References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Silver Spike Acquisition Corp II References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Silver Spike 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 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 Form 10-Q 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 "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
final prospectus for our Initial Public Offering filed with the SEC on March 12,
2021. The Company's securities 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 incorporated in the Cayman Islands on September 2,
2020 formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering,
our shares, debt or a combination of cash, shares 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 business
combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through September 30, 2022 were
organizational activities, those necessary to prepare for the IPO, and, after
the IPO, identifying a target for our Business Combination. We do not expect to
generate any operating revenues until after the completion of our initial
Business Combination. We generate non-operating income in the form of interest
income on marketable securities. We are incurring expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses in connection with completing
a Business Combination.
For the three months ended September 30, 2022, we had a net income of
$1,692,870, which consists of change in fair value of warrant liabilities of
$370,625, interest earned on marketable securities held in the Trust Account of
$1,206,292, unrealized gain on marketable securities held in the Trust Account
of $285,785, offset by formation and operational costs of $169,832.
For the nine months ended September 30, 2022, we had a net income of
$11,576,340, which consists of change in fair value of warrant liabilities of
$10,501,042, interest earned on marketable securities held in the Trust Account
of $1,640,570, unrealized gain on marketable securities held in the Trust
Account of $145,224 and broken deal income of $593,790, offset by the
operational costs of $1,304,286.
For the three months ended September 30, 2021, we had a net income of
$2,039,611, which consists of the change in fair value of warrant liabilities of
$3,212,083 and interest earned on marketable securities held in the Trust
Account of $26,609, offset by operational costs of $1,196,979 and an unrealized
loss on marketable securities held in the Trust Account of $2,102.
For the nine months ended September 30, 2021, we had a net loss of $1,320,723,
which consists of operational costs of $1,937,768 and an unrealized loss on
marketable securities held in the Trust Account of $2,102, offset by the change
in fair value of warrant liabilities of $577,292 and interest earned on
marketable securities held in the Trust Account of $41,855.
Liquidity, Capital Resources and Going Concern
On March 15, 2021, together with the full exercise by the underwriters of the
over-allotment option on March 23, 2021, we consummated the IPO of 28,750,000
Units, at a price of $10.00 per unit, generating gross proceeds of $287,750,000.
Simultaneously with the closing of the IPO, we consummated the sale of 5,166,667
private placement warrants to our sponsor at a price of $1.50 per warrant,
generating gross proceeds of $7,750,000.
Following the IPO and the sale of the private placement warrants, a total of
$287,500,000 was placed in the trust account. We incurred $16,328,950 in
transaction costs, including $5,750,000 of underwriting fees, $10,062,500 of
deferred underwriting fees and $516,450 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $431,651. Net income of $11,576,340 was affected by interest earned on
marketable securities held in the Trust Account of $1,640,570, a change in the
fair market value of the warrant liabilities of $10,501,042, an unrealized gain
on marketable securities held in the Trust Account of $145,224, and changes in
operating assets and liabilities, which provided $274,845 of cash for operating
activities.
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For the nine months ended September 30, 2021, cash used in operating activities
was $620,062. Net loss of $1,320,723 was affected by interest earned on
marketable securities held in the Trust Account of $41,855, a change in the fair
market value of the warrant liabilities of $577,292,transaction costs in
connection with the warrant liabilities of $467,695, an unrealized loss on
marketable securities held in the Trust Account of $2,102, and changes in
operating assets and liabilities, which provided $850,011 of cash for operating
activities.
As of September 30, 2022, we had marketable securities held in the trust account
of $289,342,556. We intend to use substantially all of the funds held in the
trust account, including any amounts representing interest earned on the trust
account (which interest shall be net of taxes payable and excluding deferred
underwriting commissions) to complete our Business Combination. To the extent
that our share capital is used, in whole or in part, as consideration to
complete a 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 $366,528 held outside 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, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our sponsor or an affiliate of our
sponsor or certain of 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 $1.50 per warrant unit at the option of
the lender. The warrants would be identical to the private placement warrants.
We will need to raise additional capital through loans or additional investments
from our Sponsor, shareholders, officers, directors, or third parties. Our
officers, directors and Sponsor may, but are not obligated to, loan us funds,
from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion, to meet our working capital needs. Accordingly, we may
not be able to obtain additional financing. If we are unable to raise additional
capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead
expenses. We cannot provide any assurance that new financing will be available
to us on commercially acceptable terms, if at all. These conditions raise
substantial doubt about our ability to continue as a going concern for at least
one year from the date that the financial statement are issued.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until March 15, 2023, to
consummate a Business Combination. It is uncertain that the Company 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. Management has determined that the
liquidity condition and mandatory liquidation, should a Business Combination not
occur, and potential subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern. Management intends to complete
the Business Combination prior to the termination date. No adjustments have been
made to the carrying amounts of assets or liabilities should the Company be
required to liquidate after March 15, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay our Sponsor
a monthly fee of $20,000 for office space, and administrative and support
services, provided to the Company. We began incurring these fees on March 10,
2021 and will continue to incur these fees monthly until the earlier of the
completion of a Business Combination and the Company's liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$10,062,500 in the aggregate, which 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.
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 periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815-40-15-7D 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 statements of
operations. The fair value of the Public Warrants was estimated using a Monte
Carlo simulation approach for periods where no observable traded price was
available and the fair value of the Private Warrants was estimated using a
Modified Black-Scholes model. For periods subsequent to the detachment of the
Public Warrants from the Units, the close price of the Public Warrant price was
used as the fair value as of each relevant date.
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Class A Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and are measured at fair
value. Conditionally redeemable ordinary shares (including 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, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption are presented at redemption value as temporary
equity, outside of the shareholders' equity section of our condensed balance
sheets.
Net Income (Loss) per Ordinary Share
Net income per ordinary share is computed by dividing net income by the weighted
average number of ordinary shares outstanding for the period. Remeasurement
associated with the redeemable shares of Class A ordinary shares is excluded
from income per ordinary 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. 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. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of
ASU 2020-06 did not impact the Company's 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 condensed financial statements.
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