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July 14, 2021, 6:05 a.m. EDT

10-K/A: SCVX CORP.

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(EDGAR Online via COMTEX) -- ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

References to "we", "us", "our" or the "Company" are to SCVX Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Amendment No. 1 to the Annual Report on Form 10-K/A.

Cautionary Note Regarding Forward-Looking Statements

This Amendment No. 1 to the Annual

In this Amendment No. 1 to the Annual Report of SCVX Corp. on Form 10-K/A for the fiscal year ended December 31, 2020, we are restating (i) our audited financial statements as of and for the year ended December 31, 2020, (ii) our unaudited interim financial statements as of and for the three and nine months ended September 30, 2020, (iii) our unaudited interim financial statements as of and for the three and six months ended June 30, 2020 and (iv) our unaudited interim financial statements as of and for the three months ended March 31, 2020.

The restatement results from our prior accounting for our Warrants which had been classified as a component of equity on the premise that the instruments were indexed to our own stock and were eligible to be accounted for as equity instruments instead of classifying them as derivative liabilities.

On April 12, 2021, the staff of the Securities and Exchange Commission (the "SEC Staff") issued a public statement entitled "Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies ("SPACs")" (the "SEC Staff Statement"). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC's balance sheet as opposed to equity. Since issuance on January 28, 2020, our Warrants were accounted for as equity within our balance sheets, and after discussion and evaluation, including with our independent auditors, we have concluded that our Warrants should be presented as liabilities with subsequent fair value remeasurement.

Therefore, we, in consultation with its Audit Committee, concluded that its previously issued financial statements as of and for year ended December 31, 2020, as of and for the three and nine months ended September 30, 2020, as of and for the three and six months ended June 30, 2020 and as of and for the three months ended March 31, 2020 (collectively, the "Affected Periods") should be restated because of a misapplication in the guidance around accounting for our outstanding Warrants and should no longer be relied upon.

Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity ("ASC 815-40"). The views expressed in the SEC Staff Statement were not consistent with our historical interpretation of the specific provisions within our warrant agreement and the Company's application of ASC 815-40 to the warrant agreement. We reassessed our accounting for Warrants issued in January 2020, in light of the SEC Staff's published views. Based on this reassessment, we determined that the Warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in our Statement of Operations each reporting period.

Our accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on our previously reported revenue, operating expenses, operating income, cash flows or cash.

In connection with the restatement, our management reassessed the effectiveness of our disclosure controls and procedures for the periods affected by the restatement. As a result of that reassessment, we determined that our disclosure controls and procedures for such periods were not effective with respect to the classification of our Warrants as components of equity instead of as derivative liabilities. For more information, see Item 9A included in this Amendment No. 1 to the Annual Report on Form 10-K/A.

We have not amended our previously filed Quarterly Reports on Form 10-Q for the periods affected by the restatement. The financial information that has been previously filed or otherwise reported for these periods is superseded by the information in this Amendment No. 1 to the Annual Report on Form 10-K/A, and the financial statements and related financial information contained in such previously filed reports should no longer be relied upon.

The restatement is more fully described in Note 2 of the notes to the financial statements included herein.

Overview

We are a blank check company incorporated as a Cayman Islands exempted company on November 15, 2019. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the "Business Combination"). Although we are not limited to a particular industry or sector for purposes of consummating a Business Combination, we intend to focus our search for a target business in the cybersecurity sector. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. Our sponsor is SCVX USA LLC, a Delaware limited liability company.

The registration statement for our Initial Public Offering was declared effective on January 23, 2020. On January 28, 2020, we consummated the Initial Public Offering of 23,000,000 Units, including the issuance of 3,000,000 Units as a result of the underwriters' exercise of their over-allotment option in full, at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $13.3 million, inclusive of $8.1 million in deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 6,600,000 Private Placement Warrants to our Sponsor at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to us of $6.6 million, and incurring offering costs of approximately $21,000.

