The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form
10-K/A. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of many factors, including those set forth under "Special Note Regarding
Forward-Looking Statements," "Item 1A. Risk Factors" and elsewhere in this
Annual Report on Form 10-K/A.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement and
revision of our Original Financial Statements. The impact of the restatement is
reflected in the Management's Discussion and Analysis of Critical Accounting
Policies below. Other than as disclosed in the Explanatory Note and with respect
to the impact of the restatement, no other information in this Item 7 has been
amended and this Item 7 does not reflect any events occurring after the Original
Filing. The impact of the restatement is more fully described in Note 2 to our
accompanying financial statements and Item 9A: Controls and Procedures, both
contained herein.
Overview
We are a blank check company formed under the laws of the State of Delaware for
the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or other similar business combination with one or
more businesses. We intend to effectuate our Business Combination using cash
from the proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, 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 raise capital or to
complete our initial Business Combination will be successful.
Results of Operations (as restated)
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2020 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below,
and, after our Initial Public Offering, 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 marketable securities 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.
As a result of the restatement described in Note 2 of the notes to the financial
statements included herein, we classify the warrants issued in connection with
our Initial Public Offering as liabilities at their fair value and adjust the
warrant instrument 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
For the period from July 14, 2020 (inception) through December 31, 2020, we had
a net loss of $4,563,349, which consists of operating costs of $648,442 and a
change in the fair value of warrant liabilities of $3,918,000, offset by
interest earned on marketable securities held in the Trust Account of $3,093.
For the period from July 14, 2020 (inception) through September 30, 2020, we had
a net loss of $414,554, which consists of operating costs of $428,997, offset by
interest income on marketable securities held in the Trust Account of $443 and a
change in the fair value of warrant liabilities of $14,000.
Liquidity and Capital Resources (as restated)
On September 22, 2020, we consummated the Initial Public Offering of 13,225,000
Units, which includes the full exercise of 1,725,000 Units by the underwriters
of the over-allotment option, at $10.00 per unit, generating gross proceeds of
$132,250,000. Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 4,145,000 Private Placement Warrants to the Sponsor at a
price of $1.00 per warrant, generating gross proceeds of $4,145,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $132,250,000 was
placed in the Trust Account. We incurred $7,385,802 in transaction costs,
including $2,417,300 of underwriting fees, $4,628,750 of deferred underwriting
fees and $339,752 of other offering costs.
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For the period from July 14, 2020 (inception) through December 31, 2020, cash
used in operating activities was $441,479. Net loss of $4,563,349 was affected
by interest earned on marketable securities held in the Trust Account of $3,093,
a change in the fair value of warrant liabilities of $3,918,000, transaction
costs allocable to warrant liabilities of $355,812, compensation expense related
to warrant liabilities of $55,000 and changes in operating assets and
liabilities, which used $203,849 of cash from operating activities.
For the period from July 14, 2020 (inception) through September 30, 2020, cash
used in operating activities was $404,152. Net loss of $414,554 was affected by
interest earned on marketable securities held in the Trust Account of $443, a
change in the fair value of warrant liabilities of $14,000, transaction costs
allocable to warrant liabilities of $355,812, compensation expense related to
warrant liabilities of $55,000, and changes in operating assets and liabilities,
which used $385,967 of cash from operating activities.
As of December 31, 2020, we had cash and marketable securities held in the trust
account of $132,253,093. 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 deferred underwriting commissions and income taxes payable),
to complete our Business Combination. We may withdraw interest to pay franchise
and income taxes. During the period ended December 31, 2020, we did not withdraw
any interest earned on the Trust Account. 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 December 31, 2020, we had cash of $971,469 outside of the Trust Account.
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, an affiliate of the Sponsor,
or our officers and directors 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
identical to the Private Placement Warrants, at a price of $1.00 per warrant at
the option of the lender.
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 in connection with
our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. 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 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 Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2020. 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 the Sponsor a monthly fee of $10,000 for office space,
administrative and support services to the Company. We began incurring these
fees on September 22, 2020 and will continue to incur these fees monthly until
the earlier of the completion of the Business Combination and our liquidation.
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The underwriter is entitled to a deferred fee of $4,628,750 in the aggregate.
The deferred fee will be forfeited by the underwriter solely in the event that
we fail to complete a Business Combination, subject to the terms of the
underwriting agreement. The underwriter did not receive any underwriting
discount or commissions on Units purchased by Millais Limited, the indirect
majority owner of our sponsor.
Critical Accounting Policies
The preparation of 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 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 Liability
We account for the warrants issued in connection with our Initial Public
Offering in accordance as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("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 fair value of the private warrants was estimated
using a Modified Black-Scholes Model. The fair value of the public warrants was
initially measured using the Modified Black-Scholes model, and then subsequently
measured at the public trading price. The key inputs and assumptions used for
the Modified Black-Scholes model were the common stock price, expected term in
years, expected volatility derived using a Monte Carlo Simulation, exercise
price, and risk-free interest rate.
Class A Common Stock Subject to Possible Redemption
We account for our shares of 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 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 common stock
features certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, the
Class A common stock subject to possible redemption is presented as temporary
equity, outside of the stockholders' equity section of our balance sheet.
Net Income (Loss) per Common Stock
We calculate earnings per share to allocate net income (loss) evenly to Class A
and Class B common shares. This presentation contemplates a Business Combination
as the most likely outcome, in which case, both classes of common stock share
pro rata in the income (loss) of the Company. Remeasurement adjustment
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
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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