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," "will" 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 year ended December 31, 2021, filed with the U.S. Securities and
Exchange Commission (the "SEC") on March 31, 2022 ("2021 Annual 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 June 30, 2022
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 June 30, 2022, our net income of $2,291,086
principally consists of the change in the fair value of our warrant liabilities
of $2,432,350 and interest earned on investments held in the Trust Account of
$317,482, partially offset by general and administrative expenses of $417,405
and provision for income taxes of $41,342.
For the three months ended June 30, 2021, our net loss of $4,865,327 principally
consists of the change in the fair value of our warrant liabilities of
$4,541,500, as well as general and administrative costs of $330,060, partially
offset by interest earned on investments held in the Trust Account of $6,233.
For the six months ended June, 2022, we had net income of $7,610,159, which
consists of income of $7,997,605 derived from the changes in fair value of the
warrant liabilities and interest earned on investments held in the Trust Account
of $339,771, partially offset by general and administrative expenses of $685,875
and provision for income taxes of $41,342.
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For the six months ended June 30, 2021, we had net income of $2,724,786, which
consists of income of $3,980,000 derived from the changes in fair value of the
warrant liabilities and interest earned on investments held in the Trust Account
of $11,097, partially offset by general and administrative expenses of $582,845
and transaction costs associated with the warrant liabilities of $683,466.
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 $250,000,000 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 $7,000,000.
For the six months ended June 30, 2022, cash used in operating activities was
$961,403. Net income of $7,610,159 was principally attributable to non-cash
income related to the change in fair value of the warrant liabilities of
$7,997,605. Changes in operating assets and liabilities used $234,186 of cash.
For the six months ended June 30, 2021, cash used in operating activities was
$720,379. Net income of $2,724,786 was principally attributable to non-cash
income related to the change in fair value of the warrant liabilities of
$3,980,000, partially offset by transaction costs allocated to the warrant
liability of $683,466. Changes in operating assets and liabilities used $137,534
of cash.
As of June 30, 2022, we had marketable securities of $250,290,005 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 June 30, 2022, we have withdrawn $73,468 of
interest earned on the Trust Account to pay taxes and franchise fees. We plan to
withdraw an additional $206,780 during the three months ended September 30, 2022
as reimbursement for tax and franchise fees paid during 2021 and 2022.
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 June 30, 2022, we had cash of $19,320. Until the consummation of a
business combination, we will be using the funds not held in the trust account
for identifying and evaluating prospective acquisition candidates, performing
due diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to acquire, and structuring, negotiating and
consummating the business combination. We expect that we will need to raise
additional capital through loans or additional investments from the Sponsor or
our stockholders, officers, directors, or third parties. Our officers and
directors and the Sponsor may, but are not obligated to (except as described
above), loan us funds, from time to time, in whatever amount they deem
reasonable in their sole discretion, to meet our working capital needs. 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 our business plan,
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 for a reasonable period of time, which is considered to be one
year from the issuance date of the financial statements. On April 13, 2022, we
executed a promissory note with the Sponsor in the aggregate amount of up to
$300,000 for our working capital needs.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standards Board's ("FASB") Accounting Standards Update
("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," our management has determined that the liquidity
condition and mandatory liquidation and subsequent dissolution, should we be
unable to complete a business combination, also raises substantial doubt about
our ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after January 19, 2023.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 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 our sponsor a monthly fee of $10,000 for office space, utilities
and secretarial and administrative support. 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:
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 possible 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 section of our balance
sheet.
Under ASC 480-10-S99, the Company has elected to recognize changes in the
redemption value immediately as they occur and adjust the carrying value of the
security to equal the redemption value at the end of each reporting period. This
method views the end of the reporting period as if it was also the redemption
date for the security.
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 Monte Carlo Simulation. 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.
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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. The Company has
two classes of shares, which are referred to as Class A common stock and Class B
common stock. Earnings and losses are shared pro rata between the two classes of
shares. Net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. 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
In August 2020, the Financial Accounting Standards Board ("FASB") issued 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, 2024 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
previous paragraph, if currently adopted, would have a material effect on our
unaudited condensed financial statements.
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