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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 86-1403778 | |
(State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
SAIL SM (Stakeholder Aligned Initial Listing) securities, each consisting of one share of Class A Common Stock, $0.0001 par value, andone-fifth of one redeemable warrant to acquire one share of Class A Common Stock | REVHU | The Nasdaq Stock Market LLC | ||
Class A Common Stock included as part of the SAIL SM securities | REVH | The Nasdaq Stock Market LLC | ||
Redeemable Warrants included as part of the SAIL SM securities, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | REVHW | The Nasdaq Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
Table of Contents
REVOLUTION HEALTHCARE ACQUISITION CORP.
Quarterly Report on Form 10-Q
Table of Contents
Page No. | ||||||
PART I. FINANCIAL INFORMATION | ||||||
Item 1. | 1 | |||||
Condensed Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 | 1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | ||||
Item 3. | 25 | |||||
Item 4. | 26 | |||||
PART II. OTHER INFORMATION | ||||||
Item 1. | 26 | |||||
Item 1A. | 26 | |||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities | 27 | ||||
Item 3. | 27 | |||||
Item 4. | 27 | |||||
Item 5. | 27 | |||||
Item 6. | 28 | |||||
SIGNATURES | 29 |
Table of Contents
September 30, 2022 | December 31, 2021 | |||||||
(unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | 1,516,979 | $ | 3,375,154 | ||||
Prepaid expenses | 343,598 | 836,448 | ||||||
Total current assets | 1,860,577 | 4,211,602 | ||||||
Investments held in Trust Account | 553,175,215 | 550,153,304 | ||||||
Total Assets | $ | 555,035,792 | $ | 554,364,906 | ||||
Commitments and Contingencies | ||||||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 19,096 | $ | 67,292 | ||||
Accrued expenses | 23,750 | 16,875 | ||||||
Franchise tax payable | 49,284 | 194,571 | ||||||
Income tax payable | 602,315 | — | ||||||
Total current liabilities | 694,445 | 278,738 | ||||||
Derivative warrant liabilities | 920,000 | 17,370,000 | ||||||
Deferred underwriting commissions | 19,250,000 | 19,250,000 | ||||||
Total liabilities | 20,864,445 | 36,898,738 | ||||||
Class A common stock subject to possible redemption, $0.0001 par value; 55,000,000 shares issued and outstanding at $ 10.04 and $10.00 per share redemption value at September 30, 2022 and December 31, 2021, respectively | 552,165,853 | 550,000,000 | ||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at September 30, 2022 and December 31, 2021 | — | — | ||||||
Class A common stock subject to possible redemption, $0.0001 par value; 80,000,000 shares authorized, no non-redeemable shares issued or outstanding at September 30, 2022 and December 31, 2021 | — | — | ||||||
Class B common stock, $0.0001 par value; 19,000,000 shares authorized; 2,750,000 shares issued and outstanding at September 30, 2022 and December 31, 2021 | 275 | 275 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (17,994,781 | ) | (32,534,107 | ) | ||||
Total stockholders’ deficit | (17,994,506 | ) | (32,533,832 | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 555,035,792 | $ | 554,364,906 | ||||
For the Three Months Ended September 30 | For the Nine Months Ended September 30, 2022 | Period From January 11, 2021 (inception) through September 30, 2021 | ||||||||||||||
2022 | 2021 | |||||||||||||||
General and administrative expenses | $ | 622,277 | $ | 676,676 | $ | 2,051,941 | $ | 1,495,300 | ||||||||
Franchise tax expenses | 49,315 | 49,863 | 112,476 | 141,968 | ||||||||||||
Loss from operations | (671,592 | ) | (726,539 | ) | (2,164,417 | ) | (1,637,268 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Change in fair value of derivative warrant liabilities | 4,600,000 | 11,640,000 | 16,450,000 | 20,800,000 | ||||||||||||
Financing costs - derivative warrant liabilities | — | — | — | (1,410,520 | ) | |||||||||||
Income from investments held in Trust account | 2,483,071 | 48,101 | 3,021,911 | 84,920 | ||||||||||||
Income before income tax expense | $ | 6,411,479 | $ | 10,961,562 | $ | 17,307,494 | $ | 17,837,132 | ||||||||
Income tax expense | 511,088 | — | 602,315 | — | ||||||||||||
Net income | $ | 5,900,391 | $ | 10,961,562 | $ | 16,705,179 | $ | 17,837,132 | ||||||||
Basic and diluted weighted average outstanding of Class A common stock | 55,000,000 | 55,000,000 | 55,000,000 | 41,791,339 | ||||||||||||
Basic and diluted net income per share, Class A common stock | $ | 0.10 | $ | 0.19 | $ | 0.29 | $ | 0.40 | ||||||||
