UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
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incorporation or organization) | Identification Number) |
(Address of principal executive offices) (Zip Code) |
Registrant’s telephone number, including area code: (
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered | |
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| The | |||
The | |||||
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
☒ | Smaller reporting company | |||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 12, 2021,
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
Form 10-Q
For the Quarter Ended September 30, 2021
Table of Contents
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS AS OF
SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020
| September 30, 2021 |
| December 31, 2020 | |||
(unaudited) | ||||||
Assets |
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| ||||
Current assets: |
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| ||||
Cash | $ | | $ | | ||
Prepaid expenses |
| | | |||
Total current assets |
| | | |||
Investments held in Trust Account |
| | | |||
Total assets | $ | | $ | | ||
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit |
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| ||||
Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses |
| | | |||
Total current liabilities |
| | | |||
Working capital loan - related party, at fair value | | — | ||||
Deferred underwriting commissions | | | ||||
Derivative warrant liabilities |
| | | |||
Total liabilities |
| | | |||
Commitments and Contingencies | ||||||
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| |||||
Class A ordinary shares subject to possible redemption, $ |
| | | |||
Shareholders' Deficit: |
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| ||||
Preference shares, $ |
| |||||
Class A ordinary shares, $ |
| | | |||
Class B ordinary shares, $ |
| | | |||
Additional paid-in capital |
| — | — | |||
Accumulated deficit |
| ( | ( | |||
Total shareholders' deficit |
| ( | ( | |||
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit | $ | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021,
AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
AND THE PERIOD FROM JUNE 4, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
|
| For the Period From | ||||||||||
For the Three | For the Three | For the Nine | June 4,2020 | |||||||||
Months Ended | Months Ended | Months Ended | (inception) through | |||||||||
| September 30, 2021 |
| September 30, 2020 |
| September 30,2021 |
| September 30,2020 | |||||
Operating expenses: |
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|
|
| ||||||||
General and administrative expenses | $ | | $ | | $ | |
| $ | | |||
Loss from operations |
| ( |
| ( | ( | ( | ||||||
Other income (expense): |
|
|
|
| ||||||||
Change in fair value of working capital loan - related party |
| ( |
| — | ( | — | ||||||
Change in fair value of derivative warrant liabilities | | ( | | ( | ||||||||
Financing costs - derivative warrant liabilities | — | ( | — | ( | ||||||||
Investment income from the Trust Account |
| |
| | | | ||||||
Total other income | | ( | | ( | ||||||||
Net income (loss) | $ | | $ | ( | $ | | $ | ( | ||||
Weighted average Class A ordinary shares outstanding, basic and diluted |
| |
| | | | ||||||
Basic and diluted net income (loss) per ordinary share, Class A | $ | | $ | ( | $ | | $ | ( | ||||
Weighted average Class B ordinary shares outstanding, basic and diluted |
| |
| | | | ||||||
Basic and diluted net income (loss) per ordinary share, Class B | $ | | $ | ( | $ | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021,
AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
AND THE PERIOD FROM JUNE 4, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
Ordinary Shares | Additional | Total | ||||||||||||||||||||||
Preference shares | Class A | Class B | Paid-in | Accumulated | Shareholders’ | |||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||||
Balance - December 31, 2020 |
| | $ | |
| | $ | |
| | $ | | $ | | $ | ( | $ | ( | ||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| | ||||||
Balance - March 31, 2021 (unaudited) |
| — | $ | — |
| | $ | |
| | $ | | $ | — | $ | ( | $ | ( | ||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||
Balance - June 30, 2021 (unaudited) | — | $ | — | | $ | | | $ | | $ | — | $ | ( | $ | ( | |||||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||
Balance - September 30, 2021(unaudited) |
| | $ | |
| | $ | |
| | $ | | $ | | $ | ( | $ | ( |
Ordinary Shares | Additional | Total | ||||||||||||||||||||||
Preference shares | Class A | Class B | Paid-in | Accumulated | Shareholders' | |||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||||
Balance - June 4, 2020 (inception) |
| | $ | |
| | $ | | | $ | | $ | | $ | | $ | | |||||||
Issuance of Class B ordinary shares to Sponsor |
| — |
| — |
| — |
| — | |
| |
| |
| — |
| | |||||||
Net loss |
| — |
| — |
| — |
| — | — |
| — |
| — |
| ( |
| ( | |||||||
Balance - June 30, 2020 (unaudited) |
| — | $ | — |
| — | $ | — | | $ | | $ | | $ | ( | $ | | |||||||
Excess of cash received over fair value of private placement warrants |
| — |
| — |
| |
| | — |
| — |
| |
| — |
