The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto contained elsewhere in this Annual Report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
All statements other than statements of historical fact included in this Annual
Report including, without limitation, statements under "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. When used in
this Annual Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of many factors, including those set forth under
"Cautionary Note Regarding Forward-Looking Statements," "Item 1A. Risk Factors"
and elsewhere in this Annual Report.
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 financial statements as more fully described in the Explanatory
Note and in "Note 2-Restatement of Previously Issued Financial Statements" to
our accompanying financial statements. For further detail regarding the
restatement adjustments, see Explanatory Note 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 on
June 15, 2018, 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.
In March 2020, the COVID-19 outbreak was declared a National Public Health
Emergency that continues to spread throughout the world and has adversely
impacted global activity and contributed to significant declines and volatility
in financial markets. The outbreak could have a continued material adverse
impact on economic and market conditions and trigger a period of global economic
slowdown. The rapid development and fluidity of this situation precludes any
prediction as to the ultimate material adverse impact of the coronavirus
outbreak. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Nevertheless, the outbreak presents
uncertainty and risk with respect to the Company and its ability to successfully
complete a Business Combination.
Recent Developments
On February 17, 2021, we entered into a Merger Agreement with Merger Sub and
BlackSky, which provides for, among other things, the merger of Merger Sub with
and into BlackSky, with BlackSky continuing as the surviving entity (the
"Merger" and, collectively with the other transactions contemplated by the
Merger Agreement, the "Transactions"). The Transactions set forth in the Merger
Agreement, including the Merger, will constitute a "Business Combination".
Pursuant to the Merger Agreement, the aggregate merger consideration payable to
equity holders of BlackSky at closing (the "Total Consideration") will be paid
in a number of shares of newly-issued Class A common stock of the Company,
valued at $10.00 per share (the "Company Common Stock"), calculated by dividing
(x) $925,000,000, plus (a) the aggregate exercise prices that would be paid to
BlackSky if all stock options and all warrants outstanding as of immediately
prior to the closing were exercised in full, minus (b) any unfunded amount
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under BlackSky's bridge loan, minus (c) the total consideration payable to
shares of BlackSky's Class B common stock, which is equal to the product of
(i) the total number of shares of BlackSky's Class B common stock, par value
$0.00001 per share, issued and outstanding as of immediately prior to the
effective time of the Merger and (ii) an amount in cash equal to $0.00001 by (y)
$10.00.
Effective as of the effective time of the Merger and by virtue of the Merger,
each option to purchase shares of BlackSky Class A Common Stock (each, a
"BlackSky Stock Option") that is outstanding and unexercised as of immediately
prior to the effective time of the Merger will be converted into an option to
acquire a number of shares of Company Class A Common Stock equal to the product
obtained by multiplying (x) the number of shares of BlackSky Common Stock
subject to the applicable BlackSky Stock Option by (y) the Class A Common
Exchange Ratio, and will be subject to the same terms and conditions as were
applicable to such BlackSky Stock Option (each an "Assumed Company Stock
Option"). For purposes of the Merger Agreement, the Class A Common Exchange
Ratio equals the quotient of (A) the residual Total Consideration after taking
into account the preferred series preference amounts, divided by $10.00, divided
by (B) the number of participating shares of BlackSky Common Stock on a fully
diluted basis. The exercise price per share of each Assumed Company Stock Option
will be equal to the quotient obtained by dividing (x) the exercise price per
share applicable to such BlackSky Stock Option by (y) the Class A Common
Exchange Ratio.
The Transactions will be consummated subject to the deliverables and provisions
as further described in the Merger Agreement.
Results of Operations (As Restated)
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception to December 31, 2020 were organizational
activities, those necessary to prepare for the Initial Public Offering,
identifying a target for our Business Combination, and activities in connection
with the proposed acquisition of BlackSky. 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 after the Initial Public Offering. 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 both the public and private 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 year ended December 31, 2020, we had a net loss of $15,265,396, which
consists of operating costs of $3,136,234, a change in the fair value of the
warrant liability of $13,924,875 and provision for income taxes of $1,361,
offset by interest income on marketable securities held in the Trust Account of
$1,793,627 and an unrealized gain on marketable securities held in our Trust
Account of $3,447.
For the three months ended September 30, 2020, we had a net loss of $10,482,998,
which consists of operating costs of $2,205,105, a change in the fair value of
the warrant liability of $8,614,625, and an unrealized loss on marketable
securities held in our Trust Account of $16,279, offset by interest income on
marketable securities held in the Trust Account of $101,658 and income tax
benefit of $251,353.
For the nine months ended September 30, 2020, we had a net loss of $13,169,112,
which consists of interest income on marketable securities held in the Trust
Account of $1,745,490, offset by operating costs of $2,661,813, a change in the
fair value of the warrant liability of $12,235,250, and an unrealized loss on
marketable securities held in our Trust Account of $20,478 and an income tax
benefit of $2,939.
