References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to InterPrivate II Acquisition Corp.
References to our "management" or our "management team" refer to our officers
and directors, and references to the "Sponsor" refer to InterPrivate Acquisition
Management II, LLC. 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
Quarterly Report and the Annual Report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that are not historical
facts and involve risks and uncertainties that could cause actual results to
differ materially from those expected and projected. All statements, other than
statements of historical fact included in this Quarterly Report including,
without limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the Company's financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. Words such as "expect,"
"believe," "anticipate," "intend," "estimate," "seek" and variations and similar
words and expressions are intended to identify such forward-looking statements.
Such forward-looking statements relate to future events or future performance,
but reflect management's current beliefs, based on information currently
available. A number of factors could cause actual events, performance or results
to differ materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Annual Report. The Company's securities filings can be accessed on the EDGAR
section of the SEC's website at www.sec.gov. Except as expressly required by
applicable securities law, the Company disclaims any intention or obligation to
update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 10, 2020 for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. We intend to effectuate our
Business Combination using cash from the proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, our capital stock, debt or a
combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Proposed Transaction
On May 11, 2022, the Company, TMPST Merger Sub I Inc., a Delaware corporation
and newly formed, wholly-owned direct subsidiary of the Company ("First Merger
Sub"), TMPST Merger Sub II LLC, a Delaware limited liability company and newly
formed, wholly-owned direct subsidiary of the Company ("Second Merger Sub"), and
Getaround, Inc., a Delaware corporation ("Getaround"), entered into an Agreement
and Plan of Merger (the "Merger Agreement"). If the Merger Agreement and the
transactions contemplated thereby are adopted and approved by the Company's
stockholders (and the other closing conditions are satisfied or waived in
accordance with the Merger Agreement), and the business combination is
subsequently completed, (a) First Merger Sub will merge with and into Getaround
(the "First Merger"), with Getaround being the surviving corporation of the
First Merger, and (b) immediately following the First Merger, Getaround will
merge with and into Second Merger Sub (the "Second Merger" and, together with
the First Merger, the "Mergers" and, collectively with the Mergers and other
transactions described in the Merger Agreement, the "Proposed Transaction"),
with Second Merger Sub being the surviving company of the Second Merger. In
addition, in connection with the consummation of the Proposed Transaction (the
"Closing"), the Company will be renamed "Getaround, Inc." and is referred to
herein as "Pubco."
Under the Merger Agreement, holders of Getaround's equity interests are expected
to receive approximately $800,000,000 ("the Base Purchase Price") in aggregate
consideration in the form of Pubco Class A common stock, par value $0.0001 per
share ("Pubco Class A Common Stock"), equal to the quotient obtained by dividing
(i) the Base Purchase Price by (ii) the per share price of $10.00 at the
Closing. In addition to the Base Purchase Price, Pubco will issue up to an
additional 34,000,000 shares of Pubco Class A Common Stock up to an additional
11,000,000 shares of Pubco Class A Common Stock to certain personnel of
Getaround as earnout consideration in tranches based upon the volume weighted
average price of Pubco Class A Common Stock for any twenty trading days within a
period of thirty consecutive trading days at any time following the Closing
until the seven year anniversary of the Closing. These price targets range from
$13.50 to $55.
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9,333,333 shares of Pubco Class A Common Stock issuable as part of the Base
Purchase Price will be set aside in an escrow account at Closing (the "Escrow
Shares"). 1,000,000 Escrow Shares will be set aside and allocated as agreed upon
by the Company and Getaround, including for the benefit of public stockholders
who do not redeem their Class A common stock in connection with the Proposed
Transaction (the "Non-Redeeming Public Holders"). In the event of a PIPE
Investment (as defined below), a number of Escrow Shares equal to (i) 8,333,333
multiplied by (ii) a fraction, (A) the numerator of which will be the lesser of
(y) the PIPE Investment Amount (as defined below) and (z) $125,000,000 and (B)
the denominator of which will be $125,000,000 (the "PIPE Protection Shares"),
will be set aside for the benefit of the PIPE investors. Further, a remaining
portion of the Escrow Shares, including any remaining PIPE Protection Shares not
allocated will be set aside and allocated as agreed upon by the Company and
Getaround, including, in case the PIPE Investment Amount is less than
$125,000,000, for the benefit of some or all of the Non-Redeeming Public
Holders.
