References to the "Company," "our," "us" or "we" refer to Healthcare Services
Acquisition Corporation. 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. 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 August 26, 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 (the "Business Combination") that we have not yet identified. 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 Healthcare Services
Acquisition Holdings, LLC, a Delaware limited liability company (our "Sponsor").
Our registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on December 22, 2020. On December 28, 2020, we
consummated the Initial Public Offering of 33,120,000 units (the "Units" and,
with respect to the Class A common stock included in the Units being offered,
the "Public Shares"), which included 4,320,000 Units issued pursuant to the
partial exercise by the underwriters of their over-allotment option, at $10.00
per Unit, generating gross proceeds of $331.2 million, and incurring offering
costs of approximately $18.9 million, inclusive of $11.6 million in deferred
underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 8,624,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
to our Sponsor and certain funds and accounts managed by subsidiaries of
BlackRock, Inc. (collectively, the "Anchor Investor"), 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 $8.6
million.
Upon the closing of the Initial Public Offering and the Private Placement,
$331.2 million of the net proceeds of the sale of the Units in the Initial
Public Offering and the sale of Private Placement Warrants in 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
invested only in U.S. "government securities" within the meaning of Section
2(a)(16) of the Investment Company Act of 1940, as amended (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 which invest only in direct U.S. government treasury obligations, as
determined by us, until the earlier of: (i) the completion of a Business
Combination and (ii) the distribution of the Trust Account as described below.
20
--------------------------------------------------------------------------------
Table of Contents
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or December 28, 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 earned on the funds held in the Trust Account and not previously
released to us to pay our franchise and income taxes (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 rights of holders of
the Public Shares (the "Public Stockholders") as stockholders (including the
right to receive further liquidating distributions, if any), subject to
applicable law; and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining stockholders and the board
of directors, dissolve and liquidate, subject in each case to our obligations
under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
Results of Operations
Our entire activity since inception through March 31, 2022 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a target for its 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 will 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.
For the three months ended March 31, 2022, we had net income of approximately
$3.7 million, which consisted of a non-operating gain of approximately $4.5
million for the change in fair value of derivative warrant liabilities,
approximately $48,000 of income from investments held in the Trust Account,
offset by approximately $799,000 of general and administrative expenses, $60,000
of related party general and administrative expenses and franchise tax expense
of approximately $49,000.
For the three months ended March 31, 2021, we had net income of approximately
$11.3 million, which consisted of a non-operating gain of approximately $11.6
million for the change in fair value of derivative warrant liabilities,
approximately $126,000 of income from investments held in the Trust Account,
offset by approximately $226,000 of general and administrative expenses, $60,000
of related party general and administrative expenses and franchise tax expense
of approximately $49,000.
Liquidity and Going Concern
As of March 31, 2022, we had approximately $323,000 in our operating bank
account and working capital of approximately $444,000 (not including franchise
tax obligations of approximately $49,000 that may be paid using investment
income earned in the Trust Account).
Our liquidity needs have been satisfied prior to the completion of the Initial
Public Offering through receipt of a $25,000 from the sale of shares of Class B
common stock to our Sponsor and loan proceeds from our Sponsor of approximately
$174,000 under a promissory note. The Company repaid the Note in full upon
closing of the Initial Public Offering. Subsequent to the consummation of the
Initial Public Offering and Private Placement, our liquidity needs have been
satisfied from 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 or an affiliate of our
Sponsor or our officers and directors may, but are not obligated to, provide us
working capital loans ("Working Capital Loans"). To date, we have $600,000
borrowings under the Working Capital Loans.
In connection with the management assessment of going concern considerations in
accordance with FASB ASC 205-40, "Basis of Presentation - Going Concern,"
management has determined that mandatory liquidation and subsequent dissolution
raise substantial doubt about the Company's ability to continue as a going
concern. Management plans to complete a business combination by the mandatory
liquidation date. No adjustments have been made to the carrying amounts of
assets or liabilities should the Company be required to liquidate after December
28, 2022. The financial statements do not include any adjustment that might be
necessary if the Company is unable to continue as a going concern.
