Churchill Capital VII(CVII) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Interim Financial Statements. Presents unaudited condensed financial statements for Churchill Capital Corp VII, a SPAC, covering balance sheets, operations, equity changes, cash flows, and detailed accounting notes CHURCHILL CAPITAL CORP VII CONDENSED BALANCE SHEETS | Metric | March 31, 2022 | December 31, 2021 | | :------------------------------------ | :------------- | :---------------- | | Cash | $3,865,639 | $4,155,162 | | Marketable securities held in Trust Account | $1,380,734,719 | $1,380,345,892 | | Total Assets | $1,385,554,785 | $1,385,624,642 | | Warrant Liabilities | $36,120,000 | $60,526,000 | | Total Liabilities | $84,955,070 | $109,105,250 | | Total Stockholders' Deficit | $(79,400,285) | $(103,480,608) | - Total liabilities decreased by $24,150,180, primarily due to a significant reduction in warrant liabilities from $60,526,000 to $36,120,000[14] - The stockholders' deficit improved from $(103,480,608) at December 31, 2021, to $(79,400,285) at March 31, 2022[14] CHURCHILL CAPITAL CORP VII CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Operating costs | $714,504 | $208,027 | | Loss from operations | $(714,504) | $(208,027) | | Change in fair value of Warrant Liabilities | $24,406,000 | $(6,070,000) | | Interest earned on marketable securities held in Trust Account | $348,592 | $51,619 | | Unrealized gain (loss) on marketable securities held in Trust Account | $40,235 | $(27,468) | | Net income (loss) | $24,080,323 | $(7,650,619) | | Basic and diluted net income (loss) per share, Class A common stock | $0.14 | $(0.08) | - The company reported a net income of $24,080,323 for the three months ended March 31, 2022, a significant improvement from a net loss of $7,650,619 in the prior year period[16][132][134] - This shift to net income was primarily driven by a $24,406,000 gain from the change in fair value of warrant liabilities in 2022, compared to a $6,070,000 loss in 2021[16][132][134] CHURCHILL CAPITAL CORP VII CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED) | Metric | Balance — January 1, 2022 | Net income | Balance — March 31, 2022 | | :-------------------------- | :------------------------ | :--------- | :----------------------- | | Accumulated Deficit | $(103,484,058) | $24,080,323 | $(79,403,735) | | Total Stockholders' Deficit | $(103,480,608) | $24,080,323 | $(79,400,285) | - The total stockholders' deficit decreased from $(103,480,608) at January 1, 2022, to $(79,400,285) at March 31, 2022, primarily due to the net income of $24,080,323 for the period[19] CHURCHILL CAPITAL CORP VII CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(289,523) | $(2,016,867) | | Net cash used in investing activities | $0 | $(1,380,000,000) | | Net cash provided by financing activities | $0 | $1,387,379,777 | | Net Change in Cash | $(289,523) | $5,362,910 | | Cash — End of period | $3,865,639 | $5,387,910 | - Cash used in operating activities significantly decreased from $(2,016,867) in Q1 2021 to $(289,523) in Q1 2022[26][138][139] - The 2021 cash flow figures reflect the initial investment of IPO proceeds into the Trust Account and the proceeds from the IPO and Private Placement Warrants, which were non-recurring in 2022[26] CHURCHILL CAPITAL CORP VII NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2022 (UNAUDITED) - The notes provide detailed explanations and disclosures that are an integral part of the unaudited condensed financial statements[10][24][27] NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS - The company is a Delaware-incorporated SPAC, formed on October 9, 2020, to effect a business combination, and has not yet commenced operations[28][30] - The company must complete a Business Combination within 24 months from the IPO closing (February 17, 2023), or 27 months if a definitive agreement is in place (May 17, 2023), otherwise it will liquidate[43] - Management has determined that these conditions raise substantial doubt about the Company's ability to continue as a going concern, though they believe a Business Combination is probable[52][145] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations[54] - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new accounting standards[58][59] - Warrants are classified as liabilities at fair value and re-measured each reporting period, with changes recognized in the statements of operations[69][152] NOTE 3. PUBLIC OFFERING - The company sold 138,000,000 Units at $10.00 per Unit in its IPO, including the full exercise of the over-allotment option[83] - Each Unit consists of one share of Class A common stock and one-fifth of one redeemable warrant ('Public Warrant')[83] NOTE 4. PRIVATE PLACEMENT - The Sponsor purchased 32,600,000 Private Placement Warrants at $1.00 per warrant, generating $32,600,000 in gross proceeds[84] - Proceeds from the Private Placement Warrants were added to the Trust Account[84] - Private Placement Warrants are non-transferable until 30 days after a Business Combination and will expire worthless if a Business Combination is not completed within the Combination Window[84][113] NOTE 5. RELATED PARTY TRANSACTIONS - The Sponsor purchased 34,500,000 Founder Shares (Class B common stock) for an aggregate of $25,000 in December 2020[85] - The company pays an affiliate of the Sponsor $50,000 per month for office space, administrative, and support services[89][147] - Working Capital Loans from initial stockholders or affiliates may be used to finance transaction costs, with up to $1,500,000 convertible into warrants; no such loans were outstanding as of March 31, 2022[92] NOTE 6. COMMITMENTS AND CONTINGENCIES - The underwriters are entitled to a deferred fee of $48,300,000, which will be waived if the company does not complete a Business Combination[96][148] - The company incurred due diligence fees of $1,575,000 and legal fees of $54,026, which are only due and payable upon the consummation of an initial Business Combination[97][98] NOTE 7. STOCKHOLDERS' DEFICIT - As of March 31, 2022, there were 138,000,000 shares of Class A common stock and 34,500,000 shares of Class B common stock issued and outstanding[100][101] - Holders of Class B common stock have the right to elect all of the company's directors prior to a Business Combination[104] - Class B common stock will automatically convert into Class A common stock on a one-for-one basis upon completion of a Business Combination, subject to adjustment[105] NOTE 8. WARRANT LIABILITIES - As of March 31, 2022, there were 27,600,000 Public Warrants and 32,600,000 Private Placement Warrants outstanding[106][113] - Public Warrants become exercisable