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 report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
We are restating our audited financial statements as of December 31, 2020, and
for the period from August 6, 2020 (inception) to December 31, 2020.
In this Amendment No. 2 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2020, we are restating our audited financial statements as of
December 31, 2020, and for the period from August 6, 2020 (inception) to
December 31, 2020.
We have re-evaluated our application of ASC 480-10-S99-3A to our accounting and
classification of the Public Shares, issued as part of the units sold in the IPO
on August 27, 2020. Historically, a portion of the Public Shares was classified
as permanent equity to maintain stockholders' equity greater than $5 million on
the basis that we will not redeem our Public Shares in an amount that would
cause our net tangible assets to be less than $5,000,001. Pursuant to such
re-evaluation, our management has determined that the Public Shares include
certain provisions that require classification of all of the Public Shares as
temporary equity regardless of the net tangible assets redemption limitation
contained in the Amended and Restated Certificate of Incorporation. In addition,
in connection with the change in presentation for the Public Shares, management
determined it should restate earnings per share calculation to allocate income
and losses shared pro rata between the two classes of shares. This presentation
contemplates a Business Combination as the most likely outcome, in which case,
both classes of shares share pro rata in the income and losses of our Company.
As a result of the foregoing, on December 6, 2021, the Audit Committee of the
Company, in consultation with its management, concluded that its previously
issued Financial Statements for the period from August 6, 2020 (inception)
through December 31, 2020, as previously restated in Amendment No. 1, should be
restated and should no longer be relied upon.
The restatement does not have an impact on our cash position and cash held in
the Trust Account.
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In connection with the restatement, our management reassessed the effectiveness
of our disclosure controls and procedures and internal controls and procedures
for the periods affected by the restatement. As a result of that reassessment,
we determined that our disclosure controls and procedures for the Applicable
Period was not effective with respect to the classification of the Company's
Class A common stock as components of equity instead of as temporary equity. For
more information, see Item 9A included in this Amendment No. 2.
We have not amended our previously filed Quarterly Report on Form 10-Q for the
period affected by the restatement. The financial information that has been
previously filed or otherwise reported for these periods is superseded by the
information in this Amendment No. 2, and the financial statements and related
financial information contained in such previously filed reports should no
longer be relied upon.
The restatement is more fully described in Note 2 of the notes to the financial
statements included herein.
Overview
We are a blank check company incorporated in Delaware on August 6, 2020 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 are an emerging growth company and, as such, we are subject to
all of the risks associated with emerging growth companies.
Our sponsor is HC PropTech Partners II LLC, a Delaware limited liability company
controlled by certain of our officers, directors and advisors. The registration
statement for our initial public offering was declared effective on December 3,
2020. On December 8, 2020, we consummated our initial public offering
of 23,000,000 units, including 3,000,000 additional units to cover
over-allotments, at $10.00 per unit, generating gross proceeds
of $230.0 million, and incurring offering costs of approximately $13.2 million,
inclusive of approximately $8.1 million in deferred underwriting commissions.
Simultaneously with the closing of our initial public offering, we consummated
the private placement (the "private placement") of 4,833,333 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 $7.3 million.
Upon the closing of our initial public offering and the private
placement, $230.0 million ($10.00 per unit) of the net proceeds of our initial
public offering and certain of the proceeds of the private placement was placed
in a trust account established for the benefit of our public stockholders (the
"trust account") and was invested in permitted United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940, as amended, having a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act that invest only in direct U.S. government treasury
obligations.
Our management has broad discretion with respect to the specific application of
the net proceeds of our 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 our initial business combination.
We will only have 24 months from the closing of our initial public offering, or
December 8, 2022, to complete our initial business combination (the "combination
period"). If we do not complete our initial business combination within this
period of time, we will (i) cease all operations except for the purposes of
winding up; (ii) 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 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 liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders
and our board of directors, proceed to commence a voluntary liquidation and
thereby a formal dissolution of our Company, subject in each case to its
obligations to provide for claims of creditors and the requirement of applicable
law. The representative of the underwriters agreed to waive its rights to the
deferred underwriting commission held in the trust account in the event we do
not complete our initial business combination within the Combination Period and,
in such event, such amounts will be included with the funds held in the trust
account that will be available to fund the redemption of the public shares. In
the event of such distribution, it is possible that the per share value of the
assets remaining available for distribution will be less than the initial public
offering price per unit ($10.00 per unit).
