References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "our," "us," and "Company" refer to Science Strategic Acquisition Corp.
Alpha. References to our "management" or our "management team" refer to our
officers and directors, and references to our "Sponsor" refer to SSAC Alpha
Sponsor, LLC. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
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" regarding the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intends," "may," "might," "plan," "possible,"
"potential," "predict," "project," "should," "would" and variations thereof 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, which was filed with the Securities and Exchange Commission
(the "SEC") on April 12, 2022 and the Risk Factors section of the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 2022, which was
filed with the SEC on August 17, 2022. Except as expressly required by
applicable securities laws, 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 incorporated as a Delaware corporation on
October 22, 2020 for the purpose of effecting a merger, share exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses, which we refer to as a Business Combination. We
completed our initial public offering (our "IPO") on January 28, 2021, which is
described below under "-Liquidity and Capital Resources."
Since completing our IPO, we have reviewed, and continue to review, a number of
opportunities to enter into a Business Combination with an operating business.
As of the date of this Quarterly Report, we have not entered into an agreement
to effectuate a Business Combination with any of the targets that we have
reviewed for a variety of reasons including, among other things: (i) volatile
market conditions; (ii) inability to reach an agreement on an appropriate
valuation; (iii) a declining new issuance market in 2022; (iv) our assessments
of the targets business model, customers, the competitive landscape in the
relevant industry and risks to future financial performance; (v) our preliminary
assessment of the relevant target company's ability to scale its business; and
(vi) alternative options available to potential targets, such as pursuing a
traditional initial public offering or waiting for the capital markets to
improve before pursuing a listing. As a result of these factors and our belief
that these factors will remain salient in the near term, we do not believe we
will be able to identify, agree upon and consummate a Business Combination with
a suitable target that meets our criteria for a Business Combination at an
acceptable valuation by or before January 28, 2023.
Results of Operations
For the three months ended September 30, 2022, we had net income of $1.1 million
consisting of approximately $0.6 million gain on the change in fair value of
warrant liability and $1.0 million unrealized gain on marketable securities held
in the Trust Account, partially offset by approximately $0.2 million in general
and administrative expenses and a $0.3 million provision for income taxes. For
the three months ended September 30, 2021, we had net income of $1.1 million
consisting of approximately $1.8 million gain on the change in fair value of
warrant liability and $0.7 million of general and administrative expenses.
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For the nine months ended September 30, 2022, we had net income of $7.8 million
consisting of approximately $7.8 million gain on the change in fair value of
warrant liability and $1.3 million unrealized gain on marketable securities held
in the Trust Account, partially offset by approximately $0.9 million in general
and administrative expenses and a $0.3 million provision for income taxes. For
the nine months ended September 30, 2021, we had net loss of $1.5 million
consisting of approximately $0.1 million loss on the change in fair value of
warrant liability and $1.4 million of general and administrative expenses.
Our business activities during the three and nine months ended September 30,
2022 consisted primarily of identifying and evaluating prospective acquisition
candidates for a Business Combination. We believe that we have access to
additional funds from the Sponsor that, together with cash held outside the
Trust Account (as defined below), are sufficient to meet our liquidity needs
until January 28, 2023 or an earlier deadline to consummate an initial Business
Combination as may be reflected in an amendment to our amended and restated
certificate of incorporation (an "Accelerated Termination Date"), as applicable.
Additionally, we have raised $750,000 of additional cash through the Working
Capital Loan (as defined below). However, if our estimates of our costs are less
than the actual amounts incurred, we may have insufficient funds available to
operate our business prior to January 28, 2023 or an Accelerated Termination
Date, as applicable. There is no assurance that our plans to raise additional
funds will be successful.
We do not expect to generate any operating revenues. We generate non-operating
income in the form of interest income on marketable securities held in 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 and other expenses in connection with searching for a target and
completing a Business Combination.
Liquidity and Capital Resources
As of September 30, 2022, we had approximately $0.4 million in our operating
bank account, and working capital deficit of approximately $1.7 million.
Our liquidity needs up to the completion of our IPO on January 28, 2021 had been
satisfied through a payment from our Sponsor of $25,000 for 7,762,500 shares
(the "Founder Shares") of our Class B common stock and a loan of $300,000 from
our Sponsor, which was repaid on February 2, 2021.
