References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Recharge Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to SKG Sponsor 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 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 Quarterly
Report including, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding 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. 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 this Quarterly Report and the Risk Factors section of the
Annual Report on Form 10-K/A filed with 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 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
July 7, 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 raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through March 31, 2021 were organizational activities, those
necessary to prepare for the Initial Public Offering, described below, and,
after our Initial Public Offering, 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, 2021, we had net income of $14,897,414,
which consists of operating costs of $217,961, offset by an unrealized gain on
marketable securities held in our Trust Account of $5,697, interest earned on
marketable securities held in the Trust Account of $40,072, interest income from
bank accounts of $66, and non-cash income derived from the change in fair value
of the warrant liability of $15,069,540.
Liquidity and Capital Resources
On October 5, 2020, we consummated the Initial Public Offering of 20,000,000
Units, at $10.00 per unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,750,000 Private Placement Warrants to the Sponsor at a price of
$1.00 per warrant, generating gross proceeds of $7,750,000.
On October 23, 2020, the underwriters partially exercised their over-allotment
option, resulting in an additional 40,000 Units issued for total gross proceeds
of $400,000. As a result of the underwriters' election to partially exercise
their over-allotment option a total of 10,000 Founders Shares are no longer
subject to forfeiture and 740,000 Founders Shares were forfeited. In connection
with the underwriters' partial exercise of their over-allotment option, we also
consummated the sale of an additional 12,000 Private Placement Warrants at $1.00
per Private Placement Warrant, generating total proceeds of $12,000. A total of
$404,000 was deposited into the Trust Account, bringing the aggregate proceeds
held in the Trust Account to $202,404,000.
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We incurred $11,434,768 in transaction costs, including $4,008,000 of
underwriting fees, $7,014,000 of deferred underwriting fees and $412,768 of
other costs.
For the three months ended March 31, 2021, cash used in operating activities was
$216,287. Net income of $14,897,414 was affected by interest earned on
marketable securities held in the Trust Account of $40,072, an unrealized gain
on marketable securities held in our Trust Account $5,697, non-cash income
derived from the change in fair value of the warrant liability of $15,069,540,
and changes in operating assets and liabilities, which provided $1,608 of cash
from operating activities.
As of March 31, 2021, we had cash and marketable securities held in the Trust
Account of $202,485,412. 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 deferred underwriting commissions and income taxes payable),
to complete our Business Combination. We may withdraw interest to pay franchise
and income taxes. During the period ended December 31, 2020, 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.
As of March 31, 2021, we had cash of $1,089,018 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 initial stockholders or an affiliate
of the initial stockholders or certain of our directors and officers 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 identical of the post-Business
Combination entity, at a price of $1.00 per warrant. The warrant would be
identical to the Private Placement Warrants.
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 a 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 consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 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, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support. We began incurring these fees on September 30, 2020 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, or $7,014,000
in the aggregate. The deferred fee will become payable to the underwriters from
the amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement.
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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 financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Warrant Liability
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to our
own ordinary shares, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the
time of warrant issuance and as of each subsequent quarterly period end date
while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations.
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 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,
the Class A common stock subject to possible redemption is presented as
temporary equity, outside of the stockholders' equity section of our balance
sheets.
Net Income per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable taxes, by the weighted average number of shares of Class A redeemable
common stock outstanding for the periods. Net income per common share, basic and
diluted for and Class B non-redeemable common stock is calculated by dividing
net income less income attributable to Class A redeemable common stock, by the
weighted average number of shares of Class B non-redeemable common stock
outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
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