Basic weighted average shares outstanding, Class B common stock | 2,750,000 | 2,750,000 | 2,750,000 | 2,689,961 | ||||||||||||
Diluted weighted average shares outstanding, Class B common stock | 2,750,000 | 2,750,000 | 2,750,000 | 2,750,000 | ||||||||||||
Basic and diluted net income per share, Class B common stock | $ | 0.10 | $ | 0.19 | $ | 0.29 | $ | 0.40 | ||||||||
Common Stock | Accumulated Deficit | Total | ||||||||||||||||||||||||||
Class A | Class B | Additional Paid-In | Stockholders’ | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | |||||||||||||||||||||||
Balance - December 31, 2021 | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (32,534,107 | ) | $ | (32,533,832 | ) | ||||||||||||||
Net income | — | — | — | — | — | 6,291,148 | 6,291,148 | |||||||||||||||||||||
Balance - March 31, 2022 (unaudited) | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (26,242,959 | ) | $ | (26,242,684 | ) | ||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (243,186 | ) | (243,186 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 4,513,640 | 4,513,640 | |||||||||||||||||||||
Balance - June 30, 2022 (unaudited) | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (21,972,505 | ) | $ | (21,972,230 | ) | ||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (1,922,667 | ) | (1,922,667 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 5,900,391 | 5,900,391 | |||||||||||||||||||||
Balance - September 30, 2022 (unaudited) | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (17,994,781 | ) | $ | (17,994,506 | ) | ||||||||||||||
Common Stock | Accumulated Deficit | Total | ||||||||||||||||||||||||||
Class A | Class B | Additional Paid-In | Stockholders’ | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | |||||||||||||||||||||||
Balance - January 11, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B common stock to Initial Stockholders | — | — | 2,875,000 | 288 | 24,712 | — | 25,000 | |||||||||||||||||||||
Forfeiture of Class B common stock | — | — | (125,000 | ) | (13 | ) | 13 | — | — | |||||||||||||||||||
Accretion of Class A common stock to redemption amount | — | — | — | — | (24,725 | ) | (53,885,296 | ) | (53,910,021 | ) | ||||||||||||||||||
Net loss | — | — | — | — | — | (12,380,947 | ) | (12,380,947 | ) | |||||||||||||||||||
Balance - March 31, 2021 (unaudited) | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (66,266,243 | ) | $ | (66,265,968 | ) | ||||||||||||||
Net income | — | — | — | — | — | 19,256,517 | 19,256,517 | |||||||||||||||||||||
Balance - June 30, 2021 (unaudited) | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (47,009,726 | ) | $ | (47,009,451 | ) | ||||||||||||||
Net income | — | — | — | — | — | 10,961,562 | 10,961,562 | |||||||||||||||||||||
Balance - September 30, 2021 (unaudited) | — | $ | — | 2,750,000 | $ | 275 | $ | — | $ | (36,048,164 | ) | $ | (36,047,889 | ) | ||||||||||||||
For the Nine Months Ended September 30, 2022 | For the period From January 11, 2021 (inception) through September 30, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 16,705,179 | $ | 17,837,132 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Income from investments held in Trust account | (3,021,911 | ) | (84,920 | ) | ||||
Financing cost - derivative warrant liabilities | — | 1,410,520 | ||||||
Change in fair value of derivative warrant liabilities | (16,450,000 | ) | (20,800,000 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 492,850 | (1,012,703 | ) | |||||
Accounts payable | (48,196 | ) | — | |||||
Accrued expenses | 6,875 | 16,878 | ||||||
Franchise tax payable | (145,287 | ) | 141,968 | |||||
Income tax payable | 602,315 | — | ||||||
Net cash used in operating activities | (1,858,175 | ) | (2,491,125 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Cash deposited in Trust Account | — | (550,000,000 | ) | |||||
Cash used in investing activities | — | (550,000,000 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of Class B common stock to Initial Stockholders | — | 25,000 | ||||||
Proceeds from note payable to related party | — | 276,543 | ||||||
Repayment of note payable to related party | — | (276,543 | ) | |||||
Proceeds received from initial public offering, gross | — | 550,000,000 | ||||||
Proceeds received from private placement | — | 18,000,000 | ||||||
Offering costs paid | — | (11,760,541 | ) | |||||
Net cash provided by financing activities | — | 556,264,459 | ||||||
Net change in cash | (1,858,175 | ) | 3,773,334 | |||||
Cash - beginning of the period | 3,375,154 | — | ||||||
