References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to M3-Brigade Acquisition II Corp. 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.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements. 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 SEC filings.
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 16, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from December 16, 2020 (inception) through June 30, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and the search for a target company for a
Business Combination, including activities relating to the terminated merger
agreement with Syniverse Corporation. We do not expect to generate any operating
revenues until after the completion of our 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 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 June 30, 2022, we had a net income of $4,747,253,
which consists of change in fair value of warrant liabilities of $4,983,778 and
unrealized gain on investments of $78,777, offset by formation and operating
costs of $315,302.
For the six months ended June 30, 2022, we had a net income of $28,918,222,
which consists of which consists of change in fair value of warrant liabilities
of $24,526,328, unrealized gain on investments of $119,060 and costs of the
terminated business combination of $5,400,000, offset by formation and operating
costs of $1,127,166.
For the three months ended June 30, 2021, we had a net income of $1,992,748,
which consists of change in fair value of warrant liabilities of $3,221,432,
change in fair value of overallotment liability of $437,575 and unrealized gain
on investments of $14,298, offset by the formation and operating costs of
$180,557 and merger related costs of $1,500,000.
For the six months ended June 30, 2021, we had a net income of $1,725,953, which
consists of change in fair value of warrant liabilities of $3,820,577, change in
fair value of overallotment liability of $1,406,950 and unrealized gain on
investments of $20,665, offset by the formation and operating costs of $226,874,
merger related costs of $1,500,000, excess fair value of private placement
warrants over consideration paid of $529,653 and transaction costs of
$1,265,712.
Through June 30, 2022, our efforts have been limited to organizational
activities, activities relating to identifying and evaluating prospective
acquisition candidates (including activities relating to the terminated merger
agreement with Syniverse Corporation) and activities relating to general
corporate matters. We have not generated any revenues from operations, other
than interest income on the proceeds held in the Trust Account. As of June 30,
2022 and December 31, 2021, $400,153,324 and $400,034,264 was held in the Trust
Account, respectively. We had cash outside of trust of approximately $568,000
and $987,000 at June 30, 2022 and December 31, 2021, respectively and we had
$1,428,738 and $6,325,424 of accounts payable and accrued expenses as of June
30, 2022 and December 31, 2021. Approximately $400,000 and $5,917,000,
respectively, of such liabilities at June 30, 2022 and December 31, 2021 relate
to the terminated business combination, of which $5,400,000 of the December 31,
2021 balance was waived by the vendor in February 2022.
21
Except for the withdrawal of interest to pay our taxes and up to $100,000 to pay
dissolution expenses, if any, our amended and restated certificate of
incorporation (the "Charter") provides that none of the funds held in trust will
be released from the Trust Account until the earliest of (i) the completion of
an initial business combination; (ii) the redemption of any of the shares of
Class A common stock included in the units sold in the Public Offering (the
"Units") properly submitted in connection with a stockholder vote to amend the
Charter to modify the substance or timing of the Company's obligation to redeem
100% of the common stock included in the Units being sold in the Public Offering
if the Company does not complete an initial business combination within 18
months from the closing of the Public Offering or with respect to any other
material provisions relating to stockholders' rights or pre-initial business
combination activity or (iii) the redemption of 100% of the shares of Class A
common stock included in the Units sold in the Public Offering if we are unable
to complete a business combination within such 18 month period. Through June 30,
2022, we have not withdrawn any funds from interest earned on the trust
proceeds. Other than the deferred underwriting discounts and commissions, no
amounts are payable to the underwriters of the Public Offering in the event of a
business combination.
Liquidity and Capital Resources
On March 8, 2021, we consummated the Initial Public Offering of 40,000,000 Units
at a price of $10.00 per Unit, generating gross proceeds of $400,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,500,000 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant in a private placement to our Sponsor, generating gross
proceeds of $11,250,000. On April 19, 2021, the overallotment option provided to
our underwriter expired without being exercised.
Following the Initial Public Offering, a total of $400,000,000 was placed in the
Trust Account and we had $1,530,000 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 $22,706,154 in transaction costs,
including $8,000,000 of underwriting fees, $14,000,000 of deferred underwriting
fees and $706,154 of other offering costs.
For the six months ended June 30, 2022, cash used in operating activities was
$419,590. Net income of $28,918,222 was primarily comprised of change in fair
value of warrant liability of $24,526,328 and unrealized gain on marketable
securities held in Trust Account of $119,060. Changes in operating assets and
liabilities used $4,692,424 of cash for operating activities.
