References in this quarterly report on Form10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Advanced Merger Partners, Inc. References
to our "management" or our "management team" refer to our officers and
directors, and references to the "Sponsor" refer to HLI Sponsor, LLC. 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 Quarterly
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, as amended (the "Securities Act")
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 this
Quarterly Report and the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2021 (the "Annual Report on Form 10-K") filed with the
U.S. Securities and Exchange Commission (the "SEC"). 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
November 12, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar Business
Combination with one or more businesses ("Business Combination").
We 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.
On November 1, 2022, we filed a Preliminary Proxy Statement on Schedule 14A (the
"Proxy Statement") relating to a special meeting of stockholders that is
anticipated to be held in December 2022 to approve an amendment to our amended
and restated certificate of incorporation (the "Charter Amendment") which would,
if implemented, allow us to unwind and redeem all of our outstanding public
shares in advance of our mandatory liquidation date of March 4, 2023. If
implemented, the Charter Amendment would also allow us to remove the Redemption
Limitation (as defined in the amended and restated certificate of incorporation)
to allow us to redeem public shares notwithstanding the fact that such
redemption would result in us having net tangible assets of less than
$5,000,001, and to remove up to $100,000 of interest earned on the amount on
deposit in the trust account prior to redeeming the public shares in connection
with the special meeting in order to pay dissolution expenses. We will also seek
stockholder approval to amend the Trust Agreement to change the date on which
the trustee must commence liquidation of the Trust Account to the time and date
immediately following the filing of the Charter Amendment with the Secretary of
State of the State of Delaware.
Since its IPO, our management has reviewed over 200 potential targets. However,
we have not entered into an agreement to effect a business combination with any
of these potential targets for a variety of reasons, including, among other
things: (i) the size, quality and durability of the businesses we uncovered;
(ii) the parties' inability to reach an agreement on valuation; (iii) a
retrenchment of equity values in broader capital markets, globally; and (iv)
alternative options available to potential targets, such as pursuing a
traditional initial public offering or waiting for the capital markets to
improve before pursuing a listing. Changes in the regulatory landscape due to
proposed SEC rules have further affected our prospects for consummating a
business combination. In addition, on August 16, 2022, the Inflation Reduction
Act of 2022 (the "IR Act") was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchase of
stock by publicly traded U.S. domestic corporations. The excise tax is imposed
on the repurchasing corporation itself, not its stockholders from which shares
are repurchased. Any redemptions or other repurchases that occur after December
31, 2022 may be subject to the excise tax. As a result, we determined to seek
the approval of our stockholders to, among other things, complete an early
unwind in 2022.
On November 2, 2022, the New York Stock Exchange (the "NYSE") notified the
Company that the NYSE determined to commence proceedings to delist the Public
Warrants from the NYSE and that trading in the Public Warrants would be
suspended immediately, due to abnormally low trading price levels. Trading in
our Class A Common Stock and units will continue on the NYSE. We do not intend
to appeal the NYSE's determination.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from November 12, 2020 (inception) through September 30,
2022 were organizational activities, those necessary to prepare for the Initial
Public Offering (defined below), and subsequent to the initial public offering,
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.
For the three months ended September 30, 2022, we had net income of $12,417,811,
which consists of interest earned on marketable securities of $1,297,772,
reduction in deferred underwriter fee payable of $9,362,500 and changes in fair
value of the warrant liability of $2,347,253, offset by provision for income
taxes of $254,476 and operation costs of $335,238.
For the nine months ended September 30, 2022, we had net income of $17,172,350,
which consists of interest earned on marketable securities of $1,714,982,
reduction in deferred underwriter fee payable of $9,362,500 and changes in fair
value of the warrant liability of $7,463,810, offset by provision for income
taxes of $296,066 and operation costs of $1,072,876.
For the three months ended September 30, 2021, we had net income of $2,907,032,
which consists of interest earned on marketable securities of $3,699, interest
income in bank of $50 and changes in fair value of the warrant liability of
$3,156,706, offset by operation costs of $253,423.
For the nine months ended September 30, 2021, we had net income of $1,676,350,
which consists of interest earned on marketable securities of $19,343, interest
income in bank of $103 and changes in fair value of the warrant liability of
$2,567,677, offset by operation costs of $910,773.
Liquidity and Capital Resources
On March 4, 2021, we consummated the initial public offering of 28,750,000 units
(each, a "Unit"), which includes the full exercise by the underwriters of their
over-allotment option in the amount of 3,750,000 Units, at $10.00 per Unit,
generating gross proceeds of $287.5 million (the "Initial Public Offering").
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 5,600,000 private placement warrants (the "Private Placement
Warrants") a price of $1.50 per Private Placement Warrant in a private placement
to the Sponsor, generating gross proceeds of $8.4 million.
For the nine months ended September 30, 2022, cash used in operating activities
was $1,221,811. Net income of $17,172,350 was affected by interest earned on
marketable securities of $1,714,985, reduction in deferred underwriter fee
payable $9,362,500 and change in fair value of the warrant liability of
$7,463,810. Changes in operating assets and liabilities provided $147,131 of
cash for operating activities.
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For the nine months ended September 30, 2021, cash used in operating activities
was $649,331. Net income of $1,676,350 was affected by interest earned on
marketable securities of $19,343, change in fair value of the warrant liability
of $2,567,677 and transaction costs associated with the warrant liability of
$302,772. Changes in operating assets and liabilities used $41,433 of cash for
operating activities.
As of September 30, 2022, we had investments of $289,240,400 held in the Trust
Account. Through September 30, 2022, we have not withdrawn any interest earned
from the Trust Account.
If an early unwind is not approved at the special meeting of stockholders, 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 approximately $628,376. If an early
unwind is not approved at the special meeting of stockholders, 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. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a 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 $2,000,000 of such 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.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Codification Subtopic205-40,"Presentation of Financial Statements - Going
Concern," we have determined that the liquidity condition and the date for
mandatory liquidation and dissolution raise substantial doubt about the
Company's ability to continue as a going concern through March 4, 2023, the
scheduled liquidation date of the Company if it does not complete a Business
Combination prior to such date and an early unwind is not approved at the
special meeting of stockholders. Management plans to liquidate the Company on or
before December 31, 2022. These unaudited condensed financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022.
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 an
affiliate of our sponsor a monthly fee of $10,000 for office space, utilities
and secretarial and administrative support. We began incurring these fees in
March 2021 and will continue to incur these fees monthly until the earlier of
the completion of the Business Combination and our liquidation. In addition, we
will reimburse such affiliate of our sponsor in the amount of $30,000 per month
for additional administrative services (not covered by the $10,000 payment set
forth above), subject to the closing of a Business Combination.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America 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 unaudited condensed
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:
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Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC 815
under which the Warrants do not meet the criteria for equity treatment and must
be recorded as liabilities. Accordingly, we classify the Warrants as liabilities
at their fair value and adjusts the Warrants to fair value at each reporting
period. This liability is subject tore-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our statement of
operations. The warrants included as part of the Units (the "Public Warrants")
for periods where no observable traded price was available are valued using a
Monte Carlo simulation. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date for the Public Warrants. The Private
Placement Warrants are valued initially at the initial public offering using a
Black-Scholes-Merton Model and as of September 30, 2022 valued using the Public
Warrant quoted market price.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that feature redemption rights that is 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' deficit. Our Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
shares of Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' deficit section of our balance
sheets.
Net Income Per Common Share
Net income per common stock is computed by dividing net income by the weighted
average number of shares of common stock 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.
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
unaudited condensed financial statements.
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