ITEM 2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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References
to the “Company,” “us,” “our” or “we” refer to Atlantic Avenue
Acquisition Corp. The following discussion and analysis of our
financial condition and results of operations should be read in
conjunction with our unaudited condensed financial statements and
related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All
statements other than statements of historical fact included in
this Report including, without limitation, statements under 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. When used in
this Report, words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend” and similar expressions, as they relate to us or
the Company’s management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of management,
as well as assumptions made by, and information currently available
to, the Company’s management. Actual results could differ
materially from those contemplated by the forward- looking
statements as a result of certain factors detailed in our filings
with the SEC. All subsequent written or oral forward-looking
statements attributable to us or persons acting on the Company’s
behalf are qualified in their entirety by this paragraph.
The
following discussion and analysis of our 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.
Overview
We are a
recently incorporated blank check company incorporated as a
Delaware corporation and formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more
businesses, which we refer to throughout this report as our initial
business combination. We have not selected any business combination
target and we have not, nor has anyone on our behalf, initiated any
substantive discussions, directly or indirectly, with any business
combination target.
In September
2020, our independent directors purchased, in advance, an aggregate
of 300,000 private placement warrants, at a price of $1.00 per
warrant, for an aggregate purchase price of $300,000.
Simultaneously with the closing of the Initial Public Offering,
Atlantic Avenue Partners LLC (the “sponsor”) purchased an aggregate
of 3,950,000 private placement warrants and ASA Co-Investment LLC
(“ASA Co-Investment”) purchased an aggregate of 2,750,000 private
placement warrants at a price of $1.00 per warrant, for an
aggregate purchase price of $6,700,000. A portion of the $7,000,000
proceeds from the private placements were added to the net proceeds
from the Initial Public Offering held in the trust account.
As of June
30, 2021 we held cash of $1,190,861 and deferred legal fees of
$640,067. Further, we expect to continue to incur significant costs
in the pursuit of our acquisition plans. We cannot assure you that
our plans to raise capital or to complete our initial business
combination will be successful.
Results of Operations
Our entire
activity since inception up to June 30, 2021 relates to our
formation, the Initial Public Offering and, since the closing of
the Initial Public Offering, a search for a Business Combination
candidate. We will not be generating any operating revenues until
the closing and completion of our initial Business Combination, at
the earliest.
For the
three months ended June 30, 2021, we had net loss of $3,037,998,
which consisted of $3,765 in interest earned on marketable
securities held in the Trust Account and cash held in the working
capital account, and $2,732,800 in unrealized loss on change in
fair value of warrants, offset by $308,963 in formation and
operating costs.
For the six
months ended June 30, 2021, we had net income of $3,832,249, which
consisted of $7,495 in interest earned on marketable securities
held in the Trust Account and cash held in the working capital
account, and $4,227,000 in unrealized gain on change in fair value
of warrants, offset by $402,246 in formation and operating
costs.
Liquidity and Capital Resources
As of June
30, 2021, we had cash of $1,190,861, and working capital of
$1,196,242.
We do not
believe we will need to raise additional funds in order to meet the
expenditures required for operating the business. However, if the
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 the
Business Combination. Moreover, in addition to the access of the
Working Capital Loans (as defined in Note 5 to the Company’s Notes
to the Unaudited Condensed Financial Statements), we may need to
obtain other financing either to complete our Business Combination
or because we become obligated to redeem a significant number of
the 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 the Business
Combination. If we are unable to complete the Business Combination
because we do not have sufficient funds available, we will be
forced to cease operations and liquidate the Trust Account. In
addition, following the Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order
to meet our obligations.
Based on the
foregoing, management believes that we will have sufficient working
capital and borrowing capacity from the Sponsor or an affiliate of
the Sponsor, or certain of our officers and directors to meet the
needs through the earlier of the consummation of a Business
Combination or one year from this filing. Over this time period, we
will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination
candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target
business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Critical Accounting Policies and Estimates
The
preparation of the unaudited condensed financial statements in
conformity with US GAAP requires 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 and the
reported amounts of expenses during the reporting period. Actual
results could differ from those estimates. We have identified the
following as our critical accounting policies:
Common Stock Subject to Possible Redemption
The Company
accounts for its common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common
stock subject to mandatory redemption (if any) is classified as a
liability instrument and is measured at fair value. Conditionally
redeemable common stock (including common stock 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) is classified as temporary
equity. At all other times, common stock is classified as
stockholders’ equity. The Company’s common stock features certain
redemption rights that are considered to be outside of the
Company’s control and subject to the 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 the Company’s balance sheet.
