References to the "Company," "our," "us" or "we" refer to Health Assurance
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 in Delaware on September 8, 2020 for
the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses or entities (the "Business Combination"). Our sponsor is HAAC
Sponsor, LLC ("Sponsor").
The registration statement for our Initial Public Offering ("Initial Public
Offering") was declared effective on November 12, 2020. On November 17, 2020, we
consummated the Initial Public Offering of 52,500,000 SAILSM Securities,
including 2,500,000 SAILSM Securities as a result of the underwriters' exercise
in part of their over-allotment option. The SAILSM Securities were sold at an
offering price of $10.00 per SAILSM Security, generating gross proceeds of
$525.0 million, and incurring offering costs of approximately $29.8 million,
inclusive of approximately $18.4 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 11,666,666 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
including 333,333 Private Placement Warrants as a result of the underwriters'
exercise in part of their over-allotment option, at a price of $1.50 per Private
Placement Warrant in a private placement with our Sponsor and certain directors
of our Company (the "Private Placement Warrants Purchasers"), generating gross
proceeds of $17.5 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$525.0 million ($10.00 per SAILSM Security) of the net proceeds of the sale of
the SAILSM Securities in the Initial Public Offering and 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 held as
cash or invested only 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 money market funds meeting certain conditions 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.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or November 17, 2022 and stockholders do
not approve an amendment to the certificate of incorporation to extend this
date, 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, of
$10.00, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of directors
(the "Board"), liquidate and dissolve, subject in the case of clauses (ii) and
(iii), to our obligations under Delaware law to provide for claims of creditors
and in all cases subject to the other requirements of applicable law.
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Results of Operations
Our entire activity from September 8, 2020 (inception) through June 30, 2022,
was in preparation for an Initial Public Offering, and since our Initial Public
Offering, our activity has been limited to the search for a prospective initial
Business Combination. We will not generate any operating revenues until the
closing and completion of our initial Business Combination.
For the three months ended June 30, 2022, we had net income of approximately
$9.3 million, which consisted of approximately $9.4 million in change of fair
value of derivative warrant liabilities and approximately $291,000 of gain on
investments held in a Trust Account, partially offset by approximately $333,000
of general and administrative expenses, approximately $50,000 of franchise tax
expense, and approximately $51,000 of income tax expense.
For the three months ended June 30, 2021, we had net income of approximately
$24.4 million, which consisted of approximately $25.7 million in change of fair
value of derivative warrant liabilities, approximately $8,000 in income tax
benefit, and approximately $11,000 of gain on investments held in a Trust
Account, partially offset approximately $1.2 million of general and
administrative expenses, and approximately $50,000 of franchise tax expense.
For the six months ended June 30, 2022, we had net income of approximately $16.9
million and which consisted of approximately $17.5 million in change of fair
value of derivative warrant liabilities, approximately $478,000 of gain on
investments held in a Trust Account, partially offset by approximately $897,000
of general and administrative expenses, approximately $116,000 of franchise tax
expense, and approximately $76,000 of income tax expense.
For the six months ended June 30, 2021, we had net income of approximately $22.3
million, which consisted of approximately $27.3 million in change of fair value
of derivative warrant liabilities, and approximately $164,000 of gain on
investments held in a Trust Account, partially offset approximately $5.0 million
of general and administrative expenses, approximately $50,000 of franchise tax
expense, and approximately $24,000 of income tax expense.
Liquidity and Going Concern
As of June 30, 2022, we had approximately $256,000 in cash and a working capital
of deficit approximately $2.2 million.
Prior to the Initial Public Offering, our liquidity needs were satisfied through
a payment of $25,000 from the Initial Stockholders in exchange for the issuance
of the Alignment Shares and proceeds from a loan of $300,000 pursuant to a note
agreement from the Company's Sponsor (the "Note"). We repaid the Note in full on
November 18, 2020. Following the consummation of the Initial Public Offering and
Private Placement, our liquidity needs have been satisfied with the proceeds
from 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 with working capital
loans. As of the date of this filing, there were no amounts outstanding under
any working capital loans.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") Topic 205-40, "Presentation of Financial Statements - Going
Concern," we have until November 17, 2022 to consummate a Business Combination.
