ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Silver Spike Acquisition Corp II References to our “management” or our “management team” refer to our
officers and directors, and references to the “Sponsor” refer to Silver Spike 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 of 1933, as amended (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 Form 10-Q
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 the final prospectus for our Initial Public Offering filed with the SEC on March 12, 2021. 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 incorporated in the Cayman Islands on September 2, 2020 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase,
reorganization or similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering, our shares, debt or a combination of cash, shares
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 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 inception through September 30, 2022 were organizational activities, those necessary to
prepare for the IPO, and, after the IPO, identifying a target for our Business Combination. 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 marketable securities. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with
completing a Business Combination.
For the three months ended September 30, 2022, we had a net income of $1,692,870, which consists of change in fair value of warrant liabilities of $370,625, interest earned on marketable
securities held in the Trust Account of $1,206,292, unrealized gain on marketable securities held in the Trust Account of $285,785, offset by formation and operational costs of $169,832.
For the nine months ended September 30, 2022, we had a net income of $11,576,340, which consists of change in fair value of warrant liabilities of $10,501,042, interest earned on marketable
securities held in the Trust Account of $1,640,570, unrealized gain on marketable securities held in the Trust Account of $145,224 and broken deal income of $593,790, offset by the operational costs of $1,304,286.
For the three months ended September 30, 2021, we had a net income of $2,039,611, which consists of the change in fair value of warrant liabilities of $3,212,083 and interest earned on marketable
securities held in the Trust Account of $26,609, offset by operational costs of $1,196,979 and an unrealized loss on marketable securities held in the Trust Account of $2,102.
For the nine months ended September 30, 2021, we had a net loss of $1,320,723, which consists of operational costs of $1,937,768 and an unrealized loss on marketable securities held in the Trust
Account of $2,102, offset by the change in fair value of warrant liabilities of $577,292 and interest earned on marketable securities held in the Trust Account of $41,855.
Liquidity, Capital Resources and Going Concern
On March 15, 2021, together with the full exercise by the underwriters of the over-allotment option on March 23, 2021, we consummated the IPO of 28,750,000 Units, at a price of $10.00 per unit,
generating gross proceeds of $287,750,000. Simultaneously with the closing of the IPO, we consummated the sale of 5,166,667 private placement warrants to our sponsor at a price of $1.50 per warrant, generating gross proceeds of $7,750,000.
Following the IPO and the sale of the private placement warrants, a total of $287,500,000 was placed in the trust account. We incurred $16,328,950 in transaction costs, including $5,750,000 of
underwriting fees, $10,062,500 of deferred underwriting fees and $516,450 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities was $431,651. Net income of $11,576,340 was affected by interest earned on marketable securities held in the Trust
Account of $1,640,570, a change in the fair market value of the warrant liabilities of $10,501,042, an unrealized gain on marketable securities held in the Trust Account of $145,224, and changes in operating assets and liabilities, which provided
$274,845 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities was $620,062. Net loss of $1,320,723 was affected by interest earned on marketable securities held in the Trust
Account of $41,855, a change in the fair market value of the warrant liabilities of $577,292,transaction costs in connection with the warrant liabilities of $467,695, an unrealized loss on marketable securities held in the Trust Account of
$2,102, and changes in operating assets and liabilities, which provided $850,011 of cash for operating activities.
As of September 30, 2022, we had marketable securities held in the trust account of $289,342,556. 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. To the extent that our share capital 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, 2022, we had cash of $366,528 held outside 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, 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 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 unit at
the option of the lender. The warrants would be identical to the private placement warrants.
We will need to raise additional capital through loans or additional investments from our Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and Sponsor may,
but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we
are unable to raise additional capital, we 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. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern for at
least one year from the date that the financial statement are issued.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of
Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until March 15, 2023, to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time.
If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business
Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management intends to complete the Business Combination prior to the termination date. No adjustments
have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 15, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 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.
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 our Sponsor a monthly fee of $20,000 for office
space, and administrative and support services, provided to the Company. We began incurring these fees on March 10, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,062,500 in the aggregate, which 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.
