References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Aequi Acquisition Corp. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to Aequi Sponsor 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 Annual Report on Form 10-K for the period ended December 31, 2021, as
amended, filed with the U.S. Securities and Exchange Commission (the "SEC") on
March 25, 2022, the Company's Quarterly Reports on Form 10-Q filed with the SEC
on May 10, 2022 and August 5, 2022 and the Extension Proxy. 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
September 1, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses (the "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 (the
"Private Placement Warrants"), 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through September 30, 2022 were
organizational activities and those necessary to prepare for our initial public
offering, described below, and identifying a target 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 the three months ended September 30, 2022, we had net income of $826,427,
which consisted of interest earned on marketable securities held in a trust
account (the "Trust Account") of $846,280 and change in fair value of warrant
liabilities of $337,866, offset by general and administrative expenses of
$190,500 and provision for income taxes of $167,219.
For the nine months ended September 30, 2022, we had net income of $6,517,217,
which consisted of interest earned on marketable securities held in the Trust
Account of $1,276,728 and change in fair value of warrant liabilities of
$6,033,333, offset by general and administrative expenses of $569,924 and
provision for income taxes of $222,920.
For the three months ended September 30, 2021, we had net income of $3,905,817,
which consisted of the change in the value of warrant liabilities of $4,102,667
and interest earned on marketable securities held in the Trust Account of
$23,682, offset by the general and administrative expenses of $220,532.
For the nine months ended September 30, 2021, we had net income of $5,915,978,
which consisted of the change in the value of warrant liabilities of $6,516,000
and interest earned on marketable securities held in the Trust Account of
$105,464, offset by general and administrative expenses of $705,486.
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Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business
Combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial Business Combination.
Liquidity and Capital Resources
On November 24, 2020, we consummated the initial public offering of 20,000,000
units, at a price of $10.00 per unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the initial public offering, we consummated
the sale of 4,000,000 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant in a private placement to our Sponsor, generating gross
proceeds of $6,000,000.
On December 2, 2020, we sold an additional 3,000,000 units for total gross
proceeds of $30,000,000 in connection with the underwriters' full exercise of
their over-allotment option. Simultaneously with the closing of the
over-allotment option, we also consummated the sale of an additional 400,000
Private Placement Warrants at $1.50 per Private Placement Warrant, generating
total proceeds of $600,000.
Following the initial public offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $230,000,000
was placed in the Trust Account. We incurred $13,092,230 in transaction costs,
including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting
fees and $442,230 of other offering costs, of which $250,000 of legal services
fees in connection with the initial public offering was paid through the
transfer of 350,000 shares of Class B common stock. Our legal counsel has also
provided $120,000 of legal services in connection with the Company's ongoing
reporting obligations under the Exchange Act for no additional cash
compensation. Founder Shares were previously granted in exchange for ongoing
reporting obligation services.
For the nine months ended September 30, 2022, net cash used in operating
activities was $556,767. Net income of $6,517,217 was offset by a non-cash
charge for the change in the fair value of warrant liabilities of $6,033,333 and
interest earned on marketable securities held in the Trust Account of
$1,276,728. Changes in operating assets and liabilities provided $236,077 of
cash from operating activities.
For the nine months ended September 30, 2021, net cash used in operating
activities was $374,213. Net income of $5,915,978 was affected by a non-cash
charge for the change in the fair value of warrant liabilities of $6,516,000 and
interest earned on marketable securities held in the Trust Account of $105,464.
Changes in operating assets and liabilities provided $331,273 of cash for
operating activities.
As of September 30, 2022, we had cash and marketable securities held in the
Trust Account of $231,430,817. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account to complete our Business Combination. We may withdraw interest
to pay taxes. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to complete 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.
As of September 30, 2022, we had $188,960 of cash held outside of 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, plants 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 deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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, at a
price of $1.50 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
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If our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our Business Combination. Moreover, we may need to
obtain additional financing either to complete our Business Combination or
because 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 in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our Business
Combination. If we are unable to complete our Business Combination because we do
not have sufficient funds available to us, we will be forced to cease operations
and liquidate the Trust Account. In addition, following our Business
Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
Going Concern
We have until November 24, 2022 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a Business Combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. Management intends to consummate a Business
Combination prior to November 24, 2022. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after November 24, 2022. On October 24, 2022, the Company filed the Extension
Proxy to hold a special meeting in lieu of an annual meeting of stockholders on
November 15, 2022 to seek approval from stockholders to amend the Company's
amended and restated certificate of incorporation to extend the last day of
Combination Period from November 24, 2022 to August 24, 2023 (or such earlier
date as determined by the Board of Directors).
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2022.
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
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support provided to the Company. We began incurring these fees on
November 19, 2020 and will continue to incur these fees monthly until the
earlier of the Company's consummation of a Business Combination and its
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $8,050,000
in the aggregate. The deferred fee will become payable to the underwriters 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 financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") 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 financial statements, and income and expenses
during the period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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 Accounting
Standard Codification ("ASC") 480 and ASC 815. We account for the Private
Placement Warrants, warrants as part of the Units ("Public Warrants"), and
warrants convertible from the working capital loans (together with the Private
Placement Warrants and Public Warrants, the "Warrants") in accordance with the
guidance contained in ASC 815-40 under which the Warrants do not meet the
criteria for equity treatment and must be recorded as liabilities. Accordingly,
we classify the Warrants as liabilities at their fair value and adjust 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 our statements of operations. The Private Placement
Warrants and the Public Warrants for periods where no observable traded price
was available are valued using a binomial lattice model. For periods subsequent
to the detachment of the Public Warrants from the Units, the Public Warrant
quoted market price was used as the fair value for the Public Warrants and the
Private Placement Warrants as of each relevant date. The Private Placement
Warrants have substantially the same terms as the Public Warrants.
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 is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is 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 (deficit). 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, shares of Class A
common stock subject to possible redemption are presented as temporary equity,
outside of the stockholders' deficit section of our balance sheets.
Net Income per Share of Common Stock
Our earnings per share calculation allocates net income pro rata to Class A and
Class B common stock. This presentation contemplates a Business Combination as
the most likely outcome, in which case, both classes of common stock share pro
rata in the income of the company. Accretion associated with the redeemable
shares of Class A common stock is excluded from earnings per share as the
redemption value approximates fair value.
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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