Notes
to Financial Statements
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1.
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Nature of Business and Subsequent Event
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Business
Landcadia Holdings IV, Inc., (the “Company,”
“we,” “us” or “our”), was formed as JFG Holding I LLC, a Delaware limited liability company on August
13, 2020 and converted into a Delaware corporation on January 28, 2021. We consummated an initial public offering (“Public Offering”)
on March 29, 2021.
The Company has not had any significant operations to date.
The Company was formed to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the “Business Combination”). The Company has not yet identified a Business Combination
for these purposes. There is no assurance that its plans to consummate a Business Combination will be successful or successful within
the target business acquisition period.
All activity through March 31, 2021 relates to the Company’s
formation and Public Offering, which is described below.
Sponsors
The Company’s sponsors are TJF, LLC (“TJF”)
and Jefferies Financial Group Inc. (“JFG” and together with TJF, the “Sponsors”). TJF is wholly owned by
Tilman J. Fertitta, the Company’s Co-Chairman and Chief Executive Officer.
Financing
The Company intends to finance its Business Combination
in part with proceeds from its $500,000,000 Public Offering and a $12,500,000 private placement (the “Private Placement”)
of private placement warrants (the “Sponsor Warrants”), see Notes 5 and 6. The registration statement for the Public Offering
was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on March 24, 2021. The Company consummated the
Public Offering of 50,000,000 units (the “Units”) at $10.00 per Unit on March 29, 2021, generating gross proceeds of $500,000,000.
Simultaneously with the closing of the Public Offering, the Company consummated the Private Placement of an aggregate of 8,333,333 Sponsor
Warrants at a price of $1.50 per Sponsor Warrant, generating proceeds of $12,500,000. Upon the closing of the Public Offering and Private
Placement on March 29, 2021, $500,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Public Offering and
the Private Placement was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as
trustee (the “Trust Account”).
Trust Account
The proceeds held in the Trust Account can only be invested
in permitted United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of
1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
The Company’s second amended and restated certificate
of incorporation (the “Charter”) provides that, other than the withdrawal of interest to pay tax obligations (less up to $100,000
interest to pay dissolution expenses), none of the funds held in the Trust Account will be released until the earliest of: (i) the completion
of the Business Combination; (ii) the redemption of any shares of Class A common stock included in the Units sold in the Public Offering
(“Public Shares”) properly submitted in connection with a stockholder vote to amend the Charter to modify the substance or
timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete the Business Combination
by March 29, 2023 (within 24 months from the closing of the Public Offering); or to provide for redemption in connection with a Business
Combination; or (iii) the redemption of the Public Shares if the Company is unable to complete the Business Combination within 24 months
from the closing of the Public Offering, subject to applicable law.
Initial Business Combination
The Company’s management has broad discretion with
respect to the specific application of the net proceeds of the Public Offering and Private Placement, although substantially all of the
net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will
be able to complete a Business Combination successfully. The Company must complete one initial Business Combination having an aggregate
fair market value of at least 80% of the value of the assets held in the Trust Account (excluding deferred underwriting commissions and
taxes payable on the interest earned on the Trust Account) at the time of the Company’s signing a definitive agreement in connection
with an initial Business Combination. The Company will only complete a Business Combination if the post-transaction 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.
The Sponsors and the Company’s officers and directors
have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect
to their shares of Class B common stock, par value $0.0001 per share, of the Company (“Founder Shares”) and Public Shares
held by them in connection with the completion of the 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 Charter to modify the substance or timing
of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete a Business Combination by March
29, 2023, or to provide for redemption in connection with a Business Combination and (iii) waive their rights to liquidating distributions
from the Trust Account with respect to their Founder Shares if the Company fails to complete a Business Combination by March 29, 2023,
although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the
Company fails to complete a Business Combination within the prescribed time frame; and (iv) vote any Founder Shares held by them and any
Public Shares purchased during or after the Public Offering (including in open market and privately-negotiated transactions) in favor
of the Business Combination.
