References to "we", "us", "our" or the "Company" are to Independence Holdings
Corp., except where the context requires otherwise. The following discussion
should be read in conjunction with our unaudited condensed financial statements
and related notes thereto included elsewhere in this report.
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. 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 as a Cayman Islands exempted company
on December 7, 2020. We were incorporated for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar
business combination with one or more businesses that we have not yet identified
(herein referred to as the "Initial Business Combination").
Our sponsor is Independence Sponsor LLC, a Cayman Islands limited liability
company (the "Sponsor"). The registration statement for our Initial Public
Offering was declared effective on March 8, 2021. On March 11, 2021, we
consummated our Initial Public Offering of 49,590,908 units, including 6,090,908
additional units to partially cover over-allotments, at $10.00 per unit,
generating gross proceeds of approximately $495.9 million, and incurring
offering costs of approximately $28.0 million, of which approximately
$17.4 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement (the "Private Placemeent") of 9,078,788 warrants (the
"Private Placement Warrants"), at a price of $1.50 per Private Placement Warrant
with the Sponsor, generating gross proceeds of approximately $13.6 million.
Upon the closing of the Initial Public Offering and the Private Placement,
approximately $495.9 million ($10.00 per unit) of the net proceeds of the
Initial Public Offering and certain of the proceeds of the Private Placement
were placed in a trust account (the "Trust Account") with Continental Stock
Transfer & Trust Company acting as trustee and invested in United States
government treasury bills with a maturity of 185 days or less or in money market
funds investing solely in U.S. Treasuries and meeting certain conditions under
Rule 2a-7 under the Investment Company Act of 1940, as amended, or the
Investment Company Act, as determined by us, until the earlier of: (i) the
completion of an Initial 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 its Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating an Initial Business Combination. Our
Initial Business Combination must be 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 the deferred underwriting discounts and commissions
and taxes payable on the income earned on the Trust Account) at the time we sign
a definitive agreement in connection with the Initial Business Combination.
However, we will only complete an Initial 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 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 an Initial Business Combination within 24 months
from the closing of the Initial Public Offering, or March 11, 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 to pay our income taxes, if any (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 shareholders' rights as shareholders (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 the remaining
shareholders and the board of directors, liquidate and dissolve, subject in each
such case to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $714,000 in our operating bank
account, and working capital of approximately $963,000.
Our liquidity needs to date have been satisfied through a payment of $25,000
from the Sponsor to pay for certain offering costs and expenses in exchange for
issuance of the founder shares, the loan under the note of $300,000, and the net
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
an Initial Business Combination, our officers, directors and initial
shareholders may, but are not obligated to, provide us working capital loans
(the "Working Capital Loans"). The Working Capital Loans would either be repaid
upon consummation of a business combination, without interest, or, at the
lender's discretion, up to $1,500,000 of such Working Capital Loans may be
convertible into warrants of the post business combination entity at a price of
$1.50 per warrant. To date, there are no Working Capital Loans outstanding.
Until consummation of our Initial Business Combination, we intend to use our
cash held outside the Trust Account, and, if necessary, Working Capital Loans
from the Company's officers and directors, and initial shareholders, 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.
Our management has determined that we do not have sufficient liquidity to meet
our anticipated obligations through March 11, 2023 should we proceed with an
Initial Business Combination, as such, the events and circumstances raise
substantial doubt about our ability to continue as a going concern. We have
until March 11, 2023 to consummate a Business Combination. It is uncertain that
we will be able to consummate a Business Combination by this time. If a Business
Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution of the Company. In connection with our
management's assessment of going concern considerations in accordance with FASB
ASC Topic 205-40, "Presentation of Financial Statements-Going Concern," our
management has determined that the liquidity condition and mandatory
liquidation, should a Business Combination not occur, and potential 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 March 11, 2023.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that, while it is reasonably possible that the virus could have a
negative effect on the Company's financial position, results of its operations,
close of the Initial Public Offering and/or search for a target company, the
specific impact is not readily determinable as of the date of these condensed
financial statements. The condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy is not determinable as of the date of these
unaudited condensed financial statements. The specific impact on our financial
condition, results of operations, and cash flows is also not determinable as of
the date of these unaudited condensed financial statements.
Results of Operations
Our entire activity since inception up to 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 will not be generating any operating revenues until the
closing and completion of our Initial Business Combination, at the earliest.
For the three months ended September 30, 2022, we had net income of
approximately $3.4 million, which consisted of approximately $2.2 million in
interest income from investments held in the Trust Account and non-operating
income of approximately $1.5 million resulting from changes in fair value of
derivative warrant liabilities, partially offset by approximately $289,000 in
general and administrative expenses and $30,000 in administrative
expenses-related party.
For the three months ended September 30, 2021, we had net income of
approximately $837,000, which consisted of approximately $1.1 million in change
in fair value of derivative warrant liabilities, and approximately $6,000 in
interest income from investments held in Trust Account, partially offset by
approximately $279,000 in general and administrative expenses, and $30,000 in
administrative expenses-related party.
For the nine months ended September 30, 2022, we had net income of approximately
$16.4 million, which consisted of approximately $3.0 million in interest income
from investments held in the Trust Account and non-operating income of
approximately $14.4 million resulting from changes in fair value of derivative
warrant liabilities, partially offset by approximately $933,000 in general and
administrative expenses and $90,000 in administrative expenses-related party.
