References to the "Company," "our," "us" or "we" refer to Revolution Healthcare
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed financial statements and the notes thereto contained
elsewhere in this report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (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 our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on January 11, 2021, for
the purpose of effectuating a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses or entities (herein referred to as "Initial Business Combination").
Our initial stockholders are REV Sponsor LLC, a Delaware limited liability
company (our "Sponsor"), and Health Assurance Economy Foundation, a charitable
foundation ("Foundation", and together with the Sponsor, collectively, the
"Initial Stockholders"), and includes any other holders of Alignment Shares.
The registration statement for our initial public offering was declared
effective on March 17, 2021, the "Initial Public Offering." On March 22, 2021,
we consummated the Initial Public Offering of 55,000,000 Stakeholder Aligned
Initial Listing securities, or SAILSM securities (each, a "SAIL", and
collectively, "SAILs"), including 5,000,000 SAILs as a result of the
underwriters' exercise in part of their over-allotment option. The SAILs were
sold at an offering price of $10.00 per SAIL, generating gross proceeds of
$550.0 million, and incurring offering costs of approximately $31.0 million, of
which approximately $19.3 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 12,000,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $1.50 per Private Placement Warrant with our Sponsor, generating
gross proceeds of $18.0 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$550.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in
the Initial Public Offering and the Private Placement were placed in a trust
account ("Trust Account") located in the United States, with Continental Stock
Transfer & Trust Company acting as trustee, and will be invested only in U.S.
"government securities," within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"), with
a maturity of 185 days or less, or in money market funds meeting the conditions
of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under 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 an Initial
Business Combination and (ii) the distribution of the Trust Account as described
below.
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If we do not complete an Initial Business Combination within this period of time
(and stockholders do not approve an amendment to the amended and restated
certificate of incorporation to extend this date), it 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, of $10.00, 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 the case of clauses (ii) and (iii), to our obligations under Delaware
law to provide for claims of creditors and in all cases subject to the other
requirements of applicable law. The Initial Stockholders, officers and directors
entered into a letter agreement with us, pursuant to which they agreed to
(i) waive their redemption rights with respect to any Alignment Shares and
Public Shares they hold in connection with the completion of the Initial
Business Combination, (ii) waive their redemption rights with respect to any
Alignment Shares and Public Shares they hold in connection with a stockholder
vote to approve an amendment to our amended and restated certificate of
incorporation to modify the substance or timing of our obligation to redeem 100%
of its Public Shares if we have not consummated an Initial Business Combination
within the Business Combination Period (as defined in Note 1) or with respect to
any other material provisions relating to stockholders' rights or
pre-combination transaction activity and (iii) waive their rights to liquidating
distributions from the Trust Account with respect to any Alignment Shares they
hold if we fail to complete the an Initial Business Combination within the
Business Combination Period (although they will be entitled to liquidating
distributions from the Trust Account with respect to any Public Shares they hold
if we fail to complete an Initial Business Combination within the Business
Combination Period).
Results of Operations
Our entire activity from January 11, 2021 (inception) through September 30,
2022, was in preparation for our Initial Public Offering, and since our Initial
Public Offering, our activity has been limited to the search for a prospective
Initial Business Combination. We will not generate any operating revenues until
the closing and completion of our initial Business Combination. We generate
non-operating income in the form of investment income from our investments held
in the Trust Account. We expect to incur increased expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had net income of
approximately $5.9 million, which consisted of approximately $4.6 million for
change in fair value of derivative warrant liabilities, approximately $2.5 of
income from investments held in Trust Account, offset by approximately $622,000
of general and administrative expenses, approximately $49,000 of franchise tax
expense, and approximately $511,000 of income tax expense.
For the three months ended September 30, 2021, we had net income of
approximately $11.0 million, which consisted of $11.6 million for change in fair
value of derivative warrant liabilities, approximately $48,000 of income from
investments held in Trust Account, offset by approximately $677,000 of general
and administrative expenses, and approximately $50,000 of franchise tax expense.
For the nine months ended September 30, 2022, we had net income of approximately
$16.7 million, which consisted of approximately $16.5 million for change in fair
value of derivative warrant liabilities, approximately $3.0 of income from
investments held in Trust Account, offset by approximately $2.1 million of
general and administrative expenses, approximately $112,000 of franchise tax
expense, and approximately $602,000 of income tax expense.