The Company, after signing a definitive agreement for the
Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection
with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for
cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior
to the consummation of the Business Combination, including interest earned on the Trust Account and not previously released to the Company
to pay its taxes, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer for
an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business
days prior to commencement of the tender offer, including interest earned on the Trust Account and not previously released to the Company
to pay its taxes. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders
to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder
approval. If the Company seeks stockholder approval, it will complete the Business Combination only if a majority of the outstanding shares
of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem the Public Shares in
an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption
of the Public Shares and the related Business Combination, and instead may search for an alternate Business Combination.
Notwithstanding the foregoing redemption
rights, if the Company seeks stockholder approval of the Business Combination and it does not conduct redemptions in connection with the
Business Combination pursuant to the tender offer rules, the Charter provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13
of the Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to
more than an aggregate of 15% of the shares sold in the Public Offering, without the Company’s prior consent.
The Public Shares have been recorded
at their redemption amount and classified as temporary equity (“Redeemable Shares”), in accordance with the Financial Accounting
Standards Board Accounting Standards Codification (“FASB ASC”) 480, “Distinguishing Liabilities from Equity.”
The amount in the Trust Account was initially $10.00 per Public Share ($500,000,000 held in the Trust Account divided by 50,000,000 Public
Shares). See Note 4 for further information.
The Company will have until March 29, 2023, to complete the Business
Combination. If the Company does not complete the Business Combination within this period of time, it shall (i) cease all operations except
for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public
Shares for a per-share price, payable in cash, 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 to pay its taxes (less up to $100,000 of interest
to pay dissolution expenses), divided by the number of then outstanding Public Shares, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the Company’s remaining stockholders and its board of directors, dissolve and liquidate,
subject in each case to the Company’s obligations under Delaware law to provide for claims to creditors and the requirements of
other applicable law. The Sponsors and the Company’s officers and directors have entered into a letter agreement with the Company,
pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any Founder Shares
held by them if the Company fails to complete its Business Combination by March 29, 2023; however, the Sponsors, officers and directors
are entitled to liquidating distributions from the Trust Account with respect to Public Shares held by them if the Company does not complete
the Business Combination within the required time period. In the event of such distribution, it is possible that the per share value of
the residual assets remaining available for distribution (including Trust Account assets) will be less than the Public Offering price
per Unit in the Public Offering.
Pursuant to the letter agreement referenced above, the Sponsors,
officers and directors agreed that, if the Company submits the Business Combination to the Company’s public stockholders for a vote,
such parties will vote their Founder Shares and any Public Shares in favor of the Business Combination.
Subsequent Events
We have evaluated subsequent events and transactions that
occurred after the balance sheet date up to the date the financial statements were issued. The Company did not identify any subsequent
events that would have required adjustment to or disclosure in the financial statements, other than those included herein.
Fiscal Year End
The Company has a December 31 fiscal year-end.
Liquidity and Management’s Plan
Prior to the completion of the Public Offering, the Company lacked
the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date
of the financial statement. The Company has since completed its Public Offering at which time capital in excess of the funds deposited
in the trust and/or used to fund offering expenses was released to the Company for general working capital purposes. Accordingly, management
has since reevaluated the Company’s liquidity and financial condition and determined that sufficient capital exists to sustain operations
one year from the date this financial statement is issued and therefore substantial doubt has been alleviated.
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2.
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Restatement of Previously Issued Financial Statements
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The consolidated balance sheet as of
March 29, 2021, included in the 8-K, filed April 2, 2021, has been restated to reflect the fair value of our warrant derivative liability,
which was initially recorded as a component of equity. The following table summarizes the effect of the restatement on each financial
statement line item, as indicated:
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As previously reported
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Adjustment
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As restated
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Balance Sheet as of March 29, 2021
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Warrant derivative liability
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$
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-
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$
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33, 333,333
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$
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33,333,333
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Total liabilities
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19,996,626
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33,333,333
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53,329,959
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Class A common stock subject to possible redemption
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479,191,424
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(33,333,333
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)
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445,858,091
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Class A commmon stock
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208
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333
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541
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Additional paid-in capital
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5,017,930
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1,253,357
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6,271,287
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Accumulated deficit
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(8,566
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)
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(1,253,690
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)
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(1,262,256
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)
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3.
