References to the "Company," "our," "us" or "we" refer to Broadstone 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, 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 as a Cayman Islands exempted company
on May 13, 2020. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
Our sponsor is Broadstone Sponsor LLP, a United Kingdom limited liability
partnership (the "Sponsor"). Our registration statement for the initial public
offering (the "Initial Public Offering") was declared effective on September 10,
2020. On September 15, 2020, we consummated the Initial Public Offering
of 30,000,000 units (the "Units" and, with respect to the Class A ordinary
shares included in the Units, the "Public Shares"), at $10.00 per Unit,
generating gross proceeds of $300.0 million, and incurring offering costs of
approximately $16.6 million, inclusive of approximately $10.5 million in
deferred underwriting commissions. On October 14, 2020, the underwriters
partially exercised their over-allotment option to purchase an additional
530,301 units (the "Over-Allotment Units"). On October 14, 2020, we completed
the sale of the Over-Allotment Units to the underwriters (the "Over-Allotment"),
generating gross proceeds of approximately $5.3 million, and incurred additional
offering costs of approximately $292,000 in underwriting fees (inclusive of
approximately $186,000 in deferred underwriting commissions).
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 8,000,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
to our Sponsor, each exercisable to purchase one Class A ordinary share at
$11.50 per share, at a price of $1.00 per Private Placement Warrant, generating
gross proceeds to the Company of approximately $8.0 million. Simultaneously with
the closing of the Over-Allotment Units, on October 14, 2020, we consummated the
second closing of the Private Placement, resulting in the purchase of an
aggregate of an additional 106,060 Private Placement Warrants by our Sponsor,
generating gross proceeds to the Company of approximately $106,060.
Upon the closing of the Initial Public Offering, the Over-Allotment and the
Private Placement, $305.3 million ($10.00 per Unit) of the net proceeds of the
Initial Public Offering and certain of the proceeds of the Private Placement
was placed in a trust account ("Trust Account"), located in the United States at
J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company
acting as trustee, and was invested only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
having a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act that
invest only in direct U.S. government treasury obligations, until the earlier of
(i) the completion of a Business Combination and (ii) the distribution of the
Trust Account.
16
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 24 months from the
closing of the Initial Public Offering, or September 15, 2022 (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 (which interest shall be net of taxes payable and up to $100,000 of
interest to pay dissolution expenses), divided by the number of then issued and
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 case to our
obligations under Cayman Islands law to provide for claims of creditors and
other requirements of applicable law.
Liquidity and Capital Resources
As of September 30, 2020, we had approximately $1.7 million in its operating
bank account, and working capital of approximately $1.8 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through the payment of $25,000 from our Sponsor to cover certain
of our expenses in exchange for the issuance of the Founder, a loan of
approximately $133,000 pursuant to the Note issued to our Sponsor. We repaid the
Note in full on September 15, 2020. Subsequent to the consummation of the
Initial Public Offering and Private Placement, our liquidity needs have been
satisfied with the 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 a Business Combination, our Sponsor may, but is not obligated
to, provide the Company Working Capital Loans. As of September 30, 2020, there
were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or certain of our officers and directors to meet its needs through the earlier
of the consummation of a Business Combination or one year from this filing. Over
this time period, we will be using these funds 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 Business Combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception through September 30, 2020 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 have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We generate non-operating income
in the form of interest income on cash and cash equivalents. 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.
17
For the three months ended September 30, 2020, we had net loss of approximately
$53,000, which consisted of approximately $55,000 in general and administrative
costs, offset by $2,200 in investment income earned in Trust Account.
For the period from May 13, 2020 (inception) through September 30, 2020, we had
net loss of approximately $64,000, which consisted of approximately $66,000 in
general and administrative costs, offset by $2,200 in investment income earned
in Trust Account.
