HOLLEY INC. References in this report (the "Quarterly Report") to "we," "us," "our" or the "Company" refer toEmpower Ltd. References to our "management" or our "management team" refer to our officers and directors, and references to the "sponsor" refer toEmpower Sponsor 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 related thereto which are included 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 Form 10-Q including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy, the benefits of the Business Combination and the plans and objectives of management for future operations, are forward-looking statements. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and variations thereof 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 and are subject to risks and uncertainties. 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, including risks related to the impact of the COVID-19 global pandemic, including the actions of governments, businesses and individuals in response to the situation. 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 filed with theSEC onMay 19, 2021 and subsequent filings with theSEC . The Company's securities filings can be accessed on the EDGAR section of theSEC'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. Overview As ofJune 30, 2021 , we were a blank check company incorporated in theCayman Islands onAugust 19, 2020 formed for the purpose of effecting our initial business combination. Business Combination OnJuly 16, 2021 (the "Closing Date"),Holley Inc. , aDelaware corporation (formerly known asEmpower Ltd. ) (prior to the Closing Date, "Empower" and after the Closing Date, "Holley") consummated the previously announced business combination (the "Closing") pursuant to that certain Agreement and Plan of Merger datedMarch 11, 2021 (the "Merger Agreement"), by and amongEmpower Ltd. , aCayman Islands exempted company,Empower Merger Sub I Inc. , aDelaware corporation and a direct wholly owned subsidiary of Empower ("Merger Sub I"),Empower Merger Sub II, LLC , aDelaware limited liability company and a direct wholly owned subsidiary of Empower ("Merger Sub II"), andHolley Intermediate Holdings, Inc. , aDelaware corporation ("Holley Intermediate"). In connection with the Closing, the registrant changed its name fromEmpower Ltd. toHolley Inc. The Merger Agreement provided for, among other things, the following transactions: (i) Empower changed its jurisdiction of incorporation by deregistering as aCayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of theState of Delaware (the "Domestication"), and, in connection with the Domestication, (A) each outstanding Class A ordinary share, par value$0.0001 , of Empower ("Empower Class A Share") converted automatically into one share of common stock of Holley, par value$0.0001 per share (the "Common Stock") and (B) each outstanding Class B ordinary share of Empower converted automatically into one share of Common Stock; and (ii) following the Domestication, (A) Merger Sub I merged with and into Holley Intermediate, with Holley Intermediate surviving as a wholly owned subsidiary of Empower ("Merger I"), (B) immediately following Merger I, Holley Intermediate merged with and into Merger Sub II, with Merger Sub II surviving as a limited liability company and a wholly owned subsidiary of Empower ("Merger II" and, together with Merger I, the "Mergers"). The transactions set forth in the Merger Agreement, including the Mergers, constituted a "Business Combination" as contemplated by Empower's amended and restated memorandum and articles of association. The material provisions of the Merger Agreement are described in Empower's definitive proxy statement/prospectus filed with theSEC onJune 24, 2021 (as amended, the "Proxy Statement/Prospectus") in the section entitled " Proposal No.1-The Business Combination Proposal-The Merger Agreement " beginning on page 104. Results of Operations ThroughJune 30, 2021 , we neither engaged in any operations nor generated any operating revenues. Our only activities from inception throughJune 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, searching for a business combination and activities in connection with the acquisition of Holley. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance). For the three months endedJune 30, 2021 , we had a net loss of$12,859,424 , which consisted of formation and operating costs of$1,655,583 , a change in fair value of warrant liability of 9,706,666, a loss on change inFPA liability of$1,500,000 and an unrealized loss on marketable securities held in the trust account of$4,366 which are offset by interest earned on marketable securities held in the trust account of$7,191 . For the six months endedJune 30, 2021 , we had a net loss of$15,876,912 , which consisted of formation and operating costs of$4,592,939 , a change in fair value of warrant liability of$10,143,333 , a loss on change inFPA liability of$1,200,000 , which are offset by interest earned on marketable securities held in the trust account of$59,360 . 17 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources OnOctober 9, 2020 , we consummated the Initial Public Offering of 25,000,000 units, at a price of$10.00 per unit, generating gross proceeds of$250,000,000 . After deducting underwriting fees of$5,000,000 , we received net proceeds of$245,000,000 . Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,666,667 private placement warrants to the sponsor at a price of$1.50 per private placement warrant generating gross proceeds of$7,000,000 . Deferred underwriting costs of$8,750,000 were also incurred in connection with the Initial Public Offering, but are not payable until consummation of our initial business combination. For the six months endedJune 30, 2021 , cash used in operating activities was$376,620 . Net loss of$15,876,912 was impacted by interest earned on marketable securities held in the trust account of$59,359 , a change in the fair value of warrant liability of$10,143,333 and a change in the fair value of the forward purchase agreement liability of$1,200,000 . Changes in operating assets and liabilities provided$4,216,318 of cash from operating activities. AtJune 30, 2021 , we had cash and marketable securities held in the trust account of$250,112,265 . As ofJune 30, 2021 , we had cash of$704,009 held outside of the trust account. We had sufficient cash on hand to fund operations through the date of the Business Combination onJuly 16, 2021 . Subsequent to the Business Combination management believes that we will be able to fund current and foreseeable liquidity needs with cash on hand, cash generated from operations, and borrowings available under its revolving credit facility. Off-Balance Sheet Financing Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as ofJune 30, 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. Contractual Obligations As ofJune 30, 2021 , we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as described below. The underwriter is entitled to a deferred fee of$0.35 per unit, or$8,750,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete our initial business combination, subject to the terms of the underwriting agreement. Concurrent with the execution of the Merger Agreement, the Company entered into Subscription Agreements withPIPE Investors pursuant to which, among other things, thePIPE Investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to thePIPE Investors an aggregate of 24 million shares of Domesticated Company Common Stock, at a per share price of$10.00 for an aggregate purchase price of$240,000,000 , concurrent with the consummation of the Business Combination, on the terms and subject to the conditions set forth therein. The Subscription Agreement contains customary representations and warranties of the Company, on the one hand, and each PIPE Investor, on the other hand, and customary conditions to closing, including the consummation of the transactions contemplated by the Merger Agreement. Each Subscription Agreement provides that the Company will grant thePIPE Investors certain customary registration rights. 18 -------------------------------------------------------------------------------- Table of Contents Concurrent with the execution of the Merger Agreement, the Company amended and restated theFPA , whereby, among other things, Empower Funding will purchase 5,000,000 units of the Company at a per unit price of$10.00 concurrent with the consummation of the Business Combination. The allocation of the forward purchase securities among the ultimate MidOcean funds that will be funding the forward purchase will be determined by MidOcean, in its sole discretion, at the time of a Business Combination. The forward purchase shares and forward purchase warrants underlying the units of the Company to be sold pursuant to the A&R FPA will be identical to the Class A ordinary shares included in the units sold in the Initial Public Offering, except that they will be subject to certain registration rights. Critical Accounting Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe 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 condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies. Warrant and FPA Liabilities We account for the Warrants and theFPA in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants and the forward purchase agreement do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants and theFPA as liabilities at their fair value and adjust the Warrants and theFPA 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 Private Warrants are valued using a Modified Black Scholes Option Pricing Model. For periods where no observable traded price was available, the Public Warrants are valued using a Monte Carlo simulation. 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 fair value of theFPA has been estimated using an adjusted net assets method. Class A Ordinary Shares Subject to Redemption We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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, ordinary shares are classified as shareholders' equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders' equity section of our balance sheets. Net Loss Per Ordinary Share We apply the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the trust account earnings. Our net loss is adjusted for the portion of income that is attributable to ordinary shares subject to possible redemption, as these shares only participate in the earnings of the trust account and not our income or losses. Recent Accounting Standards 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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