References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us," "our" or the "Company" are to
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 Securities
Exchange Act of 1934, as amended (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 Quarterly Report including,
without limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the completion of the
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 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
Annual Report. The Company's securities filings can be accessed on the EDGAR
section of the
Overview
We are a blank check company formed under the laws of the
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.
Business Combination Merger Agreement
On
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On
Under the Merger Agreement, the Company has agreed to acquire all of the
outstanding equity interests of Aspiration in exchange for a number of shares of
Class A common stock (valued for this purpose at
Each Aspiration stockholder (other than (i) holders of Aspiration Series C-4
preferred stock, (ii) Aspiration Series X Preferred Stock, (iii) Aspiration
common stock issued upon conversion of certain convertible senior notes and (iv)
Aspiration common stock that is subject to forfeiture under earnout arrangements
entered into strategic transactions irrespective of the Business Combination)
and each holder of a vested Aspiration option (as defined below) shall also
receive a contingent right to receive a pro rata portion of up to 100,000,000
shares of Class A common stock of New Aspiration (the "Contingent
Consideration"). The Contingent Consideration may be earned in five equal
tranches of 20,000,000 shares of New Aspiration Class A common stock (a) when
the closing price of New Aspiration Class A common stock equals or exceeds (i)
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Pursuant to the Merger Agreement, at the Effective Time, the consideration to be
issued to the holders of Aspiration capital stock (other than holders of
Aspiration Series X Preferred Stock) will be in the form of Class A common stock
of New Aspiration (valued at
Pursuant to the Merger Agreement, (a) immediately prior to the Effective Time, each warrant to purchase shares of Aspiration common stock that is issued and outstanding prior to the Effective Time will be either (i) exercised or terminated in accordance with its terms or (ii) assumed by New Aspiration and converted into a warrant of New Aspiration to purchase shares of New Aspiration Class A common stock and prior to the Effective Time, each convertible note of Aspiration will be converted into Aspiration capital stock, paid off in accordance with the terms thereof or remain outstanding as indebtedness of New Aspiration without the right to convert into capital stock of New Aspiration. If any indebtedness of Aspiration (including with respect to convertible notes of Aspiration that remain outstanding) is not paid off at the Closing, it will be assumed by New Aspiration.
The parties to the Merger Agreement have made customary representations and warranties and have agreed to certain customary covenants for a transaction of this type. The Closing is subject to certain conditions, including but not limited to the adoption by our stockholders and Aspiration's stockholders of the Merger Agreement. The Merger Agreement may also be terminated by either party under certain circumstances, including if the Business Combination has not occurred by the Outside Date (or such later date as the parties may mutually agree).
Subscription Agreements
In connection with the Business Combination, we entered into subscription
agreements with the
Pursuant to the terms of the Base Subscription Agreements and the Conversion
Stockholder Side Letters (as defined below), if during the last 10 trading days
of the 60-day period following the effectiveness of the re-sale registration
statement that New Aspiration has agreed to file with the
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Conversion Stockholder Side Letters
On
Pursuant to the Conversion Stockholder Side Letters, in the event that the
former Conversion Stockholders are issued Conversion Stockholder Additional
Shares, each former Conversion Stockholder will have the same registration
rights with respect to the Conversion Stockholder Additional Shares as the
Furthermore, we and the
A Base PIPE Investor or former Conversion Stockholder will automatically forfeit any right to receive any Additional Shares if (i) at any time from the Closing through the Adjustment Period, such Base PIPE Investor or former Conversion Stockholder is not the record and beneficial owner of the PIPE Committed Shares or Conversion Stockholder Committed Shares, as applicable, or such Base PIPE Investor or former Conversion Stockholder otherwise transfers its PIPE Committed Shares or Conversion Stockholder Committed Shares, as applicable, from New Aspiration's transfer agent's custody to a brokerage or other account not controlled by New Aspiration's transfer agent on behalf of such Base PIPE Investor or former Conversion Stockholder or (ii) at any time prior to the last day of the Adjustment Period, such Base PIPE Investor or former Conversion Stockholder or any person acting on its behalf or pursuant to any understanding with such Base PIPE Investor or former Conversion Stockholder, as applicable, directly or indirectly, engages in a Hedging Transaction (as defined in the Merger Agreement).