Pursuant to the terms of the Merger Agreement and a letter agreement entered
into on November 7, 2022 between the Company and Getaround (the "Escrow Shares
Allocation Agreement"), the Escrow Shares will be allocated promptly following
the Closing to: (i) non-redeeming public holders of Class A Stock, whether
acquired in InterPrivate II's initial public offering or acquired in the
secondary market (the "Public Stockholders"), (ii) the designees of
EarlyBirdCapital, and (iii) the holders of the Class B Stock including the
Sponsor and the current and former independent directors of InterPrivate II
(collectively, the "Bonus Share Recipients", and the Escrow Shares entitled to
be received by the Bonus Share Recipients, the "Bonus Shares"). The Bonus Shares
will be apportioned pro rata to each Bonus Share Recipient based on the number
of shares of Class A Stock held immediately following the Closing as a
percentage of the total number of shares of Class A Stock that remain
outstanding after giving effect to redemptions and the automatic conversion of
the Founder Shares into shares of Class A Stock. However, the holders of the
Representative Shares and the Founder Shares (collectively, the "Initial
Stockholders") have agreed pursuant to the Escrow Shares Allocation Agreement to
re-allocate to the Getaround equityholders the number of Bonus Shares which
exceed the number that the Initial Stockholders would have received on a pro
rata basis if no Public Stockholders elect to exercise their redemption rights.
In connection with the Closing, the Founder Shares will automatically convert
into shares of Pubco Class A Common Stock on a one-for-one basis and will
continue to be subject to the transfer restrictions applicable to the Founder
Shares.
The Merger Agreement contains customary representations and warranties,
covenants and closing conditions, including, but not limited to, approval by the
Company's stockholders of the Merger Agreement and the Proposed Transaction. The
terms of the Merger Agreement and other related ancillary agreements entered
into or to be entered into in connection with the Closing of the Proposed
Transaction, including those briefly described below, are summarized in more
detail in the Company's Form 8-K filed with the SEC on May 13, 2022.
Convertible Notes
In connection with the execution of the Merger Agreement, the Company entered
into a subscription agreement (the "Subscription Agreement") with an investor to
purchase convertible promissory notes (the "Convertible Notes") in an aggregate
principal amount of at least $100 million, up to a maximum of $175 million under
certain conditions. The Convertible Notes will be convertible into shares of
Pubco Class A Common Stock (subject to adjustments as provided in the indenture
governing the Convertible Notes) at an initial conversion rate of 86.96 shares
of Pubco Class A Common Stock per $1,000 principal amount of Convertible Notes,
representing an initial conversion price of $11.50 per share, subject to a
downward adjustment to 115% of the average daily VWAP of Pubco Class A Common
Stock for the 90 trading days after the Closing Date, subject to a minimum
conversion price of $9.21 per share, subject to adjustments to such rate as
provided in the indenture, including adjustments in connection with certain
issuances or deemed issuances of Pubco Class A Common Stock at a price less than
the then-effective conversion price, at any time prior to the close of business
on the second scheduled trading day immediately before the maturity date of the
Convertible Notes. In connection with the execution of the Subscription
Agreement for the purchase of the Convertible Notes, the Company agreed to issue
warrants (the "Notes Warrants"), each representing the right to purchase one
share of Pubco Class A Common Stock, that are exercisable for shares of Pubco
Class A Common Stock having an aggregate value equal to $3.5 million, based upon
a value of $1.25 per Note Warrant; provided that such value shall be adjusted
upward or downward to reflect the VWAP reported by Bloomberg LP (subject to
customary proportionate adjustments affecting the outstanding shares of Pubco
Class A Common Stock) of the equivalent publicly-traded warrants of the Company
during the 90 trading days following the Closing Date, subject to a maximum
upward or downward adjustment of $0.75 per Note Warrant. Notwithstanding the
foregoing, the Company shall have the right to pay cash in lieu of issuing the
Note Warrants; provided that such cash amount will be equal to $3.5 million. The
Company also agreed to pay the investor within 100 trading days following the
Closing Date, a fee equal to $5.25 million.
