References to the "Company," "Qell Acquisition Corp.," "Qell," "our," "us" or
"we" refer to Qell Acquisition Corp. The following discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the unaudited condensed financial statements and the notes
thereto contained elsewhere in this report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on August 7, 2020. The Company was incorporated for the purpose of effecting a
merger, share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses (the "Business
Combination"). We are an emerging growth company and, as such, the Company is
subject to all of the risks associated with emerging growth companies.
Our sponsor is Qell Partners LLC, a Cayman Islands limited liability company.
The registration statement for the Initial Public Offering was declared
effective on September 29, 2020. On October 2, 2020, we consummated our Initial
Public Offering of 37,950,000 units, including 4,950,000 additional units to
cover over-allotments, at $10.00 per unit, generating gross proceeds of $379.5
million, and incurring offering costs of approximately $21.2 million, inclusive
of approximately $13.3 million in deferred underwriting commissions.
On September 30, 2020 and October 2, 2020, we consummated the private placement
of a total of 7,060,000 warrants at a price of $1.50 per private placement
warrant with the sponsor, generating gross proceeds of approximately $10.6
million.
Upon the closing of the Initial Public Offering and the private placement,
$379.5 million ($10.00 per unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the private placement were placed in a
trust account, located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and will invest only in United States
government treasury obligations with a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 under the Investment
Company Act which invest only in direct U.S. government treasury obligations,
until the earlier of: (i) the completion of a business combination and (ii) the
distribution of the trust account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of private
placement warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a business combination.
If we are unable to complete a business combination within 24 months from the
closing of the Initial Public Offering, or October 2, 2022, we will (i) cease
all operations except for the purpose of winding up; (ii) as promptly as
reasonably possible, but not more than ten business days thereafter, redeem the
public shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest earned on the
funds held in the trust account and not previously released to us to pay the
income taxes, if any (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of the then-outstanding public shares, which
redemption will completely extinguish Public Shareholders' rights as
shareholders (including the right to receive further liquidation distributions,
if any); and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining shareholders and the board of
directors, liquidate and dissolve, subject in the case of clauses (ii) and
(iii), to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
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Proposed Business Combination and Related Transaction
On March 30, 2021, we entered into a Business Combination Agreement (as it may
be amended, supplemented or otherwise modified from time to time, the "Business
Combination Agreement"), by and among Qell DutchCo B.V., a Netherlands limited
liability company and wholly owned subsidiary of our Sponsor ("Holdco"), Queen
Cayman Merger LLC, a Cayman Islands limited liability company ("Merger Sub"),
and Lilium GmbH, a German limited liability company ( "Lilium").The Business
Combination Agreement provides for, among other things, the following
transactions on closing (collectively, the "Business Combination"):
• After signing of the Business Combination Agreement, and prior to closing of
the Business Combination, the legal form of our Sponsor shall be changed from
a private company with limited liability to a public limited liability
company;
• We will merge with and into Merger Sub (the "Merger"), with Merger Sub as the
surviving company (the "Surviving Company") in the merger and, after giving
effect to such merger, becoming a wholly owned subsidiary of our Sponsor;
• In connection with the Merger, each issued and outstanding ordinary share of
ours will be converted into a claim for a corresponding equity security in
the Merger Sub, and such claim shall then be automatically contributed into
our Sponsor in exchange for one ordinary share in the share capital of Holdco
(a "Holdco Ordinary Share");
• Immediately following the Merger, Merger Sub and Holdco will cause Merger Sub
to, commence winding up under the Cayman LLC Act and distribute all of its
tangible and intangible assets (including all cash) and transfer any and all
of its liabilities to Holdco (the "Liquidation Distribution and Assumption");
• Immediately following the Liquidation Distribution and Assumption, Holdco
will take a series of actions including, but not limited to, (i) consummation
of the Private Placement (as defined below), (ii) appointment of Daniel
Wiegand as executive director to the board of directors of Holdco, and
(iii) execution of the Holdco Board Agreements (as defined in the Business
Combination Agreement);
• The shareholders of Lilium will exchange (the "Exchange") their interests in
Lilium for Holdco Ordinary Shares. All Lilium shareholders, but for Daniel
Wiegand, will receive Class A Holdco Ordinary Shares in the Exchange. Daniel
Weigand will receive Class B Holdco Ordinary Shares. Class B Holdco Ordinary
Shares will rank pari passu with Class A Holdco Ordinary Shares in all
respects, provided they will be entitled to 3x super voting rights, subject
to customary sunset provisions; and
• Each outstanding warrant to purchase a Class A ordinary share of Qell will,
by its terms, convert into a warrant to purchase one Holdco Ordinary Share,
on the same contractual terms.
In accordance with the terms and subject to the conditions of the Business
Combination Agreement, the consideration to be received by the shareholders of
Lilium in connection with the transactions contemplated under the Business
Combination Agreement shall be an aggregate number of Holdco Ordinary Shares
equal to (a) $2,400,000,000, divided by (b) $10.00. Each our shareholder will
receive one Holdco Ordinary Share per our ordinary share, as set forth above.
Cash held in the trust account net of redemptions and the proceeds of the
Private Placement (as defined below), less the transaction costs of the Business
Combination, will be received by Holdco and used for general corporate purposes
after the Business Combination.
