References to the "Company," "Yellowstone Acquisition Co.," "our," "us" or "we"
refer to Yellowstone Acquisition Company. The following discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with the unaudited 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, and
Section 21E of 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. 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 Company's Annual Report on Form 10-K as amended as filed with the
Securities and Exchange Commission (the "SEC") on May 24, 2021. 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. All subsequent written or oral forward-looking statements
attributable to us or persons acting on the Company's behalf are qualified in
their entirety by this paragraph.
Overview
We are a blank check company incorporated 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 are an emerging growth company and, as such, we are
subject to all of the risks associated with emerging growth companies. On August
2, we announced the entry into the Equity Purchase Agreement for the Proposed
Business Combination.
Our Sponsor is BOC Yellowstone LLC, a Delaware limited liability company. The
registration statement for our Initial Public Offering was declared effective on
October 21, 2020. On October 26, 2020, we consummated our Initial Public
Offering of 12,500,000 Units, at $10.00 per Unit, generating gross proceeds of
$125.0 million, and incurring offering costs of approximately $7.3 million
(including $6.9 million in underwriters' fees). The underwriters were granted a
45-day option from the date of the final prospectus to the Initial Public
Offering to purchase up to 1,875,000 additional Units to cover over-allotments,
if any, at $10.00 per Unit. On December 1, 2020, the underwriters'
over-allotment option was exercised resulting in the purchase of an additional
1,098,898 Units.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement of 7,500,000 Private Placement Warrants to our Sponsor,
each exercisable to purchase one share of Class A common stock at $11.50 per
share, at a price of $1.00 per Private Placement Warrant, generating gross
proceeds to us of $7.5 million. In connection with the partial exercise of the
underwriter's over-allotment option, our Sponsor purchased an additional 219,779
Private Placement Warrants at a price of $1.00 per Private Placement Warrant,
generating additional gross proceeds of $219,779.
Upon the closing of the Initial Public Offering, $127,500,000 ($10.20 per Unit)
of the net proceeds of the sale of the Units in the Initial Public Offering,
including proceeds of the sale of the Private Placement Warrants, were placed in
a Trust Account located in the United States at JP Morgan Chase Bank, N.A. with
Continental Stock Transfer & Trust Company acting as trustee, and are invested
in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or in any
open-ended investment company that holds itself out as a money market fund
meeting certain conditions of Rule 2a-7 of the Investment Company Act, as
determined by us (or our management), until the earlier of: (i) the completion
of a Business Combination and (ii) the distribution of the funds in the Trust
Account to our stockholders, as described below. Upon the closing of the
underwriter's over-allotment option, an additional $11,208,760 in proceeds from
the exercise of the over-allotment and the sale of the additional Private
Placement Warrants were placed in the Trust Account, resulting in total funds
held in the Trust Account of $138,708,760.
Our management has broad discretion with respect to the specific application of
the net proceeds of the 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 a Business Combination.
If we are unable to complete a Business Combination within 15 months from the
closing of the Initial Public Offering, or January 25, 2022, we will (i) cease
all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but no more than 10 business days thereafter, redeem 100% of
the outstanding 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 (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 liquidation distributions, if any), and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the
remaining stockholders and our board of directors, dissolve and liquidate,
subject in each case to its obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
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Results of Operations
For the nine months ended September 30, 2021, we had net income of $2,800,617,
which includes a gain of $4,355,766 related to the change in the fair value of
the warrant liability. Our business activities from inception to September 30,
2021 consisted primarily of our formation and completing our Public Offering,
and since the offering, our activity has been limited to identifying and
evaluating prospective acquisition targets for an Initial Business Combination.
On August 2, 2021, we announced the entry into the Equity Purchase Agreement for
the Proposed Business Combination.
Liquidity and Capital Resources
As of September 30, 2021, we held $865,018 in our operating cash account.
Management believes that we will have sufficient working capital to meet our
needs through January 25, 2022. Over this time period, we will be using these
funds for paying existing accounts payable, and structuring, negotiating and
consummating the Proposed Business Combination.
