References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Monument Circle Acquisition Corp.
References to our "management" or our "management team" refer to our officers
and directors, and references to the "Sponsor" refer to Monument Circle Sponsor,
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, as amended (the "Securities Act")
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 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 Annual Report on Form 10-K as of
and for the fiscal year December 31, 2020, filed with the U.S. Securities and
Exchange Commission (the "SEC") on March 31, 2021 ("2020 Annual Report"), the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with
the SEC on May 26, 2021 ("Q1 Quarterly Report") and the Quarterly Report on Form
10-Q for the quarter ended June 30, 2021, filed with the SEC on August 6, 2021
("Q2 Quarterly Report"). 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
September 29, 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 ("Business Combination"). We intend to
effectuate our Business Combination using cash from the proceeds of the Initial
Public Offering (as defined below) and the sale of the Private Placement
Warrants (as defined below), 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 nor generated any revenues to date.
Our only activities from September 29, 2020 (inception) through September 30,
2021 were organizational activities, those necessary to prepare for the Initial
Public Offering, 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 investments 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 September 30, 2021, our net income of approximately
$2.9 million principally consists of the change in the fair value of our warrant
liabilities of approximately $3.2 million and interest earned on investments
held in the Trust Account of approximately $6 thousand, partially offset by
general and administrative expenses of approximately $0.2 million.
For the nine months ended September 30, 2021, we had net income of approximately
$5.7 million, which consists of income of approximately $7.1 million derived
from the changes in fair value of the warrant liabilities and interest earned on
investments held in the Trust Account of approximately $17 thousand, partially
offset by general and administrative expenses of approximately $0.8 million and
transaction costs associated with the warrant liabilities of approximately $0.7
million.
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Liquidity and Capital Resources
On January 19, 2021, we consummated the initial public offering of 25,000,000
units (each, a "Unit"), which included the partial exercise by the underwriters
of their over-allotment option in the amount of 3,200,000 Units, at $10.00 per
Unit, generating gross proceeds of $250.0 million (the "Initial Public
Offering"). Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 7,000,000 private placement warrants (the "Private
Placement Warrants") at a price of $1.00 per Private Placement Warrant in a
private placement to the Sponsor, generating gross proceeds of $7.0 million.
For the nine months ended September 30, 2021, cash used in operating activities
was approximately $0.8 million. Net income of approximately $5.7 million was
principally attributable to non-cash income related to the change in fair value
of the warrant liabilities of approximately $7.1 million, partially offset by
transaction costs allocated to the warrant liability of approximately $0.7
million. Changes in operating assets and liabilities generated approximately $33
thousand of cash for operating activities.
As of September 30, 2021, we had marketable securities of approximately $250.0
million held in a trust account (the "Trust Account") located in the United
States. Such amount will be invested only in U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), with a maturity of 185 days or less
or in any open-ended investment company that holds itself out as a money market
fund selected by the Company meeting the conditions of Rule 2a-7 of the
Investment Company Act, as determined by the Company, until the earlier of (i)
the completion of a Business Combination and (ii) the distribution of the funds
held in the Trust Account. Interest income on the balance in the Trust Account
may be used by us to pay taxes. Through September 30, 2021, we have not
withdrawn any interest earned from the Trust Account.
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 September 30, 2021, we had cash of approximately $0.7 million. 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, 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 our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into warrants
of the post Business Combination entity at a price of $1.00 per warrant. The
warrants would be identical to the Private Placement 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.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. 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 our sponsor a monthly fee of $10,000 for office space, utilities
and secretarial and administrative support.
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We began incurring these fees in January 2021 and will continue to incur these
fees monthly until the earlier of the completion of the Business Combination and
our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per share, or
$8,750,000 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 unaudited 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 unaudited condensed
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 ASC 815
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 statement of
operations. The Private Placement Warrants and the warrants included as part of
the Units (the "Public Warrants") for periods where no observable traded price
was available are valued using a Modified Black Scholes Option Pricing Model and
Monte Carlo simulation, respectively. 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 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 Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' (deficit) equity section of our
balance sheet.
Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. We apply the
two-class method in calculating income per common share. Accretion associated
with the redeemable shares of Class A common stock is excluded from income per
common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, "Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40)" ("ASU 2020-06") to simplify accounting
for certain financial instruments. ASU 2020-06 eliminates the current models
that require separation of beneficial conversion and cash conversion features
from convertible instruments and simplifies the derivative scope exception
guidance pertaining to equity classification of contracts in an entity's own
equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity's
own equity. ASU 2020-06 amends the diluted earnings per share guidance,
including the requirement to use the if-converted method for all convertible
instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a
full or modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. The Company is currently assessing the impact, if any, that ASU
2020-06 would have on its financial position, results of operations or cash
flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, including the standard referenced in the next
paragraph, if currently adopted, would have a material effect on our unaudited
condensed financial statements.
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