The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated on June 25, 2020 as a Delaware
corporation and formed for the purpose of effecting a Business Combination with
one or more target businesses. We completed our Public Offering on August 10,
2020. As of December 31, 2020, we had not identified any business combination
target.
We presently have no revenue, have had losses since inception from incurring
formation costs and have had no operations other than the active solicitation of
a target business with which to complete a business combination.
Since completing our Public Offering, we have reviewed, and continue to review,
a number of opportunities to enter into a Business Combination with an operating
business, but we are not able to determine at this time whether we will complete
a Business Combination with any of the target businesses that we have reviewed
or with any other target business. We intend to effectuate our Business
Combination using cash from the proceeds of our Public Offering and the sale of
the Private Placement Warrants, our capital stock, debt, or a combination of
cash, stock and debt.
Recent Developments
Proposed Business Combination
On February 22, 2021, the "Company" entered into a Business Combination
Agreement (the "Business Combination Agreement"), by and among the Company,
Ardagh Metal Packaging S.A. ("AMPSA"), Ardagh Group S.A. ("AGSA") and Ardagh MP
MergeCo Inc. ("MergeCo"), which provides for, among other things: (a) a series
of transactions that will result in the subsidiaries of AGSA that are engaged in
the business of developing, manufacturing, marketing and selling metal beverage
cans and ends and providing related technical and customer services becoming
wholly-owned by AMPSA (the "Pre-Closing Restructuring"), and (b) the merger of
MergeCo with and into the Company, with the Company being the surviving
corporation as a wholly-owned subsidiary of AMPSA (the "Merger", and, together
with the Pre-Closing Restructuring and other transactions contemplated in the
Business Combination Agreement, the "Proposed Business Combination").
The Business Combination Agreement and the transactions contemplated thereby
were unanimously approved by the Board of Directors of the Company on February
22, 2021 and the Board of Directors of AGSA on February 22, 2021.
The Business Combination Agreement
Proposed Business Combination Consideration
The aggregate consideration to be paid to AGSA pursuant to the Transfer
Agreement (as defined within the Business Combination Agreement) and the
Business Combination Agreement consists of (a) $2,315,000,000, payable in cash
and in equivalent in U.S. dollars or euros (or a combination thereof), (b)
484,956,250 shares of AMPSA, with a nominal value of EUR 0.01 per share (the
"AMPSA Shares"), (c) a promissory note issued by AMPSA in the amount of
$1,085,000,000, to be paid in cash at the consummation of the Merger (the
"Closing") or, in certain circumstances, a combination of cash and AMPSA Shares,
and (d) the right to receive, during the five-year period commencing 180 days
after the Closing 60,730,000 additional AMPSA Shares in five equal installments
depending on whether the price of AMPSA Shares maintains for a certain period of
time a volume weighted average price of $13.00, $15.00, $16.50, $18.00 or $19.50
(collectively, the "AGSA Consideration").
Representations and Warranties
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The Business Combination Agreement contains customary representations,
warranties and covenants of AMPSA, AGSA, GHV and MergeCo relating to, among
other things, their ability to enter into the Business Combination Agreement and
their outstanding capitalization.
Covenants
The Business Combination Agreement includes customary covenants of the parties
with respect to operation of their respective businesses prior to consummation
of the Proposed Business Combination and efforts to satisfy conditions to
consummation of the Proposed Business Combination. The Business Combination
Agreement also contains additional covenants of the parties, including, among
others, covenants providing for the Company and AGSA to cooperate in the
preparation of the Proxy Statement/Prospectus and Registration Statement (as
each such term is defined in the Business Combination Agreement) required to be
filed in connection with the Proposed Business Combination. The covenants of the
parties to the Business Combination Agreement will not survive the Closing,
except for those covenants that by their terms expressly apply in whole or in
part after the Closing.
Conditions to Consummation of the Proposed Business Combination
The consummation of the Proposed Business Combination is conditioned upon, among
other things, (a) no action or governmental order or law shall have been
enacted, issued, promulgated, enforced or entered that restrains, enjoins or
otherwise prohibits the consummation of the Proposed Business Combination or
would cause any part of the Proposed Business Combination to be rescinded
following the Closing; (b) the proposal to adopt the Business Combination
Agreement and approve the Proposed Business Combination shall have been approved
and adopted by the requisite affirmative vote of the Company stockholders; (c) a
Luxembourg statutory independent auditor (réviseur d'entreprises agréé) of AMPSA
shall have issued appropriate reports regarding the contributions relating to
the AMPSA Shares to be issued to the Company stockholders or AGSA as set forth
in the Business Combination Agreement; (d) all closing conditions to the private
placement pursuant to which investors will purchase 60,000,000 AMPSA Shares for
a purchase price of $10.00 per share (the "PIPE Shares") shall have been
satisfied or waived and the $600,000,000 gross proceeds from the private
placement shall have been paid to AMPSA on the date the Merger is consummated;
(e) the Registration Statement of which the Proxy Statement/Prospectus forms a
part shall have been declared effective under the Securities Act and no stop
order or proceedings for purposes of suspending the effectiveness of the
registration statement shall have been initiated by the SEC and not withdrawn;
and (f) the AMPSA Shares shall have been approved for listing on NYSE, subject
to official notice of issuance.
