References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to CHP Merger Corp. References to our "management" or our
"management team" refer to our officers and directors, references to the
"Sponsor" refer to CHP Acquisition Holdings, LLC. 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 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 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 Quarterly
Report 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/A for the year ending December 31, 2020
filed with the SEC on July 22, 2021. The Company's filings pursuant to the
Securities Act and Exchange Act 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.
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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through March 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 three months ended March 31, 2021, we had a net income of $18,043,678,
which consists of the change in fair value of warrant liability of $18,300,000
and interest income on marketable securities held in the trust account of
$34,655, offset by operating costs of $290,977.
For the three months ended March 31, 2020, we had a net loss of $398,051, which
consists of the change in fair value of warrant liability of $1,150,000 and
operating costs of $165,097, offset by interest income on marketable securities
held in the trust account of $1,147,527.
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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 three months ended March 31, 2021, cash used in operating activities was
$364,395. For the three months ended March 31, 2021, net income of $18,043,678
was impacted by interest earned on marketable securities held in the trust
account of $34,655, the non-cash charge for the change in fair value of warrant
liability of $18,300,000 and changes in operating assets and liabilities, which
used $73,418 of cash from operating activities.
As of March 31, 2021, we had cash and marketable securities held in trust of
$302,364,150 comprised of $1,000,982 in money market funds, which are invested
in U.S. Treasury Securities, and $301,363,168 in U.S. Treasury Bills with a
maturity of 185 days or less. Interest earned on the balance in the Trust
Account may be used by us to pay taxes. During the three months ended March 31,
2021 and March 31, 2020, the Company withdrew $0 and $84,434, respectively, of
interest income from the Trust Account to pay its 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 March 31, 2021, we had $239,850 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. The Units would be
identical to the Private placement warrants.
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.
We have until November 26, 2021 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
if the Company is unable to raise additional funds to alleviate liquidity needs
as well as complete a Business Combination by November 26, 2021, then the
Company will cease all operations except for the purpose of liquidating.
Management also has determined that the mandatory liquidation, should a Business
Combination not occur, and potential subsequent dissolution raises substantial
doubt about our ability to continue as a going concern. No adjustments have been
made to the carrying amounts of assets or liabilities should we be required to
liquidate after November 26, 2021.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or 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.
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
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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 condensed 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:
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
statement 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' equity section of our condensed
Net Income (Loss) Per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and 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.
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