References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to INSU Acquisition Corp. III. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Insurance Acquisition Sponsor III, LLC and Dioptra Advisors
III, 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 the Company's Annual Report on Form 10-K/A 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 formed under the laws of the State of Delaware on
October 6, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
transaction with one or more operating businesses or assets (a "Business
Combination"). We intend to effectuate our Business Combination using cash from
the proceeds of the Initial Public Offering and the sale of the Placement Units,
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 from inception through September 30, 2021 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 an initial 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.
For the three months ended September 30, 2021, we had a net income of
$1,281,369, which consists of interest earned on marketable securities held in
Trust Account of $6,302 and change in fair value of warrant liabilities of
$1,625,501, offset by general and administrative expenses of $350,434.
For the nine months ended September 30, 2021, we had net income of $1,442,609,
which consists of interest earned on marketable securities held in Trust Account
of $19,111 and a change in fair value warrant liabilities of $2,565,168, offset
by general and administrative expenses of $1,141,670.
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Liquidity and Capital Resources
On December 22, 2020, we consummated the Initial Public Offering of 25,000,000
Units, which included the partial exercise by the underwriters of their
over-allotment option in the amount of 3,200,000 Units, at a price of $10.00 per
Unit, generating gross proceeds of $250,000,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 575,000 Placement
Units at a price of $10.00 per Placement Unit in a private placement to our
Sponsor, generating gross proceeds of $5,750,000.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Placement Units, a total of
$250,000,000 was placed in the Trust Account. We incurred $15,448,021 in
transaction costs, including $4,360,000 of underwriting fees, $10,640,000 of
deferred underwriting fees and $448,021 of other offering costs.
For the nine months ended September 30, 2021, cash used in operating activities
was $695,266. Net income of $1,442,609 was affected by change in fair value of
warrant liabilities of $2,565,168 and interest earned on marketable securities
held in Trust Account of $19,111. Changes in operating assets and liabilities
provided $446,404 of cash from operating activities.
As of September 30, 2021, we had cash and marketable securities held in the
Trust Account of $250,019,317. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account to complete our Business Combination. We may withdraw interest
to pay taxes. During the three and nine months ended September 30, 2021, we did
not withdraw any interest income from the Trust Account. 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 $99,092 of cash held outside of 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, our Sponsor or an affiliate of our
Sponsor or one of its affiliates has committed to loan us funds as may be
required up to a maximum of $810,000 and may, but are not obligated to, loan us
additional funds as may be required. If we complete a Business Combination, we
may repay such loaned amounts out of the proceeds of the Trust Account released
to us. In the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. Up to $1,500,000 of such loans may be convertible into units, at a
price of $10.00 per unit, at the option of the lender. The units would be
identical to the Placement Units.
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. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
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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 the Sponsor
or an affiliate of the Sponsor $20,000 per month for office space,
administrative and shared personnel support services. We began incurring these
fees on December 18, 2020 and will continue to incur these fees monthly until
the earlier of the completion of the Business Combination and our liquidation.
In addition, we have an agreement to pay the underwriters a deferred fee of
$10,640,000. The deferred fee will become payable to the representatives of 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 Liability
We account for the Warrants in accordance with the guidance contained in
Accounting Standards Codification ("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 them 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 the condensed statements of operations. The Warrants
for periods where no observable trading price was available are valued using a
Modified Black-Scholes Option Pricing Model for the Placement Warrants and a
binomial / lattice model for the Public Warrants. 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.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A common stock subject to mandatory redemption are classified as
a liability instrument and measured at fair value. Conditionally redeemable
common stock (including common stock that feature redemption rights that is
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 Class A common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, Class A common stock subject
to possible redemption is presented as temporary equity, outside of the
stockholders' deficit section of our balance sheets.
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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 stocks outstanding during the
period. We apply the two-class method in calculating earnings per share.
Accretion associated with the redeemable shares of Class A common stocks is
excluded from earnings per share as the redemption value approximates fair
value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06," Debt-Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. We adopted ASU 2020-06 effective as of January 1,
2021. The adoption of ASU 2020-06 did not have an impact on our financial
statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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