Envoy Medical(COCH) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's analysis for Anzu Special Acquisition Corp I Item 1. Unaudited Condensed Financial Statements This section details Anzu Special Acquisition Corp I's unaudited condensed financial statements, covering balance sheets, operations, equity, cash flows, and explanatory notes Condensed Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Balance Sheet Highlights | Metric | March 31, 2021 (unaudited) | December 31, 2020 | | :---------------------------------------------- | :------------------------- | :---------------- | | Cash | $2,154,451 | $25,000 | | Prepaid expenses | $1,150,976 | — | | Deferred offering costs | — | $94,992 | | Cash and marketable securities in Trust Account | $420,007,841 | — | | Total Assets | $423,313,268 | $119,992 | | Accounts payable and accrued expenses | $82,625 | $95,693 | | Due to related party | $13,803 | — | | Warrant Liability | $26,772,000 | — | | Deferred underwriters' discount | $14,700,000 | — | | Total Liabilities | $41,568,428 | $95,693 | | Class A Common Stock subject to redemption | $376,744,830 | — | | Total Stockholders' Equity (Deficit) | $5,000,010 | $24,299 | Condensed Statement of Operations This section outlines the company's financial performance, including revenues, expenses, and net loss for the reporting period Condensed Statement of Operations (Three Months Ended March 31, 2021) | Metric | Amount | | :---------------------------------------------- | :------------ | | Formation and operating costs | $966,277 | | Loss from operations | $(966,277) | | Interest income | $7,841 | | Unrealized loss on net change in fair value of warrants | $(512,000) | | Total other income/(expense) | $(504,159) | | Net loss | $(1,470,436) | | Basic and diluted net loss per Class B common share | $(0.14) | Condensed Statement of Changes in Stockholders' Equity This section details changes in the company's stockholders' equity, reflecting capital transactions and net loss Changes in Stockholders' Equity (Three Months Ended March 31, 2021) | Item | Class A Common Stock (Shares) | Class A Common Stock (Amount) | Class B Common Stock (Shares) | Class B Common Stock (Amount) | Additional Paid-in Capital | Accumulated Deficit | Stockholders' Equity (Deficit) | | :---------------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :------------------------- | :------------------ | :----------------------------- | | Balance as of December 31, 2020 | — | — | 12,075,000 | $1,208 | $23,792 | $(701) | $24,299 | | Sale of 42,000,000 Units on March 4, 2021 | 42,000,000 | $4,200 | — | — | $406,135,800 | — | $406,140,000 | | Underwriters' discount | — | — | — | — | $(8,400,000) | — | $(8,400,000) | | Deferred underwriter Discount | — | — | — | — | $(14,700,000) | — | $(14,700,000) | | Other offering expenses | — | — | — | — | $(631,835) | — | $(631,835) | | Reclassification of issuance costs related to warrants | — | — | — | — | $782,812 | — | $782,812 | | Maximum number of redeemable shares | (37,674,483) | $(377) | — | — | $(376,744,453) | — | $(376,744,830) | | Net loss | — | — | — | — | — | $(1,470,436) | $(1,470,436) | | Balance as of March 31, 2021 | 4,325,517 | $3,823 | 12,075,000 | $1,208 | $6,466,116 | $(1,471,137) | $5,000,010 | Condensed Statement of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Statement of Cash Flows (Period from December 31, 2020 to March 31, 2021) | Cash Flow Activity | Amount | | :------------------------------------------------ | :------------ | | Net cash used in operating activities | $(1,248,975) | | Net cash used in investing activities | $(420,000,000) | | Net cash provided by financing activities | $423,378,426 | | Net change in cash | $(2,129,451) | | Cash, beginning of the period | $25,000 | | Cash, end of period | $2,154,451 | Notes to Condensed Financial Statements This section provides detailed explanatory notes supporting the condensed financial statements Note 1 - Organization and Business Operations This note describes Anzu Special Acquisition Corp I's formation, business purpose, IPO, and initial financing activities - Anzu Special Acquisition Corp I was incorporated on December 28, 2020, as a blank check company to pursue a business combination, specifically targeting high-quality businesses with transformative technologies for industrial applications[22][23][138] IPO and Private Placement Financing Summary | Event | Date | Units/Warrants | Price per Unit/Warrant | Gross Proceeds | | :---------------------------------- | :------------ | :------------- | :--------------------- | :------------- | | Initial Public Offering (IPO) | March 4, 2021 | 42,000,000 Units | $10.00 | $420,000,000 | | Over-allotment option (partial) | April 14, 2021| 500,000 Units | $10.00 | $5,000,000 | | Private Placement Warrants | March 4, 2021 | 12,400,000 Warrants | $1.00 | $12,400,000 | | Private Placement Warrants (add'l) | April 14, 2021| 100,000 Warrants | $1.00 | $100,000 | | Total Gross Proceeds | | | | $437,500,000 | - Following the IPO, $420,000,000 was placed in a U.S.