The Company's obligations under the Convertible Notes will be (a) guaranteed by
second Merger Sub and certain of its and the Company's subsidiaries and (b)
secured by collateral consisting of substantially all of the assets of Pubco and
its subsidiary guarantors pursuant to security documents to be entered into upon
the issuance of the Convertible Notes.
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The Convertible Notes will bear interest at the rate of 8.00% per annum if Pubco
elects to pay interest in cash or 9.50% per annum if Pubco elects to pay
interest in-kind, and interest will be paid semi-annually. Upon the occurrence,
and during the continuation, of an event of default, an additional 2.00% will be
added to the stated interest rate. The Convertible Notes will mature on the
fifth anniversary of issuance and will be redeemable at any time by Pubco, in
whole but not in part, for cash, at par plus accrued and unpaid interest to, but
excluding, the redemption date, plus, certain make-whole premiums as specified
in the indenture governing the Convertible Notes.
Upon the occurrence of a Fundamental Change (as defined in the indenture
governing the Convertible Notes), the investor will have the right, at its
option, to require Pubco to repurchase for cash all or any portion of its
Convertible Notes in principal amounts of $1,000 or an integral multiple
thereof, at a fundamental change repurchase price equal to the principal amount
of the Convertible Notes to be repurchased plus certain make-whole premiums,
plus accrued and unpaid interest to, but excluding, the repurchase date. The
indenture governing the Convertible Notes will include restrictive covenants
that, among other things, will limit the ability of Pubco to incur additional
debt, make restricted payments and limit the ability of Pubco to incur liens.
The indenture will also contain customary events of default.
In addition to the customary conditions to closing provided in the Subscription
Agreement, the obligations of the investor to purchase the Convertible Notes are
conditioned upon, among other things, and are expected to close concurrently
with, the consummation of the Mergers.
PIPE Investment
The Company and Getaround anticipate that after the execution of the Merger
Agreement, certain investors will agree to make private investments in the
Company (the "PIPE Investment") in an aggregate amount to be mutually agreed by
the Company and Getaround (the "PIPE Investment Amount"), which amount will
exclude any amount raised pursuant to the Subscription Agreement described
above, to purchase shares of Pubco Class A Stock to be consummated immediately
prior to the consummation of the Proposed Transaction, on the terms and subject
to the conditions of the subscription agreements to be executed and delivered by
the Company and the investors.
Getaround Holders Support Agreement
Certain stockholders of Getaround will enter into a support agreement with the
Company and Getaround, pursuant to which, among other things, such holders will
agree to provide an executed irrevocable written consent approving the Proposed
Transaction within forty-eight hours after the execution of the Merger
Agreement.
Sponsor Support Agreement
Concurrently with the execution of the Merger Agreement, the Sponsor entered
into a sponsor support agreement (the "Sponsor Support Agreement") with the
Company and Getaround, pursuant to which the Sponsor agreed to, among other
things, vote in favor of the Merger Agreement and the Proposed Transaction.
