References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Sandbridge X2 Corp References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Sandbridge X2 Holdings LLC. 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 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", 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" 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 Risk Factors section of the Company's Annual Report on Form
10-K for the year ended December 31, 2021, as filed with the U.S. Securities and
Exchange Commission (the "SEC") on March 30, 2022, and the Risk Factors section
of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2022, as filed with the SEC on August 10, 2022. The Company's SEC 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
January 15, 2021 formed for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We intend
to effectuate our Business Combination using cash from the proceeds of our
initial public offering (the "Initial Public Offering") 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 through September 30, 2022 were organizational activities,
those necessary to prepare and consummate the Initial Public Offering, described
below, and the search for 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
and dividend income on marketable securities held in our trust account (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 period from January 15, 2021 (inception) through September 30, 2021, we
had a net loss of $1,031,029 which consists of operating costs of $1,653,465,
transaction costs allocated to warrant liability of $380,000 and a change in
fair value of our warrant liability of $995,861, offset by interest income on
marketable securities held in the Trust Account of $3,043 and dividend income of
$3,532.
For the nine months ended September 30, 2022, we had net income of $6,629,071
which consists of operating costs of $1,031,706, offset by a change in the fair
value of our warrant liability of $6,473,096 and dividend income of $1,420,606.
For the three months ended September 30, 2021, we had net income of $2,260,092,
which consisted of operating cost of $1,228,486, a change in fair value of our
warrant liability of $3,485,513 and dividend income of $3,065.
For the three months ended September 30, 2022, we had a net income of $768,656,
which consists of operating costs of $322,470, offset by a change in the fair
value of our warrant liability of $248,966 and dividend income of $1,075,085.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of shares of our Class B common stock by the
Sponsor and loans from our Sponsor.
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On March 12, 2021, we completed the Initial Public Offering of 23,817,701 Units,
which included the partial exercise by the underwriters of their over- allotment
option in the amount of 1,817,701 Units, at $10.00 per Unit, generating gross
proceeds of $238,177,010. Simultaneously with the closing of the Initial Public
Offering, we completed the sale of 4,509,027 Private Placement Warrants (the
"Private Placement Warrants") at a price of $1.50 per Private Placement Warrant
in a private placement to the Sponsor, generating gross proceeds of $6,763,540.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Placement Warrants, a total
of $238,177,010 was placed in the Trust Account. We incurred $13,341,815 in
Initial Public Offering related costs, consisting of $4,367,540 in cash
underwriting fees, $8,336,195 of deferred underwriting fees and $638,080 of
other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $931,110. Net income of $6,629,071 was affected by dividends earned on
marketable securities held in the Trust Account of $1,420,606 and change in the
fair value of the warrant liability of $6,473,096. Changes in operating assets
and liabilities used $100,596 of cash from operating activities. For the period
from January 15, 2021 (inception) through September 30, 2021, cash used in
operating activities was $1,046,477. Net loss of $1,031,029 was affected by
transaction costs allocated to warrant liability of $380,000, interest earned on
marketable securities held in the Trust Account of $3,043 and dividend earned on
marketable securities held in Trust Account of $3,532, and change in the fair
value of the warrant liability of $995,861. Changes in operating assets and
liabilities provided $606,988 of cash for operating activities.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $239,609,223 consisting of money market funds.
On October 24, 2022, the Company filed a definitive proxy statement with the SEC
in respect of proposals seeking stockholder approval to: (i) amend its Amended
and Restated Certificate of Incorporation to change the date by which the
Company must consummate a Business Combination from March 12, 2023 (the
"Original Termination Date") to December 15, 2022 or such earlier date as is
determined by the Board in its sole discretion (such date the "Amended
Termination Date" and such proposal the "Charter Amendment Proposal") and
(ii) amend the Investment Management Trust Agreement, dated March 9, 2021 (the
"Trust Agreement") by and between the Company and Continental Stock Transfer and
Trust Company ("Trustee") to change the date on which Trustee must commence
liquidation of the Trust Account from the earlier of the Company's completion of
a Business Combination and the Original Termination Date to the Amended
Termination Date ("Trust Agreement Amendment Proposal"). The purpose of the
Charter Amendment Proposal and the Trust Agreement Amendment Proposal is to
permit the wind-up, liquidation and dissolution of the Company promptly
following the Amended Termination Date so that the holders of the issued and
outstanding Class A Common Stock issued in the Initial Public Offering (the
"Public Stockholders") may elect to redeem all or a portion of their issued and
outstanding Class A Common stock issued in the Initial Public Offering (the
"Public Shares") in exchange for their pro rata portion of the funds held in the
Trust Account without having to wait for approximately another 3 months for such
capital to be returned, while continuing to earn minimal interest (such
redemption the "Post-Amendment Share Redemption"). The Company has filed a
definitive proxy statement with the SEC in respect of the Charter Amendment
Proposal and the Trust Agreement Amendment Proposal. The Company has established
October 31, 2022 as the record date for determining stockholders entitled to
receive notice of, and vote at, the stockholder meeting (the "Stockholder
Meeting") being held to consider such proposals. If the Charter Amendment
Proposal and the Trust Agreement Amendment Proposal are approved, the Company
will (i) immediately after the Stockholder Meeting, cease all operations, except
for the purpose of winding up; (ii) as promptly as reasonably possible but not
later than the earlier of December 30, 2022 and ten business days after the
Amended Termination Date, complete the Post-Amendment Share Redemption, 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 the Company to pay its franchise and
income taxes, if any (less $100,000 of interest to pay dissolution expenses),
divided by the number of the then-outstanding Public Shares; and (iii) as
promptly as reasonably possible following such Post-Amendment Share Redemption
and subject to the approval of the Board and the Company's remaining
stockholders after completion of the Post-Amendment Share Redemption, liquidate
and dissolve, subject in each case to the Company's obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable
law. The Stockholder Meeting is scheduled to be held at 10:00 am, Eastern Time,
on November 29, 2022, at the offices of Ropes & Gray LLP located at 1211 Avenue
of the Americas, New York, New York 10036.
