References to "we", "us", "our" or the "Company" are to Altitude Acquisition
Corp., except where the context requires otherwise. The following discussion
should be read in conjunction with our unaudited condensed financial statements
and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated on August 12, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). We
consummated our initial public offering ("IPO") on December 11, 2020 and are
currently in the process of locating suitable targets for our Business
Combination. We intend to use the cash proceeds from our IPO and the Private
Placement described below as well as additional issuances, if any, of our
capital stock, debt or a combination of cash, stock and debt to complete the
Business Combination.
We expect to incur significant costs in the pursuit of our initial Business
Combination. We cannot assure you that our plans to raise capital or to complete
our initial Business Combination will be successful.
We completed the sale of 30,000,000 units (the "Units"), with each Unit
comprised of one share of Class A common stock (the "Public Shares") and
one-half of one warrant (the "Public Warrants"), including the issuance of
3,900,000 Units as a result of the partial exercise of the underwriters'
over-allotment option, at $10.00 per Unit generating gross proceeds of
$300,000,000. Simultaneous with the closing of the IPO, we completed the sale of
8,000,000 warrants (the "Private Warrants") at a price of $1.00 per Private
Warrant in a private placement to Altitude Acquisition Holdco, LLC (our
"Sponsor"), generating gross proceeds to us of $8,000,000 (the "Private
Placement").
On June 10, 2022, the Company's stockholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to extend the
Combination Period from June 11, 2022 to October 11, 2022. In connection with
the amendment to the Company's Amended and Restated Certificate of
Incorporation, stockholders holding an aggregate of 24,944,949 shares of our
Class A common stock exercised their right to redeem their shares for
approximately $10.01 per share of the funds held in our Trust Account (as
defined below), or a total amount of $249,614,847. Following such redemptions,
there were 5,055,051 public shares outstanding and an aggregate of approximately
$50.6 million of cash held in the Company's Trust Account.
In connection with the stockholder vote to approve an amendment to the Company's
Amended and Restated Certificate of Incorporation to extend the Combination
Period, on June 7, 2022 and June 10, 2022, the Company and Gary Teplis, the
Company's Chief Executive Officer, entered into non-redemption agreements
(collectively, the "Non-Redemption Agreements") with certain Company
stockholders (the "Non-Redeeming Stockholders") holding an aggregate of
approximately 1.4 million shares of Class A common stock. Pursuant to the
Non-Redemption Agreements, the Non-Redeeming Stockholders agreed to (a) not
redeem any shares of Class A common stock held by them on the date of the
Non-Redemption Agreements in connection with the vote to approve the extension
to the Combination Period, (b) vote all of such shares in favor of the extension
to the Combination Period and any initial business combination presented by the
Company for approval by its stockholders, and (c) not Transfer (as such term is
defined in the Non-Redemption Agreements) any of such shares until the earlier
of the October 11, 2022 and consummation of the Company's initial business
combination (the "Termination Date"). In connection with the Non-Redemption
Agreements, Mr. Teplis agreed to pay to each Non-Redeeming Stockholder $0.033
per share subject to the Non-Redemption Agreement in cash per month through the
Termination Date.
On June 16, 2022, pursuant to the trust agreement dated as of December 8, 2020
between the Company and Continental Stock Transfer & Trust Company ("CST"), the
trustee of the Trust Account, the Company issued a request to CST to withdraw
$81,200 of interest income from the Trust Account for the payment of the
Company's taxes.
On October 5, 2022, the Company" entered into a non-redemption agreement
(the "Non-Redemption Agreement") with one of its existing stockholders
(the "Non-Redeeming Stockholder") holding an aggregate of 223,124 shares of
Class A common stock, par value $0.0001, of the Company.
On October 6, 2022, the Company's stockholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to extend the
Combination Period from October 11, 2022 to April 11, 2023. In connection with
the amendment to the Company's Amended and Restated Certificate of
Incorporation, stockholders holding an aggregate of 3,382,949 shares of the
Company's Class A common stock exercised their right to redeem their shares for
approximately $10.05 per share of the funds held in the Company's trust account
totaling $34,009,688.
On October 11, 2022, pursuant to the trust agreement dated as of December 8,
2020 between the Company and CST, the trustee of the Trust Account, the Company
issued a request to CST to withdraw $81,200 of interest income from the Trust
Account for the payment of the Company's taxes.
As of September 30, 2022, a total of $50,865,089 was held in the trust account
established for the benefit of our public stockholders (the "Trust Account").
The Trust Account is invested in interest-bearing U.S. government securities and
the income earned on those investments is also for the benefit of our public
stockholders.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the private placement, although substantially
all of the net proceeds are intended to be applied generally towards
consummating a Business Combination.
