NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
1. Organization and Business Operations
Incorporation
Falcon Capital Acquisition
Corp. (the “Company”) was incorporated as a Delaware corporation on June 5, 2020.
Subsidiary
In connection with the proposed
business combination with Sharecare, Inc., a Delaware corporation (“Sharecare”) and Colin Daniel, solely in his capacity as
representative of the Sharecare stockholders (the “Stockholder Representative”), the Company formed a wholly-owned subsidiary,
FCAC Merger Sub Inc., a Delaware corporation (“Merger Sub”). The Merger Sub did not have any activity as of March 31, 2021.
The Company has neither engaged in any operations nor generated operating revenues to date.
Sponsor
The Company’s sponsor
is Falcon Equity Investors LLC, a Delaware limited liability company (the “Sponsor”).
Fiscal Year End
The Company has selected
December 31 as its fiscal year end.
Business Purpose
The Company was formed for
the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business
combination with one or more operating businesses (“Business Combination”).
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
Financing
The registration statement
for the Company’s initial public offering (the “Public Offering”) was declared effective by the U.S. Securities and
Exchange Commission (“SEC”) on September 21, 2020. The Company consummated the Public Offering of 34,500,000 units, including
the issuance of 4,500,000 units as a result of the underwriters’ exercise of their over-allotment option in full (the “Units”),
at $10.00 per Unit on September 24, 2020, generating gross proceeds of $345,000,000. Simultaneously with the closing of the Public Offering,
the Company consummated the private placement (the “Private Placement”) of an aggregate of 5,933,334 warrants (the “Private
Placement Warrants”) at a price of $1.50 per Private Placement Warrant. Upon the closing of the Public Offering and Private Placement,
$345,000,000 from the net proceeds of the Public Offering and the Private Placement was placed in a U.S.-based trust account maintained
by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”).
Trust Account
The proceeds held in the
Trust Account were invested in permitted United States “government securities” within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government
treasury obligations.
The Company’s third
amended and restated certificate of incorporation (the “Charter”) provides that, other than the withdrawal of interest earned
on the funds that may be released to the Company to pay taxes, none of the funds held in the Trust Account will be released until the
earlier of: (i) the completion of the Business Combination; (ii) the redemption of any of the shares of Class A common stock, par value
$0.0001 per share (the “Class A Common Stock”) included in the Units sold in the Public Offering properly submitted in connection
with a stockholder vote to amend the Charter to modify the substance or timing of the Company’s obligation to redeem 100% of the
common stock included in the Units being sold in the Public Offering if the Company does not complete the Business Combination within
24 months from the closing of the Public Offering or with respect to any other material provisions relating to stockholders’ rights
or pre-initial Business Combination activity or (iii) the redemption of 100% of the shares of Class A Common Stock included in the Units
sold in the Public Offering if the Company is unable to complete a Business Combination within 24 months from the closing of the Public
Offering.
The Company, after signing
a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting
called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or
against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account
calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay taxes, or (ii) provide stockholders with the opportunity to sell
their shares to the Company by means of a tender offer for an amount in cash equal to their pro rata share of the aggregate amount then
on deposit in the Trust Account calculated as of two business days prior to commencement of the tender offer, including interest earned
on the funds held in the Trust Account and not previously released to the Company to pay taxes. However, in no event will the Company
redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would
not proceed with the redemption of its public shares and the related Business Combination, and instead may search for an alternate Business
Combination.
If the Company holds a stockholder
vote in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal
to its pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation
of the Business Combination, including interest earned on the funds held in the Trust Account but not previously released to the Company
to pay taxes. As a result, such common stock will be recorded at redemption amount and classified as temporary equity upon the completion
of the Public Offering, in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity.”
