References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Artisan Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Artisan LLC. The following discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the unaudited condensed 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" 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 Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding 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 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. 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 (as defined below) 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.
Overview
We are a blank check company incorporated on February 2, 2021 as a Cayman
Islands exempted company for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses or entities. 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. We intend to effectuate our initial business combination
using cash from the proceeds of this offering and the sale of the private
placement warrants, the proceeds of the sale of our shares in connection with
our initial business combination pursuant to the forward purchase agreements (or
backstop agreements we may enter into or otherwise), shares issued to the owners
of the target, debt issued to bank or other lenders or the owners of the target,
or a combination of the foregoing or other sources.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the period from February 2, 2021 (inception) through
June 30, 2021 were organizational activities, those necessary to prepare for the
Initial Public Offering, described below, and, after our Initial Public
Offering, identifying a target company for a business combination. We do not
expect to generate any operating revenues until after the completion of our
initial business combination. We will generate non-operating income in the form
of interest income on cash and cash equivalents held after the Initial Public
Offering. 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 June 30, 2021, we had a net loss of $5,543,196, which
resulted from formation and operating costs of $507,635, expensed offering costs
associated with the initial public offering and private placement sale of
warrants of $534,056, change in the fair value of warrant liabilities of
$4,694,294 and the unrealized loss on investments held in the Trust Account of
$30,330, partially offset by the change in fair value of the forward purchase
agreement derivative asset of $223,119.
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For the period from February 2, 2021 (inception) through June 30, 2021, we had a
net loss of $5,548,696, which resulted from formation and operating costs of
$513,135, expensed offering costs associated with the initial public offering
and private placement sale of warrants of $534,056, change in the fair value of
warrant liabilities of $4,694,294 and the unrealized loss on investments held in
the Trust Account of $30,330, partially offset by the change in fair value of
the forward purchase agreement derivative asset of $223,119.
Liquidity and Capital Resources
For the period from February 2, 2021 (inception) through June 30, 2021, net cash
used in operating activities was $1,174,618, which was due to our net loss of
$5,548,696, changes in working capital accounts of $661,483, and the change in
fair value of the forward purchase agreement derivative asset of $223,119,
partially offset by the change in the fair value of warrant liabilities of
$4,694,294, expensed offering costs of $534,056 and unrealized loss on
investments held in the Trust Account of $30,330.
For the period from February 2, 2021 (inception) through June 30, 2021, net cash
used in investing activities of $339,342,350 was the result of the amount of net
proceeds from the Initial Public Offering and the private placement sale of
warrants being deposited to the Trust Account.
Net cash provided by financing activities for the for the period from February
2, 2021 (inception) through June 30, 2021 of $340,968,283 was comprised of
$332,555,503 in proceeds from the issuance of Units in the Initial Public
Offering net of underwriter's discount paid and $8,786,847 in proceeds from the
issuance of warrants in a private placement to our Sponsor, partially offset by
payment of $374,067 for offering costs associated with the Initial Public
Offering.
On May 18, 2021, we consummated our initial public offering of 30,000,000 units.
Each Unit consisted of one share of Class A ordinary shares of the Company, par
value $0.0001 per share (the "Public Shares") and one-third of one redeemable
warrant of the Company, with each whole warrant entitling the holder thereof to
purchase one share of Class A ordinary shares for $11.50 per share. The Units
were sold at a price of $10.00 per Unit, generating gross proceeds to the
Company of $300,000,000. The Company granted the underwriters a 45-day option to
purchase up to 4,500,000 additional Units solely to cover over-allotments.
Simultaneously with the consummation of the Initial Public Offering, we
completed the private sale of 5,333,333 warrants to Artisan LLC, our Sponsor, at
a purchase price of $1.50 per warrant (the "Private Placement Warrants"),
generating gross proceeds of $8,000,000. The proceeds from the sale of the
Private Placement Warrants were added to the net proceeds from the initial
public offering held in a trust account (the "Trust Account"). If we do not
complete our initial business combination within 24 months from the closing of
the initial public offering, the proceeds from the sale of the Private Placement
Warrants will be used to fund the redemption of the Public Shares (subject to
the requirements of applicable law) and the Private Placement Warrants will
expire worthless.
On March 21, 2021 the underwriters partially exercised the over-allotment option
to purchase an additional 3,934,235 Units at an offering price of $10.00 per
Unit, generating additional gross proceeds of $39,342,350 to the Company. In
addition, the Company issued 524,565 Private Placement Warrants to the Sponsor.
The underwriters have the right to exercise the remaining portion of the
over-allotment option during the aforementioned 45-day period.
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
taxes payable and deferred underwriting commissions), to complete our initial
business combination. We may withdraw interest income (if any) to pay income
taxes, if any. Our annual income tax obligations will depend on the amount of
interest and other income earned on the amounts held in the trust account. We
expect the interest income earned on the amount in the trust account (if any)
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.
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Prior to the completion of our initial business combination and subsequent to
our initial public offering, we will use the proceeds from the initial public
offering held outside the trust account, as well as have access to certain funds
from loans from our sponsor, its affiliates or members of our management team.
We will use these funds 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.
