References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to INSU Acquisition Corp. II. References to our "management" or
our "management team" refer to our officers and directors, references to the
"Sponsor" refer to Insurance Acquisition Sponsor II, LLC and Dioptra Advisors
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, 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 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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
October 11, 2018 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar Business
Combination with one or more target businesses. We intend to effectuate our
Business Combination using cash from the proceeds of our Initial Public Offering
and the sale of the Placement Units that occurred simultaneously with the
completion of our Initial Public Offering, 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.
In March 2020, the COVID-19 outbreak was declared a National Public Health
Emergency that continues to spread throughout the world and has adversely
impacted global activity and contributed to significant declines and volatility
in financial markets. The outbreak could have a continued material adverse
impact on economic and market conditions and trigger a period of global economic
slowdown. The rapid development and fluidity of this situation precludes any
prediction as to the ultimate material adverse impact of the coronavirus
outbreak. Nevertheless, the outbreak presents uncertainty and risk with respect
to the Company and its ability to successfully complete a Business Combination.
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 from October 11, 2018 (inception) through September
30, 2020 were organizational activities, those necessary to prepare for the
Initial Public Offering, described below, and finding 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 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 each of the three and nine months ended September 30, 2020, we had a net
loss of $83,615, which consisted of operating costs of $85,001, offset by
interest income on marketable securities held in the Trust Account of $1,386.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of common stock by the Sponsor and loans from
our Sponsor.
On September 8, 2020, we consummated the Initial Public Offering of 23,000,000
Units, which included the full exercise by the underwriters of their
over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit,
generating gross proceeds of $230,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 540,000 Placement Units
to the Sponsor and Cantor at a price of $10.00 per Unit, generating gross
proceeds of $5,400,000.
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Following the Initial Public Offering, the full exercise of the over-allotment
option by the underwriters and the sale of the Placement Units, a total of
$230,000,000 was placed in the Trust Account and we had $963,727 of cash held
outside of the Trust Account, after payment of costs related to the Initial
Public Offering, and available for working capital purposes. We incurred
$14,233,916 in transaction costs related to the Initial Public Offering,
including $4,000,000 of underwriting fees, $9,800,000 of deferred underwriting
fees and $433,916 of other costs.
For the nine months ended September 30, 2020, cash used in operating activities
was $300,113, which was comprised of our net loss of $83,615, interest earned on
marketable securities held in the Trust Account of $1,386 and changes in
operating assets and liabilities, which used $215,112 of cash for operating
activities.
As of September 30, 2020, we had marketable securities held in the Trust Account
of $230,001,386 (including approximately $1,000 of interest income) consisting
of U.S. Treasury securities with a maturity of 180 days or less. Interest income
on the balance in the Trust Account may be used by us to pay taxes. Through
September 30, 2020, we did not withdraw any interest income from the Trust
Account. 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 amounts released to us to pay taxes and deferred underwriting commissions)
to consummate our Business Combination. To the extent that our capital stock or
debt is used, in whole or in part, as consideration to consummate 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.
At September 30, 2020, we had cash of $690,971 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, production facilities 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 requirements or finance transaction costs in
connection with a Business Combination, our Sponsor or one of its affiliates has
committed to loan us funds as may be required up to a maximum of $750,000, and
may, but is not obligated to, loan us additional funds to fund our additional
working capital requirements and transaction costs. 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 identical to the Placement Warrants, at a price
of $1.00 per warrant at the option of the lender.
We do not believe we will need to raise additional funds in order to meet the
expenditures required to identify and acquire a target business. However, if our
estimate of the costs of undertaking due diligence investigations and
negotiating a Business Combination is less than the actual amount necessary to
do so, we may have insufficient funds available to pursue and consummate our
Business Combination. Moreover, we may need to obtain additional financing if 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. Subject to compliance with applicable securities laws,
we would only obtain such financing simultaneously with the consummation of our
Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2020. 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
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
or an affiliate of the Sponsor a monthly fee of $20,000 for office space,
administrative and shared personnel support services to the Company. We began
incurring these fees on September 3, 2020 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination and our
liquidation.
In addition, we have an agreement to pay the underwriters a deferred fee of
$9,800,000. The deferred fee will become payable to the underwriters'
representative 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 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 condensed 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:
Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." 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 as temporary equity, outside of the
stockholders' equity section of our condensed balance sheets.
Net Loss Per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable franchise and income taxes, by the weighted average number of Class A
redeemable common stock outstanding for the period. Net loss per common share,
basic and diluted for Class A and Class B non-redeemable common stock is
calculated by dividing net income, less income attributable to Class A
redeemable common stock, by the weighted average number of Class A and Class B
non-redeemable common stock outstanding for the period 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.
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