21 Aspiration Support Agreement
In connection with and following the execution of the Merger Agreement, we will enter into support agreements with certain Aspiration stockholders (the "Aspiration Support Agreements"), pursuant to which such Aspiration stockholders will agree, among other things, to vote in favor of the adoption and approval of the Business Combination and any of the documents and transactions contemplated by the Merger Agreement. Additionally, such Aspiration stockholders agreed to not transfer any securities of Aspiration held by such stockholder from the date of execution of the Aspiration Support Agreement until the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its terms, subject to certain exceptions and to not solicit any Company Business Combination (as defined in the Merger Agreement), in each case, subject to the terms and conditions of the Aspiration Support Agreements.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Sponsor entered into a support agreement (the "Sponsor Support Agreement") with us and Aspiration, pursuant to which the Sponsor agreed, among other things, to vote to adopt and approve the Merger Agreement and all other documents and transactions contemplated thereby, to vote against any Business Combination proposal other than the Business Combination or other proposals that would impede or frustrate the Business Combination, to comply with the Merger Agreement's prohibition on soliciting any alternative Business Combination and to not transfer the equity interests in us that it owns, in each case, subject to the terms and conditions of the Sponsor Support Agreement.
Amended and Restated Registration Rights Agreement
At the Closing, New Aspiration, the Sponsor and certain stockholders of New Aspiration will enter into an Amended and Restated Registration Rights Agreement, pursuant to which, among other things, the parties thereto will be granted certain customary registration rights with respect to shares of common stock of New Aspiration.
Stockholders' Agreement
At the Closing, New Aspiration,
Transfer Restrictions
The Sponsor and its directors and executive officers are subject to certain
restrictions on transfer with respect to their shares of New Aspiration common
stock pursuant to that certain Letter Agreement, dated as of
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Series X Preferred Stock Purchase Agreement
Concurrently with the execution of the Merger Agreement, we and Aspiration
entered into a Series X Preferred Stock Purchase Agreement (the "Purchase
Agreement") with
Certificate of Designations
The shares of New Aspiration Series X Preferred Stock to be issued in exchange
for shares of Aspiration Series X Preferred Stock pursuant to the Merger
Agreement, upon their issuance, will have the powers, designations, preferences,
and other rights as set forth in a Certificate of Designations of the New
Aspiration Series X Preferred Stock that we will file with the Secretary of
State of the
Voting and Consent Rights
The New Aspiration Series X Preferred Stock will not have any voting rights or rights to convert such preferred shares into shares of New Aspiration Class A common stock. Holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock will be entitled to elect (i) one director to the board of directors of New Aspiration after the ninth anniversary of the Closing Date and upon a Medium Event (as defined below) and (ii) two directors to the board of directors of New Aspiration upon a Major Event (as defined below). New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock for, among other things: (i) effecting any change of control, liquidation event or merger or consolidation of New Aspiration unless the entirety of the applicable Series X Redemption Price (as defined below) is paid with respect to all then issued and outstanding shares of Series X Preferred Stock, (ii) amending Aspiration's organizational documents to the extent such amendment has an adverse effect on the holders of Series X Preferred Stock, (iii) increasing or decreasing the number of authorized shares of New Aspiration Series X Preferred Stock, (iv) creating any class or series of New Aspiration capital stock that is pari passu or senior to the New Aspiration Series X Preferred Stock, (v) incurring indebtedness, except for indebtedness incurred under Aspiration's existing secured debt facilities, debt incurred that allows New Aspiration to satisfy a total net leverage ratio of 3.0x and debt incurred for the redemption of the New Aspiration Series X Preferred Stock (subject to limited exceptions), (vi) declaring, paying or making certain dividends and undertaking certain stock repurchases (subject to limited exceptions) and (vii) certain other specified actions.
Dividends
The dividend rate with respect to the New Aspiration Series X Preferred Stock will be either 8.0% per year in cash or, if not paid in cash, will be paid "in-kind" by accruing at a rate of 8.0%, 11.0% or 12.0% per year for any dividend period ending on or prior to the second anniversary of the Closing Date, between the second and third anniversaries of the Closing Date or between the third and fourth anniversaries of the Closing Date, respectively. New Aspiration may elect either form of dividend payment until the fourth anniversary of the Closing Date, and dividends must be paid in cash thereafter.
