References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Colicity Inc. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to X-icity Holdings Corporation. 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.
Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended ("Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report including, without limitation, statements in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding 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. 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
Registration Statement on Form S-1 (Registration No. 333-252811) filed with the
U.S. Securities and Exchange Commission ("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. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly valued our Class A common
stock subject to possible redemption. We previously determined the Class A
common stock subject to possible redemption to be equal to the redemption value
of $10.00 per share of Class A common stock while also taking into consideration
a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Class A common stock issued during the Initial
Public Offering can be redeemed or become redeemable subject to the occurrence
of future events considered outside of the Company's control. Therefore,
management concluded that the temporary equity should include all Class A common
stock subject to possible redemption, resulting in the Class A common stock
subject to possible redemption being equal to their redemption value. As a
result, management has noted a reclassification error related to temporary
equity and permanent equity. 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. In addition to the change in
presentation for the Class A common stock subject to possible redemption, the
Company also restated its income (loss) per share calculated to allocate net
income (loss) pro rata to Class A and Class B common stock. This presentation
contemplates a Business Combination as the most likely outcome, in which case,
both classes of common stock share pro rata in the income (loss) of the Company.
There is no impact to the reported amounts for total assets, total liabilities,
cash flows, or net income (loss).
Overview
We are a blank check company formed under the laws of the State of Delaware on
October 19, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses (the "Business Combination"). We intend
to effectuate our Business Combination utilizing cash from the proceeds of the
Initial Public Offering (as defined below), the partial exercise of the
Over-Allotment Option (as defined below) and the sale of the Private Placement
Warrants (as defined below), our capital stock, debt or a combination of cash,
stock and debt. Although we are not limited to a particular industry or sector
for purposes of consummating a Business Combination, we intend to initially
focus our search on identifying a prospective target business in the technology,
media and telecommunications industries in the United States and other developed
countries. We are an emerging growth company and, as such, we are subject to all
of the risks associated with emerging growth companies.
Our registration statement for the Initial Public Offering was declared
effective on February 23, 2021. On February 26, 2021, we consummated the Initial
Public Offering of 34,500,000 units (the "Units" and the shares of Class A
common stock included in the Units, the "Public Shares"), including the
underwriters' exercise of their full over-allotment option of 4,500,000 units,
at $10.00 per Unit ("Over-Allotment Option"), generating gross proceeds
of $345.0 million (the "Initial Public Offering"), and incurring offering costs
of approximately $18.8 million, inclusive of approximately $11.8 million in
deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we completed the
private sale (the "Private Placement") of an aggregate of 5,933,333 warrants
(the "Private Placement Warrants") to our Sponsor, X-icity Holdings Corporation,
at a purchase price of $1.50 per Private Placement Warrant, generating gross
proceeds to the Company of $8.9 million.
Upon the closing of the Initial Public Offering and the Private Placement, a
total of $345.0 million was placed in a trust account ("Trust Account") and we
had $2.0 million of cash held outside of the Trust Account, after payment of
costs related to the Initial Public Offering, and available for working capital
purposes. We incurred $18.9 million in transaction costs, including $6.7 million
of underwriting fees, $11.8 million of deferred underwriting fees and $0.3
million of other costs.
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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 February 26, 2023 (the "Combination
Period"), we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously
released to us (less taxes payable and up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding Public Shares,
which redemption will completely extinguish public stockholders' rights as
stockholders (including the right to receive further liquidation distributions,
if any) and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of
directors, liquidate and dissolve, subject, in the case of clauses (ii) and
(iii), to our obligations under Delaware law to provide for claims of creditors
and in all cases subject to the other requirements of applicable law.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from October 19, 2020 (inception) through September 30,
2021, were organizational activities, those necessary to prepare for the Initial
Public Offering and, after our Initial Public Offering, identifying a target
company for a Business Combination. We do not expect to generate any operating
revenues until after the completion of a Business Combination. We expect to
generate non-operating income in the form of interest income on marketable
securities held after the Initial Public Offering. 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 $9.3 million
which primarily consists of $9.5 million of changes in fair value of warrant
liabilities and interest income on marketable securities held in the Trust
Account of $4,440, partially offset by operating costs of $0.2 million. For the
nine months ended September 30, 2021, we had net income of $5.6 million which
primarily consists of $6.7 million of changes in fair value of warrant
liabilities and interest income on marketable securities held in the Trust
Account of $23,876, partially offset by operating costs of $0.7 million and
warrant offering costs of $0.5 million.
Liquidity and Capital Resources
As of September 30, 2021, we had $1.0 million of cash and working capital of
$1.2 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through the Sponsor's payment of $25,000 of our liabilities in
exchange for issuance of 7,187,500 shares of the Company's Class B common stock,
par value $0.0001 per share, (the "Founder Shares"), and a promissory note (the
"Note") issued by the Sponsor. We repaid the Note on February 26, 2021.
