References to "we", "us", "our" or the "Company" are to Blue Whale Acquisition
Corp I, except where the context requires otherwise. The following discussion
should be read in conjunction with our condensed financial statements and
related notes thereto included elsewhere in this report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act, as amended, 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 Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intends," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and variations thereof 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 10-K filed with the SEC on April 11, 2022. 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 as a Cayman Islands exempted company
on March 10, 2021, for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar Business Combination with
one or more businesses. While we may pursue an initial Business Combination
target in any industry or geographic location, we intend to focus our search for
a target business operating in the media, entertainment and technology
industries. Our Sponsor, Blue Whale Sponsor I LLC, a Cayman Islands limited
liability company. We intend to effectuate our initial Business Combination
using cash from the proceeds of our initial public offering and the private
placement of the private placement warrants, our shares, debt or a combination
of cash, equity and debt. We expect to continue to incur significant costs in
the pursuit of our acquisition plans. We cannot assure you that our plans to
complete a Business Combination will be successful.
Our registration statement for our Initial Public Offering was declared
effective on August 3, 2021. On August 6, 2021, we consummated our Initial
Public Offering of 20,000,000 units, including the issuance of 2,940,811 units
as a result of the underwriters' full exercise of their over-allotment option,
at $10.00 per Unit, generating gross proceeds of $229,408,110. Each Unit
consisted of one Public Share and one-fourth of one redeemable Warrant. Each
whole Public Warrant entitles the holder to purchase one Public Share for $11.50
per share, subject to adjustment.
Following the closing of the Initial Public Offering on August 6, 2021,
$200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in
the Initial Public Offering and the sale of the Private Placement Warrants was
placed in a non-interest bearing Trust Account (the "Trust Account"). If, in the
future, the proceeds held in the Trust Account are invested, then the proceeds
will be invested only in U.S. government treasury obligations bills 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 which invest only in direct
U.S. government treasury obligations. Assuming an interest rate of 0.10% per
year, the trust account may generate approximately $200,000 of interest
annually; however, we can provide no assurances regarding this amount or that we
will invest in U.S. government treasury obligations. We will not be permitted to
withdraw any of the principal or interest held in the trust account except for
the withdrawal of interest to pay taxes, if any. The funds held in the trust
account will not otherwise be released from the trust account until the earliest
of: (1) our completion of an initial business combination; (2) the redemption of
any public shares properly submitted in connection with a shareholder vote to
amend our amended and restated memorandum and articles of association (A) to
modify the substance or timing of our obligation to allow redemption in
connection with our initial business combination or to redeem 100% of our public
shares if we do not complete our initial business combination within 24 months
from the closing of this offering or (B) with respect to any other provision
relating to shareholders' rights or pre-initial business combination activity;
and (3) the redemption of our public shares if we have not completed an initial
business combination within 24 months from the closing of this offering, subject
to applicable law.
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If we are unable to complete our initial Business Combination within the
Combination Period or during any Extension Period, we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but no 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, divided by the number of then outstanding
public shares, which redemption will completely extinguish public Shareholder's
rights as shareholders (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 the
remaining shareholders and the Company's board of directors, proceed to commence
a voluntary liquidation and thereby a formal dissolution of the Company, subject
in each case to its obligations under Cayman Islands law to provide for claims
of creditors and the requirements of applicable law.
Liquidity and Capital Resources
On August 6, 2021 the Company consummated the Initial Public Offering of
20,000,000 units, generating gross proceeds of $200,000,000. Simultaneously with
the closing of the Initial Public Offering, the Company consummated a private
placement of 3,000,000 Warrants at a price of $2.00 per Private Placement
Warrant to its Sponsor, generating gross proceeds of $6,000,000.
On August 16, 2021, the underwriters partially exercised the over-allotment
option and purchased an additional 2,940,811 Units, generating an aggregate of
gross proceeds of $29,408,110, incurred $588,162 in cash underwriting fees, and
forfeited the remainder of the option, which over-allotment closed on August 18,
2021. Simultaneously with the closing of the exercise of the over-allotment
option, the Company completed the private sale of an aggregate of 294,081
Private Warrants to the Company's Sponsor, at a purchase price of $2.00 per
Private Warrant, generating gross proceeds of $588,162.
Following the consummation of the Initial Public Offering on August 6, 2021, an
amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering was placed in the Trust Account.
Transaction costs amounted to $13,781,962 consisting of $4,588,162 of
underwriting fees, $8,029,284 of deferred underwriting fees and $1,164,516 of
other costs.
