References to the "Company," "MPAC," "our," "us" or "we" refer to Model
Performance 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 interim 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 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. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
U.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in the British Virgin Islands as a
business company and incorporated for the purpose of effecting a merger, share
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our initial
business combination using cash from the proceeds of this offering and the
private placement of the private placement units, the proceeds of the sale of
our securities in connection with our initial business combination, our shares,
debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination (as defined below) will be successful.
Business Combination Agreement
On August 6, 2021, MultiMetaVerse Inc., a Cayman Islands exempted company
("MMV"), Model Performance Acquisition Corp., a British Virgin Islands business
company (the "Parent"), certain shareholders of MMV (each, a "Principal
Shareholder" and collectively the "Principal Shareholders"), Model Performance
Mini Corp., a British Virgin Islands business company ("Purchaser") and Model
Performance Mini Sub Corp., a Cayman Islands exempted company and wholly-owned
subsidiary of the Purchaser (the "Merger Sub"), entered into a Merger Agreement
(the "Merger Agreement").
On January 6, 2022, each of the parties to the Merger Agreement and Avatar Group
Holdings Limited, a British Virgin Islands business company controlled by
certain Principal Shareholder ("Avatar"), entered into a First Amendment to
Merger Agreement (the "Amendment"). Pursuant to the Amendment, the parties
agreed, among other things, that the Outside Closing Date (as defined in the
Merger Agreement) of the proposed business combination contemplated by the
Merger Agreement (the "Business Combination") shall be extended to September 30,
2022 from December 31, 2021.
The Amendment includes an amended covenant for MMV to procure from additional
reputable investors equity financing in the aggregate amount of $10,000,000 to
Parent no later than 15 days prior to the closing date of the Business
Combination (the "Closing Date").
The Amendment also includes the following new covenants:
MMV agrees to make to Parent, and Parent agrees to borrow from MMV three
tranches of non-interest bearing loans in the aggregate principal amount of
$2,750,000 (the "Company Loans"), all of which shall become repayable upon
? closing of the Business Combination, or if the Purchaser Parties (defined
below) materially breach the Merger Agreement or the Amendment and such breach
has not been cured within fifteen (15) days after the Company's receipt of such
notice containing the details of breach;
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Parent shall use the proceeds of MMV Loans for, among other things, working
? capital and to fund amounts required to extend the period of time for Parent to
consummate a Business Combination for up to two (2) times up to 18 months from
the closing of its initial public offering ("Parent's Duration Period");
prior to the expiration of the Parent's Duration Period, the Parent shall hold
a general meeting of shareholders to further extend the Parent's Duration
? Period (the "Further Extension Period"), and MMV shall bear and prepay Parent
in the form of additional loans to fund for any and all costs and expenses
incurred (including costs from an increased redemption amount or additional
premium paid or to be paid to the shareholders of Parent);
in the event that the closing of the Business Combination fails to occur within
the Parent's Duration Period (inclusive of applicable Further Extension Period)
? due to reasons not directly attributable to Parent, Purchaser and Merger Sub
(collectively, the "Purchaser Parties"), Avatar shall pay Parent a lump sum
payment of $3,250,000 (the "No-Deal Payment"); and
in the event that the closing of the Business Combination fails to occur on or
prior to August 25, 2022, within five (5) business days after the Company's
? receipt of relevant account details, MMV and Avatar shall (on a joint and
several basis) deposit $2,900,000 of the No-Deal Payment into an escrow account
designated by Parent, the amount of which shall be released to Parent, for
satisfaction of the obligation of Avatar under the Amendment.
The transactions set forth in the Amendment are further described in our Current
Report on Form 8-K filed with the SEC on January 6, 2022.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through March 31, 2022 were
organizational activities and those necessary to prepare for the Initial Public
Offering. We do not expect to generate any operating revenues until after the
completion of our initial Business Combination. We expect to generate
non-operating income in the form of interest income on marketable securities
held after the Initial Public Offering. We expect that we will 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 in
connection with searching for, and completing, a Business Combination.
For the three months ended March 31, 2022, we had a net loss of $155,008 which
consisted of formation and operating expenses $186,537, offset by interest
earned on marketable securities held in Trust Account of $1,433, change in fair
value of warrant liability of $30,096.
For the period from January 8, 2021 (inception) to March 31, 2021, we had a net
loss of $3,725 which consisted of formation and operating expenses.
