References to the "Company", "our", "us" or "we" refer to Hamilton Lane Alliance
Holdings I, Inc. 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.
Cautionary note regarding forward-looking statements
This Quarterly Report on Form 10-Q 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"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in the "Risk
Factors" detailed in Part I, Item 1A of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2020 and our other Securities and Exchange
Commission ("SEC") filings.
Overview
We are a blank check company incorporated on September 15, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We have not selected any specific
business combination target and we have not, nor has anyone on our behalf,
initiated any substantive discussions, directly or indirectly, with any business
combination target.
Our sponsor is HL Alliance Holdings Sponsor LLC, a Delaware limited liability
company (the "Sponsor"). We are an emerging growth company and, as such, we are
subject to all of the risks associated with emerging growth companies.
The registration statement for our Initial Public Offering was declared
effective on January 12, 2021. On January 15, 2021, we consummated its Initial
Public Offering of 27,600,000 units (the "Units" and, with respect to the Class
A common stock included in the Units being offered, the "Public Shares"),
including 3,600,000 additional Units to cover over-allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of $276.0
million, and incurring offering costs of approximately $15.9 million, of which
approximately $9.7 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 5,013,333 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to our Sponsor, generating
proceeds of approximately $7.5 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$276.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was 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 with a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act of 1940, as amended (the "Investment Company Act") which invest only in
direct U.S. government treasury obligations, as determined by us, 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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Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination. There is no
assurance that we will be able to complete a Business Combination successfully.
We must complete an initial Business Combination with one or more operating
businesses or assets with a fair market value equal to at least 80% of the net
assets held in the Trust Account (excluding any deferred underwriting
commissions and taxes payable on the income earned on the trust account).
However, we will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the
target or otherwise acquires a controlling interest in the target business
sufficient for it not to be required to register as an investment company under
the Investment Company Act.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or January 15, 2023, (as such period may
be extended pursuant to the Certificate of Incorporation, the "Combination
Period"), 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 the 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.
Results of Operations
Our entire activity since inception through June 30, 2021 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We generated non-operating
income in the form of investment income from the investments held in the Trust
Account following the closing of the Initial Public Offering.
For the three months ended June 30, 2021, we had a net loss of approximately
$3,320,000, which consisted of approximately $16,000 gain on investments held in
the Trust Account, which was partially offset by approximately $243,000 of
general and administrative expenses and $107,000 of franchise tax expenses, and
$2,986,000 in change of fair value of derivative warrant liabilities.
For the six months ended June 30, 2021, we had a net loss of approximately
$1,877,000, which consisted of approximately $459,000 of financing costs
associated with issuance of warrants, $568,000 of general and administrative
expenses $109,000 of franchise tax expenses, and $712,000 in change of fair
value of derivative warrant liabilities, partly offset by an approximate $19,000
gain on investments held in the Trust Account.
Liquidity and capital resources
As of June 30, 2021, the Company had approximately $76,000 in cash and working
capital of approximately $0.5 million (not taking into account approximately
$99,000 in tax obligations that may be paid using investment income earned in
the Trust Account). Further, we have incurred and expect to continue to incur
significant costs in the pursuit of our initial business combination plans. We
cannot assure you that our plans to consummate an initial business combination
will be successful.
Our liquidity needs to date have been satisfied through the payment of $25,000
from our Sponsor to purchase the Founder Shares (as defined in Note 5), and loan
proceeds from our Sponsor of $300,000 under a promissory note provided prior to
our Initial Public Offering (see Note 5). WE repaid the promissory note of
$300,000 on January 20, 2021. Subsequent to the consummation of the Initial
Public Offering, our Company's liquidity have been satisfied through the net
proceeds from the consummation of the Initial Public Offering, the Private
Placement held outside of the Trust Account, and an additional loan from the
Sponsor of $300,000.
Our Sponsor or an affiliate of our Sponsor, or certain of our officers and
directors intend, but are not obligated, to provide Working Capital Loans (as
defined in Note 5) as needed to meet liquidity needs. In March 2021, we borrowed
$300,000 under Working Capital Loans from the Sponsor (see Note 5). The note is
still outstanding as of June 30, 2021.
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On July 22, 2021, we entered into a Working Capital Loan Agreement with our
Sponsor, pursuant to which we may borrow up to $2.0 million from our Sponsor for
ongoing expenses reasonably related to the business of our Company and the
consummation of the Business Combination. All unpaid principal under this
Working Capital Loan will be due and payable in full on the effective date of
the Business Combination. See Note 5 for a description of the agreement and the
underlying promissory notes.
Based on the foregoing, management believes that we will have borrowing capacity
to meet our needs through the earlier of the consummation of an Initial Business
Combination or one year from this filing. Over this time period, we will use the
funds held outside of the Trust Account for paying existing accounts payable,
identifying and evaluating prospective Initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Initial Business Combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The unaudited condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
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 United States generally accepted
accounting principles. 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. The Company has identified the following as its
critical accounting policies:
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. Our investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these investments are included in income from investments held
in Trust Account in the unaudited condensed statement of operations. The
estimated fair values of investments held in the Trust Account are determined
using available market information.
