ARES ACQUISITION CORPORATION References to the "Company", "our", "us" or "we" refer to
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, 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. Such statements include, but are not limited to, possible business
combinations and the financing thereof, and related matters, as well as all
other statements other than statements of historical fact included in this Form
10-Q. Factors that might cause or contribute to such a discrepancy include, but
are not limited to, those described in our other
In this Quarterly Report of the Company on Form 10-Q for the three months
ending
The restatement results from our prior accounting for our outstanding common
stock purchase warrants issued in connection with our initial public offering in
On
Historically, the Warrants were reflected as a component of equity as opposed to
liabilities on the balance sheet based on the application of FASB ASC Topic
815-40, Derivatives and Hedging, Contracts in Entity's Own Equity ("ASC
815-40"). The views expressed in the
Therefore, the Company, in consultation with its Audit Committee, concluded that
its previously issued balance sheet as of
19
--------------------------------------------------------------------------------
Table of Contents Overview
We are a blank check company incorporated on
We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. The issuance of additional shares in a business combination:
•may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares;
•may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares;
•could cause a change in control if a substantial number of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
•may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and
•may adversely affect prevailing market prices for our units, Class A ordinary shares or warrants; and
•may not result in adjustment to the exercise price of our warrants.
Similarly, if we issue debt securities or otherwise incur significant debt, it could result in:
•default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
•acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
•our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
•our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
•our inability to pay dividends on our Class A ordinary shares;
•using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
•limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
•increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation or prevailing interest rates; and
•limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
20
--------------------------------------------------------------------------------
Table of Contents
As indicated in the accompanying financial statements, as of
Our registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 15,333,333 warrants (the "Private Placement Warrants"), including
1,733,333 additional Private Placement Warrants to cover over-allotments, for an
aggregate purchase price of
Upon the closing of the Initial Public Offering and the Private Placement,
If we are unable to complete a Business Combination within 24 months from the
closing of our Initial Public Offering, or
Results of Operations
Our entire activity since inception through
As a result of the restatement described in Note 2 of the notes to the unaudited condensed financial statements included herein, we classify the warrants issued in connection with our Initial Public Offering and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our unaudited condensed statement of operations.
For the three months ended
Liquidity and Capital Resources
21
--------------------------------------------------------------------------------
Table of Contents
As of
Our liquidity needs to date have been satisfied through a contribution of
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
We continue to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the condensed balance sheets. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than an agreement to pay our Sponsor a monthly fee of
The underwriters are entitled to a deferred fee of
Critical Accounting Policies
Management's discussion and analysis of our financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that feature 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) are classified as temporary equity. At all other
times, Class A ordinary shares are classified as shareholders' equity. Our Class
A ordinary shares features certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, at
Net Income (Loss) Per Ordinary Share
22
--------------------------------------------------------------------------------
Table of Contents
The Company's unaudited condensed statements of operations include a
presentation of income (loss) per share for ordinary shares subject to
redemption in a manner similar to the two-class method of income per share. Net
income (loss) per ordinary share, basic and diluted, for Class A ordinary shares
is calculated by dividing the investment income earned on investments held in
Trust Account for the period from
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
We account for our 20,000,000 Public Warrants and 15,333,333 Private Placement Warrants as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's unaudited condensed statement of operations. The fair value of warrants issued in connection with the Initial Public Offering and Private Placement has been estimated using an option pricing model at each measurement date.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an "emerging growth company" and under the JOBS Act will be 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 auditor'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 auditor'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 chief executive officer's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an "emerging growth company," whichever is earlier.
23
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
