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 approximately $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 underwriters' 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 ("CST")
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, 2022 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.
For the three months ended September 30, 2022, we had net income of $1,213,608
which consisted of $608,400 of non-operating gain resulting from the change in
fair value of warrant liability and $1,187,963 of income from interest in
operating account and marketable securities held in Trust Account, offset by
$240,554 in general and administrative costs and $292,201 in income tax expense.
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 nine months ended September 30, 2022, we had net income of $5,882,402
which consisted of $5,678,400 of non-operating gain resulting from the change in
fair value of warrant liability and $1,468,206 of income from interest in
operating account and marketable securities held in Trust Account, offset by
$803,710 in general and administrative costs and $310,494 in income tax expense.
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 Going Concern
As of September 30, 2022, the Company had approximately $2.1 million in its
operating bank account and working capital of approximately $1.9 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, 2022, 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, 2022, there were
no amounts outstanding under any Working Capital Loans.
Pursuant to the trust agreement dated as of August 9, 2021 between the Company
and CST, as of September 30, 2022, the Company has withdrawn a total of
$1,177,162 of interest income from the Trust Account to satisfy franchise and
income tax obligations and working capital needs.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," management has determined that the mandatory
liquidation and subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after August 12, 2023. The unaudited condensed financial statements
do not include any adjustment that might be necessary if the Company is unable
to continue as a going concern. Management plans to complete a business
combination prior to the mandatory liquidation.
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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, the Company
agreed to pay the Sponsor a total of $10,000 per month for office space,
utilities and secretarial and administrative support. Upon completion of an
initial Business Combination or the Company's liquidation, the Company will
cease paying these monthly fees. During the three and nine months ended
September 30, 2022, the Company incurred $30,000 and $90,000, respectively, in
expenses in connection with such services as reflected in the accompanying
unaudited condensed statement of operations. As of September 30, 2022 and
December 31, 2021, the Company had approximately $140,000 and $50,000,
respectively, in accrued expenses for related party in connection with such
services as reflected in the accompanying unaudited condensed balance sheets.
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") and require 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. A summary of our
significant accounting policies is included in Note 2 to our unaudited condensed
financial statements in Part I, Item 1 of this Quarterly Report. Certain of our
accounting policies are considered critical, as these policies are the most
important to the depiction of our unaudited condensed financial statements and
require significant, difficult or complex judgments, often employing the use of
estimates about the effects of matters that are inherently uncertain. Such
policies are summarized in the Management's Discussion and Analysis of Financial
Condition and Results of Operations section in our Annual Report on Form 10-K,
filed with the SEC on March 28, 2022. There have been no significant changes in
the application of our critical accounting policies during the three months
ended September 30, 2022.
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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, 2022, 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.
Emerging Growth Company
The Company is an "emerging growth company," as defined in Section 2(a) of the
Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the "JOBS Act"), and it may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
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Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act
registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that an emerging
growth company can elect to opt out of the extended transition period and comply
with the requirements that apply to non-emerging growth companies but any such
an election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period, which means that when a standard is issued or
revised and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the new or revised
standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company's financial statements with another
public company that is neither an emerging growth company nor an emerging growth
company that has opted out of using the extended transition period difficult or
impossible because of the potential differences in accounting standards used.
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CONYERS PARK III ACQUISITION CORP. 