References to the "Company," "our," "us" or "we" refer to Conyers Park III
Acquisition Corp. 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 report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
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 (the "Exchange
Act"). 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 on January 7, 2021 as a Delaware
corporation for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the "Business Combination") that we have not yet
identified. While the Company may pursue an acquisition opportunity in any
business, industry, sector or geographical location, it intends to focus on the
consumer sector and consumer-related businesses where its management team's
expertise will provide a competitive advantage. Our sponsor is Conyers Park III
Sponsor LLC, a Delaware limited liability company (our "Sponsor").
Our registration statement for our Initial Public Offering was declared
effective on August 9, 2021. On August 12, 2021, the Company consummated its
Initial Public Offering of 35,000,000 units (the "Units" and, with respect to
the Class A common stock included in the Units, the "Public Shares") at $10.00
per Unit generating gross proceeds of $350 million, and incurring offering costs
of approximately $20 million, inclusive of approximately $12 million in deferred
underwriting commissions. The Company granted the underwriters a 45-day option
to purchase up to an additional 5,250,000 units at the initial public offering
price to cover over-allotments, if any (the "Over-Allotment Units") at the time
of the Initial Public Offering.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the private placement (the "Private Placement") of 6,666,667
warrants (each, a "Private Placement Warrant" and collectively, the "Private
Placement Warrants") at a price of $1.50 per Private Placement Warrant with the
Sponsor, generating gross proceeds of $10 million.
On August 24, 2021, the underwriters partially exercised the over-allotment
option to purchase 700,000 Over-Allotment Units at a price of $10.00 per
Over-Allotment Unit, generating aggregate gross proceeds of $7,000,000, and the
Company incurred $140,000 in cash underwriting fees and $245,000 in deferred
underwriting fees. Simultaneously with the partial exercise of the
over-allotment option, the Company sold an additional 93,333 Private Placement
Warrants to the Sponsor at a price of $1.50 per additional Private Placement
Warrant, generating additional gross proceeds of $140,000.
Following the closing of the Initial Public Offering on August 12, 2021 and the
closing of the underwriter's partial exercise of the over-allotment option on
August 24, 2021, $357 million ($10.00 per Unit) of the net proceeds of the
Initial Public Offering, over-allotment and certain of the proceeds of the
Private Placement was placed in a trust account (the "Trust Account"), located
in the United States, with Continental Stock Transfer & Trust Company acting as
trustee, and was invested in U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (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
selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and
(d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company,
until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the assets held in Trust Account as described below.
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If we are unable to complete a Business Combination within 24 months from the
closing of our Initial Public Offering, or August 12, 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 and not previously
released to us for working capital purposes or to pay our franchise and income
taxes (less up to $100,000 of interest to pay dissolution expenses), divided by
the number of the then outstanding Public Shares, which redemption will
completely extinguish Public Stockholders' rights as stockholders (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 our remaining stockholders and our board of directors, liquidate and
dissolve, subject in the case of clauses (ii) and (iii), to our obligations
under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
Results of Operations
Our entire activity since inception through September 30, 2021 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of interest income on cash and cash equivalents. 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 three months ended September 30, 2021, we had net income of $122,911,
which consisted of $338,000 of non-operating gain resulting from the change in
fair value of warrant liability and $856 of income from interest in operating
account and marketable securities held in Trust Account, partially offset by
$148,511 in general and administrative costs and $17,434 in offering costs
associated with warrant liability.
For the period from January 7, 2021 (inception) through September 30, 2021, we
had net income of $120,911, which consisted of $338,000 of non-operating gain
resulting from the change in fair value of warrant liability and $856 of income
from interest in operating account and marketable securities held in Trust
Account, partially offset by $150,511 in general and administrative costs and
$17,434 in offering costs associated with warrant liability.
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately $1.6 million in its
operating bank account and working capital of approximately $2.2 million.
The Company's liquidity needs have been satisfied prior to the completion of the
Initial Public Offering through receipt of a $25,000 capital contribution from
the Sponsor in exchange for the issuance of the Founder Shares to the Sponsor
and the advancement of funds by the Sponsor under the Note (as defined below) to
cover the Company's expenses in connection with the Initial Public Offering. As
of September 30, 2021, no amounts remained outstanding under the Note.
Subsequent to the consummation of the Initial Public Offering and Private
Placement, the Company's liquidity needs have been satisfied from the proceeds
from the consummation of the Private Placement not held in the Trust Account. In
addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company's officers and directors may, but are not obligated to, provide the
Company Working Capital Loans (see Note 4). As of September 30, 2021, there were
no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity from the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors to
meet its needs through the earlier of the consummation of a Business Combination
or one year from this filing. Over this time period, the Company 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.
