EX-99.2 3 tm219310d1_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

BESPOKE CAPITAL ACQUISITION CORP.

 

(A SPECIAL PURPOSE ACQUISITION CORPORATION)

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

DECEMBER 31, 2020 AND FOR THE PERIOD FROM

JULY 8, 2019 (DATE OF INCORPORATION)

TO DECEMBER 31, 2019

 

(EXPRESSED IN UNITED STATES DOLLARS)

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

 

Management’s Discussion and Analysis

 

General

 

 

The following discussion of performance, financial condition and future prospects should be read in conjunction with the financial statements (‘‘Financial Statements’’) of Bespoke Capital Acquisition Corp. (the ‘‘Corporation’’) for the year ended December 31, 2020 and July 8, 2019 (Inception) to December 31, 2019 and the accompanying notes thereto. This Management’s Discussion and Analysis (‘‘MD&A”) has been prepared with an effective date of March 12, 2021. The Financial Statements of the Corporation have been prepared by management and are in accordance with International Financial Reporting Standards (‘‘IFRS’’). The Corporation’s financial information is expressed in United States dollars unless otherwise specified. In addition to reviewing this report, readers are encouraged to read the Corporation’s public information filings on SEDAR at www.sedar.com.

 

Cautionary Statement Regarding Forward-Looking Information

 

 

This document may contain ‘‘forward-looking statements’’ (as defined under applicable securities laws). These statements relate to future events or future performance including comments with respect to the Corporation’s objectives and priorities for fiscal year 2020 and beyond, and strategies or further actions with respect to the Corporation, a Qualifying Acquisition (as defined below), the Corporation’s business operations, financial performance and condition. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. In some cases, forward-looking statements can be identified by terminology such as ‘‘may’’, ‘‘will’’, ‘‘should’’, ‘‘expect’’, ‘‘plan’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘predict’’, ‘‘potential’’, ‘‘continue’’, ‘‘target’’, ‘‘intend’’, ‘‘could’’ or the negative of these terms or other comparable terminology. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating these statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions and the risks and uncertainties discussed in the section entitled ‘‘Risk Factors’’ in the Corporation’s annual information form dated March 12, 2021 (the “AIF”). The forward-looking information contained in this MD&A is presented for the purpose of assisting shareholders in understanding business and strategic priorities and objectives as at the periods indicated and may not be appropriate for other purposes. Forward-looking statements contained in this MD&A are not guarantees of future performance and, while forward-looking statements are based on certain assumptions that the Corporation considers reasonable, actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation. Prospective investors are cautioned to consider these and other factors carefully when making decisions with respect to the Corporation and not place undue reliance on forward-looking statements. Circumstances affecting the Corporation may change rapidly. Except as may be expressly required by applicable law, the Corporation does not undertake any obligation to update publicly or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

 

Nature of Activities

 

 

The Corporation is a special purpose acquisition corporation incorporated on July 8, 2019 under the laws of the Province of British Columbia for the purpose of effecting an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization, or any other similar business combination involving the Corporation (a ‘‘Qualifying Acquisition’’). The registered office of the Corporation is located at 595 Burrard Street, Suite 2600, Three Bentall Centre, Vancouver, BC, V7X 1L3, Canada. The Corporation’s head office is located at Third Floor, 115 Park Street, London, United Kingdom, W1K 7AP.

 

Initial Public Offering

 

 

On August 15, 2019, the Corporation completed its initial public offering (the “Offering”) of 35,000,000 Class A restricted voting units (the “Class A Restricted Voting Units”) at $10.00 per Class A Restricted Voting Unit. On September 13, 2019, the underwriters partially exercised their over-allotment option (the "Over-Allotment Option") to purchase an additional 1,000,000 Class A Restricted Voting Units, at a price of $10.00 per unit. As a result of the exercise of the Over-Allotment Option, an aggregate of 36,000,000 Class A Restricted Voting Units have been issued.

