References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Mallard Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Mallard Founders Holdings LLC. The following discussion and
analysis of the Company's condensed financial condition and results of
operations should be read in conjunction with the condensed 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.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations gives effect to the restatement of our condensed financial statements
as of December 31, 2020, March 31, 2021 and June 30, 2021. Management identified
errors made in its historical condensed financial statements where, at the
closing of our Initial Public Offering, we improperly valued our common stock
subject to possible redemption. We previously determined the common stock
subject to possible redemption to be equal to the redemption value of $10.00 per
share of common stock while also taking into consideration a redemption cannot
result in net tangible assets being less than $5,000,001. Management determined
that the common stock issued during the Initial Public Offering can be redeemed
or become redeemable subject to the occurrence of future events considered
outside of the Company's control. Therefore, management concluded that the
redemption value should include all common stock subject to possible redemption,
resulting in the common stock subject to possible redemption being equal to
their redemption value. As a result, management has noted a reclassification
error related to temporary equity and permanent equity. This resulted in a
restatement to the initial carrying value of the common stock subject to
possible redemption with the offset recorded to additional paid-in capital (to
the extent available), accumulated deficit and common stock.
Additionally, the Company discovered errors solely in its financial statements
as of December 31, 2020 and for the period from February 26, 2020 (inception)
through December 31, 2020. The Company did not recognize the fair value of
private placement warrants in excess of purchase price in the amount of
$3,800,000 and offering costs allocable to the Public and Private Placement
Warrants in the amount of $543,798 in the statement of operations. Additionally,
the company did not recognize the excess of fair value of the Founder Shares and
Private Placement Warrants offered to the Anchor Investors in the amount of
$535,827 in the statement of changes in stockholders' equity (deficit).
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 (as Restated, See
Note 2) filed with the U.S. Securities and Exchange Commission (the "SEC"). 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 restate 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
February 26, 2020, for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses (the "Business Combination"). 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 operating revenues
to date. Our only activities from inception through September 30, 2021 were
organizational activities and those necessary to prepare for the Initial Public
Offering, described below. We do not expect to generate any operating revenues
until after the completion of our initial Business Combination. We generate
non-operating income in the form of interest income on the marketable securities
held in the Trust Account and on any change in the fair value of our warrant
liabilities. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), for any increase in
the fair value of our warrant liabilities and for due diligence expenses in
connection with searching for, and completing, a Business Combination.
For the three months ended September 30, 2021, we had net income of $4,056,693,
which consists of the change in fair value of warrant liabilities of $4,650,000
and interest earned on marketable securities held in our Trust Account of
$2,800, partially offset by operating costs of $596,107.
For the nine months ended September 30, 2021, we had net income of $8,062,572,
which consists of the change in fair value of warrant liabilities of $9,230,000
and interest earned on marketable securities held in our Trust Account of
$8,310, partially offset by operating costs of $1,175,738.
For the three months ended September 30, 2020, we had a net loss $2,375, which
consisted of formation and operating costs.
For the period from February 26, 2020 (inception) through September 30, 2020, we
had a net loss $3,375, which consisted of formation and operating costs.
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Liquidity and Capital Resources
On October 29, 2020, we completed the Initial Public Offering of 11,000,000
Units at $10.00 per Unit, generating gross proceeds of $110,000,000.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the sale of 10,000,000 Private Placement Warrants at a price of
$0.50 per Private Placement Warrant in a private placement to the Sponsor,
generating gross proceeds of $5,000,000.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,039,930. Net income of $8,062,572 was affected by the change in fair
value of warrant liabilities of $9,230,000 and interest earned on marketable
securities held in the Trust Account of $8,310. Changes in operating assets and
liabilities used $1,039,930 of cash for operating activities.
For the period from February 26, 2020 (inception) through September 30, 2020,
net cash used in operating activities was $2,635. Net loss of $3,375 was
partially offset by changes in operating assets and liabilities, which provided
$740 of cash for operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account
of $111,110,228 (including approximately $10,000 of interest income) consisting
of securities held in a money market fund that invests in U.S. Treasury
securities 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 September 30, 2021,
we did not withdraw any interest earned on the Trust Account to pay our 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, which
interest shall be net of taxes payable and excluding deferred underwriting
commissions, to complete our Business Combination. We may withdraw interest from
the Trust Account to pay taxes, if any. To the extent that our share capital or
debt is used, in whole or in part, as consideration to complete a 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 September 30, 2021, we had cash of $243,007. 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, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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 of
the post Business Combination entity, at a price of $0.50 per warrant, at the
option of the lender. The warrants would be identical to the Private Placement
Warrants.
We monitor the adequacy of our working capital in order to meet the expenditures
required for operating our business prior to our initial Business Combination.
However, if our estimates 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 Business
Combination. Moreover, we may need to obtain additional financing either to
complete our Business Combination or because we become obligated to redeem a
significant number of our public shares upon completion of our Business
Combination, in which case we may issue additional securities or incur debt in
connection with such Business Combination. If we are unable to complete our
initial Business Combination because we do not have sufficient funds available
to us, we will be forced to cease operations and liquidate the Trust Account.
The Company may need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors, or third
parties. The Company's officers, directors and Sponsor may, but are not
obligated to, loan the Company funds, from time to time or at any time, in
whatever amount they deem reasonable in their sole discretion, to meet the
Company's working capital needs. Accordingly, the Company may not be able to
obtain additional financing. 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, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern if a Business Combination is not consummated.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. 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.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $3,850,000
in the aggregate, payable only upon the closing of a Business Combination.
Critical Accounting Policies
The preparation of condensed 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 condensed 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 Liabilities
We account for the Private Placement Warrants and Public Warrants issued in
connection with our Initial Public Offering in accordance with the guidance
contained in ASC 815-40-15-7D under which the warrants do not meet the criteria
for equity treatment and must be recorded as liabilities. Accordingly, we
classify the warrants as liabilities at their fair value and adjust the warrants
to fair value at each reporting period. This liability is 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 the
Private Placement Warrants was estimated by using a probability adjusted
Black-Scholes option pricing model. The fair value of the Public Warrants was
determined using the close price as of the reporting date
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and 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, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding for the
period. Accretion associated with the redeemable shares of common stock is
excluded from income (loss) per common share as the redemption value
approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06 - "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 for fiscal years beginning after December 15, 2023 for
emerging growth companies and should be applied on a full or modified
retrospective basis. We are currently assessing the impact, if any, that ASU
2020-06 would have on our financial position, results of operations or cash
flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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MALLARD ACQUISITION CORP. 