References in this Quarterly Report on Form 10-Q (this "Quarterly Report") to
"we," "us" or the "Company" are to Codere Online U.S. Corp. (f/k/a DD3
Acquisition Corp. II). References to our "management" or our "management team"
refer to our officers and directors, and references to the "Sponsor" refer to
DD3 Sponsor Group, 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 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 ("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 formed under the laws of the State of Delaware on
September 30, 2020, for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business combination with one or more businesses or entities
("Business Combination"). Our efforts to identify a prospective target business
will not be limited to a particular industry or geographic region. We intend to
effectuate our Business Combination using cash from the proceeds of the Initial
Public Offering and the sale of the private units ("Private Units") that
occurred simultaneously with the consummation of the Initial Public Offering
(the "Private Placement"), our securities, debt or a combination of cash,
securities 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 raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2020 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below,
and, after our 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 established for the benefit of our public stockholders (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 searching for, and completing, a Business
Combination.
For each of the three months ended December 31, 2020 and for the period from
September 30, 2020 (inception) through December 31, 2020, we had a net loss of
$162,645, which consisted of operating costs of $87,097, an increase in the fair
value of warrant liability of 74,000, transaction costs associated with warrant
liability of $396, and an unrealized loss on marketable securities held in our
Trust Account of $5,999, offset by interest income on marketable securities held
in the Trust Account of $4,847.
20
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of shares of Class B common stock, par value
$0.0001 per share ("Founder Shares"), by the Sponsor and loans from the Sponsor.
On December 10, 2020, we consummated the Initial Public Offering of 12,500,000
units ("Units"), at $10.00 per Unit, which included the partial exercise by the
underwriters of their over-allotment option in the amount of 1,500,000 Units,
generating gross proceeds of $125,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the Private Placement of an
aggregate of 370,000 Private Units to the Sponsor and the Forward Purchase
Investors (as defined below) at a price of $10.00 per Private Unit, generating
gross proceeds of $3,700,000.
Following the Initial Public Offering, including the partial exercise of the
over-allotment option, and the Private Placement, a total of $125,000,000 was
placed in the Trust Account. We incurred $2,966,508 in transaction costs,
including $2,500,000 of underwriting fees and $466,508 of other offering costs.
For the period from September 30, 2020 (inception) through December 31, 2020,
net cash used in operating activities was $55,200. Net loss of $162,645 and
interest earned on marketable securities held in the Trust Account of $4,847 was
offset by an increase in the fair value of warrant liabilities of $74,000,
transaction costs associated with warrant liability of $396, an unrealized loss
on marketable securities held in the Trust Account of $5,999 and changes in
operating assets and liabilities, which provided $31,987 of cash for the period.
As of December 31, 2020, we had marketable securities held in the Trust Account
of $124,998,848 (including approximately $1,000 of unrealized loss, net of
interest income) consisting of securities held in a money market fund that
invests in U.S. Treasury securities 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 December 31, 2020, we did not withdraw any interest earned on the
Trust Account to pay our taxes. 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 and to pay our expenses relating thereto, including a fee payable to
EarlyBirdCapital, Inc. ("EarlyBirdCapital") upon consummation of our Business
Combination for assisting us in connection with our Business Combination, as
described below. 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 December 31, 2020, we had cash of $743,292 held outside 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 our initial stockholders,
officers, 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 the Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into units of
the post-Business Combination entity that would be identical to the Private
Units, at a price of $10.00 per unit, 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 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.
21
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or other long-term
liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000
for office space, utilities and administrative support. We began incurring these
fees on December 7, 2020 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
We have engaged EarlyBirdCapital as an advisor in connection with our Business
Combination to assist us in holding meetings with our stockholders to discuss
the potential Business Combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with our initial Business Combination, assist us in
obtaining stockholder approval for the Business Combination and assist us with
our press releases and public filings in connection with the Business
Combination. We will pay EarlyBirdCapital a cash fee for such services upon the
consummation of our initial Business Combination in an amount up to 3.5% of the
gross proceeds of the Initial Public Offering, or $4,375,000 (exclusive of any
applicable finders' fees which might become payable).
Certain funds affiliated with Baron Capital Group, Inc., which are members of
the Sponsor, and MG Partners Multi-Strategy Fund LP (collectively, the "Forward
Purchase Investors") have entered into contingent forward purchase agreements
(the "Forward Purchase Agreements") with us that provide for the purchase of an
aggregate of up to 5,000,000 shares of Class A common stock ("Forward Purchase
Shares"), at a price of $10.00 per Forward Purchase Share, in a private
placement to close immediately prior to the closing of our initial Business
Combination. Each Forward Purchase Investor will have the right to be excused
from its purchase obligation in connection with any specific Business
Combination if, within five days following written notice delivered by us of our
intention to enter into a specific Business Combination, the Forward Purchase
Investor notifies us that it has decided not to proceed with the purchase for
any reason. If a Forward Purchase Investor exercises such right, or otherwise
fails to purchase the Forward Purchase Shares allocated to it, such Forward
Purchase Investor will forfeit a pro rata portion of its interest in the Sponsor
or its right to purchase Founder Shares from the Sponsor, as applicable. Any
funds from the sale of the Forward Purchase Shares may be used as part of the
consideration to the sellers in the initial Business Combination, for expenses
in connection with the initial Business Combination or for the combined
company's working capital needs. This obligation is independent of the
percentage of stockholders electing to redeem their public shares and could
provide us with a minimum funding level for the initial Business Combination.
The Forward Purchase Agreements also provide a right of first refusal for the
Forward Purchase Investors to participate in any sale of equity securities by us
in connection with our initial Business Combination so long as such Forward
Purchase Investor elects to purchase its Forward Purchase Shares.
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 Liabilities
We account for the warrants underlying the Private Units sold in the Private
Placement (the "Private Warrants") in accordance with the guidance contained in
ASC 815 under which the Private Warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Under ASC 815-40, the Private
Warrants are not indexed to our common stock in the manner contemplated by ASC
815-40 because the holder of the instrument is not an input into the pricing of
a fixed-for-fixed option on equity shares. Accordingly, we classify the Private
Warrants as liabilities at their fair value and adjust the Private Warrants to
fair value at each reporting period. These liabilities are 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 Warrants
are valued using a binomial lattice model.
22
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 features 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) 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,
Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders' equity section of our
condensed balance sheet.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. Shares
of common stock subject to possible redemption at December 31, 2020, which are
not currently redeemable and are not redeemable at fair value, have been
excluded from the calculation of basic net loss per common share since such
shares, if redeemed, only participate in their pro rata share of the Trust
Account earnings. The Company has not considered the effect of the warrants sold
in the Initial Public Offering or the effect of warrants underlying the 370,000
Units sold in the private placement in the calculation of diluted loss per
common share, since the exercise of the warrants are contingent upon the
occurrence of future events and the inclusion of such warrants would be
anti-dilutive. As a result, diluted net loss per common share is the same as
basic net loss per common share for the periods presented.
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.
© Edgar Online, source Glimpses
CODERE ONLINE LUXEMBOURG, S.A. 
