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| Name | Symbol | Market | Type |
|---|---|---|---|
| Liberty Media Acquisition Corporation | NASDAQ:LMACU | NASDAQ | Trust |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 10.081 | 10.05 | 10.10 | 0 | 00:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-39920
LIBERTY MEDIA ACQUISITION CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware |
| 85-3809075 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
12300 Liberty Boulevard Englewood, Colorado |
| 80112 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (720) 875-5800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
Units, each consisting of one share of Series A common stock and one-fifth of one redeemable warrant |
| LMACU |
| The Nasdaq Stock Market LLC |
Series A common stock, par value $0.0001 per share |
| LMACA |
| The Nasdaq Stock Market LLC |
Redeemable warrants, each whole warrant exercisable for one share of Series A common stock at an exercise price of $11.50 |
| LMACW |
| The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ◻ | Accelerated filer | ◻ |
Non-accelerated filer | ⌧ | Smaller reporting company | ☐ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ◻
The number of outstanding shares of Liberty Media Acquisition Corporation common stock as of June 30, 2022 was:
Series A |
| Series F | |
Liberty Media Acquisition Corporation common stock | 57,500,000 | 14,375,000 |
Table of Contents
LIBERTY MEDIA ACQUISITION CORPORATION
Condensed Balance Sheets
| June 30, | |||||
2022 | December 31, | |||||
(unaudited) | 2021 | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 484,952 | 287,403 | |||
Prepaid expenses and other current assets |
| 437,096 |
| 694,950 | ||
Total current assets | 922,048 | 982,353 | ||||
Cash and marketable securities held in Trust Account | 575,835,077 | 575,053,412 | ||||
Prepaid expenses and other assets | — | 49,102 | ||||
Total assets | $ | 576,757,125 | 576,084,867 | |||
Liabilities and Stockholders' Equity (Deficit) |
|
|
|
| ||
Current liabilities: | ||||||
Accounts payable and accrued expenses | $ | 148,593 | 442,342 | |||
Sponsor loans (note 4) | 2,957,429 | 727,825 | ||||
Other current liabilities | — | 239,999 | ||||
Total current liabilities | 3,106,022 | 1,410,166 | ||||
Public Warrants (note 3) | 5,746,550 | 20,125,000 | ||||
Private Placement Warrants (notes 3 and 4) | 5,900,000 | 18,600,000 | ||||
Forward Purchase Agreement (notes 3 and 4) | 1,782,371 | 15,405,866 | ||||
Deferred offering costs |
| 20,125,000 |
| 20,125,000 | ||
Total liabilities |
| 36,659,943 |
| 75,666,032 | ||
|
|
|
| |||
Commitments and contingencies (note 5) |
|
|
|
| ||
Common stock subject to possible redemption, 57,500,000 shares at redemption value | 575,835,077 | 575,053,412 | ||||
|
|
|
| |||
Stockholders' equity (deficit): |
|
|
|
| ||
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; none issued and outstanding |
|
| ||||
Series A common stock, $0.0001 par value; 3,000,000,000 shares authorized; 0 shares issued and outstanding (excluding 57,500,000 shares subject to possible redemption) at June 30, 2022 and December 31, 2021 |
|
| ||||
Series B common stock, $0.0001 par value; 1,000,000,000 shares authorized; none issued and outstanding |
|
| ||||
Series C common stock, $0.0001 par value; 5,000,000,000 shares authorized; none issued and outstanding | ||||||
Series F common stock, $0.0001 par value; 200,000,000 shares authorized; 14,375,000 shares issued and outstanding at June 30, 2022 and December 31, 2021 | 1,438 | 1,438 | ||||
Additional paid-in capital |
| 23,562 |
| 23,562 | ||
Accumulated deficit |
| (35,762,895) |
| (74,659,577) | ||
Total stockholders’ equity (deficit) |
| (35,737,895) |
| (74,634,577) | ||
Total liabilities and stockholders' equity (deficit) | $ | 576,757,125 | 576,084,867 | |||
See accompanying notes to condensed financial statements.
I-1
LIBERTY MEDIA ACQUISITION CORPORATION
Condensed Statements of Operations
(Unaudited)
Three Months Ended | Six Months Ended |
| ||||||||
June 30, | June 30, | |||||||||
2022 | 2021 | 2022 | 2021 | |||||||
General, administrative and formation costs | $ | (629,560) | (740,987) | (1,815,658) | (1,592,088) | |||||
Income (loss) from operations | (629,560) | (740,987) | (1,815,658) | (1,592,088) | ||||||
|
|
|
|
| ||||||
Other income (expense) |
|
|
|
| ||||||
Interest expense | (122,968) | — | (229,604) | — | ||||||
Interest income on marketable securities held in Trust Account | 730,403 | 14,338 | 781,665 | 24,421 | ||||||
Realized and unrealized gains (losses), net | 4,293,079 | 25,674,947 | 40,941,944 | (30,741,113) | ||||||
Total other income (expense) | 4,900,514 | 25,689,285 | 41,494,005 | (30,716,692) | ||||||
|
|
| ||||||||
Net earnings (loss) | $ | 4,270,954 | 24,948,298 | 39,678,347 | (32,308,780) | |||||
|
|
|
| |||||||
Basic and diluted net earnings (loss) per Series A common stock (note 2) | 0.05 | 0.35 | 0.54 | (1.30) | ||||||
Basic and diluted net earnings (loss) per Series F common stock (note 2) | $ | 0.05 | 0.35 | 0.54 | (1.30) | |||||
See accompanying notes to condensed financial statements.