The Company has 24 months
from the closing of the Public Offering to complete its Business Combination (or until September 24, 2022). If the Company does not complete
a Business Combination within this period of time, it will (i) cease all operations except for the purposes of winding up, (ii) as promptly
as reasonably possible, but not more than ten business days thereafter, redeem the public shares for a per share pro rata portion of the
Trust Account, including interest, but less income taxes payable (less up to $100,000 of such net interest to pay dissolution expenses)
and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its
remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and the Company’s executive officers and
independent directors (the “initial stockholders”) entered into a letter agreement with the Company, pursuant to which they
waived their rights to participate in any redemption with respect to their Founder Shares (as defined below); however, if the initial
stockholders or any of the Company’s officers, directors or affiliates acquire shares of Class A Common Stock, they will be entitled
to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete
a Business Combination within the required time period. In the event of such distribution, it is possible that the per share value of
the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering
price per Unit in the Public Offering.
Business Combination
Merger Agreement
On February 10, 2021,
the board of directors of the Company unanimously approved an agreement and plan of merger, dated February 12, 2021, by and among
the Company, FCAC Merger Sub Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), Sharecare, Inc. (“Sharecare”),
and Colin Daniel, solely in his capacity as representative of the Sharecare stockholders (the “Stockholder Representative”)
(as may be amended and/or restated from time to time, the “Merger Agreement”). If the Merger Agreement is adopted by the Company’s
stockholders and the transactions under the Merger Agreement are consummated, Merger Sub will merge with and into Sharecare, after which
the separate corporate existence of Merger Sub will cease and Sharecare will survive the merger as a wholly-owned subsidiary of the
Company (the “Sharecare Merger”). In addition, in connection with the consummation of the Sharecare Merger, the Company will
be renamed “Sharecare, Inc.” and is referred to herein as “New Sharecare” as of the time following such change
of name.
Sharecare, Inc. is a leading
digital healthcare company that helps members consolidate and manage various components of their health in one place, regardless of where
they are on their health journey.
Under the Merger Agreement,
holders of Sharecare’s equity interests are expected to receive $3.79 billion in aggregate consideration. At the effective time
of the Sharecare Merger, Sharecare’s stockholders will have the right to receive consideration in the form of cash and shares of
common stock of New Sharecare, subject to proration under certain circumstances specified in the Merger Agreement. In addition, under
the Merger Agreement, at the effective time of the Sharecare Merger, (i) each option to purchase shares of the Sharecare common stock
granted under any Sharecare group stock plan that is outstanding and unexercised immediately prior to the effective time, whether or not
then vested or exercisable, will be assumed by New Sharecare and shall be converted into an option to purchase shares of New Sharecare,
(ii) each holder of Sharecare options entitled to receive New Sharecare options will also receive an additional number of contingent stock
options to acquire shares of New Sharecare common stock that will vest upon the earlier of the date set forth in the corresponding New
Sharecare options and, in each case with respect to one half of the additional contingent stock options, the achievement of the Earnout
Conditions (as defined below), and (iii) each warrant to purchase shares of Sharecare capital stock will be converted into the right to
receive a number of shares of New Sharecare common stock, in each case as further described under the Merger Agreement.
Subscription Agreements
The Company entered into
subscription agreements (the “Subscription Agreements”), each dated as of February 12, 2021, with certain investors (the
“PIPE Investors”), pursuant to which, among other things, we agreed to issue and sell, in private placements to close
immediately prior to the Closing, an aggregate of 42,500,000 shares of FCAC Class A common stock, par value $0.0001 per share (the
“FCAC Class A common stock”) for a purchase price of $10.00 per share. In connection with the Closing, all of the issued
and outstanding shares of FCAC Class A common stock, including the shares of FCAC Class A common stock issued to the PIPE Investors,
will be exchanged, on a one-for-one basis, for shares of New Sharecare common stock.
The foregoing description of
the Subscription Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the form
of Subscription Agreement, a copy of which was filed as Exhibit 10.9 to our Annual Report on Form 10-K/A and as described elsewhere
in the preliminary proxy statement/prospectus that we filed with the SEC on May 11, 2021.