Cash - end of the period | $ | 1,516,979 | $ | 3,773,334 | ||||
Supplemental disclosure of noncash financing activities: | ||||||||
Deferred underwriting commissions in connection with the initial public offering | $ | — | $ | 19,250,000 |
• | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
• | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
• | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income - Basic and diluted | $ | 5,619,420 | $ | 280,971 | $ | 10,439,583 | $ | 521,979 | ||||||||
Denominator: | ||||||||||||||||
Basic and diluted weighted average common stock outstanding | 55,000,000 | 2,750,000 | 55,000,000 | 2,750,000 | ||||||||||||
Basic and diluted net income per common stock | $ | 0.10 | $ | 0.10 | $ | 0.19 | $ | 0.19 | ||||||||
For the Nine Months Ended September 30, 2022 | Period From January 11, 2021 (inception) through September 30, 2021 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income - Basic | $ | 15,909,694 | $ | 795,485 | $ | 16,758,450 | $ | 1,078,682 | ||||||||
Allocation of net income - Diluted | $ | 15,909,694 | $ | 795,485 | $ | 16,735,860 | $ | 1,101,272 | ||||||||
Denominator: | ||||||||||||||||
Basic weighted average common stock outstanding | 55,000,000 | 2,750,000 | 41,791,339 | 2,689,961 | ||||||||||||
Diluted weighted average common stock outstanding | 55,000,000 | 2,750,000 | 41,791,339 | 2,750,000 | ||||||||||||
Basic and diluted net income per common stock | $ | 0.29 | $ | 0.29 | $ | 0.40 | $ | 0.40 | ||||||||
• | at any time while the warrants are exercisable, |
• | upon a minimum of 30 days’ prior written notice of redemption, |
• | if, and only if, the last sales price of shares of the Class A common stock equals or exceeds $45.00 per share for any 20 trading days within a 30 trading day period (the “30-day trading period”) ending three business days before the Company sends the notice of redemption, and |
• | if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants commencing five business days prior to the 30-day trading period and continuing each day thereafter until the date of redemption. |
Gross Proceeds | $ | 550,000,000 | ||
Less: | ||||
Proceeds allocated to Public Warrants | (24,310,000 | ) | ||
Class A common stock issuance costs | (29,600,021 | ) | ||
Plus: | ||||
Accretion of carrying value to redemption value | 53,910,021 | |||
Class A common stock subject to possible redemption at December 31, 2021 | $ | 550,000,000 | ||
Increase in redemption value of Class A ordinary shares subject to redemption | 2,165,853 | |||
Class A common stock subject to possible redemption at September 30, 2022 | $ | 552,165,853 | ||
• | if the sum (such sum, the “Total Return”) of (i) the volume weighted average price (“VWAP”) of shares of the Company’s Class A common stock for such final fiscal quarter of such measurement period and (ii) the amount per share of any dividends or distributions paid or payable to holders of Class A common stock on the record date for which is on or prior to the last day of the measurement period, does not exceed the Price Threshold (as defined below), the number of Conversion Shares for such measurement period will be 2,875 shares of Class A common stock (or 2,500 shares if the over-allotment option is not exercised); |
• | if the Total Return exceeds the Price Threshold but does not exceed an amount equal to 130% of the Price Threshold, then the number of conversion shares for such measurement period will be the greater of (i) 2,875 shares of Class A common stock (or 2,500 shares if the over-allotment option is not exercised) and (ii) 20% of the difference between the Total Return and the Price Threshold, multiplied by (A) the sum (such sum (as proportionally adjusted to give effect to any stock splits, stock capitalizations, stock combinations, stock dividends, reorganizations, recapitalizations or any such similar transactions), the “Closing Share Count”) of (x) the number of shares of Class A common stock outstanding immediately after the closing of the Initial Public Offering (including any exercise of the over-allotment option) and (y) if in connection with the Initial Business Combination, there are issued any shares of Class A common stock or PIPE Securities (as defined below), the number of shares of Class A common stock so issued, and the maximum number of shares of Class A common stock issuable (whether settled in shares or in cash) upon conversion or exercise of such PIPE Securities, divided by (B) the Total Return; and |