I-2
LIBERTY MEDIA ACQUISITION CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended | ||||||
June 30, | ||||||
2022 | 2021 | |||||
Cash Flows from Operating Activities: |
|
| ||||
Net earnings (loss) | $ | 39,678,347 | $ | (32,308,780) | ||
Adjustments to reconcile net earnings (loss) to net cash used in operating activities: | ||||||
Realized and unrealized (gains) losses, net | (40,941,944) | 30,741,113 | ||||
Non-cash interest expense | 229,604 | — | ||||
Interest earned on Trust Account | (781,665) | (24,421) | ||||
Changes in current assets and current liabilities: |
|
|
|
| ||
Prepaid and other assets | 306,956 | (1,131,370) | ||||
Accounts payable and accrued expenses | (293,749) | (233,140) | ||||
Net cash used in operating activities |
| (1,802,451) |
| (2,956,598) | ||
Cash Flows from Investing Activities: | ||||||
Investment of cash into Trust Account | — | (575,000,000) | ||||
Net cash used in investing activities | — | (575,000,000) | ||||
|
|
|
| |||
Cash Flows from Financing Activities: |
|
|
|
| ||
Proceeds from Initial Public Offering |
| — |
| 575,000,000 | ||
Proceeds from private placement | — | 15,000,000 | ||||
Payments of offering costs |
| — |
| (11,831,708) | ||
Borrowings (payments) on Sponsor loans, net | 2,000,000 | 345,517 | ||||
Net cash provided by financing activities |
| 2,000,000 |
| 578,513,809 | ||
|
|
|
| |||
Net Change in Cash |
| 197,549 |
| 557,211 | ||
Cash — Beginning of period |
| 287,403 |
| — | ||
Cash — End of period | $ | 484,952 | $ | 557,211 | ||
|
|
|
|
| ||
Supplemental Disclosure of Non-cash Financing Activities: |
|
|
|
| ||
Deferred underwriters’ costs | $ | — | $ | 20,125,000 | ||
See accompanying notes to condensed financial statements.
I-3
LIBERTY MEDIA ACQUISITION CORPORATION
Condensed Statements of Stockholders’ Equity (Deficit)
(Unaudited)
Common Stock | Additional | Total | |||||||||||||
Series A | Series F | Paid-in | Accumulated | Stockholders’ | |||||||||||
| Amount |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | ||||||
Balance as of December 31, 2021 | $ | — | 1,438 | 23,562 | (74,659,577) | (74,634,577) | |||||||||
Net earnings (loss) | — | — | — | 39,678,347 | 39,678,347 | ||||||||||
Measurement adjustment on redeemable common stock | — | — | — | (781,665) | (781,665) | ||||||||||
Balance as of June 30, 2022 |
| $ | — | 1,438 | 23,562 | (35,762,895) | (35,737,895) | ||||||||
Common Stock | Additional | Total | |||||||||||||
Series A | Series F | Paid-in | Accumulated | Stockholders’ | |||||||||||
Amount |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||||
Balance as of March 31, 2022 |
| $ | — | 1,438 | 23,562 | (39,303,446) | (39,278,446) | ||||||||
Net earnings (loss) | — | — | — | 4,270,954 | 4,270,954 | ||||||||||
Measurement adjustment on redeemable common stock | — | — | — | (730,403) | (730,403) | ||||||||||
Balance at June 30, 2022 |
| $ | — | 1,438 | 23,562 | (35,762,895) | (35,737,895) | ||||||||
Common Stock | Additional | Total | |||||||||||||
Series A | Series F | Paid-in | Accumulated | Stockholders’ | |||||||||||
| Amount |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | ||||||
Balance as of December 31, 2020 | $ | — | 1,438 | 23,562 | (1,300) | 23,700 | |||||||||
Net earnings (loss) | — | — | — | (32,308,780) | (32,308,780) | ||||||||||
Measurement adjustment on redeemable common stock | — | — | — | (50,672,720) | (50,672,720) | ||||||||||
Balance as of June 30, 2021 |
| $ | — | 1,438 | 23,562 | (82,982,800) | (82,957,800) | ||||||||
Common Stock | Additional | Total | |||||||||||||
Series A | Series F | Paid-in | Accumulated | Stockholders’ | |||||||||||
| Amount |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | ||||||
Balance as of March 31, 2021 | $ | — | 1,438 | 23,562 | (107,916,760) | (107,891,760) | |||||||||
Net earnings (loss) | — | — | — | 24,948,298 | 24,948,298 | ||||||||||
Measurement adjustment on redeemable common stock | — | — | — | (14,338) | (14,338) | ||||||||||
Balance as of June 30, 2021 |
| $ | — | 1,438 | 23,562 | (82,982,800) | (82,957,800) | ||||||||
See accompanying notes to condensed financial statements.
