Part I [Business](index=4&type=section&id=Item%201.%20Business) Arrowroot Acquisition Corp. is a blank check company targeting enterprise software, holding $287.5 million in trust with a March 2023 business combination deadline - The company is a blank check company formed to effect a merger, share exchange, asset acquisition, or similar business combination with one or more businesses, with a focus on the **enterprise software sector**[15](index=15&type=chunk)[17](index=17&type=chunk)[22](index=22&type=chunk) IPO Details | Metric | Value | | :--- | :--- | | IPO Date | March 4, 2021 | | Units Offered | 28,750,000 | | Price per Unit | $10.00 | | Gross Proceeds from Units | $287,500,000 | | Private Placement Warrants | 8,250,000 at $1.00 each | | Amount Placed in Trust Account | $287,500,000 | - The company must complete an initial business combination with a fair market value of at least **80% of the assets held in the trust account** at the time of the agreement[35](index=35&type=chunk) - If a business combination is not completed by **March 4, 2023** (24 months from the IPO), the company will cease operations and redeem public shares, leading to liquidation[71](index=71&type=chunk) - The company pays its sponsor's affiliate **$20,000 per month** for office space, secretarial, and administrative services[88](index=88&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks as a blank check entity, including liquidation risk, high redemptions, and internal control weaknesses - The company's independent registered public accounting firm has expressed substantial doubt about its ability to continue as a **going concern**, as it will liquidate if an initial business combination is not completed by **March 4, 2023**[108](index=108&type=chunk)[110](index=110&type=chunk) - The ability of public stockholders to redeem a large number of shares may make the company's financial condition unattractive to targets, potentially hindering or preventing a desirable business combination[124](index=124&type=chunk)[127](index=127&type=chunk) - The search for a business combination may be adversely affected by the COVID-19 pandemic and its impact on financial markets and travel[133](index=133&type=chunk)[134](index=134&type=chunk) - A **material weakness in internal control over financial reporting** was identified related to the accounting for complex financial instruments, which could affect the timely and accurate reporting of financial results[271](index=271&type=chunk)[272](index=272&type=chunk) - Warrants are accounted for as **liabilities**, and changes in their fair value could materially affect financial results, causing quarterly fluctuations[277](index=277&type=chunk)[278](index=278&type=chunk) - The sponsor, executive officers, and directors will lose their entire investment if a business combination is not completed, creating a potential conflict of interest in selecting a target[265](index=265&type=chunk)[267](index=267&type=chunk) [Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[292](index=292&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) The company's executive offices are provided by an affiliate of its sponsor for a monthly fee of $20,000 - The company uses office space provided by an affiliate of its sponsor and pays **$20,000 per month** for office space, secretarial, and administrative services[292](index=292&type=chunk) [Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) There is no material litigation pending against the company or its management - To the knowledge of management, there is no litigation currently pending or contemplated against the company or its officers and directors[293](index=293&type=chunk) [Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[293](index=293&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's Nasdaq-listed securities, limited record holders, no dividend policy, and the $287.5 million IPO proceeds in trust Nasdaq Trading Symbols | Security | Trading Symbol | | :--- | :--- | | Units | ARRWU | | Class A common stock | ARRW | | Warrants | ARRWW | - As of December 31, 2021, there was **1 holder of record for units**, **1 for Class A common stock**, **4 for Class B common stock**, and **2 for warrants**[297](index=297&type=chunk) - The company has not paid any cash dividends and does not intend to prior to completing its initial business combination[298](index=298&type=chunk) - Net proceeds from the IPO and private placement totaling **$287,500,000** were placed in a trust account[300](index=300&type=chunk)[302](index=302&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The pre-operational company reported $4.84 million net income in 2021, driven by warrant fair value changes, facing substantial going concern risk due to its March 2023 liquidation deadline Statement of Operations Summary | Metric | For the year ended Dec 31, 2021 (USD) | | :--- | :--- | | Net Income | $4,844,863 | | Change in fair value of warrant liabilities (Income) | $8,680,000 | | General and administrative expenses | ($3,858,771) | | Interest earned on Trust Account | $23,634 | - As of December 31, 2021, the company had **$262,671 in cash** held outside the trust account and **$287,523,634 in the trust account**[311](index=311&type=chunk)[312](index=312&type=chunk) - Management has determined there is substantial doubt about the company's ability to continue as a **going concern** due to