References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to VPC Impact Acquisition Holdings II. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to VPC Impact Acquisition Holdings Sponsor II,
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 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 Annual Report on Form 10-K 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 January 13,
2021, formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses or entities. 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.
Recent Developments
On August 2, 2021, we entered into a business combination agreement (together
with the first amendment dated September 29, 2021, the "Business Combination
Agreement") with FinAccel Pte. Ltd. ("FinAccel") and certain other affiliated
entities, pursuant to which, among other things, FinAccel would merge with and
into our holding company. The Business Combination Agreement was unanimously
approved by our board of directors on July 29, 2021.
On March 11, 2022, we entered into a termination and fee agreement (the
"Termination Agreement") with FinAccel and certain other affiliated entities.
Pursuant to the terms of the Termination Agreement, the parties agreed to
mutually terminate the Business Combination Agreement, effective on March 11,
2022, subject to the conditions set forth in the Termination Agreement. In
conjunction with the termination of the Business Combination Agreement, the
Subscription Agreements, the Investor Rights Agreement, the Founder Holder
Agreement and the other Ancillary Documents (as each is defined in the Business
Combination Agreement) automatically terminated in accordance with their
respective terms as of the same date.
The Termination Agreement provides that we will be entitled to receive (i) an
aggregate sum not to exceed $4,000,000 in reimbursement for certain documented
out-of-pocket third party expenses incurred by the Company (the "Termination
Reimbursement Amount"), which is payable by FinAccel within six months of the
date of the Termination Agreement and (ii) if we have not consummated an initial
business combination and have determined to redeem our public shares and
liquidate or dissolve thereafter (and we do not withdraw such determination, to
the extent that such determination can be withdrawn), FinAccel will issue and
deliver to the Company a penny warrant, on terms mutually agreeable to FinAccel
and us, to purchase a number of FinAccel's ordinary shares equal to three and
one-half percent (3.5%) of the Fully Diluted Share Number (as defined in the
Termination Agreement) of FinAccel as of the date of the Termination Agreement,
subject to customary anti-dilution protections (the "Equity Termination Fee").
If FinAccel engages in any transaction that would be deemed a Sale of the
Company (as defined in the Termination Agreement), then the party surviving the
sale transaction will assume the foregoing obligation, to satisfy the Equity
Termination Fee. If FinAccel fails to pay the Termination Reimbursement Amount,
then a default interest of five percent (5%) per annum will accrue on a daily
basis from the date the Termination Reimbursement Amount was due and payable
until all such unpaid amounts have been paid. The Termination Reimbursement
Amount was due on September 11, 2022. The Company has reflected the $4,000,000
termination fee on the condensed balance sheets in accounts receivable and in
the Company's statements of operations in reimbursement of business combination
expenses. As of September 30, 2022, the Termination Reimbursement Account was
not paid and is subject to default interest, which was considered immaterial and
is not reflected in these condensed financial statements.
The Termination Agreement contains mutual releases by all parties thereto, for
all claims known and unknown, relating and arising out of, or relating to, among
other things, the Business Combination Agreement, the ancillary documents to the
Business Combination Agreement or the transactions contemplated by the Business
Combination Agreement, subject to certain exceptions with respect to claims that
cannot be waived by law, the parties obligations under the Termination Agreement
and commercial transactions unrelated to the Business Combination Agreement.
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Results of Operations
We have neither engaged in any operations (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our only activities through September 30, 2022 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, and, after the Initial Public Offering, identifying a target
company for a Business Combination. We do not expect to generate any operating
revenues until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities
held in the Trust Account. We incur 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
$7,927,252, which consists of reimbursement of business combination expenses of
$4,000,000, change in fair value of warrant liabilities of $3,055,523 and
interest earned on investments held in the Trust Account of $1,162,325, offset
by operating and formation costs of $290,596.
For the nine months ended September 30, 2022, we had a net income of
$18,352,547, which consists of reimbursement of business combination expenses of
$4,000,000, change in fair value of warrant liabilities of $14,484,436 and
interest earned on investments held in the Trust Account of $1,525,710, offset
by operating and formation costs of $1,657,599.
For the three months ended September 30, 2021, we had a net loss of $1,654,071,
which consists of the change in fair value of warrant liability of $298,788 and
operating and formation costs of $1,358,575, offset by interest income on
marketable securities held in the Trust Account of $3,292.
For the period from January 13, 2021 (inception) through September 30, 2021, we
had a net loss of $2,634,651 which consists of transaction costs incurred in
connection with warrant liability of $609,973 and operating and formation costs
of $3,358,552, offset by change in fair value of warrant liability of $1,317,580
and interest earned on marketable securities held in the Trust Account of
$16,294.