I-4
LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Business Operations
Organization and General
Liberty Media Acquisition Corporation (the "Company") is a blank check company incorporated in Delaware on November 6, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar initial business combination with one or more businesses. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
On January 21, 2021, the Company filed a restated certificate of incorporation to increase its authorized shares of Series A common stock from 2 billion shares to 3 billion shares and Series B Common Stock from 300 million shares to 1 billion shares. The Company’s authorized Series C Common Stock remains at 5 billion shares; Series F Common stock remains at 200 million shares and Preferred Stock remains at 50 million shares.
As of June 30, 2022, the Company had not commenced any operations. From November 6, 2020 (inception) until the Company’s initial public offering (“IPO”) on January 26, 2021, the Company’s entire activity was in preparation for the Company’s IPO, and following the Company’s IPO through June 30, 2022, the Company’s entire activity has been limited to the search for a prospective initial business combination. The Company will not generate any operating revenue until after the completion of an initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO, and non-operating unrealized gains and losses related to financial instruments initially recorded at the IPO date. The Company has selected December 31 as its fiscal year end.
Financing
The registration statement for the Company’s IPO was declared effective on January 21, 2021 (the "Effective Date"). On January 26, 2021, the Company consummated the IPO of 57,500,000 units, each consisting of one share of Series A common stock of the Company and -fifth of one redeemable warrant of the Company (the “Units,” with respect to the shares of Series A common stock included in the Units being offered, the “Public Shares”, and with respect to the warrants, the “Public Warrants”), at $10.00 per Unit, including the underwriter exercising their full over-allotment option, generating gross proceeds of $575,000,000 which were placed in a trust account (the “Trust Account”). Each whole Public Warrant entitles the holder to purchase one share of Series A Common Stock at a price of $11.50 per share. Substantially concurrent with the closing of the IPO, the Company consummated the sale of 10,000,000 warrants (the "Private Placement Warrants") to its Sponsor (as defined below), at a price of $1.50 per Private Placement Warrant, which is discussed in note 4. Additionally, the Company entered into a forward purchase agreement (the “Forward Purchase Agreement”) under which the Sponsor obtained the right to acquire 25,000,000 Forward Purchase Units (as defined below) for $250,000,000, in the aggregate, in connection with the Company's initial business combination, which is discussed in note 4.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds are intended to be generally applied toward consummating an initial business combination.
The Company’s initial business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (net of taxes payable) at the time of signing an agreement to enter into an initial business combination. However, the Company will only complete an initial business
I-5
LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
combination if the post-business combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended. There is no assurance that the Company will be able to successfully effect an initial business combination.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. Except as required by Delaware Law or stock exchange rule, the decision as to whether the Company will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The shares of common stock subject to redemption have been recorded at redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity. The Company will proceed with an initial business combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon consummation of an initial business combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the initial business combination.
The Company will have until January 26, 2023 to consummate an initial business combination (the "Combination Period"). However, if the Company is unable to complete an initial business combination within the Combination Period or 27 months from the IPO if the Company has executed a letter of intent, agreement in principle or definitive agreement for an initial business combination by January 26, 2023 (an “agreement in principle event”), the Company will redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company, divided by the number of then outstanding Public Shares, subject to applicable law and as further described in the prospectus filed on January 25, 2021 with the U.S. Securities and Exchange Commission (the “SEC”), and then seek to dissolve and liquidate.
The Company’s sponsor, Liberty Media Acquisition Sponsor, LLC (the “Sponsor”), and the Company’s officers and directors have agreed to (i) waive their redemption rights with respect to their Founder Shares (as defined in note 4), Private Placement Warrants and Public Shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares and private placement shares if the Company fails to complete the initial business combination within the Combination Period.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor
I-6
LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations, and the Company believes that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure you that the Sponsor would be able to satisfy those obligations.
Basis of Presentation
The accompanying (a) condensed balance sheet as of December 31, 2021, which has been derived from audited financial statements, and (b) the interim unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The Company considers the fair value of the Private Placement Warrants and Forward Purchase Agreement to be its most significant accounting estimate.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Liquidity and Going Concern
As of June 30, 2022, the Company had cash outside the Trust Account of $484,952 available for working capital needs. All cash and marketable securities held in the Trust Account is generally unavailable for the Company’s use prior to an initial business combination, and is restricted for use either in an initial business combination or to redeem common stock. As of June 30, 2022, none of the amount in the Trust Account was available to be withdrawn as described above.
From inception through June 30, 2022, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares, advances from the Sponsor under the Note (as defined in note 4) in an aggregate amount
I-7
LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
of $169,933, the remaining net proceeds from the IPO, the sale of Private Placement Warrants, and borrowings under the Working Capital Loan with the Sponsor (as defined in note 4).