Acquiror Support Agreement
In connection with the
execution of the Merger Agreement, our Sponsor, the Company and Sharecare entered into an Agreement (the “Acquiror Support
Agreement”), pursuant to which the Sponsor agreed to vote all shares of FCAC beneficially owned by it in favor of each of the
proposals at the special meeting and to vote against any transaction or proposal that would reasonably be expected to result in the
failure of the Business Combination from being consummated.
The Sponsor also agreed that it
would not (a) sell, assign, transfer (including by operation of law), create any lien or pledge, dispose of or otherwise encumber
any of our shares beneficially owned by it, (b) deposit any such shares into a voting trust or enter into a voting agreement or grant
any proxy or power of attorney with respect thereto that is inconsistent with the Merger Agreement or (c) enter into any contract,
option or other arrangement requiring the direct acquisition or sale, assignment, transfer or other disposition of any such shares.
In addition, our Sponsor agreed
not to solicit, initiate or knowingly encourage any transaction in violation of the Merger Agreement or participate in any discussions
or negotiations regarding any information with the intent to any unsolicited proposal that constitutes, or any reasonably be expected
to lead to, a business combination proposal or other transaction in violation of the Merger Agreement.
The foregoing description of
the Acquiror Support Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the
Acquiror Support Agreement, a copy of which was filed as Exhibit 10.12 to our Annual Report on Form 10-K/A and as described
elsewhere in the preliminary proxy statement/prospectus that we filed with the SEC on May 11, 2021.
Sharecare Support Agreements
In connection with the
execution of the Merger Agreement, certain Sharecare securityholders (the “Sharecare Supporting Securityholders”)
entered into a support agreement with the Company and Sharecare (the “Support Agreement”). Under the Support Agreement,
each Sharecare Supporting Securityholder agreed, as promptly as reasonably practicable (and in any event within five business days)
following the SEC declaring the proxy statement/prospectus relating to the approval by our securityholders of the Business
Combination effective, to execute and deliver a written consent with respect to the outstanding securities of (i) Sharecare common
stock and preferred stock and (ii) securities convertible into or exercisable or exchangeable for Sharecare capital stock, held by
such Sharecare Supporting Securityholder adopting the Merger Agreement and approving the Business Combination. In addition, each
Sharecare Supporting Securityholder agreed to voluntarily convert any convertible notes it owns into the applicable series of
preferred stock in connection with the Business Combination and agreed that any warrants it owns would convert into New Sharecare
common stock in connection with the Business Combination.
The shares of Sharecare common
stock and preferred stock and such convertible securities that are owned by the Sharecare supporting securityholders and subject to the
Support Agreements represent approximately 66.8% of the outstanding voting power of Sharecare common stock, preferred stock and securities
(on an as converted basis).
The Support Agreements prohibit
the Sharecare Supporting Securityholders from engaging in activities that have the effect of soliciting a competing acquisition proposal.
In addition, the Support Agreements restrict the transfer of shares covered by the Support Agreements.
The foregoing description of the
Support Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the form of Support
Agreement, a copy of which was filed as Exhibit 10.11 to our Annual Report on Form 10-K and as described elsewhere in the preliminary
proxy statement/prospectus that we filed with the SEC on May 11, 2021.
Non-Redemption Agreements
In connection with the
execution of the Merger Agreement, the Company entered into non-redemption agreements (the “Non-Redemption Agreements”)
with certain holders of Class A common stock, pursuant to which such holders agreed not to exercise their redemption rights in
connection with the Business Combination. The aggregate number of shares of our Class A common stock subject to the Non-Redemption
Agreements is 4,197,245, which represents $41,972,450 of otherwise exercisable redemption rights.
The foregoing description of the
Non-Redemption Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the form of
Non-Redemption Agreement, a copy of which was filed as Exhibit 10.14 to our Annual Report on Form 10-K and as described elsewhere in the
preliminary proxy statement/prospectus that we filed with the SEC on May 11, 2021.