Liquidity and Capital Resources
On April 12, 2021, the Company consummated the IPO of 5,000,000 units (the
"Units"). Each Unit consists of one Class A ordinary share ("Ordinary Share"),
one-half of one redeemable warrant ("Warrant") with each whole warrant entitling
its holder to purchase one Ordinary Share at a price of $11.50, and one right
("Right") to receive one-tenth of one Ordinary Share upon the consummation of an
initial business combination. The Company granted the underwriters of the IPO
(the "Underwriters") a 45-day option to purchase up to an additional 750,000
units at the IPO price to cover over-allotments, which was subsequently
exercised on April 12, 2021 (the "Over-Allotment Option"). The Units were sold
at an offering price of $10.00 per Unit, generating gross proceeds of
$50,000,000. On April 15, 2021, the Over-Allotment Option closed. The total
aggregate issuance by the Company of the Over- Allotment Option Units at a price
of $10.00 per unit resulted in total gross proceeds of $7,500,000. On April 15,
2021, simultaneously with the sale of the Over-Allotment Option Units, the
Company consummated the private sale of an additional 22,500 private Units,
generating gross proceeds of $225,000. The Private Units were issued pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions
did not involve a public offering.
Following the Initial Public Offering, the sale of the Private Placement
Warrants and the exercise of over-allotment option, a total of $58,075,000 was
placed in the Trust Account. As of March 31, 2022, we had $577,092 of cash held
outside of the Trust Account, after payment of costs related to the Initial
Public Offering, and available for working capital purposes. We incurred
$3,658,769 in transaction costs, including $1,150,000 of underwriting fees,
$2,012,500 of deferred underwriting fees and $496,269 of other offering costs.
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For the three months ended March 31, 2022, cash and cash equivalents used in
operating activities was $854,735. Net loss of $155,008 was affected by noncash
charges related to interest earned on marketable securities held in Trust
Account of $1,433, change in fair value of warrant liability of $30,096 and cash
used in operating activities of $668,198.
For the period from January 8, 2021 (inception) to March 31, 2021, cash and cash
equivalents used in operating activities was $0. Net loss of $3,725 was affected
by noncash charges related to formation costs paid by Sponsor in exchange for
issuance of Class B ordinary shares of $3,725.
For the three months ended March 31, 2022, we had cash of $577,092 available for
working capital needs.
Our liquidity needs have been satisfied to date through receipt of $25,000 from
the sale of the insider shares, advances from our sponsor and an affiliate of
our sponsor in an aggregate amount of $200,000, which was cancelled in
connection with the Private Placement and not outstanding as of December 31,
2021, and, following the IPO, the remaining net proceeds from our IPO and
Private Placements.
On January 10, 2022 and March 21, 2022, we received two loans, for an aggregate
of $1,699,975, from MMV.
We have incurred and expect to continue to incur significant costs in pursuit of
our acquisition plans. If the estimate of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate its business prior to our Business
Combination. Moreover, we may need to obtain additional financing or draw on the
Working Capital Loans (as defined below) either to complete a Business
Combination or because it becomes obligated to redeem a significant number of
the public shares upon consummation of our Business Combination, in which case
we may issue additional securities or incur debt in connection with such
Business Combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
Business Combination. If we are unable to complete the Business Combination
because it does not have sufficient funds available, we will be forced to cease
operations and liquidate the Trust Account. In addition, following the Business
Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
In addition, in connection with our assessment of going concern considerations
in accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," we have until July 12, 2022 (after one
extension for a quarter since April 12, 2022, the initial expiration date) to
consummate the proposed Business Combination. It is uncertain that we will be
able to consummate the proposed Business Combination by this time. 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 July 12, 2022. On August 6, 2021, we entered into a Merger Agreement,
which provides for a business combination between us and MMV. We intend to
complete the proposed Business Combination before the mandatory liquidation
date. However, there can be no assurance that we will be able to consummate any
business combination by July 12, 2022.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non- financial assets.
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 our Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support. We began incurring these fees on April 12, 2021 and will
continue to incur these fees monthly until the earlier of the completion of the
Business Combination and our liquidation.
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The underwriters are entitled to a deferred fee of 3.5% of the gross proceeds of
the Initial Public Offering, or $2,012,500. The deferred fee will be payable in
cash to the underwriters solely in the event that we complete a Business
Combination from the amounts held in the Trust Account, subject to the terms of
the underwriting agreement.
Critical Accounting Policies
The preparation of 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 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:
Warrant Liability
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified in the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date.
Financial Accounting Standards Board ("FASB") ASC 470-20, Debt with Conversion
and Other Options addresses the allocation of proceeds from the issuance of
convertible debt into its equity and debt components. The Company applies this
guidance to allocate IPO proceeds from the Units between Class A ordinary shares
and warrants, using the residual method by allocating IPO proceeds first to fair
value of the warrants and then the Class A ordinary shares.
The Company accounts for the private placement warrants as warrant liabilities
due to certain features contained in the warrant agreements that give rise to
liability treatment. The Public Warrants are treated as equity as they do not
meet the definition of a warrant liability.
Net Loss Per Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Earnings and losses are shared pro rata between the
two classes of shares. The 3,021,250 and 0 potential common shares for
outstanding warrants to purchase our stock were excluded from diluted earnings
per share for the three months ended March 31, 2022 and for the period from
January 8, 2021 (inception) through March 31, 2021 respectively, because the
warrants are contingently exercisable, and the contingencies have not yet been
met. As a result, diluted net loss per common share is the same as basic net
loss per common share for the periods.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
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