The Company anticipates that the $484,952 outside of the Trust Account as of June 30, 2022, and the unused portion of the Working Capital Loan (as defined in note 4) will be sufficient to allow the Company to operate through January 26, 2023, assuming that an initial business combination is not consummated during that time. Until consummation of its initial business combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loan from the Sponsor, for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the initial business combination.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimate of the costs of undertaking in-depth due diligence and negotiating the initial business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the initial business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor and/or third parties. The Sponsor is not under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
In connection with the Company’s assessment of going concern considerations in accordance with ASC Topic 205-40, Presentation of Financial Statements — Going Concern, management has determined that the mandatory liquidation date and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to complete a business combination by January 26, 2023 (unless such a period is extended as described herein), then the Company will cease all operations except for the purpose of liquidating. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 26, 2023.
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted by the COVID-19 outbreak, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. The Company’s ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.
I-8
LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(2) Net Earnings (Loss) per Share
The Company applies the two-class method in calculating earnings (loss) per share. The Company has not considered the effect of warrants sold in the IPO and the private placement to purchase an aggregate 21.5 million shares of common stock in the calculation of diluted loss per share, since the exercise of the warrants into shares of common stock is contingent upon the occurrence of future events. As a result, diluted net earnings (loss) per common share is the same as basic net earnings (loss) per common share for the periods presented. Basic and diluted net earnings (loss) attributable to shareholders is calculated by adding the adjustment to the Series A redeemable common stock that is recorded directly to retained earnings (deficit) from net earnings (loss). Net earnings (loss) attributable to shareholders is allocated to the Series A redeemable common stock and the Series F non-redeemable common stock on a weighted average shares outstanding pro rata basis.
Below is a reconciliation of the net earnings (loss) per common share:
(3) Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted
I-9
LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The value of the Public Warrants (as defined in note 4) is based on quoted market prices considered to be traded on “active markets” and accordingly are reported in the foregoing table as Level 1 fair value.
The fair value of the Forward Purchase Agreement (as described in note 4) is calculated as the difference between the present value of the aggregate $250,000,000 commitment and the fair value of the common stock and warrants to be issued pursuant to the Forward Purchase Agreement, based on the public trading price of the Units issued in the Company’s IPO.
The fair value of the Private Placement Warrants is reported in the foregoing table as Level 2 fair value. The fair value of the Private Placement Warrants was derived from a Black-Scholes option pricing model using observable market data as the significant inputs. The assumptions under the model include the underlying stock price, strike price, risk-free interest rate, estimated volatility, and the expected term. Expected stock price volatility is based on the implied volatility of the Public Warrants. The fair value of the underlying shares is the published closing market price on the Nasdaq Capital Market as of each reporting date, as adjusted for significant results, as necessary. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the date of valuation equal to the remaining expected life of the Private Placement Warrants. The dividend yield percentage is zero because the Company does not currently pay dividends, nor does it intend to do so during the expected term of the Private Placement Warrants.
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The fair value of the Private Placement Warrants was estimated at June 30, 2022 using the following assumptions:
Private Placement Warrants | ||
Estimated dividend yield | 0.00% | |
Expected volatility | 5.9% | |
Risk-free interest rate | 2.70% | |
Expected term (years) | 5 |
The Company recognized unrealized gains of $4,293,079 and $25,674,947 for the three months ended June 30, 2022 and 2021, respectively, and an unrealized gain of $40,941,944 and an unrealized loss of $30,741,113 for the six months ended June 30, 2022 and 2021, respectively, related to financial instruments marked to fair value.
(4) Related Party Transactions
Founder Shares
On November 6, 2020, the Sponsor purchased 17,250,000 shares of the Company’s Series F common stock, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000. On November 18, 2020, the Sponsor contributed an aggregate of 2,875,000 Founder Shares to the Company’s capital for no consideration resulting in the Sponsor holding an aggregate of 14,375,000 Founder Shares, including 1,875,000 Founder Shares that were subject to forfeiture for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part. On January 26, 2021, the underwriter exercised the full over-allotment option and therefore the 1,875,000 Founder Shares are no longer subject to forfeiture.
Private Placement Warrants
Substantially concurrent with the closing of the IPO, the Sponsor purchased an aggregate of 10,000,000 Private Placement Warrants at a price of $1.50 per warrant ($15,000,000 in the aggregate). The difference between these proceeds and the $17,500,000 fair value of the Private Placement Warrants at the IPO date was recorded to realized and unrealized gains (losses), net in the condensed statements of operations. Each Private Placement Warrant is exercisable to purchase one share of Series A common stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the IPO to be held in the Trust Account.
Forward Purchase Agreement
The Company entered into the Forward Purchase Agreement under which the Sponsor (the “Forward Purchaser’’) obtained the right to acquire 25,000,000 forward purchase units (each, a “Forward Purchase Unit’’) for $250,000,000, in the aggregate, in connection with the Company's initial business combination. Each Forward Purchase Unit will consist of one share of Series B common stock (the “Forward Purchase Shares”), and -fifth of one warrant to purchase one share of Series A common stock (the “Forward Purchase Warrants”), at a purchase price of $10.00 per Forward Purchase Unit, and will be sold in a private placement that will close substantially concurrent with the closing of the Company’s initial business combination. The terms of the Forward Purchase Warrants will generally be identical to the terms of the Public Warrants included in the units issued in the IPO.
