References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Atlas Crest Investment Corp. II. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Atlas Crest Investment II 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 on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act 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 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 Annual Report on Form 10-K for the year ending
December 31, 2020 filed with the SEC on March 26, 2021. 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 December 21, 2020 as a Delaware
corporation and formed for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses, which we refer to throughout this
Quarterly Report as our "initial business combination". We intend to effectuate
our initial business combination using cash from the proceeds of the initial
public offering and the private placement of the private placement warrants, the
proceeds of the sale of our shares in connection with our initial business
combination (pursuant to forward purchase agreements or backstop agreements we
may enter into following the consummation of the initial public offering 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the period from December 21, 2020 (inception) through
September 30, 2021 were organizational activities, those necessary to prepare
for our 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 generate non-operating income in the form of
interest income or gains on investments on the cash and investments held in a
trust account from the proceeds derived from our 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 September 30, 2021, we had net income of $4,247,370,
which resulted from a gain on change in the fair value of warrant liabilities of
$4,545,504 and an unrealized gain on marketable securities held in trust account
in the amount of $40,875, offset in part by operating costs of $288,736 and
franchise tax expense of $50,273.
For the nine months ended September 30, 2021, we had net income of $8,536,965,
which resulted from a gain on change in the fair value of warrant liabilities of
$9,754,087, an unrealized gain on marketable securities held in trust account in
the amount of $68,553 and interest and dividend income on investments held in
trust account of $2,078 offset in part by operating costs of $729,981, expensed
offering costs of $289,922, franchise tax expense of $149,180, and a loss on the
sale of private placement warrants of $118,670.
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Liquidity and Capital Resources
On February 8, 2021, we consummated an initial public offering of 34,500,000
units generating gross proceeds to the Company of $345,000,000. Simultaneously
with the consummation of the initial public offering, we completed the private
sale of 5,933,333 warrants to the Sponsor at a purchase price of $1.50 per
warrant (the "Private Placement Warrants"), generating gross proceeds of
$8,900,000. 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 an 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.
For the nine months ended September 30, 2021, net cash used in operating
activities was $1,327,299, which was due to a non-cash gain on the change in
fair value of warrant liabilities of $9,754,087, changes in working capital of
$448,138, unrealized gain on investments in the Trust Account of $68,553 and
interest and dividend income on investments held in Trust Account of $2,078
offset in part by our net income of $8,536,965, expensed offering costs added
back to net income of $289,922, and a non-cash loss on the sale of private
placement warrants of $118,670.
For the nine months ended September 30, 2021, net cash used in investing
activities of $345,000,000 was the result of the amount of net proceeds from our
initial public offering being deposited to the Trust Account.
Net cash provided by financing activities for the nine months ended September
30, 2021 of $346,256,451 was comprised of $338,100,000 in proceeds from the
issuance of units in our initial public offering net of underwriter's discount
paid and $8,900,000 in proceeds from the issuance of warrants in a private
placement to our Sponsor, offset by the payment of $443,549 for offering costs
associated with the initial public offering and repayment of the outstanding
balance on the promissory note to our Sponsor of $300,000.
As of September 30, 2021, we had cash of $254,152 held outside the Trust
Account. 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 an intended initial business combination, our Sponsor or an
affiliate of our Sponsor or certain of our officers and directors may, but are
not obligated to, loan us funds as may be required on a non-interest basis. If
we complete our initial business combination, we would repay such loaned
amounts. 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. 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 or an affiliate of our Sponsor 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.
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. 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 public shares upon
completion of our business combination, in which case we may issue additional
securities or incur debt in connection with such business combination. In
addition, we intend to target businesses larger than we could acquire with the
net proceeds of our initial public offering and the sale of the private
placement units and may as a result be required to seek additional financing to
complete such proposed initial business combination. Subject to compliance with
applicable securities laws, we would only complete such financing simultaneously
with the completion of our business combination. If we are unable to complete
our initial business combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the trust
account. In addition, following our business combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
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Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of the Working Capital Loans (and any shares
of Class A common stock issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital
Loans and upon conversion of the Founder Shares) are entitled to registration
rights pursuant to a registration rights agreement that was effective with the
Initial Public Offering, requiring us to register such securities for resale (in
the case of the Founder Shares, only after conversion to Class A common stock).
The holders of these securities are entitled to make up to three demands,
excluding short form demands, that we register such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the completion of a Business
Combination. The registration rights agreement does not contain liquidating
damages or other cash settlement provisions resulting from delays in registering
our securities. We will bear the expenses incurred in connection with the filing
of any such registration statements.
Business Combination Marketing Agreement
We engaged the representative of the underwriters and Moelis & Company LLC, an
affiliate of the Sponsor, in connection with a Business Combination to assist us
in holding meetings with our stockholders to discuss the potential Business
Combination and the target business' attributes, introduce us to potential
investors that are interested in purchasing our securities in connection with a
Business Combination, assist us in obtaining stockholder approval for the
Business Combination and assist us with press releases and public filings in
connection with the Business Combination. We will pay the representative of the
underwriters and Moelis & Company LLC a cash fee for such services upon the
consummation of the Business Combination of 2.25% ($7,762,500) and 1.25%
($4,312,500), respectively, or 3.5% ($12,075,000), in the aggregate, of the
gross proceeds of the initial public offering. A portion of such fee may be
re-allocated or paid to members of FINRA that assist us in consummating our
Business Combination.
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:
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 initial fair value of the public warrants was
estimated using a Monte Carlo simulation approach and the initial and subsequent
fair value of the private placement warrants was estimated using a Modified
Black-Scholes model. The subsequent measurement of the fair value of the public
warrants was measured using quoted market prices.
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Common stock subject to possible redemption
All of the 34,500,000 shares of Class A common stock sold as part of the units
in our initial public offering contain a redemption feature which allows for the
redemption of such public shares in connection with our liquidation, if there is
a stockholder vote or tender offer in connection with our initial business
combination and in connection with certain amendments to our second amended and
restated certificate of incorporation. In accordance with SEC and its staff's
guidance on redeemable equity instruments, which has been codified in Accounting
Standards Codification ("ASC") 480-10-S99, redemption provisions not solely
within the control of the Company require common stock subject to redemption to
be classified outside of permanent equity. Therefore, all Class A common stock
has been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net Income Per Share of Common Stock
Net income per common share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the period.
As the Class A shares are considered to be redeemable at fair value, and a
redemption at fair value does not amount to a distribution different than other
stockholders, Class A and Class B common stock are presented as one class of
stock in calculating net income per share. As a result, the calculated net
income per share is the same for Class A and Class B shares of common stock. The
Company has not considered the effect of the Warrants sold in the Initial Public
Offering and private placement to purchase an aggregate of 14,558,333 shares in
the calculation of diluted income per share, since the exercise of the Warrants
are contingent upon the occurrence of future events.
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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