References to the "Company," "FTAC Parnassus Acquisition Corp.," "FTAC
Parnassus," "our," "us" or "we" refer to FTAC Parnassus Acquisition Corp. 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 Securities Exchange Act of 1934, as amended (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 December 18, 2020. 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 target businesses (the "Business Combination"). We intend to
effectuate our Business Combination using cash from the proceeds of our initial
public offering and the sale of the placement units 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 (other than searching for a Business
Combination after the Initial Public Offering) nor generated any revenues to
date. Our only activities from inception through September 30, 2022 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and, after the Initial Public Offering, identifying a
target company for an initial Business Combination. We do not expect to generate
any operating revenues until after the completion of our Business Combination,
at the earliest. We expect to generate non-operating income in the form of
interest income on marketable securities held after the Initial Public Offering.
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.
For the three months ended September 30, 2022, we had net income of $916,568,
which consisted of a $512,075 non-operating gain resulting from the change in
fair value of derivative warrant liabilities and $1,102,610 of income from
investments held in Trust Account, offset by provision for income taxes of
$202,569 and $495,548 in general and administrative expenses.
For the nine months ended September 30, 2022, we had net income of $6,655,357,
which consisted of a $6,682,450 non-operating gain resulting from the change in
fair value of derivative warrant liabilities and $1,442,346 of income from
investments held in Trust Account, offset by provision for income taxes of
$241,594 and $1,227,845 in general and administrative expenses.
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For the three months ended September 30, 2021, we had net income of $512,929,
which consisted of a $822,850 non-operating gain resulting from the change in
fair value of derivative warrant liabilities and $6,302 of income from
investments held in Trust Account, offset by approximately $316,223 in general
and administrative expenses.
For the nine months ended September 30, 2021, we had net income of $1,241,033,
which consisted of a $2,537,950 non-operating gain resulting from the change in
fair value of derivative warrant liabilities and $13,563 of income from
investments held in Trust Account, offset by approximately $788,180 in general
and administrative expenses and $522,300 in offering costs associated with
derivative warrant liabilities.
Liquidity and Capital Resources
On March 16, 2021, we consummated the Initial Public Offering of 25,000,000
Units, which included the partial exercise by the underwriter of its
over-allotment option in the amount of 3,000,000 Units, at a price of $10.00 per
Unit, generating gross proceeds of $250,000,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 690,000 Placement
Units at a price of $10.00 per Placement Unit in a private placement to our
Sponsor and Millennium, generating gross proceeds of $6,900,000.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Placement Units, a total of
$250,000,000 was placed in the Trust Account and invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), with a maturity
of 185 days or less, or in money market funds meeting certain conditions under
Rule 2a-7 of the Investment Company Act and that invest only in direct U.S.
government obligations. We incurred $15,527,366 in transaction costs, including
$4,400,000 of underwriting fees, $10,600,000 of deferred underwriting fees and
$527,366 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $1,222,901. Net income of $6,655,357 was affected by interest earned on
marketable securities held in the Trust Account of $1,442,346 and change in fair
value of warrant liabilities of $6,682,450. Changes in operating assets and
liabilities provided $246,538 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,003,270. Net income of $1,241,033 was affected by interest earned on
marketable securities held in the Trust Account of $13,563, change in fair value
of warrant liabilities of $2,537,950, transaction costs attributable to warrant
liabilities of $522,300, and general and administrative expenses paid under the
promissory note of $875. Changes in operating assets and liabilities used
$215,965 of cash for operating activities.
As of September 30, 2022, we had investments held in the Trust Account of
$251,095,080 (including $1,095,080 of interest, net of withdrawals). We intend
to use substantially all of the funds held in the Trust Account, including any
amounts representing interest earned on the Trust Account to complete our
Business Combination. We may withdraw interest to pay taxes. During the three
and nine months ended September 30, 2022, we withdrew an amount of $367,131 in
interest income from the Trust Account to pay franchise and income taxes. To the
extent that our capital stock 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 target business or businesses, make other acquisitions and pursue our
growth strategies.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates 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. As of September 30, 2022, $150,000 in such loans were
outstanding.