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LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In addition, the Forward Purchaser has reserved the right to provide incremental funding to the Company in connection with the Company’s initial business combination by purchasing additional shares of Series B common stock at a purchase price of $10.00 per share, which shares would be sold in a private placement substantially concurrent with the closing of the initial business combination.
An investor rights agreement whose terms are incorporated in the Forward Purchase Agreement also provides that the Sponsor is entitled to registration rights with respect to the Forward Purchase Warrants and the shares of common stock issuable upon exercise of the Forward Purchase Warrants or upon conversion of the Series B common stock. In addition, the investor rights agreement provides that upon certain issuances of equity securities by the Company (other than issuances due to the exercise of warrants) (each such issuance, a “Triggering Event”), the Sponsor has certain contractual preemptive rights which are intended to allow the Sponsor to maintain its percentage ownership interest in the Company’s common stock and voting stock.
Services Agreement and Facilities Sharing Agreement
The Company entered into agreements that require the Company to pay Liberty Media Corporation (“LMC”) a total of $91,666 per month for office space, administrative and support services. In addition, each independent director receives annual cash compensation of $75,000. The Sponsor, officers and directors of the Company, and LMC and its subsidiaries will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable initial business combinations.
Promissory Note and Related Party Loans
On November 6, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of December 31, 2021 and the completion of the IPO. On January 26, 2021, the outstanding balance on the Note of $169,933 was fully repaid.
In addition, in order to finance transaction costs in connection with an initial business combination, the Sponsor, LMC and its subsidiaries or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (as amended and restated, “Working Capital Loan”). If the Company completes an initial business combination, the Company would repay the Working Capital Loan out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loan would be repaid only out of funds held outside the Trust Account. In the event that an initial business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loan, but no proceeds held in the Trust Account would be used to repay the Working Capital Loan. The Working Capital Loan would either be repaid upon consummation of an initial business combination, without interest, or, at the lender’s discretion, up to $2,500,000 of such Working Capital Loan may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. On April 15, 2021, the Company put in place a Working Capital Loan of $2,500,000 with the Sponsor. During the first quarter of 2022, the Company and the Sponsor amended the Working Capital Loan to increase the aggregate principal to $4,000,000. As of June 30, 2022, the Company had borrowed $3,000,000 under the Working Capital Loan. The Company concluded that the Working Capital Loan is a debt host with a conversion feature which is considered a financial instrument required to be bifurcated. The conversion feature will be measured at fair value (Level 2) each period with the change in fair value recorded through the realized and unrealized (gains) losses, net line item in the accompanying statements of operations. The debt balance will be accreted up to its par value using the effective interest rate method from the initial borrowing date to expected maturity. Interest expense for the three and six months ended June 30, 2022 related entirely to the amortization of the discount. As of June 30, 2022, the unamortized discount was $42,571. The maturity date is the expected date of the initial business combination and therefore the
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LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
conversion feature liability and the debt have been classified as current as of June 30, 2022. The conversion feature has been included in the other current liabilities line item in the accompanying condensed balance sheet.
(5) Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Forward Purchase Shares, Forward Purchase Warrants, Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loan, if any (and any shares of Series A common stock issuable upon the exercise of the Forward Purchase Warrants, Private Placement Warrants or warrants issued upon the conversion of the Working Capital Loan and upon conversion of the Founder Shares) will be entitled to registration rights with respect to the Private Placement Warrants, Forward Purchase Warrants, warrants issued upon conversion of the Working Capital Loan, if any, warrants purchased by them in the open market, and shares of Series A common stock purchased by them in the open market or issuable upon (1) conversion of the Founder Shares, (2) exercise of the Private Placement Warrants, (3) conversion of the Forward Purchase Shares and shares of Series B common stock purchased in connection with the Company’s initial business combination (if any), (4) exercise of the Forward Purchase Warrants, and (5) exercise of warrants issued upon conversion of the Working Capital Loan, if any, pursuant to an investor rights agreement entered into at the closing of the IPO requiring the Company to register such securities for resale. The holders of these securities will be entitled to make up to three demands in any 12-month period, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of the Company’s initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The holders will also have registration rights in connection with certain hedging and financing transactions that they may enter into with respect to these securities. However, the investor rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Following the consummation of the initial business combination, the Sponsor will have certain rights to maintain its proportionate interest in the Company’s common stock or voting stock by purchasing additional shares as a result of certain issuances by the Company. Upon certain events, the Company’s Sponsor will have the right to purchase such equity securities issuable in connection with the events which will, when added to the issued and outstanding common shares beneficially owned by LMC and its wholly owned subsidiaries immediately prior to the events, result in the Sponsor and LMC and its permitted transferees maintaining their percentage ownership of the Company's outstanding voting stock in the case of issuances of voting stock and other securities convertible, exercisable or exchangeable for voting stock, and maintaining their percentage ownership of the Company's outstanding common stock in the case of issuances of nonvoting stock or other securities convertible, exercisable or exchangeable for nonvoting stock. Such right will not be applicable to the issuance of shares upon the exercise of Public Warrants or Private Placement Warrants which are outstanding prior to or issued in connection with the Company’s initial business combination.
