Envoy Medical(COCH) - 2021 Q4 - Annual Report

PART I This section provides an overview of the company's business, key risk factors, and general corporate information Item 1. Business The company is a blank check company (SPAC) focused on acquiring businesses with transformative industrial technologies within 24 months of its IPO - The company is a blank check company formed to effect a business combination, with an intended focus on transformative technologies for industrial applications[36][39] - On December 6, 2021, the company entered into Forward Purchase Agreements (FPAs) to secure up to $80 million in unsecured convertible notes and up to $40 million in forward purchase securities, contingent on the closing of an initial business combination[47] - The company's acquisition strategy targets three primary sources: industrial technology leaders, corporate spin-outs, and closely-held companies[49][52][53] - If a business combination is not completed within the 24-month period, the company will cease operations, redeem public shares at approximately $10.00 per share from the trust account, and liquidate, with warrants expiring worthless[128] Initial Public Offering and Trust Account Details | Metric | Value | | :--- | :--- | | IPO and Over-Allotment Gross Proceeds | $425,000,000 | | Private Placement Warrants Gross Proceeds | $12,500,000 | | Amount Deposited in Trust Account | $425,000,000 | | Deadline to Complete Business Combination | 24 months from IPO closing (approx. March 2023) | Item 1A. Risk Factors The company faces significant risks including a 'going concern' warning, failure to complete a business combination, 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" due to its financial condition and the need to complete a business combination[175][177] - There is a risk of failing to complete an initial business combination within the prescribed 24-month timeframe, which would result in liquidation and the public warrants expiring worthless[200][202] - A material weakness was identified in the company's internal control over financial reporting related to the accounting for temporary equity and earnings per share[288][289] - Significant conflicts of interest exist as directors and officers have obligations to other entities, which may lead to business opportunities being presented elsewhere before being offered to the company[303][304][305] - The company's warrants are accounted for as liabilities, and changes in their fair value could adversely affect financial results and the market price of its stock[413][414] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments as of the filing date[415] Item 2. Properties The company maintains its executive offices in Tampa, Florida, for which it pays a monthly fee of $40,521 to an affiliate of its sponsor for office space and administrative services - The company's executive offices are located at 12610 Race Track Road, Suite 250, Tampa, FL 33626[416] - A monthly fee of $40,521 is paid to a sponsor affiliate for office space and administrative support services[416] Item 3. Legal Proceedings The company is not currently involved in any material litigation, arbitration, or governmental proceedings - There is no material litigation currently pending against the company or its management[417] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable[419] PART II This section covers the company's market information, management's discussion and analysis, financial statements, and controls and procedures Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's securities trade on Nasdaq, with no dividends paid, and IPO proceeds of $425 million held in a trust account - The company's securities (Units, Class A common stock, and warrants) began trading on Nasdaq in March and April 2021[423] - No cash dividends have been paid to date, and none are planned before the initial business combination is completed[425] - Net proceeds of $425 million from the IPO and private placement warrant sales were placed in a U.S.-based trust account[431] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $251,633 for FY2021, with liquidity supported by cash and a sponsor loan, and warrants accounted for as liabilities Financial Highlights (Year Ended Dec 31, 2021) | Metric | Value | | :--- | :--- | | Net Loss | ($251,633) | | Operating Costs | $5,204,970 | | Change in Fair Value of Warrant Liability | $5,465,695 (Income) | | Interest Income from Trust Account | $37,665 | Liquidity Position (As of Dec 31, 2021) | Metric | Value | | :--- | :--- | | Cash in Operating Account | $149,845 | | Working Capital | ($1,815,006) | | Investments in Trust Account | $425,037,665 | - On March 29, 2022, the company secured a working capital loan facility of up to $1.5 million from its sponsor to fund operations[451] - Critical accounting policies require warrants to be classified as liabilities at fair value and redeemable Class A common stock to be classified as temporary equity outside of stockholders' equity[463][464] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide this information - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[470] Item 8. Financial Statements and Supplementary Data The section presents audited financial statements for FY2021, with the