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 identified the following critical accounting policies:
Warrant Liabilities
We account for the 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 statements of operations. The fair value of the Public Warrants was estimated using a Monte Carlo simulation approach for periods where no observable traded
price was available and the fair value of the Private Warrants was estimated using a Modified Black-Scholes model. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was
used as the fair value as of each relevant date.
Class A Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including 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, ordinary shares are classified as shareholders’ equity. Our ordinary
shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as
temporary equity, outside of the shareholders’ equity section of our condensed balance sheets.
Net Income (Loss) per Ordinary Share
Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. Remeasurement associated with the redeemable shares
of Class A ordinary shares is excluded from income per ordinary share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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 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. The Company adopted ASU 2020-06 on January 1, 2021.
Adoption of ASU 2020-06 did not impact the Company’s 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.
PART II – OTHER INFORMATION
ITEM 1. |
LEGAL PROCEEDINGS
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None.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our Initial Public Offering filed
with the SEC on March 12, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem
immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our Initial Public Offering filed with the
SEC on March 12, 2021, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by negative impacts on the global
economy, capital markets or other geopolitical conditions resulting from the recent invasion of Ukraine by Russia and subsequent sanctions against Russia, Belarus and related individuals and entities
United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the recent invasion of Ukraine by Russia in February 2022. In
response to such invasion, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions
and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Certain
countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine during the ongoing military conflict, increasing geopolitical tensions with Russia. The invasion of Ukraine by
Russia and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have created global security concerns that could have a lasting
impact on regional and global economies. Although the length and impact of the ongoing military conflict in Ukraine is highly unpredictable, the conflict could lead to market disruptions, including significant volatility in commodity prices,
credit and capital markets, as well as supply chain interruptions. Additionally, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in
capital markets.
Any of the abovementioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine and
subsequent sanctions, could adversely affect our search for a business combination and any target business with which we ultimately consummate a business combination. The extent and duration of the Russian invasion of Ukraine, resulting sanctions
and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a
global scale. Any such disruptions may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those related to the market for our securities, cross-border transactions or our ability to raise
equity or debt financing in connection with any particular business combination. If these disruptions or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations
of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our Business Combination
and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance
with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material
adverse effect on the business, investments and results of our operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our
ability to negotiate and complete our Business Combination and results of operations.
On March 30, 2022, the SEC issued proposed rules (the “2022 Proposed Rules”) relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private
operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions;
increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act. The 2022 Proposed Rules, if adopted,
whether in the form proposed or in revised form, and certain positions and legal conclusions expressed by the SEC in connection with the 2022 Proposed Rules may materially adversely affect our ability to negotiate and complete our Business
Combination and may increase the costs and time related thereto.
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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On March 15, 2021, together with the full exercise by the underwriters of the over-allotment option on March 23, 2021, we consummated our Initial Public Offering of 28,750,000 Units, at a price
of $10.00 per Unit, generating total gross proceeds of $287,500,000. Credit Suisse and Stifel, Nicolaus & Company acted as joint book-running managers. The securities sold in the offering were registered under the Securities Act on
registration statements on Form S-1 (No. 333-252803). The SEC declared the registration statements effective on March 10, 2021.
Simultaneously with the consummation of the Initial Public Offering, we consummated a private placement of 5,166,667 Private Placement Warrants to our Sponsor at a price of $1.50 per Private
Placement Warrant, generating total proceeds of $7,750,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering except that the Private Placement Warrants are not transferable, assignable
or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by
the initial purchasers or their permitted transferees.
Of the gross proceeds received from the Initial Public Offering, $287,500,000 was placed in the Trust Account.
We paid a total of $5,750,000 in underwriting discounts and commissions and $516,450 for other offering costs and expenses related to the Initial Public Offering. In addition, the underwriters
agreed to defer $10,062,500 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. |
MINE SAFETY DISCLOSURES
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Not applicable.
ITEM 5. |
OTHER INFORMATION
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None.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10‑Q.
Exhibit No.
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Description
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Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS*
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XBRL Instance Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Labels Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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