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Concurrently with the execution of the Business Combination Agreement, we
entered into Subscription Agreements with certain investors (collectively, the
"Private Placement Investors") pursuant to which, among other things, such
investors agreed to subscribe for and purchase and Holdco agreed to issue and
sell to such investors, 45,000,000 Holdco Ordinary Shares (the "Private
Placement Shares"), for an aggregate of $450,000,000 (the "Private Placement")
in proceeds. The closing of the Private Placement is contingent upon, among
other things, the substantially concurrent consummation of the Business
Combination and related transactions.
Liquidity and Capital Resources
As of March 31, 2021, we had approximately $1.0 million in our operating bank
account and negative working capital of approximately $1.7 million.
To date, our liquidity needs have been satisfied through a payment of $25,000
from our Sponsor to cover certain of our expenses in exchange for the issuance
of the Founder Shares to our Sponsor, a loan of approximately $195,000 pursuant
to a promissory note issued to our Sponsor and the net proceeds from the
consummation of the Private Placement not held in the Trust Account. We fully
repaid the Note on November 2, 2020. In addition, in order to finance
transaction costs in connection with a Business Combination, our Sponsor may,
but is not obligated to, provide us working capital loans (the "Working Capital
Loans"). As of March 31, 2021, there were no amounts outstanding under the
Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or our officers and directors to meet our needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination 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 Business Combination.
Results of Operations
Our entire activity since inception through March 31, 2021 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of interest income on cash and cash equivalents. We expect to
incur increased 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 March 31, 2021, we had net income of approximately
$23.6 million which consisted of an approximately $27.6 million gain in change
fair value of derivative warrant liabilities and approximately $63,000 income
from our investments held in the Trust Account, partially offset by $4.0 million
in general and administrative expenses (including approximately of 3.8 million
in merger costs), and $78,000 in general and administrative expenses - related
party.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
We entered into an Administrative Services Agreement pursuant to which we have
agreed to pay our Sponsor a total of $10,000 per month for office space,
utilities and administrative support.
On January 28, 2021, we entered into an Administrative Services Agreement with
Qell Operational Holdings LLC ("Holdings"), an affiliate of Qell Partners LLC
(the "Sponsor"), pursuant to which Holdings will provide certain administrative
services to us and we will reimburse Holdings up to $50,000 a month, subject to
adjustment in accordance with the terms of the agreement. In connection
therewith, we terminated the Administrative Services Agreement between the
Company and the Sponsor dated October 1, 2020.
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The underwriters of the Initial Public Offering were entitled to underwriting
discounts and commissions of 5.5%, of which 2.0% (approximately $7.6 million)
was paid at the closing of the Initial Public Offering and 3.5% (approximately
$13.3 million) was deferred. The underwriters reimbursed us $300,000 for certain
of our offering costs. The deferred underwriting discounts and commissions will
become payable to the underwriters upon the consummation of the Initial Business
Combination and will be paid from the amounts held in the Trust Account. The
underwriters are not entitled to any interest accrued on the deferred
underwriting discounts and commissions.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company has identified the following as its
critical accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that
feature 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) are classified as temporary equity. At all other times, Class A
ordinary shares are classified as shareholders' equity. Our Class A ordinary
shares feature certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, at March 31, 2021, an aggregate of 32,571,861 Class A ordinary
shares subject to possible redemption are presented as temporary equity, outside
of the shareholders' equity section of our balance sheet.
Net Income Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted-average number of ordinary shares outstanding during the
periods. We have not considered the effect of the warrants sold in the Initial
Public Offering and the Private Placement to purchase an aggregate of 19,710,000
of our Class A ordinary shares in the calculation of diluted income (loss) per
share, since their inclusion would be anti-dilutive under the treasury stock
method.
Our statement of operations includes a presentation of income per share for
ordinary shares subject to redemption in a manner similar to the two-class
method of income per share. Net income per ordinary share, basic and diluted for
Class A ordinary shares is calculated by dividing the gain on marketable
securities, dividends, and interest held in the Trust Account, net of applicable
taxes available to be withdrawn from the Trust Account, resulting in net income
of $63,000 for the three months ended March 31, 2021, by the weighted average
number of Class A ordinary shares outstanding for the period. Net income per
ordinary share, basic and diluted for Class B ordinary shares is calculated by
dividing the net income, less income attributable to Class A ordinary shares by
the weighted average number of Class B ordinary shares outstanding for the
period.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("ASU")
No. 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):
Accounting for Convertible Instruments and Contracts in an Entity's Own
Equity ("ASU 2020-06"), which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP. The ASU also
removes certain settlement conditions that are required for equity-linked
contracts to qualify for the derivative scope exception, and it simplifies the
diluted earnings per share calculation in certain areas. We adopted ASU 2020-06
on January 1, 2021. Adoption of the ASU did not impact our financial position,
results of operations or cash flows.
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Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the Public Company Accounting Oversight Board (United
States), or PCAOB, regarding mandatory audit firm rotation or a supplement to
the auditor's report providing additional information about the audit and the
financial statements (auditor discussion and analysis) and (iv) disclose certain
executive compensation related items such as the correlation between executive
compensation and performance and comparisons of the Chief Executive Officer's
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our Initial Public Offering or
until we are no longer an "emerging growth company," whichever is earlier.
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