References to the "Company," "our," "us" or "we" refer to L Catterton Asia
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed financial statements and the notes thereto contained
elsewhere in this report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on January 5, 2021, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). Our
Sponsor is LCA Acquisition Sponsor, LP, a Cayman Islands limited partnership.
The registration statement for our IPO was declared effective on March 10,
2021. On March 15, 2021, we consummated the IPO of 25,000,000 units, at $10.00
per Unit, generating gross proceeds of $250.0 million. On March 24, 2021, the
Underwriters partially exercised the over-allotment option and purchased an
additional 3,650,874 Over-Allotment Units, generating an aggregate of gross
proceeds of approximately $36.5 million. Each Unit consists of one Class A
ordinary share, and one-third of one redeemable warrant to purchase one Class A
ordinary share at a price of $11.50 per whole share. We incurred transaction
costs for the IPO and over-allotment of approximately $16.5 million, inclusive
of approximately $10.0 million in deferred underwriting commissions.
Simultaneously with the closing of the IPO, we consummated the private placement
of 5,000,000 warrants at a price of $1.50 per warrant ("Private Placement
Warrants") to the Sponsor, generating gross proceeds of $7.5 million.
Simultaneously with the closing of the exercise of the overallotment option, we
completed the sale of an aggregate of an additional 486,784 Private Placement
Warrants to the Sponsor, at a purchase price of $1.50 per Private Warrant,
generating gross proceeds of approximately $730,000.
Upon the closing of the IPO and exercise of the over-allotment option, and the
simultaneous Private Placements, approximately $286.5 million ($10.00 per Unit)
of the net proceeds were placed in a trust account ("Trust Account") located in
the United States with Continental Stock Transfer & Trust Company acting as
trustee, and invested only in U.S. "government securities," within the meaning
of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act, which invest only in direct U.S. government treasury
obligations, as determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust
Account as described below.
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If we have not completed a Business Combination within 24 months from the
closing of the IPO, we will (i) cease all operations except for the purpose of
winding up, (ii) as promptly as reasonably possible but not more than ten
business days thereafter, redeem the Public Shares,
at a per-share price, payable in cash, equal to the aggregate amount then on
deposit in the Trust Account, including interest earned on the funds held in the
Trust Account and not previously released to us to pay its taxes (less up to
$100,000 of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish Public
Stockholders' rights as stockholders (including the right to receive further
liquidating distributions, if any), and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders
and our board of directors, liquidate and dissolve, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Recent Developments
On April 12, 2021, the Staff of the Securities and Exchange Commission ("SEC")
released the Staff Statement on Accounting and Reporting Considerations for
Warrants Issued by Special Purpose Acquisition Companies ("SPACs") (the
"Statement"). The SEC Staff Statement addresses certain accounting and reporting
considerations related to warrants of a kind similar to those issued by the
Company at the time of its IPO in February 2021.
The Warrants were classified as equity in the Company's previously issued
audited balance sheet as of March 15, 2021. In light of the Statement and
guidance in Accounting Standards Codification ("ASC") 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", in particular as applicable to
certain provisions in the Warrants related to tender or exchange offer
provisions as well as provisions that provided for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the
warrant, the Company evaluated the terms of the Warrant Agreement entered into
in connection with the Company's IPO and concluded that the Company's Warrants
include provisions that, based on ASC 815-40, preclude the Warrants from being
classified as components of equity. The Warrants are not eligible for an
exception from derivative accounting, and therefore should be classified as a
liability measured at fair value, with changes in fair value reported each
period in earnings.
Results of Operations
For the period from January 5, 2021 (inception) through June 30, 2021, we had a
net income of approximately $3.8 million, which included a loss from operations
of $350,000, offering cost expense allocated to warrants of $695,000, a gain
from the change in fair value of warrant liabilities of $4,809,000, and interest
income of $13,000.
For the three months ended June 30, 2021, we had a net income of approximately
$4.9 million, which included a loss from operations of $285,000, a gain from the
change in fair value of warrant liabilities of $5,143,000, and interest income
of $10,000.
Our business activities from inception to June 30, 2021 consisted primarily of
our formation and completing our IPO, and since the offering, our activity has
been limited to identifying and evaluating prospective acquisition targets for a
Business Combination.
Liquidity and Capital Resources
As of June 30, 2021, the Company had approximately $0.7 million in its operating
bank account, and working capital of approximately $1.2 million.
The Company's liquidity needs up to March 15, 2021 had been satisfied through a
capital contribution from the Sponsor of $25,000 for the founder shares and the
loan under an unsecured promissory note from the Sponsor of up to $300,000.
Subsequent to the consummation of the IPO, the Company's liquidity needs have
been satisfied through the net proceeds from the consummation of the Private
Placement not held in the Trust Account. In addition, in order to finance
transaction costs in connection with a Business Combination, our Sponsor or an
affiliate of our Sponsor, or certain of our
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officers and directors may, but are not obligated to, provide us working capital
loans. As of June 30, 2021, there were no amounts outstanding under any working
capital loan.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, we will be using these funds held outside of the
Trust Account for paying existing accounts payable, identifying and evaluating
prospective initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Except as set forth below, there have been no significant changes in our
critical accounting policies as discussed in the final prospectus filed by us
with the SEC on March 12, 2021.
Warrants Liability
We evaluated the Warrants in accordance with ASC 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", and concluded that a provision in
the Warrant Agreement related to certain tender or exchange offers as well as
provisions that provided for potential changes to the settlement amounts
dependent upon the characteristics of the holder of the warrant, precludes the
Warrants from being accounted for as components of equity. As the Warrants meet
the definition of a derivative as contemplated in ASC 815 and are not eligible
for an exception from derivative accounting, the Warrants are recorded as
derivative liabilities on the Balance Sheet and measured at fair value at
inception (on the date of the IPO) and at each reporting date in accordance with
ASC 820, "Fair Value Measurement", with changes in fair value recognized in the
Statement of Operations in the period of change.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2021, we
did not have any off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Regulation S-K.
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