References to the "Company," "our," "us" or "we" refer to Learn CW Investment
Corporation. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
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. 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 "Cautionary Note
Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K.
15
--------------------------------------------------------------------------------
Table of Contents
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on February 2, 2021, for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar Business
Combination with one or more businesses. While we may pursue an initial Business
Combination target in any industry or geographic location, we intend to focus
our search for a target business operating in the media, entertainment and
technology industries. Our Sponsor, Learn CW Investment Corporation, a Cayman
Islands limited liability company. We intend to effectuate the Business
Combination using cash from the proceeds of our initial public offering and the
private placement of the private placement warrants, our shares, debt or a
combination of cash, equity 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.
Our registration statement for our IPO was declared effective on October 7,
2021. On October 13, 2021, we consummated our IPO of 23,000,000 units, including
the issuance of 3,000,000 units as a result of the underwriter's full exercise
of their over-allotment option, at $10.00 per Unit, generating gross proceeds of
$230,000,000. Each Unit consisted of one Public Share and one-half of one
redeemable Warrant. Each whole Public Warrant entitles the holder to purchase
one Public Share for $11.50 per share, subject to adjustment. Simultaneously
with the closing of the IPO, the Company consummated the sale of 7,146,000
warrants at a price of $1.00 per Private Placement Warrant in a private
placement to CWAM LC Sponsor, LLC (the "Sponsor") generating gross proceeds of
$7,146,000.
Following the closing of the IPO on October 13, 2021, $232,300,000 ($10.10 per
Unit) from the net proceeds of the sale of the Units in the Initial Public
Offering and the sale of the Private Placement Warrants was placed in a
non-interest bearing Trust Account (the "Trust Account"), located in the United
States at a nationally recognized financial institution, with U.S. Bank National
Association acting as trustee, and invested only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
having a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act which
invest only in direct U.S. government treasury obligations. Pursuant to the
trust agreement, the trustee will not be permitted to invest in other securities
or assets. The Trust Account is intended as a holding place for funds pending
the earliest to occur of either: (i) the completion of the initial Business
Combination; (ii) the redemption of any public shares properly tendered in
connection with a stockholder vote to amend our Amended and Restated Memorandum
and Articles of Association (A) to modify the substance or timing of our
obligation to provide holders of the Class A ordinary shares the right to have
their shares redeemed in connection with the initial Business Combination or to
redeem 100% of the public shares if the Company does not complete the initial
Business Combination within 18 months from the closing of this offering or (B)
with respect to any other provision relating to the rights of holders of the
Class A ordinary shares; or (iii) absent the completing an initial Business
Combination within 18 months from the closing of this offering, the return of
the funds held in the Trust Account to the public stockholders as part of the
redemption of the public shares. If the Company does not invest the proceeds as
discussed above, the Company may be deemed to be subject to the Investment
Company Act.
If we are unable to complete the Business Combination within the Combination
Period or during any Extension Period, we will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but no
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, divided by the number of then outstanding public shares, which
redemption will completely extinguish public Shareholder's rights as
shareholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining shareholders
and the Company's board of directors, proceed to commence a voluntary
liquidation and thereby a formal dissolution of the Company, subject in each
case to its obligations under Cayman Islands law to provide for claims of
creditors and the requirements of applicable law.
Results of Operations
Our only activities from inception through December 31, 2022, were those related
to our formation, the preparation for our Initial Public Offering and, since the
closing of the IPO, the search for a prospective initial Business Combination.
We have neither engaged in any operations nor generated any operating revenues
to date. We will not generate any operating revenues until after completion of
the Business Combination, at the earliest. We incurred expenses as a result of
being a public company (including for legal, financial reporting, accounting and
auditing compliance), as well as for expenses in connection with searching for a
prospective initial Business Combination.
16
--------------------------------------------------------------------------------
Table of Contents
For the year ended December 31, 2022, we had a net income of $9,891,490, which
consisted of operating expenses of $1,802,357, a change in fair value of the
warrant liability of $8,419,283, and interest income related to the Trust
Account of $3,274,564.