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Summary of Significant Accounting Policies
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Basis of Presentation
Our accompanying financial statements include the accounts
of the Company and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of the SEC. The interim financial information provided is unaudited, but includes all adjustments
which management considers necessary for the fair presentation of the results for these periods. Operating results for interim periods
are not necessarily indicative of the results that may be expected for the full year period.
Use of Estimates
The preparation of these financial statements 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 revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933 (as amended, 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 independent registered public accounting firm 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.
Further, section 102(b)(1) of the JOBS Act exempts emerging
growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those
that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the
Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any
such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Cash and Cash Equivalents
The Company considers all short-term investments with an
original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March
31, 2021 and December 31, 2020.
Cash consists of proceeds from the
Public Offering and Private Placement held outside of the Trust Account and may be used to pay for business, legal and accounting due
diligence for the Business Combination and continuing general and administrative expenses.
Concentration
of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts with a financial institution which may exceed the Federal
depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and the Company believes that it is
not exposed to significant risks on such accounts.
Fair
Value of Financial Instruments
The Company classifies financial instruments under FASB
ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are reported at fair value at each reporting
period. Our financial instruments that are subject to fair value measurements consist of cash and marketable securities held in trust
and warrant derivative liability. The carrying value of the Company’s cash and cash equivalents, and accrued liabilities, approximates
their fair value due to the short-term nature of such instruments. See Note 8 for further information.
Prepaid Expenses
Prepaid expenses of $1,683,416 consist of premiums for directors
and officers insurance. These premiums will amortized over the 2-year term of the agreement.
Offering Costs
Total offering costs were $800,000 and consisted of legal,
accounting, and other costs incurred in connection with the formation and preparation of the Public Offering. Underwriting commissions
for the Public Offering were $27,500,000, of which $17,500,000 have been deferred until the completion of the Business Combination. Because
the Public Warrants have been accounted for as a liability at fair value instead of equity, the Company applied the relative fair value
method and allocated a portion of offering costs and underwriting commissions to expenses with the remainder charged to additional paid
in capital at the closing of the Public Offering.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are $2,319,311
as of March 31, 2021, and primarily consist offering costs related to the Business Combination and directors and officers insurance premiums.
Warrant Liabilities
In accordance with FASB ASC 815-40,
Derivatives and Hedging: Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be settled
in its own stock, such as warrants, as equity of the entity or as an asset or liability. If an event that is not within the entity’s
control could require net cash settlement, then the contract should be classified as an asset or a liability rather than as equity. We
have determined because the terms of Public Warrants include a provision that entitles all warrantholders to cash for their warrants in
the event of a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled
to cash, our warrants should be classified as liability measured at fair value, with changes in fair value each period reported in earnings.
Volatility in our Common Stock and Public Warrants may result in significant changes in the value of the derivatives and resulting gains
and losses on our statement of operations.
Loss
Per Common Share
Basic loss per common share is computed by dividing net
loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. All shares of Class B
common stock are assumed to convert to shares of Class A common stock on a one-for-one basis. Consistent with FASB ASC 480, shares
of Class A common stock subject to possible redemption, as well as their pro rata share of undistributed trust earnings consistent
with the two-class method, have been excluded from the calculation of loss per common share for the three months ended March 31, 2021.
Such shares, if redeemed, only participate in their pro rata share of trust earnings, see Note 4. Diluted loss per share includes the
incremental number of shares of common stock to be issued in connection with the conversion of Class B common stock or to settle
warrants, as calculated using the treasury stock method. For the three months ended March 31, 2021 , the Company did not have any dilutive
warrants, securities or other contracts that could, potentially, be exercised or converted into common stock. As a result, diluted loss
per common share is the same as basic loss per common share for all periods presented. Further, in accordance with FASB ASC 260, the loss
per share calculation reflects the effect of the stock splits as discussed in Note 4 for all periods presented.