As of June 30, 2022 and December 31, 2021, we had approximately $229,408,110
cash held in the Trust Account. We intend to use substantially all of the funds
held in the Trust Account and the proceeds from the sale of the forward purchase
shares to complete our Business Combination. To the extent that our shares or
debt is used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the post-Business Combination
entity, make other acquisitions and pursue our growth strategies.
As of June 30, 2022 and December 31, 2021, we had cash of $2,281,197 and $66,156
held outside of the Trust Account, respectively. We intend to use the funds held
outside of the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, properties, or similar locations of prospective
target businesses or their representative or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or our officers and directors may
provide us working capital loans ("Working Capital Loans"). On February 16,
2022, the Sponsor confirmed to the Company that it will provide any such Working
Capital Loans for at least the next twelve months. On February 22, 2022, the
Company drew down and received cash proceeds of $2.5 million. The outstanding
balance under this loan is $2.5 million as of June 30, 2022. If we complete a
Business Combination, we may repay such loaned amounts out of the proceeds of
the Trust Account released to us. In the event that a 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 $2,500,000 of such loans may be
convertible into warrants, at a price of $2.00 per warrant, at the option of the
lender. The warrants would be identical to the Private Placement Warrants.
In connection with the Company's assessment of going concern considerations in
accordance with the authoritative guidance in Financial Accounting Standard
Board ("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern." The
Company has until August 6, 2023, 24 months from the closing of the IPO, to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by the specified period. If a Business
Combination is not consummated by August 6, 2023 and the Company decides not to
extend the period of time to consummate a Business Combination, there will be a
mandatory liquidation and subsequent dissolution.
The Company's date for mandatory liquidation and subsequent dissolution raise
substantial doubt about the Company's ability to continue as a going concern one
year from the date that these condensed financial statements are issued. These
condensed 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 should the Company be unable to continue as a going concern.
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Results of Operations
Our only activities from inception through June 30, 2022, were those related to
our formation, the preparation for our Initial Public Offering and, since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any operating revenues to date. We will not generate any operating revenues
until after completion of our initial Business Combination, at the earliest. We
incurred expenses as a result of being a public company (including for legal,
financial reporting, accounting and auditing compliance), as well as for
expenses in connection with searching for a prospective initial Business
Combination.
For the three months ended June 30, 2022, we had a net income of $1,335,318
which is comprised of formation and operating expenses of $380,246 and a change
in fair value of the warrant liability of $1,715,564.
For the three months ended June 30, 2021, we had a net income of $0 which is
comprised of formation and operating expenses of $0.
For the six months ended June 30, 2022, we had a net income of $3,785,610 which
is comprised of formation and operating expenses of $940,203, a change in fair
value of the warrant liability of $4,875,813 and a change in the fair value of
the FPA of $150,000.
For the period from March 10, 2021, through June 30, 2021, we had a net loss of
$5,000, which is comprised of formation and operating expenses of $5,000.
Related Party Transactions
Founder Shares
On March 11, 2021, the Company issued an aggregate of 5,750,000 shares of Class
B ordinary shares (the "Founder Shares") to the Sponsor for an aggregate
purchase price of $25,000. The Founder Shares include an aggregate of up to
750,000 shares subject to forfeiture by the Sponsor to the extent that the
underwriters' over-allotment is not exercised in full or in part. Such shares
have been recapitalized into 2,548,979 Class F ordinary shares and 5,097,958
Class G ordinary shares (which we respectively refer to as "Class F founder
shares" and "Class G founder shares," and collectively refer to as "founder
shares" as further described herein). Pursuant to a re-organization of the
Company's share capital effective July 5, 2021, the Class B ordinary shares have
been canceled and all of the shares presently issued and outstanding are Class F
ordinary shares and Class G ordinary shares. (See Note 9).
On August 18, 2021, the underwriters partially exercised the over-allotment
option resulting in the issuance of an additional 326,757 Class F ordinary
shares and 653,513 Class G ordinary shares to the Sponsor.
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares
until two years after the completion of a Business Combination.
Related Party Loans
On March 11, 2021, the Sponsor agreed to loan the Company an aggregate of up to
$300,000 to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). The Note is non-interest bearing and is payable on
the earlier of (i) December 31, 2022 or (ii) the date the Company completes its
initial Business Combination. As of June 30, 2022 and December 31, 2021, the
Company had $156,384 outstanding on the Note, which is classified as current on
our Condensed Balance Sheets.