• | if the Total Return exceeds an amount equal to 130% of the Price Threshold, then the number of Conversion Shares for such measurement period will be the greater of (i) 2,875 shares of Class A common stock (or 2,500 shares if the over-allotment option is not exercised) and (ii) the sum of (x) 20% of the difference between an amount equal to 130% of the Price Threshold and the Price Threshold and (y) 30% of the difference between the Total Return and an amount equal to 130% of the Price Threshold, multiplied by (A) the Closing Share Count, divided by (B) the Total Return. |
• | The term “measurement period” means (i) the period of four fiscal quarters ending with, and including, the last fiscal quarter of the fiscal year in which the Company consummates its Initial Business Combination and (ii) each of the nine successive four-fiscal-quarter periods (in each case, as proportionally adjusted to give effect to any stock splits, stock capitalizations, stock combinations, stock dividends, reorganizations, recapitalizations or any such similar transactions). |
• | The “Price Threshold” will initially equal $10.00 for the first measurement period and will thereafter be adjusted at the beginning of each subsequent measurement period to be equal to the greater of (i) the Price Threshold for the immediately preceding measurement period and (ii) the VWAP for the immediately preceding measurement period. |
• | For purposes of the above calculation, “PIPE Securities” means securities (other than the Public Warrants and the Private Placement Warrants) issued by the Company and/or any entities that (after giving effect to completion of the Initial Business Combination) are subsidiaries of the Company that are directly or indirectly convertible into or exercisable for shares of Class A common stock, or for a cash settlement value in lieu thereof. |
• | The foregoing calculations will be based on the Company’s fiscal year and fiscal quarters, which may change as a result of an Initial Business Combination. Each conversion of Alignment Shares will apply to the holders of Alignment Shares on a pro rata |
Fair Value Measured as of September 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Investments held in Trust Account (1) | $ | 553,175,215 | $ | — | $ | — | $ | 553,175,215 | ||||||||
Liabilities: | ||||||||||||||||
Derivative public warrant liabilities | $ | 440,000 | $ | — | $ | — | $ | 440,000 | ||||||||
Derivative private warrant liabilities | $ | — | $ | 480,000 | $ | — | $ | 480,000 |
(1) | Includes approximately $1,400 of cash. |
Fair Value Measured as of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Investments held in Trust Account (2) | $ | 550,153,304 | $ | — | $ | — | $ | 550,153,304 | ||||||||
Liabilities: | ||||||||||||||||
Derivative public warrant liabilities | $ | 8,250,000 | $ | — | $ | — | $ | 8,250,000 | ||||||||
Derivative private warrant liabilities | $ | — | $ | — | $ | 9,120,000 | $ | 9,120,000 |
(2) | Includes approximately $900 of cash. |
As of December 31, 2021 | ||||
Exercise price | 11.50 | |||
Stock Price | 9.74 | |||
Option term (in years) | 5.00 | |||
Volatility | 13 | % | ||
Risk-free interest rate | 1.26 | % |
Derivative warrant liabilities at December 31, 2021 - Level 3 | $ | 9,120,000 | ||
Transfer of Private Warrants to Level 2 - March 31, 2022 | (9,120,000 | ) | ||
Derivative warrant liabilities at September 30, 2022 - Level 3 | $ | — | ||
Derivative warrant liabilities at January 11, 2021 | $ | — | ||
Issuance of Derivative Warrants (level 3) | 56,230,000 | |||
Change in fair value of derivative warrant liabilities - Level 3 | (3,030,000 | ) | ||
Derivative warrant liabilities at March 31, 2021 - Level 3 | $ | 53,200,000 | ||
Transfer of Public Warrants to Level 1 | (23,320,000 | ) | ||
Change in fair value of derivative warrant liabilities - Level 3 | (12,240,000 | ) | ||
Derivative warrant liabilities at June 30, 2021 - Level 3 | $ | 17,640,000 | ||
Change in fair value of derivative warrant liabilities - Level 3 | (6,360,000 | ) | ||
Derivative warrant liabilities at September 30, 2021 - Level 3 | $ | 11,280,000 | ||
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Revolution Healthcare 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 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 (the “Securities Act”), 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 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 our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated in Delaware on January 11, 2021, for the purpose of effectuating a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (herein referred to as “Initial Business Combination”). Our initial stockholders are REV Sponsor LLC, a Delaware limited liability company (our “Sponsor”), and Health Assurance Economy Foundation, a charitable foundation (“Foundation”, and together with the Sponsor, collectively, the “Initial Stockholders”), and includes any other holders of Alignment Shares.
