References to the "Company," "Shelter," "our," "us" or "we" refer to Shelter
Acquisition Corporation I. The following discussion and analysis of our
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 on Form 10-Q. 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 (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). When used in this Quarterly Report on Form 10-Q,
words such as "may," "should," "could," "would," "expect," "plan," "anticipate,"
"believe," "estimate," "continue," or the negative of such terms or other
similar expressions, as they relate to us or our management, identify forward
looking statements. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other filings with the
Securities and Exchange Commission ("SEC"). Such forward looking statements are
based on the beliefs of management, as well as assumptions made by, and
information currently available to, our management. No assurance can be given
that results in any forward-looking statement will be achieved and actual
results could be affected by one or more factors, which could cause them to
differ materially. The cautionary statements made in this Quarterly Report on
Form 10-Q should be read as being applicable to all forward-looking statements
whenever they appear in this Quarterly Report. Actual results could differ
materially from those contemplated by the forward-looking statements as a result
of certain factors detailed in our filings with the SEC. All subsequent written
or oral forward-looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporated as a Delaware corporation on December
11, 2020 for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses ("Business Combination"). While we may pursue a Business
Combination target in any stage of its corporate evolution or in any industry or
sector, we currently intend to concentrate on identifying businesses that
provide technologically innovative solutions to the real estate industry,
broadly defined as "PropTech."
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete our initial
Business Combination will be successful.
On July 2, 2021, we consummated our Initial Public Offering of 20,000,000 units
("Units"). Each Unit consists of one share of Class A common stock, par value
$0.0001 per share ("Class A common stock" and shares thereof sold in the Initial
Public Offering, "Public Shares"), and one-half of one redeemable warrant (each,
a "Public Warrant"), each whole Public Warrant exercisable into one share of
Class A common stock at an exercise price of $11.50 per share. The Units were
sold at a price of $10.00 per unit, generating gross proceeds to the Company of
$200,000,000.
Simultaneously with the consummation of the Initial Public Offering and the sale
of the Units, we consummated the sale of 6,250,000 warrants (each, a "Private
Placement Warrant"), at a price of $1.00 per Private Placement Warrant, to
Shelter Sponsor LLC, a Delaware limited liability company (the "Sponsor"), in a
private placement ("Private Placement") generating gross proceeds of $6,250,000.
On July 14, 2021, we issued an additional 2,164,744 Units in connection with the
partial exercise by the underwriters of their over-allotment option, generating
gross proceeds of $21,647,440. Simultaneously with the closing of the
underwriters' partial exercise of the over-allotment option, we sold an
additional 432,949 Private Placement Warrants, at a price of $1.00 per Private
Placement Warrant, to the Sponsor in a private placement (together with the
Private Placement, the "Private Placements") generating gross proceeds of
$432,949.
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Following the closing of the Initial Public Offering on July 2, 2021, and the
partial exercise of the over-allotment option on July 14, 2021, a total of
$221,647,440 ($10.00 per Unit) from the net proceeds of the sale of the Units in
the Initial Public Offering and pursuant to the partial exercise of the
over-allotment option, together with certain of the proceeds from the sale of
the Private Placement Warrants in the Private Placements, was placed in a trust
account (the "Trust Account") located in the United States with Continental
Stock Transfer & Trust Company acting as trustee, and invested only in U.S.
government securities 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 of 1940, as amended, 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.
If we are unable to complete a Business Combination within 18 months from the
closing of our Initial Public Offering, 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 franchise and income taxes (less up to
$100,000 of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish public
stockholders' rights as stockholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and the board of directors, dissolve and
liquidate, subject in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
Results of Operations
We have not commenced any operations. All activity for the period from December
11, 2020 (inception) through June 30, 2022 relates to our formation and Initial
Public Offering, and, since the completion of our Initial Public Offering,
searching for a target to consummate an initial Business Combination. We will
not generate any operating revenues until after the completion of our initial
Business Combination, at the earliest. We will generate non-operating income in
the form of interest income from the proceeds derived from the Initial Public
Offering and placed in the Trust Account.
For the three months ended June 30, 2022, we had net income of $3,003,133 which
was comprised of general and administrative expenses of $264,588, provision for
income taxes of $9,305 and franchise tax expense of $50,000, which was offset by
income from investments held in Trust Account of $299,309, and a change in fair
value of derivative warrant liabilities of $3,027,717.
For the six months ended June 30, 2022, we had net income of $6,080,134 which
was comprised of general and administrative expenses of $538,482, provision for
income taxes of $9,305 and franchise tax expense of $100,000, which was offset
by income from investments held in Trust Account of $321,536, and a change in
fair value of derivative warrant liabilities of $6,406,385.
For the three months ended June 30, 2021, we had net loss of $20,258 which was
comprised of only general and administrative expenses.
For the six months ended June 30, 2021, we had net loss of $48,968 which was
comprised of only general and administrative expenses.