A reconciliation of net loss per common
share as adjusted for the portion of income that is attributable to common stock subject to redemption is as follows:
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Three months
ended March 31,
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2021
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Numerator:
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Net loss - basic and diluted
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$
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(953,567
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)
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Less: Income attributable to common stock subject to possible redemption
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-
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Net loss available to common shares
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$
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(953,567
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)
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Demoninator:
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Weighted average number of shares – basic and diluted
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14,354,255
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Basic and diluted loss available to common shares
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$
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(0.07
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)
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Income Taxes
The Company complies with the accounting and reporting requirements
of FASB ASC, 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of
assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
There were no unrecognized tax benefits as of March 31,
2021. FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those 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 benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at March 31, 2021. The Company is
currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has been subject to income tax examinations by major taxing authorities since inception.
The effective tax rate was 21.0% for all periods presented. The Company
recorded a deferred tax benefit of $6,974 on the Net Operating Loss in the three months ended March 31, 2021. In assessing the realization
of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
After consideration of all of the information available, management believes that significant uncertainty exists with respect to future
realization of the deferred tax assets and has therefore established a full valuation allowance. For the three months ended March 31,
2021, the change in the valuation allowance was $6,974 which resulted in no income tax expense (benefit) for this period.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but
not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
On August 13, 2020, JFG purchased
a 100% of the membership interest in the Company for $1,000. On January 28, 2021 we converted the Company from a limited liability company
to a corporation and issued 5,727,000 Founder Shares in lieu of membership rights to its member. Then on February 2, 2021, the Company
completed a 1:1.25 stock split of all Founder Shares, resulting in total shares issued and outstanding of 7,187,500, all owned by JFG. On February 5, 2021, we issued 7,187,500 Founder Shares to TJF for $10,000. The total number of authorized shares
of all classes of capital stock is 301,000,000, of which 240,000,000 shares are Class A shares at par value $0.0001 per share; 60,000,000
shares are Class B shares at par value $0.0001 per share; and 1,000,000 shares are Preferred stock at par value $0.0001 per share. An
aggregate of 1,875,000 Founder Shares were forfeited because the underwriters did not exercise their over-allotment option. As of March
31, 2021, JFG and TJF each owned 6,250,000 Founder Shares. The financial statements reflect the changes in stock retroactively for all
periods presented. The financial statements reflect the changes in stock retroactively for all periods presented. Following these transactions,
the Company had $11,000 in invested capital, or $0.0001 per share.
Redeemable Shares
All of the 50,000,000 Public Shares
sold as part of the Public Offering contain a redemption feature as defined in the Public Offering. In accordance with FASB ASC 480, redemption
provisions not solely within the control of the Company require the security to be classified outside of permanent equity. The Company’s
amended and restated certificate of incorporation provides a minimum net tangible asset threshold of $5,000,001. The Company recognizes
changes in redemption value immediately as they occur and will adjust the carrying value of the security to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying amount of Redemption Shares will be affected by charges against
additional paid-in capital.
At March 31, 2021 there were 50,000,000
Public Shares, of which 44,616,678 were classified as Redeemable Shares, classified outside of permanent equity, and 5,383,322 classified
as Class A common stock.
For further information on the Founder
Shares, see Note 6.
Public Units
In the Public Offering, which closed March 29, 2021, the
Company sold 50,000,000 Units at a price of $10.00 per Unit (the “Public Units”). Each Unit consists of one share of the Company’s
Class A common stock, $0.0001 par value and one-fourth of one redeemable warrant (each a “Public Warrant”). Under the terms
of the warrant agreement, the Company has agreed to use its best efforts to file a new registration statement under the Securities Act
no later than 15 business days following the completion of the Business Combination covering the shares of Class A common stock issuable
upon exercise of the Public Warrants, to use its best efforts to cause such registration statement to become effective and to maintain
a current prospectus relating to those shares of Class A common stock until the Public Warrants expire or are redeemed. If a registration
statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective by the 60th business
day after the closing of the Business Combination, warrantholders may, until such time as there is an effective registration statement
and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a "cashless
basis" in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common
stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of
a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public
Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement.