Liquidity and Capital Resources
On March 9, 2021, the Company consummated the Initial Public Offering of
25,578,466 units (the "Units") which includes the partial exercise by the
underwriters of their over-allotment option in the amount of 3,078,466 Units, at
$10.00 per Unit, generating gross proceeds of $255,784,660. Simultaneously with
the closing of the Initial Public Offering, the Company consummated the sale of
5,127,129 warrants (the "Private Placement Warrants") at a price of $1.50 per
Private Placement Warrant in a private placement to VPC Impact Acquisition
Holdings Sponsor II, LLC (the "Sponsor"), generating gross proceeds of
$7,690,693.
Transaction costs amounted to $14,564,011, consisting of $5,115,693 of
underwriting fees, $8,952,463 of deferred underwriting fees and $495,855 of
other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $408,086. Net income of $18,352,547 was affected by interest earned on
investments held in the Trust Account of $1,525,710 and changes in fair value of
warrant liabilities of $14,484,436. Changes in operating assets and liabilities
used $2,750,487 of cash for operating activities.
For the period from January 13, 2021 (inception) through September 30, 2021,
cash used in operating activities was $1,525,679. Net loss of $2,634,651 was
affected by interest earned on marketable securities held in the Trust Account
of $16,294, changes in fair value of warrant liability of $1,317,580,
transaction costs incurred in connection with warrant liability of $609,973, and
formation cost paid by Sponsor in exchange for issuance of founder shares of
$5,000. Changes in operating assets and liabilities provided $1,827,873 of cash
for operating activities.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $257,332,068, consisting of money market funds invested primarily in U.S.
Treasury Securities. We may withdraw interest from the Trust Account to pay
taxes, if any. 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 income taxes payable), to complete our Business Combination. To the extent
that our share capital 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 target
business or businesses, make other acquisitions and pursue our growth
strategies.
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,
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, the 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 Private Placement Warrants of the post Business Combination
entity at a price of $1.50 per warrant at the option of the lender. Such
warrants would be identical to the Private Placement Warrants.
Off-Balance Sheet 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
The Company entered into an agreement, commencing on March 4, 2021, to pay the
Sponsor up to $10,000 per month for office space, utilities, secretarial and
administrative support services. Upon completion of a Business Combination or
its liquidation, the Company will cease paying these monthly fees. For the three
and nine months ended September 30, 2022, the Company incurred $30,000 and
$90,000 in fees for these services. As of September 30, 2022 $90,000 of these
fees were accrued. For the three months ended September 30, 2021 and for the
period from January 13, 2021 (inception) through December 31, 2021, the Company
incurred $30,000 and $100,000 in fees for these services, respectively. As of
December 31, 2021 $90,000 of these fees were accrued.
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The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,952,463
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 the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
Subscription Agreement
Concurrently with entering into the Business Combination Agreement, Holdco (as
defined in the Business Combination Agreement) entered into subscription
agreements with certain investors (the "PIPE Investors") (the "Subscription
Agreements"), pursuant to which such investors would have subscribed for Holdco
Class A Ordinary Shares (in the form of Holdco Class A ADSs) in a private
placement for $10.00 per share substantially concurrently at the Closing (as
defined in the Business Combination Agreement) for an aggregate purchase price
of $120 million. The proceeds from the private placement would have been used
for general working capital purposes following the Closing.
In light of the termination of the Proposed Business Combination and pursuant to
the Business Combination Agreement, we have terminated the existing Subscription
Agreements with all PIPE Investors.
Liquidity and Going Concern
As of September 30, 2022, the Company had $41,252 in its operating bank
accounts, $257,332,068 in marketable securities held in the Trust Account to be
used for a Business Combination or to repurchase or redeem its ordinary shares
in connection therewith and a working capital of $535,796.
In the absence of a completed Business Combination, the Company may require
additional capital. If the Company is unable to raise additional capital, it may
be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, suspending the pursuit of a Business
Combination. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's ("FASB") 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 9,
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. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after March 9, 2023. The Company intends to
complete its Business Combination in advance of the mandatory liquidation date.
Critical Accounting Policies and Estimates
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 and
estimates:
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued share purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. We account for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
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, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
Class A Ordinary 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 are classified as a liability instrument and 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' deficit section of our
condensed balance sheets.
Net Income (Loss) Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted average number of ordinary shares outstanding during the period.
This presentation contemplates a business combination as the most likely
outcome, in which case, both classes of shares share pro rata in the income
(loss) of the Company. Accretion associated with the redeemable shares of
Class A ordinary shares is excluded from earnings per share as the redemption
value approximates fair value.
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Recent Accounting Standards
In August 2020, FASB issued Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to
simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective for fiscal years beginning
after December 15, 2023 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company is currently assessing the impact, if any, that ASU 2020-06 would
have on its financial position, results of operations or cash flows, if adopted.
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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VPC IMPACT ACQUISITION HOLDINGS II 