Underwriting Agreement
On January 26, 2021, the Company paid a fixed underwriting discount of $0.20 per Unit, or $11,500,000 in the aggregate. Additionally, a deferred underwriting discount of $0.35 per Unit, or $20,125,000 in the aggregate, will be payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.
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LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(6) Stockholder’s Equity
Preferred Stock—The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.0001 and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2022, there was no preferred stock issued or .
Series A Common Stock—The Company is authorized to issue a total of 3,000,000,000 shares of Series A common stock at par value of $0.0001 each. As of June 30, 2022, there were 57,500,000 shares of Series A common stock and outstanding, all of which were subject to possible redemption.
Series B Common Stock—The Company is authorized to issue a total of 1,000,000,000 shares of Series B common stock at par value of $0.0001 each. As of June 30, 2022, there were no shares of Series B common stock issued or .
Series C Common Stock—The Company is authorized to issue a total of 5,000,000,000 shares of Series C common stock at par value of $0.0001 each. As of June 30, 2022, there were no shares of Series C common stock issued or outstanding.
Series F Common Stock—The Company is authorized to issue a total of 200,000,000 shares of Series F common stock at par value of $0.0001 each. As of June 30, 2022, there were 14,375,000 shares of Series F common stock and outstanding.
Prior to the completion of our initial business combination, only holders of Series F common stock will have the right to vote on the election of directors and only holders of a majority of the outstanding shares of our Series F common stock may remove members of our board of directors for any reason. On any vote to approve our initial business combination or any other matter submitted to a vote of our stockholders prior to our initial business combination other than the matters addressed above, holders of Series A, Series B (if any), and Series F common stock will generally vote together as a single class, except as required by Delaware law or stock exchange rule, with each share of common stock entitling the holder to one vote. Following our initial business combination, holders of our Series A and Series B common stock will generally vote together as a single class on matters presented for a stockholder vote, except as required by Delaware law or stock exchange rule, with each share of Series A common stock entitling the holder to one vote per share and each share of Series B common stock entitling the holder to ten votes per share. Holders of Series C common stock will not be entitled to any voting powers, except as (and then only to the extent) otherwise required by Delaware law. Each share of Series B common stock is exchangeable at the option of the holder for one share of Series A common stock of the same group. All series of the Company’s common stock participate on an equal basis with respect to dividends and distributions.
Warrants—The Public Warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of an initial business combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Series A common stock or equity-linked securities, excluding Forward Purchase Units, for capital raising purposes in connection with the consummation of the initial business combination at an issue price or effective issue price of less than $9.20 per share of Series A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or LMC and its subsidiaries, without taking into account any Founder Shares held by the Sponsor or LMC and its subsidiaries, as applicable) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances, excluding the Forward Purchase Units, represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the initial business combination (net of redemptions), and (z) the volume weighted average trading price of the Series A common stock during the trading day period starting on the trading day prior to the day on which the Company consummates the initial business combination
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LIBERTY MEDIA ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger prices, as described in the agreement related to the Public Warrants, will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price, as described in the agreement related to the Public Warrants, will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Series A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of an initial business combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding completing an initial business combination, the consequences of not completing an initial business combination, the release of funds held in the Trust Account (as defined below), the availability of working capital and borrowing capacity, the use of funds outside the Trust Account, the payment of deferred underwriting commissions to the underwriters of our IPO (as defined below), the payment of fees in connection with our services agreement and facilities sharing agreement with Liberty Media Corporation (“LMC”), the impact of accounting standards on our financial statements, fluctuations in interest rates and foreign exchange rates, and our obligations under the forward purchase agreement we entered into in connection with our IPO. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:
| ● | our being a company with no operating history and no revenue; |
| ● | our ability to select an appropriate target business or businesses; |
| ● | our ability to complete our initial business combination; |
| ● | our expectations around the performance of a prospective target business or businesses; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | our directors and officers allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination; |
| ● | actual and potential conflicts of interest relating to LMC, our Sponsor (as defined below) and other entities in which members of our management team are involved; |
| ● | our potential ability to obtain additional financing to complete our initial business combination including from our Sponsor, LMC or other third parties; |
| ● | our pool of prospective target businesses, including the location and industry of such target businesses; |
| ● | our ability to consummate an initial business combination due to the uncertainty resulting from the COVID-19 pandemic and other events (such as terrorist attacks, armed conflicts, natural disasters or a significant outbreak of other infectious diseases); |
| ● | the ability of our officers and directors to generate a number of potential initial business combination opportunities; |
| ● | the voting structure of our common stock, including any potential adverse effect on our ability to complete an initial business combination timely or cost effectively, and, following our initial business combination, our status as a controlled company and the ability of our Sponsor and LMC to exercise control over our policies and operations, each as a result of the high vote feature of our Series B common stock; |
| ● | our public securities’ potential liquidity and trading; |
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| ● | the lack of a market for our securities; |
| ● | the use of proceeds not held in the Trust Account or available to us from interest income on the Trust Account balance; |
| ● | the Trust Account not being subject to claims of third parties; |
| ● | the classification of our warrants as liabilities; and |
| ● | our financial performance following our IPO. |
For additional risk factors, please see our Annual Report on Form 10-K for the year ended December 31, 2021 (as filed with the SEC on March 31, 2022). These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.