In order to finance transaction costs in connection with a Business Combination,
the Company's Sponsor, an affiliate of the Sponsor, or the Company's officers
and directors may loan the Company funds as may be required (the "Working
Capital Loans"). Such Working Capital Loans would be evidenced by promissory
notes. On February 16, 2022, the Sponsor confirmed to the Company that it will
provide any such Working Capital Loans for at least the next twelve months,
pursuant to a promissory note. The notes would either be repaid upon
consummation of a Business Combination, without interest, or, at the lender's
discretion, up to $2,500,000 of notes may be converted upon consummation of a
Business Combination into warrants at a price of $2.00 per warrant. The warrants
will be identical to the Private Placement Warrants. In the event that a
Business Combination does not close, the Company may use a portion of proceeds
held outside the Trust Account to repay the Working Capital Loans but no
proceeds held in the Trust Account would be used to repay the Working Capital
Loans.
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In addition, our Sponsor, officers and directors, or our respective affiliates
will be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable Business Combinations. Our audit committee
will review on a quarterly basis all payments that were made by us to our
Sponsor, executive officers or directors, or our affiliates. Any such payments
prior to an initial Business Combination will be made using funds held outside
the Trust Account. There was $325,000 due to related party as at June 30, 2022
and December 31, 2021.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities were first listed on Nasdaq through
the earlier of consummation of the initial Business Combination and the
liquidation, we agreed to pay our Sponsor $10,000 per month for office space,
secretarial and administrative services provided to us by an affiliate of our
Sponsor. There was no balance due to related parties at June 30, 2022 and
December 31, 2021, respectively.
Registration Rights Agreement
The holders of the Founder Shares, Private Placement Shares, and any shares that
may be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon conversion of the Founder Shares) were entitled to
registration rights pursuant to a registration and shareholder rights agreement
signed upon the effective date of the Initial Public Offering. The holders of
these securities were entitled to make up to three demands, excluding short form
demands, that we register such securities. In addition, the holders had certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The underwriters were paid a cash underwriting discount of 2.00% of the gross
proceeds of the Initial Public Offering, or $4,588,162. In addition, the
underwriters will be entitled to a deferred fee of three and half percent
(3.50%) of the gross proceeds of the Initial Public Offering, or $8,029,284. On
August 16, 2021, the underwriters partially exercised the over-allotment option
and purchased an additional 2,940,811 Over-Allotment Units, generating an
aggregate of gross proceeds of $29,408,110, incurred $588,162 in cash
underwriting fees and $1,029,284 in deferred underwriters' fees, and forfeited
the remainder of the option, which over-allotment closed on August 18, 2021. The
deferred fee was placed in the Trust Account and will be paid in cash upon the
closing of a Business Combination, subject to the terms of the underwriting
agreement.
Forward Purchase Agreement
The Company entered into a forward purchase agreement with MIC Capital Partners
(Public) Parallel Cayman, LP, an affiliate of the Sponsor, providing for the
purchase, in its sole discretion, an aggregate of up to 5,000,000 Units for an
aggregate purchase price of up to $50,000,000, or $10.00 per Unit, in a private
placement to close substantially concurrently with the closing of our initial
Business Combination. The forward purchase investor will determine in its sole
discretion the specific number of forward purchase Units it will purchase, if
any, pursuant to the forward purchase agreement. Each forward purchase Unit will
consist of one Class A ordinary share and one-fourth of one redeemable Warrant.
The terms of the forward purchase Units will generally be identical to the terms
of the units being issued in the Initial Public Offering, except that the
securities underlying the forward purchase Units will be subject to certain
registration rights.
Critical Accounting Estimates
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 Polices ("GAAP").
The preparation of our 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. The company has identified the following as its
critical accounting policies:
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Derivative Financial Instruments
The Company accounts for the Warrants and Forward Purchase Agreements ("FPAs")
as either equity-classified or liability-classified instruments based on an
assessment of the specific terms of the Warrants and FPAs and the applicable
authoritative guidance in Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 480, "Distinguishing Liabilities from
Equity" ("ASC 480"), and ASC 815, "Derivatives and Hedging" ("Warrants and FPAs
ASC 815"). The assessment considers whether they are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and meet all of the requirements for equity classification under ASC
815, including whether the Warrants and FPAs are indexed to the Company's own
ordinary shares and whether the holders of the Warrants could potentially
require "net cash settlement" in a circumstance outside of the Company's
control, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of
issuance of the Warrants and execution of the FPAs and as of each subsequent
quarterly period end date while the Warrants and FPAs are outstanding. For
issued or modified warrants and FPAs that meet all of the criteria for equity
classification, such warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants and FPAs that do not meet all the criteria for equity classification,
such 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 liability-classified warrants are recognized as a
non-cash gain or loss on the statements of operations.
Recently Issued Accounting Standards
In August 2020, 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 for fiscal years beginning
after December 15, 2023, including interim periods within those fiscal years,
with early adoption permitted. The Company is currently evaluating the impact
this guidance will have on its financial statements.
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.
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BLUE WHALE ACQUISITION CORP I 
