References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Longview Acquisition Corp. II. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to Longview Investors II LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K for the year ended
December 31, 2021, filed with the U.S. Securities and Exchange Commission (the
"SEC") on March 31, 2022. The Company's securities filings can be accessed on
the EDGAR section of the SEC's website at www.sec.gov. Except as expressly
required by applicable securities law, the Company disclaims any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
October 23, 2020, for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, 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 will be successful.
Recent Developments
As previously announced on July 15, 2021, the Company entered into a business
combination agreement with HF Halo Merger Sub, Inc., a wholly owned subsidiary
of the Company ("Merger Sub") and HeartFlow Holding, Inc. ("HeartFlow") (the
"Business Combination Agreement"). Pursuant to the Business Combination
Agreement, Merger Sub would merge with and into HeartFlow (the "Merger"), with
HeartFlow surviving the Merger as a wholly owned subsidiary of the Company. In
addition, the Company would be renamed HeartFlow Group, Inc. ("New HeartFlow")
following the consummation of the transactions.
On February 4, 2022, the Company, HeartFlow and Merger Sub entered into a
Termination of the Business Combination Agreement (the "Termination Agreement"),
pursuant to which the parties mutually agreed to terminate the Business
Combination Agreement, effective immediately. As per Company's Current Report on
Form 8-K filed with the SEC on November 15, 2021, the Company requested that
HeartFlow management undertake a thorough analysis of its financial projections.
Following the conclusion of that process, and extensive mutual efforts to
negotiate an appropriate valuation adjustment, both parties agreed to terminate
the Business Combination Agreement.
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As a result of the termination of the Business Combination Agreement, the
Business Combination Agreement is of no further force and effect, and certain
transaction agreements entered into in connection with the Business Combination
Agreement, including, but not limited to, the Investors' Rights Agreement, dated
as of July 15, 2021 and to be effective as of the closing of the Business
Combination, by and among the Company, the sponsor, and certain holders, will
either be terminated or no longer be effective, as applicable, in accordance
with their respective terms.
The Company intends to continue to pursue the consummation of a Business
Combination with an appropriate target.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from October 23, 2020 (inception) through March 31, 2022,
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur 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 a net income of $4,281,904,
which consists of a change in fair value of derivative liabilities of
$10,148,000, change in fair value of the convertible note-related party of
$365,111 and interest earned on marketable securities held in the Trust Account
of $377,623, offset by operating costs of $644,880, provision for income taxes
of $63,771 and change in the fair value loss of the FPA of $5,900,179.
For the three months ended March 31, 2021, we had a net loss of $11,644,456,
which consists of operating costs of $61,198, change in fair value of derivative
liabilities of $530,000, reversal of initial classification of FPA liability of
$9,902,957, change in the fair value of the FPA of $149,223, and transaction
costs allocated to derivative liabilities of $1,001,129, offset by interest
earned on marketable securities held in the Trust Account of $51.
Liquidity and Capital Resources
On March 23, 2021, we consummated the Initial Public Offering of 69,000,000
Units, at $10.00 per Unit, generating gross proceeds of $690,000,000, which is
described in Note 3 to our condensed consolidated financial statements.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 9,800,000 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant in a private placement to the Sponsor, generating gross
proceeds of $14,700,000.
Following the Initial Public Offering, the full exercise of the underwriters'
over-allotment option, and the sale of the Private Placement Warrants, a total
of $690,000,000 was placed in the Trust Account. We incurred $35,566,388 in
Initial Public Offering related costs, including $12,700,000 of underwriting
fees, $22,225,000 of deferred underwriting fees and $641,388 of other costs.
For the three months ended March 31, 2022, cash used in operating activities was
$707,686. Net income of $4,281,904 was affected by change in fair value of
derivative liabilities of $10,148,000, change in fair value of the convertible
note-related party of $365,111 and interest earned on marketable securities held
in the Trust Account of $377,623 and change in the fair value loss of the FPA of
$5,900,179. Changes in operating assets and liabilities provided $965 of cash
for operating activities.
For the three months ended March 31, 2021, cash used in operating activities was
$645,317. Net loss of $11,644,456 was affected by interest earned on marketable
securities held in the Trust Account of $51, change in the fair value of the FPA
of $149,223, initial classification of FPA liability of $9,902,957, change in
fair value of warrant liabilities of $530,000, and transaction costs allocated
to warrant liabilities of $1,001,129. Changes in operating assets and
liabilities used $584,119 of cash for operating activities.
