Forge(FRGE) - 2021 Q4 - Annual Report

PART I Business Motive Capital Corp, a blank check company, seeks to complete a business combination by December 2022, focusing on financial technology acquisitions General and Initial Public Offering Motive Capital Corp, a blank check company, completed its $414 million IPO in December 2020, placing proceeds into a trust account - The company is a blank check company with no operations, formed to effect an initial business combination[17] Initial Public Offering and Private Placement Details | Metric | Value | | :--- | :--- | | IPO Units Sold | 41,400,000 | | Price per Unit | $10.00 | | Gross IPO Proceeds | $414,000,000 | | Private Placement Warrants | 7,386,667 | | Price per Private Warrant | $1.50 | | Gross Private Placement Proceeds | $11,080,000 | | Amount Placed in Trust Account | $414,000,000 | Proposed Business Combination The company entered a definitive merger agreement with Forge Global, Inc. on September 13, 2021, valuing the transaction at $1.5 billion - Entered into a definitive merger agreement with Forge Global, Inc. on September 13, 2021, which will result in Forge becoming a wholly-owned subsidiary of the post-merger company[24][26] - Total consideration for Forge equity holders is valued at $1.5 billion, with an aggregate cash component not to exceed $100 million[27] - The transaction is supported by a $68.5 million PIPE financing from certain investors at $10.00 per share[31] - An Amended & Restated Forward Purchase Agreement commits purchasers to buy 5 million Forward Purchase Units, and up to an additional 9 million units to offset redemptions, for a total potential of 14 million units[28] Business Strategy and Acquisition Criteria The company's strategy focuses on acquiring financial technology companies in North America and Europe, prioritizing strong market positions and financial results - The company focuses on financial software and information services companies within the financial technology sector, specifically targeting sub-sectors like Banking & Payments, Capital Markets, Data & Analytics, Insurance, and Investment Management[34] - Acquisition criteria include a defensible market position, strong operating and financial results, readiness to be a public company, and offering attractive risk-adjusted returns for shareholders[40] Initial Business Combination and Redemption The company must complete its initial business combination by December 15, 2022, with public shareholders having redemption rights subject to asset maintenance - The deadline to complete an initial business combination is December 15, 2022[45] - The initial business combination must be with a target business having an aggregate fair market value of at least 80% of the assets held in the trust account[43] - Public shareholders have the right to redeem their shares for cash upon completion of the business combination, but redemptions cannot cause the company's net tangible assets to fall below $5,000,001[48][49] - If no business combination is completed within 24 months of the IPO, the company will cease operations, redeem public shares, and dissolve[52] Risk Factors The company faces significant risks as a blank check entity, including failure to complete a business combination, high redemptions, and internal control weaknesses - The company is a blank check entity with no operating history, making it difficult for investors to evaluate its ability to achieve its business objectives[64] - Failure to complete an initial business combination by the December 15, 2022 deadline will result in the company's liquidation, with public shareholders receiving their pro-rata share of the trust account and warrants expiring worthless[82][87] - The ability of public shareholders to redeem their shares for cash could make the company's financial condition unattractive to targets or prevent the completion of a business combination if redemption levels are high[79][80] - A material weakness in internal control over financial reporting has been identified regarding the accounting for complex equity instruments, which could adversely affect the ability to report financial results accurately[178][181] - The company's warrants and forward purchase agreement are accounted for as derivative liabilities, and changes in their fair value are included in earnings each period, which may cause volatility in reported financial results[183] - The report from the independent registered public accounting firm expresses substantial doubt about the company's ability to continue as a going concern due to the mandatory liquidation requirement if a business combination is not completed[88] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[215] Properties The company's executive offices are provided by its sponsor, with a potential monthly fee currently waived - Executive offices are provided by the sponsor, with a potential fee of up to $10,000 per month, which is currently waived[216] Legal Proceedings The company is not a party to any material pending legal proceedings - The company is not involved in any material legal proceedings[217] Mine Safety Disclosures This item is not applicable to the company - No mine safety disclosures are reported[218] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's units, shares, and warrants trade on the NYSE, with no cash dividends paid or planned before a business combination - The company's securities are traded on the NYSE under symbols MOTV.U (units), MOTV (Class A shares), and MOTV WS (warrants)[221] - No cash dividends have been paid to date, and none are planned prior to the completion of the initial business combination[223] - Gross proceeds of $414 million from the IPO were raised, with the net proceeds placed in a trust account. Transaction costs amounted to approximately $23.7 million[226][227] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2021, the company reported net income of $9.4 million, driven by derivative fair value changes, but faces going concern doubt due to liquidation risk Results of Operations | Metric | For the Year Ended Dec 31, 2021 | For the Period from Sep 28, 2020 to Dec 31, 2020 | | :--- | :--- | :--- | | General and administrative expenses | $6.8 million | $35,000 | | Change in fair value of derivative liabilities | $16.1 million (gain) | ($10.7 million) (loss) | | Net Income (Loss) | $9.4 million | ($11.8 million) | - As of December 31, 2021, the company had approximately $255,000 in cash and a working capital deficit of approximately $4.9 million[248] - Management has determined that the mandatory liquidation requirement if a business combination is not completed by December 15, 2022 raises substantial doubt about the company's ability to continue as a going concern[252] - Critical accounting policies include classifying Class A