References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to HumanCo Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to HumanCo 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 of 1933 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
completion of the Proposed Business Combination (as defined below), 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, including that the conditions of
the Proposed Business Combination are not satisfied. 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 filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
October 5, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Units, Private Placement Warrants, 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 our Initial Public Offering) nor generated any revenues to
date. Our only activities from October 5, 2020 (inception) through June 30, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on cash and 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.
For the three months ended June 30, 2022, we had a net income of $4,862,532,
which consists of interest earned on cash and marketable securities held in the
Trust Account of $141,590 and a change in the fair value of the warrant
liabilities of $4,977,000, offset by general and administrative expenses of
$251,730 and provision for income tax of $4,328.
For the six months ended June 30, 2022, we had a net income of $4,825,255, which
consists of interest earned on cash and marketable securities held in the Trust
Account of $149,297 and a change in the fair value of the warrant liabilities of
$15,168,000, offset by Class A stock incentive to new investor of $9,880,977,
general and administrative expenses of $606,737 and provision for income tax of
$4,328.
For the three months ended June 30, 2021, we had a net income of $2,934,967,
which consists of interest earned on cash and marketable securities held in the
Trust Account of $4,967, and a change in the fair value of the warrant
liabilities of $2,934,967, offset by general and administrative expenses of
$334,383.
For the six months ended June 30, 2021, we had a net income of $2,867,699, which
consists of interest earned on cash and marketable securities held in the Trust
Account of $38,029, and a change in the fair value of the warrant liabilities of
$3,404,000, offset by general and administrative expenses of $574,330.
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Liquidity and Capital Resources
On December 11, 2020, we consummated the Initial Public Offering of 28,750,000
Units, at $10.00 per Unit, generating gross proceeds of $287,500,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 8,075,000 Sponsor Warrants at a price of $1.00 per Sponsor Warrant
in a private placement to our sponsor, generating gross proceeds of $8,075,000.
In addition, simultaneously with the consummation of the Initial Public
Offering, we consummated a private placement of 2,500,000 Private Placement
Units at a price of $10.00 per Private Placement Unit, generating gross proceeds
of $25,000,000.
For the six months ended June 30, 2022, cash used in operating activities was
$671,108. Net income of $4,825,255 was affected by a change in the fair value of
the warrant liabilities of $15,168,000, Class A stock incentive to new investor
of $9,880,977 and interest earned on cash and marketable securities held in the
Trust Account of $149,297. Changes in operating assets and liabilities used
$60,043 of cash for operating activities.
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For the six months ended June 30, 2021, cash used in operating activities was
$224,434. Net income of $2,867,699 was affected by a change in the fair value of
the warrant liabilities of $3,404,000 and interest earned on cash and marketable
securities held in the Trust Account of $38,029. Changes in operating assets and
liabilities provided $349,896 of cash for operating activities.
As of June 30, 2022, we had $312,627,386 in cash held in the Trust Account
(including approximately $127,386 of interest income available for withdrawal
for Delaware and Federal income tax payments) consisting of U.S. Treasury Bills
and Money Market. 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 income taxes payable), to complete our Business Combination. 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.
As of June 30, 2022, we had cash of $371,858. 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.
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In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our sponsor or an affiliate of our
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. We have issued our sponsor a
promissory note for up to $2,000,000 in working capital loans, of which we have
drawn down $666,697 as of June 30, 2022. Up to $2,000,000 of such working
capital loans are convertible into warrants of the post-Business Combination
entity at a price of $1.00 per warrant. The warrants would be identical to the
Sponsor 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.
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, if the Company is unable to raise additional funds to
alleviate liquidity needs as well as complete a Business Combination by the
close of business on December 11, 2022, or an extension to this date granted by
shareholders, then the Company will cease all operations except for the purpose
of liquidating. This date for mandatory liquidation and subsequent dissolution
raises substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Contractual Obligations
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$10,062,500 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 a 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:
Warrant Liability
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
statements of operations. The Public Warrants for periods where no observable
traded price was available were valued using a Monte Carlo simulation, and the
Private Warrants were valued using a Black-Scholes 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.
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 Public 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 Public Class A common stock subject to possible
redemption are presented as temporary equity, outside of the stockholders'
equity (deficit) section of our balance sheets.
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". The Company has 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 by the weighted average
shares of common stock outstanding for the respective period.
Recent Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which
requires entities to measure all expected credit losses for financial assets
held at the reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. ASU 2016-13 also requires additional
disclosures regarding significant estimates and judgments used in estimating
credit losses, as well as the credit quality and underwriting standards of an
entity's portfolio. The Company expects to adopt the provisions of this guidance
on January 1, 2023. The adoption is not expected to have a material impact on
the Company's condensed financial statements.
Besides the above, the Company's management does not believe that any other
recently issued, but not yet effective, accounting standards, if currently
adopted, would have a material effect on the accompanying condensed financial
statements.
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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 condensed financial statements.
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