Related Party Transactions
In August 2020, our Sponsor acquired 5,750,000 founder shares for an aggregate
purchase price of $25,000. Prior to the initial investment in the company of
$25,000 by our Sponsor, we had no assets, tangible or intangible. The number
of founder shares issued was determined based on the expectation that such
founder shares would represent 20% of the outstanding shares upon completion of
our initial public offering. The per share purchase price of the founder shares
was determined by dividing the amount of cash contributed to us by an aggregate
number of founder shares issued. Subsequently, we decreased the size of the
offering and decreased the number of founder shares proportionally in the
offering as to maintain the ownership of our initial stockholders at 20% of the
issued and outstanding shares of our common stock upon the consummation of the
offering. In connection with the underwriter's exercise of the over-allotment
option on December 1, 2020, we decreased the number of founder shares to
3,399,724 shares, resulting in a purchase price of $.00735 per share of Class B
common stock. Our Sponsor intends to transfer certain founder shares to each of
our independent director nominees, at their original purchase price.
On September 27, 2021, the Sponsor agreed to loan the Company an aggregate of up
to $1,000,000 to cover expenses related to the Proposed Business Combination
pursuant to a promissory note (the "Note"). This loan bears interest at the
Federal Short Term Rate published pursuant to Section 1274(d) of the Code,
compounded annually. The loan is payable on the earlier of the date on which
the Company consummates its initial business combination or the date that the
Company's winding up is effective. The principal balance, together with all
accrued interest thereon, may be prepaid at any time at the election of the
Company. As of September 30, 2021, there was $1,000,000 outstanding under the
Note. At the option of the holder, the Note is convertible into Private
Placement Warrants at a price of $1.00 per warrant. The Sponsor may elect to
convert all or any portion of the unpaid principal balance of the Note, together
with all accrued and unpaid interest thereon, into that number of Conversion
Warrants, each whole warrant exercisable for one ordinary share of the Company,
equal to: (x) the portion of the principal amount of the Note, together with all
accrued and unpaid interest thereon, being converted, divided by (y) $1.50,
rounded up to the nearest whole number of warrants. The Conversion Warrants
shall be identical to the Private Placement Warrants issued by the Company to
the Sponsor. In addition, in order to finance transaction costs in connection
with an intended initial business combination, our Sponsor or an affiliate of
our Sponsor or certain of our officers and directors may, but are not obligated
to, loan us additional funds as may be required. If we complete our initial
business combination, we would repay such loaned amounts. In the event that our
initial business combination does not close, we may use a portion of the working
capital held outside the trust account to repay such loaned amounts but no
proceeds from our trust account would be used for such repayment. Up to
$1,500,000 of such loans (including the $1,000,000 previously loaned on
September 27, 2021) may be convertible into warrants, at a price of $1.50 per
warrant at the option of the lender. Such warrants would be identical to the
private placement warrants, including as to exercise price, exercisability and
exercise period. The terms of such loans by our officers and directors, if any,
have not been determined and no written agreements exist with respect to such
loans. We do not expect to seek loans from parties other than our Sponsor or an
affiliate of our Sponsor as we do not believe third parties will be willing to
loan such funds and provide a waiver against any and all rights to seek access
to funds in our trust account.
Our Sponsor, officers, directors, advisors or any of their respective
affiliates, will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on our behalf, including expenses related to our
formation and initial public offering as well as identifying potential target
businesses and performing due diligence on suitable business combinations, and
any expenses incurred in negotiating and consummating any potential business
combination. Additionally, our Sponsor, officers, directors, advisors, or our or
their affiliates may receive a payment in connection with the successful
completion of our initial business combination; however, any such payment would
not be made from the proceeds of this offering held in the trust account and we
currently do not have any arrangement or agreement with our Sponsor, officers,
directors, advisors, or our or their affiliates, to do so. Our audit committee
will review on a quarterly basis all payments that were made or are to be made
to our Sponsor, officers, directors, or our or their affiliates and will
determine which expenses and the amount of expenses that will be reimbursed.