Each Public Warrant entitles the holder to purchase one
share of Class A common stock at a price of $11.50 per share. Each Public Warrant will become exercisable on the later of 30 days after
the completion of the Business Combination or 12 months from the closing of the Public Offering. However, if the Company does not complete
the Business Combination on or prior to March 29, 2023, the warrants will expire at the end of such period. If the Company is unable to
deliver registered shares of Class A common stock to the holder upon exercise of Public Warrants issued in connection with the Units during
the exercise period, there will be no net cash settlement of these Public Warrants and the Public Warrants will expire worthless, unless
they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the Public Warrants become exercisable,
the Company may call the warrants for redemption: (i) in whole and not in part; (ii) at a price of $0.01 per warrant; (iii) upon not less
than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and (iv) if,
and only if, the reported closing price of the Class A common stock equals or exceeds a certain dollar value per share for any 20 trading
days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
Underwriting Commissions
The Company paid an underwriting discount of $10,000,000
($0.20 per Unit sold) to the underwriters at the closing of the Public Offering on March 29, 2021, with an additional fee (“Deferred
Discount”) of $17,500,000 ($0.35 per Unit sold) payable upon the Company’s completion of the Business Combination. The Deferred
Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes
its Business Combination. See Note 6 for further information on underwriting commissions.
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6.
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Commitments and Related Party Transactions
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Founder Shares
The Founder Shares are identical
to the Public Shares except that the Founder Shares are subject to certain transfer restrictions and the holders of the Founder Shares
will have the right to elect all of the Company’s directors prior to the Business Combination. The Founder Shares will automatically
convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment pursuant
to certain anti-dilution rights. The Sponsors collectively own 20% of the Company’s issued and outstanding shares after the Public
Offering. An aggregate of 1,875,000 Founder Shares were forfeited because the underwriters did not exercise their over-allotment option.
The holders have agreed not to transfer, assign or sell
any of their Founder Shares until one year after the completion of the Business Combination, or earlier if, subsequent to the Business
Combination, (i) the closing price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the Business Combination or (ii) the date on which the Company completes a liquidation, merger, stock exchange
or other similar transaction after the Business Combination that results in all of the Company’s stockholders having the right to
exchange their shares of common stock for cash, securities or other property (the “Lock Up Period”).
The Founder Shares will automatically convert into shares
of Class A common stock concurrently with or immediately following the consummation of the Business Combination on a one-for-one basis,
subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment.
In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with
the Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the
aggregate, 20% of the total number of all shares of Class A common stock outstanding after such conversion (after giving effect to any
redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued,
or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company
in connection with or in relation to the consummation of the initial business combination, excluding any shares of Class A common stock
or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller
in the Business Combination and any private placement-equivalent warrants issued to the Sponsors, officers or directors upon conversion
of working capital loans; provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Sponsor Warrants
In conjunction with the Public Offering that closed on March
29, 2021, the Sponsors purchased an aggregate of 8,333,333 Sponsor Warrants at a price of $1.50 per warrant ($12,500,000 in the aggregate)
in the Private Placement. A portion of the purchase price of the Sponsor Warrants was added to the proceeds from the Public Offering to
be held in the Trust Account such that at closing of the Public Offering, $500,000,000 was placed in the Trust Account.
Each Sponsor Warrant entitles
the holder to purchase one share of Class A common stock at $11.50 per share. The Sponsor Warrants (including the Class A common stock
issuable upon exercise of the Sponsor Warrants) are not transferable, assignable or salable until 30 days after the completion of the
Business Combination and they are non-redeemable so long as they are held by the initial purchasers of the Sponsor Warrants or their permitted
transferees. If the Sponsor Warrants are held by someone other than the initial purchasers of the Sponsor Warrants or their permitted
transferees, the Sponsor Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants
included in the Units sold in the Public Offering. Otherwise, the Sponsor Warrants have terms and provisions that are identical to those
of the Public Warrants except that the Sponsor Warrants may be exercised on a cashless basis. If the Company does not complete
the Business Combination, then the proceeds will be part of the liquidating distribution to the public stockholders and the Sponsor Warrants
issued to the Sponsors will expire worthless.
