HENNESSY CAPITAL INVESTMENT CORP. V The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section
and elsewhere in this Form 10-Q regarding the Company's financial position,
business strategy and the plans and objectives of management for future
operations, are forward-looking statements. When used in this Form 10-Q, words
such as "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors detailed in our filings with the
Overview
We are a blank check company incorporated as a
The issuance of additional shares of our stock in an Initial Business Combination:
? may significantly dilute the equity interest of our stockholders;
? may subordinate the rights of holders of our common stock if preferred stock is
issued with rights senior to those afforded our common stock;
? could cause a change in control if a substantial number of shares of our common
stock is issued, which may affect, among other things, our ability to use our
net operating loss carry forwards, if any, and could result in the resignation
or removal of our present officers and directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the stock ownership or voting rights of a person seeking to obtain
control of us; and
? may adversely affect prevailing market prices for our Class A common stock
and/or warrants.
Similarly, if we issue debt securities or incur other indebtedness to finance our Initial Business Combination, it could result in:
? default and foreclosure on our assets if our operating revenues after an
Initial Business Combination are insufficient to repay our debt obligations;
? acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand;
? our inability to obtain necessary additional financing if the debt security or
other indebtedness contains covenants restricting our ability to obtain such
financing while the debt security or other indebtedness is outstanding;
? our inability to pay dividends on our common stock;
? using a substantial portion of our cash flow to pay principal and interest on
our debt, which will reduce the funds available for dividends on our common
stock if declared, or limit our ability to pay expenses, make capital
expenditures and acquisitions and fund other general corporate purposes;
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? limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation;
? limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and
? other disadvantages compared to our competitors
At
Recent Developments - COVID-19
In
Recent Developments - Entry into Merger Agreement and Plan of Reorganization; PIPE Financing Subscription Agreements
On
Pursuant to the Merger Agreement, a business combination between the Company and
Plus (the "Business Combination") will be effected through (a) the merger of
Plus is a global provider of self-driving truck technology aimed at making
trucks safer, more efficient, more comfortable, and better for the environment
using its autonomous driving solution PlusDrive advanced sensing technologies,
including radar, lidar, and cameras to provide a 360-degree sensing system. Plus
plans to begin mass production of PlusDrive, starting in 2021 with FAW, a
heavy-truck manufacturer. Plus is headquartered in
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Under the terms of the Merger Agreement, the aggregate consideration to be paid
to existing Plus shareholders as a result of the F-Reorg Merger and Plus Merger
is expected to be up to approximately 272 million shares of newly issued
ordinary shares of
As a result of the HCIC Merger, (a) each outstanding share of the Company's common stock will be cancelled in exchange for the right to receive for one PubCo Class A Ordinary Share, and (b) each outstanding warrant of the Company will become exercisable for one PubCo Class A Ordinary Share on the same terms and conditions.
In connection with the execution of the Merger Agreement, on
The consummation of the Business Combination (the "Closing") is subject to
certain conditions, including but not limited to the approval of the Company's
stockholders and Plus' shareholders of the Merger Agreement. The Merger
Agreement may also be terminated by either party under certain circumstances,
including upon notice after
Additional information regarding the proposed Business Combination and the
business and operations of Plus is contained in the Current Report on Form 8-K
filed by the Company on
Results of Operations
For the period from
Our normal operating costs since
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The Public Offering and the Private Placement closed on
As discussed further in Note 7 to the condensed financial statements, the
Company accounts for its outstanding public and private warrants as components
as derivative liabilities in the accompanying unaudited condensed financial
statements. As a result, the Company is required to measure the fair value of
the public and private warrants at the end of each reporting period and
recognize changes in the fair value from the prior period in the Company's
operating results for each current period. The condensed statement of operations
for the three and six months ended
The Company's prior accounting for the warrants as components of equity instead
of as derivative liabilities at
Liquidity and Capital Resources
On
The net proceeds from the Public Offering and Private Placement were
approximately
Until the consummation of the Public Offering, the Company's only sources of
liquidity were an initial purchase of shares of our Class B common stock for
At
The preponderance of the current liabilities (approximately
The Company has only until
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In the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per unit in the Public Offering.
