References to the "Company", "our", "us" or "we" refer to Hamilton Lane Alliance
Holdings I, Inc. 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 (the
"Securities Act"), 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 the "Risk
Factors" detailed in Part I, Item 1A of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021 and our other Securities and Exchange
Commission ("SEC") filings.
Overview
We are a blank check company incorporated on September 15, 2020, as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We have not selected any specific
business combination target and we have not, nor has anyone on our behalf,
initiated any substantive discussions, directly or indirectly, with any business
combination target.
Our sponsor is HL Alliance Holdings Sponsor LLC, a Delaware limited liability
company (the "Sponsor"). We are an emerging growth company and, as such, we are
subject to all of the risks associated with emerging growth companies.
The registration statement for our Initial Public Offering was declared
effective on January 12, 2021. On January 15, 2021, we consummated its Initial
Public Offering of 27,600,000 units (the "Units" and, with respect to the Class
A common stock included in the Units being offered, the "Public Shares"),
including 3,600,000 additional Units to cover over-allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of $276.0
million, and incurring offering costs of approximately $15.9 million, of which
approximately $9.7 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 5,013,333 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to our Sponsor, generating
proceeds of approximately $7.5 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$276.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account ("Trust Account") located in the United States with Continental
Stock Transfer & Trust Company acting as trustee, and invested only in U.S.
government securities with a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act of 1940, as amended (the "Investment Company Act") which invest only in
direct U.S. government treasury obligations, 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 the Private
Placement Warrants, 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.
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We must complete an initial Business Combination with one or more operating
businesses or assets with a fair market value equal to at least 80% of the net
assets held in the Trust Account (excluding any deferred underwriting
commissions and taxes payable on the income earned on the trust account).
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 business
sufficient for it not to be required to register as an investment company under
the Investment Company Act.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or January 15, 2023, (as such period may
be extended pursuant to the Certificate of Incorporation, 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 to pay its taxes (less 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 Stockholders' rights as
stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of
directors, liquidate and dissolve, subject, in each case, 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 March 31, 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. We generated non-operating
income in the form of investment income from the investments held in the Trust
Account following the closing of the Initial Public Offering.
For the three months ended March 31, 2022, we had net income of approximately
$4.3 million, which consisted of approximately $4.5 million in the change of
fair value of derivative warrant liabilities and approximately $7,000 income
from investments held in the Trust Account, partially offset by approximately
$241,000 of general and administrative expenses and approximately $49,000 of
franchise tax expense.
For the three months ended March 31, 2021, we had net income of approximately
$1.4 million, which consisted of approximately $2.3 million in the change of
fair value of derivative warrant liabilities and approximately $3,000 of income
from investments held in the Trust Account, partially offset by approximately
$459,000 of financing costs associated with the issuance of warrants,
approximately $326,000 of general and administrative expenses and approximately
$49,000 of franchise tax expense
Liquidity and Capital Resources
As of March 31, 2022, we had approximately $36,000 in cash and working capital
deficit of approximately $197,000, inclusive of $675,000 in loans payable to our
Sponsor.
Prior to our Initial Public Offering, our liquidity needs to date have been
satisfied through receipt of $25,000 from the sale of the founder shares to our
Sponsor and a loan of $300,000 from our Sponsor under an unsecured promissory
note provided. We fully repaid the unsecured promissory note of $300,00 on
January 20, 2021. Subsequent to the consummation of the Initial Public Offering,
our liquidity has been satisfied through the net proceeds from the consummation
of the Initial Public Offering, the Private Placement held outside of the Trust
Account, and loans from the Sponsor of $675,000.
Our Sponsor or an affiliate of the Sponsor, or certain of the Company's officers
and directors intend, but are not obligated, to provide Working Capital Loans as
needed to meet liquidity needs. On March 26, 2021 we entered into a promissory
note with our Sponsor in the principal amount of up to $300,000 and on July 22,
2021, we entered an additional promissory note in the with the Sponsor,
(collectively, the "Agreements"), pursuant to which the Company may borrow up to
$2.0 million from the Sponsor for ongoing expenses reasonably related to the
business of the Company and the consummation of the Business Combination. In
March 2021, we borrowed $300,000, in August 2021 we borrowed an additional
$300,000, and in March 2022, we borrowed $75,000 under these Agreements. As of
March 31, 2022 and December 31, 2021, the total balance of $675,000 and
$600,000, respectively, was outstanding related to these
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Agreements, and $1.6 million was available under the $2.0 million promissory
note as of March 31, 2022. All unpaid principal under these Agreements will be
due and payable in full on the effective date of the Business Combination.
See Note 5 to the unaudited condensed financial statements in Part 1 Item 1 for
a description of the Agreements and the underlying promissory notes.
