References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Spring Valley Acquisition Corp. References
to our "management" or our "management team" refer to our officers and
directors, and references to the "Sponsor" refer to Spring Valley Acquisition
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
Company's final prospectus for its Initial Public Offering filed with the U.S.
Securities and Exchange Commission (the "SEC"). 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 August 20,
2020 formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other 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
and the sale of the Private Placement Warrants, 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 a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from the August 20, 2020 (inception) through March
31, 2022 were organizational activities and those necessary to prepare for the
Initial Public Offering and searching for a target, described below. We do not
expect to generate any operating revenues until after the completion of our
initial Business Combination. We expect to generate non-operating income in the
form of interest income from the proceeds from the Initial Public Offering. We
expect that we will 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 in connection with searching for, and
completing, a Business Combination.
For the three months ended March 31, 2022, we had a net loss of approximately
$16.0 million, which consisted of general and administrative expenses of
approximately $5.1 million and changes in fair value of derivative warrant
liabilities of approximately $10.8 million, offset by income from investments
held in the Trust Account of approximately $23,000.
For the three months ended March 31, 2021, we had a net income of approximately
$8.7 million, which consisted of changes in fair value of derivative warrant
liabilities of $9,028,000, offset by income from investments held in the Trust
Account of approximately $6,000, offset by general and administrative expenses
of approximately $299,000.
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Liquidity and Capital Resources
On November 27, 2020, we consummated the Initial Public Offering of 23,000,000
Units, which included the full exercise by the underwriters of their
over-allotment option in the amount of 3,000,000 Units, at a price of $10.00 per
Unit, generating gross proceeds of $232,000,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 8,900,000 Private
Placement Warrants to the Sponsor at a price of $1.00 per Private Placement
Warrant generating gross proceeds of $8,900,000.
Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of $232,300,000 was placed in the Trust Account. We incurred
$12,492,354 in transaction costs (net of $750,000 reimbursement received from
underwriters), including $4,600,000 of underwriting fees, $8,050,000 of deferred
underwriting fees and $592,354 of other costs.
As of March 31, 2022, we had cash held in the trust account of approximately
$232.3 million. 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. We may withdraw
interest from the Trust Account to pay taxes, if any. To the extent that our
share capital or debt 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 March 31, 2022, we had cash of approximately $577,000. 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 may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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.
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 initial 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 completion of
our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 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 an
affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities
and secretarial and administrative support services provided to the Company. We
began incurring these fees on November 23, 2020 and will continue to incur these
fees monthly until the earlier of the completion of a Business Combination and
the Company's liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $8,050,000
in the aggregate. The deferred fee 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.
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Pursuant to a registration and shareholders rights agreement entered into on
November 23, 2020, the holders of the Founder Shares, Private Placement Warrants
and any warrants that may be issued upon conversion of Working Capital Loans
(and any Class A ordinary shares issuable upon the exercise of the Private
Placement Warrants and warrants that may be issued upon conversion of the
Working Capital Loans) will be entitled to registration rights. The holders of
the majority of these securities are entitled to make up to three demands,
excluding short form demands, that we register such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to completion of a Business
Combination. However, the registration and shareholder rights agreement provides
that we will not permit any registration statement filed under the Securities
Act to become effective until termination of the applicable lockup period. The
registration and shareholder rights agreement does not contain liquidating
damages or other cash settlement provisions resulting from delays in registering
our securities. We will bear the expenses incurred in connection with the filing
of any such registration statements.
Contingent Fees
We entered into a contingent fee arrangement with one of our service providers
in connection with the search for a prospective initial Business Combination.
Per the arrangement, fees for services performed were contingent upon the
closing of a Business Combination and therefore not included as liabilities on
the accompanying balance sheets. As of March 31, 2022 and December 31, 2021,
these fees were approximately $0 and $4.0 million, respectively.
Critical Accounting Policies
The preparation of 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 period reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies other than as
noted below.
Derivative Warrant Liability
We account for the Warrants as either equity-classified or liability-classified
instruments based on an assessment of the specific terms and applicable
authoritative guidance in Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 480, Distinguishing Liabilities from
Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the Warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the Warrants meet all of the requirements for equity classification
under ASC 815, including whether the Warrants are indexed to our own ordinary
shares and whether the holders of Warrants could potentially require "net cash
settlement" in a circumstance outside of our control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of issuance of the Warrants and as of each
subsequent quarterly period end date while the Warrants are outstanding. For
issued or modified Warrants that meet all of the criteria for equity
classification, such Warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
Warrants that do not meet all the criteria for equity classification, such
Warrants are required to be recorded as liabilities at their initial fair value
on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the liability-classified Warrants are recognized as a
non-cash gain or loss on the statements of operations.
We account for the Warrants in accordance with the guidance contained in ASC
815-40 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 unaudited condensed statement of
operations. See Note 7 to our unaudited condensed financial statements included
in Item 1 of Part I of this Quarterly Report for further discussion of the
pertinent terms of the Warrants and Note 9 for further discussion of the
methodology used to determine the value of the warrant liabilities.
Class A Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Ordinary shares subject to
mandatory redemption is classified as a liability instrument and is measured at
fair value. Conditionally redeemable ordinary shares (including ordinary shares
that features
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redemption rights that is either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our Class A ordinary shares features
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, at March 31, 2022
and December 31, 2021, 23,000,000 Class A ordinary shares subject to possible
redemption are presented as temporary equity outside of the shareholders' equity
section of our balance sheets.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. Net income (loss) per
ordinary share is calculated by dividing the net income (loss) by the weighted
average shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) does not consider the effect of the
warrants underlying the Units sold in the Initial Public Offering (including the
consummation of the Over-allotment) and the private placement warrants to
purchase an aggregate of 20,400,000 Class A ordinary shares in the calculation
of diluted income (loss) per share, because the exercise of the warrants is
contingent upon the occurrence of future events. As a result, diluted net income
(loss) per share is the same as basic net income (loss) per share for the three
months ended March 31, 2022 and 2021. Accretion associated with the redeemable
Class A ordinary shares is excluded from earnings per share as the redemption
value approximates fair value.
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
financial statements.
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