Private Placement Subscription Agreements
In connection with the execution of the Business Combination Agreement, on
February 22, 2021, AMPSA and the Company entered into Subscription Agreements
(each, a "Subscription Agreement" and collectively, the "Subscription
Agreements") with certain investors and Gores Sponsor V LLC (the "Sponsor"),
pursuant to which the investors and the Sponsor agreed to purchase, and AMPSA
agreed to sell to the investors and the Sponsor the PIPE Shares for an aggregate
cash amount of $600,000,000.
The issuance of the PIPE Shares pursuant to the Subscription Agreements is
contingent upon, among other customary closing conditions, the substantially
concurrent consummation of the Proposed Business Combination. Pursuant to the
Subscription Agreements, AMPSA agreed that, within 30 calendar days after the
date of Closing, it will file with the SEC (at AMPSA's sole cost and expense) a
registration statement registering the resale of the PIPE Shares, and AMPSA will
use its commercially reasonable efforts to have the registration statement
declared effective as soon as practicable after the filing thereof.
Results of Operations
For the period from June 25, 2020 to December 31, 2020, we had a net loss of
($650,745). Our busines activities during the year mainly consisted of
identifying and evaluating prospective acquisition candidates for a Business
Combination. We believe that we have sufficient funds available to complete our
efforts to effect a Business Combination with an operating business by August
10, 2022. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our Business
Combination.
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As indicated in the accompanying unaudited financial statements, at December 31,
2020, we had $705,817 in cash and deferred offering costs of $18,375,000.
Further, we expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete our Business
Combination will be successful.
Liquidity and Capital Resources
On July 14, 2020, the Sponsor purchased 11,500,000 Founder Shares for an
aggregate purchase price of $25,000, or approximately $0.002 per share. On
August 3, 2020, the Sponsor transferred 25,000 Founder Shares to each of the
Company's three independent directors at their original purchase price. On
August 5, 2020, the Company effected a stock dividend with respect to the
Company's Founder Shares of 2,156,250 shares thereof, resulting in the Company's
Initial Stockholders holding an aggregate of 13,656,250 shares of Class F Common
Stock. On September 21, 2020, the Sponsor forfeited 531,250 Founder Shares
following the expiration of the unexercised portion of underwriter's
over-allotment option, so that the Founder Shares held by the Initial
Stockholders would represent 20.0% of the outstanding shares of common stock
following completion of the Public Offering.
On August 10, 2020, the Company consummated its Public Offering of 52,500,000
Units at a price of $10.00 per Unit, including 5,000,000 Units as a result of
the underwriter's partial exercise of its over-allotment option, generating
gross proceeds of $525,000,000. On the IPO Closing Date, we completed the
private sale of an aggregate of 6,250,000 Private Placement Warrants, each
exercisable to purchase one share of Common Stock at $11.50 per share, to our
Sponsor, at a price of $2.00 per Private Placement Warrant, generating gross
proceeds, before expenses, of $12,500,000. After deducting the underwriting
discounts and commissions (excluding the Deferred Discount, which amount will be
payable upon consummation of the Business Combination, if consummated) and the
estimated offering expenses, the total net proceeds from our Public Offering and
the sale of the Private Placement Warrants were $526,055,000, of which
$525,000,000 (or $10.00 per share sold in the Public Offering) was placed in the
Trust Account. The amount of proceeds not deposited in the Trust Account was
$1,055,000 at the closing of our Public Offering. Interest earned on the funds
held in the Trust Account may be released to us to fund our Regulatory
Withdrawals, for a maximum of 24 months and/or additional amounts necessary to
pay our franchise and income taxes.
On July 14, 2020, Company borrowed $300,000 by the issuance of an unsecured
promissory note from the Sponsor for $300,000 to cover expenses related to the
Public Offering. This Note was non-interest bearing and payable on the earlier
of June 30, 2021 or the completion of the Public Offering. This Note was repaid
in full upon the completion of the Public Offering.
As of December 31, 2020, we had cash held outside of the Trust Account of
approximately $705,817, which is available to fund our working capital
requirements. Additionally, interest earned on the funds held in the Trust
Account may be released to us to fund our Regulatory Withdrawals, for a maximum
of 24 months and/or additional amounts necessary to pay our franchise and income
taxes.
