets and liabilities, which provided of $142,634 of cash.
For the three months ended
March 31, 2020, cash provided by operating activities was $108. Net loss of $20 was offset by changes in operating assets and liabilities,
which provided $128 of cash from operating activities.
As of March 31, 2021, we had
cash and marketable securities held in the trust account of $345,006,438. We intend to use substantially all of the funds held in the
trust account, including any amounts representing interest earned on the trust account not previously released to us (less taxes payable
and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay our taxes. To the
extent that our equity 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.
As of March 31, 2021, we had
cash of $86,962 outside of the trust account. We intend to use the funds held outside the trust account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective
target businesses and structure, negotiate and complete a business combination.
We do not believe we will
need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination.
However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial
business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business
prior to our initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with
an intended initial business combination, our sponsors, officers and directors or their respective affiliates may, but are not obligated
to, loan us funds as may be required on a non-interest basis. In February 2021, the Sponsors and the independent directors collectively
committed to provide us an aggregate of $970,000 in loans. In May 2021, the Sponsors and the independent directors collectively committed
to provide an additional $756,000 in loans. These loans, if issued, as well as any future loans that may be made by our officers and directors
(or their affiliates), will be evidenced by notes and if we complete our initial business combination, we would repay such loaned amounts.
In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust
account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $2,000,000 of such
loans may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender.
The warrants would be identical to the private placement warrants. Prior to the completion of our initial business combination, we do
not expect to seek loans from parties other than our sponsors, officers, directors or their respective affiliates as we do not believe
third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust
account.
Based on the loan commitment
provided by the Sponsors and the independent directors, we believe we will have sufficient cash to meet the Company’s working capital
needs through the earlier of consummation of a Business Combination or May 17, 2022.
We may need to obtain additional
financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds
held in our trust account or because we become obligated to redeem a significant number of our public shares upon completion of the business
combination, in which case we may issue additional securities or incur debt in connection with such business combination. If we are unable
to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations
and liquidate the trust account.
Off-balance sheet financing arrangements
We did not have any off-balance
sheet arrangements as of March 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities
or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose
entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay two affiliates of
our executive officers an aggregate monthly fee of $20,000 for office space and secretarial support provided to the Company. We began
incurring these fees on December 4, 2020 and will continue to incur these fees monthly until the earlier of the completion of a business
combination and the Company’s liquidation.
The underwriters are entitled
to a deferred underwriting discount of 3.5% of the gross proceeds of the Offering or an aggregate of $12,075,000, which were placed in
the trust account.
We entered into a fee arrangement
with a service provider pursuant to which certain fees incurred by us will be deferred and become payable only if we consummate a business
combination. If a business combination does not occur, we will not be required to pay these contingent fees. As of March 31, 2021, the
amount of these contingent fees was approximately $1,708,000. There can be no assurances that we will complete a business combination.
In December 2020, subsequent
to the consummation of our Offering, we entered into three consulting arrangements for services to help identify and introduce us to potential
targets and provide assistance with due diligence, deal structuring, documentation and obtaining shareholder approval for an initial business
combination. These agreements provide for an aggregate monthly fee of $62,500 and aggregate success fees of $1,100,000 payable upon the
consummation of an initial business combination.
Critical Accounting Policies
The preparation of financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the warrants
issued in connection with our initial public offering in accordance with Accounting Standards Codification (“ASC”)
815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC 815”), under which
the warrants do not meet the criteria for equity classification and must be recorded as liabilities. As the warrants meet the definition
of a derivative as contemplated in ASC 815, the Warrants are measured at fair value at inception and at each reporting date in accordance
with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statement of operations in the period of change.
Class A Common Stock Subject to Possible Redemption
We account for our shares
of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features 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) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common
stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future
events. Accordingly, the Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’
equity section of our balance sheets.
Net Loss per Common Share
We apply the two-class method
in calculating earnings per share. Net loss per common share, basic and diluted for Class A redeemable common stock is calculated
by dividing the interest income earned on the Trust Account, net of applicable taxes, by the weighted average number of shares of Class A
redeemable common stock outstanding for the periods. Net loss per common share, basic and diluted for and Class B non-redeemable
common stock is calculated by dividing net loss less income attributable to Class A redeemable common stock, by the weighted average
number of shares of Class B non-redeemable common stock outstanding for the period presented.
Recent Accounting Standards
Management does not
believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on our financial statements.