For period from January 11, 2021 (inception) through September 30, 2021, we had
net income of approximately $17.8 million, which consisted of $20.8 million for
change in fair value of derivative warrant liabilities, approximately $85,000 of
income from investments held in Trust Account, offset by approximately
$1.4 million of financing costs-derivative warrant liabilities, approximately
$1.5 million of general and administrative expenses, and approximately $142,000
of franchise tax expense.
Liquidity, Capital Resources and Going Concern
As of September 30, 2022, we had approximately $1.5 million in cash and working
capital of approximately $1.8 million, not taking into account tax obligation of
approximately $652,000 that may be paid from income from investments held in the
Trust Account.
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Our liquidity needs to date have been satisfied through a cash contribution of
$25,000 from our Sponsor to purchase Alignment Shares, a loan of approximately
$277,000 from our Sponsor pursuant to the Note (as defined in Note 4), and the
proceeds from the consummation of the Private Placement not held in the Trust
Account. Then, we repaid the Note in full on March 24, 2021. In addition, in
order to finance transaction costs in connection with an Initial Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us Working Capital
Loans. As of September 30, 2022 and December 31, 2021, there were no amounts
outstanding under any Working Capital Loans (as defined in Note 4).
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of an Initial Business Combination or one year from this filing.
However, in connection with our assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial
Statements-Going Concern," we have until March 22, 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. Management has determined that the 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 we be required to liquidate after March 22, 2023.
We filed a preliminary proxy statement on October 24, 2022 and a definitive
proxy statement on November 7, 2022 to call a special meeting of stockholders to
approve an amendment to its Amended and Restated Certificate of Incorporation
and an amendment to its Investment Management Trust Agreement to allow for the
Company to return capital to stockholders prior to the original termination date
of March 22, 2023, to be determined (the "Amended Termination Date"). Upon
approval by the Company's stockholders of the proposals set forth in the proxy
statement, the Company would redeem the Public Shares and begin liquidation
proceedings.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("GAAP") 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. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our 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 March 21, 2022.
We believe that our critical accounting policies and estimates have a higher
degree of inherent uncertainty and require our most significant judgments. There
were no changes in our critical accounting policies and estimates during the
nine months ended September 30, 2022 from those set forth in "Critical
Accounting Policies" in our December 31, 2021 Annual Report on Form 10-K filed
with the SEC on March 21, 2022.
Recent Accounting Pronouncements
The information set forth in Note 2 of the Notes to the unaudited condensed
Financial Statements in Part I, Item 1 of this Quarterly Report, relating to a
discussion of recent accounting pronouncements, is hereby incorporated by
reference herein.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations, other than for an agreement
to pay our Sponsor $10,000 per month for office space, secretarial and
administrative support provided to members of our management team. The affiliate
of the Sponsor has waived such fees and such fees will not be payable until the
affiliate of the Sponsor determines that such fees should be paid. As of
September 30, 2022 and December 31, 2021, the Company has not accrued or
incurred any administrative fees. In addition, each independent director
receives quarterly cash compensation of $50,000 and $75,000 (or between $200,000
and $300,000 in the aggregate per year).
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Registration Rights
The holders of the Alignment Shares, Private Placement Warrants, and Private
Placement Warrants that may be issued upon conversion of Working Capital Loans
(and any shares of Class A common stock into which such securities may convert
and that may be issued upon conversion of Working Capital Loans and upon
conversion of the Alignment Shares) were entitled to registration rights
pursuant to a registration rights agreement signed upon the effective date of
the Initial Public Offering, requiring us to register such securities for
resale. The holders of these securities were entitled to make up to three
demands, excluding short form demands, that we registered 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.
Underwriting Agreement
We granted the underwriter a 45-day option to purchase up to 7,500,000
additional SAILs, to cover any over-allotment, at the initial public offering
price less the underwriting discounts and commissions. On March 22, 2021, the
underwriters partially exercised the over-allotment option to purchase an
additional 5,000,000 SAILs.
The underwriter was entitled to an underwriting discount of $0.20 per SAIL, or
$11.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per SAIL, or approximately $19.3 million in the
aggregate will be payable to the underwriter for deferred underwriting
commissions. The deferred fee will become payable to the underwriter from the
amounts held in the Trust Account solely in the event that the Company completes
an Initial Business Combination, subject to the terms of the underwriting
agreement.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are 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, the condensed 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 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 Public Company
Accounting Oversight Board (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.
These exemptions will apply for a period of five years following the completion
of our Initial Public Offering or until we are no longer an "emerging growth
company," whichever is earlier.
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REVOLUTION HEALTHCARE ACQUISITION CORP. 