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its 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 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
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The 9,200,000 Public Warrants and the 5,013,333 Private Placement Warrants are
recognized as derivative liabilities in accordance with ASC 815-40. Accordingly,
we recognize the warrant instruments as liabilities at fair value and adjusts
the instruments to fair value at each reporting period. The liabilities are
subject to re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in the condensed statement of operations. The
fair value of the Public Warrants issued in connection with the Public Offering
and Private Placement Warrants were initially measured at fair value using a
likely modified Black-Scholes model. The fair value of Public Warrants issued in
connection with the Initial Public Offering has been measured based on the
listed market price of such warrants, a Level 1 measurement, since March 2021.
Subsequently, the fair value of the Private Placement Warrants has been
estimated based on the observed price for Public Warrants, a Level 2
measurement, as of March 31, 2021 and June 30, 2021.
Offering Costs Associated with The Initial Public Offering
Offering costs consist of legal, accounting, underwriting commissions and other
costs incurred that were directly related to the Initial Public Offering.
Offering costs are allocated to the separable financial instruments issued in
the Initial Public Offering based on a relative fair value basis, compared to
total proceeds received. Offering costs associated with warrant liabilities are
expensed as incurred, presented as non-operating expenses in the condensed
statements of operations. Offering costs associated with the Class A common
stock were charged to stockholders' equity upon the completion of the Initial
Public Offering on January 15, 2021. We classify deferred underwriting
commissions as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
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 (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
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,
shares of Class A common stock are 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 the occurrence of uncertain future events.
Accordingly, as of June 30, 2021, a total of 24,915,900 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. There was
no Class A common stock subject to possible redemption as of December 31, 2020.
Net Income (loss) Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net income per share of common stock is computed by
dividing the net income by the weighted average number of common shares
outstanding during the period excluding shares subject to forfeiture. Weighted
average Class B shares were reduced for an aggregate of 1,803,922 shares of
Class B common stock (up to 235,294 Contingent Founder Shares were subject to
forfeiture by the Sponsor if the over-allotment option was not exercised in full
or in part by the underwriters) (the "Contingent Founder Shares") held by our
Sponsor that are subject to forfeiture and transfer restrictions unless and
until the trading price of Class A common stock exceeds certain price thresholds
during specified periods of time following the closing of the Initial Business
Combination (see Note 5). In addition, prior the exercise of the over-allotment
400,000 shares of Class B common stock was subject to forfeiture by the Sponsor
if the over-allotment option was not exercised in full by the underwriters. On
January 15, 2021, in connection with the over-allotment exercise, the 400,000
Class B shares and the 235,294 Contingent Founder Shares were no longer subject
to forfeiture.
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Our unaudited condensed statements of operations includes a presentation of net
income (loss) per share for Class A common stock subject to redemption in a
manner similar to the two-class method of net income (loss) per share. Net
income (loss) per common stock, basic and diluted for Class A redeemable common
stock for the three and six months ended June 30, 2021 is calculated by dividing
the income from investments held in the Trust Account of approximately $16,000
and 19,000, respectively, net of interest available to be withdrawn for the
payments of taxes franchise taxes of approximately $16,000 and $19,000 for the
three and six months ended June 30, 2021, respectively, by the weighted average
number of shares of Class A redeemable common stock outstanding for the period.
Net loss per share, basic and diluted for Class B non-redeemable common stock
for the three and six months ended June 30, 2021 is calculated by dividing net
loss, adjusted for income attributable to Class A redeemable common stock, by
the weighted average number of shares of Class B non-redeemable common stock
outstanding for the period. Nonredeemable Class B common stock include the
Founder Shares as these shares do not have any redemption features and do not
participate in the income earned on the Trust Account.
The calculation of diluted net income (loss) per common stock does not consider
the effect of the warrants issued in connection with the Initial Public Offering
and the Private Placement to purchase an aggregate of 14,213,333 shares of
common stock as their inclusion would be anti-dilutive under the treasury stock
method.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("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. The ASU also removes
certain settlement conditions that are required for equity-linked contracts to
qualify for the derivative scope exception, and it simplifies the diluted
earnings per share calculation in certain areas. The Company adopted ASU 2020-06
on January 1, 2021. Adoption of the ASU did not impact the Company's financial
position, results of operations or cash flows.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting standards updates, if currently adopted, would
have a material effect on the Company's unaudited condensed financial
statements.
Off-balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an independent registered public accounting firm's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the report of independent
registered public accounting firm providing additional information about the
audit and the financial statements (auditor discussion and analysis), and (iv)
disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of the principal
executive officer's compensation to median employee compensation. These
exemptions will apply for a period of five years following the completion of the
Initial Public Offering or until we are no longer an "emerging growth company,"
whichever is earlier.
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