 

Each Class A Restricted Voting Unit was comprised of a Class A restricted voting share (a “Class A Restricted Voting Share”) and one-half of a share purchase warrant (each whole warrant, a “Warrant”). Each whole Warrant entitles the holder to purchase one Class A Restricted Voting Share for a purchase price of $11.50, commencing sixty-five (65) days after the completion of the Qualifying Acquisition and will expire on the day that is five years after the closing date of the Qualifying Acquisition or earlier as further described in the Corporation’s final long form prospectus dated August 8, 2019 (the “Prospectus”).

 

The Class A Restricted Voting Units commenced trading on August 15, 2019 on the Toronto Stock Exchange (the “Exchange”) under the symbol “BC.V”. and separated into Class A Restricted Voting Shares and the Warrants on September 24th, 2019, under the symbols “BC.U” and “BC.WT.U”, respectively. The Class B shares (the “Class B Shares”) will not be listed prior to the Qualifying Acquisition. Prior to any Qualifying Acquisition, the Class A Restricted Voting Shares may only be redeemed upon certain events. Class A Restricted Voting Shares will be redeemable for a pro-rata portion of the amount then held in the escrow account, net of taxes payable and other prescribed amounts.

 

The proceeds of $360,000,000 relating to the Class A Restricted Voting Units are held by TSX Trust Company, as “Escrow Agent”, in an escrow account (the “Escrow Account”) at a Canadian chartered bank or subsidiary thereof, in accordance with the escrow agreement. Subject to applicable law, none of the escrow funds in the Escrow Account will be released from the Escrow Account until the earliest of: (i) the closing by the Corporation of a Qualifying Acquisition within the “Permitted Timeline”; (ii) a redemption (on the closing of a Qualifying Acquisition or on an extension of the Permitted Timeline, each as provided in the Prospectus) by holders of, or an automatic redemption of, Class A Restricted Voting Shares; (iii) a Winding-Up. Proceeds held in the escrow account may also be used to satisfy the requirement of the Corporation to pay taxes on the interest or certain other amounts earned on the escrowed funds and for payment of certain expenses.

 

1

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

The escrowed funds are being held to enable the Corporation to (i) satisfy redemptions made by holders of Class A Restricted Voting Shares (including in the event of a Qualifying Acquisition or an extension to the Permitted Timeline, or in the event a Qualifying Acquisition does not occur within the Permitted Timeline), (ii) fund the Qualifying Acquisition with the net proceeds following payment of any such redemptions and deferred underwriting commission, and/or (iii) pay taxes on amounts earned on the escrowed funds and certain permitted expenses. Such escrowed funds and all amounts earned thereon, subject to such obligations and applicable law, will be assets of the Corporation. These escrowed funds will also be used to pay (i) the underwriters the portion of the deferred underwriting commission provided in the initial public offering underwriting agreement in an amount equal to $11,700,000 and (ii) the discretionary deferred portion of the underwriting commission to such person(s) as is designated by the Corporation, all in accordance with the terms of the underwriting agreement. The discretionary deferred portion will be payable only at the Corporation’s sole discretion, in whole or in part, and only upon completion of its Qualifying Acquisition, in accordance with the terms of the underwriting agreement.

 

Consummation of the Qualifying Acquisition will require approval by a majority of the Corporation's directors unrelated to the Qualifying Acquisition.

 

In connection with the closing of a Qualifying Acquisition within the Permitted Timeline, holders of Class A Restricted Voting Shares will be provided with the opportunity to redeem all or a portion of their Class A Restricted Voting Shares for an amount per share, payable in cash, equal to the pro-rata portion (per Class A Restricted Voting Share) of: (A) the escrowed funds available in the escrow account at the time immediately prior to the redemption deposit deadline, including interest and other amounts earned thereon; less (B) an amount equal to the total of (i) any applicable taxes payable by the Corporation on such interest and other amounts earned in the escrow account, and (ii) actual and expected expenses directly related to the redemption, each as reasonably determined by the Corporation, subject to certain limitations as further described in the Prospectus. Each holder of Class A Restricted Voting Shares, together with any affiliate of such holder or other person with whom such holder or affiliate is acting jointly or in concert, will not be permitted to redeem more than an aggregate of 15% of the number of Class A Restricted Voting Shares issued and outstanding.

