References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Accelerate Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to Accelerate Acquisition Sponsor, LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such statements include, but are not limited to, possible business
combinations and the financing thereof, and related matters, as well as other
statements other than statements of historical fact in this Form 10-Q. Such
forward-looking statements relate to future events or future performance, but
reflect management's current beliefs, based on information currently available.
A number of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements, including that the conditions of the Proposed
Business Combination are not satisfied. For information identifying important
factors that could cause actual results to differ materially from those
anticipated in the forward-looking statements, please refer to the Risk Factors
section of the Company's final prospectus for its Initial Public Offering filed
with the U.S. Securities and Exchange Commission (the "SEC"). The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
This Management's Discussion and Analysis of Financial Condition has been
restated to give effect to the restatement of our financial statements as of
March 31, 2021 and June 30, 2021. Management re-evaluated the Company's
application of ASC 480-10-99 to its accounting classification of public shares.
In connection with the preparation of the Company's financial statements as of
September 30, 2021, management identified errors made in its historical
financial statements where, at the closing of the Company's Initial Public
Offering, the Company improperly classified a portion of its Class A common
stock subject to possible redemption. The Company previously determined the
Class A common stock subject to possible redemption cannot result in net
tangible assets being less than $5,000,001. Management determined that the Class
A common stock issued during the Initial Public Offering can be redeemed or
become redeemable subject to the occurrence of future events considered outside
of the Company's control. Therefore, management concluded that the redemption
value should include all Class A common stock subject to possible redemption
regardless if the result is less than $5,000,001 in net tangible assets. In
accordance with SEC Staff Accounting Bulletin No. 99, "Materiality" and SEC
Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements", management has concluded the classification error related to
temporary equity and permanent equity was material to the historical financial
statements. Therefore, the Company, in consultation with its Audit Committee,
concluded that its previously issued financial statements impacted should be
restated. This resulted in a restatement to temporary equity with the offset
recorded to additional paid-in capital (to the extent available), accumulated
deficit and Class A common stock. This also resulted in a restatement of
earnings per share for the Affected Periods.
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 30, 2020 for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from December 30, 2020 (inception) through September 30,
2021 were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended September 30, 2021, we had net income of $5,867,626,
which consists of changes in fair value of the warrant liability of $6,143,067
and interest earned on marketable securities held in Trust Account of $10,083,
offset by formation and operating costs of $285,524.
For the nine months ended September 30, 2021, we had net income of $653,734,
which consists of changes in fair value of the warrant liability of $2,203,067
and interest earned on marketable securities held in Trust Account of $21,043,
offset by formation and operating costs of $1,570,376.
Liquidity and Capital Resources
On March 22, 2021, we consummated the Initial Public Offering of 40,000,000
Units at $10.00 per Unit, generating gross proceeds of $400,000,000 which is
described in Note 5. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 7,333,333 Private Placement Warrants at a
price of $1.50 per Private Placement Warrant in a private placement to the
Sponsor, generating gross proceeds of $11,000,000, which is described in Note 6.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,263,559. Net income of $653,734 was affected by interest earned on
marketable securities held in the Trust Account of $21,043, changes in warrant
liability of $2,203,067 and transaction costs allocable to warrant liability of
$801,198. Changes in operating assets and liabilities used $494,381 of cash for
operating activities.
As of September 30, 2021, we had investments held in the Trust Account of
$400,021,043 (including approximately $21,043 of interest) consisting of money
market funds which are invested primarily in U.S. Treasury Securities. Interest
income on the balance in the Trust Account may be used by us to pay taxes.
Through September 30, 2021, we have not withdrawn any interest earned from the
Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of September 30, 2021, we had cash of $1,170,560. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such Working Capital Loans 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.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate 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. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. 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 have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support. We began incurring these fees on March 22, 2021 and will
continue to incur these fees monthly until the earlier of the completion of the
Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$14,000,000 in the aggregate. The deferred fee will become payable to the
underwriters 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.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical
accounting policies:
Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC
815-40, under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the Warrants to fair value in respect
of each reporting period. This liability is subject to re-measurement at each
balance sheet date until the Warrants are exercised, and any change in fair
value is recognized in our statement of operations. The Private Warrants and the
Public Warrants for periods where no observable traded price was available are
valued using a lattice model, specifically a binomial lattice model
incorporating the Cox-Ross-Rubenstein methodology. For periods subsequent to the
severability of the Public Warrants from the Units, the Public Warrant quoted
market price was used as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that feature redemption rights that is either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
shares of Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' (deficit) equity section of our
balance sheet.
Net Income (Loss) Per Common Share
Net loss per common stock is computed by dividing net loss by the weighted
average number of common stocks outstanding during the period. We apply the
two-class method in calculating earnings per share. Accretion associated with
the redeemable shares of Class A common stocks is excluded from earnings per
share as the redemption value approximates fair value.
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Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-06,
Debt --debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging --Contracts in Entity' Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity' Own Equity ("ASU 2020-06"),
which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The Company adopted ASU 2020-06 on January
1, 2021. Adoption of the ASU did not impact the Company's financial position,
results of operations or cash flows.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying financial statements.
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