References to the "Company," "our," "us" or "we" refer to Health Assurance
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 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. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on September 8, 2020 for
the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses or entities (the "Business Combination"). Our sponsor is HAAC
Sponsor, LLC ("Sponsor").
The registration statement for our Initial Public Offering ("Initial Public
Offering") was declared effective on November 12, 2020. On November 17, 2020, we
consummated the Initial Public Offering of 52,500,000 SAILSM Securities,
including 2,500,000 SAILSM Securities as a result of the underwriters' exercise
in part of their over-allotment option. The SAILSM Securities were sold at an
offering price of $10.00 per SAILSM Security, generating gross proceeds of
$525.0 million, and incurring offering costs of approximately $29.8 million,
inclusive of approximately $18.4 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 11,666,666 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
including 333,333 Private Placement Warrants as a result of the underwriters'
exercise in part of their over-allotment option, at a price of $1.50 per Private
Placement Warrant in a private placement with our Sponsor and certain directors
of our Company (the "Private Placement Warrants Purchasers"), generating gross
proceeds of $17.5 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement,
$525.0 million ($10.00 per SAILSM Security) of the net proceeds of the sale of
the SAILSM Securities in the Initial Public Offering and 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 held as
cash or invested only in U.S. "government securities," within the meaning set
forth in Section 2(a)(16) of the Investment Company Act, with a maturity of
185 days or less, or in money market funds meeting certain conditions under the
Investment Company Act, which invest only in direct U.S. government treasury
obligations, as determined by us, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or November 17, 2022 and stockholders do
not approve an amendment to the certificate of incorporation to extend this
date, 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, of
$10.00, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of directors
(the "Board"), liquidate and dissolve, subject in the case of clauses (ii) and
(iii), to our obligations under Delaware law to provide for claims of creditors
and in all cases subject to the other requirements of applicable law.
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Results of Operations
Our entire activity from September 8, 2020 (inception) through September 30,
2021, was in preparation for an Initial Public Offering, and since our Initial
Public Offering, our activity has been limited to the search for a prospective
Initial Business Combination. We will not generate any operating revenues until
the closing and completion of our Initial Business Combination.
For the three months ended September 30, 2021, we had net income of
approximately $18.2 million, which consisted of approximately $21.6 million in
change of fair value of derivative warrant liabilities, approximately $8,000 of
gain on investments held in a Trust Account, and an income tax benefit of
approximately $9,000, partially offset by approximately $3.1 million of general
and administrative expenses, $280,000 of general and administrative expenses -
related party, approximately $50,000 of franchise tax expense and approximately
$9,000 of an income tax benefit.
For the nine months ended September 30, 2021, we had net income of approximately
$40.5 million, which consisted of approximately $48.9 million in change of fair
value of derivative warrant liabilities and approximately $171,000 of gain on
investments held in a Trust Account and approximately, partially offset by
approximately $7.6 million of general and administrative expenses, approximately
$862,000 of general and administrative expenses - related party, approximately
$100,000 of franchise tax expense and approximately $15,000 of income tax
expense.
For the period from September 8, 2020 (inception) through September 30, 2020, we
had a loss of approximately $13,000, which consisted of $1,000 of general and
administrative expenses and approximately $12,000 of franchise tax expense.
Liquidity and Going Concern
As of September 30, 2021, we had $1.5 million in cash and working capital
deficit of approximately $124,000.
Prior to September 30, 2020, our liquidity needs were satisfied through a
payment of $25,000 from the Initial Stockholders in exchange for the issuance of
the Alignment Shares and proceeds from a loan of $300,000 pursuant to a note
agreement from our Sponsor (the "Note"). We repaid the Note in full on
November 18, 2020. Following the consummation of the Initial Public Offering and
Private Placement, our liquidity needs have been satisfied with the proceeds
from the Private Placement not held in the Trust Account. In addition, in order
to finance transaction costs in connection with a Business Combination, our
Sponsor may, but is not obligated to, provide us with working capital loans. As
of the date of this filing, there were no amounts outstanding under any working
capital loans.
In connection with our assessment of going concern considerations in accordance
with ASU 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," as of September 30, 2021, we do not have
sufficient liquidity to meet our obligations in the next twelve months. However,
we have determined that we have access to funds from our Sponsor that are
sufficient to fund our working capital needs until the earlier of the
consummation of an Initial Business Combination or a minimum one year from the
date of issuance of these unaudited condensed financial statements.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than for an agreement to pay our Sponsor $10,000 per month for office
space, secretarial and administrative support provided to members of our
management team. In addition, each independent director will receive quarterly
cash compensation of $62,500 (or $250,000 in the aggregate per year).
