References to the "Company," "Priveterra Acquisition Corp.," "our," "us" or "we"
refer to Priveterra 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 interim 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 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. 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 incorporated in Delaware on November 17, 2020. We
were formed 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").
Our Sponsor is Priveterra Sponsor, LLC, a Delaware limited liability company.
The registration statement for the Initial Public Offering was declared
effective on February 8, 2021. On February 11, 2021, we consummated the Initial
Public Offering of 27,600,000 Units, at $10.00 per Unit, generating gross
proceeds of $276,000,000, and incurring offering costs of approximately
$5,520,000, inclusive of approximately $9,660,000 in deferred underwriting
commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 5,213,333 Private Placement Warrants, at a price of
$1.50 per Private Placement Warrant to our Sponsor, generating gross proceeds to
us of approximately $7,820,000.
Upon the closing of the Initial Public Offering and the Private Placement,
$276,000,000 ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in the
Trust Account and was invested in permitted United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940, as amended, having a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act that invest only in direct U.S. government treasury
obligations.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination.
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We will only have 24 months from the closing of the Initial Public Offering, or
February 11, 2023, to complete our initial Business Combination (the
"Combination Period"). If we do not complete a Business Combination within this
period of time, we will (i) cease all operations except for the purposes of
winding up; (ii) as promptly as reasonably possible, but not more than ten
business days thereafter, redeem the Public Shares for a per share pro rata
portion of the Trust Account, including interest and not previously released to
us to fund our working capital requirements (less taxes payable and up to
$100,000 of such net interest to pay dissolution expenses) and (iii) as promptly
as possible following such redemption, dissolve and liquidate the balance of our
net assets to our remaining stockholders, as part of our plan of dissolution and
liquidation. Our Sponsor and our executive officers and independent director
nominees (the "initial stockholders") entered into a letter agreement with us,
pursuant to which they have waived their rights to participate in any redemption
with respect to their Founder Shares; however, if the initial stockholders or
any of our officers, directors or affiliates acquire shares of common stock in
or after the Initial Public Offering, they will be entitled to a pro rata share
of the Trust Account upon our redemption or liquidation in the event we do not
complete a Business Combination within the required time period. In the event of
such distribution, it is possible that the per share value of the residual
assets remaining available for distribution (including Trust Account assets)
will be less than the Initial Public Offering price per Unit in the Initial
Public Offering.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $1.0 million in our operating bank
account and working capital of approximately $1.2 million.
Prior to the completion of the Initial Public Offering, our liquidity needs have
been satisfied through a capital contribution from the Sponsor of $25,000 for
the founder shares and loans under an unsecured promissory note from the Sponsor
of $73,295. On February 15, 2021, we issued an unsecured convertible promissory
note to our Sponsor, pursuant to which we may borrow up to $1,500,000 from our
sponsor for ongoing expenses reasonably related to our business and the
consummation of an initial business combination. All unpaid principal under the
convertible note will be due and payable in full on the earlier of
(i) February 11, 2023 and (ii) the effective date of our initial business
combination. Our Sponsor will have the option, at any time on or prior to such
maturity date, to convert any amounts outstanding under the convertible note
into warrants to purchase shares of our Class A common stock, par value $0.0001
per share, at a conversion price of $1.50 per warrant, with each warrant
entitling the holder to purchase one share of our Class A common stock at a
price of $11.50 per share, subject to the same adjustments applicable to the
private placement warrants sold concurrently with our initial public offering.
In June 2021 we had $100,000 of Working Capital Loans outstanding which were
converted into 66,667 Working Capital Warrants. As of June 30, 2021 and December
31, 2020, there were no borrowings under the Working Capital Loans.
Based on the foregoing, 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. Over this time period, we will be using these funds to pay existing
accounts payable, identifying and evaluating prospective initial Business
Combination candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating the
Business Combination.
Management continues 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.
Results of Operations
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 and dividends on investments held in Trust
Account. Additionally, we will recognize unrealized gains or loss related to our
Warrants. 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.
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For the six months ended June 30, 2021, we had net income of $ 2,294,016, which
is driven by an unrealized gains of $ 3,511,333 on our warrants and $ 37,035 in
interest income from investments held in our Trust Account. Partially offsetting
our income is $ 599,306 in formation and operating costs. For the trhee months
ended June 30, 2021, we had net loss of $398,443, which is driven by an
unrealized loss of $3,655,467 on our warrants and $398,443 in formation and
operating costs. Partially offsetting our loss is $28,716 in interest income
from investments held in our Trust Account.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities are first listed on the Nasdaq Stock
Market, we agreed to pay the Sponsor up to $25,000 per month for administrative
and other services, of which $10,000 per month will be paid to the Sponsor for
office space and administrative services provided to members of the management
team and up to $15,000 will be used to compensate the Company's Chief Operating
Officer and Chief Financial Officer and Chief Legal Officer and Secretary for a
portion of their time spent on the Company's affairs. Upon completion of the
Business Combination or the Company's liquidation, the Company will cease paying
these monthly fees.
