References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Athlon Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to AAC HoldCo, 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 and the Company's plans to dissolve, liquidate
and redeem the Public Shares, including the estimated per-share redemption
price, 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, 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 Annual Report on Form 10-K 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 formed under the laws of the State of Delaware on
October 6, 2020 for the purpose of effecting the merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination").
As of the date of the filing of this Quarterly Report, the Company has
determined that it will not complete a Business Combination within the
Combination Period. In accordance with the provisions of its Certificate of
Incorporation, the Company plans to (i) cease all operations on December 1,
2022, except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the Public
Shares, at 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
taxes (less $100,000 of interest to pay dissolution expenses), divided by the
number of then outstanding Public Shares, which redemption will completely
extinguish Public Stockholders' rights as stockholders of the Company (including
the right to receive further liquidating distributions, if any), and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of the Company's remaining stockholders and the Company's board of
directors, dissolve and liquidate, subject in each case to the Company's
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law. Based on the Company's estimate of its tax
liabilities to be paid from interest earned on the funds held in the Trust
Account, the Company expects that the per-share redemption price for the Public
Shares will be approximately $10.06. There will be no redemption rights or
liquidating distributions with respect to the Company's warrants, which will
expire worthless.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2022 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. We generate non-operating income in the form of
interest income on investments 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, 2022, we had net income of $2,662,361,
which consisted of the change in fair value of warrant liabilities of $1,705,600
and interest earned on investments held in Trust Account of $1,479,038,
partially offset by formation and operating expenses of $239,914.
For the nine months ended September 30, 2022, we had a net income of
$12,577,248, which consisted of changes in fair value of warrant liabilities of
$11,937,068 and interest earned on investments held in Trust Account of
$1,652,489, partially offset by formation and operating expenses of $729,946.
For the three months ended September 30, 2021, we had a net income of
$1,078,911, which consisted of the changes in fair value of warrant liabilities
of $1,279,200 and interest earned on marketable securities held in Trust Account
of $4,957, offset by formation and operational costs of $205,246.
For the nine months ended September 30, 2021, we had net loss of $108,487, which
consisted of formation and operational costs of $1,022,678 and transaction costs
incurred in connection with warrant liabilities of $611,630, offset by the
changes in fair value of the warrant liabilities of $1,492,400 and interest
earned on marketable securities held in Trust Account of $33,421.
17
--------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources
On January 14, 2021, the Company consummated the Initial Public Offering of
27,600,000 Units, which includes the full exercise by the underwriter of its
over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit,
generating gross proceeds of $276,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,520,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement with the Sponsor, generating gross
proceeds of $7,520,000, which is described in Note 4.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Units, a total of $276,000,000 was placed in
the Trust Account. We incurred related costs of $15,649,762, consisting of
$5,520,000 in cash underwriting fees, $9,660,000 of deferred underwriting fees
and $469,762 of other offering costs relating to the Initial Public Offering.
For the nine months ended September 30, 2022, cash used in operating activities
was $650,441. Net income of $12,577,248 was affected by changes in fair value of
warrant liabilities of $11,937,068 and interest earned on investments held in
Trust Account of $1,652,489. Net changes in operating assets and liabilities
provided $361,868 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $833,314. Net loss of $108,487 was affected by the change in fair value of
the warrant liability of $1,492,400, transaction costs associated with the
Initial Public Offering of $611,630, and interest earned on marketable
securities held in Trust Account of $33,421. Net changes in operating assets and
liabilities provided $189,364 of cash for operating activities.
As of September 30, 2022, we had investments held in the Trust Account of
$277,371,747 (including $1,371,747 of interest available to pay the Company's
tax obligations). Interest income on the balance in the Trust Account may be
used by us to pay taxes. Through September 30, 2022, we have withdrawn $320,000
in interest earned from the Trust Account to pay taxes.
As of September 30, 2022, we had $335,681 of cash held outside of the Trust
Account. The Company has used the funds held outside the Trust Account, for
expenses incurred as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as identifying and
evaluating prospective acquisition candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to acquire, and structuring, negotiating and consummating the
Business Combination. We may withdraw interest to pay taxes.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company is required to dissolve and
liquidate if a Business Combination is not completed within 24 months from the
closing of the Company's Initial Public Offering (the "Combination Period"). The
Company has determined that a Business Combination will not be consummated
within the Combination Period, so there will be a mandatory liquidation and
subsequent dissolution of the Company. Management has determined that the
liquidity condition and mandatory liquidation and subsequent dissolution of the
Company raises substantial doubt about the Company's ability to continue as a
going concern. These unaudited condensed interim 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 as a result of the
Company's substantial doubt to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. 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 an
affiliate of one of our executive officers a monthly fee of $5,000 for office
space, utilities and secretarial and administrative services. We began incurring
these fees on January 11, 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 $9,660,000
in the aggregate. The deferred fee will become payable to the underwriters
solely in the event that the Company completes a Business Combination from the
amounts held in the Trust Account, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of 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:
18
--------------------------------------------------------------------------------
Table of Contents
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. 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 at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statements of operations.
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 section of our balance
sheets.
Net Income (loss) Per Common Share
The Company has two classes of shares, which are referred to as Class A common
stock and Class B common stock. Income is shared pro rata between the two
classes of shares. Net income (loss) per common stock is computed by dividing
net income (loss) by the weighted average number of shares of common stock
outstanding for the period. Accretion associated with the redeemable shares of
Class A common stock is excluded from earnings per share as the redemption value
approximates fair value.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
© Edgar Online, source Glimpses