For the six months ended June 30, 2021, cash used in operating activities was
$1,057,438. Net income of $1,725,953 was primarily comprised of change in fair
value of warrant liability of $3,820,577, change in fair value of overallotment
option of $1,406,950 and unrealized gain on marketable securities held in Trust
Account of $20,665, offset by transaction costs allocable to warrant liabilities
of $1,265,712 and excess fair value of private placement warrants over
consideration paid of $529,653. Changes in operating assets and liabilities
provided by $669,436 of cash for operating activities.
In February of 2022, a vendor waived payment of $5,400,000 of the accrued
transaction costs. This reversal is included in the condensed statement of
operations.
As of June 30, 2022, we had cash and marketable securities held in the Trust
Account of approximately $400,153,000. We intend to use substantially all of the
funds held in the Trust Account, including any amounts representing interest
earned on the Trust Account to complete our Business Combination. We may
withdraw interest to pay franchise and income taxes. During the three and six
months ended June 30, 2022, we did not withdraw any interest earned on the Trust
Account. 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.
22
As of June 30, 2022, we had cash of approximately $568,000 outside of the Trust
Account. 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, an affiliate of the
Sponsor, or our officers and directors may, but are not obligated to, loan us
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 $1,500,000 of such loans may be convertible into warrants,
at a price of $1.50 per warrant at the option of the lender. The warrants would
be identical to the Private Placement Warrants, including as to exercise price,
exercisability and exercise period. The terms of such loans by our officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans. The loans would be repaid upon consummation of a Business
Combination, without interest.
Further, our sponsor, officers and directors or their respective affiliates may,
but are not obligated to, loan us funds as may be required (the "Working Capital
Loans"). If we complete a business combination, we would repay the Working
Capital Loans. In the event that a business combination does not close, we may
use a portion of proceeds held outside the Trust Account to repay the Working
Capital Loans, but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. Such Working Capital Loans would be evidenced by
promissory notes. The notes would either be repaid upon consummation of a
business combination, without interest, or, at the lender's discretion,
converted upon consummation of a business combination into additional Private
Warrants at a price of $1.50 per Private Warrant. As of June 30, 2022 and
December 31, 2021, no Working Capital Loans have been issued.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Codification Subtopic 205-40,
"Presentation of Financial Statements-Going Concern," management has determined
that if the Company is unable to raise additional funds to alleviate liquidity
needs, obtain approval for an extension of the deadline or complete a Business
Combination by March 8, 2023, then the Company will cease all operations except
for the purpose of liquidating. The Company intends to complete a Business
Combination before the mandatory liquidation date or obtain approval for an
extension, however, it is uncertain whether the Company will be able to do so.
If a Business Combination is not consummated by this date and an extension not
requested by the Sponsor, there will be a mandatory liquidation and subsequent
dissolution of the Company. Management has determined that the liquidity
condition and the mandatory liquidation, should a Business Combination not occur
and an extension is not requested by the Sponsor, and potential subsequent
dissolution raises substantial doubt about the Company's ability to continue as
a going concern. No adjustments have been made to the carrying amounts of assets
or liabilities should the Company be required to liquidate after March 8, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 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.
23
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.45 per Unit issued at our
initial public offering, or $14,000,000 in the aggregate. The deferred fee will
be waived by the underwriters in the event that we do not complete a Business
Combination, 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:
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("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 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, common stock is classified as stockholders' equity. Our common stock
features certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, the
Class A common stock subject to possible redemption is presented as temporary
equity, outside of the stockholders' deficit section of our balance sheets.
Net Income (Loss) per Common Share
Our Company's statement of operations includes a presentation of income (loss)
per share for common shares subject to possible redemption in a manner similar
to the two-class method of income (loss) per share. Net income (loss) per common
share, basic and diluted, for Common stock subject to possible redemption is
calculated by dividing the proportionate share of income or loss on marketable
securities held by the Trust Account, net of applicable franchise and income
taxes, by the weighted average number of Common stock subject to possible
redemption outstanding since original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock
is calculated by dividing the net income (loss), adjusted for income or loss on
marketable securities attributable to Common stock subject to possible
redemption, by the weighted average number of non-redeemable common stock
outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of
common stock as these shares do not have any redemption features. Non-redeemable
common stock participates in the income or loss on marketable securities based
on non-redeemable shares' proportionate interest.
Warrant Liabilities
The Company's Warrants meet the definition of a derivative and are recorded as
derivative liabilities on the Balance Sheet and measured at fair value. At each
reporting date, changes in the fair value are recognized in the statement of
operations in the period of change.
24
Recently Adopted 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, 2024 and should be applied on a
full or modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The
adoption of ASU 2020- 06 does not have an impact on the Company's financial
statements.
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
© Edgar Online, source Glimpses
M3 BRIG 