Digital World Acquisition (US:DWAC)2023-11-12 16:00PART I - FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements Digital World Acquisition Corp. reported a net income of $1.28 million for Q1 2023, driven by trust account interest, despite a $32.9 million stockholders' deficit and going concern warning due to PIPE terminations and an $18 million SEC settlement Condensed Balance Sheets Balance Sheet Summary as of March 31, 2023 | Account | March 31, 2023 (Unaudited) ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | Total Assets | $303,831,444 | $300,499,990 | | Cash Held in Trust Account | $303,517,309 | $300,330,651 | | Total Liabilities | $35,575,090 | $33,523,422 | | Accrued expenses | $18,524,787 | $18,054,912 | | Deferred underwriter fee payable | $10,062,500 | $10,062,500 | | Total Stockholders' Deficit | ($32,865,687) | ($31,974,608) | Unaudited Condensed Statements of Operations Statements of Operations for the Three Months Ended March 31 | Metric | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Loss from operation costs | ($1,023,579) | ($3,190,442) | | Interest earned on cash held in Trust Account | $3,186,658 | $29,531 | | Net income (loss) | $1,279,786 | ($3,160,911) | | Basic and diluted net income (loss) per Class A common stock | $0.03 | ($0.08) | - The company's shift to net income in Q1 2023 was primarily driven by a significant increase in interest earned on cash held in the Trust Account, which rose to nearly $3.2 million from just under $30,000 in the prior-year period13 Unaudited Condensed Statements of Cash Flows Cash Flow Summary for the Three Months Ended March 31 | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($414,286) | ($646,388) | | Net cash provided by financing activities | $566,000 | $360,150 | | Net change in cash | $151,714 | ($286,238) | | Cash at end of period | $152,704 | $41,493 | Notes to Condensed Financial Statements The notes detail the company's SPAC status, pending TMTG merger, going concern uncertainty, and significant subsequent events including an $18 million SEC settlement, $467 million in PIPE financing terminations, and a Nasdaq delisting notice - The company is a blank check company formed to effect a business combination, with an intended focus on technology-focused companies in the Americas22 - A merger agreement was signed on October 20, 2021, with Trump Media & Technology Group Corp. (TMTG), where TMTG would become a wholly-owned subsidiary of the company46 - Factors such as the deadline to consummate a business combination and the need for additional financial resources raise substantial doubt about the Company's ability to continue as a going concern43 - On July 20, 2023, the SEC approved a settlement requiring the company to pay an $18 million civil penalty after the closing of any merger, related to violations of antifraud provisions in its IPO and S-4 filings107134 - As of October 24, 2023, PIPE Investors have terminated commitments totaling approximately $467 million, significantly reducing the planned $1 billion private placement142 - The company received a notice from Nasdaq on May 23, 2023, for non-compliance with filing requirements, and was granted an extension until November 20, 2023, to regain compliance135136 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a $1.45 million net income in Q1 2023, driven by trust account interest, while highlighting the pending TMTG merger, significant PIPE terminations, limited liquidity outside the trust, and substantial going concern risks Results of Operations Quarterly Results Comparison | Metric | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :--- | :--- | :--- | | Net Income (Loss) | $1,450,593 | ($3,202,814) | | Interest Earned on Trust | $3,186,658 | N/A (not specified in this chunk) | | General & Admin Costs | $221,942 | $397,734 | | Legal Investigation Costs | $669,137 | $2,742,708 | - The company has not generated any operating revenues to date, with activities limited to organizational tasks and the search for a business combination target159 Liquidity and Capital Resources - As of March 31, 2023, the company had $303.5 million held in its trust account and $152,704 in cash outside the trust account168170 - The company's ability to continue as a going concern is in substantial doubt due to the impending deadline to consummate a business combination and a lack of financial resources to sustain operations for a reasonable period172 - The company has contractual obligations for monthly administrative and support services at $15,000 per month and a deferred underwriting fee of $10,062,500 payable upon completion of a business combination174175 Quantitative and Qualitative Disclosures about Market Risk This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not required as the company is a smaller reporting company179 Controls and Procedures Management concluded that as of March 31, 2023, disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting related to accrual accounting - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2023181 - A material weakness in internal control over financial reporting was identified relating to financial reporting systems and accounting for accruals181182 PART II - OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, defaults, and exhibits relevant to the company's operations Legal Proceedings The company is involved in a FINRA inquiry, a shareholder lawsuit alleging insider trading, and an $18 million SEC settlement related to IPO and merger filing violations - The company is cooperating with a FINRA inquiry regarding trading activity that occurred before the public announcement of the Merger Agreement186 - A shareholder lawsuit was filed on October 20, 2023, alleging that former directors and related entities realized illegal short-swing profits from trading the company's securities, seeking disgorgement of these profits to the company187 - On July 20, 2023, the SEC approved a settlement with the company regarding an investigation into its IPO and S-4 filings, agreeing to pay an $18 million civil penalty after closing a business combination190 Risk Factors Key risks include potential share redemptions preventing the business combination, possible merger agreement termination, absence of an independent fairness opinion on the TMTG deal, and conflicts of interest among executive officers and directors - Key risks include the potential for the Merger Agreement to be terminated if not completed by December 31, 2023, and the fact that the company did not obtain an independent fairness opinion on the financial terms of the Business Combination200 - The company is dependent on its executive officers and directors, who allocate time to other businesses, creating potential conflicts of interest that could negatively impact the completion of the business combination200 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None195 Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None196 Mine Safety Disclosures This section is not applicable to the company - Not Applicable197 Other Information There is no other information to report for the period - None198 Exhibits This section lists exhibits filed with the Form 10-Q, including an Administrative Services Agreement, two Promissory Notes, and officer certifications - Exhibits filed include an Administrative Services Agreement with Renatus LLC, two promissory notes issued to ARC Global Investments II LLC, and certifications from the Principal Executive Officer and Principal Financial Officer201