22
--------------------------------------------------------------------------------
Pursuant to the Non-Redemption Agreement, the Non-Redeeming Stockholder agreed
to (a) not redeem the Shares in connection with the vote to amend the Company's
amended and restated certificate of incorporation to extend the date by which
the Company has to consummate an initial business combination from October 11,
2022 to April 11, 2023 and (b) vote all of its Shares in favor of the Extension.
In connection with the foregoing, Gary Teplis, the Chief Executive Officer of
the Company, agreed to pay to the Non-Redeeming Stockholder $0.05 per Share per
month through the Extended Date, in a single cash payment within 45 days from
the date of the Non-Redemption Agreement.
Results of Operations
As of September 30, 2022, we have not commenced any operations. All activity for
the period from August 12, 2020 (inception) through September 30, 2022 relates
to our formation and IPO, and, since the completion of the IPO, our searching
for a target to consummate a Business Combination. We will not generate any
operating revenues until after the completion of a Business Combination, at the
earliest. We generate non-operating income in the form of interest income from
the proceeds derived from the IPO and placed in the Trust Account.
For the three months ended September 30, 2022, we had a net income of $1,158,637
which included unrealized gain on change in fair value of warrants of
$1,389,550, interest income earned on the proceeds in the Trust Account of
$222,471 and interest income earned on the operating bank account of $1,
partially offset by operating costs of $439,362 and income tax provision of
$14,023.
For the nine months ended September 30, 2022, we had a net income of $9,540,916
which included unrealized gain on change in fair value of warrants of
$11,915,139, interest income earned on the proceeds in the Trust Account of
$534,340 and interest income earned on the operating bank account of $2,
partially offset by operating costs of $2,885,762 and income tax provision of
$22,803.
For the three months ended September 30, 2021, we had a net loss of $569,008
which included operating costs of $4,903,000, partially offset by unrealized
gain on change in fair value of warrants of $4,327,824, interest income earned
on the proceeds in the Trust Account of $6,165 and interest income earned on the
operating bank account of $3.
For the nine months ended September 30, 2021, we had a net income of $12,043,581
which included unrealized gain on change in fair value of warrants of
$17,773,513, interest income earned on the proceeds in the Trust Account of
$19,240 and interest income earned on the operating bank account of $23,
partially offset by operating costs of $5,749,195.
Liquidity and Capital Resources
As of September 30, 2022, we had cash outside our Trust Account of $24,338
available for working capital needs.
In connection with the stockholder vote to amend the Company's Amended and
Restated Certificate of Incorporation, on June 14, 2022, stockholders holding an
aggregate of 24,944,949 shares of our Class A common stock exercised their right
to redeem their shares for approximately $10.01 per share of the funds held in
our Trust Account, totaling $249,614,847.
On June 16, 2022, pursuant to the trust agreement dated as of December 8, 2020
between the Company and CST, the Company issued a request to CST to withdraw
$81,200 of interest income from the Trust Account for the payment of the
Company's taxes.
As of September 30, 2022, we had investments held in the Trust Account of
$50,865,089, consisting of mutual funds comprised of U.S. Treasury Bills.
For the nine months ended September 30, 2022, cash used by operating activities
was $99,916. Net income of $9,540,916 was impacted by interest income earned on
Trust of $534,340, unrealized gain on change in fair value of warrants of
$11,915,139, and changes in operating assets and liabilities, which provided
$2,808,647 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $630,274. Net income of $12,043,581 was impacted by interest earned on
investments held in the Trust Account of $19,240, change in fair value of
warrant liability of $17,773,513, and changes in operating assets and
liabilities, which provided $5,118,898 of cash for operating activities.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account
(excluding the deferred underwriters' discount) to complete our initial Business
Combination. We may withdraw interest to pay our taxes and liquidation expenses
if we are unsuccessful in completing a Business Combination. We estimate our
annual franchise tax obligations to be $200,000, which is the maximum amount of
annual franchise taxes payable by us as a Delaware corporation per annum, which
we may pay from funds from the IPO held outside of the Trust Account or from
interest earned on the funds held in the Trust Account and released to us for
this purpose. Our annual income tax obligations will depend on the amount of
interest and other income earned on the amounts held in the trust account
reduced by our operating expense and franchise taxes. We expect the interest
earned on the amount in the trust account will be sufficient to pay our income
taxes. To the extent that our equity or debt is used, in whole or in part, as
consideration to complete our initial 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.
23
--------------------------------------------------------------------------------
On June 2, 2021, we issued an unsecured promissory note to the Sponsor for an
aggregate available principal amount of $300,000 to be used for a portion of the
expenses of the Business Combination. This loan is non-interest bearing,
unsecured and due at the earlier of December 31, 2021 or the closing of the
Business Combination. We had no borrowings under the promissory note.