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 the Company's financial position, and the
results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these unaudited condensed
financial statements. The unaudited condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
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Contractual Obligations
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final
prospectus relating to the Initial Public Offering to purchase up to 5,250,000
Over-Allotment Units to cover over-allotments, if any, at the Initial Public
Offering price less the underwriting discounts and commissions. On August 24,
2021, the underwriters partially exercised their over-allotment option for
700,000 Over-Allotment Units.
The underwriters were entitled to an underwriting discount of 2% of the gross
proceeds of the Initial Public Offering, or $7,140,000 in the aggregate, which
was paid upon the closing of the Initial Public Offering and the partial
exercise of the over-allotment option. In addition, the underwriters are
entitled to a deferred fee of 3.5% of the gross proceeds of the Initial Public
Offering, or $12,495,000 in the aggregate in connection with the closing of the
Initial Public Offering and the partial exercise of the over-allotment option.
Administrative Support Agreement
Commencing on the effective date of the Initial Public Offering, we agreed to
pay our Sponsor a total of $10,000 per month for office space, utilities and
secretarial and administrative support. Upon completion of the initial Business
Combination or our liquidation, we will cease paying these monthly fees. The
Company incurred $20,000 in expenses in connection with such services during the
three months ended September 30, 2021 and for the period from January 7, 2021
(inception) through September 30, 2021.
Critical Accounting Policies and Estimates
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 U.S. dollars in conformity with accounting
principles generally accepted in the United States ("GAAP"). 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:
Offering Costs Associated with the Initial Public Offering
Offering costs consist of legal, accounting, underwriting fees and other costs
incurred through the balance sheet date that were directly related to the
Initial Public Offering. Offering costs are allocated to the separable financial
instruments issued in the Initial Public Offering based on a relative fair value
basis, compared to total proceeds received. Offering costs allocated to warrant
liability are expensed as incurred, presented as non-operating expenses in the
statement of operations. Offering costs associated with the Class A common
shares issued are charged to stockholders' equity upon the completion of the
Initial Public Offering.
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Warrant Liability
The Company accounts for the Private Placement Warrants in accordance with the
guidance contained in ASC 815-40. Such guidance provides that because the
private placement warrants do not meet the criteria for equity treatment
thereunder, each private placement warrant must be recorded as a liability.
Accordingly, the Company will classify each private placement warrant as a
liability at its fair value. This liability is subject to re-measurement at each
balance sheet date. With each such re-measurement, the private placement warrant
liability will be adjusted to fair value, with the change in fair value
recognized in the Company's statement of operations.
The Private Placement Warrants are identical to the Public Warrants underlying
the Units sold in the Public Offering, except that the Private Placement
Warrants and the Class A common stock issuable upon exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days
after the completion of a Business Combination, subject to certain limited
exceptions. Additionally, the Private Placement Warrants will be exercisable on
a cashless basis and non-redeemable so long as they are held by the Sponsor or
such its permitted transferees. If the Private Placement Warrants are held by
someone other than the Sponsor or its permitted transferees, the Private
Placement Warrants will be redeemable by the Company and exercisable by such
holders on the same basis as the Public Warrants.
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 Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." 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 features redemption rights that is either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within the Company's control) is classified as temporary equity. At all other
times, shares of common stock are classified as stockholders' equity. The
Company's common stock features certain redemption rights that are considered to
be outside of the Company's control and subject to occurrence of uncertain
future events. Accordingly, at September 30, 2021, Class A common stock subject
to possible redemption is presented as temporary equity, outside of the
stockholders' equity section of the Company's unaudited condensed balance sheet.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the
periods. The Company has not considered the effect of the warrants sold in the
Initial Public Offering and the Private Placement to purchase an aggregate of
18,660,000 shares of the Company's Class A common stock in the calculation of
diluted income per share, since their inclusion would be anti-dilutive under the
treasury stock method. Accretion associated with the redeemable Class A common
stock is excluded from earnings per share as the redemption value approximates
fair value.
The Company's unaudited condensed statements of operations include a
presentation of income (loss) per share for common stock subject to redemption
in a manner similar to the two-class method of income (loss) per share. In order
to determine the net income (loss) attributable to both the public Class A
common stock subject to redemption and Class B common stock, the Company first
calculated the total income (loss) allocable to both sets of shares. Subsequent
to calculating the total income (loss) allocable to both sets of shares, the
Company split the amount to be allocated using a ratio of 69% for the Class A
common stock and 31% for the Class B common stock for the three months ended
September 30, 2021 and 43% for the Class A common stock and 57% for the Class B
common stock for the period from January 7, 2021 (inception) through September
30, 2021, reflective of the respective participation rights.
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Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 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): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"),
which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. For smaller reporting companies, this update
is effective for fiscal years beginning after December 15, 2023, and interim
periods within those fiscal years. Early adoption is permitted. The Company's
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.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
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 will qualify as an "emerging growth company" and
under the JOBS Act will be 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 such, our unaudited condensed
financial statements may not be comparable to companies that comply with public
company effective dates.
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