References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer toUSHG Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, references to the "Sponsor" refer toUSHG Investments, LLC . 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 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 Quarterly Report on Form 10-Q for the three months endedMarch 31, 2021 filed with theU.S. Securities and Exchange Commission (the "SEC") onMay 24, 2021 and the Company's final prospectus for its initial public offering (the "Initial Public Offering"). The Company's securities filings can be accessed on the EDGAR section of theSEC'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 incorporated onDecember 4, 2020 as aDelaware 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 or entities ("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 Placement Warrants (as defined below), our shares, debt, or a combination of cash, equity, and debt. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. Our Sponsor isUSHG Investments, LLC , aDelaware limited liability company. The registration statement for the Initial Public Offering was declared effective onFebruary 24, 2021 . OnMarch 1, 2021 , we consummated the Initial Public Offering of 28,750,000 units ("Units" and, with respect to the Class A common stock included in the units being offered, the "public shares"), including 3,750,000 over-allotment Units, at$10.00 per Unit, generating gross proceeds of$287.5 million , and incurring offering costs of approximately$784,282 , inclusive of approximately$15.8 million in deferred underwriting commissions. Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (the "Private Placement") of 1,333,333 warrants (each, a "Private Placement Warrant" and collectively, the "Private Placement Warrants") at a price of$1.50 per Private Placement Warrant to the Sponsor, generating proceeds of$2.0 million . 17
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Table of Contents Upon the closing of the Initial Public Offering and the Private Placement,$287.5 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering was held in a trust account ("Trust Account") located inthe United States withAmerican Stock Transfer & Trust Company, LLC acting as trustee, and invested only inUnited States "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment Company Act") having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in directU.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. If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, orMarch 1, 2023 , 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 our 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 our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations underDelaware law to provide for claims of creditors and the requirements of other applicable law. Recent Developments OnNovember 8, 2021 , the Company entered into an Investment Agreement and Plan of Merger (the "Investment Agreement") withPanera Brands, Inc. , aDelaware corporation ("Panera"), andRye Merger Sub Inc. , aDelaware corporation and wholly owned subsidiary of Panera ("Merger Sub"), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Panera (the "Merger"). Upon the terms and subject to the conditions set forth in the Investment Agreement, at the effective time of the Merger (the "Effective Time"), each issued and outstanding share of the Company's Class A common stock and each issued and outstanding share of the Company's Class B common stock will be converted into the right to receive a number of shares of Panera's common stock, par value$0.01 per share ("Panera Common Stock") at an exchange ratio of$10.00 divided by the public offering price per share in the Panera IPO (as defined below). In addition, at the Effective Time, each issued and outstanding warrant of the Company will be assumed by Panera and will relate to Panera Common Stock (each, a "Warrant") (with the number of shares of Panera Common Stock underlying each Warrant adjusted in accordance with the terms of the Investment Agreement). The consummation of the proposed Transactions (as defined in the Investment Agreement) is subject to the receipt of the requisite approval of the stockholders of the Company (such approval, the "HUGS stockholder approval") and the fulfillment of certain other conditions, including the consummation of Panera's initial public offering of Panera Common Stock (the "Panera IPO"). Results of Operations We have neither engaged in any operations (other than searching for a Business Combination after the Initial Public Offering) nor generated any revenues to date. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on cash and cash equivalents. 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 endedSeptember 30, 2021 , we had net income of approximately$1,643,080 , which consisted of approximately$238,414 in formation and operating costs and$50,000 in franchise tax expense, offset by an$1,927,152 gain from change in fair value of warrant liabilities and by$4,342 in interest income from funds held in the Trust Account. For the nine months endedSeptember 30, 2021 , we had a net income of approximately$4,194,795 , which consisted of approximately$549,959 in formation and operating costs,$150,000 in franchise tax expense and approximately$757,984 in offering costs allocated to derivative warrant liabilities, offset by$5,642,686 gain from change in fair value of warrant liabilities and$10,052 in income from funds held in the Trust Account. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as ofSeptember 30, 2021 . Contractual Obligations The underwriters are entitled to a deferred fee of$0.55 per Unit, or$15,812,500 in the aggregate. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement. We have entered into an Administrative Services Agreement pursuant to which the Company will pay an affiliate of the Sponsor a total of$10,000 per month for office space, secretarial and administrative services. We will make payments to the Sponsor until the earlier of the completion of the Initial Business Combination or the liquidation of the trust assets. We paid$30,000 and$80,000 for the services provided through the Administrative Services Agreement for the three and nine months endedSeptember 30, 2021 , respectively. Critical Accounting Policies The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe 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 unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies: Investments Held in the Trust Account Our portfolio of investments held in the Trust Account is comprised ofU.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 inU.S. government securities, or a combination thereof. The investments held in the Trust Account are classified as trading 18
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Table of Contents 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 in income from investments held in the Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. 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 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. Conditionally redeemable shares of Class A common stock (including shares of 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 shares of Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as ofSeptember 30, 2021 , 28,750,000 shares of Class A common stock subject to possible redemption were presented as temporary equity, outside of the stockholders' equity section of the accompanying balance sheet. The Class A common stock subject to possible redemption reflected on the balance sheet asSeptember 30, 2021 are reconciled in the following table: Gross proceeds$ 287,500,000
Less:
Proceeds allocated to public warrants (13,129,167 ) Class A shares offering costs at closing (15,845,671 )
Additional offering costs incurred during the three months ended
(42,160 )
Plus:
Total accretion of carrying value to redemption value 29,016,998 Class A common stock subject to possible redemption$ 287,500,000 Net Income Per Share of Common Stock We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." Net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. We have not considered the effect of the warrants sold in the Initial Public Offering and Private Placement in the calculation of diluted income per share, because the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value. Warrant Liability The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts 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 the Company's statement of operations. The Private Placement Warrants are valued using a Modified Black Scholes Option Pricing Model. Recent accounting standards InAugust 2020 , theFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effectiveJanuary 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning onJanuary 1, 2021 . Management is currently evaluating the new guidance but does not expect the adoption of this guidance to have a material impact on the Company's financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk As ofSeptember 30, 2021 , we were not subject to any market or interest rate risk. Following the consummation of the Initial Public Offering, the net proceeds of the Initial Public Offering, including amounts in the Trust Account, have been invested inU.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely inU.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. 19
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