For the period ended December 31, 2021, we had a net income of $9,486,606, which
consisted of operating expenses of $453,467, a change in fair value of the
warrant liability of $12,039,966, interest income of $3,712, transaction costs
allocable to warrant liability of $781,595 and loss on issuance of private
placement warrants of $1,322,010.
Liquidity, Capital Resources and Going Concern
On October 13, 2021, the Company consummated the Initial Public Offering of
20,000,000 units, generating gross proceeds of $200,000,000. Simultaneously with
the closing of the Initial Public Offering, the Company consummated a private
placement of 7,146,000 Warrants at a price of $1.00 per Private Placement
Warrant to its Sponsor, generating gross proceeds of $7,146,000. Simultaneously,
the underwriters exercised the over-allotment option and purchased an additional
3,000,000 Over-Allotment Units, generating an aggregate of gross proceeds of
$30,000,000.
Following the consummation of the Initial Public Offering on October 13, 2021,
an amount of $232,300,000 ($10.10 per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering was placed in the Trust Account.
Transaction costs amounted to $12,375,591 consisting of $2,446,000 of
underwriting fees, $9,780,500 of deferred underwriting fees and $930,686 of
other costs.
As of December 31, 2022 and 2021, we had approximately $235,578,275 and
$232,303,712 cash held in the Trust Account, respectively. We intend to use
substantially all of the funds held in the Trust Account. To the extent that our
shares 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 post-Business
Combination entity, make other acquisitions and pursue our growth strategies.
As of December 31, 2022 and 2021, we had cash of $748,857 and $237,363 held
outside of the Trust Account, respectively. We intend to use the funds held
outside of the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, properties, or similar locations of prospective
target businesses or their representative or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or our officers and directors may
provide us working capital loans ("Working Capital Loans"). On May 3, 2022, the
Sponsor confirmed to the Company that it will provide any such Working Capital
Loans for at least the next twelve months. On May 5, 2022, the Company drew down
and received cash proceeds of $1,050,000. The outstanding balance under this
loan is $1,050,000 as of December 31, 2022. If we complete a Business
Combination, we may repay such loaned amounts out of the proceeds of the Trust
Account released to us. 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 $1,500,000 of such loans may be convertible into
warrants, at a price of $1.00 per warrant, at the option of the lender. The
warrants would be identical to the Private Placement Warrants.
In connection with the Company's assessment of going concern considerations in
accordance with the authoritative guidance in Financial Accounting Standard
Board ("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern." The
Company initially had until April 13, 2023, 18 months from the closing of the
IPO, to consummate a Business Combination. On April 13, 2023, we extended the
period of time to consummate the Business Combination by one month, from April
13, 2023 to May 13, 2023. In connection with such extension, an aggregate of
$115,000 was deposited in the Trust Account. It is uncertain that the Company
will be able to consummate a Business Combination by the specified period. If a
Business Combination is not consummated by May 13, 2023 and the Company decides
not to extend the period of time to consummate a Business Combination, there
will be a mandatory liquidation and subsequent dissolution.
17
--------------------------------------------------------------------------------
Table of Contents
The Company's evaluation of its working capital, along with, the liquidity
condition and date for mandatory liquidation and subsequent dissolution raise
substantial doubt about the Company's ability to continue as a going concern one
year from the date that these financial statements are issued. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
RELATED PARTY TRANSACTIONS
Founder Shares
On February 2, 2021, the Company issued an aggregate of 7,187,000 shares of
Class B ordinary shares (the "Founder Shares") to the Sponsor for an aggregate
purchase price of $25,000. On August 20, 2021 and September 9, 2021, the Sponsor
effected a surrender of 1,287,000 Class B ordinary shares and 150,000 Class B
ordinary shares, respectively, to the Company for no consideration, resulting in
a decrease in the total number of Class B ordinary shares outstanding from
7,187,000 to 5,750,000. The Founder Shares included an aggregate of up to
750,000 shares subject to forfeiture by the Sponsor to the extent that the
underwriters' over-allotment is not exercised in full or in part. The
underwriter's over-allotment option was exercised in full on October 13, 2021,
and these shares are no longer subject to forfeiture.