| | |||||||
Accretion of Class A ordinary shares to redemption amount |
| — |
| — |
| — |
| — | — |
| — |
| ( |
| ( |
| ( | |||||||
Net loss |
| — |
| — |
| — |
| — | — |
| — |
| — |
| ( |
| ( | |||||||
Balance - September 30, 2020 (unaudited) |
| — | $ | — |
| | $ | | | $ | | $ | — | $ | ( | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021,
AND FOR THE PERIOD FROM JUNE 4, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
For the Period | ||||||
For the Nine | From June 4, 2020 | |||||
Months Ended | (Inception) through | |||||
| September 30, 2021 |
| September 30, 2020 | |||
Cash Flows from Operating Activities: |
|
| ||||
Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
| ||||
Change in the fair value of derivative warrant liabilities |
| ( | | |||
Investment income from the Trust Account |
| ( | ( | |||
Financing costs - derivative warrant liabilities | — | | ||||
General and administrative expenses paid by Sponsor in exchange for issuance of Class B ordinary shares |
| — | | |||
General and administrative expenses paid by Sponsor under promissory note | — | | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses |
| ( | ( | |||
Accounts payable |
| | | |||
Accrued expenses |
| | | |||
Net cash used in operating activities |
| ( | ( | |||
| ||||||
Cash Flows from Investing Activities: | ||||||
Cash deposited in Trust Account | — | ( | ||||
Net cash used in investing activities | — | ( | ||||
Cash Flows from Financing Activities: | ||||||
Proceeds from note payable to related party | — | | ||||
Repayment of note payable to related party | — | ( | ||||
Proceeds from working capital loan to related party | | — | ||||
Proceeds received from initial public offering, gross | — | | ||||
Proceeds received from private placement | — | | ||||
Offering costs paid | — | ( | ||||
Net cash provided by financing activities | | | ||||
Net change in cash | ( | | ||||
Cash - beginning of the period |
| | | |||
Cash - end of the period | $ | | $ | | ||
Supplemental disclosure of noncash investing and financing activities: |
|
| ||||
Offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | $ | — | $ | | ||
Offering costs included in accounts payable | $ | — | $ | | ||
Offering costs included in accrued expenses | $ | — | $ | | ||
Offering costs funded with note payable | $ | — | $ | | ||
Deferred underwriting commissions | $ | — | $ | | ||
Accretion of Class A ordinary shares to redemption | $ | — | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
6
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Description of Organization, Business Operations and Basis of Presentation
Burgundy Technology Acquisition Corporation (the “Company”) was incorporated as a Cayman Islands exempted company on June 4, 2020. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from June 4, 2020 (inception) through September 30, 2021 relates to the Company’s formation and the preparation of its initial public offering (the “Initial Public Offering”) and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering (as defined below).
The Company’s sponsor is Burgundy Technology Sponsor Limited, a Jersey private limited company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on August 26, 2020. On August 31, 2020, the Company consummated its Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon the closing of the Initial Public Offering, the Over-Allotment and the Private Placement, approximately $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, the Over-Allotment and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
7
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will provide the holders (the “Public Shareholders”) of its Public Shares, with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be at $
Notwithstanding the foregoing, if the Company seeks shareholder approval of its Business Combination and does not conduct redemptions in connection with its Business Combination pursuant to the tender offer rules, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Company’s Sponsor, officers and directors (the “initial shareholders”) have agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (a) that would modify the substance or timing of the Company’s obligation to provide holders of its Public Shares the right to have their shares redeemed in connection with a Business Combination or to redeem
If the Company anticipates that it may not be able to consummate a Business Combination within
8
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If the Company has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than
The initial shareholders have agreed to waive their liquidation rights with respect to the Founder Shares and Private Placement Shares held by them if the Company fails to complete a Business Combination within the Combination Period. However, if the initial shareholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution (including Trust Account assets) will be only $
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the period for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the period ending December 31, 2021 or any future period.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K/A filed by the Company with the SEC on June 4, 2021.