Liquidity and Capital Resources
As of September 30, 2020, we had approximately $1.7 million in our operating
bank account, working capital of approximately $1.8 million, and $2,200 in
interest income available in the Trust Account to pay for our tax obligations,
if any.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through the payment of $25,000 from our Sponsor to cover certain
of our expenses in exchange for the issuance of founder shares, a loan of
approximately $133,000 pursuant to a note agreement with our Sponsor (the
"Note"). We repaid the Note in full on September 15, 2020. Subsequent to the
consummation of the Initial Public Offering and Private Placement, our liquidity
needs have been satisfied with the 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 a Business Combination, our Sponsor may,
but is not obligated to, provide us working capital loans. As of September 30,
2020, there were no amounts outstanding under any working capital loan.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or our officers and directors to meet our needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using these funds 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 Business Combination.
We continue to evaluate the impact of the COVID-19 pandemic and has concluded
that the specific impact is not readily determinable as of the date of the
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Contractual Obligations
Administrative Support Agreement
Commencing on the date our securities are first listed on the New York Stock
Exchange, we agreed to pay our Sponsor a total of $10,000 per month for office
space, utilities, secretarial and administrative support services provided to
members of our management team. Upon completion of the initial Business
Combination or our liquidation, we will cease paying these monthly fees. We
recorded $10,000 in connection with such services for the three month period
ended September 30, 2020 and for the period from May 13, 2020 (inception)
through September 30, 2020 in general and administrative expenses in the
accompanying unaudited condensed statements of operations.
Registration Rights
The holders of Founder Shares, Private Placement Warrants, and securities that
may be issued upon conversion of Working Capital Loans, if any, are entitled to
registration rights pursuant to a registration rights agreement. These holders
will be entitled to make up to three demands, excluding short form demands, that
we register such securities. In addition, these holders will 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.
18
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final
prospectus relating to the Initial Public Offering to purchase up to 4,500,000
additional Units to cover over-allotments, if any, at the Initial Public
Offering price less the underwriting discounts and commissions. On October 14,
2020, the underwriters partially exercised the over-allotment option to purchase
an additional 530,301 Over-Allotment Units. The remaining over-allotment option
was expired on October 25, 2020 and unexercised.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$6.0 million and approximately $0.1 million in the aggregate, paid upon the
closing of the Initial Public Offering in September 2020 and the Over-Allotment
in October 2020, respectively. The underwriters reimbursed $390,000 to the
Company to reimburse certain expenses in connection with the Initial Public
Offering.
In addition, $0.35 per unit, or approximately $10.7 million in the aggregate,
will be payable to the underwriters for deferred underwriting commissions. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company has identified the following as its
critical accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that
feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) are classified as temporary equity. At all other times,
Class A ordinary shares are classified as shareholders' equity. Our Class A
ordinary shares feature certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, at September 30, 2020, 28,631,770 Class A ordinary shares subject
to possible redemption are presented as temporary equity, outside of the
shareholders' equity section of the Company's balance sheet.
Net Income (Loss) Per Ordinary Share
Net income (loss) per share is computed by dividing net (loss) income by the
weighted-average number of ordinary shares outstanding during the periods. We
have not considered the effect of the warrants sold in the Initial Public
Offering and the Private Placement to purchase an aggregate of 23,000,000, of
the Company's Class A ordinary shares in the calculation of diluted income
(loss) per share, since their inclusion would be anti-dilutive under the
treasury stock method.
Our unaudited condensed statements of operations include a presentation of
income (loss) per share for ordinary shares subject to redemption in a manner
similar to the two-class method of income per share. Net income per ordinary
share, basic and diluted for Class A ordinary shares is determined by dividing
the income earned on investments held in the Trust Account of $2,200 for the
three months ended September 30, 2020 and for the period from May 13, 2020
(inception) through September 30, 2020 by the weighted average number of Class A
ordinary shares outstanding for each period. Net loss per ordinary share, basic
and diluted for Class B ordinary shares is determined by dividing the net loss
of approximately $53,000 and approximately $64,000, for the three months ended
September 30, 2020 and for the period from May 13, 2020 (inception) through
September 30, 2020, respectively, less income attributable to Class A ordinary
shares of $2,200 in each period, by the weighted average number of Class B
ordinary shares outstanding for each period.
19
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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 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 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 CEO'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.
© Edgar Online, source Glimpses