References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Athlon Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to AAC HoldCo, 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 and Section 21E of 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
completion of the Proposed Business Combination (as defined below), 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, including that the conditions of
the Proposed Business Combination are not satisfied. 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 6, 2020 for the purpose of effecting the merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or 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 Units, 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 October 6, 2020 (inception) through June 30, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and identifying 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 in the Trust
Account. 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 June 30, 2021, we had net loss of $4,851,521, which
consists of changes in fair value of the warrant liability of $4,615,200 and
operation costs of $247,659, offset by interest earned on marketable securities
held in Trust Account of $11,338.
For the six months ended June 30, 2021, we had net loss of $1,187,398, which
consists of transaction costs incurred in connection with warrant liability of
$611,630 and operating costs of $817,432, offset by changes in fair value of the
warrant liability of $213,200 and interest earned on marketable securities held
in Trust Account of $28,464.

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Liquidity and Capital Resources
On January 14, 2021, the Company consummated the Initial Public Offering of
27,600,000 Units, which includes the full exercise by the underwriter of its
over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit,
generating gross proceeds of $276,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,520,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement with the Sponsor, generating gross
proceeds of $7,520,000, which is described in Note 4.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Units, a total of $276,000,000 was placed in
the Trust Account. We incurred related costs of $15,649,762, consisting of
$5,520,000 in cash underwriting fees, $9,660,000 of deferred underwriting fees
and $469,762 of other offering costs relating to the Initial Public Offering.
For the six months ended June 30, 2021, cash used in operating activities was
$780,414. Net loss of $1,187,398 was affected by the change in fair value of the
warrant liability of $213,200, transaction costs associated with the IPO of
$611,630, and interest earned on marketable securities held in Trust Account of
$28,464. Net changes in operating assets and liabilities provided $37,018 of
cash for operating activities.
As of June 30, 2021, we had marketable securities held in the Trust Account of
$276,028,464 (including approximately $5,212 of interest income consisting of
U.S. Treasury Bills with a maturity of 185 days or less). Interest income on the
balance in the Trust Account may be used by us to pay taxes. Through June 30,
2021, we have not withdrawn any interest earned from the Trust Account.
As of June 30, 2021, we had cash and marketable securities held in the trust
account of $276,028,464. 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 June 30, 2021, we had $774,824 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, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. 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
at a price of $1.00 per warrant, at the option of the lender. The warrants would
be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, 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.

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Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of June 30, 2021.
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 an
affiliate of one of our executive officers a monthly fee of $5,000 for office
space, utilities and secretarial and administrative services. We began incurring
these fees on January 11, 2021 and will continue to incur these fees monthly
until the earlier of the completion of the Business Combination and our
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $9,660,000
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 the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
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 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:
Warrant Liability
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. We account for 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 statement 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 as of each relevant date.
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 ("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. 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' equity section of our 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 B
non-redeemable
common stock is calculated by dividing the net income, less income attributable
to Class A redeemable common stock, by the weighted average number of Class B
non-redeemable
common stock outstanding for the period presented.

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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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in our Exchange Act reports is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our management, including our principal executive officer and principal
financial officer or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial and accounting officer,
we conducted an evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the fiscal quarter ended June 30, 2021, as such term
is defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act. Based on this evaluation and in light of the material
weakness in internal controls described below, our principal executive officer
and principal financial and accounting officer have concluded that during the
period covered by this report, our disclosure controls and procedures were not
effective. Our internal control over financial reporting did not result in the
proper accounting classification of the Private Placement Warrants and Public
Warrants we issued in January 2021 which, due to its impact on our financial
statements, we determined to be a material weakness. This mistake in
classification was brought to our attention only when the SEC issued a Staff
Statement on Accounting and Reporting Considerations for Warrants Issued by
Special Purpose Acquisition Companies ("SPACs") dated April 12, 2021 (the "SEC
Statement"). The SEC Statement addresses certain accounting and reporting
considerations related to warrants of a kind similar to those we issued at the
time of our initial public offering in January 2021.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended June 30, 2021 covered by this Quarterly
Report on
Form 10-Q
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting, other than as described herein.
Management has implemented remediation steps to address the material weakness
and to improve our internal control over financial reporting. Specifically, we
enhanced the supervisory review of accounting procedures in this financial
reporting area and expanded and improved our review process for complex
securities and related accounting standards. As of June 30, 2021, this had not
been fully remediated.

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