Going Concern
We have until March 16, 2023 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
the liquidity condition and mandatory liquidation, should a Business Combination
not occur, and potential subsequent dissolution raises substantial doubt about
our ability to continue as a going concern. Management intends to complete a
Business Combination prior to March 16, 2023. No adjustments have been made to
the carrying amounts of assets or liabilities should we be required to liquidate
after March 16, 2023.
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As of September 30, 2022, we had $105,235 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 finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or certain of our directors and
officers may, but are not obligated to, loan us funds as may be required. 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 $1,500,000 of such loans
may be convertible into units, at a price of $10.00 per unit, at the option of
the lender. The units would be identical to the Placement Units. We do not
expect to seek loans from parties other than our Sponsor or an affiliate of our
Sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
trust account. As of September 30, 2022, the Company had $150,000 outstanding
borrowings under the Promissory Note.
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. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the condensed financial statements. The
condensed financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. 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.
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 the Sponsor a monthly fee of $20,000 for office space,
administrative and shared personnel support services to the Company. We began
incurring these fees on March 12, 2021 and will continue to incur these fees
monthly until the earlier of the completion of a business combination and our
liquidation. On June 8, 2021, the administrative services agreement was amended
and restated to increase the monthly charge payable from $20,000 to $27,500. For
the three and nine months ended September 30, 2022, we incurred and paid
expenses of $82,500 and $247,500 under this agreement, respectively. For the
three and nine months ended September 30, 2021, we incurred and paid expenses of
$82,500 and $162,500 under this agreement, respectively. As of September 30,
2022 and December 31, 2021, we did not have a balance outstanding for services
in connection with such agreement in the accompanying condensed balance sheets.
In addition, we have an agreement to pay the underwriter a deferred fee of
$10,600,000. The deferred fee will become payable to the representative of the
underwriter 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.
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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:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of 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"). 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 Public Warrants and the Private Placement Warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjust the carrying value
of the instruments to fair value at each reporting period. The liabilities are
subject to re-measurement at each balance sheet date until exercised. The
initial fair value of the Public Warrants issued in connection with the Initial
Public Offering were estimated using a binomial lattice model in a risk-neutral
framework. The fair value of the Public Warrants as of September 30, 2022 is
based on observable listed prices for such warrants. The fair value of the
Private Placement Warrants as of September 30, 2022 is determined using a
Black-Scholes option pricing model. 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.
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 is
measured at fair value. Conditionally redeemable Class A common stock (including
Class A common stock that features redemption rights that are 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, Class A common stock is classified as stockholders' equity. As part of
the Private Placement, the Company issued 690,000 shares of Class A common stock
("Placement Shares"). These Placement Shares will not be transferable,
assignable or salable until 30 days after the completion of our initial business
combination, as such they are considered non-redeemable and presented as
permanent equity in the Company's condensed balance sheets. Excluding the
Placement Shares, our Class A common stock features certain redemption rights
that are considered to be outside of our control and subject to the occurrence
of uncertain future events. Accordingly, as of the Initial Public Offering
date, 25,000,000 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.
Effective with the closing of the Initial Public Offering and the over-allotment
option, we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the
extent available) and accumulated deficit (see Note 2).
Net Income per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have 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 per common share is
calculated by dividing net income by the weighted average shares of common stock
outstanding for the respective period.
The calculation of diluted net income per common share does not consider the
effect of the warrants underlying the Units sold in the Initial Public Offering
(including the consummation of the over-allotment) and the private placement
warrants to purchase an aggregate of 6,422,500 shares of Class A common stock,
because their exercise is contingent upon future events and their inclusion
would be anti-dilutive under the treasury stock method. As a result, diluted net
income per share is the same as basic net income per common share for the three
and nine months ended September 30, 2022. Accretion associated with the
redeemable Class A common stock is excluded from earnings per common 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" ("ASU
2020-06"), which simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. ASU 2020-06 also removes
certain settlement conditions that are required for equity-linked contracts to
qualify for the derivative scope exception, and it simplifies the diluted
earnings per share calculation in certain areas. The Company is currently
assessing the impact, if any, that ASU 2020-06 would have on its financial
position, results of operations or cash flows.
We do not believe that any other recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the Company's condensed financial statements.
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FTAC PARNASSUS ACQUISITION CORP. 