9
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Revision to Previously Reported Financial Statements
In preparation of the Company’s unaudited condensed financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should revise its financial statements to classify all Public Shares in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments in ASC 480, paragraph 10-S99, redemption provisions not solely within the control of the Company require shares subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Public Shares in permanent equity, or total shareholders’ equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that, the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $
The impact of the revision to the audited balance sheet as of December 31, 2020 is a reclassification of approximately $
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
10
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
This may make comparison of the Company’s unaudited condensed financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Risk and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an Initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an Initial Business Combination in a timely manner. The Company’s ability to consummate an Initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
As of September 30, 2021, the Company had approximately $
To date, the Company’s liquidity needs have been satisfied through a payment of $
The Company’s management plans to continue its efforts to complete a Business Combination within
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements — Going Concern,” management has determined that the mandatory liquidation date and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to complete a business combination by February 28, 2022 (unless such a period is extended as described herein), then the Company will cease all operations except for the purpose of liquidating. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 28, 2022 .
11
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 2 — Summary of Significant Accounting Policies
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2021 and December 31, 2020, the Company did not have any cash equivalents.
Investments Held in Trust Account
Upon the closing of the Initial Public Offering and the Private Placement, the Company was required to place net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement in a Trust Account, which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $
Fair Value
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
These tiers include:
● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
12
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
● | 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. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The fair value of Private Warrants was calculated using the Black-Scholes Option Pricing Model since these instruments do not have the early redemption feature. The fair value of Public Warrants has since been measured by the trading price of the warrants which began to separately trade in October 2020.
Fair Value of Financial Instruments
As of September 30, 2021 and December 31, 2020, the carrying values of cash, prepaid expenses, accounts payable and accrued expenses approximate their fair values due to the short-term nature of the instruments. As of September 30, 2021 and December 31, 2020, the Company’s investments held in the Trust Account are comprised of investments in U.S. Treasury securities with an original maturity of
Working Capital Loan – Related Party
The Company has elected the fair value option to account for its working capital loan – related party with its Sponsor as defined and more fully described in Note 4. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recorded as change in the fair value of working capital loan – related party on the unaudited condensed statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumption about the assumptions that a market participant would use in pricing the asset or liability.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations within the period of the completion of the Initial Public Offering. Offering costs associated with the Public Shares were charged against the carrying value of the Class A ordinary shares upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as a long-term liability due to the uncertain nature of the closing of a Business Combination and its encumbrance to the Trust Account.
13
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021 and December 31, 2020,
Effective with the closing of the Initial Public Offering (including upon the sale of the Over-Allotment Units), the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including issued warrants to purchase its Class A ordinary shares, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Company issued
Net Income (Loss) Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
The calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of
14
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares:
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, 2021 | September 30, 2021 | |||||||||||
Class A | Class B | Class A | Class B | |||||||||
Basic and diluted net income (loss) per ordinary share: | ||||||||||||
Numerator: | ||||||||||||
Allocation of net income | $ | | $ | | $ | | $ | | ||||
Denominator: | ||||||||||||
Basic and diluted weighted average ordinary shares outstanding | | | | | ||||||||
Basic and diluted net income per ordinary share | $ | | $ | | $ | | $ | |
For the Three Months Ended | For the Period from June 4, 2020 | |||||||||||
September 30, 2020 | (inception) through September 30, 2020 | |||||||||||
| Class A |
| Class B |
| Class A | Class B | ||||||
Basic and diluted net loss per ordinary share: | ||||||||||||
Numerator: | ||||||||||||
Allocation of net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Denominator: | ||||||||||||
Basic and diluted weighted average ordinary shares outstanding |
| |
| |
| |
| | ||||
Basic and diluted net loss per ordinary share | $ | ( | $ | ( | $ | ( | $ | ( |
Income Taxes
FASB ASC Topic 740, “Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were
15
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
There is currently
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current 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 the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Note 3 — Initial Public Offering
On August 31, 2020, the Company consummated its Initial Public Offering of
Each Unit consists of
Note 4 — Related Party Transactions
Founder Shares
On June 12, 2020, the Sponsor paid $
The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier of (A)
16
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Private Placement Units
Simultaneously with the closing of the Initial Public Offering and the Over-Allotment on August 31, 2020 and September 18, 2020, the Company consummated the Private Placement of