 

If the Corporation is unable to consummate a Qualifying Acquisition within the Permitted Timeline of 18 months from the closing of the Offering (or 21 months from the closing of the Offering if the Corporation has executed a definitive agreement for a Qualifying Acquisition within 18 months from the closing of the Offering but has not completed the Qualifying Acquisition within such 18-month period), the Corporation will be required to redeem each of the outstanding Class A Restricted Voting Shares, for an amount per share, payable in cash, equal to the pro-rata portion (per Class A Restricted Voting Share) of: (A) the escrowed funds available in the escrow account, including any interest and other amounts earned thereon, less (B) an amount equal to the total of (i) any applicable taxes payable by the Corporation on such interest and other amounts earned in the escrow account, (ii) any taxes of the Corporation arising in connection with the redemption of the Class A Restricted Voting Shares, and (iii) up to a maximum of $50,000 of interest and other amounts earned from the proceeds in the escrow account to pay actual and expected Winding-Up expenses and certain other related costs, each as reasonably determined by the Corporation. The underwriters will have no right to the deferred underwriting commission held in the escrow account in such circumstances.

 

Such Permitted Timeline, however, could be extended to up to 36 months with shareholder approval of only the holders of Class A Restricted Voting Shares, by ordinary resolution, with approval by the Corporation’s board of directors. If such approvals are obtained, holders of Class A Restricted Voting Shares, irrespective of whether such holders voted for or against, or did not vote on, the extension of the Permitted Timeline, would be permitted to deposit all or a portion of their shares for redemption prior to the second business day before the shareholders’ meeting in respect of the extension.

 

Subsequent Events

 

 

On February 4, 2021, the Company and Vintage Wine Estates, Inc. (“VWE”) announced that they have entered into definitive transaction agreement (the “Transaction Agreement”) pursuant to which, among other things, the Corporation will acquire, all of the equity of VWE (the “Transaction”) by way of a merger between VWE and a wholly owned subsidiary of the Corporation (“Merger Sub”). The Transaction is intended to constitute the Company’s qualifying acquisition pursuant to the TSX Company Manual.

 

As part of the Transaction, among other things, (i) the Corporation will change its jurisdiction of incorporation from the Province of British Columbia to the State of Nevada (the “Continuance”); (ii) Merger Sub will merge with and into VWE with VWE surviving the merger as a wholly owned subsidiary of the Corporation (the “Merger”); and (iii) the Corporation will change its name to “Vintage Wine Estates, Inc.” (referred to herein as “New VWE Holdco”). All outstanding Class A restricted voting shares (the “Class A Restricted Voting Shares”) and the outstanding Class B shares (the “Founder’s Shares”) held by the Bespoke Sponsor Capital LP (our “sponsor”) will be converted on a one-to-one basis into shares of common stock of New VWE Holdco (“New VWE Holdco Common Stock”) and the outstanding share purchase warrants will continue and remain outstanding on a one-for-one basis as share purchase warrants of New VWE Holdco (“New VWE Holdco Warrants”).

 

Following completion of the Transaction, New VWE Holdco will own 100% of VWE and, assuming no redemptions of Class A Restricted Voting Shares and no exercise of dissent rights in connection with the Continuance, former holders’ of VWE’s equity securities will collectively own an approximately 39% equity and voting interest in New VWE Holdco.

