References in this quarterly report on Form 10-Q (the "Quarterly Report") to "we," "us" or the "Company" refer toSandbridge X2 Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer toSandbridge 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 final prospectus for its Initial Public Offering filed with theU.S. Securities and Exchange Commission (the "SEC"). The Company'sSEC filings can be accessed on the EDGAR section of theSEC'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 theState of Delaware onJanuary 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 throughJune 30, 2021 were organizational activities, those necessary to prepare and consumate 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 fromJanuary 15, 2021 (inception) throughJune 30, 2021 , we had net loss of$3,291,121 which consists of operating costs of$424,979 , transaction costs allocated to warrant liability of$380,000 and a change in the fair value of our warrant liability of$2,489,652 , offset by interest income on marketable securities held in the Trust Account of$3,043 and dividend income of$467 . For the three months endedJune 30, 2021 , we had net loss of$5,069,599 which consists of operating costs of$342,307 , a change in the fair value of our warrant liability of$4,730,339 , offset by interest income on marketable securities held in the Trust Account of$2,580 and dividend income of$467 . 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. OnMarch 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$13,376,865 in Initial Public Offering related costs, consisting of$4,367,540 in cash underwriting fees,$8,336,195 of deferred underwriting fees and$673,130 of other offering costs. 17 -------------------------------------------------------------------------------- Table of Contents For the period fromJanuary 15, 2021 (inception) throughJune 30, 2021 , cash used in operating activities was$919,455 . Net loss of$3,291,121 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 the Trust Account of$467 , and change in the fair value of the warrant liability of$2,489,652 . Changes in operating assets and liabilities used$494,476 of cash for operating activities. As ofJune 30, 2021 , we had marketable securities held in the Trust Account of$238,180,520 consisting of exchange traded funds. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest and dividend earned on the Trust Account (less income taxes payable), to complete our Business Combination. We may withdraw interest and dividend 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 ofJune 30, 2021 , we had cash of$830,626 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, at a price of$1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The loans would be repaid upon consummation of a Business Combination, without interest. 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 upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. OnMay 25, 2021 , the Company received a notice from theNew York Stock Exchange (the "NYSE") indicating that the Company was not in compliance with Section 802.01E of the NYSE Listed Company Manual as a result of its failure to timely file the Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2021 (the "Q1 2021 Form 10-Q") with theSEC . The notice had no immediate effect on the listing or trading of the Company's securities on the NYSE. The NYSE has informed the Company that it will have six months fromMay 24, 2021 to file the Q1 2021 Form 10-Q with theSEC and may regain compliance with the NYSE listing standards at any time prior to that date by filing its Q1 2021 Form 10-Q. The Company filed the Q1 2021 Form 10-Q onJune 22, 2021 . Off-Balance Sheet Arrangements We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as ofJune 30, 2021 . 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 commencing onMarch 9, 2021 , to pay an affiliate of the Sponsor$10,000 per month for office space, utilities and secretarial and administrative support services. Upon the earlier of the completion of a Business Combination and its liquidation, we will cease paying these monthly fees. 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. 18 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe 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: 19 -------------------------------------------------------------------------------- Table of Contents Warrant Liability We account for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in Accounting Standards Codification ("ASC") 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 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 condensed statement of operations. The fair value of the warrants was estimated using quoted prices in an active market. 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' equity section of our condensed balance sheet. Net Income (Loss) Per Common Share We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net income (loss) per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period presented. 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 condensed financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in theSEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter endedJune 30, 2021 , as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our certifying officers concluded that, solely due to the Company's restatement of its balance sheet as ofMarch 12, 2021 to reclassify the Company's warrants to liabilities in accordance with applicable accounting policies, our disclosure controls and procedures were not effective as ofJune 30, 2021 . We have corrected the accounting for the warrants in theMarch 31, 2021 Quarterly Report on Form 10-Q. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting as the circumstances that led to the restatement of our financial statements had not yet been identified. However, management did implement changes in internal control over financial reporting during second quarter of 2021 designed to remediate a material weakness solely related to the presentation of the Company's warrants as equity instead of liability. We plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include increasing communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. 20
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source