-based Trust Account, with an additional $5,000,000 added after the over-allotment option exercise, to be used for a Business Combination or redemption of public shares[31] - The company does not expect to generate operating revenues until after the completion of a Business Combination, with non-operating income derived from interest on marketable securities in the Trust Account[24][142] - The company corrected its previously issued financial statements to classify warrants as liabilities measured at fair value, with changes reported in earnings, following SEC Staff guidance[43][44] Note 2 - Summary of Significant Accounting Policies This note outlines the company's key accounting practices, including fair value measurements and warrant treatment - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[48][49] Cash and Cash Equivalents | Category | March 31, 2021 | December 31, 2020 | | :-------------------------------------- | :------------- | :---------------- | | Cash held outside Trust Account | $2,154,451 | $25,000 | | Cash equivalents held in Trust Account | $420,007,841 | $0 | - Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of stockholders' equity, due to redemption rights outside the company's control[57] - Offering costs for the IPO totaled $23,731,835 as of March 31, 2021, including underwriting commissions and deferred underwriters' commissions, with a portion allocated to Public Warrants expensed immediately[58][59] Fair Value Hierarchy of Liabilities (March 31, 2021) | Liabilities | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | | :------------------------ | :---------------------------------------- | :-------------------------------------------- | :---------------------------------------------- | | Public Warrant liability | $— | $— | $14,000,000 | | Private Warrant liability | $— | $— | $12,772,000 | | Total | $— | $— | $26,772,000 | - Warrants are accounted for as derivative liabilities at fair value, re-measured each reporting period, with changes recognized in the statement of operations. The fair value is estimated using Monte-Carlo simulations with Level 3 inputs[72][118][119] Net Loss Per Common Share (Three Months Ended March 31, 2021) | Metric | Amount | | :------------------------------------------------------------------ | :----------- | | Net income allocable to Class A common shares subject to redemption | $7,841 | | Redeemable Class A Common Shares, Basic and Diluted | 42,000,000 | | Basic and Diluted net income per share, Redeemable Class A Common Shares | $0.00 | | Non-Redeemable Net Loss | $(1,478,277) | | Basic and diluted weighted average shares outstanding, common stock | 10,500,000 | | Basic and diluted net loss per share, common stock | $(0.14) | Note 3 - Initial Public Offering This note details the company's IPO, including unit structure, warrant terms, and redemption conditions - The IPO on March 4, 2021, involved the sale of 42,000,000 Units at $10.00 each, with an additional 500,000 Units issued on April 14, 2021, from the underwriters' partial over-allotment option[86][87] - Each Unit includes one Class A common stock and one-third of one Public Warrant, exercisable for one Class A common stock at $11.50 per share[86] - Public Warrants become exercisable on the later of 30 days after a Business Combination or 12 months from the IPO closing, and expire five years from Business Combination completion or earlier upon redemption/liquidation[88][89] - The company may redeem Public Warrants at $0.01 per warrant if the Class A common stock's Reference Value equals or exceeds $18.00 per share, or at $0.10 per warrant if the Reference Value equals or exceeds $10.00 per share (with cashless exercise option)[95][97][98] Note 4 - Private Placement This note describes the private placement of warrants to the Sponsor, outlining terms and restrictions - The company sold 12,400,000 Private Placement Warrants to the Sponsor at $1.00 per warrant, generating $12,400,000, concurrently with the IPO, and an additional 100,000 warrants on April 14, 2021[103] - Private Placement Warrants are identical to Public Warrants but are subject to transfer restrictions and are exercisable on a cashless basis and non-redeemable (with exceptions) as long as held by initial purchasers or permitted transferees[104][105] Note 5 - Related Party Transactions This note discloses transactions and agreements between the company and its related parties, including the Sponsor - The Sponsor initially purchased 7,187,500 Founder Shares, which increased to 12,075,000 shares through stock dividends, but 1,450,000 shares were forfeited on April 14, 2021, due to the unexercised over-allotment option[106][133] - Founder Shares and Class A common stock received upon conversion are subject to transfer restrictions until the earlier of one year post-Business Combination or specific stock price/liquidation events[107] - As of March 31, 2021, the company had no borrowings under a $300,000 promissory note from the Sponsor but owed $13,803 to a related party for offering expenses[110][111] - The company pays an affiliate of the Sponsor $40,521 per month for administrative services, commencing March 1, 2021[113] Note 6 - Warrant Liability This note explains the accounting for warrant liabilities, including fair value measurement and changes - The company