References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Forum Merger IV Corporation. References to
our "management" or our "management team" refer to our officers and directors,
and references to the "Sponsor" refer to Forum Investors IV LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021 and June 30, 2021. The Company's
management re-evaluated the Company's application of ASC 480-10-S99-3A to its
accounting classification of the redeemable shares of Class A common stock
issued as part of the units sold in the Company's Initial Public Offering on
March 22, 2021. Historically, a portion of the shares of Class A common stock
was classified as permanent equity to maintain stockholders' equity greater than
$5 million on the basis that the Company will not redeem its shares of Class A
common stock in an amount that would cause its net tangible assets to be less
than $5,000,001, as described in the Company's Amended and Restated Certificate
of Incorporation. Pursuant to such re-evaluation, the Company's management has
determined that the shares of Class A common stock include certain provisions
that require classification of all of the shares of Class A common stock as
temporary equity regardless of the net tangible assets redemption limitation
contained in the Amended and Restated Certificate of Incorporation. This
resulted in a restatement to the initial carrying value of the Class A common
stock subject to possible redemption with the offset recorded to additional
paid-in capital (to the extent available), accumulated deficit and Class A
common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
January 15, 2021 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 intend
to effectuate our Business Combination using cash from the proceeds of the
Initial Public Offering and the sale of the Private Placement Units, our capital
stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our only activities from January 15, 2021 (inception) through September
30, 2021 were organizational activities, those necessary to prepare for the
Initial Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended September 30, 2021, we had net income of $1,366,853,
which consisted of a change in fair value of warrants of $2,032,958 and interest
earned on marketable securities held in Trust Account of $8,471, offset by
operating costs of $674,576.
For the period from January 15, 2021 (inception) through September 30, 2021, we
had a net loss of $3,528,616, which consisted of formation and operating costs
of $1,330,252, transaction costs allocated to warrants of $399,286 and a change
in fair value of warrants of $1,816,685, offset by interest earned on marketable
securities held in Trust Account of $17,607.
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Liquidity and Capital Resources
On March 22, 2021, we consummated the Initial Public Offering of 30,000,000
Units at $10.00 per Unit, generating gross proceeds of $300,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 930,000 Private Placement Units at a price of $10.00 per Private
Placement Unit in a private placement to the Sponsor, and the underwriters of
the Initial Public Offering (150,000 Private Placement Units), generating gross
proceeds of $9,300,000.
On March 30, 2021, in connection with the underwriters' partial exercise of
their over-allotment option, we consummated the sale of an additional 3,601,509
Units at a price of $10.00 per Unit and the sale of an additional 72,301 Private
Placement Units at a price of $10.00 per Private Placement Unit, generating
total gross proceeds of $36,738,100.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Placement Units, a total of
$336,015,090 was placed in the Trust Account. We incurred $18,998,772 in Initial
Public Offering related costs, including $6,720,300 of underwriting fees,
$11,760,528 of deferred underwriting fees and $517,944 of other costs.
For the period from January 15, 2021 (inception) through September 30, 2021,
cash used in operating activities was $1,096,427. Net loss of $3,528,616 was
affected by transaction costs allocable to warrants of $399,286, change in fair
value of warrant liability of $1,816,685 and interest earned on marketable
securities held in Trust Account of $17,607. Changes in operating assets and
liabilities provided $233,825 of cash for operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account
of $336,032,697 consisting of money market funds. Income on the balance in the
Trust Account may be used by us to pay taxes. We intend to use substantially all
of the funds held in the Trust Account, including any amounts representing
interest earned on the Trust Account (less income taxes payable), to complete
our Business Combination. To the extent that our capital stock or debt is used,
in whole or in part, as consideration to complete our Business Combination, the
remaining proceeds held in the Trust Account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
As of September 30, 2021, we had cash of $1,710,629. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,200,000 of such loans may be convertible into units of
the post Business Combination entity at a price of $10.00 per unit. The units
would be identical to the Private Placement Units.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a total of $30,000 per month for 24 months, or $720,000
in the aggregate, for office space, utilities and secretarial and administrative
support. We began incurring these fees on March 17, 2021 and will continue to
incur these fees monthly until the earlier of the completion of the Business
Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$11,760,528 in the aggregate. The deferred fee will be forfeited by the
underwriters solely in the event that the Company fails to complete a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We 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. We account for the Warrants in accordance with the guidance
contained in ASC 815-40 under which the Warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, we classify
the Warrants as liabilities at their fair value and adjust the Warrants to fair
value at each reporting period. This liability is 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 Private Warrants and the Public
Warrants for periods where no observable traded price was available are valued
using a binomial lattice model. For periods subsequent to the detachment of the
Public Warrants from the Units, the Public Warrant quoted market price was used
as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480, "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that feature redemption rights that is either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our public Class A
common stock features certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events.
Accordingly, shares of Class A common stock subject to possible redemption are
presented as temporary equity, outside of the stockholders' deficit section of
our balance sheets.
Net Income (Loss) Per Common 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 two classes of shares, which are referred to as Class A common stock
and Class B common stock. Income and losses are shared pro rata between the two
classes of shares. Accretion associated with the redeemable shares of Class A
common stock is excluded from income (loss) per common share as the redemption
value approximates fair value.
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Recent 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. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. We adopted ASU 2020-06 effective as of January 15,
2021. The adoption of ASU 2020-06 did not have an impact on our financial
statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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