Sponsor Agreement
In connection with the
execution of the Merger Agreement, the Sponsor entered into a sponsor agreement (the “Sponsor Agreement”) with Sharecare
and us, pursuant to which our Sponsor agreed, subject to the consummation of the Business Combination, that the shares of our Class
B common stock beneficially owned by it shall convert into our Class A common stock at the initial conversion ratio, subject to
adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and that the Sponsor waives any
additional anti-dilution adjustments to which it would otherwise be entitled pursuant to Section 4.3(b)(ii) of our certificate of
incorporation.
The Sponsor Agreement provides
that the Sponsor will not redeem any shares of our Class B common stock (or any shares of our Class A common stock received upon conversion
of shares of our Class B common stock) that it owns in connection with the Business Combination and will not commence or participate in
and take all actions necessary to opt out of any class in any class action with respect to any claim, derivative or otherwise, against
us, Sharecare, any affiliate or designee of the Sponsor acting in his or her capacity as director, or any of their respective successors
and assigns relating to the negotiation, execution or delivery of the Sponsor Agreement, the Merger Agreement or the consummation of the
transactions contemplated in such agreements.
Our Sponsor also agreed that,
at the Closing, it would deposit the Earnout Shares into the earnout escrow account and it would agree to cancel 1,284,750 shares of our
Class B common stock and to transfer to a charitable foundation designated by the Company to advance its charitable objectives 428,250
shares of our Class B common stock.
The foregoing description of the Sponsor Agreement does not purport to
be complete and is qualified in its entirety by the terms and conditions of the Sponsor Agreement, a copy of which was filed as Exhibit
10.13 to our Annual Report on Form 10-K and as described elsewhere in the preliminary proxy statement/prospectus that we filed with the
SEC on May 11, 2021.
Additional information regarding
Sharecare, the Sharecare Merger and the transactions is available in the preliminary proxy statement/prospectus filed with the SEC on
February 16, 2021.
Emerging Growth Company
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 of 1933, as amended (the “Securities Act”) registration statement
declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (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, we, 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 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 accountant
standards used.
2. Significant Accounting Policies
Basis of Presentation
These unaudited
consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. The interim
financial information provided is unaudited, but includes all adjustments which management considers necessary for the fair
presentation of the results for the periods ended March 31, 2021. Operating results for the period ended March 31, 2021 are not
necessarily indicative of the results that may be expected through December 31, 2021 or any future period and should be read in
conjunction with the Company’s financial statements and notes thereto included in the Company’s Annual Report on
Form 10-K/A for the period ended December 31, 2020 filed with the SEC on May 11, 2021.
Liquidity and Capital
Resources
On September 24, 2020
the Company consummated a $345,000,000 Public Offering consisting of 34,500,000 units at a price of $10.00 per unit
(“Unit”). Each Unit consists of one share of the Company’s Class A common stock, $0.0001 par value (the
“Class A Common Stock”) and one-third of one redeemable warrant (each, a “Public Warrant”). Simultaneously,
with the closing of the Public Offering, the Company consummated an approximately $8,900,000 private placement (“Private
Placement”) of an aggregate of 5,933,334 warrants (“Private Placement Warrants”) at a price of $1.50 per warrant.
Upon closing of the Public Offering and Private Placement on September 24, 2020, $345,000,000 in proceeds (including $12,075,000 of
deferred underwriting commissions) from the Public Offering and Private Placement was placed in a U.S.-based trust account
maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). The remaining
$9,005,393 held outside of the Trust Account was used to pay underwriting commissions of $6,900,000 and deferred offering and
formation costs.
As of March 31, 2021
the Company had an unrestricted cash balance of $325,151 as well as cash and investments held in the Trust Account of $345,042,590.
