You should read the following discussion and analysis of our financial condition
and results of operations together with our historical condensed financial
statements and the related notes thereto appearing elsewhere in this Quarterly
Report. The objective of the following discussion and analysis is to provide
material information relevant to your assessment of the financial condition and
results of operations of our company, including an evaluation of the amounts and
certainty of cash flows from operations and from outside sources, and to better
allow you to view our company from management's perspective. Some of the
information contained in this discussion and analysis or set forth elsewhere in
this Quarterly Report, including information with respect to our plans and
strategy for our business and related financing, includes forwardlooking
statements that involve risks and uncertainties. As a result of many factors,
including those factors set forth in the "Risk Factors" section of this
Quarterly Report and our Annual Report on Form 10-K for the year ended
Overview
References in this report to "we," "us," "our," "company" or "our company" are
to
We are a blank check company, incorporated as a
On
As of
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from
1
--------------------------------------------------------------------------------
Table of Contents
For the three months ended
For the nine months ended
For the three months ended
Liquidity and Capital Resources
Until the consummation of our Initial Public Offering, our only source of
liquidity was an initial purchase of Class B Common Stock by our sponsor and
loans from our sponsor, as described in Note 1 to our condensed financial
statements. As of
For the nine months ended
As of
2
--------------------------------------------------------------------------------
Table of Contents
In addition to expenses incurred as a result of being a public company mentioned above, we expect to use these funds primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination, and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial business combination, our sponsor, any
affiliate of our sponsor, or our officers or directors may, but none of them is
obligated to, loan us funds as may be required. If we complete our initial
business combination, we would repay such loaned amounts out of the proceeds of
the Trust Account released to us. In the event that our initial 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
In addition, we could use a portion of the funds held outside the Trust Account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a "no-shop" provision (a provision designed to keep target businesses from "shopping" around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a "no-shop" provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
If our estimates of the costs of our primary liquidity requirements prior to an initial business combination, including the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we may target businesses with enterprise values that are greater than we could acquire with the net proceeds of our Initial Public Offering and the Private Placements, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial business combination. There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop arrangements we may enter into. 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 initial 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 initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
The net proceeds held in the Trust Account may be used as consideration to pay the sellers of a target business with which we ultimately complete our initial business combination and to pay the deferred underwriting commissions. If our initial business combination is paid for using equity or debt, or not all of the funds released from the Trust Account are used for payment of the consideration in connection with our initial business combination or the redemption of our public shares, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
3
--------------------------------------------------------------------------------
Table of Contents
Based on the fact that while we may begin preliminary due diligence of a target business in connection with an indication of interest, we intend to undertake in-depth due diligence, depending on the circumstances of the relevant prospective acquisition, only after we have negotiated and signed a letter of intent or other preliminary agreement that addresses the terms of a business combination. However, if our estimate of the costs of undertaking in-depth due diligence and negotiating a business combination is less than the actual amount necessary to do so, or if our sponsor exercises its extension option, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. If we are required to seek additional capital, we could seek such additional capital through loans or additional investments from our sponsor, members of our management team or any of their respective affiliates, but such persons are not under any obligation to loan funds to, or otherwise invest in, us.
Commitments and Contractual Obligations
For the three months ended
The below summarizes certain other commitments and contractual obligations to which we are subject:
Administrative Services Agreement
Commencing on the date that our Units were first listed on the
Registration Rights Agreement
The holders of our founder shares, Private Placement Warrants and any warrants that may be issued on conversion of working capital loans (and any shares of our Class A Common Stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the working capital loans and upon conversion of the founder shares) are entitled to registration rights pursuant to a registration rights agreement we have entered into requiring us to register such securities for resale (in the case of the founder shares, only after conversion to shares of our Class A Common Stock). The holders of these securities are entitled to make up to three demands, excluding short form registration demands, that we register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriting Agreement
The underwriters of the Initial Public Offering are entitled to a deferred
underwriting commission of 3.5% of the gross proceeds of the Initial Public
Offering and over-allotment, or
Vendor Agreements
As of
Critical Accounting Policies
The preparation of our condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in
4
--------------------------------------------------------------------------------
Table of Contents
Class A Common Stock Subject to Possible Redemption
We account for the Class A Common Stock subject to possible redemption in
accordance with the guidance enumerated in Accounting Standards Codification
("ASC") 480 "Distinguishing Liabilities from Equity". 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 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 we consider to be outside of our control and subject to
the occurrence of uncertain future events. Accordingly, at
We recognize changes in redemption value immediately as they occur and adjust the carrying value of redeemable Class A Common Stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, we recognized a measurement adjustment from initial book value to redemption amount value. The change in the carrying value of redeemable Class A Common Stock resulted in charges against additional paid-in capital and accumulated deficit.
Net income (loss) per share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period.
We apply the two-class method in calculating earnings (loss) per share. Earnings
and losses are shared pro rata between the two classes of shares. The
calculation of diluted income (loss) per share of common stock does not consider
the effect of the warrants issued in connection with the (i) Public Offering and
(ii) Private Placement, because the warrants are contingently exercisable, and
the contingencies have not yet been met. As a result, diluted earnings (loss)
per common share is the same as basic earnings (loss) per common share for the
periods presented. As of
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging." Our derivative
instruments are recorded at fair value as of the closing date of the Initial
Public Offering (
Warrant Instruments
We account for the Public Warrants and the Private Placement Warrants issued in
connection with the Initial Public Offering and the Private Placement in
accordance with the guidance contained in FASB ASC 815, "Derivatives and
Hedging" whereby under that provision, the Public Warrants and the Private
Placement Warrants do not meet the criteria for equity treatment and must be
recorded as a liability. Accordingly, we classify the warrant instrument as a
liability at fair value and adjust the instrument to fair value at each
reporting period. This liability will be re-measured at each balance sheet date
until the Public Warrants and the Private Placement Warrants are exercised or
expire, and any change in fair value will be recognized in our statement of
operations. The fair value at issuance was calculated using a Monte Carlo
simulation model to value the Public Warrants and the Private Placement
Warrants. On
5
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source