At December 31, 2020, the Company had current liabilities of $567,859 and
working capital of $492,046, largely due to amounts owed to professionals,
consultants, advisors and others who are working on seeking a Business
Combination. Such work is continuing after December 31, 2020 and amounts are
continuing to accrue.
We intend to use substantially all of the funds held in the Trust Account,
including interest (which interest shall be net of Regulatory Withdrawals and
taxes payable) to consummate our Business Combination. Moreover, we may need to
obtain additional financing either to complete a Business Combination or because
we become obligated to redeem a significant number of shares of our Common Stock
upon completion of a Business Combination. Subject to compliance with applicable
securities laws, we would only complete such financing simultaneously with the
completion of our Business Combination. If we are unable to complete our
Business Combination because we do not have sufficient funds available to us, we
will be forced to cease operations and liquidate the Trust Account. In addition,
following our Business Combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations. To the extent
that our capital stock or debt is used, in whole or in part, as consideration to
consummate our Business Combination, the remaining proceeds held in our Trust
Account, if any, will be used as working capital to finance the operations of
the target business or businesses, make other acquisitions and pursue our growth
strategy.
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Off-balance sheet financing arrangements
We had no obligations, assets or liabilities which would be considered
off-balance sheet arrangements at December 31, 2020. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We had not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or entered into any non-financial agreements involving assets.
Contractual obligations
As of December 31, 2020, we did not have any long-term debt obligations, capital
lease obligations, operating lease obligations, purchase obligations or
long-term liabilities. In connection with the Public Offering, we entered into
an administrative services agreement to pay monthly recurring expenses of
$20,000 to The Gores Group for office space, utilities and secretarial support.
The administrative services agreement terminates upon the earlier of the
completion of a Business Combination or the liquidation of the Company.
The underwriter is entitled to underwriting discounts and commissions of 5.5%
($28,875,000), of which 2.0% ($10,500,000) was paid at the closing of the Public
Offering, and 3.5% ($18,375,000) was deferred. The Deferred Discount will become
payable to the underwriter from the amounts held in the Trust Account solely in
the event that the Company completes a Business Combination, subject to the
terms of the underwriting agreement. The underwriter is not entitled to any
interest accrued on the Deferred Discount.
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Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") and pursuant to the accounting and disclosure rules and regulations of
the Securities and Exchange Commission ("SEC"), and reflect all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial position as of
December 31, 2020 and the results of operations and cash flows for the periods
presented. Operating results for the period ended December 31, 2020 are not
necessarily indicative of results that may be expected for the full year or any
other period. While the Company was formed on June 25, 2020, there were no
transactions or operations between inception and July 14, 2020. Therefore, these
financials statements do not include comparative statements to prior
2020 periods.
Offering Costs
The Company complies with the requirements of the Accounting Standards
Codification (the "ASC") 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A
- "Expenses of Offering." Offering costs consist principally of professional and
registration fees incurred through the balance sheet date that are related to
our Public Offering and were charged to stockholders' equity upon the completion
of our Public Offering. Accordingly, offering costs totaling $29,563,655
(including $28,875,000 in underwriter's fees), and were charged to stockholders'
equity.
Net loss per common share
The Company has two classes of shares, which are referred to as Class A common
stock (the "Common Stock") and Class F Common Stock (the "Founders Shares"). Net
income/(loss) per common share is computed utilizing the two-class method. The
two-class method is an earnings allocation formula that determines earnings per
share separately for each class of common stock based on an allocation of
undistributed earnings per the rights of each class. At December 31, 2020, the
Company did not have any dilutive securities or other contracts that could,
potentially, be exercised or converted into common stock and then share in the
earnings of the Company under the treasury stock method. As a result, diluted
net income/(loss) per common share is the same as basic net income/(loss) per
common share for the period.
Income Taxes
The Company follows the asset and liability method of accounting for income
taxes under ASC 740, "Income Taxes." Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
For those liabilities or benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. The
Company recognizes accrued interest and penalties related to unrecognized tax
liabilities as income tax expense. No amounts were accrued for the payment of
interest and penalties at December 31, 2020.
The Company may be subject to potential examination by U.S. federal, states or
foreign jurisdiction authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the
nexus of income amounts in various tax jurisdictions and compliance with U.S.
federal, states or foreign tax laws.
The Company is incorporated in the State of Delaware and is required to pay
franchise taxes to the State of Delaware on an annual basis.
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Recently issued accounting pronouncements not yet adopted
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements based on current operations of the
Company. The impact of any recently issued accounting standards will be
re-evaluated on a regular basis or if a business combination is completed where
the impact could be material.
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