References to the "Company," "our," "us" or "we" refer to Spartan Acquisition
Corp. III. 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 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"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Quarterly Report on Form 10-Q. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those
described in our other U.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on December 23, 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 (the "Initial Business Combination"). Our sponsor is Spartan
Acquisition Sponsor III LLC ("Sponsor").
The registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on February 8, 2021. On February 11, 2021, we
consummated the Initial Public Offering of 55,200,000 units (the "Units" and,
with respect to the Class A common stock included in the Units being offered,
the "Public Shares"), including 7,200,000 additional Units to cover
over-allotments (the "Over-Allotment Units"), at $10.00 per Unit, generating
gross proceeds of $552.0 million, and incurring offering costs of approximately
$31.1 million, of which approximately $19.3 million was for deferred
underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 9,360,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to our Sponsor, generating
proceeds of approximately $14.0 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$552.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account (the "Trust Account"). The proceeds held in the Trust Account were
invested only in U.S. government securities with a maturity of 185 days or less
or in money market funds that meet certain conditions under Rule 2a-7 under the
Investment Company Act of 1940, as amended, and that invest only in direct U.S.
government treasury obligations, as determined by us. Funds will remain in the
Trust Account until the earlier of (i) the consummation of the Initial Business
Combination or (ii) the distribution of the Trust Account proceeds as described
below. The remaining proceeds outside the Trust Account may be used to pay for
business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses.
If we are unable to complete an Initial Business Combination within 24 months
from the closing of the Initial Public Offering, or February 11, 2023 (the
"Combination Period"), we will (i) cease all operations except for the purpose
of
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winding up, (ii) as promptly as reasonably possible but no more than ten
business days thereafter subject to lawfully available funds therefor, 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 our
franchise and income taxes (less up to $100,000 of such net 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 our 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. Our Sponsor and our officers and directors
will enter into a letter agreement, signed upon the effective date of the
Initial Public Offering, with us, pursuant to which they agreed to waive their
rights to liquidating distributions from the Trust Account with respect to any
Founder Shares (as defined below) held by them if we fail to complete the
Initial Business Combination within the Combination Period. However, if our
Sponsor or any of our directors, officers or affiliates acquires shares of
Class A common stock in or after the Initial Public Offering, they will be
entitled to liquidating distributions from the Trust Account with respect to
such shares if we fail to complete the Initial Business Combination within the
prescribed time period.
Results of Operations
Our entire activity from January 1, 2021 through March 31, 2021, was in
preparation for an Initial Public Offering, and since our Initial Public
Offering, our activity has been limited to the search for a prospective
Initial Business Combination. We will not generate any operating revenues until
the closing and completion of our Initial Business Combination. We generate
non-operating income in the form of investment income from our investments held
in the Trust Account. We expect to incur increased 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 three months ended March 31, 2021, we had a loss of approximately $4.4
million, which consisted of approximately $2.5 million change in fair value of
derivative warrant liabilities, approximately $1.1 million of transaction costs
- derivative warrant liabilities, approximately $867,000 of general and
administrative expenses and approximately $48,000 of franchise tax expense, and
offset by approximately $16,000 of interest income from investments held in
Trust Account.
Liquidity and Capital Resources
As of March 31, 2021, we had approximately $1.1 million in cash and working
capital of approximately $1.4 million.
Our liquidity needs to date have been satisfied through a cash payment of
$25,000 from our Sponsor to cover for certain offering costs on our behalf in
exchange for issuance of Founder Shares, and loan proceeds from our Sponsor of
approximately $182,000 under an unsecured promissory note (the "Note"). We
repaid the Note in full on February 17, 2021. Subsequent from the consummation
of the Initial Public Offering, our liquidity has been satisfied through the net
proceeds from the consummation of the Initial Public Offering and the Private
Placement held outside of the Trust Account.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of an Initial Business Combination or one year from this filing.
Over this time period, we will be using these funds held outside of the Trust
Account for paying existing accounts payable, identifying and evaluating
prospective Initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Initial Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
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Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with United States generally accepted
accounting principles. The preparation of these unaudited condensed financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities in our unaudited condensed financial
statements. On an ongoing basis, we evaluate our estimates and judgments,
including those related to fair value of financial instruments and accrued
expenses. We base our estimates on historical experience, known trends and
events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. Our investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the unaudited condensed balance
sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these investments are included in
income from investments held in Trust Account in the unaudited condensed
statement of operations. The estimated fair values of investments held in the
Trust Account are determined using available market information.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity" ("ASC 480") and ASC 815,
"Derivatives and Hedging" ("ASC 815"). The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
Derivative warrant liabilities are classified as noncurrent liabilities as
their liquidation is not reasonably expected to require the use of current
assets or require the creation of current liabilities.
The 13,800,000 warrants issued in connection with the Initial Public Offering
(the "Public Warrants") and the 9,360,000 Private Placement Warrants are
recognized as derivative liabilities in accordance with ASC 815. Accordingly, we
recognize the warrant instruments as liabilities at fair value and adjust the
instruments to fair value at each reporting period. The liabilities are subject
to re-measurement at each balance sheet date until exercised. The fair value of
the Public Warrants and the Private Placement Warrants have been estimated using
a Black-Scholes option pricing model.
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 480 . Shares of Class A common stock subject
to mandatory redemption (if any) are classified as liability instruments and are
measured at fair value. Shares of conditionally redeemable Class A common stock
(including Class A 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, shares of Class A common stock are 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 the
occurrence of uncertain future events. Accordingly, as of March 31, 2021, a
total of 49,393,703 shares of Class A common stock subject to possible
redemption are presented as temporary equity, outside of the stockholders'
equity section of our unaudited condensed balance sheets.
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Net Loss Per Share of Common Stock
Net loss per common stock is computed by dividing net loss by the
weighted-average number of shares of common stock outstanding during the period.
We have not considered the effect of the warrants sold in the Initial Public
Offering and private placement to purchase an aggregate of 23,160,000 shares in
the calculation of diluted loss per share, since the exercise of the warrants
are contingent upon the occurrence of future events and the inclusion of such
warrants would be anti-dilutive.
Our unaudited condensed statements of operations include a presentation of loss
per common stock subject to redemption in a manner similar to the two-class
method of income per share. Net loss per share for the three months ended March
31, 2021, basic and diluted for Class A common stock, was calculated by dividing
the interest income earned on investments held in the Trust Account of
approximately $16,000, net of applicable taxes available to be withdrawn from
the Trust Account of approximately $16,000, by the weighted average number of
55,200,000 Class A common stock outstanding for the period. Net loss per share
basic and diluted for Class B common stock, was calculated by dividing the net
loss (approximately $4.4 million less income attributable to Class A common
stock in the amount of approximately $0, resulting in a loss of approximately
$4.4 million), by the weighted average number of 12,980,000 Class B common stock
outstanding for the period.
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. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU
did not impact our financial position, results of operations or cash flows.
We do 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.
Off-Balance Sheet Arrangements
As of March 31, 2021, we
did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (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 a result, the unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of 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, (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 (United States) 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 Chief Executive Officer's compensation
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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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