Upon the closing of the Initial Public Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in the Trust Account, located in the United States, with Continental Stock Transfer & Trust Company acting as trustee, and was invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

If we are unable to complete a Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up;

Results of Operations

Our entire activity had been related to our formation, Initial Public Offering, which was consummated on January 28, 2020, and since the Initial Public Offering, our activity has been limited to the search for a prospective Initial Business Combination, and we will not be generating any operating revenues until the closing and completion of our Initial Business Combination. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the year ended December 31, 2020 we had net loss of approximately $13.1 million, which consisted of approximately $2.9 million in general and administrative expenses, approximately $0.1 million of administrative fees - related party, approximately $9.9 million of change in fair value, and approximately $0.8 million of offering costs associated with issuance of the Warrants, offset by approximately $0.5 million in interest income from investments held in the Trust Account.

For the period from November 15, 2019 (inception) to December 31, 2019, we had a net loss of approximately $21,000, which was solely general and administrative expenses.

For the nine months ended September 30, 2020, we had a net loss of approximately $8.2 million, which consisted of approximately $1.8 million in general and administrative expenses, approximately $0.1 million of administrative fees - related party, a change in fair value of warrant liabilities of approximately $6.1 million and approximately $0.8 million of offering costs associated with issuance of the warrants, offset by approximately $0.5 million in interest income from investments held in the Trust Account.

For the three months ended September 30, 2020, we had a net loss of approximately $8.8 million, which consisted of approximately $0.1 million in general and administrative expenses, $30,000 of administrative fees - related party and a change in fair value of warrant liabilities of approximately $8.7 million, offset by approximately $21,000 in interest income from investments held in the Trust Account.

For the six months ended June 30, 2020, we had a net income of approximately $0.6 million, which consisted of approximately $0.5 million in interest income from investments held in the Trust Account and a change in fair value of warrant liabilities of approximately $2.6 million, offset by approximately $1.7 million in general and administrative expenses, approximately $0.1 million of administrative fees - related party and approximately $0.8 million of offering costs associated with issuance of the warrants.

For the three months ended June 30, 2020, we had a net loss of approximately $11.5 million, which consisted of approximately $0.1 million in general and administrative expenses, $30,000 of administrative fees - related party and a change in fair value of warrant liabilities of approximately $11.6 million, offset by approximately $0.2 million in interest income from investments held in the Trust Account.

For the three months ended March 31, 2020, we had a net income of approximately $12.0 million, which consisted of approximately $0.3 million in interest income from investments held in the Trust Account and a change in the fair value of warrant liabilities of approximately $14.2 million, offset by approximately $1.6 million in general and administrative expenses, $30,000 of administrative fees - related party and approximately $0.8 million of offering costs associated with issuance of the warrants.

As a result of the restatement described in Note 2 of the notes to the financial statements included herein, we classify the Warrants as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations.

Liquidity and Capital Resources

As of December 31, 2020, we had approximately $917,000 in cash and working capital of approximately $149,000. As of September 30, 2020, we had approximately $941,000 in our operating bank accounts, and working capital of approximately $0.9 million. As of June 30, 2020, we had approximately $985,000 in our operating bank accounts, and working capital of approximately $1.1 million. As of March 31, 2020, we had approximately $1.2 million in our operating bank accounts, and working capital of approximately $1.2 million.

Prior to the completion of the Initial Public Offering, our liquidity needs were satisfied through a capital contribution of $25,000 from the Sponsor in exchange for the issuance of the Founder Shares, and a borrowing of approximately $139,000 under the Note (as defined below). Subsequent to the consummation of the Initial Public Offering on January 28, 2020, the liquidity needs have been satisfied through the net proceeds from the consummation of the Private Placement not held in the Trust Account. We fully repaid the Note on January 28, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, our officers, directors and initial shareholders may, but are not obligated to, provide us Working Capital Loans (as defined below). To date, there were no amounts outstanding under any Working Capital Loans.