the mandatory liquidation date of **March 4, 2023**, if a business combination is not completed[316](index=316&type=chunk) - On December 29, 2021, the sponsor provided a convertible promissory note of up to **$1.5 million** to fund working capital, with **$750,000 drawn** upon execution[314](index=314&type=chunk) - Critical accounting policies include classifying warrants as liabilities measured at fair value and Class A common stock subject to redemption as temporary equity[321](index=321&type=chunk)[322](index=322&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=55&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any accounting or financial disclosure matters - None[326](index=326&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management concluded disclosure controls were ineffective as of December 31, 2021, due to a material weakness in accounting for complex financial instruments, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of December 31, 2021[327](index=327&type=chunk) - The ineffectiveness is due to a **material weakness in internal control over financial reporting** related to the company's accounting for complex financial instruments[327](index=327&type=chunk) - Management intends to remediate the weakness by expanding its review process for complex securities, enhancing access to accounting literature, and consulting with third-party professionals[328](index=328&type=chunk)[330](index=330&type=chunk) [Other Information](index=56&type=section&id=Item%209B.%20Other%20Information) Key events include a board resignation, a new director appointment, and an additional $200,000 draw from the sponsor's promissory note - Gaurav Dhillon resigned from the board of directors, effective **October 29, 2021**[331](index=331&type=chunk) - Peter Kuper was appointed to the board of directors and as chair of the Audit Committee, effective **March 4, 2022**[332](index=332&type=chunk) - On March 17, 2022, the company drew down an additional **$200,000** from the sponsor's promissory note, leaving **$550,000 available**[334](index=334&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=57&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section outlines the company's leadership, board independence, committee structures, code of ethics, and potential conflicts of interest Directors and Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Matthew Safaii | 42 | Chief Executive Officer and Chairman of the Board | | Thomas Olivier | 54 | President, Chief Financial Officer and Vice Chairman of the Board | | Dixon Doll | 79 | Director | | Will Semple | 44 | Director | | Peter Kuper | 52 | Director | - The board of directors has determined that Dixon Doll, Will Semple, and Peter Kuper are **independent directors** under Nasdaq listing standards[347](index=347&type=chunk) - The board has three standing committees: an **audit committee** (chaired by Peter Kuper), a **compensation committee** (chaired by Will Semple), and a **nominating and corporate governance committee** (chaired by Dixon Doll)[348](index=348&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk)[354](index=354&type=chunk) - The company has adopted a Code of Ethics applicable to its directors, officers, and employees[356](index=356&type=chunk) - The company acknowledges potential conflicts of interest, as officers and directors have fiduciary or contractual obligations to other entities and may be required to present business opportunities to them before presenting to the company[359](index=359&type=chunk) [Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) No cash compensation was paid to executive officers or directors, with non-employee directors receiving founder shares and the sponsor receiving a monthly administrative fee - No cash compensation has been paid to any directors or executive officers for services rendered to the company[375](index=375&type=chunk) - The company pays its sponsor **$20,000 per month** for office space, secretarial, and administrative services, commencing March 2, 2021[375](index=375&type=chunk) - In January 2021, non-employee directors Dixon Doll, Will Semple, and Gaurav Dhillon each received **40,000 founder shares**[375](index=375&type=chunk) - The sponsor, executive officers, and directors are reimbursed for out-of-pocket expenses incurred in connection with activities on the company's behalf[375](index=375&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=65&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details beneficial ownership, with the sponsor holding 98.33% of Class B common stock and three entities owning over 5% of Class A common stock Beneficial Ownership of Class B Common Stock | Beneficial Owner | Class B Shares Owned | % of Class B | Total Voting Control % | | :--- | :--- | :--- | :--- | | Arrowroot Acquisition LLC (Sponsor) | 7,067,500 | 98.33% | 19.67% | | Matthew Safaii (CEO) | 7,067,500 (1) | 98.33% | 19.67% | | Thomas Olivier (CFO) | 7,067,500 (1) | 98.33% | 19.67% | | All officers and directors as a group | 7,187,500 | 99.44% | 19.78% | *Note (1): Shares are held by the sponsor, of which Messrs. Safaii and Olivier are managers with shared voting and investment discretion.