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BIG SKY GROWTH PARTNERS, INC.

(BSKY)
Delayed Nasdaq  -  10:37 2022-12-02 am EST
10.06 USD    0.00%
11/14BIG SKY GROWTH PARTNERS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)
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BIG SKY GROWTH PARTNERS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

03/31/2022 | 02:37pm EST

References to the "Company," "Big Sky," "our," "us," or "we" refer to Big Sky Growth Partners, Inc. 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 Annual Report on Form 10-K.


Overview

We are a blank check company incorporated in Delaware on February 11, 2021. We were 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 (the "Business Combination"). We are an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.


Our sponsor is Big Sky Growth Partners, LLC, a Delaware limited liability
company (the "Sponsor"). The registration statement for our initial public
offering (the "Initial Public Offering") was declared effective on April 28,
2021. On May 3, 2021, we consummated our Initial Public Offering of 30,000,000
units (the "Units" and, with respect to the Class A common stock included in the
Units being offered, the "Public Shares"), at $10.00 per Unit, generating gross
proceeds of $300.0 million, and incurring offering costs of approximately
$17.3 million, of which $10.5 million was for deferred underwriting commissions.
We granted the underwriters a
45-day
option to purchase up to an additional 4,500,000 Units at the Initial Public
Offering price to cover over-allotments, if any. The option expired unexercised
on June 14, 2021.

Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement (the "Private Placement") of 5,733,333 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to the Sponsor, generating
proceeds of $8.6 million. Upon the closing of the Initial Public Offering and
the Private Placement, $300.0 million ($10.00 per Unit) of the net proceeds of
the sale of the Units in the Initial Public Offering and of the Private
Placement Warrants in the Private Placement were placed in a trust account
("Trust Account") located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and invested only in U.S. government treasury
obligations with a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule
2a-7
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), which invest only in direct U.S. government treasury obligations, as
determined by the Company, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.

Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the value of the funds held in the Trust Account (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the interest earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, we only intend to complete a Business Combination if the post-transaction company owns or acquires 50% or more of the voting securities of the target business or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.

If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or May 3, 2023 (the "Combination Period"), and our stockholders have not amended the Certificate of Incorporation to extend such Combination Period, we will (i) cease all operations 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 us to pay its income taxes (less taxes payable and up to $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 (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case, to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

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Results of Operations

Our entire activity since inception, was in preparation for our formation and the Initial Public Offering, and, subsequent to the Initial Public Offering up to December 31, 2021, identifying a target company for a Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination at the earliest.

For the period from February 11, 2021 (inception) through December 31, 2021, we had net income of approximately $5.1 million, which consisted of a $6.4 million gain in change of fair value of derivative warrant liabilities and income from investments held in the Trust account of approximately $15,000, which was partially offset by approximately $536,000 of offering costs associated with the issuance of warrants, $520,000 of general and administrative expenses and $178,000 of franchise tax expenses.

Liquidity and Capital Resources

As of December 31, 2021, we had approximately $1.0 million in our operating bank account and working capital of approximately $1.1 million.

Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to cover for certain offering costs on our behalf in exchange for issuance of Founder Shares (as defined in Note 4 to the financial statements), and loan from the Sponsor of approximately $96,000 under the Note (as defined in Note 4 to the financial statements). We repaid the Note in full on May 4, 2021. Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans (as defined in Note 4 to the financial statements). As of December 31, 2021, there were no amounts outstanding under any Working Capital Loan.

Based on the foregoing, our management believes that we will have sufficient working capital and borrowing capacity 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.

Contractual Obligations

Registration Rights and Shareholder Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of 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) were entitled to registration rights pursuant to a registration and stockholder rights agreement signed upon the consummation of the Initial Public Offering. These holders will be entitled to certain demand and "piggy-back" registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.

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Underwriting Agreement

The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $6.0 million in the aggregate, paid upon the closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or $10.5 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic, including new variant strains of the underlying virus, current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions or other geopolitical events as well as adverse developments in the economy and capital markets, including rising energy costs, inflation and interest rates, in the United States and globally, on the industry and has concluded that while it is reasonably possible that these events could have a negative effect on our financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies

This 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 United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate 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 Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
480,
Distinguishing Liabilities From Equity
("ASC 480") and FASB ASC Topic 815
, Derivatives and Hedging
("ASC 815")
, paragraph 15 Embedded Derivatives
("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.

The warrants issued in connection with the Initial Public Offering (the "Public Warrants") and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815, paragraph 40, Contracts in Entity's Own Equity ("ASC 815-40"). Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period until they are exercised. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value utilizing a binomial Montel Carlo simulation model. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants on December 31, 2021. Subsequently, the fair value of the Private Placement Warrants, has been estimated utilizing the observed price for Public Warrants. The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

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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 480. Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A 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) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders' equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2021, 30,000,000 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders' equity section of our balance sheet.


Under FASB ASC
480-10-S99,
we have elected to recognize changes in the redemption value immediately as they
occur and adjust the carrying value of the security to equal the redemption
value at the end of the reporting period. This method would view the end of the
reporting period as if it were also the redemption date of the security.
Immediately upon the closing of the Initial Public Offering, we recognized the
accretion from initial book value to redemption amount value. The change in the
carrying value of shares of the redeemable Class A common stock resulted in
charges against additional
paid-in
capital and accumulated deficit.

Net Income (Loss) Per Common Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.

The calculation of diluted net income per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 13,233,333 shares of common stock since their exercise is contingent upon future events. The Company has considered the effect of Class B common stock that was excluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of over-allotment option by the underwriters. Since the contingency was satisfied, the Company has included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

Recent Accounting Pronouncements


In August 2020, the FASB issued Accounting Standards Update ("ASU")
No. 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
, 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 the derivative scope exception, and it also simplifies the diluted earnings
per share calculation in certain areas. We early adopted the ASU on February 11,
2021. Adoption of the ASU did not impact our financial position, results of
operations or cash flows.

Our management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying financial statements.

Off-Balance

Sheet Arrangements


As of December 31, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

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JOBS Act


The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act 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, the 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 CEO'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.

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