Based on the foregoing, management has determined that the working capital deficit raises substantial doubt about the Company's ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date the Company is required to liquidate, January 28, 2022. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Related Party Transactions

Founder Shares

In November 2019, the Sponsor purchased 5,750,000 Founder Shares for an aggregate price of $25,000. In December 2019, the Sponsor transferred an aggregate of 1,092,500 Founder Shares to members of our management team. The holders of the Founder Shares have agreed to forfeit up to an aggregate of 750,000 Founder Shares, on a pro rata basis, to the extent that the over-allotment option was not exercised in full by the underwriters. On January 28, 2020, the over-allotment option was exercised in full. Accordingly, no Founder Shares were forfeited.

The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (1) one year after the completion of the initial Business Combination and (2) the date on which the Company consummates a liquidation, merger, share exchange, reorganization, or other similar transaction after the initial Business Combination that results in all of the Company's shareholders having the right to exchange their ordinary shares for cash, securities or other property. Notwithstanding the foregoing, if the last reported sale price of the Company's Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, the Founder Shares will be released from the lock-up.

Private Placement Warrants

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 6,600,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $6.6 million and incurring offering costs of approximately $21,000. Each whole Private Placement Warrant is exercisable for one whole Class A ordinary share at a price of $11.50 per share. Certain proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If we do not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

The Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Related Party Loans

On November 19, 2019, the Sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses pursuant to the Note. This loan was non-interest bearing and payable upon the completion of the Initial Public Offering. We borrowed approximately $139,000 under the Note and fully repaid this amount on January 28, 2020.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors, may, but are not obligated to, loan us funds as may be required ("Working Capital Loans"). If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender's discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of December 31, 2020, we had no borrowings under any Working Capital Loans.

Contractual Obligations

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and "piggyback" registration rights. However, the registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriters a 45-day option from the final prospectus relating to the Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters fully exercised their over-allotment option on January 28, 2020.

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.6 million in the aggregate, which was paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or $8.1 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Administrative Support Agreement

Commencing on the date that our securities were first listed on the NYSE, we agreed to pay the Sponsor a total of $10,000 per month for office space, administrative and support services. Upon completion of the Initial Business Combination or the liquidation, we will cease paying these monthly fees. We incurred $120,000 in expenses in connection with such services during the year ended December 31, 2020, as reflected in the accompanying statements of operations. As of December 31, 2020, an aggregate of $120,000 in accrued expenses with related party was outstanding, as reflected in the accompanying balance sheets.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:

Class A Ordinary Shares Subject to Possible Redemption

Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders' equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption at the redemption amount are presented at redemption value as temporary equity, outside of the shareholders' equity section of our balance sheets.

Net Loss Per Ordinary Share

Net income (loss) per share is computed by dividing net loss by the weighted-average number of ordinary shares outstanding during the period. We have not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 18,100,000 shares of Class A ordinary shares in the calculation of diluted loss per ordinary share, since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the periods presented.

The Company's statements of operations include a presentation of income (loss) per share for ordinary share subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per ordinary share, basic and diluted, for ordinary share subject to possible redemption is calculated by dividing the proportionate share of net gain from investments held in Trust Account, by the weighted average number of ordinary share subject to possible redemption outstanding since original issuance.

Net income (loss) per share, basic and diluted, for non-redeemable ordinary share is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to ordinary shares subject to possible redemption, by the weighted average number of non-redeemable ordinary share outstanding for the period.

Non-redeemable ordinary share includes Class B ordinary shares, excluding Class B ordinary shares subject to forfeiture, and non-redeemable shares of Class A ordinary shares. Non-redeemable ordinary share participates in the income or loss on marketable securities based on non-redeemable shares' proportionate interest.

Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

We issued 18,100,000 Warrants, including 11,500,000 Public Warrants and 6,600,000 Private Placement Warrants, which are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Private Placement Warrants has been estimated using Monte-Carlo simulations at each balance sheet date. The fair value of the Public Warrants was initially measured using a Monte-Carlo simulation model at each measurement date and subsequently been measured based on the market price when separately listed and traded.

Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

JOBS Act

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among . . .

Jul 14, 2021

COMTEX_389783255/2041/2021-07-14T06:05:09

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