The registration statement for our initial public offering was declared effective on March 17, 2021, the “Initial Public Offering.” On March 22, 2021, we consummated the Initial Public Offering of 55,000,000 Stakeholder Aligned Initial Listing securities, or SAILSM securities (each, a “SAIL”, and collectively, “SAILs”), including 5,000,000 SAILs as a result of the underwriters’ exercise in part of their over-allotment option. The SAILs were sold at an offering price of $10.00 per SAIL, generating gross proceeds of $550.0 million, and incurring offering costs of approximately $31.0 million, of which approximately $19.3 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 12,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds of $18.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $550.0 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 (“Trust Account”) located in the United States, with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of an Initial Business Combination and (ii) the distribution of the Trust Account as described below.
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If we do not complete an Initial Business Combination within this period of time (and stockholders do not approve an amendment to the amended and restated certificate of incorporation to extend this date), it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, of $10.00, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Delaware law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. The Initial Stockholders, officers and directors entered into a letter agreement with us, pursuant to which they agreed to (i) waive their redemption rights with respect to any Alignment Shares and Public Shares they hold in connection with the completion of the Initial Business Combination, (ii) waive their redemption rights with respect to any Alignment Shares and Public Shares they hold in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of its Public Shares if we have not consummated an Initial Business Combination within the Business Combination Period (as defined in Note 1) or with respect to any other material provisions relating to stockholders’ rights or pre-combination transaction activity and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Alignment Shares they hold if we fail to complete the an Initial Business Combination within the Business Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if we fail to complete an Initial Business Combination within the Business Combination Period).
Results of Operations
Our entire activity from January 11, 2021 (inception) through September 30, 2022, was in preparation for our 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. We generate non-operating income in the form of investment income from our investments held in the Trust Account. 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.
For the three months ended September 30, 2022, we had net income of approximately $5.9 million, which consisted of approximately $4.6 million for change in fair value of derivative warrant liabilities, approximately $2.5 of income from investments held in Trust Account, offset by approximately $622,000 of general and administrative expenses, approximately $49,000 of franchise tax expense, and approximately $511,000 of income tax expense.
For the three months ended September 30, 2021, we had net income of approximately $11.0 million, which consisted of $11.6 million for change in fair value of derivative warrant liabilities, approximately $48,000 of income from investments held in Trust Account, offset by approximately $677,000 of general and administrative expenses, and approximately $50,000 of franchise tax expense.
For the nine months ended September 30, 2022, we had net income of approximately $16.7 million, which consisted of approximately $16.5 million for change in fair value of derivative warrant liabilities, approximately $3.0 of income from investments held in Trust Account, offset by approximately $2.1 million of general and administrative expenses, approximately $112,000 of franchise tax expense, and approximately $602,000 of income tax expense.
