References to "we", "us", "our" or the "Company" are to ABG Acquisition Corp I.,
except where the context requires otherwise. The following discussion should be
read in conjunction with our unaudited condensed financial statements and
related notes thereto included elsewhere in this report.
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, and
Section 21E of the Securities Exchange Act of 1934, as amended. 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 our other Securities and Exchange
Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on November 17, 2020. We were formed for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar
business combination with one or more businesses (the "Business Combination").
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 ABG Acquisition Holdings I LLC, a Cayman Islands limited
liability company (the "Sponsor"). The registration statement for our Initial
Public Offering was declared effective on February 16, 2021. On February 19,
2021, we consummated its Initial Public Offering of 15,065,000 Class A ordinary
shares (the "Public Shares"), including the 1,965,000 Public Shares as a result
of the underwriters' full exercise of their over-allotment option, at an
offering price of $10.00 per Public Share, generating gross proceeds of
approximately $150.7 million, and incurring offering costs of approximately
$8.9 million, of which approximately $5.3 million was for deferred underwriting
commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 501,300 Class A ordinary shares
(the "Private Placement Shares"), at a price of $10.00 per Private Placement
Share to the Sponsor, generating gross proceeds of approximately $5.0 million.
Upon the closing of the Initial Public Offering and the Private Placement,
approximately $150.7 million ($10.00 per Public Share) of the net proceeds of
the Initial Public Offering and certain of the proceeds of the Private Placement
were placed in a trust account ("Trust Account"), located in the United States
with Continental Stock Transfer & Trust Company acting as trustee, and have been
invested only in 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 in any open-ended investment company that holds itself out as a money
market fund meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of
Rule 2a-7 of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), 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.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of Private
Placement Shares, 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 one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(excluding the amount of any deferred underwriting discount held in trust) at
the time of the signing of the agreement to enter into the initial Business
Combination. 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 sufficient for it not to be required to register as an investment company
under the Investment Company Act.
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If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or February 19, 2023 (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 (less taxes payable and
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 Shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any) and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject, in
each case, to our obligations under Cayman Islands law to provide for claims of
creditors and in all cases subject to the other requirements of applicable law.
Going Concern Consideration and Capital Resources
As of September 30, 2022, we had approximately $98,000 in our operating bank
account and working capital of deficit approximately $46,000.
Our liquidity needs to date have been satisfied through a contribution of
$25,000 from our Sponsor to cover certain expenses in exchange for the issuance
of the Founder Shares, the loan of $100,000 from the Sponsor pursuant to the
Note, and the proceeds from the consummation of the Private Placement not held
in the Trust Account. We fully repaid the Note on February 22, 2021. In
addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us Working Capital
Loans. As of September 30, 2022 and December 31, 2021 there were no Working
Capital Loans outstanding.
In connection with management's assessment of going concern considerations in
accordance with FASB ASC 205-40, "Presentation of Financial Statements-Going
Concern," management has determined that the liquidity condition and mandatory
liquidation and subsequent dissolution raises substantial doubt about our
ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after February 19, 2023. The unaudited condensed financial statements do not
include any adjustment that might be necessary if we are unable to continue as a
going concern. We intend to complete a Business Combination before the mandatory
liquidation date. Over this time period, we will be using the funds 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 Business Combination.
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
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Results of Operations
Our entire activity since inception through September 30, 2022 related to our
formation, the preparation for an Initial Public Offering, and since our Initial
Public Offering, our activity has been limited to the search for a prospective
initial Business Combination. We will not generate any operating revenues until
the closing and completion of our initial Business Combination.
For the three months ended September 30, 2022, we had net income of
approximately $564,000, which consisted of approximately $768,000 in income from
investments held in the Trust Account, partially offset by approximately
$174,000 in general and administrative expenses and $30,000 of general and
administrative expenses to related party.
For the three months ended September 30, 2021, we had net loss of approximately
$216,000, which consisted of approximately $218,000 in general and
administrative expenses, including $30,000 of general and administrative
expenses to related party, partially offset by approximately $2,000 in income
from investments held in the Trust Account.
For the nine months ended September 30, 2022, we had net income of approximately
$159,000, which consisted of approximately $874,000 in income from investments
held in the Trust Account partially offset by approximately $625,000 in general
and administrative expenses, $90,000 of general and administrative expenses to
related party.
For the nine months ended September 30, 2021, we had net loss of approximately
$593,000, which consisted of approximately $598,000 in general and
administrative expenses, including $80,000 of general and administrative
expenses to related party, partially offset by approximately $5,000 in income
from investments held in the Trust Account.
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. We have identified the following as our critical
accounting policies:
Investments Held in Trust Account
Our portfolio of investments 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 and generally have a readily determinable fair
value, or a combination thereof. When our investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities. When our investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading
securities and investments in money market funds are presented on the condensed
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 are included
in income from investments held in Trust Account in the accompanying unaudited
condensed statements of operations. The estimated fair values of investments
held in the Trust Account are determined using available market information.
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Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares 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, Class A ordinary shares are classified as shareholders' equity. As part
of the Private Placement, we issued 501,300 Private Placement Shares to our
Sponsor. These Private Placement Shares will not be transferable, assignable or
salable until 30 days after the completion of our initial Business Combination.
They are also considered non-redeemable and are presented as permanent equity in
the condensed balance sheets. Our Class A ordinary shares sold in the Initial
Public Offering feature certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, at September 30, 2022 and December 31, 2021, 15,065,000 Class A
ordinary shares subject to possible redemption are presented as temporary
equity, outside of the shareholders' deficit section of our condensed balance
sheets.
Under ASC 480-10-S99, the Company has elected to recognize changes in the
redemption value immediately as they occur and adjust the carrying value of the
security to equal the redemption value at the end of each reporting period. This
method would view the end of the reporting period as if it were also the
redemption date for the security. Effective with the closing of our initial
public offering, we recognized the accretion from initial book value to
redemption amount, which resulted in charges against additional paid-in capital
(to the extent available) and accumulated deficit.
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of ordinary shares, which are referred
to as Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of ordinary shares. This presentation
assumes a business combination as the most likely outcome. Net loss per ordinary
share is calculated by dividing the net income (loss) by the weighted average
ordinary shares outstanding for the respective periods.
At September 30, 2022 and 2021, we did not have any dilutive securities and
other contracts that could potentially be exercised or converted into ordinary
shares and then share in our earnings. Accretion associated with the redeemable
Class A ordinary shares is excluded from earnings per ordinary share as the
redemption value approximates fair value.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
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 qualify as an "emerging growth company" and
under the JOBS Act are 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 auditor'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 auditor's report 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 CEO's compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of our Initial Public
Offering or until we are no longer an "emerging growth company," whichever is
earlier.
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