References to the "Company," "our," "us" or "we" refer to NextGen Acquisition
Corporation. 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, including our proposed Xos Business
Combination, 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 the "Risk Factors" section of our Form
10-K/A, in our Xos Disclosure Statement, and in our other filings with the SEC.
Our filings with the SEC can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, we disclaim 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 incorporated as a Cayman Islands exempted company
on July 29, 2020 for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses that the Company has not yet identified. Our Sponsor is
NextGen Sponsor LLC, a Cayman Island exempted company.
The registration statement for our Initial Public Offering was declared
effective on October 6, 2020. On October 9, 2020, we consummated the Initial
Public Offering of 35,000,000 Units, at $10.00 per Unit, generating gross
proceeds of $350.0 million, and incurring offering costs of approximately $19.8
million, inclusive of approximately $12.3 million in deferred underwriting
commissions. On November 13, 2020, the underwriters partially exercised the
over-allotment option and on November 17, 2020, purchased an additional
2,500,000 Over-Allotment Units, generating gross proceeds of $25.0 million, and
incurred additional offering costs of approximately $1.4 million in underwriting
fees (inclusive of approximately $875,000 in deferred underwriting fees).
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement of 6,000,000 Private Placement Warrants, at a price of
$1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds
of $9.0 million. Simultaneously with the closing of the Over-allotment on
November 17, 2020, we consummated the second closing of the Private Placement,
resulting in the purchase of an aggregate of an additional 333,334 Private
Placement Warrants by the Sponsor, generating gross proceeds to the Company of
$500,000.
Upon the closing of the Initial Public Offering, the Over-Allotment and the
Private Placement, $375.0 million ($10.00 per Unit) of the net proceeds of the
sale of the Units in the Initial Public Offering and the Private Placement were
placed in a Trust Account with Continental Stock Transfer & Trust Company acting
as trustee and invested in United States government treasury bills with a
maturity of 185 days or less or in money market funds investing solely in U.S.
Treasuries and meeting certain conditions under Rule 2a-7 under the Investment
Company Act, 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.
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If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or October 9, 2022, we will (i) cease
all operations except for the purpose of winding up; (2) as promptly as
reasonably possible but not more than 10 business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest (less up to
$100,000 of interest to pay dissolution expenses and which interest shall be net
of taxes payable), divided by the number of then issued and outstanding Public
Shares, which redemption will completely extinguish Public Shareholders' rights
as shareholders (including the right to receive further liquidating
distributions, if any); and (3) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and our
board of directors, liquidate and dissolve, subject in each case to our
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.
Proposed Xos Business Combination
On February 21, 2021, the Company entered into the Merger Agreement with Merger
Sub and Xos.
The Merger Agreement provides that, among other things and upon the terms and
subject to the conditions thereof, the following transactions will occur:
(i) at the Closing, upon the terms and subject to the conditions of the Merger
Agreement, in accordance with the DGCL, Merger Sub will merge with and into Xos,
the separate corporate existence of Merger Sub will cease and Xos will be the
surviving corporation and the Company's wholly-owned subsidiary;
(ii) as a result of the Merger, among other things and after giving effect to
the Company Recapitalization (as defined in the Merger Agreement), all
outstanding shares of Xos common stock or resulting from the conversion of
preferred stock of Xos into common stock of Xos, together with shares of Xos
common stock reserved in respect of (a) Xos Options, (b) Xos RSUs and (c) Xos
Restricted Stock Awards outstanding as of immediately prior to the Merger that
will be converted into awards based on new Xos common stock, will be cancelled
in exchange for the right to receive an aggregate of 127,626,116 shares of new
Xos common stock (at a deemed value of $10.00 per share), which, in the case of
Xos Awards, will be shares underlying awards based on new Xos common stock
representing a pre-transaction equity value of Xos of $1,276,261,160. The
portion of the Aggregate Merger Consideration reflecting the conversion of the
Xos Awards is calculated assuming that all new Xos Options are net-settled
(although new Xos Options may by their terms be cash exercised, resulting in
additional dilution); and
(iii) upon the effective time of the Domestication, the Company will immediately
be renamed "Xos, Inc." or such other name as agreed to by the Company and Xos
prior to Closing.
Prior to the Closing, subject to the approval of the Company's shareholders, and
in accordance with the DGCL, CICA and the Company's amended and restated
memorandum and articles of association, the Company will effect a deregistration
under the CICA and a domestication under Section 388 of the DGCL (by means of
filing a certificate of domestication with the Secretary of State of Delaware),
pursuant to which its jurisdiction of incorporation will be changed from the
Cayman Islands to the State of Delaware.
In connection with the Domestication, (i) each of the Company's then issued and
outstanding Class A ordinary shares, par value $0.0001 per share, will convert
automatically, on a one-for-one basis, into a share of NextGen Common Stock,
(ii) each of the Company's then issued and outstanding Class B ordinary shares,
par value $0.0001 per share, will convert automatically, on a one-for-one basis,
into a share of NextGen Common Stock, (iii) each of the Company's then issued
and outstanding warrant will convert automatically into a Domesticated NextGen
Warrant, pursuant to the Warrant Agreement, dated October 6, 2020, between the
Company and Continental Stock Transfer & Trust Company, as warrant agent, and
(iv) each of the Company's then issued and outstanding Cayman NextGen Units, if
any, will be cancelled and will entitle the holder thereof to one share of
NextGen Common Stock and one-third of one Domesticated NextGen Warrant.