The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed financial statements and the notes thereto.
Overview
The accompanying financial statements and the other information herein refer to Liberty Media Acquisition Corporation as “LMAC,” the “Company,” “us,” “we” and “our” unless the context otherwise requires. We are a blank check company incorporated in Delaware on November 6, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar initial business combination with one or more businesses. Our sponsor is Liberty Media Acquisition Sponsor, LLC, a Delaware limited liability company (“Sponsor”).
On November 6, 2020, the Sponsor purchased 17,250,000 shares of the Company’s Series F common stock, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000. On November 18, 2020, the Sponsor contributed an aggregate of 2,875,000 Founder Shares to the Company’s capital for no consideration resulting in the Sponsor holding an aggregate of 14,375,000 Founder Shares, including 1,875,000 Founder Shares that were subject to forfeiture for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part. On January 26, 2021, the underwriter exercised the full over-allotment option and therefore the 1,875,000 Founder Shares are no longer subject to forfeiture. The fair value of the Founder Shares at date of our initial public offering (“IPO”) was determined to be approximately $139,000,000 based on the value of the Series A common stock that was issued on the same day as a proxy for value. The value of these shares will not ultimately be realized until an initial business combination is completed.
The registration statement for our IPO became effective on January 21, 2021. On January 26, 2021, we consummated the IPO of 57,500,000 units (the “Units”), including 7,500,000 Units sold pursuant to the full exercise of the underwriters’ over-allotment option. Each Unit consists of one share of Series A common stock of the Company, par value $0.0001 per share (“Series A Common Stock”), and one-fifth of one redeemable warrant of the Company. Each whole warrant entitles the holder thereof to purchase one share of Series A Common Stock for $11.50 per share, subject to adjustment, following the later of 30 days after the consummation of the initial business combination and 12 months from the closing of the IPO. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $575,000,000.
Substantially concurrent with the closing of the IPO, the Company completed the private placement of 10,000,000 warrants (the “Private Placement Warrants”) at a purchase price of $1.50 per Private Placement Warrant, to our Sponsor, generating gross proceeds to the Company of $15,000,000 (the “Private Placement”). The Private Placement Warrants are identical to the warrants sold as part of the Units in the IPO except that, so long as they are held by the Sponsor or its permitted transferees: (1) they will not be redeemable by the Company; (2) they (including the Series A Common Stock
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issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the consummation of the initial business combination; (3) they may be exercised by the holders on a cashless basis; and (4) they (including the Series A Common Stock issuable upon exercise of these warrants) are entitled to registration rights.
A total of $575,000,000, comprised of proceeds from the IPO and the issuance of the Private Placement Warrants was placed in a U.S.-based Trust Account at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, if any, the funds held in the Trust Account will not be released from the Trust Account until the earliest of: (1) the consummation of the initial business combination; (2) the redemption of any Series A Common Stock properly submitted in connection with a stockholder vote to amend the Company's Amended and Restated Certificate of Incorporation (A) to modify the substance or timing of the Company's obligation to allow redemptions in connection with the initial business combination or to redeem 100% of its Series A Common Stock if the Company does not complete its initial business combination within 24 months from the closing of the IPO (or 27 months from the closing of the IPO if the Company has executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the closing of the IPO, which we refer to as an “agreement in principle event”) or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3) the redemption of all of the Series A Common Stock if it is unable to complete its initial business combination within 24 months from the closing of the IPO (or 27 months if an agreement in principle event has occurred), subject to applicable law.
Our Sponsor, executive officers and directors have agreed that we only have 24 months from the closing of the IPO to complete an initial business combination (or 27 months if an agreement in principle event has occurred). If we have not completed an initial business combination within such 24-month period (or 27 months if an agreement in principle event has occurred) or during any extended time that we have to consummate an initial business combination beyond 24 months (or 27 months if an agreement in principle event has occurred) as a result of a stockholder vote to amend our Amended and Restated Certificate of Incorporation, we will: (1) cease all operations except for the purposes of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Series A Common Stock, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding shares of Series A Common Stock, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete an initial business combination within such 24-month period (or 27 months if an agreement in principle event has occurred).
Results of Operations
From November 6, 2020 (inception) until our IPO on January 26, 2021, our entire activity was in preparation for our IPO, and, following our IPO through June 30, 2022, our entire activity has been limited to the search for a prospective initial business combination. The following table is a summary of our operating results:
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General, administrative and formation costs decreased $111,427 and increased $223,570 during the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year. The decrease for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily due to decreased legal fees. The increase for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily due to increased legal fees in the first quarter of 2022.
Interest expense increased $122,968 and $229,604 during the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year. Interest expense is non-cash and is related entirely to the Working Capital Loan (see note 4 to the accompanying condensed financial statements).
Interest income on marketable securities held in the Trust Account increased $716,065 and $757,244 during the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year, primarily due to a higher dividend yield during the second quarter of 2022.