has 26,666,666 warrants outstanding, classified as derivative liabilities due to adjustments to the exercise price based on a variable not fixed-for-fixed[114][115] Warrant Liability Changes | Item | Amount | | :---------------------------------------- | :------------ | | Warrant liabilities at March 4, 2021 | $26,260,000 | | Change in fair value of warrant liabilities | $512,000 | | Warrant liabilities at March 31, 2021 | $26,772,000 | - The fair value of the warrant liability is determined using a Monte Carlo simulation model, utilizing Level 3 inputs such as expected stock-price volatility, expected life, risk-free interest rate, and dividend yield[119] Note 7 - Commitments and Contingencies This note outlines the company's contractual obligations, including registration rights and underwriting discounts - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan warrants are entitled to registration rights, requiring the company to register such securities for resale[120] - The underwriters received a fixed underwriting discount of $8,500,000 and are entitled to a deferred discount of $14,875,000, payable only upon the completion of a Business Combination[124][145][153] Note 8 - Stockholders' Equity This note details the company's authorized and outstanding share capital, including Class A and Class B common stock - The company has authorized 1,000,000 preferred shares ($0.0001 par value), with none issued or outstanding as of March 31, 2021[125] - As of March 31, 2021, there were 4,325,517 Class A common shares issued and outstanding (excluding 37,674,483 shares subject to possible redemption) and 12,075,000 Class B common shares issued, with 1,450,000 Class B shares forfeited on April 14, 2021[126][127][133] - Holders of Class B common stock exclusively vote on director elections prior to a Business Combination; all common stock votes together on other matters. Class B shares automatically convert to Class A upon Business Combination completion[128][129] Note 9 - Subsequent Events This note reports significant events occurring after the balance sheet date, such as additional unit issuance and share forfeiture - On April 14, 2021, the company issued an additional 500,000 Units and 100,000 Private Placement Warrants due to the underwriters' partial over-allotment exercise, resulting in the Sponsor forfeiting 1,450,000 Class B common shares[133] - Public shares and Public Warrants underlying the Units began trading separately on April 21, 2021[134] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, liquidity, and capital resources Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements, which are subject to inherent risks and uncertainties - The report includes forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[137] Overview This section provides a general overview of Anzu Special Acquisition Corp I's business and strategic objectives - Anzu Special Acquisition Corp I is a blank check company incorporated on December 28, 2020, to effect a business combination, primarily targeting high-quality businesses with transformative technologies for industrial applications[138] - The company completed its IPO on March 4, 2021, and is actively reviewing opportunities for a Business Combination, intending to use proceeds from the IPO, Private Placement Warrants, capital stock, or debt[138][139] Results of Operations This section analyzes the company's financial results, focusing on net loss and non-operating income - For the three months ended March 31, 2021, the company reported a net loss of $(1,470,436), primarily due to organizational activities and IPO preparation[141] - The company does not expect operating revenues until after a Business Combination, generating non-operating income from interest on marketable securities in the Trust Account[142] Liquidity and Capital Resources This section discusses the company's cash position, working capital, and funding sources for future operations Liquidity and Capital Resources (March 31, 2021) | Metric | Amount | | :----------------- | :---------- | | Operating bank account | $2,154,451 | | Working capital | $3,208,999 | - The company's liquidity needs were met by a $25,000 payment from the Sponsor for Founder Shares and $212,487 in advances from a related party prior to the IPO[143] - Following the IPO and Private Placement Warrants sales, $425,000,000 was deposited into the Trust Account, with $2,154,451 held outside for working capital[145] - Substantially all funds in the Trust Account are intended for a Business Combination, with remaining proceeds used for target business operations or other acquisitions[146] Off-Balance Sheet Financing Arrangements This section confirms the absence of off-balance sheet arrangements as of the reporting date - As of March 31, 2021, the company had no off-balance sheet arrangements, special purpose entities, guaranteed debt, or non-financial asset purchases[151] Contractual Obligations This section details the company's commitments, including administrative fees and deferred underwriting discounts - The company has no long-term debt or lease obligations, but is committed to paying an affiliate of its Sponsor $40,251 monthly for administrative