The following discussion summarizes the significant factors affecting the
operating results, financial condition, liquidity and capital resources of Post
Holdings Partnering Corporation. This discussion should be read in conjunction
with the financial statements under Item 8 of this report and the "Cautionary
Statement On Forward-Looking Statements" on page 1.
OVERVIEW
We are a blank check company incorporated in Delaware on January 27, 2021 for
the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar partnering transaction with one or more
businesses that we have not yet identified (a "Partnering Transaction"). We are
an emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
On May 28, 2021, we consummated the initial public offering of 30,000,000 units
(the "Units"). Each Unit consists of one share of Series A common stock, $0.0001
par value per share (the "Series A common stock" and such shares, the "Public
Shares") and one-third of one redeemable warrant (the "Public Warrants"). Each
whole Public Warrant will entitle the holder to purchase one share of Series A
common stock at an exercise price of $11.50 per share, subject to adjustment.
The Units were sold at an offering price of $10.00 per Unit, generating total
gross proceeds of $300,000,000. The Units began trading on the New York Stock
Exchange (the "NYSE") under the ticker symbol "PSPC.U" on May 26, 2021. As of
July 16, 2021, holders of the Units could elect to separately trade their shares
of Series A common stock and Public Warrants, with the shares of Series A common
stock and the Public Warrants listed on the NYSE under the symbols "PSPC" and
"PSPC WS", respectively.
On June 3, 2021, we issued an additional 4,500,000 Units (the "Over-Allotment
Units") pursuant to the underwriters' exercise in full of their over-allotment
option in connection with the initial public offering. The Over-Allotment Units
were priced at $10.00 per Over-Allotment Unit, generating total gross proceeds
of $45,000,000. The term "IPO" as used herein generally refers to the
consummation of the initial public offering on May 28, 2021 and the
underwriters' exercise in full of their over-allotment option on June 3, 2021.
In fiscal 2021, we incurred offering costs in connection with the IPO of
$17,887,856, of which $10,675,000 was for deferred underwriting commissions.
On May 28, 2021, in conjunction with the closing of the initial public offering,
we consummated the private sale of 1,000,000 units of the Company (the "Private
Placement Units") at a purchase price of $10.00 per Private Placement Unit to
our sponsor, PHPC Sponsor, LLC (the "Sponsor"), generating total gross proceeds
of $10,000,000. Concurrently with the sale of the Over-Allotment Units, the
Sponsor purchased an additional 90,000 Private Placement Units for total gross
proceeds of $900,000. Each Private Placement Unit consists of one share of
Series A common stock ("the "Private Placement Shares") and one-third of one
warrant, each whole warrant entitling the Sponsor to purchase one share of
Series A common stock at an exercise price of $11.50 per share (the "Private
Placement Warrants"). The term "Private Placement" as used herein generally
refers to the consummation of the private sale of Private Placement Units on May
28, 2021 and the private sale of Private Placement Units in conjunction with the
sale of the Over-Allotment Units on June 3, 2021.
Of the gross proceeds received from the IPO and Private Placement, $345,000,000
(or $10.00 per Unit sold in the IPO) was deposited in a trust account (the
"Trust Account") located in the United States (the "U.S.") with Continental
Stock Transfer & Trust Company acting as trustee.
Our Sponsor, executive officers and directors agreed not to propose an amendment
to our amended and restated certificate of incorporation that would modify the
substance or timing of our obligation to provide holders of our Public Shares
the right to have their shares redeemed in connection with a Partnering
Transaction or to redeem 100% of our Public Shares if we do not complete a
Partnering Transaction within 24 months from the closing of our IPO, or May 28,
2023, or 27 months, or August 28, 2023, following an agreement in principle
event, which means we have executed a letter of intent, agreement in principle
or definitive agreement for a Partnering Transaction within 24 months from the
closing of the IPO but have not completed the Partnering Transaction within such
24-month period (such 24-month or 27-month period, the "Combination Period") or
with respect to any other provision relating to the rights of holders of Public
Shares (the "Public Stockholders"), unless we provide the Public Stockholders
with the opportunity to redeem their shares of Series A common stock in
conjunction with any such amendment.
We expect to continue to incur significant costs in the pursuit of a Partnering
Transaction. We cannot assure you that our plans to complete a Partnering
Transaction will be successful.
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RESULTS OF OPERATIONS
As of December 31, 2022, we had not commenced any operations. All activity for
the period from January 27, 2021 (inception) through December 31, 2022 relates
to our formation and IPO, and from the IPO date relates to our search for
potential target businesses. We will not generate any operating revenue until
after the completion of our Partnering Transaction, at the earliest. We incur
general and administrative expenses through operating as a blank check company.
We generate other income in the form of interest income earned on our
investments held in trust, and non-operating unrealized gains related to
derivative instruments initially recorded at the IPO date. The year ended
December 31, 2021 represents the period beginning January 27, 2021, the
inception date of the Company, and ending December 31, 2021.