Net
Income Per Common Share
Net income
per common share is computed by dividing net income by the weighted
average number of common shares outstanding for each of the
periods. The calculation of diluted income per common share does
not consider the effect of the warrants issued in connection with
the (i) IPO, and (ii) Private Placement since the exercise of the
warrants are contingent upon the occurrence of future events. The
warrants are exercisable to purchase 19,500,000 shares of common
stock in the aggregate.
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 ASC
815-15. 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.
We issued
12,500,00 warrants to purchase shares of Class A common stock to
investors in our Initial Public Offering and issued 7,000,000
private placement warrants. All of our outstanding warrants are
recognized as derivative liabilities in accordance with ASC 815-40.
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 statement of operations. The private
placement warrants were initially valued at their purchase price
($1.00 per warrant). Their value as of June 30, 2021 was determined
using a Monte Carlo Simulation. The Public Warrants were initially
valued using a Monte Carlo Simulation. Their value as of June 30,
2021 was determined based on the closing market price of the Public
Warrants as of that date.
Off-Balance Sheet Arrangements
As of June
30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 3. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
As of June 30, 2021, we were not
subject to any market or interest rate risk. Following the
consummation of our Initial Public Offering, the net proceeds
received into the Trust Account, have been invested in U.S.
government treasury bills, notes or bonds with a maturity of 180
days or less or in certain money market funds that invest solely in
US treasuries. Due to the short-term nature of these investments,
we believe there will be no associated material exposure to
interest rate risk.
ITEM 4. |
CONTROLS AND
PROCEDURES
|
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 our
reports filed or submitted under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required
by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief
Executive Officer and Chief Financial Officer carried out an
evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of June 30, 2021. Based upon
their evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures (as
defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act)
were not effective as of June 30, 2021 due solely to the material
weakness in our internal control over financial reporting to the
classification of the Company’s Warrants as components of equity
instead of as derivative liabilities.
Changes in Internal Control Over Financial Reporting
During the
most recently completed fiscal quarter, there has been no change in
our internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting as the circumstances that
led to the revision of our financial statements had not yet been
identified. In light of the material weakness, we plan to enhance
our processes to identify and appropriately apply applicable
accounting requirements to better evaluate and understand the
nuances of the complex accounting standards that apply to our
financial statements. Our plans at this time include providing
enhanced access to accounting literature, research materials and
documents and increased communication among our personnel and
third-party professionals with whom we consult regarding complex
accounting applications. The elements of our remediation plan can
only be accomplished over time, and we can offer no assurance that
these initiatives will ultimately have the intended effects.
PART
II – OTHER INFORMATION
ITEM 1. |
LEGAL
PROCEEDINGS.
|
None.
Factors that
could cause our actual results to differ materially from those in
this report include the risk factors described in our Amendment No.
1 to our Annual Report on Form 10-K/A filed with the SEC on June
15, 2021. As of the date of this Report, other than as described
below, there have been no material changes to the risk factors
disclosed in the Amendment No. 1 to our Annual Report on Form
10-K/A filed with the SEC on June 15, 2021.
ITEM 2. |
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
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None.
ITEM 3. |
DEFAULTS UPON
SENIOR SECURITIES.
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None.
ITEM 4. |
MINE SAFETY
DISCLOSURES.
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Not
applicable.
ITEM 5. |
OTHER
INFORMATION.
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None.
The
following exhibits are filed as part of, or incorporated by
reference into, this Quarterly Report on Form 10-Q.
No.
|
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Description of
Exhibit
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Certification of Principal
Executive Officer Pursuant to Securities Exchange Act Rules
13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
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Certification of Principal
Financial Officer Pursuant to Securities Exchange Act Rules
13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
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Certification of Principal
Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Certification of Principal
Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS*
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XBRL Instance Document
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101.CAL*
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XBRL Taxonomy Extension
Calculation Linkbase Document
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101.SCH*
|
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XBRL Taxonomy Extension Schema
Document
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101.DEF*
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XBRL Taxonomy Extension
Definition Linkbase Document
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101.LAB*
|
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XBRL Taxonomy Extension Labels
Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension
Presentation Linkbase Document
|
* Filed herewith.
** Furnished.
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.
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ATLANTIC
AVENUE ACQUISITION CORP
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Date: August 10, 2021
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By:
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/s/ Ashok Nayyar
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Ashok Nayyar
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Chief Executive Officer
(Principal
Executive Officer)
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ATLANTIC
AVENUE ACQUISITION CORP
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Date: August 10, 2021
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By:
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/s/ Barry Best
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Barry Best
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Chief Financial Officer
(Principal
Financial Officer)
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