Realized and unrealized gains (losses), net decreased $21,381,868 and increased $71,683,057 during the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year. Changes in the fair value of financial instruments recognized in the condensed statements of operations are primarily due to market factors primarily driven by changes in the fair value of the underlying shares.
Liquidity and Capital Resources
As of June 30, 2022, we had $484,952 in cash which, along with other assets, resulted in a working capital deficit of $2,183,974. Excluding the Sponsor loans (included in current liabilities) the Company has a working capital surplus of $773,455.
Our liquidity needs prior to the consummation of the IPO were satisfied through the proceeds of $25,000 from the sale of Founder Shares to our Sponsor, and loan proceeds from our Sponsor of $169,933 under a promissory note we entered into with our Sponsor (the “Note”). We repaid the Note in full on January 26, 2021. Subsequent to the consummation of the IPO, our liquidity needs have been satisfied through the net proceeds held outside of the Trust Account from the consummation of the IPO and the Private Placement. See “Overview” for additional information regarding the IPO, Private Placement and Trust Account. Additionally, on April 15, 2021, the Company entered into a Working Capital Loan with the Sponsor (see note 4 to the notes to the accompanying condensed financial statements).
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During the first quarter of 2022, we amended the Working Capital Loan to increase the aggregate principal to $4,000,000. As of June 30, 2022, we had borrowed $3,000,000 on the Working Capital Loan.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet the Company’s needs through the earlier of the consummation of the initial business combination or the mandatory liquidation date. Over this time period, the Company will be using the funds held outside of the Trust Account for paying existing accounts payable, payments under the shared services and facilities sharing arrangements, identifying and evaluating prospective initial business combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the initial business combination. If the Company’s estimate of the costs of undertaking due diligence and other activities related to consummating the initial business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the initial business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor and/or third parties. The Sponsor is not under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
We do not have any long-term debt obligations, finance lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
On January 26, 2021, we entered into a services agreement and facilities sharing agreement pursuant to which we pay LMC and certain of its subsidiaries a total of $91,666 per month for office space, administrative and support services.
The underwriters are entitled to underwriting discounts and commissions of 5.5%, of which 2.0% ($11,500,000) was paid at the closing of the IPO and 3.5% ($20,125,000) was deferred. The deferred underwriting discount will be paid to the underwriters upon the consummation of the initial business combination subject to the terms of the underwriting agreement.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted, would have a material effect on the accompanying financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2022, we were not subject to any market or interest rate risk. Following the consummation of our IPO, the net proceeds of our IPO, including amounts in the Trust Account, have been invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2022
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because of a material weakness in our internal control over financial reporting related to the reclassification of the Company’s warrants, accounting for the Forward Purchase Agreement and other accounting matters which resulted in the restatement of our audited opening balance sheet and the subsequent quarterly condensed financial statements filed on Form 10-Q, as discussed in more detail below and in the Company’s Quarterly Reports on Form 10-Q/A filed for each of the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021. Management will monitor the remediation of the material weakness, as described below.
Changes in Internal Control Over Financial Reporting
Other than the execution of material weakness remediation activities described below, there has been no change in the Company's internal control over financial reporting that occurred during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
Remediation Activities
See “Item 9A Controls and Procedures” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for disclosure of information about the material weakness that was reported as related to the reclassification of the Company’s warrants, accounting for the Forward Purchase Agreement and other accounting matters which resulted in the restatement of our opening balance sheet and the subsequent quarterly condensed financial statements.
Prior to our IPO, accounting services were provided to our company by a third party accounting firm that specialized in special purpose acquisition companies. In connection with our IPO, we entered into a shared services arrangement with LMC. Following the IPO, we transitioned the accounting services to the resources available to us under the shared services arrangement, which includes the experience and expertise of LMC personnel in evaluating complex accounting issues. Utilizing these resources, we reviewed accounting literature, research and guidance and made conclusions regarding these complex accounting issues. In addition, we engaged a third party expert to review and evaluate management’s conclusions regarding these complex issues.
The Company believes the foregoing efforts will effectively remediate the material weakness. Because the reliability of the internal control process requires repeatable execution, the successful on-going remediation of the material weakness will require on-going review and evidence of effectiveness prior to concluding that the controls are effective. The Company's remediation efforts are underway; however, there is no assurance that the remediation efforts will be effective in the future or that additional material weaknesses will not develop or be identified.
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PART II - OTHER INFORMATION
Item 6. Exhibits.
Exhibit Number |
| Description |
31.1 | ||
31.2 | ||
32 | ||
101.INS | Inline XBRL Instance Document* - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document.* | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LIBERTY MEDIA ACQUISITION CORPORATION | ||
Date: July 29, 2022 | By: | /s/ Gregory B. Maffei |
Gregory B. Maffei | ||
President and Chief Executive Officer | ||
Date: July 29, 2022 | By: | /s/ Brian J. Wendling |
Brian J. Wendling | ||
Chief Accounting Officer and Principal Financial Officer | ||
II-2
1 Year Liberty Media Acquisition Chart |
1 Month Liberty Media Acquisition Chart |
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