Registration Rights and Lock-Up Agreement
In connection with the consummation of the First Merger, the Company, the
Sponsor and Jeffrey Harris, Matthew Luckett and Tracey Brophy Warson (the
"Sponsor Holders"), EarlyBird Capital and certain equity holders of Getaround
(the "Legacy Holders" and, together with the Sponsor Holders and EarlyBird
Capital, the "Holders") will enter into an Amended and Restated Registration
Rights Agreement. Pursuant to the terms of the Amended and Restated Registration
Rights Agreement, (a) the Holders will be granted registration rights with
respect to their respective Pubco shares, and (b) the Sponsor Holders and the
Legacy Holders will agree not to effect any sale or distribution of certain
equity securities of Pubco held by any of them during the lock-up period
described therein in each case, on the terms and subject to the conditions set
forth therein.
15
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2022 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on
marketable securities held in the Trust Account. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
The three months ended September 30, 2022 compared to the three months ended
September 30, 2021
For the three months ended September 30, 2022 and 2021, we had a net loss of
$248,537 versus a net loss of $15,485, respectively, a change of $233,052. This
change was primarily driven by increases in operating costs of $740,848 and an
offset of $568,200 for changes in fair value of warrant liabilities and an
increase in the provision for income taxes of $271,311. We recorded income for
the change in fair value of warrant liabilities of $165,867 for the three months
ended September 30, 2022 compared to $734,067 for the three months ended
September 30, 2021. The change in fair value of warrant liabilities is due to
the decrease in warrant values from an ending balance of $ 4,115,552 as of
December 31, 2021 to $ 236,980 as of September 30, 2022 as a result of current
market conditions.
Period-to-period changes in our results also include interest income on
marketable securities held in the Trust Account for the three months ended
September 30, 2022 of $336,544 compared to $30,522 for the three months ended
September 30, 2021, and we had an unrealized gain on marketable securities held
in the Trust Account for the three months ended September 30, 2022 of $1,027,141
compared to an unrealized loss of $14,144 for the three months ended September
30, 2021.
The nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021
For the nine months ended September 30, 2022 and, 2021, we had a net loss of
$220,264 versus a net loss of $2,585,255, respectively, a change of $2,364,991.
This change was primarily driven by increases in operating costs of $3,881,451
and an offset of $4,791,338 for changes in fair value of warrant liabilities,
and an increase in the provision for income taxes of $322,368. There were no
warrant transaction costs for the nine months ended September 30, 2022 compared
to $6,835 for the nine months ended September 30, 2021. We recorded income for
the change in fair value of warrant liabilities of $3,878,572 for the nine
months ended September 30, 2022 compared to a loss of $912,766 for the nine
months ended September 30, 2021.
Period-to-period changes in our results also include interest income on
marketable securities held in the Trust Account for the nine months ended
September 30, 2022 of $823,607 compared to $54,504 for the nine months ended
September 30, 2021, and we had an unrealized gain on marketable securities held
in the Trust Account for the nine months ended September 30, 2022 of $983,987
compared to an unrealized loss of $17,547 for the nine months ended September
30, 2021.
Liquidity and Capital Resources
On March 9, 2021, we consummated the Initial Public Offering of 25,875,000 Units
which includes the full exercise by the underwriters of their over-allotment
option in the amount of 3,375,000 Units, at $10.00 per Unit, generating gross
proceeds of $258,750,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 4,616,667 Private Placement Warrants at a
price of $1.50 per Private Placement Warrant in a private placement to the
Sponsor and EarlyBirdCapital, generating gross proceeds of $6,925,000.
16
For the nine months ended September 30, 2022, cash used in operating activities
was $502,057. Net loss of $220,264 was affected by a non-cash income related to
the change in warrant liability of $3,878,572, interest earned on marketable
securities held in the Trust Account of $823,607 and an unrealized loss on
marketable securities held in in the Trust Account of $983,987. Changes in
operating assets and liabilities used $5,404,373 of cash for operating
activities primarily due to accrued expenses.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $260,207,445 including interest income of $823,607 and unrealized losses of
$983,987 consisting of U.S. Treasury Bills with a maturity of 185 days or less.