services until a Business Combination or liquidation[152] - A deferred underwriting discount of $14,875,000 is payable to underwriters from the Trust Account upon completion of a Business Combination[153] Critical Accounting Policies This section addresses management's assessment of critical accounting policies and estimates - Management has not identified any critical accounting policies[154] Recent Accounting Standards This section discusses the potential impact of recently issued accounting standards on the financial statements - Management believes that recently issued, but not yet effective, accounting standards would not have a material effect on the unaudited condensed financial statements if currently adopted[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Anzu Special Acquisition Corp I is exempt from providing market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[157] Item 4. Controls and Procedures This section reports on the effectiveness of disclosure controls and internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2021, due to a material weakness in internal control over financial reporting[159] - The material weakness was identified after reevaluating warrant accounting, classifying them as liabilities at fair value, following the SEC Staff Statement on SPAC warrants[161] - Despite the material weakness, management believes the unaudited condensed financial statements fairly present the company's financial condition, results of operations, and cash flows[160] - There were no changes in internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[162] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal and equity matters Item 1. Legal Proceedings This section confirms the absence of material legal proceedings against the company - The company is not currently involved in any material legal proceedings outside the ordinary course of business[164] Item 1A. Risk Factors This section updates key risks, including warrant accounting changes and internal control weaknesses - The company's warrants are now accounted for as liabilities, and changes in their fair value could adversely affect the market price of Class A common stock or make it more difficult to consummate an initial business combination[166][167] - A material weakness in internal control over financial reporting related to warrant accounting has been identified, which could impair the ability to accurately report financial results and adversely affect investor confidence[168][169][170] - The material weakness and change in warrant accounting may lead to litigation or other disputes, which could materially and adversely affect the business, operating results, or ability to complete a Business Combination[172][173] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered equity sales and the allocation of IPO proceeds Unregistered Sales This section describes the private sales of Founder Shares and Private Placement Warrants - The Sponsor purchased 7,187,500 Founder Shares for $25,000, which increased to 12,075,000 shares through stock dividends, but 1,450,000 shares were forfeited on April 14, 2021[174] - The company issued 12,400,000 Private Placement Warrants to the Sponsor for $12,400,000 on March 4, 2021, and an additional 100,000 warrants for $100,000 on April 14, 2021[175] - These sales were exempt from registration under Section 4(a)(2) of the Securities Act as transactions not involving a public offering[176] Use of Proceeds This section outlines how the company utilized proceeds from its initial public offering - The IPO generated aggregate gross proceeds of $425,000,000 from the sale of 42,000,000 Units and an additional 500,000 Units from the over-allotment option[178] - A total of $425,000,000 from the net proceeds of the Units and Private Placement Warrants was deposited into the Trust Account[181] - Transaction costs for the IPO amounted to $24,006,835, including underwriting discounts and other cash offering costs[181] - As of March 31, 2021, $2,154,451 of cash was held outside the Trust Account for working capital purposes[181] Item 3. Defaults Upon Senior Securities This section confirms that the company has not defaulted on any senior securities - There were no defaults upon senior securities[183] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[184] Item 5. Other Information This section reports that no other material information is required to be disclosed - No other information was reported[185] Item 6. Exhibits This section lists all supplementary documents and certifications filed with the report - The exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Specimen Unit/Stock/Warrant Certificates, Warrant Agreement, Letter Agreement, Investment Management Trust Agreement, Registration Rights Agreement, Administrative Services Agreement, Sponsor Warrant Purchase Agreement, Form of Indemnity Agreement, and CEO/CFO Certifications[187][189] Signatures This section contains the official signatures of the company's Chief Executive Officer and Chief Financial Officer - The report was signed by Dr. Whitney Haring-Smith, Chief Executive Officer, and John W. Joy, Chief Financial Officer, on May 17, 2021[194]