Each whole private placement warrant underlying the Private Placement Units (the “Private Placement Warrants”) is exercisable for one whole Class A ordinary share at a price of $
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Units until
Related Party Loans
On June 12, 2020, the Sponsor agreed to loan the Company an aggregate of up to $
17
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lenders’ discretion, up to $
Related Party Extension Loans
As discussed in Note 1, the Company may extend the period of time to consummate a Business Combination up to
Note 5 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Units, and units that may be issued upon conversion of Working Capital Loans (and in each case holders of their component securities and any permitted transferees, as applicable) are entitled to registration rights to require the Company to register a sale of any of its securities held by them pursuant to the registration rights agreement. These holders will be entitled to make up to
Underwriting Agreement
The Company granted the underwriters a
The underwriters were entitled to an underwriting discount of $
18
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 6 — Derivative Warrant Liabilities
As of September 30, 2021 and December 31, 2020, the Company had
Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a)
The warrants are exercisable at $
If (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $
Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the placement warrants as described):
● | in whole and not in part; |
● | at a price of $ |
● | upon a minimum of |
● | if, and only if, the last sale price of our Class A ordinary shares equals or exceeds $ |
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BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
If the Company is unable to complete the Initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until
Note 7 – Class A Ordinary Shares Subject to Possible Redemption
The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue
The Class A ordinary shares subject to possible redemption reflected on the condensed balance sheets are reconciled on the following table:
Gross proceeds |
| $ | |
Less: |
|
| |
Amount allocated to Public Warrants |
| ( | |
Class A ordinary shares issuance costs |
| ( | |
Plus: |
|
| |
Accretion of carrying value to redemption value |
| | |
Class A ordinary shares subject to possible redemption | $ | |
Note 8 — Shareholders’ Equity
Preference Shares — The Company is authorized to issue
Class A Ordinary Shares — The Company is authorized to issue
Class B Ordinary Shares — The Company is authorized to issue
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BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class A ordinary shareholders and Class B ordinary shareholders of record are entitled to
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for share subdivisions, share consolidations, share capitalizations, rights issuances, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein and in the amended and restated memorandum and articles of association. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the Business Combination, the ratio at which Founder Shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Founder Shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate on an as-if-converted basis,
Note 9 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
September 30, 2021 |
|
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Quoted Prices in | Significant Other | Significant Other | |||||||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
Assets: | |||||||||
Investments held in Trust Account | $ | | $ | — | $ | — | |||
Liabilities: |
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|
|
|
|
| |||
Working capital loan - related party | $ | — | $ | — | $ | | |||
Derivative warrant liabilities - Public Warrants | $ | | $ | — | $ | — | |||
Derivative warrant liabilities - Private Placement Warrants | $ | — | $ | — | $ | |
December 31, 2020 |
|
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| ||||
Quoted Prices in | Significant Other | Significant Other | |||||||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
Assets: | |||||||||
Investments held in Trust Account | $ | | $ | — | $ | — | |||
Liabilities: |
|
|
|
|
|
| |||
Derivative warrant liabilities - Public Warrants | $ | | $ | — | $ | — | |||
Derivative warrant liabilities - Private Placement Warrants | $ | — | $ | — | $ | |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There was
21
BURGUNDY TECHNOLOGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Level 1 assets include investments in mutual funds invested in government securities and Public Warrants. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The fair value of Public Warrants issued in connection with the Initial Public Offering has been measured based on the listed market price of such warrants, a Level 1 measurement, since October 2020. The fair value of Private Warrants is calculated using the Black-Scholes Option Pricing model since these instruments do not have the early redemption feature. The Company recognized a gain in the unaudited condensed statements of operations resulting from a decrease in the fair value of derivative warrant liabilities of approximately $
The estimated fair values of the Private Placement Warrants and the Working Capital Loan are determined using Level 3 inputs. Inherent in a Black-Scholes Option Pricing Model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its Class A ordinary share warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s equity shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| September 30, 2021 |
| December 31, 2020 |
| |||
Volatility |
| | % | % | |||
Share price | $ | | $ | | |||
Risk-free rate |
| | % |
| | % | |
Dividend yield |
| | % |
| | % | |
Expected life (years) | | |
The change in the fair value of the derivative warrant liabilities measured using Level 3 inputs for the period for the nine months ended September 30, 2021 is summarized as follows:
Warrant liabilities - Level 3, December 31, 2020 |
| $ | |
Change in fair value of warrant liabilities - Level 3 |
| ( | |
Warrant liabilities - Level 3, September 30, 2021 | $ | |
The change in the fair value of the Working Capital Loan measured using Level 3 inputs for the period for the nine months ended September 30, 2021 is summarized as follows:
|
| | |
Working Capital Loan at January 1, 2021 | $ | — | |
Issuance of Working Capital Loan – Level 3 |
| | |
Change in fair value of Working Capital Loan - Level 3 |
| ( | |
Working Capital Loan - Level 3, September 30, 2021 | $ | |
Note 10 — Subsequent Events
A further $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Burgundy Technology Acquisition Corporation. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations 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 on June 4, 2020 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”), that we have not yet identified.
