(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
References to the "Company," "SCVX Corp." "our," "us" or "we" refer to SCVX Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
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"). 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 "Sponsor").
The registration statement for our initial public offering (the "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 (the "Units" and, with respect to the Class A ordinary shares included in the Units, the "Public Shares"), 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 ("Private Placement") of 6,600,000 warrants (the "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 a trust account (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 24 months from the closing of the Initial Public Offering, or January 28, 2022 (the "Combination Period"), we will (i) cease all operations except for the purpose of winding up;
Proposed Business Combination
On May 15, 2021, we entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the "Merger Agreement"), by and among the Company, Bloom Merger Sub Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company ("Merger Sub"), and Bright Machines, Inc., a Delaware corporation ("Bright Machines").
The Merger Agreement provides for, among other things, the following transactions: (i) at least one day prior to the Effective Time (as defined in the Merger Agreement), we will become a Delaware corporation (the "Redomicile"),
The Business Combination is expected to close in the second half of 2021, following the receipt of the required approval by our shareholders and the fulfillment of other customary closing conditions. We will apply to list the securities of the combined company on Nasdaq effective as of no later than the Effective Time of the Merger.
In accordance with the terms and subject to the conditions of the Merger Agreement, each share of Bright Machines Common Stock, following the Preferred Stock Conversion and other than any Cancelled Shares (as defined in the Merger Agreement) and Dissenting Shares (as defined in the Merger Agreement) shall be converted into the right to receive a number of shares of our duly authorized, validly issued, fully paid and nonassessable common stock, par value $0.0001 per share ("Company Common Stock"), at an exchange ratio determined in accordance with the Merger Agreement based on a pre-money enterprise value of Bright Machines of $1.1 billion and $10.00 price per share of Company Common Stock. In addition, in the event that the closing sale price of Company Common Stock exceeds certain price thresholds for 20 out of any 30 consecutive trading days during the first five years following the closing of the Business Combination (the "Closing"), up to an additional 23,000,000 shares of Company Common Stock may be issued to the parties that were holders of Bright Machines Common Stock immediately prior to the Effective Time of the Merger.
Concurrently with the execution of the Merger Agreement, we entered into subscription agreements (the "Subscription Agreements") with certain investors (the "PIPE Investors"). Pursuant to the Subscription Agreements, the PIPE Investors agreed to subscribe for and purchase, and we agreed to issue and sell to such investors, an aggregate of 20,500,000 of our Class A ordinary shares for a purchase price of $10.00 per share, for aggregate gross proceeds of $205,000,000 (the "PIPE Financing"). The closing of the PIPE Financing is contingent upon, among other things, the substantially concurrent consummation of the Business Combination.
Results of Operations
Our entire activity since inception up to March 31, 2021 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for and efforts toward completing an initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the three months ended March 31, 2021, we had net income of approximately $12.5 million, which consisted of approximately $3,000 in interest earned from investments held in the Trust Account and approximately $13.1 million gain from change in fair value of warrant liabilities, offset by approximately $589,000 in general and administrative expenses and $30,000 of related party administrative fees.
For the three months ended March 31, 2020, we had net income of approximately $12.0 million, which consisted of approximately $14.2 million gain from change in the fair value of warrant liabilities, $283,000 in interest earned from investments held in the Trust Account, offset by approximately $1.6 million in general and administrative expenses, $30,000 related party administrative fee and approximately $791,000 offering costs associated with issued public and private warrants.
Liquidity, Capital Resources and Going Concern
As of March 31, 2021, we had approximately $767,000 in our operating bank accounts, and working capital deficit of approximately $768,000.
Prior to the completion of the Initial Public Offering, our liquidity needs were satisfied through a payment of $25,000 from the Company's Chairman and Co-Chief Executive Officer to cover for certain offering costs in exchange for the issuance of the Founder Shares, and the loan under the Note of approximately $139,000 to us to cover for offering costs in connection with the Initial Public Offering. 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 our ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date we are required to liquidate, January 28, 2022. The unaudited condensed financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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.
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 New York Stock Exchange, 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 our liquidation, we will cease paying these monthly fees. We incurred $30,000 and $0 in expenses in connection with such services during the three months ended March 31, 2021 and 2020, respectively, as reflected in the accompanying unaudited condensed statements of operations. As of March 31, 2021 and December 31, 2020, $150,000 and $120,000 in accrued expenses with related party were outstanding, respectively, as reflected in the accompanying unaudited condensed balance sheets.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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 unaudited condensed 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 Income (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 share 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.
Our 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 Class A 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 Class A 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 Class A ordinary share 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 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 its financial instruments, including issued shares 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 account for its 18,100,000 warrants issued in connection with its Initial Public Offering (11,500,000) and Private Placement (6,600,000) as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts 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 the statements of operations. The fair value of warrants issued in connection with the Private Placement has been estimated using Monte-Carlo simulations at each balance sheet date. The fair value of the warrants issued in connection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model and subsequently been measured at each measurement date based on the market price of such warrants.
Recent Adopted Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Recent Issued Accounting Standards
Our management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying financial statement.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and
Jul 14, 2021
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