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares
until two years after the completion of a Business Combination.
Promissory Note - Related Party
On February 18, 2021, the Sponsor agreed to loan the Company an aggregate of up
to $300,000 to cover expenses related to the Proposed Offering pursuant to a
promissory note (the "Note"). On March 25, 2021, the Company borrowed $300,000
on the Note to cover expenses related to the Proposed Offering. On September 7,
2021, the Sponsor and the company agreed to amend and restate the Note (the
"Amended and Restated Note") to extend the maturity date. The Amended and
Restated Note was non-interest bearing and was paid in full in October 2021.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination,
the sponsor, an affiliate of the sponsor, or the Company's officers and
directors may, but are not obligated to, loan the Company funds as may be
required (the "Working Capital Loans"). Such Working Capital Loans would be
evidenced by promissory notes. The notes would either be repaid upon
consummation of a Business Combination, without interest, or, at the lender's
discretion, up to $1,500,000 of notes may be converted upon consummation of a
Business Combination into warrants at a price of $1.00 per warrant. The warrants
will be identical to the Private Placement Warrants. In the event that a
Business Combination does not close, the Company 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. As of December 31, 2022 and 2021, the Company has drawn $1,050,000 and $0
on this loan, respectively.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of December 31, 2022 and 2021, 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 other than obligations disclosed
herein.
18
--------------------------------------------------------------------------------
Table of Contents
Contractual Obligations
Registration Rights Agreement
The holders of the Founder Shares, Private Placement Shares, and any shares that
may be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon conversion of the Founder Shares) were entitled to
registration rights pursuant to a registration rights agreement signed upon the
effective date of the Initial Public Offering. The holders of these securities
were entitled to make up to three demands, excluding short form demands, that we
register such securities. In addition, the holders had certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,780,500
in the aggregate, and a discretionary deferred fee of $2,000,000. The deferred
fee will become payable to the underwriter 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.
Softbank and Sponsors Investors Investment
A fund managed by SB Management Limited, a 100% directly owned subsidiary of
SoftBank Group Corp., and certain members of our Sponsor, in the aggregate, have
purchased $100.0 million of units (or 10,000,000 units) and $7.7 million of
units (or 770,000 units), respectively, in the Initial Public Offering. The
underwriter is entitled to an underwriting discount of $0.35 per unit for every
unit purchased by Softbank, the payment of which has been deferred and will
become payable to the underwriter from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination. The
underwriter has not received any underwritten discount for any unit purchased by
the sponsor investors.
Critical Accounting Estimates
The preparation of the financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America ("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 income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following critical accounting
estimates affecting our financial statements:
Derivative Financial Instruments
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 480,
"Distinguishing Liabilities from Equity" ("ASC 480"), and ASC 815, "Derivatives
and Hedging" ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own ordinary shares, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the warrants was estimated using a
Monte Carlo simulation model. The more significant estimates made by management
in these fair value determinations are around the inputs used in the fair value
model, with volatility being the most judgmental of those inputs. A 1% increase
in volatility input would increase the Company's warrant liability by
approximately $1,700,000.
19
--------------------------------------------------------------------------------
Table of Contents
Recently Issued Accounting Standards
In August 2020, FASB issued 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. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption
permitted. The Company is currently evaluating the impact this guidance will
have on its financial statements.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. Section 102(b)(1) of the JOBS Act exempts emerging
growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a
Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the
new or revised financial accounting standards. The JOBS Act provides that a
company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an
election to opt out is irrevocable. We have elected to irrevocably opt out of
such extended transition period, which means that when a standard is issued or
revised and it has different application dates for public or private companies,
we will adopt the new or revised standard at the time public companies adopt the
new or revised standard. This may make comparison of our financial statements
with another emerging growth company that has not opted out of using the
extended transition period difficult or impossible because of the potential
differences in accountant standards used.
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, (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 (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.
© Edgar Online, source Glimpses