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CHP MERGER CORP.

(CHPM)
Delayed Nasdaq  -  04:00 2022-04-22 pm EDT
10.18 USD   -0.10%
04/22CHP Merger Corp.(NasdaqCM:CHPM) dropped from NASDAQ Composite Index
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04/15Chp Merger : Accelus and CHP Merger Corp. Mutually Agree To Terminate Business Combination - Form 8-K
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04/15Chp Merger Corp. : Termination of a Material Definitive Agreement, Other Events, Financial Statements and Exhibits (form 8-K)
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CHP MERGER CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

03/17/2022 | 03:20pm EDT

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. 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, including those set forth under "Special Note Regarding Forward-Looking Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K.

Overview

We are a blank check company formed under the laws of the State of Delaware on July 31, 2019 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more target businesses. We intend to effectuate our Business Combination using cash from the proceeds of our initial public offering and the sale of the Private placement warrants that occurred simultaneously with the completion of our initial public offering, our capital stock, debt or a combination of cash, stock 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.

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Business Combination Agreement

On November 15, 2021, the Company announced a proposed business combination (the "Business Combination") between CHP and Integrity Implants Inc. d/b/a Accelus. The Company issued a press release announcing the execution of the Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the "Business Combination Agreement"), by and among the Company, Accelerate Merger Sub, Inc., a wholly-owned subsidiary of the Company, and Accelus. The Business Combination was unanimously approved by CHP's board of directors on November 14, 2021, and the Business Combination Agreement was signed on November 15, 2021.

Results of Operations


We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2021 were organizational activities,
those necessary to prepare for the initial public offering, described below, and
identifying a target company for our initial 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 on marketable securities 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 in connection with completing our initial Business
Combination.

For the year ended December 31, 2021, we had a net income of $22,219,073, which consists of interest earned on investments held in the trust account of $68,694 and changes in fair value of warrant liability of $25,755,833, offset by operating costs of $3,605,454.

For the year ended December 31, 2020, we had a net loss of $24,470,087, which consists of interest earned on investments held in the trust account of $1,986,435, offset by changes in fair value of warrant liability of $25,430,000, operating costs of $651,434 and a provision for income taxes of $375,088.

Liquidity and Capital Resources

On November 26, 2019, we consummated the initial public offering of 30,000,000 Units, which included the partial exercise by the underwriters of the over-allotment option to purchase an additional 2,500,000 Units, at $10.00 per Unit, generating gross proceeds of $300,000,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 8,000,000 Private placement warrants to our Sponsor at a price of $1.00 per warrant, generating gross proceeds of $8,000,000.

Following the initial public offering, the exercise of the over-allotment option and the sale of the Private placement warrants, a total of $300,000,000 was placed in the trust account. We incurred $17,070,862 in transaction costs, including $6,000,000 of underwriting fees, $10,500,000 of deferred underwriting fees and $570,862 of other offering costs.

For the year ended December 31, 2021, cash used in operating activities was $1,769,146. Net income of $22,219,073 was affected by interest earned on investments held in the trust account of $68,694, the non-cash charge for the change in fair value of warrant liability of $25,755,833. Changes in operating assets and liabilities provided $1,836,308 of cash from operating activities.

For the year ended December 31, 2020, cash used in operating activities was $781,796. Net loss of $24,470,087 was affected by interest earned on investments held in the trust account of $1,986,435, change in fair value of warrant liabilities of $25,430,000 and changes in operating assets and liabilities, which provided $244,726 of cash from operating activities.

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As of December 31, 2021, we had cash and investments held in trust of $188,391,090 comprised of money market funds, which are invested in U.S. Treasury Securities. Interest earned on the balance in the Trust Account may be used by us to pay taxes. During the year ended December 31, 2021 and 2020, the Company withdrew $728,515 and $84,434, respectively, of interest income from the Trust Account to pay its income and franchise taxes.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less taxes payable and deferred underwriting commissions) to complete our initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of December 31, 2021, we had $98,614 of cash held outside of 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 our 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. If we complete a Business Combination, we would repay such loaned amounts. 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 $1,500,000 of such loans may be convertible into warrants identical to the Private placement warrants, at a price of $1.00 per warrant at the option of the lender.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our 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 our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

Going Concern

In connection with the Company's assessment of going concern considerations in accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of the deadline or complete a Business Combination by May 26, 2022, then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 26, 2022. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension.

Off-balance

Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or

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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 our Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support to the Company. We began incurring these fees on November 21, 2019 and will continue to incur these fees monthly until the earlier of the completion of our initial Business Combination and the Company's liquidation.

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,500,000 in the aggregate. The deferred fee will be forfeited by the underwriters solely in the event that we fail to complete our initial Business Combination, 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:

Warrant Liability


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. The Warrants for periods where no
observable traded price was available are valued using a binomial lattice model.
For periods subsequent to the detachment of the Public Warrants from the Units,
the Public Warrant quoted market price was used as the fair value as of each
relevant date. The measurement of the Private Warrants for periods subsequent to
the initial measurement were valued using a binomial lattice model.

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 condensed balance sheets.

Net Income (Loss) Per Common Share

We have two classes of stock, 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 stock. Net income per common share, basic and

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diluted for Class A redeemable common stock is calculated by dividing the
interest income earned on the trust account, net of applicable franchise and
income taxes, by the weighted average number of Class A redeemable common stock
outstanding for the period. Net loss per common share, basic and diluted for
Class B
non-redeemable
common stock is calculated by dividing the net income, less income attributable
to Class A redeemable common stock, by the weighted average number of Class B
non-redeemable
common stock outstanding for the period presented.

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. We are 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 our financial statements.

© Edgar Online, source Glimpses

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