On January 28, 2021, we consummated our IPO of 31,050,000 units (the "Units"),
including the issuance of 4,050,000 Units as a result of the underwriter's full
exercise of its over-allotment option. Each Unit consists of one share of our
Class A common stock (such shares of Class A common stock included in the Units
sold, the "Public Shares") and one-third of one warrant of the Company, with
each whole warrant entitling the holder thereof to purchase one whole share of
Class A common stock at a price of $11.50 per share, subject to certain
adjustments. The Units were sold at a price of $10.00 per Unit, generating gross
proceeds to the Company of $310,500,000. Simultaneously with the closing of our
IPO, we completed the private sale of an aggregate of 5,473,333 private
placement warrants (the "Private Placement Warrants") to our Sponsor at a
purchase price of $1.50 per Private Placement Warrant, generating gross proceeds
to us of $8,210,000.
A total of $310,500,000, comprised of the net proceeds of the IPO and the sale
of the Private Placement Warrants, was placed in a U.S.-based trust account (the
"Trust Account") at JP Morgan Chase Bank, N.A., maintained by Continental Stock
Transfer & Trust Company, acting as trustee. Transaction costs for the IPO and
the sale of the Private Placement Warrants amounted to $17,495,500 consisting of
$6,210,000 of underwriting fees, $10,867,500 of deferred underwriting fees and
$418,000 of other offering costs. In addition, as of September 30, 2022,
approximately $0.4 million of cash was held outside of the Trust Account and is
available for working capital purposes.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $311,822,570 consisting of U.S. Treasury Bills with a maturity of 180 days or
less. Interest income on the balance in the Trust Account may be used by us to
pay taxes.
For the nine months ended September 30, 2022, net cash used in operating
activities was $0.7 million. Net income of $7.8 million was affected by a gain
on the change in fair value of our warrant liability of $7.8 million and
unrealized gain on marketable securities held in the Trust Account of $1.3
million. Changes in operating assets and liabilities provided $0.6 million of
cash for operating activities.
For the nine months ended September 30, 2021, net cash used in operating
activities was $0.9 million. Net loss of $1.5 million was affected by a loss on
the change in fair value of our warrant liability of $0.1 million, and
unrealized gain on marketable securities held
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in the Trust Account of less than $0.1 million, and a non-cash warrant issuance
cost of $0.4 million. Changes in operating assets and liabilities provided $0.1
million of cash for operating activities.
As noted above, we do not believe we will be able to identify, agree upon and
consummate a Business Combination with a suitable target that meets our criteria
for a Business Combination at an acceptable valuation by or before January 28,
2023. Accordingly, we expect to use the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account and not
previously released to us to pay our tax obligations (less up to $100,000 of
interest to pay dissolution expenses), to redeem the Public Shares at a
per-share price, payable in cash, equal to the aggregate amount on deposit in
the Trust Account as of January 28, 2023 or an Accelerated Termination Date, as
applicable. We may make permitted withdrawals from the Trust Account to pay our
taxes, including franchise taxes and income taxes.
We intend to use funds held outside the Trust Account primarily to meet our
liquidity needs until January 28, 2023 or an Accelerated Termination Date, as
applicable, including to pay taxes to the extent the interest earned on the
Trust Account is not sufficient to pay our taxes.
On May 27, 2022, we issued an unsecured promissory note to our Sponsor, pursuant
to which our Sponsor may provide up to $750,000 to us as a working capital loan
(the "Working Capital Loan"). The Working Capital Loan does not bear interest
and is repayable in full on the earlier of (i) the consummation of the Company's
initial Business Combination or (ii) end of the Business Combination period.
Upon the consummation of a Business Combination, our Sponsor shall have the
option, but not the obligation, to convert the principal balance of the Working
Capital Loan, in whole or in part, into warrants at a price of $1.50 per
warrant. Such warrants would be identical to the Private Placement Warrants. In
the event that a Business Combination does not close, we 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 would be used to repay the Working Capital
Loan. The Working Capital Loan is subject to customary events of default, the
occurrence of which automatically trigger the unpaid principal balance of the
Working Capital Loan and all other sums payable with regard to the Working
Capital Loan becoming immediately due and payable. As of September 30, 2022 and
the date of this Quarterly Report, there was $750,000 outstanding under the
Working Capital Loan.
In order to fund working capital deficiencies, our Sponsor or an affiliate of
our Sponsor or certain of our directors and officers may, but are not obligated
to, loan us additional funds as may be required. Similar to the Working Capital
Loan described above, up to $750,000 of such loans may be convertible into
warrants at a price of $1.50 per warrant at the option of the lender and such
warrants would be identical to the Private Placement Warrants issued to our
Sponsor.
