References to the "Company," "our," "us" or "we" refer to Sustainable
Development Acquisition I Corp. 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 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" 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
"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 Delaware on December 16, 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 "Business Combination"). Our Sponsor Sustainable Development
Sponsor, LLC, a Delaware limited liability company.
The registration statement for our IPO was declared effective on February 4,
2021. On February 9, 2021, we consummated the IPO of 31,625,000 units (including
4,125,000 units issued to the Underwriters pursuant to the exercise in full of
the over-allotment option granted to the Underwriters) ("Units" and, with
respect to the Class A common stock included in the Units being offered, the
"Public Shares"), at $10.00 per Unit, generating gross proceeds of $316.3
million, and incurring offering costs of approximately $17.3 million, inclusive
of $10.6 million in deferred underwriting commissions.
Simultaneously with the closing of the IPO, we consummated the private placement
("Private Placement") of 9,325,000 warrants at a price of $1.00 per warrant
("Private Placement Warrants" and, together with the warrants included in the
Units, the "Warrants") to the Sponsor, generating gross proceeds of
approximately $9.3 million.
Upon the closing of the IPO and the Private Placement on February 9, 2021,
$316.3 million ($10.00 per Unit) of the net proceeds of the sale of the Units in
the IPO and the Private Placement were placed in a trust account ("Trust
Account") located in the United States with Continental Stock Transfer & Trust
Company acting as trustee, and invested only in U.S. "government securities,"
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), having a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act, which invest only in direct U.S. government
treasury obligations, as determined by the Company, until the earlier of: (i)
the completion of a Business Combination and (ii) the distribution of the Trust
Account as described below.
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If we have not completed a Business Combination within 24 months from the
closing of the IPO, 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 its 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), and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining stockholders and our
board of directors, liquidate and dissolve, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Recent Developments
On April 12, 2021, the Staff of the Securities and Exchange Commission ("SEC")
released the Staff Statement on Accounting and Reporting Considerations for
Warrants Issued by Special Purpose Acquisition Companies ("SPACs") (the
"Statement"). The SEC Staff Statement addresses certain accounting and reporting
considerations related to warrants of a kind similar to those issued by the
Company at the time of its IPO in February 2021.
The Warrants were classified as equity in the Company's previously issued
audited balance sheet as of February, 2021. In light of the Statement and
guidance in Accounting Standards Codification ("ASC") 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", in particular as applicable to
certain provisions in the Warrants related to tender or exchange offer
provisions as well as provisions that provided for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the
warrant, the Company evaluated the terms of the Warrant Agreement entered into
in connection with the Company's IPO and concluded that the Company's Warrants
include provisions that, based on ASC 815-40, preclude the Warrants from being
classified as components of equity. The Warrants are not eligible for an
exception from derivative accounting, and therefore should be classified as a
liability measured at fair value, with changes in fair value reported each
period in earnings.
Results of Operations
For the three months ended June 30, 2021, we had a net loss of approximately
$8.5 million, which included a loss from operations of $0.36 million, and a loss
from the change in fair value of warrant liabilities of $8.15 million.
For the six months ended June 30, 2021, we had a net income of approximately
$0.8 million, which included a loss from operations of $.55 million, offering
cost expense allocated to warrants of $1.03 million, expense for excess in fair
value over cash received for private placement warrants of $1.94 million and
fully offset by a gain from the change in fair value of warrant liabilities of
$4.31 million.
Our business activities from inception to June 30, 2021 consisted primarily of
our formation and completing our IPO, and since the offering, our activity has
been limited to identifying and evaluating prospective acquisition targets for a
Business Combination.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of Class B common stock by our Sponsor and
advances from our Sponsor.
On February 9, 2021, we consummated our Initial Public Offering of 31,625,000
units (the "Units"), including 4,125,000 Units sold pursuant to the full
exercise of the underwriters' option to purchase additional Units. Each Unit
consists of one share of Class A common stock, $0.0001 par value per share (the
"Class A Common Stock"), and one-half of one redeemable warrant (the "Public
Warrants"), each whole Public Warrant entitling the holder thereof to purchase
one share of Class A Common Stock at an exercise price of $11.50 per share,
subject to adjustment. The Units were sold at an offering price of $10.00 per
Unit, generating gross proceeds of $316,250,000 (before underwriting discounts
and commissions and offering expenses). Simultaneously with the closing of the
Initial Public Offering, we consummated the sale of 9,325,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant in a private
placement to our stockholders, generating gross proceeds of $9,325,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $316,250,000
was placed in the Trust Account, and we had approximately $3.2 million of cash
held outside of the Trust Account and working capital of approximately $2.6
million. We incurred approximately $17.3 million in transaction costs, including
$10.6 million of deferred underwriting fees that will be paid to the
underwriters from the amounts held in the Trust Account solely in the event the
Company completes its initial Business Combination.
For the six months ended June 30, 2021, net cash used in operating activities
was $1.3 million, net cash used in investing activities was $316.3 million, and
net cash provided by financing activities was $318.9 million.
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At June 30, 2021, we had cash held in the Trust Account of $316,258,757. We
intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable (if applicable) and deferred underwriting commissions) and the
proceeds from the sale of the forward purchase shares to complete our Business
Combination. To the extent that our shares or debt is used, in whole or in part,
as consideration to complete our Business Combination, the remaining proceeds
held in the Trust Account will be used as working capital to finance the
operations of the post-Business Combination entity, make other acquisitions and
pursue our growth strategies.
At June 30, 2021, we had cash of $1,314,242 held outside of 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, properties or similar
locations of prospective target businesses or their representatives or owners,
review corporate documents and material agreements of prospective target
businesses, and 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 $2,000,000 of such loans may be
convertible into warrants, at the price of $1.00 per warrant at the option of
the lender.
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 and consummating 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 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
consummation of our Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business Combination. Subject
to compliance with applicable securities laws, we would only complete such
financing simultaneously with the completion of our Business Combination. If we
are unable to complete our Business Combination because we do not have
sufficient funds available to us, we will be forced to cease operations and
liquidate the Trust Account. In addition, following our Business Combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 2021. 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.
The underwriters are entitled to a deferred fee of $0.35 per share, or
$10,631,250 in the aggregate. The deferred fee 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
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 U.S. GAAP. 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.
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Except as set forth below, there have been no significant changes in our
critical accounting policies as discussed in the final prospectus filed by us
with the SEC on February 8, 2021.
Warrants Liability
We evaluated the Warrants in accordance with ASC 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", and concluded that a provision in
the Warrant Agreement related to certain tender or exchange offers as well as
provisions that provided for potential changes to the settlement amounts
dependent upon the characteristics of the holder of the warrant, precludes the
Warrants from being accounted for as components of equity. As the Warrants meet
the definition of a derivative as contemplated in ASC 815 and are not eligible
for an exception from derivative accounting, the Warrants are recorded as
derivative liabilities on the Balance Sheet and measured at fair value at
inception (on the date of the IPO) and at each reporting date in accordance with
ASC 820, "Fair Value Measurement", with changes in fair value recognized in the
Statement of Operations in the period of change.
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
unaudited condensed financial statements.
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