Interest income on the balance in the Trust Account may be used by us to pay
taxes. Through September 30, 2022, we have withdrawn $ 421,391 from the Trust
Account related to payments for Delaware franchise taxes and federal income
taxes.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of September 30, 2022, we had cash of $40,119 held outside the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. Up to $1,500,000 of such loans may be convertible into
warrants at a price of $1.50 per warrant, at the option of the lender. The
warrants would be identical to the Private Placement Warrants.
We will need to raise additional capital through loans or additional investments
from our initial stockholders, officers or directors. If we are unable to raise
additional capital, we may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of a potential transaction, and reducing
overhead expenses. We cannot provide any assurance that new financing will be
available to us on commercially acceptable terms, if at all. These conditions
raise substantial doubt about our ability to continue as a going concern through
one year and one day from the issuance of this report.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities that would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, administrative and support services.
We began incurring these fees on March 4, 2021 and will continue to incur these
fees monthly until the earlier of the completion of the Business Combination and
our liquidation.
We have entered into an agreement, pursuant to which we will pay the Vice
President a total of $10,000 per month for assisting us in negotiating and
consummating an initial Business Combination. Upon completion of the Business
Combination or the Company's liquidation, the agreement will terminate and the
Company will cease paying these monthly fees.
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We engaged EarlyBirdCapital as our advisor in connection with the Business
Combination to assist us in holding meetings with our stockholders to discuss
the potential Business Combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with the Business Combination, assist us in obtaining
stockholder approval for the Business Combination, and assist us with its press
releases and public filings in connection with the Business Combination. On July
5, 2022, the BCMA was amended, and as a result Morgan Stanley is no longer
required to perform any services under the BCMA and is not entitled to receive
any compensation thereunder. We will pay EarlyBirdCapital a cash fee for such
services upon the consummation of a Business Combination in an amount equal to
1.75% of the gross proceeds of the Initial Public Offering (exclusive of any
applicable finders' fees which might become payable).
We have issued to EarlyBirdCapital, and/or its designees, 200,000 representative
shares (the "representative shares") for nominal consideration. The holders of
the representative shares have agreed not to transfer, assign or sell any such
shares without our prior consent until the completion of our initial business
combination. In addition, the holders of the representative shares have agreed
(i) to waive their conversion rights (or right to participate in any tender
offer) with respect to such shares in connection with the completion of our
initial business combination and (ii) to waive their rights to liquidating
distributions from the Trust Account with respect to such shares if we fail to
complete our initial business combination within 24 months from the closing of
the Public Offering.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with GAAP 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 financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following critical accounting
policies:
Warrant Classification
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") Topic 480, "Distinguishing
Liabilities from Equity" ("ASC 480") and ASC Topic 815, "Derivatives and
Hedging" ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own shares of common stock and whether the
warrant holders could potentially require "net cash settlement" in a
circumstance outside of the Company's control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding. As of September
30, 2022 and December 31, 2021, the Private Placement Warrants were accounted
for as liabilities, and the Public Warrants were accounted for as temporary
equity.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in ASC 480. Common stock subject to mandatory redemption 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 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, common stock subject to possible
redemption is presented as temporary equity, outside of the stockholders' equity
section of our condensed balance sheets.
Net Income (Loss) Per Share of Common Stock
Net income per common share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period.
Accretion associated with the redeemable shares of Class A common stock is
excluded from earnings per share as the redemption value approximates fair
value.
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The Company has not considered the effect of the Public Warrants and the Private
Placement Warrants to purchase shares of common stock in the calculation of
diluted net income (loss) per share, since the exercise of such warrants into
shares of common stock is contingent upon the occurrence of future events and
their inclusion would be anti-dilutive. As a result, diluted net income (loss)
per common share is the same as basic net income (loss) per common share for the
periods presented.
Non-redeemable common stock includes the Founder Shares and other shares of
common stock that do not have redemption features.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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