The Company has incurred and expects to incur significant costs in pursuit of
its financing and acquisition plans. Management believes that the Company has
access to funds from the Sponsor that are sufficient to fund the working capital
needs of the Company until the consummation of an initial Business Combination
or through the end of the Business Combination period. However, in connection
with the Company's assessment of going concern considerations in accordance with
Financial Accounting Standards Board ("FASB") Accounting Standards Update
2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a
Going Concern," management has determined that the Company's cash flow deficit
and the deadline to consummate an initial Business Combination being within
twelve months from the issuance of the financial statements accompanying this
Quarterly Report raise substantial doubt about the Company's ability to continue
as a going concern within one year after the date that the financial statements
accompanying this Quarterly Report are issued. There is no assurance that the
Company's plans to raise additional funds will be successful. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than the Working Capital Loan and as
described below.
We had an agreement to pay an affiliate of our Sponsor a monthly fee of $10,000
for office space and administrative and support services provided to the
Company. The Company and the affiliate of our Sponsor canceled the agreement
effective March 31, 2022 as the affiliate of our Sponsor agreed to waive the
monthly payments. No amounts have been accrued or paid for the period from the
commencement date through September 30, 2022.
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The underwriter of the IPO is entitled to a deferred discount of $0.35 per Unit,
or $10,867,500 in the aggregate. The deferred discount will become payable to
the underwriter 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 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 condensed 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 Liabilities
We account for the public warrants and the Private Placement Warrants in
accordance with the guidance contained in Accounting Standards Codification
("ASC") Topic 815 under which the public warrants and the Private Placement
Warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Under ASC Subtopic 815-40, "Derivatives and Hedging - Contracts in
Entity's Own Equity" ("ASC 815-40"), the public warrants and the Private
Placement Warrants are not indexed to our common stock in the manner
contemplated by ASC 815-40 because the holder of the instrument is not an input
into the pricing of a fixed-for-fixed option on equity shares. Accordingly, we
classify the public warrants and the Private Placement Warrants as liabilities
at their fair value and adjust the public warrants and the Private Placement
Warrants to fair value at each reporting period. These liabilities are 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 public
warrants are valued using the closing price of the public warrants as of each
relevant date. The Private Placement Warrants are valued using a Monte Carlo
simulation model.
Working Capital Loan Payable
The Company accounted for the Working Capital Loan payable in accordance with
ASC 470, "Debt". The Working Capital Loan payable is recorded at amortized cost.
The conversion option feature had a fair value of $0 as of on June 1, 2022, the
date of initial measurement. As such, there is no debt discount recorded as
there are no proceeds to allocate to the conversion option feature.
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." Class A common stock subject to mandatory redemption is classified as a
liability instrument and is 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) are classified as
temporary equity. At all other times, Class A 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' deficit section of our condensed balance sheets.
We recognize changes in redemption value at the end of each reporting period and
adjust the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Immediately upon the closing of the
IPO the Company recognized the remeasurement from initial book value to
redemption amount value. The change in the carrying value of redeemable common
stock resulted in charges against additional paid-in capital to the extent
available and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
Net income (loss) per share of common stock is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the period in compliance with accounting and disclosure requirements of
FASB ASC Topic 260, "Earnings Per Share." The remeasurement associated with the
redeemable Class A common stock is excluded from net income (loss) per share of
common stock as the redemption value approximates fair value. The Company has
not considered the effect of the warrants sold in the IPO and the 5,473,333
Private Placement Warrants in the calculation of diluted net income (loss) per
share, since the exercise
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of the warrants is contingent upon the occurrence of future events. As a result,
diluted net income (loss) per share of common stock is the same as basic net
income (loss) per share of common stock for the periods presented.
The Company's condensed statement of operations includes a presentation of net
income (loss) per share of Class A common stock subject to possible redemption
and non-redeemable Class B common stock and allocates the net income (loss) into
the two classes of shares in calculating net income (loss) per share of common
stock, basic and diluted. For redeemable Class A common stock, net income (loss)
per share of common stock is calculated by dividing the net income (loss) by the
weighted average number of shares of Class A common stock subject to possible
redemption outstanding. For non-redeemable Class B common stock, net income
(loss) per share is calculated by dividing the net income (loss) by the weighted
average number of shares of nonredeemable Class B common stock outstanding for
the period.
Recent Accounting Standards
In August 2020, FASB issued Accounting Standards Update 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 accounting principles generally
accepted in the United States of America ("GAAP"). ASU 2020- 06 removes certain
settlement conditions that are required for equity contracts to qualify for the
derivative scope exception, and it also simplifies the diluted earnings per
share calculation in certain areas. ASU 2020-06 is effective for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted. We are currently assessing the impact, if
any, that ASU 2020-06 would have on our financial position, results of
operations or cash flows.
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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