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Results of Operations
Our entire activity since inception up to December 31, 2020 was in preparation
for our formation, our initial public offering, and since the closing of our
initial public offering, a search for business combination candidates. We will
not generate any operating revenues until the closing and completion of our
initial business combination. We generate non-operating income in the form of
interest income and dividends on investments held in trust account. We expect to
incur increased 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 period from August 6, 2020 (inception) through December 31, 2020, we had
a net loss of approximately $4.2 million which consisted of an approximately
$3.5 million loss from change in fair value of derivative warrant liabilities,
financing costs of approximately $0.6 million, approximately $46,000 in general
and administrative expenses, related party administrative fees of approximately
$11,000, and approximately $81,000 in franchise tax expense, partially offset by
income from our investments held in the trust account of approximately $8,000.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $1.8 million in our operating bank
account and working capital of approximately $2.1 million (not taking into
account tax obligations that may be paid using the interest income earned from
investments in the Trust Account).
In addition, in order to finance transaction costs in connection an intended
initial business combination, our sponsor may, but is not obligated to, provide
us working capital loans. Up to $1.5 million of such working capital loans may
be convertible into warrants of the post-business combination entity at a price
of $1.50 per warrant at the option of the lender. Such warrants would be
identical to the Private Placement Warrants. Except for the foregoing, the terms
of such loans, if any, have not been determined and no written agreements exist
with respect to such loans to date. As of December 31, 2020, the Company had no
working capital loans outstanding.
Prior to the completion of our initial public offering, our liquidity needs were
satisfied through the proceeds of $25,000 from our sponsor in exchange for the
issuance of founder shares, and loan proceeds from our sponsor of $163,000 under
a promissory note, which we fully repaid on December 8, 2020. After the
consummation of our initial public offering, our liquidity needs have been
satisfied with the net proceeds from our initial public offering and the private
placement not held in the Trust Account.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our sponsor or an affiliate of our sponsor
or our officers and directors to meet our needs through the earlier of the
consummation of our initial business combination or one year from the date of
this filing. Over this time period, we will be using these funds 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
Business Combination.
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. The investments held in the trust account are classified as trading
securities. Trading securities are presented on the balance sheets at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included net gain from investments held in
trust account in the accompanying statement of operations. The estimated fair
values of investments held in the trust account were determined using available
market information.
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Class A Common Stock Subject to Possible Redemption
The Company accounts for its 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 the Company's control) are classified as temporary equity. At
all other times, shares of Class A common stock are classified as stockholders'
equity. The Company's Class A common stock features certain redemption rights
that are considered to be outside of the Company's control and subject to the
occurrence of uncertain future events. Accordingly, at December 31, 2020,
23,000,000 shares of Class A common stock subject to possible redemption are
presented as temporary equity, outside of the stockholders' equity section of
the Company's balance sheet.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted-average number of common stock outstanding during the periods. We
have not considered the effect of the warrants sold in our initial public
offering and Private Placement to purchase an aggregate of 12,500,000 shares of
Class A common stock in the calculation of diluted earnings per common share,
since their inclusion would be anti-dilutive under the treasury stock method. As
a result, diluted earnings per common share is the same as basic earnings per
common share for the periods presented.
Our statement of operations includes a presentation of income per common share
for common stock subject to redemption in a manner similar
to the two-class method of income per share. Net loss per common share, basic
and diluted for Class A common stock is calculated by dividing the investment
income earned on the Trust Account, net of applicable income or loss and
franchise taxes, by the weighted average number of shares of Class A common
stock outstanding since the initial issuance. Net loss per common share, basic
and diluted for Class B common stock is calculated by dividing the net income or
loss, less income attributable to Class A common stock, by the weighted average
number of shares of Class B common stock outstanding for the period.
Derivative 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 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.
We issued 7,666,667 warrants to purchase Class A common stock to investors in
our initial public offering and issued 4,833,333 Private Placement Warrants. All
of our outstanding warrants are recognized as derivative liabilities in
accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as
liabilities at fair value and adjust 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 our
statement of operations. The fair value of warrants issued in connection with
the Initial Public Offering and Private Placement were initially measured at
fair value using a Monte Carlo simulation model and subsequently, the fair value
of the Private Placement warrants have been estimated using a Monte Carlo
simulation model each measurement date. The fair value of Warrants issued in
connection with our Initial Public Offering have subsequently been measured
based on the listed market price of such warrants.
Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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