The Company’s working capital needs will be satisfied through the funds, held outside of the Trust Account, from the Public
Offering. Interest on funds held in the Trust Account may be used to pay taxes. Further, the Sponsor or an affiliate of the Sponsor
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required.
Up to $1,500,000 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. The terms of such loans
have not been determined and no written agreements exist with respect to such loans.
Net Income (Loss) Per Share
Net income (loss) per
common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.
The Company has not considered the effect of the Warrants sold in the Initial Public Offering and Private Placement of 11,500,000
and 5,933,334, respectively, since the average market price of the Company’s Class A common stock for the three months ended
March 31, 2021 was below the Warrants’ $11.50 exercise price. As a result, diluted income per common stock is
the same as basic net income per common share for the period presented.
The Company’s
unaudited consolidated statement of operations includes a presentation of net income (loss) per share for common shares subject to
redemption in a manner similar to the two-class method of net income (loss) per share. Net income per common share for basic and
diluted Class A common stock for the three months ended March 31, 2021 is calculated by dividing the interest income earned on the
Trust Account of $65,479 net of franchise taxes of $41,983, and income taxes of nil by the weighted average number of Class A
redeemable common stock outstanding for the period. Net income per share, basic and diluted for Class B common stock for the three
months ended March 31, 2021 is calculated by dividing the income from change in fair value of warrant liabilities of $8,973,000
offset by general and administration expenses of $862,274 and franchise taxes of $0, resulting in a net income of $8,110,726, by
the weighted average number of Class B common stock outstanding for the period.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may
exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management
believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the consolidated balance sheets, primarily due to their short-term nature.
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 revenue
and expenses during the reporting period. 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 conforming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the
warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results
could differ significantly from those estimates.
Cash and Cash Equivalents
For purposes of the statement
of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to
be cash equivalents. As of March 31, 2021 and December 31, 2020, the Company had no cash equivalents.
Class A Common Stock Subject to Possible
Redemption
As discussed in Note 1, all
of the 34,500,000 shares of Class A common stock sold as part of the Units in the Public Offering contain a redemption feature which allows
for the redemption of shares of Class A common stock under the Charter. In accordance with FASB ASC 480, redemption provisions not solely
within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which
involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480.
Although the Company has not specified a maximum redemption threshold, its Charter provides that in no event will the Company redeem its
Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001.
The Company recognizes changes
in redemption value immediately as they occur and will adjust the carrying value at the end of each reporting period. Increases or decreases
in the carrying amount of redeemable shares of Class A common stock shall be affected by charges against additional paid in capital.
Accordingly, at March 31,
2021 and December 31, 2020, 29,665,062 and 28,851,640, respectively of the 34,500,000 shares of Class A common stock subject to possible
redemption included in the Units were classified as temporary equity, outside of the stockholders’ equity section on the Company’s
consolidated balance sheet, at approximately $10.00 per share.
Offering Costs
The Company complies with
the requirements of the ASC 340-10-S99-1. Offering costs of $18,608,160 as of March 31, 2021, net of $889,980 in warrant issuance cost
which was expensed in 2020, consist principally of legal and accounting fees incurred through the balance sheet date that were charged
to stockholders’ equity upon completion of the Public Offering.
Income Taxes
The Company complies
with the accounting and reporting requirements of Financial Accounting Standards Board Accounting Standard Codification, or FASB
ASC, 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases
of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized. As of March 31,
2021, the Company had deferred tax asset of $1,701,187 and valuation allowance of $1,701,187.
As of December 31, 2020, the Company had deferred tax asset of $3,648,841 and valuation allowance of $3,648,841. The deferred tax
asset was primarily the result of net operation loss carryforwards.
There were no unrecognized
tax benefits as of March 31, 2021 and December 31, 2020. 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. No amounts were accrued for the payment of
interest and penalties at 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. The Company’s current taxable income primarily consists of interest income on the Trust
Account. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible.