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Each of the dividend rates set forth above will increase by (i) 5.0% per annum
(a) if New Aspiration fails to pay any dividend that is required to be paid in
cash if surplus cash is available, (b) if New Aspiration defaults on payment
with respect to a Liquidation (as defined below) or redemption, (c) if New
Aspiration is in material breach of certain covenants under the New Aspiration
Certificate of Designations, subject to certain cure periods, (d) if New
Aspiration experiences a bankruptcy or insolvency event, whether voluntary or
involuntary, (e) if New Aspiration fails to deliver New Aspiration Class A
common stock to a holder of New Aspiration Series X Preferred Stock upon the
valid exercise of the Warrant (the foregoing clauses (a) through (e), a "Major
Event"), (f) if New Aspiration fails to pay any dividend that is required to be
paid in cash if surplus cash is unavailable, (g) if New Aspiration is in
material breach of certain other covenants under the New Aspiration Certificate
of Designations, subject to certain cure periods, (h) if New Aspiration defaults
on outstanding indebtedness or if outstanding indebtedness is accelerated, in
each case, in excess of
Springing Rights
Upon the occurrence of a Major Event that has continued for 90 days (and upon the occurrence of certain Major Events, and in certain circumstances, 180 days) or upon the occurrence of a Medium Event that has continued for 180 days, subject to certain time extensions, for so long as such Event of Noncompliance is continuing (the period following termination of the foregoing cure periods, the "Liquidity Period"), the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock shall have the right to cause New Aspiration to pursue an issuance of securities, a Liquidation (as defined below), merger, sale of assets or similar transaction or series of transactions, a leveraged recapitalization or any other transaction or series of transactions (each, a "Liquidity Transaction") generating sufficient proceeds available for distribution to holders of New Aspiration Series X Preferred Stock to pay the entirety of the Series X Redemption Price (as defined below). During the Liquidity Period, New Aspiration shall direct an independent financial advisor, approved by the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock then outstanding, to establish procedures to effect a Liquidity Transaction in an orderly manner with the objective of achieving the highest available value for New Aspiration within a reasonable period of time and the payment of the entire Series X Redemption Price payable in respect of all outstanding shares of New Aspiration Series X Preferred Stock. However, if a Liquidity Period has commenced and the Event of Noncompliance is cured, New Aspiration may discontinue and will not be required to pursue a Liquidity Transaction.
Immediately following the commencement of a Liquidity Transaction, holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock may take control of and direct the process of a Liquidity Transaction and cause New Aspiration to consummate, subject to any requisite stockholder approvals, any Liquidity Transaction in order to redeem the New Aspiration Series X Preferred Stock at the Series X Redemption Price.
Furthermore, during a Liquidity Period, unless New Aspiration is able to redeem outstanding New Aspiration Series X Preferred Stock at the then applicable Series X Redemption Price as a result, New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock to acquire any business, incur any indebtedness, repurchase capital stock or make distributions (subject to certain exceptions) or fail to redeem outstanding New Aspiration Series X Preferred Stock with surplus cash (subject to applicable law and the terms of any indebtedness of New Aspiration).
Ranking and Liquidation Preference
The New Aspiration Series X Preferred Stock will rank senior to New Aspiration's
common stock with respect to dividend rights and rights upon the voluntary or
involuntary liquidation, dissolution or winding up of the affairs of New
Aspiration (a "Liquidation"). Upon a Liquidation, each share of New Aspiration
Series X Preferred Stock would be entitled to the applicable Series X Redemption
Price. The liquidation preference of the New Aspiration Series X Preferred Stock
will be equal to
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Redemption Rights and Series X Redemption Price
New Aspiration will have the right to redeem all or any portion of the New Aspiration Series X Preferred Stock at any time by paying the applicable Series X Redemption Price; provided, however, that no optional redemption will be permitted that would result in less than 33% of the shares of New Aspiration Series X Preferred Stock that are issued on the Closing Date to remain outstanding following such redemption unless all remaining shares of New Aspiration Series X Preferred Stock are redeemed.
Each holder of New Aspiration Series X Preferred Stock will have the option to require New Aspiration to redeem any portion of the New Aspiration Series X Preferred Stock at the Series X Redemption Price: (i) at any time after the ninth anniversary of the Closing Date or (ii) upon the occurrence of a Major Event (following the expiration of the applicable cure period) at the election of the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock. New Aspiration will be required to redeem all of the outstanding shares of New Aspiration Series X Preferred Stock at the Series X Redemption Price automatically upon the occurrence of a change of control, a Liquidation or an insolvency event.
The following table sets forth the "Series X Redemption Price":
Timing of Redemption Series X Redemption Price
Until 30 months after the Closing Date Make-Whole Amount (as defined below) (the "First Optional Call Date") From the First Optional Call Date until 106% of the sum of the Series X the first anniversary of the First Liquidation Preference and accrued but Optional Call Date
unpaid dividends
From the first anniversary of the First 103% of the sum of the Series X Optional Call Date until 66 months Liquidation Preference and accrued but following the First Optional Call Date unpaid dividends From and after the date 66 months after 100% of the sum of the Series X the First Optional Call Date
Liquidation Preference and accrued but unpaid dividends
The "Make-Whole Amount" with respect to any redemption of any share of New Aspiration Series X Preferred Stock prior to the First Optional Call Date is defined in the New Aspiration Certificate of Designations as an amount equal to the sum of (A) the remaining dividends that would accrue on such shares being redeemed from the day immediately following the redemption date to the First Optional Call Date at 8.0% as may be increased by the de-SPAC Incremental Rate or the Noncompliance Incremental Rate, if applicable, plus (B) the Series X Liquidation Preference of such shares being redeemed plus (C) the then current amount of accrued in-kind dividends on such shares being redeemed, assuming that, for purposes of calculating the foregoing, the shares of New Aspiration Series X Preferred Stock being redeemed were to remain outstanding through the First Optional Call Date.
