References to the "Company," "Forum Merger IV Corporation," "our," "us" or "we"
refer to Forum Merger IV Corporation. The following discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with our audited financial statements and the notes related thereto
which are included in "Item 8. Financial Statements and Supplementary Data" of
this Annual Report on Form 10-K. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including those set forth under "Special
Note Regarding Forward-Looking Statements," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are
subject to known and unknown risks, uncertainties and assumptions about us that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. 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 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.
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. 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 December 31,
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 period from January 15, 2021 (inception) through December 31, 2021, we
had a net loss of $2,091,085, which consisted of formation and operating costs
of $1,891,019, transaction costs allocated to warrants of $399,286, offset by
interest earned on marketable securities held in trust account of $26,202 and a
change in fair value of warrants of $173,018.
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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 completed the
private sale of 930,000 private placement units at a price of $10.00 per private
placement unit in which the Sponsor purchased 780,000 private placement units
and Jefferies LLC purchased 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. In connection with the underwriters'
partial exercise of their over-allotment option, the Sponsor purchased an
additional 54,022 private placement units and Jefferies LLC purchased an
additional 18,008 private placement units. Each private placement unit consists
of one share of Class A common stock and one-fourth of one warrant.
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 December 31, 2021, cash
used in operating activities was $1,282,875. Net loss of $2,091,085 was affected
by transaction costs allocable to warrants of $399,286, change in fair value of
warrant liabilities of $173,018 and interest earned on marketable securities
held in trust account of $26,202. Changes in operating assets and liabilities
provided $608,144 of cash for operating activities.
As of December 31, 2021, we had marketable securities held in the trust account
of $336,041,292 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 December 31, 2021, we had cash of $1,524,181. 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 addition, in order to finance transaction costs in connection with an
intended initial business combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete our initial business
combination, we would repay such loaned amounts. In the event that our initial
business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts but no proceeds from
our trust account would be used for such repayment. Up to $1,200,000 of such
working capital loans may be convertible into private placement-equivalent units
at a price of $10.00 per unit at the option of the lender. Such units would be
identical to the private placement units, including as to exercise price,
exercisability and exercise period of the underlying warrants. The terms of such
working capital loans by our Sponsor or its affiliates, or our officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans. We do not expect to seek loans from parties other than
our Sponsor or an affiliate of our Sponsor as we do not believe third parties
will be willing to loan such funds and provide a waiver against any and all
rights to seek access to funds in our trust account.
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.
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Going Concern
We have until March 22, 2023 to consummate a business combination. It is
uncertain that we will be able to consummate a business combination by this
time. If a business combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a business combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after March
22, 2023.
Related Party Transactions
Founder Shares
On January 15, 2021, the Sponsor purchased 8,625,000 shares of our Class B
common stock for an aggregate price of $25,000. The founder shares included an
aggregate of up to 1,125,000 shares of Class B common stock subject to
forfeiture by the Sponsor to the extent that the underwriters' over-allotment
was not exercised in full or in part, so that the Sponsor will own, on an
as-converted basis, 20% of our issued and outstanding shares after the initial
public offering (assuming the Sponsor does not purchase any public shares in the
initial public offering and excluding the private placement shares). As a result
of the underwriters' election to partially exercise their over-allotment option
on March 30, 2021, a total of 224,623 founder shares were forfeited and 900,377
founder shares are no longer subject to forfeiture, resulting in an aggregate of
8,400,377 founder shares issued and outstanding.
The Sponsor has agreed, subject to certain limited exceptions, not to transfer,
assign or sell any of its founder shares until the earlier to occur of: (A) one
year after the completion of a business combination or (B) subsequent to a
business combination, (x) if the closing price of the Class A common stock
equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 150 days after a
business combination, or (y) the date on which we complete a liquidation,
merger, capital stock exchange or other similar transaction that results in all
of our stockholders having the right to exchange their shares of common stock
for cash, securities or other property.
Administrative Support Agreement
We entered into an agreement, commencing on March 17, 2021, 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 (which payments will be accelerated if we consummate our initial
business combination prior to the end of our 24-month term, or $720,000 in the
aggregate). For the period from January 15, 2021 (inception) through December
31, 2021, we incurred $278,000 and paid $308,000 in fees for these services, of
which $30,000 is included in prepaid expenses in the accompanying balance sheet.
Related Party Loans
On January 28, 2021, the Sponsor agreed to loan us an aggregate of up to
$300,000 to cover expenses related to the initial public offering pursuant to a
promissory note (the "promissory note"). The promissory note was non-interest
bearing and payable on the earlier of December 31, 2021 or the completion of the
initial public offering. The outstanding balance under the promissory note of
$110,000 was repaid at the closing of the initial public offering on March 22,
2021. Borrowings under the promissory note are no longer available to us.
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. 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 $1,200,000 of such working capital 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. As of December 31, 2021, no working
capital loans were outstanding.
Due to Sponsor
The Sponsor advanced $675,038 to us in anticipation of the amount to be paid for
the purchase of additional private placement units in the event the
underwriters' exercise their over-allotment option. The advance is non-interest
bearing and due on demand. As of December 31, 2021, $34 remains outstanding.
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Other Contractual Obligations
Other than as described herein, we do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
Registration Rights Agreement
Pursuant to a registration rights agreement entered into on March 17, 2021, the
holders of the founder shares (including any shares of Class A common stock
issuable upon conversion of the founder shares), private placement units,
private placement shares, private placement warrants (and any shares of Class A
common stock issuable upon the exercise of the private placement warrants), and
securities that may be issued upon conversion of working capital loans are
entitled to registration rights requiring us to register such securities for
resale (in the case of the founder shares, only after conversion to Class A
common stock). The holders of these securities will be entitled to make up to
three demands, excluding short form demands, that we register such securities
for sale under the Securities Act. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of a business combination and rights to require us
to register for resale such securities pursuant to Rule 415 under the Securities
Act. Notwithstanding the foregoing, the underwriters may not exercise their
demand and "piggyback" registration rights after five and seven years after the
effective date of the registration statement related to the initial public
offering and may not exercise their demand rights on more than one occasion. 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 date of the initial public
offering to purchase up to 4,500,000 additional units to cover over-allotments,
if any, at the initial public offering price less the underwriting discounts and
commissions. On March 30, 2021, the underwriters elected to partially exercise
their over-allotment option to purchase an additional 3,601,509 units and
forfeited their option to purchase an additional 898,491 units.
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 we fail to complete a business
combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We 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 Topic
480, "Distinguishing Liabilities from Equity" ("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 placement warrants and the public warrants for periods
where no observable traded price was available are valued using a Monte Carlo
simulation. 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.
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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 ASC 480. 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' deficit. 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
sheet.
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.
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 financial statements.
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