Digital World Acquisition (DWAC) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and internal controls Financial Statements The unaudited financial statements for the quarter ended March 31, 2022, show a net loss of $1.88 million, driven by operating costs, with total assets of $293.7 million primarily cash in trust, against total liabilities of $12.3 million, and a going concern uncertainty due to the deadline to complete a business combination Unaudited Balance Sheet The balance sheet as of March 31, 2022, shows total assets of $293.7 million, primarily cash in trust, and a $11.9 million stockholders' deficit Balance Sheet Summary (as of March 31, 2022) | Account | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Cash | $41,492 | $327,731 | | Cash Held in Trust Account | $293,286,629 | $293,257,098 | | Total Assets | $293,674,726 | $293,990,852 | | Total Current Liabilities | $2,251,798 | $683,535 | | Total Liabilities | $12,314,298 | $10,746,035 | | Accumulated Deficit | ($11,890,418) | ($10,006,029) | | Total Stockholders' Deficit | ($11,889,572) | ($10,005,183) | Unaudited Statements of Operations For the three months ended March 31, 2022, the company reported a net loss of $1.88 million, primarily due to formation and operating costs Statement of Operations (Three Months Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Formation and operating costs | $1,863,920 | $485 | | Interest earned on cash held in Trust Account | $29,531 | $0 | | Net loss | ($1,884,389) | ($485) | | Basic and diluted net income per Class A common stock | ($0.05) | ($0.00) | Unaudited Condensed Statement of Cash Flows Cash flow activities for the three months ended March 31, 2022, show $586,239 used in operations and $300,000 provided by financing, resulting in a net cash decrease Cash Flow Summary (Three Months Ended March 31, 2022) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($586,239) | | Net cash provided by financing activities | $300,000 | | Net change in cash | ($286,239) | | Cash at end of period | $41,492 | Notes to Condensed Financial Statements These notes provide details on the company's SPAC nature, the proposed $875 million merger with TMTG, going concern uncertainties, and sponsor loan agreements - The company is a blank check company formed to effect a business combination, intending to focus on technology-focused companies, with all activity to date relating to its formation, IPO, and search for a target[24][25] - On October 20, 2021, the Company entered into a merger agreement with Trump Media & Technology Group Corp. (TMTG) for an aggregate merger consideration of $875 million, subject to adjustments[42][45] - The company has until September 8, 2022 (or up to March 8, 2023, with extensions) to consummate a business combination, raising substantial doubt about its ability to continue as a going concern due to this uncertainty and significant expected costs[41] - The Sponsor has committed to provide loans up to $1 million to finance transaction costs, with $300,000 outstanding as of March 31, 2022[81] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's status as a blank check company, the proposed merger with TMTG, and its financial results, highlighting a net loss of $1.88 million for Q1 2022 and a significant going concern risk due to the impending deadline to complete a business combination - The company's activities since inception have been organizational, preparing for the IPO, and searching for a business combination, including the proposed merger with TMTG[111] - For the three months ended March 31, 2022, the company had a net loss of $1,884,389, primarily from general and administrative costs of $1,863,920[113] - As of March 31, 2022, the company had $41,492 in cash outside the Trust Account and $293,286,629 held within the Trust Account[119][120] - Factors such as the September 8, 2022 deadline for a business combination and significant ongoing costs raise substantial doubt about the Company's ability to continue as a going concern[125] 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 for smaller reporting companies[130] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of March 31, 2022, and concluded they were effective, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[132] - No changes in internal control over financial reporting occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[133] PART II – OTHER INFORMATION This section details legal proceedings, updated risk factors, equity sales, other significant events, and a list of exhibits Legal Proceedings The company is cooperating with inquiries from both FINRA and the SEC, with the FINRA inquiry concerning trading activity preceding the public announcement of the TMTG merger agreement, and the SEC investigation involving a broader request for documents related to the proposed business combination - The company is cooperating with a FINRA inquiry reviewing trading that occurred before the public announcement of the Merger Agreement[135] - The company is also cooperating with an SEC investigation and has received a subpoena for documents regarding board meetings, communications with potential targets including TMTG, and other related matters[136] Risk Factors The company highlights that there have been no material changes to its risk factors, but specifically notes the risk posed by proposed SEC rules from March 30, 2022, which, if adopted, could increase the costs, time, and complexity of completing its business combination with TMTG - On March 30, 2022, the SEC issued proposed rules related to SPACs, which, if adopted, may increase costs and time needed to complete the Business Combination[140] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[141] Other Information The company reported several key events, including a May 11, 2022 amendment to the merger agreement with TMTG, a May 12, 2022 amendment to the insider letter increasing convertible loans from the sponsor from $1.5 million to $30 million, and a May 18, 2022 filing of a Certificate of Correction to fix an error in the company's Restated Charter regarding extension payment amounts - On May 11, 2022, the Company entered into the First Amendment to the Merger Agreement with TMTG, which clarified terms including the handling of an escrow amount[147] - On May 12, 2022, the company amended an insider letter to increase the aggregate principal amount of convertible loans from the Sponsor and others from $1,500,000 to $30,000,000[148] - On May 18, 2022, the company filed a Certificate of Correction to fix an error in its Amended and Restated Certificate of Incorporation related to the deposit amount required for a business combination extension[150] Exhibits This section lists the exhibits filed as part of the Quarterly Report, including certifications by the principal executive and financial officers and Inline XBRL documents