Further, our Sponsor, officers and directors or their respective affiliates may,
but are not obligated to, loan us funds as may be required (the "Working Capital
Loans"). If we complete a Business Combination, we will repay the Working
Capital Loans. In the event that a Business Combination does not close, we may
use a portion of proceeds held outside the Trust Account to repay the Working
Capital Loans, but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. Such Working Capital Loans would be evidenced by
promissory notes. The notes would either be repaid upon consummation of a
Business Combination, without interest, or, at the lender's discretion. As of
September 30, 2022 and December 31, 2021, no Working Capital Loans have been
issued.
On November 16, 2021, January 18, 2022, February 1, 2022, April 25, 2022, May 2,
2022, May 13, 2022, June 3, 2022, June 6, 2022, and June 16, 2022, we received
$100,000, $100,000, $250,000, $50,000, $100,000, $20,000, $25,000, $177,423 and
$66,000 advances from our Sponsor or its affiliates to be used for working
capital purposes, respectively. The advances are non-interest bearing and due on
demand. As of September 30, 2022 and December 31, 2021, we owed the Sponsor or
its affiliates $888,423 and $100,000 related to these advances, respectively.
We have incurred and expect to continue to incur significant costs in pursuit of
our acquisition plans. We will need to raise additional capital through loans or
additional investments from our Sponsor, stockholders, officers, directors, or
third parties. Our officers, directors and Sponsor may, but are not obligated
to, loan us funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet our working capital needs.
Accordingly, we may not be able to obtain additional financing.
In addition, we have until April 11, 2023 to consummate a Business Combination.
If we are unable to complete a Business Combination prior to April 11, 2023, we
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 us to pay our franchise and income taxes,
divided by the number of then outstanding public shares, subject to applicable
law and as further described in registration statement, and then seek to
dissolve and liquidate.
As a result of the above, in connection with our assessment of going concern
considerations in accordance with FASB's Accounting Standards Update ("ASU")
2014-15,"Disclosures of Uncertainties about an Entity's Ability to Continue as a
Going Concern," management determined that these conditions raise substantial
doubt about our ability to continue as a going concern through April 11, 2023,
the scheduled liquidation date. These financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should us be unable to
continue as a going concern.
Off-Balance Sheet Financing Arrangements
We did not have any off-balance sheet arrangement as of September 30, 2022.
Contractual Obligations
As of September 30, 2022, we did not have any long-term debt, capital or
operating lease obligations. We entered into an administrative services
agreement pursuant to which we will pay an affiliate of one of our directors for
office space and secretarial and administrative services provided to members of
our management team, in an amount not to exceed $10,000 per month. We have
incurred $30,000 and $90,000 of administrative service fees for three and nine
months ended September 30, 2022, respectively. The payment of the administrative
service fee was suspended starting in May 2022.
For the three and nine months ended September 30, 2021, we have incurred 30,000
and $90,000 of administrative service fees, respectively.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with GAAP 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 as our critical accounting policies:
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified on the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date. We have
determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation
of proceeds from the issuance of convertible debt into its equity and debt
components. We apply this guidance to allocate IPO proceeds from the Units
between Class A common stock and warrants, using the residual method by
allocating IPO proceeds first to fair value of the warrants and then the Class A
common stock.
24
--------------------------------------------------------------------------------
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 ASC Topic 480 "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) is classified as
liability instruments and is measured at fair value. Conditionally redeemable
Class A common stock (including common stock that features redemption rights
that are 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 the
occurrence of uncertain future events. Accordingly, at September 30, 2022 and
December 31, 2021, 5,055,051 and 30,000,000 shares of Class A common stock
subject to possible redemption are presented as temporary equity, outside of the
stockholders' deficit section of our balance sheets, respectively.
Net Income (loss) Per Share of Common Stock
We have two classes of common stock, which are referred to as Class A common
stock and Class B common stock. Earnings and losses are shared pro rata between
the two classes of common stock. The 23,000,000 shares of Class A common stock
potentially issuable upon the exercise of outstanding warrants to purchase
Class A common stock were excluded from diluted earnings per share for the three
and nine months ended September 30, 2022 and 2021 because the warrants are
contingently exercisable, and the contingencies have not yet been met. As a
result, diluted net income (loss) per share of common stock is the same as basic
net income (loss) per share of common stock for the periods presented.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity's Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity's 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 scope exception, and it
simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective January 1, 2024 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
We are currently assessing the impact, if any, that ASU 2020-06 would have on
its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" under the JOBS Act and are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an independent registered public accounting firm's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the independent registered public accounting firm's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis), and (iv) disclose certain
executive compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation.
These exemptions will apply for a period of five years following the completion
of this offering or until we are no longer an "emerging growth company,"
whichever is earlier.
25
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses
ALTITUDE ACQUISITION CORP. 