Series X Minimum Cash Balance
Pursuant to the New Aspiration Certificate of Designations, New Aspiration will
also be required to maintain a minimum cash balance of
Investor Rights Agreement
We entered into an Investor Rights Agreement with Oaktree to be effective upon the Closing Date (the "New Aspiration Investor Rights Agreement") on substantially similar terms and conditions (while taking into account the consummation of the Business Combination), as those contained in the Investor Rights Agreement (as defined below) set forth below, such that New Aspiration, upon the Closing, shall be subject to the New Aspiration Investor Right Agreement.
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As a condition to the closing of the Purchase Agreement, Aspiration and Oaktree entered into an Investor Rights Agreement (the "Investor Rights Agreement") pursuant to which, among other things, Aspiration granted Oaktree certain customary registration rights with respect to the shares of Aspiration common stock underlying the Warrant and certain other securities that may be issued to Oaktree in respect of the Warrant.
In addition, pursuant to the Investor Rights Agreement, for so long as shares of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remain outstanding, Oaktree will have (i) a participation right, subject to certain exceptions, pursuant to which Oaktree may maintain its ownership percentage of Aspiration common stock in connection with future offerings or sales of Aspiration equity securities and (ii) a right of first offer with respect to the provision of any future debt or preferred equity financing to Aspiration or its subsidiaries. The Investor Rights Agreement also provides that, so long as 33% of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remains outstanding, Oaktree will be entitled to appoint one non-voting observer to the board of directors of Aspiration. The Investor Rights Agreement further contains a number of other customary covenants and agreements, including certain standstill provisions, preemptive rights, rights of first refusal with respect to future debt financing transactions and information rights.
The Investor Rights Agreement provides that Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written consent of Aspiration for one year following the closing of the issuance of Aspiration Series X Preferred Stock. From and after such date, Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written consent of Aspiration, which consent may not be unreasonably withheld by Aspiration (other than in the event of a transfer to certain restricted transferees).
Warrant
Pursuant to the Purchase Agreement, at the Closing Date, New Aspiration will issue to Oaktree a warrant (the "Warrant") to purchase a number of shares of New Aspiration common stock equal to 6.0% of the total number of shares of New Aspiration capital stock outstanding on a fully diluted basis (excluding the shares of New Aspiration Series X Preferred Stock and the Warrant) as of immediately following the consummation of the Business Combination.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through
The three months ended
For the three months ended
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The six months ended
For the six months ended
Liquidity and Capital Resources
On
For the six months ended
As of
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 the Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the 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
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, the 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 the Trust Account would be used for
such repayment. Up to
We will need to raise additional capital through loans or additional investments from our initial stockholders, officers or directors. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern through one year and one day from the issuance of this report.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities that would be considered
off-balance sheet arrangements as of
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 the Sponsor
a monthly fee of
We have entered into an agreement, pursuant to which we will pay the Vice
President a total of
We engaged
We have issued to
The representative shares have been deemed compensation by
We have granted the holders of these shares and the private placement units
registration rights.
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Critical Accounting Policies
The preparation of condensed 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. We have identified the following critical accounting policies:
Warrant Classification
We account 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
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 480. Shares of Class A common stock subject
to mandatory redemption are classified as a liability instrument and measured at
fair value. Conditionally redeemable common stock (including common stock that
features 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) 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 the occurrence of uncertain future events. Accordingly, at
Net Loss Per Share of Common Stock
The Company's statement of operations includes a presentation of loss per share of common stock in a manner similar to the two-class method of loss per share.
Net loss per share of common stock, basic and diluted, for our Class A common stock subject to possible redemption is calculated by dividing (i) its allocable share of net loss by (ii) the weighted average number of shares of our Class A common stock subject to possible redemption outstanding during the period.
Net loss per share of common stock, basic and diluted, for our non-redeemable Class A common stock is calculated by dividing (i) its allocable share of net loss by (ii) the weighted average number of shares of our non-redeemable Class A common stock outstanding during the period.
The Company has not considered the effect of the Public Warrants and the Private Placement Warrants to purchase shares of our Class A common stock in the calculation of diluted net loss per share, since the exercise of such warrants into shares of our Class A common stock is contingent upon the occurrence of future events and their inclusion would be anti-dilutive. As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented.
Non-redeemable Class A common stock includes the Founder Shares and other shares of Class A common stock that do not have redemption features.
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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