Our sponsor is Burgundy Technology Sponsor Limited, a Jersey private limited company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on August 26, 2020. On August 31, 2020, we consummated its Initial Public Offering of 30,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $300.0 million. The underwriters exercised the over-allotment option in full and on September 18, 2020 purchased an additional 4,500,000 units (the “Over-Allotment Units”), generating additional gross proceeds of $45.0 million (the “Over-Allotment”). We incurred offering costs of approximately $19.6 million, including approximately $12.1 million in deferred underwriting fees.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 950,000 Units (the “Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $9.5 million. We consummated a second closing (the “Second Closing”) of the Private Placement simultaneously with the closing of the Over-Allotment on September 18, 2020 for an additional 112,500 Private Placement Units to the Sponsor, generating gross proceeds to us of approximately $1.1 million.
Upon the closing of the Initial Public Offering, the Over-Allotment and the Private Placement, approximately $346.7 million ($10.05 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and was invested only in U.S. government securities within the meaning of Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of funds held in the Trust Account as described below.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, the Over-Allotment and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating our initial Business Combination.
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If we have not completed our initial Business Combination within 18 months (unless such a period is extended as described herein), we 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, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholder’s rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to consummate a Business Combination within 18 months (unless such period is extended as described herein).
If we anticipate that we may not be able to consummate a Business Combination within 18 months, we may extend the combination period. In order to extend the time available for us to consummate a Business Combination, our Sponsor or its affiliate or designees must deposit into the Trust Account approximately $1.1 million ($0.033 per public share), on or prior to the date of the applicable deadline, for each monthly extension, up to an aggregate of approximately $6.8 million, or $0.198 per public share, if we effect extension for up to six months in aggregate.
Liquidity and Going Concern
As of September 30, 2021, we had approximately $74,000 in our operating bank account and a working capital deficit of approximately $1.2 million.
To date, our liquidity needs have been satisfied through a payment of $25,000 from our Sponsor to cover certain expenses on our behalf in exchange for the issuance of the Founder Shares to our Sponsor, a loan of approximately $188,000 pursuant to a promissory note issued to our Sponsor and the net proceeds from the consummation of the Private Placement not held in the Trust Account. We repaid the promissory note on September 3, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor provided us a Working Capital Loan. As of September 30, 2021, $30,000 was drawn under the Working Capital Loan. A further $50,000 was drawn under the Working Capital Loan on October 8, 2021.
We plan to continue our efforts to complete a Business Combination within 18 months of the closing of the Initial Public Offering, or February 28, 2022 (unless such a period is extended as described herein). We believe that the funds currently available to it outside of the Trust Account will be sufficient to allow it to operate until February 28, 2022; however, there can be no assurances that its estimate is accurate.
In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” our management has determined that the mandatory liquidation date and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. If we are unable to complete a Business Combination by February 28, 2022 (unless such a period is extended as described herein), then we will cease all operations except for the purpose of liquidating. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after February 28, 2022.
Results of Operations
Our entire activity since inception up to September 30, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We will not generate any operating revenues until after the completion of our initial Business Combination. We generate non-operating income in the form of investment income from the Trust Account. We will continue 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, 2021, we had net income of approximately $3.0 million, which consisted of a gain of approximately $4.6 million from changes in the fair value of derivative warrant liabilities and approximately $5,000 in investment income from the Trust Account, partially offset by approximately $1.6 million in general and administrative expenses and approximately $1,000 from changes in the fair value of the working capital loan.