It is uncertain that we will be able to consummate a Business Combination by
this time. If a Business Combination is not consummated by this date, there will
be a mandatory liquidation and subsequent dissolution of the Company. Management
has determined that the liquidity condition and 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 November 17, 2022.
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
condensed balance sheets. The condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. A summary of our significant accounting
policies is included in Note 2 to our condensed financial statements in Part I,
Item 1 of this Quarterly Report. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our financial statements and require significant, difficult or complex
judgments, often employing the use of estimates about the effects of matters
that are inherently uncertain. Such policies are summarized in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
in our 2021 Annual Report on Form 10-K filed with the SEC on March 30, 2022.
There have been no significant changes in the application of our critical
accounting policies during the six months ended June 30, 2022.
We believe that our critical accounting policies and estimates have a higher
degree of inherent uncertainty and require our most significant judgments. In
addition, had we used to estimate different from any of these, our condensed
financial statements could have been materially different from those presented.
There were no changes in our critical accounting policies and estimates during
the six months ended June 30, 2022 from those set forth in "Critical Accounting
Policies" in our December 31, 2021 Annual Report on Form 10-K filed with the SEC
on March 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed financial statements included in Part I,
Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than for an agreement to pay our Sponsor $10,000 per month for office
space, secretarial and administrative support provided to members of our
management team. In addition, each independent director will receive quarterly
cash compensation of $62,500 (or $250,000 in the aggregate per year). Subsequent
to March 31, 2022, the independent directors no longer receive quarterly cash
compensation.
Registration and Stockholder Rights
The holders of the Alignment Shares, Private Placement Warrants, and Private
Placement Warrants that may be issued upon conversion of Working Capital Loans
(and any shares of Class A common stock into which such securities may convert
and that may be issued upon conversion of Working Capital Loans and upon
conversion of the Alignment Shares) are entitled to registration rights pursuant
to a registration rights agreement. The initial stockholders and holders of the
Private Placement Warrants will be entitled to make up to three demands,
excluding short form registration demands, that we register such securities for
sale under the Securities Act. In addition, these holders will have "piggy-back"
registration rights to include their securities in other registration statements
filed by us. We will bear the expenses incurred in connection with the filing of
any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 7,500,000
additional SAILSM Securities, consisting of 7,500,000 shares of Class A common
stock and 1,875,000 redeemable warrants, to cover any over-allotment, at the
initial public offering price less the underwriting discounts and commissions.
The warrants that would be issued in connection with the over-allotment SAILSM
Securities are identical to the Public Warrants, subject to certain limited
exceptions, and have no net cash settlement provisions. On November 17, 2020,
the underwriters exercised the over-allotment option in part to purchase
2,500,000 additional SAILSM Securities.
The underwriters were entitled to an underwriting discount of $0.20 per SAILSM
Security, or $10.0 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per SAILSM Security, or $17.5
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.
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In connection with the consummation of the sale of SAILSM Securities pursuant to
the over-allotment option exercised on November 17, 2020, the underwriters were
entitled to an aggregate of approximately $0.5 million in fees payable upon
closing and additional deferred underwriting commissions of approximately $0.9
million.
Deferred Legal Fees
We entered into an agreement to obtain legal advisory services, pursuant to
which our legal counsel agreed to defer their fees until the closing of the
Initial Business Combination. The deferred fees will become payable to the legal
counsel in the event that we complete a Business Combination. As of June 30,
2022 and December 31, 2021, we have an aggregate of approximately $2.7 million
incurred in connection with such arrangement, included as deferred legal fees in
the accompanying condensed balance sheets.
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 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 PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the 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 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.
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