References to the "Company," "Big Sky Growth Partners, Inc.," "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 unaudited interim condensed financial statements
and the notes thereto contained elsewhere in this report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
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 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. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
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 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.
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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.
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 September 30, 2022, 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 three months ended September 30, 2022, we had net income of
approximately $2.7 million, which consisted of an approximately $1.8 million
gain in change of fair value of derivative warrant liabilities and income from
investments held in the Trust account of approximately $1.4, which was partially
offset by approximately $159,000 of general and administrative expenses,
approximately $50,000 of franchise tax expenses, and approximately $274,000 of
income tax expenses.
For the three months ended September 30, 2021, we had net income of
approximately $3.7 million which consisted of an approximately $4.0 million gain
from the change in fair value of derivative warrant liabilities and income from
investments held in the Trust Account of approximately $4,000, partially offset
by approximately $199,000 in general and administrative expense, and
approximately $50,000 of franchise taxes.
For the nine months ended September 30, 2022, we had net income of approximately
$9.1 million, which consisted of an approximately $8.5 million gain in change of
fair value of derivative warrant liabilities and income from investments held in
the Trust account of approximately $1.8 million, which was partially offset by
approximately $667,000 of general and administrative expenses, approximately
$150,000 of franchise tax expenses, and approximately $310,000 of income tax
expenses. Due to the increase in income earned on the Trust Account we are no
longer projecting net operating losses. As a result, during the nine months
ended September 30, 2022, we had income tax expense of approximately $310,000.
From February 11, 2021 (inception) to ended September 30, 2021, we had net
income of approximately $4.8 million, which consisted of a $5.3 million gain in
change of fair value of derivative warrant liabilities, and approximately $8,000
in gain on investments held in the Trust Account, which was partially offset by
approximately $536,000 of offering costs associated with the issuance of
warrants, $340,000 of general and administrative expenses and $125,000 of
franchise tax expenses.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $219,000 in our operating bank
account and working capital of approximately $330,000, not taking into account
tax obligation of approximately $242,000 that may be paid from income from
investments held in the Trust Account.
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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 condensed interim financial statements), and loan
from the Sponsor of approximately $96,000 under the Note (as defined in Note 4
to the condensed interim 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 and interest released from the Trust Account to pay for its tax
obligation. 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 condensed interim financial
statements). As of September 30, 2022 and December 31, 2021, there were no
amounts outstanding under any Working Capital Loans.
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 through liquidation date. 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.
However, in connection with our assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial
Statements-Going Concern," management has determined that mandatory liquidation
and subsequent dissolution raise substantial doubt about our ability to continue
as a going concern. We intend to complete our initial business combination
before the mandatory liquidation date; however, there can be no assurance that
the Company will be able to consummate any business combination by May 3, 2023.
No adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after May 3, 2023. The condensed
interim financial statements do not include any adjustment that might be
necessary if we are unable to continue as a going concern
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.
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
condensed interim financial statements. The condensed interim financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
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On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing corporations are
permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the "Treasury") has been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax. Any share redemption or other share repurchase that occurs after
December 31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent we would
be subject to the excise tax in connection with a Business Combination,
extension vote or otherwise will depend on a number of factors, including
(i) the fair market value of the redemptions and repurchases in connection with
the Business Combination, extension or otherwise, (ii) the structure of a
Business Combination, (iii) the nature and amount of any "PIPE" or other equity
issuances in connection with a Business Combination (or otherwise issued not in
connection with a Business Combination but issued within the same taxable year
of a Business Combination) and (iv) the content of regulations and other
guidance from the Treasury. In addition, because the excise tax would be payable
by us and not by the redeeming holder, the mechanics of any required payment of
the excise tax have not been determined. The foregoing could cause a reduction
in the cash available on hand to complete a Business Combination and in our
ability to complete a Business Combination.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our condensed interim financial statements, which have
been prepared in accordance with United States generally accepted accounting
principles. The preparation of these condensed interim 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 condensed interim 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")
Topic 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
Monte Carlo simulation model. The fair value of Public Warrants issued in
connection with the Initial Public Offering has subsequently been measured based
on the listed market price of such warrants. 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 September 30, 2022 and 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 condensed balance sheets.
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. Subsequently, we recognized changes in the
redemption value as a deemed dividend as reflected on the accompanying unaudited
condensed financial statements.
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.
For the three and nine months ended September 30, 2022, the calculation of
diluted net income does not consider the effect of the warrants underlying the
Units sold in the Initial Public Offering and the Private Placement Warrants to
purchase an aggregate of 13,233,333 shares of Class A common stock in the
calculation of diluted income per share, since their exercise is contingent upon
future events. 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 June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for our Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. We are considering the
impact of this pronouncement on our financial statements.
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 condensed interim financial statements.
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Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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 condensed interim 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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