Registration Rights
The holders of the Founder Shares, Sponsor Warrants, shares
of Class A common stock issuable upon conversion of the Founder Shares, Sponsor Warrants or working capital loans will be entitled to
registration rights. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company
register such securities for sale under the Securities Act. In addition, these holders will have ‘‘piggy-back’’
registration rights to include their securities in other registration statements filed by the Company. Notwithstanding the foregoing,
JFG may not exercise its demand and “piggyback” registration rights after five (5) and seven (7) years; respectively after
the effective date of the registration statement relating to the Public Offering and may not exercise its demand rights on more than one
occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Commissions
Jefferies LLC is the underwriter of the Public Offering,
and its indirect parent, JFG, beneficially owns 50.0% of the Founder Shares. Jefferies LLC received all of the underwriting discount that
was due at the closing of the Public Offering, and will receive the additional Deferred Discount payable from the Trust Account upon completion
of the Business Combination. See Note 5 for further information regarding underwriting commissions.
Administrative Services Agreement
The Company entered into an administrative services agreement
in which we will pay Fertitta Entertainment, Inc., (an affiliate of TJF) for office space, secretarial and administrative services provided
to members of our management team, in an amount not to exceed $20,000 per month commencing on the date of effectiveness of the Public
Offering and ending on the earlier of the completion of a Business Combination or the Company’s liquidation.
Directors’ Payments
We expect to pay $100,000 to each of our independent directors
at the closing of a Business Combination for services rendered as board members prior to the completion of a Business Combination.
Sponsors’ Indemnification of the Trust Accounts
The Sponsors have agreed that they will be jointly and severally
liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective
target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account
to below the lesser of (i) $10.00 per public share or (ii) the actual amount per public share held in the Trust Account as of the date
of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may
be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the
Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Public Offering against certain
liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable
against a third party, the Sponsors will not be responsible to the extent of any liability for such third party claims.
Sponsor Loans
On February 5, 2021 the Sponsors agreed to loan the Company up to an
aggregate of $300,000 by the issuance of unsecured promissory notes to cover expenses related to the Public Offering. These loans will
be payable without interest on the earlier of December 31, 2021 or the completion of the Public Offering. These loans of $197,315 were
repaid in full in April 2021.
In addition, the Sponsors will not be prohibited from loaning
the Company funds in order to finance transaction costs in connection with the Business Combination. On May 10, 2021, the Company issued
unsecured, convertible promissory notes (the “Convertible Notes”) to the Sponsors, pursuant to which the Company may borrow
up to $750,000 from each Sponsor, or an aggregate of $1,500,000, for ongoing business expenses and the Business Combination. All unpaid
principal under the Convertible Notes will be due and payable in full on the earlier of (i) March 29, 2023 or (ii) the effective date
of Business Combination (the “Maturity Date”). The Sponsors will each have the option, at any time on or prior to the Maturity
Date, to convert any amounts outstanding under their respective Convertible Note into warrants to purchase shares of the Company's Class
A common stock, at a conversion price of $1.50 per warrant, with each warrant entitling the holder to purchase one share of Class A common
stock at a price of $11.50 per share, subject to the same adjustments applicable to the private placement warrants sold concurrently with
the Company’s initial public offering. See Note 5 for the terms of the warrants. As of May 10, 2021, the Company borrowed $150,000
from each Sponsor, or $300,000 in the aggregate, under the Convertible Notes.
|
7.
|
Derivative Financial Instruments
|
In accordance with FASB ASC 815-40,
Derivatives and Hedging: Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be settled
in its own stock, such as warrants, as equity of the entity or as an asset or liability. If an event that is not within the entity’s
control could require net cash settlement, then the contract should be classified as an asset or a liability rather than as equity. We
have determined because the terms of Public Warrants include a provision that entitles all warrantholders to cash for their warrants in
the event of a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled
to cash, our warrants should be classified as a derivative liability measured at fair value, with changes in fair value each period reported
in earnings. Volatility in our Common Stock and Public Warrants may result in significant changes in the value of the derivatives and
resulting gains and losses on our statement of operations.
In
conjunction with our Public Offering, which closed March 29, 2021, the Company sold 50,000,000 Public Units at a price of $10.00 per Unit.
Each Public Unit consists of one share of the Company’s Class A common stock, $0.0001 par value and one-fourth of one redeemable
Public Warrant and simultaneously, the Sponsors purchased an aggregate of 8,333,333 Sponsor Warrants at a price of $1.50 per warrant ($12,500,000
in the aggregate) in the Private Placement. As of March 31, 2021, 16,666,667 Public Warrants and 8,333,333 Sponsor Warrants are outstanding.
