References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Build Acquisition Corp. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"Sponsor" refer to Build Acquisition Sponsor LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. the SEC. The Company's securities filings can be
accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as
expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021 and June 30, 2021. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly valued our Class A common
stock subject to possible redemption. We previously determined the Class A
common stock subject to possible redemption to be equal to the redemption value
of $10.00 per share of Class A common stock while also taking into consideration
a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Class A common stock issued during the Initial
Public Offering can be redeemed or become redeemable subject to the occurrence
of future events considered outside of the Company's control. Therefore,
management concluded that the redemption value should include all Class A common
stock subject to possible redemption, resulting in the Class A common stock
subject to possible redemption being equal to their redemption value. As a
result, management has noted a reclassification error related to temporary
equity and permanent equity. This resulted in a restatement to the initial
carrying value of the Class A common stock subject to possible redemption with
the offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 23, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on
marketable securities held in the Trust Account. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had a net income of
$2,262,067, which consists of change in fair value of warrant liabilities of
$2,560,000 and interest earned on marketable securities held in Trust Account of
$2,573, offset by operation costs of approximately $300,506.
For the nine months ended September 30, 2021, we had a net income of $75,457,
which consists of change in fair value of warrant liabilities of $960,000,
interest earned on marketable securities held in Trust Account of $11,015,
offset by operation costs of approximately $602,638 and transaction costs of
$292,920.
Liquidity and Capital Resources
On March 19, 2021, we completed the Initial Public Offering of 20,000,000 Units
at $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously
with the closing of the Initial Public Offering, we completed the sale of
4,000,000 Private Placement Warrants at a price of $1.50 per Private Placement
Warrant in a private placement to the Sponsor, generating gross proceeds of
$6,000,000.
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Following the Initial Public Offering, and the sale of the Private Placement
Warrants, a total of $200,000,000 was placed in the Trust Account. We incurred
$4,461,429 in Initial Public Offering related costs, including $4,000,000 of
underwriting fees and $461,429 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities
was $837,451. Net income of approximately $75,457 was affected by noncash income
related to the change in fair value of the warrant liabilities of $960,000,
interest earned on marketable securities held in Trust Account of $11,015 and
transaction costs associated with the warrant liabilities of $292,920. Changes
in operating assets and liabilities used approximately $234,813 of cash for
operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account
of $200,011,015 (including approximately $11,000 of interest income) consisting
of U.S. Treasury Bills with a maturity of 185 days or less. Interest income on
the balance in the Trust Account may be used by us to pay taxes. As at September
30, 2021, total franchise taxes of $150,000 were included in accounts payable
and accrued expenses on the condensed balance sheet. Through September 30, 2021,
we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of September 30, 2021, we had cash of $726,120. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such Working Capital Loans may be
convertible into warrants of the post-Business Combination entity at a price of
$1.50 per warrant.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of one of our executive officers a monthly fee of $10,000 for office
space, utilities and secretarial and administrative support. We began incurring
these fees on March 16, 2021 and will continue to incur these fees monthly until
the earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,000,000
in the aggregate. The deferred fee will become payable to the underwriters from
the amounts held in the Trust Account solely in the event that the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC
815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Accordingly, we classify the
Warrants as liabilities at their fair value and adjust the Warrants to fair
value at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statements of operations. The Private Placement Warrants and
the Public Warrants for periods where no observable traded price was available
were valued using a lattice model, specifically a binomial lattice model
incorporating the Cox-Ross-Rubenstein methodology. For periods subsequent to the
detachment of the Public Warrants from the Units, the Public Warrant quoted
market price was used as the fair value as of each relevant date.
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Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and measured at fair value.
Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.
Net income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding for the
period. The Company applies the two-class method in calculating income (loss)
per common share. Accretion associated with the redeemable shares of Class A
common stock is excluded from income (loss) per common share as the redemption
value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06- Contracts in Entity's Own Equity
(Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to
equity classification of contracts in an entity's own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
We are currently assessing the impact, if any, that ASU 2020-06 would have on
our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on the Company's condensed financial statements.
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