For period from January 11, 2021 (inception) through September 30, 2021, we had net income of approximately $17.8 million, which consisted of $20.8 million for change in fair value of derivative warrant liabilities, approximately $85,000 of income from investments held in Trust Account, offset by approximately $1.4 million of financing costs-derivative warrant liabilities, approximately $1.5 million of general and administrative expenses, and approximately $142,000 of franchise tax expense.
Liquidity, Capital Resources and Going Concern
As of September 30, 2022, we had approximately $1.5 million in cash and working capital of approximately $1.8 million, not taking into account tax obligation of approximately $652,000 that may be paid from income from investments held in the Trust Account.
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Our liquidity needs to date have been satisfied through a cash contribution of $25,000 from our Sponsor to purchase Alignment Shares, a loan of approximately $277,000 from our Sponsor pursuant to the Note (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account. Then, we repaid the Note in full on March 24, 2021. In addition, in order to finance transaction costs in connection with an Initial Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under any Working Capital Loans (as defined in Note 4).
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of an Initial Business Combination or one year from this filing. However, in connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements-Going Concern,” we have until March 22, 2023 to consummate a Business Combination. It is uncertain that we 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 mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after March 22, 2023.
We filed a preliminary proxy statement on October 24, 2022 and a definitive proxy statement on November 7, 2022 to call a special meeting of stockholders to approve an amendment to its Amended and Restated Certificate of Incorporation and an amendment to its Investment Management Trust Agreement to allow for the Company to return capital to stockholders prior to the original termination date of March 22, 2023, to be determined (the “Amended Termination Date”). Upon approval by the Company’s stockholders of the proposals set forth in the proxy statement, the Company would redeem the Public Shares and begin liquidation proceedings.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 2 to our condensed financial statements in Part I, Item 1 of this Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2021 Annual Report on Form 10-K filed with the SEC on March 21, 2022.
We believe that our critical accounting policies and estimates have a higher degree of inherent uncertainty and require our most significant judgments. There were no changes in our critical accounting policies and estimates during the nine months ended September 30, 2022 from those set forth in “Critical Accounting Policies” in our December 31, 2021 Annual Report on Form 10-K filed with the SEC on March 21, 2022.
Recent Accounting Pronouncements
The information set forth in Note 2 of the Notes to the unaudited condensed Financial Statements in Part I, Item 1 of this Quarterly Report, relating to a discussion of recent accounting pronouncements, is hereby incorporated by reference herein.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations, other than for an agreement to pay our Sponsor $10,000 per month for office space, secretarial and administrative support provided to members of our management team. The affiliate of the Sponsor has waived such fees and such fees will not be payable until the affiliate of the Sponsor determines that such fees should be paid. As of September 30, 2022 and December 31, 2021, the Company has not accrued or incurred any administrative fees. In addition, each independent director receives quarterly cash compensation of $50,000 and $75,000 (or between $200,000 and $300,000 in the aggregate per year).
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Registration Rights
The holders of the Alignment Shares, Private Placement Warrants, and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock into which such securities may convert and that may be issued upon conversion of Working Capital Loans and upon conversion of the Alignment Shares) were entitled to registration rights pursuant to a registration rights agreement signed upon the effective date of the Initial Public Offering, requiring us to register such securities for resale. The holders of these securities were entitled to make up to three demands, excluding short form demands, that we registered such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriter a 45-day option to purchase up to 7,500,000 additional SAILs, to cover any over-allotment, at the initial public offering price less the underwriting discounts and commissions. On March 22, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 5,000,000 SAILs.
The underwriter was entitled to an underwriting discount of $0.20 per SAIL, or $11.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per SAIL, or approximately $19.3 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement.
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 condensed 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 (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 Chief Executive Officer’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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 21, 2022, the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2022 and the risk factors set forth below. 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 currently known to us or that we currently deem immaterial may also impair our business or results of operations. You should review the risk factors below for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this Report. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Risks Related to Our Business and Financial Position
We may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in the event of a liquidation or in connection with redemptions of our common stock after December 31, 2022.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (H.R. 5376) (the “IRA”) , which among other things, beginning in 2023, will impose a 1% excise tax on any domestic corporation that repurchases or buybacks public company stock after December 31, 2022 (the “Excise Tax”). The company is assessing the potential impact of the Act.