 

The Continuance, the Merger and related matters will be considered at a shareholders’ meeting, expected to be held in the second quarter of 2021. The Corporation will also provide holders of Class A Restricted Voting Shares the opportunity to redeem all or a portion of their Class A Restricted Voting Shares in accordance with BCAC’s organizational documents. The VWE board of directors has determined that the Transaction Agreement and the Transaction are in the best interests of VWE and the BCAC board of directors has determined that the Transaction Agreement and the Transaction are in the best interests of BCAC. The BCAC board of directors has recommended that BCAC shareholders vote in favor of the Continuance, the Merger and related matters.

 

Concurrently with entering into the Transaction Agreement, our sponsor entered into a support agreement, pursuant to which it agreed, among other things, to vote in favor of the Continuance, the Merger and related matters and certain VWE shareholders entered into a support agreement pursuant to which they agreed, among other things, to vote in favor of the Transaction. Concurrent with the consummation of the Transaction, the VWE shareholders and our sponsor will enter into an investor rights agreement (the “Investor Rights Agreement”), which will provide for, among other things, voting agreements, registration rights and certain other restrictions.

 

2

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Completion of the Transaction remains subject to the satisfaction or waiver of certain customary conditions, including, among other things: (a) the receipt of Corporation shareholder approval, approving the Continuance, the Merger and related matters; (b) the effectiveness of a registration statement on Form S-4 and the issuance by the Ontario Securities Commission of a final receipt for the Corporation’s non-offering prospectus; (c) the approval of the Toronto Stock Exchange (the “TSX”); (d) the approval for listing of the New VWE Holdco Common Stock and the New VWE Holdco Warrants on Nasdaq; (e) the expiration or termination of any waiting period (and any extension thereof) and receipt of all required consents applicable to the Transaction under applicable antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (f) the occurrence of the Continuance.

 

Further details on the proposed transactions are set out in the Material Change Report and the Transaction Agreement and BCAC’s which were filed on SEDAR on February 12, 2021 and February 12, 2021, respectively, and Preliminary Prospectus dated March 12, 2021.

 

3

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Selected Financial Information

 

Below is selected information from the statement of net loss and comprehensive loss for the three and nine months ended December 31, 2020.

 

Statement of Operations           

 

   Three months
ended
December 31,
2020		   For the three
months ended
December, 31
2019		   Year ended
December 31,
2020		   From July 8, 2019
(Date of
Incorporation) to
December 31,
2019		 
Expenses                    
General and administrative  $1,139,934    569,997    2,597,010    1,036,785 
(Loss) from operations   (1,139,934)   (569,997)   (2,597,010)   (1,036,785)
                     
Other income                    
Investment income  $49,631    1,632,001    2,281,976    2,255,356 
(Loss) income before income tax (benefit) expense   (1,090,303)   1,062,004    (315,034)   1,218,571 
                     
Income taxes                    
Income tax (benefit) expense   (194,007)   193,963    (193,963)   193,963 
Net (loss), income  $(896,296)   868,041    (121,071)   1,024,608 
                     
                     
Basic and diluted net income per Class A share  $0.00    0.03    0.05    0.42 
                     
Weighted average number of Class A shares outstanding (basic and diluted)   36,000,000    36,000,000    36,000,000    28,107,345 
                     
                     
Basic and diluted net income per Class B share  $(0.10)   (0.04)   (0.20)   (1.50)
                     
Weighted average number of Class B Shares outstanding (basic and diluted)   9,000,000    9,000,000    9,000,000    7,241,879 

 

 

Results of Operations

 

 

For the three months ended December 31, 2020, the Corporation earned interest income of $49,631, reported a net loss of $(896,296), basic and diluted net loss of $(0.10) per Class B Share and net income of $0.00 per Class A Share.

 

For the three months ended December 31, 2019 the Corporation earned interest income of $1,632,001 reported a net income of $868,041, basic and diluted net loss of $(0.04) per Class B Share and net income of $0.03 per Class A Share.

 

For the year ended December 31, 2020, the Corporation earned interest income of $2,281,976. reported a loss of $(121,071), basic and diluted net loss of $(0.20) per Class B Share and net income of $0.05 per Class A Share.