For the three months ended June 30, 2020, we had net loss of $9,128,568, which
consists of operating costs of $198,382, a change in the fair value of the
warrant liability of $9,014,125, and an unrealized loss on marketable securities
held in our Trust Account of $382,449, offset by interest income on marketable
securities held in the Trust Account of $435,966 and income tax benefit of
$30,422.
For the six months ended June 30, 2020, we had net loss of $2,686,114, which
consists of interest income on marketable securities held in the Trust Account
of $1,643,832, offset by operating costs of $456,708, a change in the fair value
of the warrant liability of $3,620,625, and an unrealized loss on marketable
securities held in our Trust Account of $4,199 and a provision of income taxes
of $248,414.
For the three months ended March 31, 2020, we had net income of $6,442,454,
which consists of interest income on marketable securities held in the Trust
Account of $1,207,866, an unrealized gain on marketable securities held in our
Trust Account of $378,250, and a change in the fair value of the warrant
liability of $5,393,500, offset by operating costs of $258,326 and a provision
for income taxes of $278,836.
For the year ended December 31, 2019, we had net loss of $7,209,680, which
consists of interest income on marketable securities held in the trust account
of $714,993, a change in the fair value of the warrant liability of $6,999,875,
transaction costs of $560,698 offset by an unrealized loss on marketable
securities held in our trust account of $6,479, operating costs of $264,346 and
a provision for income taxes of $93,275.
Liquidity and Capital Resources (As Restated)
On November 5, 2019, we consummated the Initial Public Offering of 27,500,000
Units at a price of $10.00 per Unit, generating gross proceeds of $275,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,500,000 Private Placement Warrants to our Sponsor at a price of
$1.00 per Private Placement Warrant, generating gross proceeds of $7,500,000.
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On November 13, 2019, as a result of the underwriters' election to fully
exercise their over-allotment option, we consummated the sale of an additional
4,125,000 Units at $10.00 per Unit, and the sale of an additional 825,000
Private Placement Warrants, at a price of $1.00 per Private Placement Warrant,
generating total gross proceeds of $42,075,000.
Following the Initial Public Offering, the exercise of the over-allotment option
in full and the sale of the Private Placement Warrants, a total of $316,250,000
was placed in the Trust Account. We incurred $18,047,876 in transaction costs,
including $6,325,000 of underwriting fees, $11,068,750 of deferred underwriting
fees, and $654,126 of other costs in connection with the Initial Public
Offering.
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For the year ended December 31, 2020, cash used in operating activities was
$1,397,955. Net loss of $15,265,396 was affected by interest earned on
marketable securities held in the Trust Account of $1,793,627, a non-cash charge
for the change in the fair value of warrant liabilities of $13,924,875, an
unrealized gain on marketable securities held in our Trust Account of $3,447 and
a deferred income tax provision of $1,361. Changes in operating assets and
liabilities provided $1,738,279 of cash from operating activities.
For the year ended December 31, 2019, cash used in operating activities was
$286,574. Net loss of $7,209,680 was affected by interest earned on marketable
securities held in the Trust Account of $714,993, a non-cash charge for the
change in the fair value of warrant liabilities of $6,999,875, transaction costs
of $560,698 an unrealized loss on marketable securities held in our trust
account of $6,479 and a deferred income tax benefit of $1,361. Changes in
operating assets and liabilities provided $72,408 of cash from operating
activities.
As of December 31, 2020, we had marketable securities held in the Trust Account
of $318,041,728 (including approximately $1,792,000 of interest income and
unrealized gains) consisting of U.S. treasury bills with a maturity of 185 days
or less. Interest income on the balance in the Trust Account may be used by us
to pay taxes. Through December 31, 2020, we withdrew $713,860 of interest earned
on the Trust Account to pay for our tax obligations.
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
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.
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.
As of December 31, 2020, we had cash of $399,516 held outside of the Trust
Account and working capital deficit of $1,627,973. Until the consummation of a
Business Combination, we will be using the funds not held in 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. Our Sponsor, officers, directors or their affiliates are not under
any obligation to advance us funds, or to invest in us. Accordingly, we may not
be able to obtain additional financing. 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 a potential transaction, 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.
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.
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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 the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support. Upon completion of the Business Combination or our
liquidation, we will cease paying these monthly fees.
In addition, we have an agreement to pay the underwriters a deferred fee of
$11,068,750. The deferred fee will become payable to the representatives of 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 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 with the guidance contained in ASC 815-40-15-7D 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.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible conversion 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
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 are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders' equity section of our
balance sheets.
Net Income Per Common Share
We apply the two-class method in calculating earnings per share. Net income
(loss) per common share, basic and diluted for Class A common stock subject to
possible redemption is calculated by dividing the interest income earned on the
Trust Account, net of applicable taxes, if any, by the weighted average number
of shares of Class A common stock subject to possible redemption outstanding for
the period. Net income (loss) per common share, basic and diluted for and
non-redeemable common stock is calculated by dividing net loss less income
attributable to Class A common stock subject to possible redemption, by the
weighted average number of shares of non redeemable common stock outstanding for
the period presented.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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