For the nine months ended September 30, 2021, we had a net loss of approximately
$192,000, which consisted of approximately $659,000 in general and
administrative expenses, approximately $67,000 in administrative
expenses-related party, and approximately $634,000 in financing costs-derivative
warrant liabilities, offset by approximately $1.1 million in change in fair
value of derivative warrant liabilities, and approximately $29,000 in interest
income from investments held in Trust Account.
Related Party Transactions
Founder Shares
On December 11, 2020, the Sponsor paid an aggregate of $25,000 to cover for
certain expenses on our behalf in exchange for issuance of 11,500,000 Class B
ordinary shares (the "Founder Shares"). In March 2021, we issued to the initial
shareholders an additional 1,006,250 Founder Shares, resulting in the Sponsor
holding an aggregate of 12,506,250 Founder Shares. The holders of the Founder
Shares agreed to forfeit up to an aggregate of 1,631,250 Founder Shares, on a
pro rata basis, to the extent that the option to purchase additional Units was
not exercised in full by the underwriters, so that the Founder Shares will
represent 20% of our issued and outstanding shares after the Initial Public
Offering. Also in March 2021, our Sponsor transferred 25,000 Founder Shares to
each of our independent directors, as well as another transferee (which amounts
have been adjusted for the share issuance of 1,006,250 ordinary shares, as well
as transfers back to our Sponsor by our independent directors and such other
transferee of 2,187 ordinary shares each, which they received as a result of the
share issuance). On March 9, 2021, the underwriters partially exercised the
over-allotment option to purchase an additional 6,090,908 Units; leaving only
108,523 Class B ordinary shares remain subject to forfeiture. On April 22, 2021,
the underwriters' over-allotment option expired, and the Sponsor forfeited
108,523 shares of Class B ordinary shares accordingly.
The initial shareholders agreed not to transfer, assign or sell any of their
Founder Shares until the earlier to occur of (A) one year after the completion
of the Initial Business Combination and (B) subsequent to the Initial Business
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Combination, (x) if the closing price of the Class A ordinary shares equals or
exceeds $12.00 per share (as adjusted for share subdivisions, share
capitalizations, 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, share exchange or other similar transaction that results in
all of the public shareholders having the right to exchange their ordinary
shares for cash, securities or other property.
Related Party Loans
On December 7, 2020, the Sponsor agreed to loan us up to $300,000 pursuant to a
promissory note. The note was non-interest bearing, unsecured and due upon the
closing of the Initial Public Offering. The company borrowed approximately
$171,000 under the note and fully repaid the balance upon closing of the Initial
Public Offering.
In addition, in order to finance transaction costs in connection with an Initial
Business Combination, the Sponsor, members of our founding team or any of their
affiliates may, but are not obligated to, loan us funds as may be required. If
we complete an Initial Business Combination, we would repay the Working Capital
Loans out of the proceeds of the Trust Account released to us. Otherwise, the
Working Capital Loans would be repaid only out of funds held outside the Trust
Account. In the event that an Initial 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 an Initial Business Combination, without interest,
or, at the lenders' discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into warrants of the post Initial 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 September 30, 2022 and December 31, 2021, we had no
borrowings under the Working Capital Loans.
Administrative Services Agreement
Commencing on the date that our securities were first listed on Nasdaq until the
earlier of our consummation of an Initial Business Combination or our
liquidation, we pay affiliates of the Sponsor a total of $10,000 per month, in
the aggregate, for office space, secretarial and administrative services
provided to us.
In addition, the Sponsor, executive officers and directors, or their respective
affiliates will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable Initial Business
Combinations. The audit committee will review on a quarterly basis all payments
that were made by us to the Sponsor, executive officers or directors, or their
affiliates. Any such payments prior to an Initial Business Combination will be
made using funds held outside the Trust Account.
During the three months ended September 30, 2022 and 2021, we incurred
approximately $30,000 in expenses for these services, which is included in
administrative expenses-related party on the accompanying unaudited condensed
statements of operations. During the nine months ended September 30, 2022 and
2021, we incurred $90,000 and approximately $67,000, respectively, in expenses
for these services, which is included in administrative expenses-related party
on the accompanying unaudited condensed statements of operations. As of
September 30, 2022 and December 31, 2021, we had no amounts payable for such
services.
Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of Working Capital Loans (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares) were entitled to registration rights pursuant to a
registration and shareholder rights agreement signed upon the effective date of
the Initial Public Offering. The holders of these securities were entitled to
make up to three demands, excluding short form demands, that we register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
completion of the Initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
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Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final
prospectus to purchase up to 6,525,000 additional Units at the Initial Public
Offering price less the underwriting discounts and commissions. On March 9,
2021, the underwriters partially exercised the over-allotment option to purchase
an additional 6,090,908 Units.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
approximately $9.9 million in the aggregate, paid upon the closing of the
Initial Public Offering. The underwriters were entitled to a deferred
underwriting commission of $0.35 per Unit, or approximately $17.4 million. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete an Initial Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. A summary of our significant accounting policies is
included in Note 2 to our condensed financial statements in Part I, Item 1 of
this Quarterly Report on Form 10-Q. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our 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 2021 Annual Report on Form 10-K filed with the SEC on
April 15, 2022. There have been no significant changes in the application of our
critical accounting policies during the nine months ended September 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed financial statements included in Part I,
Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent
accounting pronouncements.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 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 financial statements may not be comparable to companies that comply
with 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 auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (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 auditor's report
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 Chief Executive Officer's
compensation to median employee compensation.
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