There is no cap or ceiling on the reimbursement of out-of-pocket expenses
incurred by such persons in connection with activities on our behalf.
In connection with our initial public offering, our Sponsor purchased an
aggregate of 7,500,000 private placement warrants at a price of $1.00 per whole
warrant ($7,500,000 in the aggregate) in a private placement which closed
simultaneously with the closing of the initial public offering. Each whole
private placement warrant is exercisable for one whole share of our Class A
common stock at $11.50 per share. In addition, in connection with the exercise
of the underwriter's overallotment option on December 1, 2020, we purchased
private placement warrants at a price of $1.00 per whole warrant to purchase an
additional 219,779 shares of Class A common stock at a price of $11.50 per
share. Our Sponsor will be permitted to transfer the private placement warrants
held by it to certain permitted transferees, including our officers, directors,
and other permitted transferees and any such permitted transferees receiving
such securities will be subject to the same agreements with respect to such
securities as the Sponsor.
Pursuant to the registration rights agreement entered into with our initial
stockholders prior to the closing of our initial public offering, we may be
required to register certain securities for sale under the Securities Act. These
holders, and holders of warrants issued upon conversion of Working Capital
Loans, if any, are entitled under the registration rights agreement to make up
to three demands that we register certain of our securities held by them for
sale under the Securities Act and to have the securities covered thereby
registered for resale pursuant to Rule 415 under the Securities Act. In
addition, these holders have the right to include their securities in other
registration statements filed by us. However, the registration rights agreement
provides that we will not permit any registration statement filed under the
Securities Act to become effective until the securities covered thereby are
released from their lock-up restrictions, as described herein. We will bear the
costs and expenses of filing any such registration statements. See the section
of this prospectus entitled "Certain Relationships and Related Party
Transactions."
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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and expenses during the periods reported.
Actual results could materially differ from those estimates.
We have identified the following as our critical accounting policies:
Net (Loss) Income Per Common Share
Net (loss) income per share of common stock is computed by dividing net (loss)
income by the weighted average number of common shares outstanding during the
period. We apply the two-class method in calculating earnings per share.
Accretion associated with the redeemable shares of Class A common stock is
excluded from earnings per share as the redemption value approximates fair
value.
As of September 30, 2021, we had outstanding warrants to purchase of up to
14,519,228 shares of Class A common stock. The weighted average of these shares
was excluded from the calculation of diluted net income per share of common
stock since the exercise of the warrants is contingent upon the occurrence of
future events. As of September 30, 2021, we did not have any dilutive securities
or other contracts that could, potentially, be exercised or converted into
shares of common stock and then share in our earnings. As a result, diluted net
income per common share is the same as basic net income per common share for the
period.
Redeemable Shares of Class A Common Stock
All of the 13,598,898 shares of Class A common stock sold as parts of the Units
in the Public Offering contain a redemption feature. In accordance with the
Accounting Standards Codification 480-10-S99-3A ("ASC 480"), "Classification and
Measurement of Redeemable Securities", redemption provisions not solely within
the control of the Company require the security to be classified outside of
permanent equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity's equity instruments, are excluded from the
provisions of ASC 480. The Company classifies all shares of Class A common stock
as redeemable.
Warrants Liability
We account for the warrants in accordance with the guidance contained in
Accounting Standards Codification 815 ("ASC 815"), "Derivatives and Hedging",
under which the warrants do not meet the criteria for equity treatment and must
be recorded as derivative liabilities. Accordingly, we classify the warrants as
liabilities at their fair value and adjust the warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance
sheet date until the warrants are exercised, and any change in fair value is
recognized in our statement of operations. The fair value of the Private
Placement Warrants and the Public Warrants issued in connection with the Public
Offering have been measured based on the listed market price of such Warrants.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.
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