21
--------------------------------------------------------------------------------
Table of Contents
Risks and Uncertainties
We continue to evaluate the impact of the COVID-19 pandemic and have concluded
that the specific impact is not readily determinable as of the date of the
balance sheets. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
condensed financial statements. The specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these condensed financial statements.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans (and any shares of common
stock issuable upon the exercise of the Private Placement Warrants or warrants
issued upon conversion of the Working Capital Loans and upon conversion of the
Founder Shares), as well as the Forward Purchasers and their permitted
transferees, are entitled to registration rights pursuant to a registration
rights agreement. These holders will be entitled to certain demand and
"piggyback" registration rights. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$6.6 million in the aggregate, paid upon the closing of the Initial Public
Offering. An additional fee of $0.35 per unit, or $11.6 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 we complete 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 unaudited condensed financial statements, which
have been prepared in accordance with United States generally accepted
accounting principles. The preparation of these unaudited condensed 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 unaudited condensed 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. We have identified the following as our critical
accounting policies:
Investments Held in Trust Account
The Company's portfolio of investments is comprised of 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 investments in money market
funds that invest in U.S. government securities and generally have a readily
determinable fair value, or a combination thereof. When the Company's
investments held in the Trust Account are comprised of U.S. government
securities, the investments are classified as trading securities. When the
Company's investments held in the Trust Account are comprised of money market
funds, the investments are recognized at fair value. Trading securities and
investments in money market funds are presented on the condensed balance sheets
at fair value at the end of each reporting period. Gains and losses resulting
from the change in fair value of these securities is included in income on
investments held in the Trust Account in the accompanying condensed statements
of operations. The estimated fair values of investments held in the Trust
Account are determined using available market information.
22
--------------------------------------------------------------------------------
Table of Contents
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 the Financial Accounting Standards Board's
("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing
Liabilities from Equity" ("ASC 480"). Class A common stock subject to mandatory
redemption (if any) is classified as a liability instrument and is measured at
fair value. Conditionally redeemable Class A common stock (including Class A
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, Class A common stock is classified as stockholders' equity. Our Class A
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, as of March 31, 2022 and December 31, 2021, 33,120,000 shares of
Class A common stock subject to possible redemption were presented at redemption
value as temporary equity, outside of the stockholders' deficit section of the
condensed balance sheets.
Under ASC 480-10-S99, the Company has elected to recognize changes in the
redemption value immediately as they occur and adjust the carrying value of the
security to equal the redemption value at the end of the reporting period. This
method would view the end of the reporting period as if it were also the
redemption date of the security. Immediately upon the closing of the Initial
Public Offering, we recognized the accretion from initial book value to
redemption amount value. The change in the carrying value of shares of the
redeemable Class A common stock resulted in charges against additional paid-in
capital and accumulated deficit.
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
The 16,560,000 Public Warrants issued in connection with the Initial Public
Offering and the 8,624,000 Private Placement Warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjust the instruments to
fair value at each reporting period. The liabilities are subject to
re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our statement of operations. The fair value of the
Public Warrants was initially calculated using a Monte Carlo simulation model
that assumes optimal exercise of our redemption option, including the make whole
table, at the earliest possible date. The fair value of Private Placement
Warrants was initially calculated using the Black-Scholes Option Pricing Model
since these instruments do not have the early redemption feature. Beginning in
January 2021, the fair value of the Public Warrants is determined based on the
listed price in an active market for such warrants. As the transfer of Private
Placement Warrants to anyone who is not a permitted transferee would result in
the Private Placement Warrants having substantially the same terms as the Public
Warrants, we determined that the fair value of each Private Placement Warrant is
equivalent to that of each Public Warrant. The fair value of the Warrants as of
December 31, 2021 is based on observable listed prices for such warrants. The
determination of the fair value of the warrant liability may be subject to
change as more current information becomes available and accordingly the actual
results could differ significantly. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs
incurred that were directly related to the Initial Public Offering. Offering
costs were allocated to the separable financial instruments issued in the
Initial Public Offering based on a relative fair value basis, compared to total
proceeds received. Offering costs associated with warrant liabilities were
expensed as incurred, presented as non-operating expenses in the statement of
operations. Offering costs associated with the Class A common stock were charged
against the carrying value of the shares of Class A common stock upon the
completion of the Initial Public Offering. The Company will keep deferred
underwriting commissions classified as non-current liabilities as their
liquidation is not reasonably expected to require the use of current assets or
require the creation of current liabilities.
23
--------------------------------------------------------------------------------
Table of Contents
Net Income Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of shares, which
are referred to as Class A common stock and Class B common stock. Income and
losses are shared pro rata between the two classes of shares. This presentation
assumes a business combination as the most likely outcome. Net income per common
stock is calculated by dividing the net income by the weighted average shares of
common stock outstanding for the respective period.
The calculation of diluted net income per common stock does not consider the
effect of the warrants issued in connection with the Initial Public Offering and
the Private Placement to purchase an aggregate of 25,184,000 shares of common
stock because their exercise is contingent upon future events and their
inclusion would be anti-dilutive under the treasury stock method. As a result,
diluted net income per common stock is the same as basic net income per common
stock for the three months ended March 31, 2022 and 2021. Accretion associated
with the redeemable Class A common stock is excluded from earnings per share as
the redemption value approximates fair value.
Recent Accounting Standards
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 statement.
Off-Balance Sheet Arrangements
As of March 31, 2022, 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 unaudited 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 regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the unaudited condensed 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.
© Edgar Online, source Glimpses
HEALTHCARE SERVICES ACQUISITION CORPORATION 