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 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.
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Cautionary note regarding forward-looking statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Private Securities Litigation Reform Act of
1995. 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-K. 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 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 the 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.
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.
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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
We have neither engaged in any operations nor generated any revenues from
September 15, 2020 (inception) through December 31, 2020. Our only activities
since inception have been organizational activities and those necessary to
prepare for our Initial Public Offering. 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 after the Initial Public Offering.
For the period from September 15, 2020 (inception) through December 31, 2020, we
had a net loss of approximately $6,000, which consisted of general and
administrative expenses and franchise tax expenses.
Liquidity and capital resources
As indicated in the accompanying financial statements, at December 31, 2020, we
had approximately $0.2 million in cash and a working capital deficit of
approximately $0.4 million. Further, we have incurred and expect to continue to
incur significant costs in the pursuit of our initial business combination
plans. We cannot assure you that our plans to consummate an initial business
combination will be successful.
Our liquidity through December 31, 2020 had been satisfied through receipt of
$25,000 from the sale of the founder shares to our Sponsor and a loan of
$300,000 in a loan from our Sponsor under an unsecured promissory note. Through
December 31, 2020 and prior to the Initial Public Offering, we fully borrowed
$300,000 under the unsecured promissory note. Subsequent to the closing of the
Initial Public Offering, the Over-Allotment, the proceeds from the consummation
of the Private Placement not held in the Trust Account will be used to satisfy
our liquidity. We fully repaid the Note to our Sponsor on January 20, 2021. In
addition, in order to fund working capital deficiencies or finance transaction
costs in connection with a Business Combination, our Sponsor may, but are not
obligated to, provide us Working Capital Loans. To date, there were no amounts
outstanding under any Working Capital Loan.
Based on the foregoing, management believes that it will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we 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.
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Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The 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.
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.
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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.
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. As of December 31, 2020, we
borrowed $300,000 under the Note. We fully repaid the Note on January 20, 2021.
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. Except for the
foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. As of
December 31, 2020, we had no borrowings under the Working Capital Loans.
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.
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.
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Controls and procedures
We are not currently required to maintain an effective system of internal
controls as defined by Section 404 of the Sarbanes-Oxley Act. We will be
required to comply with the internal control requirements of the Sarbanes-Oxley
Act for the fiscal year ending December 31, 2021. Only in the event that we are
deemed to be a large accelerated filer or an accelerated filer would we be
required to comply with the independent registered public accounting firm
attestation requirement. Further, for as long as we remain an emerging growth
company as defined in the JOBS Act, we intend to 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 requirement.
Prior to the closing of the Initial Public Offering, we had not completed an
assessment, nor had our independent registered public accounting firm tested our
systems, of internal controls. We expect to assess the internal controls of our
target business or businesses prior to the completion of our initial business
combination and, if necessary, to implement and test additional controls as we
may determine are necessary in order to state that we maintain an effective
system of internal controls. A target business may not be in compliance with the
provisions of the Sarbanes-Oxley Act regarding the adequacy of internal
controls. Many small and mid-sized target businesses we may consider for our
initial business combination may have internal controls that need improvement in
areas such as:
· staffing for financial, accounting and external reporting areas, including
segregation of duties;
· reconciliation of accounts;
· proper recording of expenses and liabilities in the period to which they
relate;
· evidence of internal review and approval of accounting transactions;
· documentation of processes, assumptions and conclusions underlying significant
estimates; and
· documentation of accounting policies and procedures.
Because it will take time, management involvement and perhaps outside resources
to determine what internal control improvements are necessary for us to meet
regulatory requirements and market expectations for our operation of a target
business, we may incur significant expense in meeting our public reporting
responsibilities, particularly in the areas of designing, enhancing, or
remediating internal and disclosure controls. Doing so effectively may also take
longer than we expect, thus increasing our exposure to financial fraud or
erroneous financing reporting.
Once our management team's report on internal controls is complete, we will
retain our independent registered public accounting firm to audit and render an
opinion on such report when required by Section 404 of the Sarbanes-Oxley Act.
The independent registered public accounting firm may identify additional issues
concerning a target business's internal controls while performing their audit of
internal control over financial reporting.
Off-balance sheet arrangements; commitments and contractual obligations;
quarterly results
As of December 31, 2020, 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.
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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 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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