References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to INSU Acquisition Corp. III. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer collectively to Insurance Acquisition Sponsor III, LLC and
Dioptra Advisors III, 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" 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 Quarterly Report
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 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. 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 6, 2020 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. 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 in the Trust Account 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 $1,116,642,
which consists of interest earned on marketable securities held in Trust Account
of $1,102,234 and a change in fair value of warrant liabilities of $428,167,
partially offset by general and administrative expenses of $226,894 and
provision for income taxes of $186,865.
For the nine months ended September 30, 2022, we had net income of $5,029,994,
which consists of interest earned on marketable securities held in Trust Account
of $1,441,974 and a change in fair value of warrant liabilities of $4,775,917,
partially offset by general and administrative expenses of $958,181 and
provision for income taxes of $229,716.
For the three months ended September 30, 2021, we had net income of $1,281,369,
which consists of interest earned on marketable securities held in Trust Account
of $6,302 and a change in fair value of warrant liabilities of $1,625,501,
partially offset by general and administrative expenses of $350,434.
For the nine months ended September 30, 2021, we had net income of $1,442,609,
which consists of interest earned on marketable securities held in Trust Account
of $19,111 and a change in fair value warrant liabilities of $2,565,168,
partially offset by general and administrative expenses of $1,141,670.
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Liquidity and Capital Resources
On December 22, 2020, we consummated the Initial Public Offering of 25,000,000
Units, which included the partial exercise by the underwriters of their
over-allotment option in the amount of 3,200,000 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 575,000 Placement
Units at a price of $10.00 per Placement Unit in a private placement to our
Sponsor, generating gross proceeds of $5,750,000.
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. We incurred $15,448,021 in
transaction costs, including $4,360,000 of underwriting fees, $10,640,000 of
deferred underwriting fees and $448,021 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $1,045,279. Net income of $5,029,994 was affected by change in fair value of
warrant liabilities of $4,775,917 and interest earned on marketable securities
held in Trust Account of $1,441,974. Changes in operating assets and liabilities
provided $142,618 of cash from operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $695,266. Net income of $1,442,609 was affected by change in fair value of
warrant liabilities of $2,565,168 and interest earned on marketable securities
held in Trust Account of $19,111. Changes in operating assets and liabilities
provided $446,404 of cash from operating activities.
As of September 30, 2022, we had cash, investments and marketable securities
held in the Trust Account of $250,933,138. 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 $517,193 of interest income from the Trust Account to pay
franchise 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.
As of September 30, 2022, we had $155,863 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 fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or one of its affiliates has committed to loan us funds as may be
required up to a maximum of $1,500,000 and may, but are not obligated to, loan
us additional 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. As of September 30, 2022, $960,000 in such
loans were outstanding.
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.
19
Off-Balance Sheet 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 December 18, 2020 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination and our
liquidation.
In addition, we have an agreement to pay the underwriters a deferred fee of
$10,640,000. The deferred fee will become payable to the representatives of 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 Liabilities
We account for the Warrants in accordance with the guidance contained in
Accounting Standards Codification ("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 them 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 the condensed statements of operations. The Warrants
for periods where no observable trading price was available are valued using a
Modified Black-Scholes Option Pricing Model for the Placement Warrants and a
binomial / lattice model for the Public Warrants. 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 for the Public Warrants 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 ASC Topic 480, "Distinguishing Liabilities from
Equity." 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 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, common stock is classified as stockholders' equity.
Our 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, Class A common stock subject to possible redemption is
presented as temporary equity, outside of the stockholders' deficit section of
our balance sheets.
20
Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. We apply
the two-class method in calculating earnings per share. Accretion associated
with the redeemable shares of Class A common stock is excluded from earnings per
share as the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any 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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