auditor's report highlighting a 'going concern' warning due to the business combination deadline - The auditor's report contains a "going concern" paragraph, citing liquidity conditions and the mandatory liquidation date of March 4, 2023, as reasons for substantial doubt about the company's ability to continue as a going concern[598] Balance Sheet Summary (as of December 31, 2021) | Account | Amount | | :--- | :--- | | Assets | | | Cash | $149,845 | | Investments held in Trust Account | $425,037,665 | | Total Assets | $426,903,621 | | Liabilities & Equity | | | Derivative warrant liabilities | $21,063,972 | | Deferred underwriting fee payable | $14,875,000 | | Total Liabilities | $38,617,145 | | Class A common stock subject to possible redemption | $425,000,000 | | Total stockholders' deficit | ($36,713,524) | Item 9A. Controls and Procedures Management concluded that disclosure controls were ineffective due to a material weakness in internal control over financial reporting, leading to financial statement restatements - Disclosure controls and procedures were deemed not effective as of December 31, 2021[474] - A material weakness was identified in internal control over financial reporting concerning the accounting for temporary equity and earnings per share, which resulted in the restatement of the company's financial statements for the periods ended March 31, 2021, and June 30, 2021[477] PART III This section details the company's directors, executive compensation, security ownership, related party transactions, and accounting fees Item 10. Directors, Executive Officers and Corporate Governance This section details the company's directors and executive officers, board committee structure, and potential conflicts of interest with affiliated entities - The management team is led by Chairman William Wulfsohn (former CEO of Ashland) and CEO Dr. Whitney Haring-Smith (co-founding managing partner at Anzu Partners)[486][487] - The board has three standing committees: Audit, Compensation, and Nominating and Corporate Governance, with all committee members (Teresa A. Harris, Priya Cherian Huskins, Susan J. Kantor) serving as independent directors[501][502][506] - Significant potential conflicts of interest exist, as officers and directors have fiduciary duties to other entities, including Anzu Partners, which may compete for business combination opportunities[514][516] Item 11. Executive Compensation Directors and officers receive no cash compensation, while a sponsor affiliate receives a monthly fee of $40,520.83 for administrative services - No cash compensation has been paid to any directors or officers for services rendered[538] - An affiliate of the sponsor is paid $40,520.83 per month for office space, administrative, and support services[538] - Out-of-pocket expenses incurred on behalf of the company are reimbursed to the sponsor, directors, and officers[538] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The sponsor holds 99.3% of Class B common stock, representing 19.9% of total voting control, with initial stockholders controlling director elections Beneficial Ownership as of March 31, 2022 | Beneficial Owner | Class A % | Class B % | Total Voting Control % | | :--- | :--- | :--- | :--- | | Glazer Capital, LLC | 7.0% | — | 5.6% | | Aristeia Capital, LLC | 6.3% | — | 5.0% | | Anzu SPAC GP I LLC (Sponsor) | — | 99.3% | 19.9% | - The initial stockholders, through their ownership of all Class B founder shares, control 20% of the company's outstanding common stock and have the exclusive right to elect directors prior to the initial business combination[548] Item 13. Certain Relationships and Related Transactions, and Director Independence This section details related party transactions with the sponsor, including founder share sales, warrant placements, administrative fees, and a working capital loan, with three directors deemed independent - The sponsor purchased founder shares for an aggregate price of $25,000 and 12.5 million private placement warrants for $12.5 million[551][552] - The company pays a sponsor affiliate $40,520.83 per month for administrative services[554] - In March 2022, the company entered into an agreement for a working capital loan of up to $1.5 million from the sponsor, of which $750,000 was outstanding as of the report date[559] - The board of directors has determined that Teresa A. Harris, Priya Cherian Huskins, and Susan J. Kantor are independent directors[565] Item 14. Principal Accounting Fees and Services The company paid its independent auditor, WithumSmith+Brown, PC, a total of $177,375 for audit and tax services in FY2021, all pre-approved by the audit committee Auditor Fees (WithumSmith+Brown, PC) for FY 2021 | Fee Category | Amount (USD) | | :--- | :--- | | Audit Fees | $169,650 | | Audit-Related Fees | $0 | | Tax Fees | $7,725 | | All Other Fees | $0 | | Total | $177,375 | PART IV This section provides an index of financial statements and all exhibits filed with the annual report Item 15. Exhibits, Financial Statement Schedules This section provides an index of the financial statements and all exhibits filed with the Annual Report on Form 10-K - This item provides an index of the financial statements and all exhibits filed with the 10-K report[576][578]