During the three months ended March 31, 2021, the Company recorded
income tax expense of $0.
Recent Accounting Pronouncements
Management does not believe
that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the
Company’s financial statements.
3. Fair Value Measurements
The fair value of the
Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value
using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a
Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Public Offering
have been measured based on the listed market price of such warrants since November 2020 when the warrants began separately trading.
For the period ended March 31, 2021, the Company recognized a charge to the statement of operations resulting from an decrease in
the fair value of liabilities of $8.9 million presented as change in fair value of warrant liabilities in the accompanying unaudited
consolidated statement of operations.
The following table
presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis
as of March 31, 2021 and December 31, 2020 by level within the fair value hierarchy:
|
|
Level
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account (1)
|
|
1
|
|
$
|
345,041,662
|
|
|
$
|
345,081,176
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities - Public
|
|
1
|
|
$
|
17,710,000
|
|
|
$
|
24,725,000
|
|
Warrant liabilities - Private
|
|
3
|
|
$
|
14,002,669
|
|
|
$
|
15,960,669
|
|
|
(1)
|
Excludes $928 and $943 of cash
balance held within the Trust Account as of March 31, 2021 and December 31, 2020, respectively.
|
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. There were no transfers between levels for the
three months ended March 31, 2021. During the three month period ended March 31, 2021, the Company withdrew $105,007 from the Trust Account
for working capital and to pay franchise taxes.
The estimated fair value
of the Private Placement Warrants is determined using Level 3 inputs.
Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate
and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s
traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of
the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar
to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual
term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides
quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
|
|
As of
March 31,
2021
|
|
|
As of
December 31,
2020
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
9.97
|
|
|
$
|
10.54
|
|
Volatility for private warrants
|
|
|
30.4
|
%
|
|
|
30.3
|
%
|
Term
|
|
|
5.50
|
|
|
|
5.50
|
|
Risk-free rate
|
|
|
0.96
|
%
|
|
|
0.43
|
%
|
Dividend yield
|
|
|
-
|
%
|
|
|
-
|
%
|
The change
in the fair value of the Level 3 warrant liabilities for the three months ended March 31, 2021 is summarized as follows:
Level 3 warrant liabilities at December 31, 2020
|
|
$
|
15,960,669
|
|
Change in fair value of warrant liabilities
|
|
|
(1,958,000
|
)
|
Level 3 warrant liabilities at March 31, 2021
|
|
$
|
14,002,669
|
|
4. Public Offering
Public Units
In the Public Offering, which
closed September 24, 2020, the Company sold 34,500,000 Units, including the issuance of 4,500,000 units as a result of the underwriters’
exercise of their over-allotment option in full, at a price of $10.00 per Unit. Each Unit consists of one share of Class A Common Stock
and one-third of one redeemable warrant (each whole warrant, a “Warrant”). Each whole Warrant entitles the holder to purchase
one share of Class A Common Stock at a price of $11.50 per share. Each Warrant will become exercisable on the later of 30 days after the
completion of our initial business combination and 12 months from the closing of the Public Offering. The exercise price and number of
shares of Class A Common Stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event
of a stock dividend, or recapitalization, reorganization, merger or consolidation.
The Company granted the underwriters
a 45-day option to purchase up to 4,500,000 additional Units to cover any over-allotment, at the Public Offering price less the underwriting
discounts and commissions. On September 24, 2020, the Company issued 4,500,000 Units in connection with the underwriters’ exercise
of the over-allotment option in full.
5. Related Party Transactions
Founder Shares
On June 5, 2020, the Sponsor
received 8,625,000 shares of Class B common stock (the “Founder Shares”) in exchange for a capital contribution of $25,000,
or approximately $0.003 per share.
In addition, up to 1,125,000
Founder Shares could have been forfeited by the initial stockholders depending on the exercise of the underwriters’ over-allotment
option. As a result of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently
subject to forfeiture.