Off-balance sheet financing arrangements
As of
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 entered into any agreements for non-financial assets.
Contractual obligations
At
Also, commencing on the date the securities are first listed on the Nasdaq
Capital Market, the Company has agreed to compensate each of its President and
Chief Operating Officer as well as its Chief Financial Officer
Upon completion of the Initial Business Combination or the Company's liquidation, the Company will cease paying or accruing these monthly fees.
In connection with identifying an Initial Business Combination candidate and negotiating an Initial Business Combination, the Company may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an Initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an Initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP 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. The Company has identified the following as its critical accounting policies:
Emerging Growth Company:
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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Net Income (Loss) Per Common Share:
Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period as calculated using the treasury stock method. The Company has not considered the effect of the warrants sold in the Public Offering and the Private Placement to purchase an aggregate of 15,558,333 shares of Class A common stock in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per common share is the same as basic loss per common share for the period.
The Company's condensed statement of operations include a presentation of income
(loss) per share for common stock subject to redemption in a manner similar to
the two-class method of income (loss) per share. Net income (loss) per share,
basic and diluted for Class A common stock is calculated by dividing the
interest income earned on the funds in the Trust Account, net of income tax
expense and franchise tax expense, by the weighted average number of shares of
Class A common stock outstanding since their original issuance. Net income
(loss) per common share, basic and diluted, for shares of Class B common stock
is calculated by dividing the net income (loss), less income attributable to
Class A common stock, by the weighted average number of shares of Class B common
stock outstanding for the period. Net income (loss) available to each class of
common stockholders is as follows for the three and six months ended
Three Months Six Months
Ended Ended
June 30 , June 30,
2021 2021
Net income available to Class A common stockholders: Interest income
$ 12,000 $ 28,000 Less: Income and franchise taxes (limited to income) (12,000 ) (28,000 ) Net income attributable to Class A common stockholders $ - $ -
Weighted average Class A common shares outstanding - basic and diluted
34,500,000 34,500,000
Net income per Class A common share - basic and diluted
$ (13,701,000 ) $ (16,136,000 ) Less: amount attributable to Class A common stockholders - -
Net (loss) attributable to Class B common stockholders
8,625,000 8,506,000
Net loss per Class B common share - basic and diluted
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash accounts in a financial institution which, at times,
may exceed the
Financial Instruments:
The fair value of the Company's assets and liabilities, which qualify as
financial instruments under
Use of Estimates:
The preparation of condensed financial statements in conformity with
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Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and
Income Taxes:
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, "Income Taxes." Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company's currently taxable income consists of interest income on the Trust
Account net of taxes. The Company's general and administrative costs are
generally considered start-up costs and are not currently deductible. During the
three and six months ended
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing
authorities. There were no unrecognized tax benefits as of
Redeemable Common Stock:
As discussed in Note 4, all of the 34,500,000 public shares sold as part of
Units in the Public Offering contain a redemption feature which allows for the
redemption of public shares if the Company holds a stockholder vote or there is
a tender offer for shares in connection with a Business Combination. In
accordance with FASB ASC 480, redemption provisions not solely within the
control of the Company require the security to be classified outside of
permanent equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity's equity instruments, are excluded from the
provisions of FASB ASC 480. Although the Company did not specify a maximum
redemption threshold, its charter provides that in no event will it redeem its
public shares in an amount that would cause its net tangible assets
(stockholders' equity) to be less than
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of the securities at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock
are affected by adjustments to additional paid-in capital. Accordingly, at
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Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the 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 the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the warrants was estimated using a Monte Carlo simulation approach.
Recent Accounting Pronouncements:
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's financial statements.
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