We had net earnings of $11,892,175 and $7,488,319 for the years ended December
31, 2022 and 2021, respectively. Income from investments held in trust increased
to $5,051,052 in the year ended December 31, 2022 from $13,507 in the prior
year, driven by rising interest rates during fiscal 2022. General and
administrative expenses, which include professional fees, IPO-related costs
associated with derivative warrant liabilities, franchise taxes and fees related
to the services agreement with Post Holdings, Inc. ("Post"), decreased to
$1,825,290 in the year ended December 31, 2022 from $2,232,588 in the prior
year, primarily due to higher IPO-related costs in fiscal 2021. Gains on
derivative warrant liabilities decreased to $9,138,399 in the year ended
December 31, 2022 from $9,707,400 in the prior year due to changes in the fair
value of our derivative warrant liabilities. Additionally, we incurred income
tax expense of $471,986 during the year ended December 31, 2022 primarily due to
increased interest income in fiscal 2022.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity needs prior to the closing of the IPO were satisfied through a
payment of $25,000 from the Sponsor to purchase 11,500,000 shares of Series F
common stock, $0.0001 par value per share (the "Founder Shares") and the loan of
$213,424 from the Sponsor under an unsecured promissory note, which was repaid
in full on May 28, 2021. On April 8, 2021, the Sponsor surrendered 2,875,000
Founder Shares to the Company for no consideration resulting in an aggregate of
8,625,000 Founder Shares outstanding. Subsequent to the closing of the IPO, our
liquidity has been satisfied through the proceeds from the IPO and Private
Placement not held in the Trust Account. As of December 31, 2022, we had
$869,805 in our operating bank account. In addition, in order to finance
transaction costs in connection with a Partnering Transaction, the Sponsor or an
affiliate of the Sponsor, or certain of our officers and directors, may, but are
not obligated to, provide us with working capital loans. As of December 31,
2022, there were no amounts outstanding under any working capital loans.
Based on the foregoing, we believe that we will have sufficient cash on hand and
borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain
of our officers and directors, to meet our needs through the Combination Period
in which we have to complete a Partnering Transaction, which is less than twelve
months as of December 31, 2022. Over this time period, we will use these funds
for paying any existing accounts payable, identifying and evaluating prospective
Partnering Transaction 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
Partnering Transaction. Additionally, interest income earned on investments held
in trust can be used by us to pay for taxes and up to $100,000 of dissolution
expenses in the event a Partnering Transaction is not completed.
We do not have any long-term debt obligations, finance lease obligations,
operating lease obligations or purchase obligations.
On May 28, 2021, we entered into a services agreement that provided that,
commencing on the date that our securities were first listed on the NYSE through
the earlier of consummation of the Partnering Transaction and our liquidation,
we would pay Post $40,000 per month for office space and administrative and
support services provided to members of our management team.
The underwriters are entitled to underwriting discounts and commissions of
$16,775,000, of which $6,100,000 was paid at the closing of the IPO and
$10,675,000 was deferred. The deferred underwriting commissions will be paid to
the underwriters solely in the event that the Company completes a Partnering
Transaction subject to the terms of the underwriting agreement.
As of December 31, 2022, less than twelve months remained in the Combination
Period in which we had to complete a Partnering Transaction. We evaluated our
ability to continue as a going concern in accordance with Accounting Standards
Codification ("ASC") Topic 205-30, "Liquidation Basis of Accounting." We believe
that we have sufficient cash on hand and borrowing capacity from the Sponsor or
an affiliate of the Sponsor, or certain of our officers and directors, to meet
our liquidity needs through the Combination Period. It is uncertain that we will
be able to complete a Partnering Transaction by the end of the Combination
Period, and if a Partnering Transaction is not completed by the end of the
Combination Period, there will be a mandatory liquidation and subsequent
dissolution of the Company (see Note 1 within "Notes to Financial Statements"
for information on the liquidating distributions from the Trust Account to
holders of the Public Shares upon dissolution). We have determined that the
liquidity condition and mandatory liquidation, should a Partnering Transaction
not occur, and potential subsequent dissolution, raises substantial doubt about
our ability to continue as a going concern. As of December 31, 2022, no
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adjustments had been made to the carrying amounts of assets or liabilities that
might be necessary should we be required to liquidate at the end of the
Combination Period.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America ("GAAP") requires us 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 years reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting estimates:
Derivative Financial Instruments
We account for our warrants in accordance with the guidance in ASC Topic 815,
"Derivatives and Hedging," under which the warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, we classify
our warrants as liabilities at their fair value and adjust the warrants to fair
value at each reporting period. The Public Warrants were initially measured at
fair value using a Monte Carlo simulation at their original issuance and
subsequently measured using their quoted market price once they became actively
traded on the NYSE during the third quarter of fiscal 2021. The fair value of
the Private Placement Warrants was determined using a Black-Scholes Option
Pricing Model using observable and unobservable market data as the significant
inputs (risk free rate, dividend yield and volatility).
Inherent in the Black-Scholes Option Pricing Model, utilized to measure the fair
value of the Private Placement Warrants, are assumptions related to expected
trading price volatility, expected life, risk-free interest rate and dividend
yield. We estimate the volatility of our Private Placement Warrants based on
implied volatility from the traded Public Warrant price. The primary significant
unobservable input used in the fair value measurements was implied volatility.
As of December 31, 2022, a hypothetical 10% change in implied volatility in
isolation would have changed the fair value measurement of the Company's Private
Placement Warrants by an immaterial amount. The risk-free interest rate is based
on the U.S. treasury zero-coupon yield curve for a maturity similar to the
expected remaining life of the Private Placement Warrants. The expected life of
the Private Placement Warrants is assumed to be equivalent to their remaining
contractual term. We anticipate the dividend rate will remain at zero.
RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS
See Note 3 within "Notes to Financial Statements" for a discussion regarding
recently issued and adopted accounting standards.
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