The Founder Shares are identical
to the shares of Class A Common Stock included in the Units sold in the Public Offering except that the Founder Shares are subject to
certain transfer restrictions, as described in more detail below.
On August 26, 2020, the Sponsor
transferred 20,000 Founder Shares to each of three directors of the Company, resulting in the Sponsor holding 8,565,000 Founder Shares.
The initial stockholders
have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the
Company’s initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the closing
price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s
initial Business Combination, and (B) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar
transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange
their common stock for cash, securities or other property.
Private Placement Warrants
In conjunction with the Public
Offering, the Sponsor purchased an aggregate of 5,933,334 Private Placement Warrants, at a price of $1.50 per warrant (approximately $8,900,000
in the aggregate) in the Private Placement. Each Private Placement Warrant entitles the holder to purchase one share of Class A Common
Stock at $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the Public
Offering to be held in the Trust Account such that at closing of the Public Offering, $345,000,000 was placed in the Trust Account.
The Private Placement Warrants
(including the shares of common stock issuable upon exercise of the Private Placement Warrants) are not transferable, assignable or salable
until 30 days after the completion of the initial Business Combination and they are non-redeemable for cash so long as they are held by
the initial purchasers of the Private Placement Warrants or their permitted transferees. If the Private Placement Warrants are held by
someone other than the initial purchasers of the Private Placement Warrants or their permitted transferees, the Private Placement Warrants
will be redeemable for cash by the Company and exercisable by such holders on the same basis as the warrants included in the Units sold
in the Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Warrants
sold as part of the Units in the Public Offering and have no net cash settlement provisions.
If the Company does not complete
a Business Combination, then the proceeds will be part of the liquidating distribution to the public stockholders and the Warrants issued
to the Sponsor will expire worthless.
Sponsor Loans
The Sponsor agreed to loan
the Company up to an aggregate of $300,000 by the issuance of an unsecured promissory note (the “Note”) to cover expenses
related to the Public Offering. The Note was payable without interest on the earlier of December 31, 2020 or the completion of the Public
Offering. As of March 31, 2021, borrowings on the Note totaling $105,393 were repaid in full and accordingly, as of March 31, 2021, there
was no amount outstanding under the Note.
Administrative Services Agreement
The Company entered
into an administrative services agreement in which the Company will pay an affiliate of the Sponsor for office space, utilities and
secretarial and administrative services provided to members of the Company’s management team in an amount not to exceed
$15,000 per month. The administrative services fee commenced on September 25, 2020. For the three months ended March 31, 2021, the
Company incurred $45,000 in administrative services expenses under the arrangement.
Working Capital Loans
In order to finance transaction
costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required. Up to $1,500,000 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. The terms of such loans have not been determined and no written agreements exist
with respect to such loans. To date, the Company had no working capital loans outstanding.
6. Commitments and Contingencies
Registration Rights
The holders of the Founder
Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans (and any 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
and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement, requiring
the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding
short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to our completion of our initial business combination. The Company will bear
the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters
a 45-day option to purchase up to 4,500,000 additional Units to cover any over-allotment, at the Public Offering price less the underwriting
discounts and commissions. On September 24, 2020, the Company issued 4,500,000 Units in connection with the underwriters’ exercise
of the over-allotment option in full. The Company paid an underwriting discount of $6,900,000 ($0.20 per Unit sold) to the underwriters
at the closing of the Public Offering on September 24, 2020, with an additional fee (“Deferred Discount”) of $12,075,000 ($0.35
per Unit sold) payable upon the Company’s completion of an initial Business Combination. The Deferred Discount will become payable
to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
The underwriters will not be entitled to any interest accrued on the Deferred Discount, and no Deferred Discount is payable to the underwriters
if there is no Business Combination.