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As of March 31, 2022, we had marketable securities held in the Trust Account of
$690,350,022 (including approximately $377,623 of interest income) consisting of
U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the
balance in the Trust Account may be used by us to pay taxes. Through March 31,
2022, the Company withdraw $176,500 of interest income from the Trust Account to
pay franchise and income taxes. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account (less income taxes payable), to complete our Business
Combination. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to complete our Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and
pursue our growth strategies.
As of March 31, 2022, we had cash of $125,377. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
We are party to a loan agreement with our sponsor pursuant to which we may
borrow up to $2,000,000 in order to fund working capital deficiencies or finance
transaction costs in connection with a Business Combination. Our sponsor or an
affiliate of our Sponsor or certain of our officers and directors may, but are
not obligated to, loan us additional funds as may be required. If we complete a
Business Combination, we would repay such loaned amounts. In the event that a
Business Combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts but no proceeds from
our trust account would be used for such repayment. Up to $2,000,000 of such
loans may be convertible into warrants, at the option of the lender. The
warrants would be identical to the private placement warrants. On February 15,
2022, the Company and our sponsor further amended the Convertible Promissory
Note to increase the aggregate principal amount of the Convertible Promissory
Note from $2,000,000 to $3,000,000. All other terms of the Convertible
Promissory Note remain in full force and effect. During the three months ended
March 31, 2022, we drew down $2,650,000 under the Convertible Promissory Note.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating an initial Business Combination are less than the actual amount
necessary to do so, we may have insufficient funds available to operate our
business prior to our initial Business Combination. Moreover, we may need to
obtain additional financing either to complete our initial Business Combination
or because we become obligated to redeem a significant number of our public
shares upon consummation of our initial Business Combination, in which case we
may issue additional securities or incur debt in connection with such Business
Combination.
The Company intends to complete a Business Combination by March 23, 2023.
However, in the absence of a completed Business Combination, the Company may
require additional capital. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit
of a Business Combination. The Company cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all.
We have until March 23, 2023 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. 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
March 23, 2023. The Company intends to pursue the objective of completing a
Business Combination by March 23, 2023.
Off-Balance Sheet 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.
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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 affiliate
of the Sponsor a total of $10,000 per month for office space, utilities and
administrative and support services. We began incurring these fees on March 18,
2021 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit (except with
respect to units purchased by funds affiliated with Glenview Capital Management,
LLC and an investment vehicle controlled by individuals affiliated with Glenview
Capital Management, LLC), or $22,225,000 in the aggregate. The deferred fee will
be forfeited by the underwriters solely in the event that the Company fails to
complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of condensed consolidated 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:
Convertible Promissory Note
The Company accounts for its convertible promissory note under ASC 815,
Derivatives and Hedging ("ASC 815"). Under 815-15-25, the election can be at the
inception of a financial instrument to account for the instrument under the fair
value option under ASC 825. The Company has made such election for its
convertible promissory note. Using the fair value option, the convertible
promissory note is to be recorded at its initial fair value on the date of
issuance, and each balance sheet date thereafter. The Company evaluates the
change based on the conversion price at the current market value. When
recognized, changes in the estimated fair value of the notes are recognized as a
non-cash gain or loss on the condensed consolidated statements of operations
(see Note 5).
Derivative Liabilities - Warrants and Forward Purchase Agreement
The Company accounts for the Warrants and Forward Purchase Agreement ("FPA") in
accordance with the guidance contained in ASC 815-40, "Derivatives and Hedging."
For derivative financial instruments that are accounted for as assets or
liabilities, the derivative instrument is initially recorded at its fair value
on the grant date and these liabilities are subject to re-measurement at each
balance sheets date until exercised, and any change in fair value is recognized
in the statements of operations. Derivative liabilities are classified in the
balance sheets 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.
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 ASC Topic 480, "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is 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, 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 occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' deficit section of our condensed consolidated balance
sheets. We recognize changes in redemption value immediately as they occur and
adjusts the carrying value of the Class A common stock subject to possible
redemption to equal the redemption value at the end of each reporting period.
This method would view the end of the reporting period as if it were also the
redemption date for the security.
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Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Net income (loss) per common stock is computed
by dividing net income (loss) by the weighted average number of common stock
outstanding for the period. The Company has two classes of common stock, which
are referred to as Class A common stock and Class B common stock. Income (loss)
is allocated pro rata between the two share classes. Accretion associated with
the redeemable shares of Class A common stock is excluded from earnings per
share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, FASB issued 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, 2024 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 issues, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on the Company's condensed consolidated financial statements.
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LONGVIEW ACQUISITION CORP. II 