Based on the foregoing, management believes that we will have borrowing capacity
to meet our needs through the earlier of the consummation of an Initial Business
Combination or one year from this filing. Over this time period, we will use the
funds held 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 Initial Business Combination.
However, in connection with our assessment of going concern considerations in
accordance with FASB's ASC Topic 205-40, "Presentation of Financial Statements -
Going Concern," management has determined that if we are unable to complete a
Business Combination by January 15, 2023, then we will cease all operations
except for the purpose of liquidating. The date for 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 the Company be required to liquidate after the Combination
Period. We intend to complete a Business Combination before the mandatory
liquidation date.
Management continues to evaluate the impact of the COVID-19 pandemic and the
conflict in Ukraine and the surrounding region on the industry and has concluded
that while it is reasonably possible that these risks and uncertainties could
have a negative effect on the Company's financial position, results of its
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the unaudited condensed financial
statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Related Party Transactions
Founder Shares
On September 22, 2020, our Sponsor subscribed to purchase 14,375,000 shares of
our Class B common stock, par value $0.0001 per share (the "Founder Shares"),
and fully paid for those shares on September 23, 2020. Shares and the associated
amounts reflected: (i) the reverse stock split of Class B Common Stock in
October 2020, (ii) the forfeiture of 7,441,176 shares of Class B Common Stock by
our Sponsor in December 2020, and (iii) the 6-to-5 stock split of Class B Common
Stock in January 2020, resulting in an aggregate of 4,870,588 shares of Class B
Common Stock outstanding. In November 2020, our Sponsor transferred 25,000
Founder Shares to each of the independent directors. The initial stockholders
agreed to forfeit up to 400,000 Founder Shares to the extent that the
over-allotment option was not exercised in full by the underwriters, so that the
Founder Shares would represent 15.0% of our issued and outstanding shares of
common stock after the Initial Public Offering. The underwriter exercised its
over-allotment option in full on January 15, 2021; thus, these 400,000 Founder
Shares were no longer subject to forfeiture.
Of the 4,870,588 shares of Class B Common Stock outstanding, an aggregate of
1,803,922 shares (up to 235,294 Contingent Founder Shares were subject to
forfeiture by our Sponsor if the over-allotment option was not exercised in full
or in part by the underwriters) (the "Contingent Founder Shares") are not
transferable, assignable or salable until (A) with respect to half of the
Contingent Founder Shares, if the last reported sale price of Class A Common
Stock equals or exceeds $12.50 (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing one year after the closing of the initial
Business Combination until two years after the closing of the initial Business
Combination, and (B) with respect to the remaining Contingent Founder Shares, if
the last reported sale price of Class A Common Stock equals or exceeds $15.00
(as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading
day period commencing two years after the closing of the initial Business
Combination until three years after the closing of the initial Business
Combination. Our Sponsor will forfeit the Contingent Founder Shares for no
consideration to the extent the $12.50 and $15.00 trading price thresholds
described in clauses A and B are not met during the specified periods. The
underwriter exercised its over-allotment option in full on January 15, 2021;
thus, these 235,294 Contingent Founder Shares were no longer subject to
forfeiture.
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The initial stockholders agreed, subject to limited exceptions, not to transfer,
assign or sell any of the Founder Shares until the earlier to occur of: (A) one
year after the completion of the initial Business Combination or (B) subsequent
to the initial Business Combination, (x) if the last reported sale price of
Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing at least 150
days after the initial Business Combination, or (y) the date on which we
complete a liquidation, merger, capital stock exchange or other similar
transaction that results in all of the stockholders having the right to exchange
their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated
the private Placement of 5,013,333 Private Placement Warrants at a price of
$1.50 per Private Placement Warrant to our Sponsor, generating proceeds of
approximately $7.5 million.
Each whole Private Placement Warrant is exercisable for one whole share of Class
A Common Stock at a price of $11.50 per share, subject to adjustment. A portion
of the proceeds from the sale of the Private Placement Warrants to our Sponsor
was added to the proceeds from the Initial Public Offering held in the Trust
Account. If we do not complete a Business Combination within the Combination
Period, the Private Placement Warrants will expire worthless. The Private
Placement Warrants will be non-redeemable for cash (except as described below)
and exercisable on a cashless basis so long as they are held by our Sponsor or
its permitted transferees.
Our Sponsor agreed, subject to limited exceptions, not to transfer, assign or
sell the Private Placement Warrants until 30 days after the completion of the
initial Business Combination. The Sponsor transferred 1,478,933 of its Private
Placement Warrants to certain employees of its ultimate parent entity, Hamilton
Lane Incorporated, as permitted transferees for services rendered to Hamilton
Lane Incorporated in connection with the Company.