ordinary shares subject to redemption as temporary equity and accounting for warrants and the forward purchase agreement as derivative liabilities, which are remeasured to fair value each reporting period[271][277] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Motive Capital Corp is not required to provide this market risk disclosure - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[282] Financial Statements and Supplementary Data This section refers to the full financial statements and supplementary data located at the end of the Form 10-K report - The financial statements are located after Item 16 of the report[283] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were no disagreements with accountants[284] Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in accounting for complex equity instruments, leading to prior restatements - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021[285] - A material weakness was identified in the internal control over financial reporting concerning the interpretation and accounting for complex equity and equity-linked instruments[287] - This material weakness led to the restatement of the company's balance sheet as of December 15, 2020, and financial statements for the period ended December 31, 2020, as well as interim statements for 2021[287] - Management is working to remediate the weakness by consulting with subject matter experts and improving processes for evaluating complex accounting standards[292] PART III Directors, Executive Officers and Corporate Governance The company is led by key executives and a seven-member board, with potential conflicts of interest due to affiliations with Motive Partners Executive Officers and Directors | Name | Title | | :--- | :--- | | Rob Heyvaert | Executive Chairman and Director | | Blythe Masters | Chief Executive Officer and Director | | Kristy Trieste | Chief Financial Officer and Director | | Jill M. Considine | Director | | Stephen C. Daffron | Director | | Dina Dublon | Director | | Paula Madoff | Director | - The board has three standing committees (Audit, Compensation, Nominating and Corporate Governance), each composed entirely of independent directors[319] - Potential conflicts of interest exist as officers and directors have fiduciary duties to other entities, including Motive Partners and its affiliates, which may have overlapping investment objectives[335][336] Executive Compensation No cash compensation has been paid to officers or directors, with only out-of-pocket expenses reimbursed - No officers or directors have received cash compensation for services rendered[346] - The sponsor, officers, and directors are reimbursed for out-of-pocket expenses related to company activities, such as identifying target businesses[346] Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Initial shareholders, including the sponsor, own 100% of Class B shares, giving them significant influence over shareholder votes - The sponsor, officers, and directors as a group beneficially own 100% of the Class B ordinary shares, which constitutes 20% of the company's total outstanding ordinary shares[350][354] - Only holders of Class B ordinary shares have the right to vote for the election of directors prior to the initial business combination[354] - Significant beneficial owners of Class A ordinary shares include Weiss Asset Management LP (7.3%) and Citadel Advisors LLC (6.6%) as of their respective filing dates[350][352] Certain Relationships and Related Transactions, and Director Independence The company has several related party transactions with its sponsor, and four of its seven directors are independent - The sponsor purchased 10,350,000 founder shares (after adjustments) for $25,000 and 7,386,667 private placement warrants for $11.08 million[357][358] - The board of directors has determined that Dina Dublon, Jill M. Considine, Paula Madoff, and Stephen C. Daffron are independent directors[368] - The audit committee is responsible for reviewing and approving all related party transactions exceeding $120,000[366] Principal Accountant Fees and Services The company's independent auditor, WithumSmith+Brown, PC, was paid $144,200 in audit fees for FY 2021, with all services pre-approved Accountant Fees (WithumSmith+Brown, PC) | Fee Category | FY 2021 | Period Ended Dec 31, 2020 | | :--- | :--- | :--- | | Audit Fees | $144,200 | $92,700 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $3,605 | $0 | | All Other Fees | $0 | $0 | PART IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including the merger agreement and charter documents - This section provides an index of all exhibits filed with the Form 10-K, including the merger agreement, charter documents, and various other agreements[376][377] Financial Statements Report of Independent Registered Public Accounting Firm The auditor issued an unqualified opinion but highlighted substantial doubt about the company's going concern ability due to mandatory liquidation risk - The auditor's report contains a "Going Concern" paragraph, raising substantial doubt about the company's ability to continue operations if a business combination is not completed by the deadline[389] Consolidated Financial Statements The financial statements show $414.1 million in the trust account, a $43.7 million shareholders' deficit, and a $9.4 million net income for 2021 Consolidated Balance Sheet Data (as of Dec 31) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Cash | $254,726 | $1,674,650 | | Cash and Investments held in Trust Account | $414,111,439 | $414,020,525 | | Total Liabilities | $44,368,676 | $55,438,801 | | Class A ordinary shares subject to possible redemption | $414,000,000 | $414,000,000 | | Total shareholders' deficit | ($43,728,277) | ($53,092,021) | Consolidated Statement of Operations Data | Account | Year Ended Dec 31, 2021 | Period Ended Dec 31, 2020 | | :--- | :--- | :--- | | General and administrative expenses | ($6,829,050) | ($35,004) | | Change in fair value of derivative liabilities | $16,101,880 | ($10,659,080) | | Net income (loss) | $9,363,744 | ($11,799,629) | Notes to Consolidated Financial Statements The notes detail the company's formation, IPO, proposed merger, accounting policies, related party transactions, and a decrease in derivative liabilities - The company has until December 15, 2022, to consummate a Business Combination, or it will be required to liquidate[422] - All 41,400,000 Class A ordinary shares are classified as temporary equity due to redemption features and are carried at their redemption value of $414 million[459] - The fair value of derivative liabilities (public warrants, private warrants, and forward purchase agreement) decreased from $40.5 million as of Dec 31, 2020, to $24.4 million as of Dec 31, 2021, resulting in a non-operating gain[512][514]