Risks and Uncertainties
Management continues to
evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s, or its target’s, financial position, results of its operations and/or
completion of the Business Combination, the specific impact is not readily determinable as of the date of these unaudited
consolidated financial statements. The unaudited consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Contingent Liability
In connection with the agreement
and plan of merger with Sharecare, Inc. (see note 1), the Company is contingently liable for merger and acquisition legal fees of $3,873,280.
The merger and acquisition legal fees will be due and payable from the amounts held in the Trust Account solely in the event that the
Company completes the business combination with Sharecare.
7. Stockholders’ Equity
Class A Common
Stock - The Company is authorized to issue 380,000,000 shares of Class A common stock with a par value of
$0.0001 per share. As of March 31, 2021 and December 31, 2020, there were 34,500,000 shares of Class A common stock issued and outstanding of which,
29,665,062 and 28,851,640, respectively, were classified outside of permanent equity.
Class B Common
Stock - The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of
$0.0001 per share. Holders of the Company’s Class B common stock are entitled to one vote for each share. As of March 31, 2021
and December 31, 2020, there were 8,625,000 shares of Class B common stock issued and outstanding.
Preferred
stock - The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per
share. As of March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
8. Warrants
Public Warrants may only be exercised for a whole
number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade.
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) 12 months from the closing of the Public Offering; provided in each case that the Company has an effective registration statement
under the Securities Act covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants and a current prospectus
relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless
exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later
than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration
statement for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the Public
Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration
statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of
the warrant agreement relating to the Warrants. If a registration statement covering the shares of Class A Common Stock issuable upon
exercise of the Warrants is not effective by the sixtieth (60th) day after the closing of the initial Business Combination, warrant holders
may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain
an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the Public Offering, except that the Private Placement Warrants and
the shares of Class A Common Stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If
the Private Placement Warrants are held by someone other than their initial purchasers or their permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company may call the
Warrants for redemption (except with respect to the Private Placement Warrants):
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption; and
|
|
●
|
if, and only if, the last reported closing price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
Additionally,
commencing ninety days after the Warrants become exercisable, the Company may redeem its outstanding Warrants in whole and not in
part, for the number of shares of Class A common stock determined by reference to the table set forth in the Company’s
prospectus relating to the Public Offering based on the redemption date and the “fair market value” of the Class A
Common Stock, upon a minimum of 30 days’ prior written notice of redemption and if, and only if, the last sale price of the
shares of Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the
warrant holders, if, and only if, the Private Placement Warrants are also concurrently exchanged at the same price (equal to a
number of shares of Class A Common Stock) as the outstanding Warrants, as described above and if, and only if, there is an effective
registration statement covering the shares of Class A Common Stock issuable upon exercise of the Warrants and a current prospectus
relating thereto available throughout the 30-day period after written notice of redemption is given. The “fair market
value” of the shares of Class A Common Stock is the average last reported sale price of the Class A Common Stock for the 10
trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of
warrants.
If the Company calls the
Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless
basis,” as described in the warrant agreement.
The exercise price and number
of shares of Class A Common Stock issuable upon exercise of the Warrants may be adjusted in certain circumstances. If the Company is unable
to complete a Business Combination within the required time period 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.
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 its 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 Company’s board of directors and, in
the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held by
the initial stockholders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances
represent more than 50% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination,
and (z) the volume weighted average trading price of the Class A Common Stock during the 10 trading day period starting on the trading
day after the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below
$9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the Market Value, and
the $18.00 per share redemption trigger price of the Warrants will be adjusted (to the nearest cent) to be equal to 180% of the Market
Value. However, if the Company does not complete its initial Business Combination on or prior to September 24, 2022, the Warrants will
expire at the end of such period.
9. Subsequent Events
Management has
evaluated subsequent events to determine if events or transactions occurring through May 26, 2021, the date the unaudited
consolidated financial statements were available for issuance, require potential adjustment to or disclosure in the unaudited
consolidated financial statements and has concluded that, except as noted above, all such events that would require recognition or
disclosure have been recognized or disclosed.