On February 21, 2021, concurrently with the execution of the Merger Agreement,
NextGen entered into Subscription Agreements with the PIPE Investors, pursuant
to, and on the terms and subject to the conditions of which, the PIPE Investors
have collectively subscribed for 22,000,000 shares of the NextGen Common Stock
for an aggregate purchase price equal to $220,000,000, a portion of which is
expected to be funded by one or more affiliates of the Sponsor and certain
additional investors (which may include mutual funds and existing shareholders).
2,000,000 of the shares of the NextGen Common Stock to be sold in the PIPE
Investment are shares owned by certain Xos officers. The PIPE Investment will be
consummated substantially concurrently with the Closing.
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The consummation of the proposed Xos Business Combination is subject to certain
conditions as further described in the Merger Agreement.
For more information about the Merger Agreement and the proposed Xos Business
Combination, see the Company's Current Reports on Form 8-K filed with the SEC on
February 22, 2021 and on May 14, 2021, and the Xos Disclosure Statement that the
Company has filed with the SEC. Unless specifically stated, this Quarterly
Report does not give effect to the proposed Xos Business Combination and does
not contain the risks associated with the proposed Xos Business Combination.
Such risks and effects relating to the proposed Xos Business Combination are
included in the Xos Disclosure Statement.
Results of Operations
Our entire activity from July 29, 2020 (inception) through June 30, 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 June 30, 2021, we had net income of approximately
$733,000 which consisted mainly of an approximately $1,283,000 gain in change in
fair value of derivative warrant liabilities and approximately $13,000 in net
gain on investments held in Trust Account, partially offset by approximately
$532,000 in general and administrative expenses, and $30,000 in general and
administrative expenses - related party.
For the six months ended June 30, 2021, we had a loss of approximately $7.7
million, which consisted mainly of an approximately $6.3 million loss in change
in fair value of derivative warrant liabilities, approximately $1.3 million in
general and administrative expenses, and $60,000 in general and administrative
expenses - related party, partially offset by approximately $22,000 in net gain
on cash equivalents held in Trust Account.
Liquidity and Capital Resources
Our entire activity since inception through June 30, 2021 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of interest income from the proceeds derived from the Initial
Public Offering. We expect to incur increased expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
On March 29, 2021, we issued a promissory note, pursuant to which we may borrow
up to an aggregate principal amount of $1,000,000. The promissory note is
non-interest bearing and payable on the earlier of (i) October 9, 2022 and (ii)
the completion of our initial Business Combination. As of June 30, 2021, there
was $440,000 outstanding under the promissory note.
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 June 30, 2021, management believes that the
Company will have sufficient working capital and borrowing capacity to meet its
needs through the earlier of the consummation of a Business Combination or one
year from this filing.
We continue to evaluate the impact of the COVID-19 pandemic and has concluded
that the specific impact is not readily determinable as of the date of the
balance sheet. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
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Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of our 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 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. We have identified the
following as our critical accounting policies:
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. 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.
The 12,500,000 Public Warrants and the 6,333,334 Private Placement Warrants are
recognized as derivative liabilities in accordance with ASC 815-40. Accordingly,
the we recognize the warrant instruments as liabilities at fair value and
adjusts 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 the Public Warrants issued in connection with the Public Offering and
Private Placement Warrants were initially measured at fair value using a Monte
Carlo simulation model and subsequently, the fair value of the Private Placement
Warrants have been estimated using a Monte Carlo simulation model each
measurement date. The fair value of Public Warrants issued in connection with
the Initial Public Offering have subsequently been measured based on the listed
market price of such warrants.
Class A Ordinary Shares Subject to Possible Redemption
We account for Class A ordinary shares subject to possible redemption in
accordance with the guidance in Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities
from Equity." Class A ordinary shares subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares 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 our control) are classified as temporary equity. At all other
times, Class A ordinary shares are classified as shareholders' equity. Our Class
A ordinary shares feature certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, on June 30, 2021 and December 31, 2020, 32,185,932 and 32,952,414
Class A ordinary shares subject to possible redemption are presented as
temporary equity, outside of the shareholders' equity section of the Company's
condensed balance sheets.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net loss per share is computed by dividing net loss by the
weighted average number of shares of ordinary shares outstanding during the
period excluding ordinary shares subject to forfeiture. An aggregate of
32,185,932 Class A ordinary shares subject to possible redemption on June 30,
2021 have been excluded from the calculation of basic loss per ordinary share,
since such shares, if redeemed, only participate in their pro rata share of the
trust earnings. We have not considered the effect of the warrants sold in the
Initial Public Offering (including the consummation of the Over-Allotment Units)
and Private Placement to purchase an aggregate of 18,833,334 ordinary shares in
the calculation of diluted loss per share, since the exercise of the warrants
are contingent upon the occurrence of future events. As a result, diluted net
loss per ordinary share is the same as basic net loss per ordinary share for the
period presented.
We apply the two-class method in calculating income (loss) per ordinary share.
Net income (loss) per ordinary share, basic and diluted for Class A ordinary
shares subject to possible redemption is calculated by dividing the
proportionate share of income or loss on Investment held by the Trust Account,
net of applicable franchise and income taxes, by the weighted average number of
shares of Class A ordinary shares subject to possible redemption outstanding
since original issuance.
Net income (loss) per ordinary share, basic and diluted for non-redeemable
ordinary share is calculated by dividing net income (loss) less income
attributable to Class A ordinary shares subject to possible redemption by the
weighted average number of shares of non-redeemable ordinary shares outstanding
for the period presented.
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Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("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 U.S. 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.
Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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 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.
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