We have incurred and expect to continue to incur significant costs in pursuit of
our acquisition plans. We may have insufficient funds available to operate our
business prior to our initial business combination. In order to finance
transaction costs in connection with an intended initial business combination,
our sponsor, its affiliates, our officer or certain of our directors may, but
are not obligated to, loan us funds as may be required. If we complete our
initial business combination, we may repay such loaned amounts out of the
proceeds of the trust account released to us. In the event that our initial
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
loans may be convertible into warrants of the post-business combination entity
at a price of $1.50 per warrant at the option of the lender. The warrants would
be identical to the private placement warrants. Except for the foregoing, the
terms of such loans, if any, have not been determined and no written agreements
exist with respect to such loans. Prior to the completion of our initial
business combination, we do not expect to seek loans from parties other than our
sponsor, its affiliates or members of our management team as we do not believe
third parties will be willing to loan such funds and provide a waiver against
any and all rights to seek access to funds in our trust account.
Moreover, we may need to obtain additional financing to complete our initial
business combination, either because the transaction requires more cash than is
available from the proceeds held in our trust account, or because we become
obligated to redeem a significant number of our public shares upon the
completion of the business combination, in which case we may issue additional
securities or incur debt in connection with such business combination. If we
have not consummated our initial business combination within the required time
period because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the trust account.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements.
Contractual Obligations
Registration Rights
Pursuant to a registration rights agreement entered into on May 13, 2021, the
holders of the Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants
issued upon conversion of the Working Capital Loans) have registration and
shareholder rights to require the Company to register a sale of any of its
securities held by them. The holders of these securities are entitled to make up
to three demands, excluding short form demands, that the Company register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
completion of an initial Business Combination. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.
Promissory Notes - Related Party
On February 4, 2021, the Company issued an unsecured promissory note to the
Sponsor (the "Promissory Note"), pursuant to which the Company may borrow up to
an aggregate principal amount of $300,000. The Promissory Note is non-interest
bearing and payable on the earlier of September 30, 2021 or the consummation of
the Initial Public Offering. As of June 30, 2021, there was $1,150 in borrowings
outstanding under the Promissory Note.
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On August 16, 2021, the Company issued an unsecured promissory note to the
Sponsor (the "Second Promissory Note"), pursuant to which the Company may borrow
up to an aggregate principal amount of $300,000. The Second Promissory Note is
non-interest bearing and payable upon the consummation of a Business
Combination.
Underwriters Agreement
The Company granted the underwriters a 45-day option from the date of the
Initial Public Offering to purchase up to 4,500,000 additional Units to cover
over-allotments at the Proposed Public Offering price less the underwriting
discounts and commissions. The underwriters partially exercised the
over-allotment option on March 21, 2021.
The underwriters were paid a cash underwriting discount of $0.20 per Unit, or
$6,786,847 in the aggregate upon the closing of the Initial Public Offering and
partial exercise of the over-allotment option. In addition, the underwriters are
due a deferred fee of $0.35 per Unit, or $11,876,982 in the aggregate. Subject
to the terms of the underwriting agreement, (i) the deferred fee will be placed
in the Trust Account and released to the underwriters only upon the completion
of a Business Combination and (ii) the deferred fee will be waived by the
underwriters in the event that the Company does not complete a Business
Combination.
Critical Accounting Policies
The preparation of 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:
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480, Distinguishing Liabilities from Equity. Ordinary Shares subject to
mandatory redemption are classified as a liability instrument and are measured
at fair value. Conditionally redeemable ordinary shares (including 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 the Company's control) are classified as temporary equity. At all
other times, ordinary shares are classified as shareholders' equity. The
Company's ordinary shares feature certain redemption rights that are considered
to be outside of the Company's control and subject to the occurrence of
uncertain future events. As of June 30, 2021, 33,934,235 Class A ordinary shares
subject to possible redemption are presented at redemption value as temporary
equity, outside of the shareholders' equity section of the Company's balance
sheet.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in ASC 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to the
Company's own common stock, among other conditions for equity classification.
This assessment, which requires the use of professional judgment, is conducted
at the time of warrant issuance and as of each subsequent quarterly period end
date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the public warrants and forward
purchase agreement was estimated using a Black-Scholes Option Pricing Method -
Barrier Option and the fair value of the Private Placement Warrants was
estimated using a Modified Black-Scholes Option Pricing Method.
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Net Loss Per Ordinary Share
Net loss per ordinary share is computed by dividing net loss by the
weighted-average number of ordinary shares outstanding during the period.
The Company's condensed statements of operations include a presentation of net
loss per share for ordinary shares subject to possible redemption and applies
the two-class method in calculating net loss per share. Net loss per ordinary
share, basic and diluted, for Class A redeemable ordinary shares is calculated
by dividing the allocable unrealized loss on investments held in the Trust
Account by the weighted average number of Class A ordinary shares subject to
possible redemption outstanding since original issuance. Net loss per share,
basic and diluted, for Class A and Class B non-redeemable ordinary shares is
calculated by dividing the net loss, adjusted for income attributable to Class A
redeemable ordinary shares, by the weighted average number of Class A and Class
B non-redeemable ordinary shares outstanding for the period. Class B
non-redeemable ordinary shares includes the Founder Shares as these shares do
not have any redemption features and do not participate in the income earned on
the Trust Account.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("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) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is 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 yet
effective, accounting standards, if currently adopted, would have a material
effect on the Company's financial statements.
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