Liquidity and Capital Resources
At June 30, 2022, we had $216,877 in our operating bank account and a working
capital deficit of $141,756, net of franchise tax payable of $20,000, income tax
payable of $9,305, and $80,000 in franchise taxes paid but not yet reimbursed by
the Trust Account.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through a capital contribution from the Sponsor of $25,000, to
cover certain offering costs, for the founder shares, the loan under an
unsecured promissory note from the Sponsor of $240,000. The promissory note from
the Sponsor was paid in full upon closing of the Initial Public Offering.
Subsequent to the consummation of the Initial Public Offering and Private
Placements, our liquidity needs have been satisfied through the proceeds from
the consummation of the Private Placements not held in the Trust Account.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us Working Capital
Loans. To date, there were no amounts outstanding under any Working Capital
Loans.
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Going Concern
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Update ("ASU")
205-40, "Presentation of Financial Statements - Going Concern (Subtopic
205-40)," we have until January 2, 2023, to consummate a Business Combination.
It is uncertain that we will be able to consummate a Business Combination by
this time. If a Business Combination is not consummated by this date, there will
be a mandatory liquidation and subsequent dissolution of the Company.
Additionally, we had a working capital deficit of $141,756 as of June 30, 2022
and expect to incur significant costs in pursuit of our acquisition plans. As a
result, we will likely need to raise additional funds to meet obligations and
sustain operations, which there can be no assurance that funds will be available
or if they are on terms acceptable to us. We have determined that the liquidity
condition and mandatory liquidation, should a Business Combination not occur,
and potential subsequent dissolution raises substantial doubt about our ability
to continue as a going concern. We intend to consummate a Business Combination
prior to January 2, 2023. No adjustments have been made to the carrying amounts
of assets or liabilities should we be required to liquidate after January 2,
2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 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.
Contractual Obligations
Administrative Support Agreement
We have agreed to pay the Sponsor or one or more of its affiliates, commencing
on the effective date of the registration statement for our Initial Public
Offering, a total of $20,000 per month for office space and administrative and
support services. Upon completion of a Business Combination or liquidation, we
will cease paying these monthly fees.
Registration and Stockholder Rights
The holders of the founder shares, Private Placement Warrants, and warrants that
may be issued upon conversion of Working Capital Loans (and any shares of common
stock issuable upon the exercise of the Private Placement Warrants or warrants
issued upon conversion of the Working Capital Loans and upon conversion of the
founder shares) will be entitled to registration rights pursuant to the
registration rights agreement requiring us to register such securities for
resale (in the case of the founder shares, only after conversion to shares of
Class A common stock). The holders of these securities will be entitled to make
up to three demands, excluding short form registration demands, that we register
such securities. In addition, these holders will have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of a Business Combination and rights to require us to register
for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriting Agreement
On July 2, 2021, we paid a fixed underwriting discount of $4,000,000, which was
calculated as two percent (2%) of the gross proceeds of the Initial Public
Offering. On July 14, 2021, the underwriters partially executed their
over-allotment option to purchase an additional 2,164,744 Units at a price of
$10.00 per Unit, and were paid a fixed underwriting discount of $432,949.
Additionally, the underwriters will be entitled to a deferred underwriting
discount of 3.5% of the gross proceeds of the Initial Public Offering and
over-allotment held in the Trust Account, or $7,757,660, upon the completion of
our initial Business Combination.
Critical Accounting Policies
The preparation of the unaudited condensed financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the unaudited condensed financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those
estimates.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risk. We evaluate all of our financial instruments to determine
if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with FASB ASC Topic 480, "Distinguishing Liabilities
from Equity" and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). For
derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value on the grant date
and is then re-valued at each reporting date, with changes in the fair value
reported in the statements of operations. The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is evaluated at the end of each reporting period.
Class A Common Stock Subject to Possible Redemption
All of the 22,164,744 Class A common stock sold as part of the Units in the
Initial Public Offering contain a redemption feature which allows for the
redemption of such public shares in connection with our liquidation, if there is
a stockholder vote or tender offer in connection with the Business Combination
and in connection with certain amendments to our amended and restated
certificate of incorporation. In accordance with ASC 480-10-S99, redemption
provisions not solely within our control require common stock subject to
redemption to be classified outside of permanent equity. Therefore, all Class A
common stock has been classified outside of permanent equity.
Net Income (Loss) Per Share of Common Stock
We have two classes of common stock, which are referred to as Class A common
stock and Class B common stock. Earnings and losses are shared pro rata between
the two classes of common stock. The 17,765,321 shares of common stock issuable
upon the exercise of the Company's outstanding warrants were excluded from
diluted earnings per share because the warrants are contingently exercisable,
and the contingencies have not yet been met. As a result, diluted net income
(loss) per common share is the same as basic net income (loss) per common share
for the periods. The 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 Pronouncements
In August 2020, the FASB issued 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 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 non-emerging growth companies
beginning January 1, 2022, 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, and plan to adopt ASU 2020-06 on
January 1, 2024.
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 unaudited condensed financial statements.
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JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. 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
such, our financial statements may not be comparable to companies that comply
with 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 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 principal 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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SHELTER ACQUISITION CORPORATION I 