The total taxable value of shares repurchased is reduced by the fair market value of and newly issued shares during the taxable year. Because we are a Delaware corporation and our securities trade on Nasdaq, we may be deemed a “covered corporation” within the meaning of the IRA. Redemption rights are ubiquitous to nearly all SPACs. Shareholders have the ability to require the SPAC to repurchase their shares prior to the merger in what is known as a redemption right, essentially getting their money back. There are two possible scenarios in which redemption rights come into play. First, they can be exercised by the shareholders themselves because they are exiting the transaction, or second, they can be triggered because the SPAC did not find a target with which to merge. While not free from doubt, absent any further guidance from Congress, the Excise Tax may apply to any redemptions of our common stock after December 31, 2022, including redemptions in connection with an initial business combination, unless an exemption is available. Issuances of securities in connection with our initial business combination transaction (including any PIPE transaction at the time of our initial business combination) are expected to reduce the amount of the Excise Tax in connection with redemptions occurring in the same calendar year, but the number of securities
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redeemed may exceed the number of securities issued. Moreover, the fair market value of any stock redeemed may exceed the fair market value of any stock issued. Consequently, Excise Tax may reduce the amount of cash we have available to complete a business combination and may make a transaction with us less appealing to potential business combination targets. Further, the application of the Excise Tax in the event of a liquidation is uncertain. The Company will continue to assess the potential impact of the IR Act and the impact on SPACs.
Risks Related to Our Proposed Initial Business Combination
We may hold all funds in the Trust Account in cash until the earlier of consummation of our initial business combination or liquidation.
With respect to the regulation of special purpose acquisition companies like the Company (“SPACs”), on March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating to, among other items, disclosures in business combination transactions involving SPACs and private operating companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections by SPACs in SEC filings in connection with proposed business combination transactions; 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 of 1940, as amended (the “Investment Company Act”), including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities.
The funds in the Trust Account have, since our IPO, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act), we may, and likely will, on or prior to the 24-month anniversary of the effective date of the registration statement filed in connection with our IPO (the “IPO Registration Statement”), should our Company continue to exist to such date, instruct Continental, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash until the earlier of consummation of our initial business combination or liquidation. As a result, following such liquidation, we will likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.
General Risk Factors
The current economic downturn may lead to increased difficulty in completing our initial business combination.
Our ability to consummate our initial business combination may depend, in part, on worldwide economic conditions. In recent months, we have observed increased economic uncertainty in the United States and abroad. Impacts of such economic weakness include:
• | falling overall demand for goods and services, leading to reduced profitability; |
• | reduced credit availability; |
• | higher borrowing costs; |
• | reduced liquidity; |
• | volatility in credit, equity and foreign exchange markets; and |
• | bankruptcies. |
These developments could lead to inflation, higher interest rates, and uncertainty about business continuity, which may adversely affect the business of our potential target businesses and create difficulties in obtaining debt or equity financing for our initial business combination, as well as leading to an increase in the number of public stockholders exercising redemption rights in connection therewith.
Recent volatility in capital markets and lower market prices for our securities may affect our ability to obtain financing for our initial business combination through sales of shares of our common stock or issuance of indebtedness.
With uncertainty in the capital markets and other factors, financing for our initial business combination may not be available on terms favorable to us or at all. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may limit the operations and growth of the surviving company of our initial business combination. If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to complete our initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities.
Sales of Unregistered Securities
Not applicable.
Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibit No. | Description | |
31.1* | Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934. | |
31.2* | Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934. | |
32.1** | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. | |
32.2** | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. | |
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 10th day of November, 2022.
REVOLUTION HEALTHCARE ACQUISITION CORP. | ||
By: | /s/ Jay Markowitz, M.D. | |
Name: | Jay Markowitz, M.D. | |
Title: | Chief Executive Officer | |
REVOLUTION HEALTHCARE ACQUISITION CORP. | ||
By: | /s/ Mark McDonnell | |
Name: | Mark McDonnell | |
Title: | Chief Financial Officer (Principal Financial Officer) |
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