References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to FTAC Hera Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to FTAC Hera Sponsor, LLC and FTAC Hera Advisors, 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" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of this Quarterly Report and the Company's Annual Report on Form
10-K filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on January 18,
2021 and formed for the purpose of effecting a merger, amalgamation, share
exchange, asset acquisition, share purchase, reorganization or other similar
Business Combination with one or more businesses. We intend to effectuate our
Business Combination using cash derived from the proceeds of the Initial Public
Offering and the sale of the Placement Units, our shares, debt or a combination
of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete 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 from January 18, 2021 (inception) through March 31, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and, after the Initial Public Offering,
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination, at the earliest. 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 in
connection with completing a Business Combination.
For the three months ended March 31, 2022, we had net income of $10,663,372,
which consists of the change in fair value of warrant liabilities of $10,983,598
and interest earned on marketable securities held in the Trust Account of
$75,911, partially offset by general and administrative expenses of $396,137.
For the period from January 18, 2021 (inception) through March 31, 2022, we had
a net loss of $1,383,684, which consists of transaction costs allocable to
warrants of $1,625,720 and operating and formation costs of $198,641, partially
offset by the change in fair value of warrant liabilities of $435,339 and
interest earned on marketable securities held in the Trust Account of $5,338.
16
Liquidity and Capital Resources
On March 8, 2021, we consummated the Initial Public Offering of 80,000,000 Units
at $10.00 per Unit, generating gross proceeds of $800,000,000. Simultaneously
with the closing of the Initial Public Offering, we consummated the sale of
1,920,000 Placement Units at a price of $10.00 per Placement Unit in a private
placement to the Sponsor and Millennium, generating gross proceeds of
$19,200,000.
On March 9, 2021, the underwriters partially exercised their over-allotment
option, resulting in an additional 5,147,760 Units issued for an aggregate
amount of $51,477,600.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Placement Units, a total of
$851,477,600 was placed in the Trust Account. We incurred $47,481,502 in Initial
Public Offering related costs, including $16,000,000 of underwriting fees,
$30,831,268 of deferred underwriting fees and $650,234 of other offering costs.
For the three months ended March 31, 2022, cash used in operating activities was
$421,941. Net income of $10,663,372 was affected by interest earned on
marketable securities held in the Trust Account of $75,911 and the change in
fair value of warrant liabilities of $10,983,598. Changes in operating assets
and liabilities used $25,804 of cash for operating activities.
For the period from January 18, 2021 (inception) through March 31, 2022, cash
used in operating activities was $792,687. Net loss of $1,383,684 was affected
by formation costs paid by the Sponsor in exchange for the issuance of Founder
Shares in the amount of $5,000, operating costs paid by the Sponsor through
promissory notes of $150, transaction costs allocable to warrants of $1,625,720,
interest earned on marketable securities held in the Trust Account of $5,338 and
the change in fair value of warrant liabilities of $435,339. Changes in
operating assets and liabilities used $599,196 of cash for operating activities.
As of March 31, 2022, we had marketable securities held in the Trust Account of
$851,623,010 (including approximately $145,410 of interest income) consisting of
money market funds which are primarily invested in U.S. Treasury Securities with
a maturity of 185 days or less. We may withdraw interest from the Trust Account
to pay taxes, if any. 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 taxes payable), to complete our Business Combination. To the
extent that our share capital or debt is used, in whole or in part, as
consideration to complete our Business Combination, the remaining proceeds held
in the Trust Account will be used as working capital to finance the operations
of the target business or businesses, make other acquisitions and pursue our
growth strategies.
As of March 31, 2022, we had cash of $543,730 held outside the Trust Account. We
intend to use the funds held outside the Trust Account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
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. The Working Capital Loans would either be repaid upon
consummation of a Business Combination or, at the lender's discretion, up to
$2,000,000 of such Working Capital Loans may be convertible into units of the
post-Business Combination entity at a price of $10.00 per unit. The units would
be identical to the Placement Units. As of March 31, 2022 and December 31, 2021,
the Company had no outstanding borrowings under the Working Capital Loans.
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.
Going Concern
We have until March 8, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a Business Combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. Management intends to complete a Business
Combination prior to March 8, 2023. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after March 8, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
17
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 the Sponsor a monthly fee of $25,000 for office space,
administrative and shared personnel support services. We began incurring these
fees on March 4, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation. On
June 9, 2021, the administrative services agreement was amended and restated to
increase the monthly charge for office space, administrative and shared
personnel support services payable to an affiliate of the Sponsor from $25,000
to $40,000.
The underwriters are entitled to a deferred fee of $30,831,268 in the aggregate.
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that we complete a Business
Combination, subject to the terms of the underwriting agreement.
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 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 share purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. We account for the Warrants in accordance with the guidance
contained in ASC 815-40 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.
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 ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption are classified
as a liability instrument and 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 occurrence of uncertain future events. Accordingly,
Class A ordinary shares subject to possible redemption are presented at
redemption value as temporary equity, outside of the shareholders' equity
section of our condensed balance sheets. Under ASC 480-10-S99, the Company has
elected to recognize changes in the redemption value immediately as they occur
and adjust the carrying value of the security to equal the redemption value at
the end of each reporting period. This method would view the end of the
reporting period as if it were also the redemption date for the security.
Net Income (Loss) Per Ordinary Share
We comply with the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share". Net income per ordinary share is computed by dividing net
income (loss) by the weighted average number of ordinary shares outstanding for
the period. 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. Accretion associated with the redeemable
Class A ordinary shares is excluded from earnings per share as the redemption
value approximates fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
18
© Edgar Online, source Glimpses