Registration Rights
The initial stockholders and holders of the Private Placement Warrants will be
entitled to registration rights pursuant to a registration rights agreement. The
initial stockholders and holders of the Private Placement Warrants will be
entitled to make up to three demands, excluding short form registration demands,
that register such securities for sale under the Securities Act. In addition,
these holders will have "piggy-back" registration rights to include their
securities in other registration statements filed by us. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 3,600,000
additional Units to cover any over-allotments, at the initial public offering
price less the underwriting discounts and commissions. The warrants that were
issued in connection with the 3,600,000 over-allotment Units are identical to
the public warrants and have no net cash settlement provisions.
We paid an underwriting discount of 2% of the per Unit offering price, or
approximately $5,520,000 million in the aggregate at the closing of the Initial
Public Offering, and agreed to pay an additional fee (the "Deferred Underwriting
Fees") of 3.5% of the gross offering proceeds, or approximately $9,660,000 in
the aggregate upon the Company's completion of an Initial Business Combination.
The Deferred Underwriting Fees will become payable to the underwriters from the
amounts held in the Trust Account solely in the event the Company completes its
initial Business Combination.
Critical Accounting Policies
Derivative Financial Instruments
We evaluates our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified in the balance sheet 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. We have
determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation
of proceeds from the issuance of convertible debt into its equity and debt
components. We apply this guidance to allocate IPO proceeds from the Units
between Class A common stock and warrants, using the residual method by
allocating IPO proceeds first to fair value of the warrants and then the Class A
common stock.
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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. The investments held in the Trust Account are presented on the balance
sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities is included in gain
on marketable securities, dividends and interest held in Trust Account in the
accompanying unaudited condensed statements of operations. The estimated fair
values of investments held in the Trust Account were determined using available
market information.
Class A Common Stock Subject to Possible Redemption
We account for Class A common stock subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Class A common stock subject to mandatory redemption (if any) is classified as a
liability instrument and measured at fair value. Conditionally redeemable
Class A common stock (including Class A 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, Class A 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 the occurrence of uncertain future events. Accordingly, at June 30, 2021,
24,816,332 Class A common stock subject to possible redemption is presented as
temporary equity, outside of the stockholders' equity section of the unaudited
condensed balance sheet.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted-average number of common stock outstanding during the periods. We have
not considered the effect of the warrants sold in the Initial Public Offering
and Private Placement as such warrants are contingent upon further events which
have yet to occur. As a result, diluted earnings per share is the same as basic
earnings per share for the periods presented.
Our unaudited condensed statements of operations include a presentation of
income (loss) per share for common stock subject to redemption in a manner
similar to the two-class method of income per share. Net income per common
share, basic and diluted for Class A common stock is calculated by dividing the
net gain from investments held in the Trust Account of approximately $37,035 for
the six months ended June 30, 2021, net of applicable taxes available to be
withdrawn from the Trust Account of approximately $37,035 for the six months
ended June 30, 2021, resulting in net income of $0 for the six months ended June
30, 2021, by the weighted average number of Class A common stock outstanding for
each period. Net income per share, basic and diluted for Class B common stock is
calculated by dividing the net income of $2,294,016 for the six months ended
June 30, 2021, less income attributable to Class A common stock of $0, by the
weighted average number of Class B common stock outstanding for the period.
Net income per common share, basic and diluted for Class A common stock is
calculated by dividing the net gain from investments held in the Trust Account
of approximately $28,716 for the three months ended June 30, 2021, net of
applicable taxes available to be withdrawn from the Trust Account of
approximately $28,716 for the three months ended June 30, 2021, resulting in net
income of $0 for the three months ended June 30, 2021, by the weighted average
number of Class A common stock outstanding for each period. Net loss per share,
basic and diluted for Class B common stock is calculated by dividing the net
loss of $4,025,194 for the three months ended June 30, 2021, less income
attributable to Class A common stock of $0, by the weighted average number of
Class B common stock outstanding for the period.
Recent Accounting Pronouncements
Management is currently assessing any recently issued, but not effective,
accounting standards.
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.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
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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 Public Company
Accounting Oversight Board 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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