* - Three entities are reported as beneficial owners of more than **5% of Class A common stock**: Linden Capital L.P. (**5.30%**), HGC Investment Management Inc. (**5.86%**), and Periscope Capital Inc. (**5.42%**)[381](index=381&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=66&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section outlines related party transactions, including founder share purchases, administrative fees, and a convertible promissory note from the sponsor, confirming director independence - The sponsor purchased **7,187,500 founder shares** for an aggregate price of **$30,000**[386](index=386&type=chunk) - The company pays an affiliate of the sponsor **$20,000 per month** for office space and administrative services[388](index=388&type=chunk) - The sponsor provided a convertible promissory note for up to **$1,500,000** to fund working capital. As of Dec 31, 2021, **$750,000 was outstanding**. The note is convertible into warrants at **$1.00 per warrant** upon a business combination[390](index=390&type=chunk) - The company has a policy for the review and approval of related party transactions by its audit committee. If a business combination with an affiliate is pursued, an independent fairness opinion will be obtained[394](index=394&type=chunk)[395](index=395&type=chunk) [Principal Accountant Fees and Services](index=68&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section summarizes audit and tax fees paid to WithumSmith+Brown, PC for 2021, noting all services are pre-approved by the audit committee Principal Accountant Fees | Fee Type | For the year ended Dec 31, 2021 (USD) | For the period from Nov 5, 2020 (inception) to Dec 31, 2020 (USD) | | :--- | :--- | :--- | | Audit Fees | ~$131,000 | $18,025 | | Tax Fees | ~$5,400 | $0 | | All Other Fees | $0 | $0 | - The audit committee pre-approves all auditing services and permitted non-audit services to be performed by the auditors[399](index=399&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=70&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K, including financial statements and an index of exhibits - This section provides an index of all financial statements and exhibits filed with the annual report, including key corporate governance and financing documents[401](index=401&type=chunk)[402](index=402&type=chunk)[405](index=405&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=74&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion on the financial statements but included a 'Going Concern' paragraph due to the company's mandatory March 2023 liquidation date - The auditor, WithumSmith+Brown, PC, issued an **unqualified opinion** on the financial statements[415](index=415&type=chunk) - The audit report contains a **'Going Concern' paragraph**, noting that the company's mandatory liquidation date of **March 4, 2023**, raises substantial doubt about its ability to continue as a going concern[416](index=416&type=chunk) [Financial Statements Data](index=75&type=section&id=Financial%20Statements%20Data) The financial statements show total assets of $288.3 million, total liabilities of $24.0 million, a stockholders' deficit of $23.2 million, and a 2021 net income of $4.8 million primarily from warrant fair value changes Balance Sheet Highlights (as of December 31, 2021) | Metric | Amount (USD) | | :--- | :--- | | **Assets** | | | Cash and marketable securities held in trust account | 287,523,634 | | **Total Assets** | **288,300,858** | | **Liabilities & Equity** | | | Warrant liabilities | 11,991,250 | | Deferred underwriting fee payable | 10,062,500 | | **Total Liabilities** | **23,981,661** | | Class A common stock subject to possible redemption | 287,500,000 | | **Total Stockholders' (Deficit)** | **(23,180,803)** | Statement of Operations Highlights (For the year ended December 31, 2021) | Metric | Amount (USD) | | :--- | :--- | | General and administrative expenses | (3,858,771) | | Change in fair value of warrant liabilities | 8,680,000 | | Interest earned on Trust Account | 23,634 | | **Net income** | **4,844,863** | [Notes to Financial Statements](index=79&type=section&id=Notes%20to%20Financial%20Statements) The notes detail the company's blank check nature, going concern risk, accounting policies for warrants and redeemable stock, related-party transactions, deferred underwriting fees, and warrant valuation methodologies - Note 1: The company must complete a Business Combination by **March 4, 2023**, or it will be required to liquidate. This condition raises substantial doubt about its ability to continue as a **going concern**[450](index=450&type=chunk)[455](index=455&type=chunk) - Note 2: Class A common stock subject to redemption is classified as **temporary equity**. Warrants are classified as **liabilities** and re-measured to fair value each reporting period[463](index=463&type=chunk)[467](index=467&type=chunk) - Note 5: The company pays its sponsor **$20,000/month** for administrative support and has a convertible promissory note with the sponsor for up to **$1.5 million**, of which **$750,000 was outstanding** at year-end[486](index=486&type=chunk)[489](index=489&type=chunk) - Note 6: A deferred underwriting fee of **$10,062,500** is payable from the trust account upon completion of a Business Combination[492](index=492&type=chunk) - Note 10: The fair value of warrant liabilities was **$11,991,250** as of Dec 31, 2021. Public warrants are a **Level 1 measurement** (market price), while Private Warrants are a **Level 3 measurement** (Modified Black Scholes model)[516](index=516&type=chunk)[519](index=519&type=chunk)