24
For the three months ended September 30, 2020, we had a net loss of approximately $121,000, which consisted of general and administrative expenses of approximately $126,000, partially offset by investment income from the Trust Account of approximately $5,000.
For the nine months ended September 30, 2021, we had net income of approximately $19.4 million, which consisted of a gain of approximately $21.6 million from changes in the fair value of derivative warrant liabilities and approximately $16,000 in investment income from the Trust Account, partially offset by approximately $2.2 million in general and administrative expenses and approximately $1,000 from changes in the fair value of the working capital loan.
For the period from June 4, 2020 (inception) through September 30, 2020, we had a net loss of approximately $144,000, which consisted of general and administrative expenses of approximately $148,000, partially offset by investment income from the Trust Account of approximately $5,000.
Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Units, and units that may be issued upon conversion of Working Capital Loans (and in each case holders of their component securities and any permitted transferees, as applicable) are entitled to registration rights to require us to register a sale of any of its securities held by them pursuant to the registration rights agreement. These holders will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by us. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating to the Initial Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters fully exercised their over-allotment option on September 18, 2020.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $6.9 million in the aggregate, paid upon the closing of the Initial Public Offering and the Over-Allotment. In addition, $0.35 per unit, or approximately $12.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. 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.
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company has identified the following as its critical accounting policies:
25
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in investment income from investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021 and December 31, 2020, 34,500,000 Class A ordinary shares subject to possible redemption are presented as temporary equity outside of the shareholders’ equity section of our condensed balance sheets.
Effective with the closing of the Initial Public Offering (including closing of the Over-Allotment), we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 17,781,250 shares of ordinary shares in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the periods presented. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
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We issued 17,250,000 warrants to purchase Class A ordinary shares to investors related to our Initial Public Offering and issued 531,250 Private Placement Warrants. All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our unaudited condensed statements of operations. Subsequent to when the warrants began separately trading, the fair value measurements were determined based on their trading price. The fair value of Private Placement Warrants was calculated using the Black-Scholes Option Pricing Model since these instruments do not have the early redemption feature. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited 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 PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
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
Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective as of September 30, 2021.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The material weakness discussed below was remediated during the quarter ended September 30, 2021.
Remediation of a Material Weakness in Internal Control over Financial Reporting
In connection with our management's assessment of our internal control over financial reporting as of June 30, 2021, we identified a material weakness in our internal control over financial reporting. The identified material weakness pertained to our control activities solely due to our misapplication of the accounting for our warrants as liabilities. Our control activities were not designed appropriately to ensure that our related accounting conclusions were sufficiently documented and reviewed for compliance with GAAP. The material weakness resulted in a material misstatement of current liabilities and shareholders' equity on our condensed balance sheets as well as a material misstatement of our net income within our unaudited condensed statements of operations.
During the second quarter of 2021, our management enhanced and revised the design of our controls and procedures over our accounting for derivative liabilities. These enhancements include our implementation of additional procedures related to documentation of our management's evaluation of the facts and circumstances supporting its judgments and conclusions surrounding our accounting for derivative liabilities as well as consultation with third-party accounting and valuation experts with relevant knowledge and experience to assist our management with its evaluation of our accounting for such items.
As a result of these enhancements, our management concluded that the material weakness was remediated as of June 30, 2021.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors.
You should carefully consider the risks described in the “Risk Factors” section included in our Annual Report on Form 10-K/A for the year ended December 31, 2020. Risks to which we are subject include, but are not limited to, the factors mentioned in such section and under “Cautionary Note Regarding Forward-Looking Statements” above, and the risks of our businesses described elsewhere in this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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 | Description | ||
31.1 | |||
31.2 | |||
32.1* | |||
32.2* | |||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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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 15 th day of November, 2021.
BURGUNDY TECHNOLOGY | ||
By: | /s/ Leo Apotheker | |
Name: | Leo Apotheker | |
Title: | Co-Chief Executive Officer | |
BURGUNDY TECHNOLOGY | ||
By: | /s/ James Scott Mackey | |
Name: | James Scott Mackey | |
Title: | Chief Financial Officer |
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