The Sponsor Warrants (including the Class A common stock issuable upon exercise of the Sponsor Warrants) are not transferable, assignable
or salable until 30 days after the completion of the Business Combination and they are non-redeemable so long as they are held by the
initial purchasers of the Sponsor Warrants or their permitted transferees. If the Sponsor Warrants are held by someone other than the
initial purchasers of the Sponsor Warrants or their permitted transferees, the Sponsor Warrants will be redeemable by the Company and
exercisable by such holders on the same basis as the Public Warrants. Otherwise, the Sponsor Warrants have terms and provisions that are
identical to those of the Public Warrants except that the Sponsor Warrants may be exercised on a cashless basis. If the Company does not
complete the Business Combination, then the proceeds will be part of the liquidating distribution to the public stockholders and the Sponsor
Warrants issued to the Sponsors will expire worthless. Because the terms of the Sponsor Warrants and Public Warrants are so similar,
we classified both types of warrants as a derivative liability measured at fair value.
Each Public Warrant entitles the holder to purchase one
share of Class A common stock at a price of $11.50 per share. Each Public Warrant will become exercisable on the later of 30 days after
the completion of the Business Combination or 12 months from the closing of the Public Offering. However, if the Company does not complete
the Business Combination on or prior to March 29, 2023, the warrants will expire at the end of such period. If the Company is unable to
deliver registered shares of Class A common stock to the holder upon exercise of Public Warrants issued in connection with the Units during
the exercise period, there will be no net cash settlement of these Public Warrants and the Public Warrants will expire worthless, unless
they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the Public Warrants become exercisable,
the Company may call the warrants for redemption: (i) in whole and not in part; (ii) at a price of $0.01 per warrant; (iii) upon not less
than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and (iv) if,
and only if, the reported closing price of the Class A common stock equals or exceeds a certain dollar value per share for any 20 trading
days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
As of March 29, 2021, the initial value of our Public Warrants and
Sponsor Warrants were $22,166,667 and $11,166,666, respectively. As of March 31, 2021, the value of our Public Warrants and Sponsor Warrants
were $22,000,000 and $11,000,000, respectively. For the three months ended March 31, 2021, we recorded a gain related to the change in
fair value of warrant derivative liability of $333,333 in other income and expense on our statement of operations.
For further information on our warrants,
see Notes 5 and 6.
|
8.
|
Fair Value Measurements
|
Fair value is measured based on an
exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based measurement that should be determined based
on assumptions market participants would use in pricing an asset or liability. Assets and liabilities measured at fair value
are based on a market valuation approach using prices and other relevant information generated by market transactions involving
identical or comparable assets or liabilities. As a basis for considering such assumptions, a three-tiered fair value hierarchy is
established, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices
in active markets; (Level 2) inputs, other than the quoted prices in active markets that are observable, either directly or
indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to
develop its own assumptions. Management determined that the fair value of each Sponsor Warrant is the similar to that of a Public
Warrant, with an insignificant adjustment for short-term marketability restrictions. Accordingly, at March 31, 2021 the Public
Warrants and Sponsor Warrants are classified as Level 3 financial instrument.
The following table presents the Company’s
assets and liabilities that are measured at fair value and indicates the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value:
|
|
Fair Value measured as of March 31, 2021
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and marketable securities held in trust
|
|
$
|
500,000,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
500,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant derivative liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,000,000
|
|
|
$
|
22,000,000
|
|
Sponsor Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
11,000,000
|
|
|
|
11,000,000
|
|
Total Warrant derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
33,000,000
|
|
|
$
|
33,000,000
|
|
The following is a summary of changes in fair value of our
warrant derivative liability categorized within the Level 3 hierarchy as of March 31, 2021;
|
|
March 31, 2021
|
|
Initial valuation of warrant liability
|
|
$
|
33,333,333
|
|
Gain on derivative liability
|
|
|
(333,333
|
)
|
Ending Balance
|
|
$
|
33,000,000
|
|
Landcadia
Holdings IV, Inc.