Registration and Stockholder Rights
The holders of the Alignment Shares, Private Placement Warrants, and Private
Placement Warrants that may be issued upon conversion of Working Capital Loans
(and any shares of Class A common stock into which such securities may convert
and that may be issued upon conversion of Working Capital Loans and upon
conversion of the Alignment Shares) are entitled to registration rights pursuant
to a registration rights agreement. The initial stockholders and holders of the
Private Placement Warrants will be entitled to make up to three demands,
excluding short form registration demands, that we register such securities for
sale under the Securities Act. In addition, these holders will have "piggy-back"
registration rights to include their securities in other registration statements
filed by us. We will bear the expenses incurred in connection with the filing of
any such registration statements.
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Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 7,500,000
additional SAILSM Securities, consisting of 7,500,000 shares of Class A common
stock and 1,875,000 redeemable warrants, to cover any over-allotment, at the
initial public offering price less the underwriting discounts and commissions.
The warrants that would be issued in connection with the over-allotment SAILSM
Securities are identical to the Public Warrants, subject to certain limited
exceptions, and have no net cash settlement provisions. On November 17, 2020,
the underwriters exercised the over-allotment option in part to purchase
2,500,000 additional SAILSM Securities.
The underwriters were entitled to an underwriting discount of $0.20 per SAILSM
Security, or $10.0 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per SAILSM Security, or $17.5
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.
In connection with the consummation of the sale of SAILSM Securities pursuant to
the over-allotment option exercised on November 17, 2020, the underwriters were
entitled to an aggregate of approximately $0.5 million in fees payable upon
closing and additional deferred underwriting commissions of approximately $0.9
million.
Deferred Legal Fees
We entered into an agreement to obtain legal advisory services, pursuant to
which our legal counsel agreed to defer their fees until the closing of the
Initial Business Combination. The deferred fees will become payable to the legal
counsel in the event that we complete a Business Combination. As of September
30, 2021, and December 31, 2020, we recorded an aggregate of approximately $5.6
million and $0, respectively, in connection with such arrangement as deferred
legal fees in the accompanying condensed balance sheets.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with United States generally accepted
accounting principles. The preparation of these unaudited condensed 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 unaudited condensed 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.
Investments Held in the Trust Account
Our portfolio of investments is comprised of U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 185 days or less, or investments in money market funds that invest
in U.S. government securities and generally have a readily determinable fair
value, or a combination thereof. When our investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities. When our investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading
securities and investments in money market funds are presented on the balance
sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities is included in gain
on investments held in the Trust Account in the accompanying unaudited condensed
statement of operations. The estimated fair values of investments held in the
Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
The shares of Class A common stock subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable shares of Class A common stock (including shares of
Class A common stock that feature 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, shares of Class A common stock are classified as stockholders'
equity. Our Class A common stock features certain redemption rights that are
considered to be outside of our control
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subject to occurrence of uncertain future events, Accordingly, at September 30,
2021 and December 31, 2021, 52,500,000 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 balance sheet.
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 redeemable Class A common stock resulted in charges against
additional paid-in capital and accumulated deficit.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge its exposures to cash flow, market
or foreign currency risks. Management evaluates all of our financial
instruments, including issued warrants to purchase its Class A common stock, to
determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480 and 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 instruments to
fair value at each reporting period until they are exercised. Their
re-measurement to fair value is recognized in our statement of operations. The
fair value of Public Warrants was initially calculated using a modified
Black-Scholes option pricing model, and subsequent to their being separately
listed and traded, the Public Warrants are measured at their market price. The
fair value of Private Placement Warrants was calculated using a modified
Black-Scholes Option Pricing Model. The determination of the fair value of the
warrant liability 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.
Net Income Per Share of Common Stock
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 the net income (loss) by the weighted average shares of
common stock outstanding for the respective period.
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 24,791,666 shares of
Class A common stock in the calculation of diluted income per share, because
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 share
for the three and nine months ended September 30, 2021. 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 August 2020, the FASB issued 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. The ASU 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. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU
did not impact our financial position, results of operations or cash flows.
We do not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on our
condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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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 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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