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.
25
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 (Note 4).
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.
Results of Operations
Our entire activity from September 8, 2020 (inception) through March 31, 2021,
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 March 31, 2021, we had a net loss of approximately
$2.1 million, which consisted of approximately $1.6 million in change of fair
value of derivative warrant liabilities, and approximately $152,000 of gain on
investments held in a Trust Account, partially offset $3.6 million of general
and administrative expenses, approximately $302,000 of general and
administrative expenses - related party, and approximately $32,000 of income tax
expense.
26
Liquidity and Going Concern
As of March 31, 2021, the Company had $3.1 million in cash and working capital
of approximately $1.6 million.
Prior to September 30, 2020, 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 us 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 ASU 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," as of March 31, 2021, we do not have sufficient
liquidity to meet our obligations in the next twelve months. However, we have
determined that we have access to funds from our Sponsor that are sufficient to
fund our working capital needs until the earlier of the consummation of an
Initial Business Combination or a minimum one year from the date of issuance of
these unaudited condensed financial statements.
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).
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.
27
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account 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, or a combination
thereof. Our investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the unaudited condensed balance
sheet at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these investments are included in
income from investments held in Trust Account in the unaudited condensed
statement of operations. The estimated fair values of investments held in the
Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
The shares of Class A common stock subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable shares of Class A common stock (including shares of
Class A common stock 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, shares of Class A common stock are classified as
stockholders' equity. The Company's Class A common stock features certain
redemption rights that are considered to be outside of the Company's control and
subject to occurrence of uncertain future events, Accordingly, at March 31, 2021
and December 31, 2021, 42,857,615 and 43,070,607 shares of Class A common stock
subject to possible redemption are presented at redemption value as temporary
equity, outside of the stockholders' equity section of the Company's balance
sheet, respectively.
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 the
Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity" ("ASC
480") and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). 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. 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.
We issued 13,125,000 warrants to purchase Class A common stock, including
Over-Allotment Units, to investors in our Initial Public Offering and issued
11,666,666 Private Placement Warrants. All of our outstanding 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
Public Warrants was calculated using an option pricing model. The inputs
utilized to calculate the value of an option pricing model are (i) the value of
the underlying asset, (ii) the exercise price, (iii) the risk-free rate,
(iv) the volatility of the underlying asset, (v) the dividend yield of the
underlying asset, and (vi) the assumed time to a liquidity event. The fair value
of Private Warrants was calculated using the Black-Scholes Option Pricing Model.
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.
28
Net Income (Loss) Per Share of Common Stock
Net income (loss) per share is computed by dividing net income (loss) by the
weighted-average number of common stock outstanding during the periods. Share
settlement of our warrants to purchase an aggregate of 24,791,666 shares of
Class A nonredeemable common stock at a price of $11.50 was presumed for the
calculation of diluted earnings per Class A and Class B nonredeemable share
because it is more dilutive than the cash settlement alternative. Under this
assumption, the contract is settled in common shares, and the effect of the
liability classification (change in fair value of derivative warrant liability)
is reversed as a numerator adjustment. Potentially dilutive weighted average
share of 773,521 are included in the denominator.
Our unaudited condensed statement of operations includes a presentation of
income (loss) per share for common stock subject to redemption in a manner
similar to the two-class method of income (loss) per share. Net income per share
of common stock, basic and diluted for shares of Class A redeemable common stock
is calculated by dividing the income earned on investments held in the Trust
Account of approximately $152,000, net of applicable taxes and working capital
amounts available to be withdrawn from the Trust Account of approximately
$32,000, which was a net of approximately $120,000 for the period for the
three-month ended March 31, 2021, by the weighted average number of Class A
redeemable common stock outstanding for the period. There are no securities that
can convert into redeemable Class A shares which would cause dilution and share
in the earnings.
Net loss per share of common stock, basic and diluted for shares of Class B
nonredeemable common stock is calculated by dividing the net loss of
approximately $2.1 million, less income attributable to Class A redeemable
common stock by the weighted average number of Class B nonredeemable common
stock outstanding for the period. Net loss per share of common stock, diluted
for shares of Class A nonredeemable common stock, as discussed above, and Class
B nonredeemable common stock, is calculated by dividing the net loss of
approximately $3.9 million (including the $1.6 million of the effect of
liability classification) less income attributable to Class A redeemable common
stock, divided by the weighted average of Class A nonredeemable common stock and
Class B nonredeemable common stock outstanding for the period.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. The ASU also removes certain settlement conditions
that are required for equity-linked contracts to qualify for the derivative
scope exception, and it simplifies the diluted earnings per share calculation in
certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU
did not impact our financial position, results of operations or cash flows.
We do not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on our
financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2021, we
did not have any off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Regulation S-K.
29
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 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
HEALTH ASSURANCE ACQUISITION CORP. 