On February 26, 2021, we consummated the Initial Public Offering of 34,500,000
Units, including the underwriters' exercise of their full Over-Allotment Option,
generating gross proceeds of $345.0 million. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 5,933,333 Private
Placement Warrants to our Sponsor at a purchase price of $1.50 per Private
Placement Warrant, generating gross proceeds to the Company of $8.9 million.
Upon the closing of the Initial Public Offering and the Private Placement, a
total of $345.0 million was placed in the Trust Account and we had $2.0 million
of cash held outside of the Trust Account, after payment of costs related to the
Initial Public Offering, and available for working capital purposes. We incurred
$18.9 million in transaction costs, including $6.7 million of underwriting fees,
$11.8 million of deferred underwriting fees and $0.3 million of other costs.
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As of September 30, 2021, we had marketable securities held in the Trust Account
of $345,023,876. We intend to utilize substantially all of the funds held in the
Trust Account, including any amounts representing interest earned on funds in
the Trust Account (less deferred underwriting commissions and 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.
For the nine months ended September 30, 2021, cash used in operating activities
was $1.0 million. Net income of $5.6 million was primarily impacted by the
change in fair value of warrant liabilities of $6.7 million, interest earned on
marketable securities held in the Trust Account of $23,876 and changes in
operating assets and liabilities which used $0.2 million of cash from operating
activities, partially offset by deferred warrant offering costs of $0.3 million.
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 initial stockholders 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 $1.5
million of such loans may be convertible into warrants identical to the Private
Placement Warrants, at a price of $1.00 per warrant at the option of the lender.
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. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term cash obligations, other than the deferred underwriting
commissions described below and an agreement to pay our Sponsor a monthly fee of
$10,000 for office space, administrative and support services. We began
incurring these fees on February 23, 2021 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination or our
liquidation.
Registration Rights
The holders of Founder Shares, Private Placement Warrants, and securities that
may be issued upon conversion of working capital loans, if any, will be entitled
to registration rights pursuant to a registration rights agreement dated as of
February 23, 2021. These holders are 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
The underwriters were granted a 45-day option from the date of the final
prospectus relating to the Initial Public Offering to purchase up to 4,500,000
additional Units to cover over-allotments, if any, at $10.00 per Unit. The
underwriters exercised their full Over-Allotment Option concurrent with the
consummation of the Initial Public Offering on February 26, 2021.
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The underwriters were paid an underwriting discount of $0.20 per unit (excluding
the 400,000 units purchased by Pendrell and an affiliate of Craig McCaw as well
as 517,500 shares purchased by certain other parties (total of 917,500 shares)
with respect to which no underwriting discount is payable), or $6,716,500 in the
aggregate, upon the closing of the Initial Public Offering. $0.35 per unit
(excluding the 400,000 units purchased by Pendrell and an affiliate of Craig
McCaw as well as 517,500 shares purchased by certain other parties (total of
917,500 shares) with respect to which no underwriting discount is payable), or
$11,753,875 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
the Company completes 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 as a critical accounting policy:
Class A Common Stock Subject to Possible Redemption
All of the 34,500,000 shares of Class A common stock included in the Units sold
as part of the Initial Public Offering contain a redemption feature as described
in the prospectus for the public offering. In accordance with the Financial
Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC")
Topic 480, Distinguishing Liabilities from Equity, redemption provisions not
solely within the control of Colicity Inc. require the security to be classified
outside of permanent equity. As a result, all of our Class A common stock is
classified as temporary equity.
Our amended and restated certificate of incorporation provides a minimum net
tangible asset threshold of $5,000,001. However, we believe classifying all of
our common stock subject to possible redemption as temporary equity does not
invalidate the $5 million requirement as we will not redeem our Class A common
stock in an amount that would cause our net tangible assets to be less than
$5,000,001.
Public and Private Placement Warrants
We account for the warrants issued in connection with our Initial Public
Offering in accordance with ASC Topic 815-40, Derivatives and Hedging-Contracts
in Entity's Own Equity ("ASC 815"), under which we have determined that the
warrants do not meet the criteria for equity classification and must be recorded
as liabilities. As the warrants meet the definition of a derivative as
contemplated in ASC 815, the warrants are measured at fair value at inception
and at each reporting date, with changes in fair value recognized in the
statement of operations in the period of the change.
JOBS Act
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, the 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 Public Company Accounting Oversight Board 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 (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our Initial Public Offering or until we are no longer an
"emerging growth company," whichever is earlier.
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Recent accounting standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") 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) ("ASU 2020-06")
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity and amends the diluted earnings per share guidance,
including the requirement to use the if-converted method for all convertible
instruments. As an emerging growth company under the JOBS Act, the provisions of
ASU 2020-06 are effective for Colicity beginning on January 1, 2024 and should
be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. We are currently evaluating the impact
of this standard on our financial statements but do not expect the adoption of
ASU 2020-06 to have a material effect 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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COLICITY INC. 