on the later of 30 days after a Business Combination or 12 months from the IPO closing[106] - The company may redeem Public Warrants at $0.01 each if the Class A common stock price equals or exceeds $18.00 for 20 trading days within a 30-trading day period, provided a current registration statement is in effect[109][110] NOTE 9. FAIR VALUE MEASUREMENTS - The company classifies its financial assets and liabilities measured at fair value using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[115][116][118] | Description | Level | March 31, 2022 | December 31, 2021 | | :------------------------------------ | :---- | :------------- | :---------------- | | Marketable securities held in Trust Account | 1 | $1,380,734,719 | $1,380,345,892 | | Warrant liability - Public Warrants | 1 | $16,560,000 | $27,600,000 | | Warrant liability - Private Placement Warrants | 3 | $19,560,000 | $32,926,000 | - Public Warrants are classified as Level 1 after detachment from Units, while Private Placement Warrants are classified as Level 3 and valued using a modified Black-Scholes model[120] NOTE 10. SUBSEQUENT EVENTS - Management has evaluated subsequent events up to the date of financial statement issuance and identified no events requiring adjustment or disclosure[125] - Churchill Capital Corp VII is a Special Purpose Acquisition Company (SPAC), incorporated on October 9, 2020, formed to effect a business combination. As of March 31, 2022, the company had not commenced any operations and generates non-operating income from interest on proceeds held in its Trust Account[28][30] - The company consummated its Initial Public Offering (IPO) on February 17, 2021, selling 138,000,000 units at $10.00 per unit, generating gross proceeds of $1,380,000,000[31] - Simultaneously with the IPO, the company sold 32,600,000 Private Placement Warrants at $1.00 per warrant, generating gross proceeds of $32,600,000[32] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition and operations, noting the company's blank check status, Q1 2022 net income from warrant fair value changes, liquidity, and going concern uncertainty - The company is a blank check company with no operating revenues, incurring significant costs in the pursuit of a business combination and public company compliance[129][131] - Net income for the three months ended March 31, 2022, was $24,080,323, primarily driven by a $24,406,000 gain from the change in fair value of warrant liabilities[132] - Cash used in operating activities for Q1 2022 was $289,523, a notable improvement from $2,016,867 used in Q1 2021[138][139] - Substantial doubt about the company's ability to continue as a going concern exists if a Business Combination is not completed by February 17, 2023 (extendable to May 17, 2023)[145] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk The company's primary market risk exposure is interest rate risk, but due to the short-term nature of its Trust Account investments, management believes there is no material exposure - Net proceeds in the Trust Account are invested in U.S. government treasury bills with a maturity of 185 days or less or in certain money market funds[155] - Due to the short-term nature of these investments, the company believes there is no associated material exposure to interest rate risk[155] Item 4. Controls and Procedures The CEO and CFO concluded disclosure controls were effective, and a material weakness in internal control over financial reporting related to complex financial instruments has been remediated - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[157] - A material weakness in internal control over financial reporting related to complex financial instruments has been remediated[159] - Remediation efforts included enhancing processes to apply accounting requirements, providing enhanced access to accounting literature, and engaging third-party professionals for review and oversight[159] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings - No legal proceedings were reported by the company[163] Item 1A. Risk Factors Highlights significant risk factors, focusing on new SEC proposed rules for SPACs that could impact business combination completion, increase costs, and risk investment company classification - New SEC proposed rules (2022 Proposed Rules) relating to SPACs may materially adversely affect the company's ability to negotiate and complete a Business Combination and may increase associated costs and time[166] - There is a risk that the company could be deemed an 'investment company' under the Investment Company Act, which would impose burdensome compliance requirements and restrict its activities, making it difficult to complete a Business Combination[167][168] - The 2022 Proposed Rules include a safe harbor for SPACs, requiring a business combination agreement within 18 months and completion within 24 months of the IPO. Failure to meet these conditions could result in the company being subject to Investment Company Act regulation[171] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details proceeds from the Initial Public Offering and private placement of warrants, with $1,380,000,000 placed in the Trust Account and $73,525,223 in transaction costs - The Initial Public Offering of 138,000,000 Units generated total gross proceeds of $1,380,000,000[173] - The private placement of 32,600,000 warrants to the Sponsor generated gross proceeds of $32,600,000[174] - An aggregate of $1,380,000,000 from the IPO and private placement was placed in the Trust Account[177] - Transaction costs amounted to $73,525,223, including underwriting fees and other offering costs[178] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[179] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - No mine safety disclosures were reported[179] Item 5. Other Information The company reported no other information - No other information was reported[179] Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications from principal executive and financial officers and XBRL-related documents - The exhibits include certifications from the Principal Executive Officer (31.1, 32.1) and Principal Financial Officer (31.2, 32.2) as required by the Securities Exchange Act and Sarbanes-Oxley Act[181] - XBRL Instance Document and Taxonomy Extension documents are also filed as exhibits[181] Part III. Signatures SIGNATURES The report is signed by Michael Klein, CEO and President, and Jay Taragin, CFO, on May 16, 2022, certifying its submission in accordance with Exchange Act requirements - The report was signed on May 16, 2022, by Michael Klein, Chief Executive Officer and President, and Jay Taragin, Chief Financial Officer[184]