References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Aequi Acquisition Corp. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to Aequi 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 Securities Exchange Act of 1934, as amended (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 for the period ended December 31, 2020, as
amended, 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.
This Management's Discussion and Analysis of Financial Condition has been
restated to give effect to the restatement of our financial statements as of
March 31, 2021 and June 30, 2021. Management re-evaluated the Company's
application of ASC 480-10-99 to its accounting classification of Public Shares.
In connection with the preparation of the Company's financial statements as of
September 30, 2021, management identified errors made in its historical
financial statements where, at the closing of the Company's Initial Public
Offering, the Company improperly classified a portion of its Class A common
stock subject to possible redemption. The Company previously determined the
Class A common stock subject to possible redemption cannot result in net
tangible assets being less than $5,000,001. Management determined that the Class
A common stock issued during the Initial Public Offering can be redeemed or
become redeemable subject to the occurrence of future events considered outside
of the Company's control. Therefore, management concluded that the redemption
value should include all Class A common stock subject to possible redemption
regardless if the result is less than $5,000,001 in net tangible assets. In
accordance with SEC Staff Accounting Bulletin No. 99, "Materiality" and SEC
Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements", management has concluded the classification error related to
temporary equity and permanent equity was material to the historical financial
statements. Therefore, the Audit Committee concluded, after discussion with the
Company's management and its advisors, that the Company's previously issued
financial statements impacted should be restated. This resulted in a restatement
to temporary equity with the offset recorded to additional paid-in capital (to
the extent available), accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 1, 2020, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses (the "Business Combination").
We intend to effectuate our Business Combination using cash from the proceeds of
our initial public offering (the "Initial Public Offering") and the sale of the
private placement warrants (the "Private Placement Warrants"), our capital
stock, debt or a combination of cash, stock 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 revenues to date.
Our only activities from inception through September 30, 2021 were
organizational activities and those necessary to prepare for the Initial Public
Offering, described below, and subsequent to 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 at the earliest. We generate non-operating income in the form of
interest income on marketable securities held after the Initial Public Offering.
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.
For the three months ended September 30, 2021, we had net income of $3,905,817,
which consisted of interest earned on investment held in Trust Account of
$23,682 and change in fair value of warrant liability of $4,102,667, offset by
operating costs of $220,532.
For the nine months ended September 30, 2021, we had net income of $5,915,978,
which consisted of the change in the value of our warrant liabilities of
$6,516,000 and interest earned on investment held in Trust Account of $105,464,
offset by operating costs of $705,486.
For the period from September 1, 2020 (inception) through September 30, 2020, we
had net loss of $761, which consisted of operating and formation costs.
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Liquidity and Capital Resources
On November 24, 2020, we consummated our Initial Public Offering of 20,000,000
units ("Units"), at a price of $10.00 per Unit, generating gross proceeds of
$200,000,000. Simultaneously with the closing of our Initial Public Offering, we
consummated the sale of 4,000,000 Private Placement Warrants at a price of $1.50
per Private Placement Warrant in a private placement to our Sponsor, generating
gross proceeds of $6,000,000.
On December 2, 2020, we sold an additional 3,000,000 Units for total gross
proceeds of $30,000,000 in connection with the underwriters' full exercise of
their over-allotment option. Simultaneously with the closing of the
over-allotment option, we also consummated the sale of an additional 400,000
Private Placement Warrants at $1.50 per Private Placement Warrant, generating
total proceeds of $600,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $230,000,000
was placed in a trust account ("Trust Account"). We incurred $13,092,230 in
transaction costs, including $4,600,000 of underwriting fees, $8,050,000 of
deferred underwriting fees and $442,230 of other offering costs, of which
$250,000 of legal services fees in connection with the Initial Public Offering
was paid through the transfer of 350,000 shares of Class B common stock (the
"Founder Shares"). Our legal counsel will also provide up to $120,000 of legal
services in connection with the Company's ongoing reporting obligations under
the Exchange Act for no additional cash compensation.
For the nine months ended September 30, 2021, net cash used in operating
activities was $374,213. Net income of $5,915,978 was offset by a non-cash
charge for the change in the fair value of warrant liabilities of $6,516,000 and
interest earned on marketable securities held in the Trust Account of $105,464.
Changes in operating assets and liabilities provided $331,273 of cash from
operating activities.
For the period from September 1, 2020 (inception) through September 30, 2020,
net cash used in operating activities was $761.
As of September 30, 2021, we had cash and marketable securities held in the
trust account of $230,124,709. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account to complete our Business Combination. We may withdraw interest
to pay taxes. To the extent that our capital stock 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.
As of September 30, 2021, we had $920,831 of cash 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, 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, 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 $1.50 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
22
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 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 Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
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 the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support provided to the Company. We began incurring these fees on
November 19, 2020 and will continue to incur these fees monthly until the
earlier of the Company's consummation of a Business Combination and its
liquidation.
The underwriters are 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 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.
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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") 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 identified the following critical accounting policies:
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 stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to Accounting
Standard Codification ("ASC") 480 and ASC 815. We account for the Private
Placement Warrants, warrants as part of the Units ("Public Warrants"), and
warrants convertible from the working capital loans (together with the Private
Placement Warrants and Public Warrants, 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 statement of operations. The Private Placement
Warrants and the Public Warrants for periods where no observable traded price
was available are valued using a binomial lattice model. For periods subsequent
to the detachment of the Public Warrants from the Units, the Public Warrant
quoted market price was used as the fair value for the Public Warrants and the
Private Placement Warrants as of each relevant date.
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 Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
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, common stock is
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 occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of our balance sheets.
Net Income (Loss) per Common 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 common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average shares of
common stock outstanding for the respective period.
We did not consider the effect of the warrants issued in connection with the
Initial Public Offering and the private placement in the calculation of diluted
income (loss) per share because their exercise is contingent upon future events.
As a result, diluted net income (loss) per common share is the same as basic net
income (loss) per common share. Accretion associated with the redeemable Class A
common stock is excluded from income (loss) per common share as the redemption
value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standard Board 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. ASU 2020-06
removes certain settlement conditions that are required for equity contracts to
qualify for the derivative scope exception and it also simplifies the diluted
earnings per share calculation in certain areas. ASU 2020-06 is effective for
fiscal years beginning after December 15, 2023, including interim periods within
those fiscal years, with early adoption permitted. We adopted ASU 2020-06
effective as of January 1, 2021. The adoption of ASU 2020-06 did not have an
impact on our financial statements.
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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