References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Athlon Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to AAC HoldCo, 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
Form10-Qincluding, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the completion of the Proposed Business Combination (as defined
below), 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, including that the
conditions of the Proposed Business Combination are not satisfied. 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.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of January 14, 2021, March 31, 2021 and June
30, 2021. Management identified errors made in its historical financial
statements where, at the closing of our Initial Public Offering, we improperly
valued our Class A common stock subject to possible redemption. We previously
determined the Class A common stock subject to possible redemption to be equal
to the redemption value of $10.00 per share of Class A common stock while also
taking into consideration a 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, resulting in
the Class A common stock subject to possible redemption being equal to their
redemption value. As a result, management has noted a reclassification error
related to temporary equity and permanent equity. This resulted in a restatement
to the initial carrying value of the Class A common stock subject to possible
redemption with the offset recorded to additional paid-in capital (to the extent
available), accumulated deficit and Class A common stock. In connection with the
change in presentation for the Class A common stock subject to redemption, the
Company also restated its earnings per share calculation to allocate net income
(loss) evenly to Class A and Class B common stock. This presentation
contemplates a Business Combination as the most likely outcome, in which case,
both classes of common stock pro rata in the income (loss) of the Company.
Overview
We are a blank check company formed under the laws of the State of Delaware on
October 6, 2020 for the purpose of effecting the merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We intend
to effectuate our Business Combination using cash from the proceeds of the
Initial Public Offering and the sale of the Private Units, 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 October 6, 2020 (inception) through September 30, 2021
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and 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 investments 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.
For the three months ended September 30, 2021, we had a net income of
$1,078,911, which consists of the change in fair value of warrant liability of
$1,279,200 and interest earned on marketable securities held in Trust Account of
$4,957, offset by formation and operational costs of $205,246.
For the nine months ended September 30, 2021, we had net loss of $108,487, which
consists of formation and operational costs of $1,022,678 and transaction costs
incurred in connection with warrant liability of $611,630, offset by the change
in fair value of the warrant liability of $1,492,400 and interest earned on
marketable securities held in Trust Account of $33,421.


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Liquidity and Capital Resources
On January 14, 2021, the Company consummated the Initial Public Offering of
27,600,000 Units, which includes the full exercise by the underwriter of its
over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit,
generating gross proceeds of $276,000,000 which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,520,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement with the Sponsor, generating gross
proceeds of $7,520,000, which is described in Note 5.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Units, a total of $276,000,000 was placed in
the Trust Account. We incurred related costs of $15,649,762, consisting of
$5,520,000 in cash underwriting fees, $9,660,000 of deferred underwriting fees
and $469,762 of other offering costs relating to the Initial Public Offering.
For the nine months ended September 30, 2021, cash used in operating activities
was $833,314. Net loss of $108,487 was affected by the change in fair value of
the warrant liability of $1,492,400, transaction costs associated with the IPO
of $611,630, and interest earned on marketable securities held in Trust Account
of $33,421. Net changes in operating assets and liabilities provided $189,364 of
cash for operating activities.
As of September 30, 2021, we had investments held in the Trust Account of
$276,033,421 (including approximately $33,421 of interest income consisting of
U.S. Treasury Bills with a maturity of 185 days or less). Interest income on the
balance in the Trust Account may be used by us to pay taxes. Through
September 30, 2021, we have not withdrawn any interest earned from the Trust
Account.
As of September 30, 2021, we had cash and investments held in the trust account
of $276,033,421. 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 $721,924 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, the Sponsor, or certain of our officers
and directors or their affiliates 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 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 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.


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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 an
affiliate of one of our executive officers a monthly fee of $5,000 for office
space, utilities and secretarial and administrative services. We began incurring
these fees on January 11, 2021 and will continue to incur these fees monthly
until the earlier of the completion of the Business Combination and our
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $9,660,000
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 the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
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:
Warrant Liability
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 ASC 480
and ASC 815. 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 statements 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 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 Accounting Standards Codification ("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 condensed
balance sheets.
Net Loss Per Common Share
Net income (loss) per common stock is computed by dividing net income (loss) by
the weighted average number of common stock outstanding for the period. The
Company applies the
two-class
method in calculating earnings per share. Accretion associated with the
redeemable shares of Class A common stock is excluded from earnings per share as
the redemption value approximates fair value.


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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
condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as of September 30, 2021. Based upon their evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) were not effective, due to the material weakness in our internal
control over financial reporting related to the Company's accounting for complex
financial instruments. As a result, we performed additional analysis as deemed
necessary to ensure that our financial statements were prepared in accordance
with U.S. generally accepted accounting principles. Accordingly, management
believes that the financial statements included in this Form 10-Q present fairly
in all material respects our financial position, results of operations and cash
flows for the period presented.
Management has implemented remediation steps to improve our internal control
over financial reporting. Specifically, we expanded and improved our review
process for complex securities and related accounting standards. We plan to
further improve this process by enhancing access to accounting literature,
identification of third-party professionals with whom to consult regarding
complex accounting applications and consideration of additional staff with the
requisite experience and training to supplement existing accounting
professionals.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

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