If we do not obtain stockholder approval for the Charter Amendment Proposal and
the Trust Agreement Amendment Proposal at the Stockholder Meeting, and if we
identify a counterparty to a potential business combination transaction, which
we do not expect to do prior to the end of the Combination Period, we intend to
use substantially all of the funds held in the Trust Account, including any
amounts representing interest and dividend income earned on the Trust Account
(less income taxes payable), to complete our Business Combination. We may
withdraw interest and dividend income to pay franchise and income taxes. 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 September 30, 2022, we had cash of $156,644 outside of the Trust Account.
If we do not receive stockholder approval for the Charter Amendment Proposal and
Trust Agreement Amendment Proposal, then 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. If we receive stockholder approval for the Charter Amendment
Proposal and the Trust Agreement Amendment Proposal, then we intend to use the
funds held outside the Trust Account to wind up and dissolve the Company.
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On May 11, 2022, the Company issued a promissory note to its Sponsor permitting
borrowings of up to $1,500,000 to provide the Company with working capital in
order to finance transaction costs in connection with a Business Combination
(the "Working Capital Loan"). The Company received an initial $500,000 under the
promissory note, with additional borrowings available only at the discretion of
the Sponsor and its members. The Working Capital Loan is non-interest bearing,
and is due upon consummation of a Business Combination. If the Company completes
a Business Combination, the Company will repay the Working Capital Loan out of
the proceeds of the Trust Account released to the Company. Otherwise, the
Working Capital Loan will be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, the Company
may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loan, but no proceeds held in the Trust Account will be used to
repay the Working Capital Loan. The Sponsor may opt to convert the outstanding
balance of the Working Capital Loan to warrants, at price of $1.50 per warrant,
of the post Business Combination entity (the "Working Capital Loan Warrants").
The terms of the Working Capital Loan Warrants will be identical to the terms of
the Private Placement Warrants (see Note 7). If the Company does not complete a
Business Combination, the note will not be repaid and all amounts owed under it
will be forgiven except to the extent that the Company has funds available to it
outside of its Trust Account. As of September 30, 2022, $500,000 was outstanding
under the Working Capital Loan.
We may raise additional capital through loans or additional investments from the
Sponsor or Sponsor's members 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 upon consummation of 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 that would be considered
off-balance sheet arrangements as of September 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.
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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 that commenced on
March 9, 2021, pursuant to which we pay an affiliate of the Sponsor $10,000 per
month for office space, utilities and secretarial and administrative support
services and the Working Capital Loan from our Sponsor of up to $1,500,000, of
which $500,000 was outstanding as of September 30, 2022. Upon the earlier of the
completion of a Business Combination and our liquidation, we will cease paying
monthly fees to the Sponsor and will either repay the Working Capital Loan in
full or convert the balance of the loan into Working Capital Loan Warrants.
Certain of the underwriters of the Initial Public Offering are entitled to a
deferred fee of $0.35 per share, or $8,336,195 in the aggregate, which reflects
the underwriters' partial exercise of their over-allotment option. 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. The underwriters did not receive any
upfront underwriting discount or commissions on the 1,980,000 Units purchased by
the members of our Sponsor that are affiliated with PIMCO, but will receive
deferred underwriting commissions with respect to such Units.
Critical Accounting Policies
The preparation of 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 financial statements, and income and expenses
during the period 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 ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption are
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock 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, 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 condensed balance sheet.
Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the periods. We
apply the two-class method in calculating earnings per share. 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 FASB issued Accounting Standard 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. ASU 2020-06 also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception and simplifies the diluted earnings per share
calculation in certain areas. The Company adopted the ASU on January 1, 2022.
Adoption of the ASU 2020-06 did not impact the Company's financial position,
results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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