Related party loans
On September 22, 2020, our Sponsor agreed to loan us an aggregate of up to
$300,000 to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). This loan was non-interest bearing and payable
upon the completion of the Initial Public Offering. We borrowed $300,000 under
the Note and fully repaid the Note on January 20, 2021. After repayment, the
Note was no longer available for borrowings.
In addition, 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 intend, but
are not obligated to, loan us funds as may be required ("Working Capital
Loans"). If we complete a Business Combination, we may repay the Working Capital
Loans out of the proceeds of the Trust Account released to us. Otherwise, the
Working Capital Loans could be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, we may use a
portion of proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the
Working Capital Loans. The Working Capital Loans would either be repaid upon
consummation of a Business Combination or, at the lender's discretion, up to
$2.0 million of such Working Capital Loans may be convertible into warrants of
the post Business Combination entity at a price of $1.50 per warrant. The
warrants would be identical to the Private Placement Warrants. As of March 31,
2022 and December 31, 2021 we had $600,000 of Working Capital Loans outstanding.
Other Contractual Obligations
Registration rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any, (and any shares of
Class A Common Stock issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital
Loans and upon conversion of the Founder Shares) were entitled to registration
rights pursuant to a registration rights agreement signed prior to the
consummation of the Initial Public Offering. These holders will be entitled to
certain demand and "piggyback" registration rights. We will bear the expenses
incurred in connection with the filing of any such registration statements.
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Underwriting agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $5.5 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately $9.7
million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. 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.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States 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 unaudited condensed financial statements, and
the reported amounts of income and expenses during the periods reported. Actual
results could materially differ from those estimates. We have identified the
following as our critical accounting policies:
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account 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, or a combination
thereof. The investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet 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 net gain from investments held
in Trust Account on the statement of operations. The estimated fair values of
investments held in the Trust Account are determined using available market
information.
Class A Common Stock Subject to Possible Redemption
We account for Class A common stock subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Common stock subject to mandatory redemption (if any) is classified as a
liability instrument and measured at fair value. Conditionally redeemable common
stock (including common stock that features 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) is classified as temporary
equity. At all other times, common stock is classified as stockholders' equity.
Our outstanding common stock features certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, at March 31, 2022 and December 31, 2020,
27,600,000 shares of common stock subject to possible redemption is presented as
temporary equity, outside of the stockholders' equity section of the balance
sheet.
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. Immediately upon the closing of the Initial
Public Offering, the Company recognized the accretion from initial book value to
redemption amount value, which approximates fair value. The change in the
carrying value of Class A common stock subject to possible redemption resulted
in charges against additional paid-in capital (to the extent available) and
accumulated deficit and Class A common stock.
Derivative 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 ASC ASC
480 and FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), Embedded
Derivatives ("ASC 815-15"). The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period.
All of our outstanding warrants are recognized as derivative liabilities in
accordance with ASC 815-40, Contracts in Entity's Own Equity ("ASC 815-40").
Accordingly, we recognize the warrant instruments as liabilities at fair value
and adjust the instruments to fair value
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at each reporting period. The liabilities are 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 fair value of the Public Warrants issued in
connection with the Public Offering and Private Placement Warrants were
initially measured at fair value using a likely modified Black-Scholes model.
The fair value of Public Warrants issued in connection with the Initial Public
Offering has been subsequently measured based on the listed market price of such
warrants, a Level 1 measurement, on March 31, 2022. Subsequently, the fair value
of the Private Placement Warrants has been estimated based on the observed price
for Public Warrants, a Level 2 measurement.
Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) adjusted for the effects of a
deemed dividend to Class A stockholders by the weighted average shares of common
stock outstanding for the respective period.
The calculation of weighted average shares of Class B common stock outstanding
was reduced for an aggregate of 1,803,922 shares of Class B common stock (the
"Contingent Founder Shares") held by the Sponsor that are subject to forfeiture
and transfer restrictions unless and until the trading price of Class A common
stock exceeds certain price thresholds during specified periods of time
following the closing of the Initial Business Combination.
We have not considered the effect of the warrants sold in the Initial Public
Offering and Private Placement to purchase an aggregate of 14,213,333 shares of
common stock in the calculation of diluted loss per common share, because their
exercise is contingent upon future events. As a result, diluted net loss per
common share is the same as basic net loss per common stock for the periods
presented.
Recent Accounting Pronouncements
Our management does not believe there are any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our unaudited condensed financial statements.
Off-balance sheet arrangements; commitments and contractual obligations;
quarterly results
As of March 31, 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.
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 a result, our 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 independent registered public accounting firm'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 report of independent
registered public accounting firm 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 principal
executive officer's compensation to
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median employee compensation. These exemptions will apply for a period of five
years following the completion of the Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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