 

From July 8, 2019 (Inception) to December 31, 2019, the Corporation earned interest income of $2,255,356, reported an income of $1,024,608, a basic and diluted net loss of $(1.50) per Class B Share and net income of $0.42 per Class A Share.

 

General and Administrative Expenses

 

General and administrative expenses include costs incurred relating to assessing, negotiating and conducting due diligence on potential Qualifying Acquisitions, as well as general administrative costs of operating the Corporation. A summary of the general and administrative expenses incurred during the year ended December 31, 2020 and July 8, 2019 (Inception) to December 31, 2019 are as follows:

 

10. General and administrative expenses          

 

   Three months
ended December 31,
2020		   Three months
ended December 31,
2019		   Twelve months
ended December 31,
2020		   From July 8, 2019
(Date of
Incorporation) to
December 31,
2019		 
Public company filing and listing costs  $77,085    20,825    258,955    191,513 
Professional fees (marketing, recruitment, diligence, etc.)   815,951    355,717    1,531,802    549,865 
Insurance   108,705    55,350    281,731    88,964 
General office expenses (travel, service agreement, phone etc.)   138,193    138,105    524,522    206,443 
   $1,139,934    569,997    2,597,010    1,036,785 

 

4

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Income Taxes

The Corporation is subject to federal, provincial, and territorial taxes of Canada. The Corporation follows the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. The Corporation recognizes the tax benefit from an uncertain tax position only if it is more-likely-than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

Deferred income tax assets, including those arising from unutilized tax losses, require management to assess the likelihood that the Corporation will generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing laws in each applicable jurisdiction. Future taxable income is also significantly dependent upon the Corporation completing a Business Combination, the underlying structure of a Business Combination, and the resulting nature of operations. To the extent that future cash flows and/or the probability, structure and timing, and the nature of operations of a future Business Combination differ significantly from estimates made, the ability of the Corporation to realize a deferred income tax asset could be materially impacted.

 

The Corporation recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits at both December 31, 2020 and December 31, 2019. No amounts were accrued for the payment of interest and penalties for the year ended December 31, 2020 and for the period from July 8, 2019 (inception) to December 31, 2019. The Corporation is currently not aware of any issues under review that could result in significant payments, accruals or material impacts to its position.

 

The Corporation is subject to income tax examinations by major taxing authorities. These potential examinations may include questioning the timing and amount of deductions and compliance with federal, provincial, and territorial tax laws. The Corporation's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. It is possible, however, that at some future date, an additional liability could result from audits by taxing authorities. If the final outcome of these tax related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

 

Selected Financial Information

 

 

Below is selected information from the statement of net income and comprehensive income for the three months ended December 31, 2020, the three months ended September 30, 2020, June 30, 2020, the three months ended March 31, 2020, the three months ended December 31, 2019 and from July 8, 2019 (Date of Incorporation) to September 30, 2019.

 

Statement of Operations               

 

   Three months ended December 31, 2020   For the three months ended September, 30 2020   For the three months ended June, 30 2020   For the three months ended March, 31 2020   For the three months ended December, 31 2019   From July 8, 2019 (Date of Incorporation) to September  30, 2019 
Expenses                              
General and administrative  $1,139,934    664,966    235,209    556,901    569,997    466,788 
(Loss) from operations   (1,139,934)   (664,966)   (235,209)   (556,901)   (569,997)   (466,788)
                               
Other income                              
Investment income  $49,631    64,709    702,596    1,465,040    1,632,001    623,355 
(Loss) income before income tax (benefit) expense   (1,090,303)   (600,257)   467,386    908,139    1,062,004    156,567 
                               
Income taxes                              
Income tax (benefit) expense   (194,007)   (199,992)   143,999    56,037    193,963    - 
Net (loss) income  $(896,296)   (400,265)   323,387    852,102    868,041    156,567 
                               
                               
Basic and diluted net income per Class A share  $0.00    0.00    0.01    0.03    0.03    0.56 
                               
Weighted average number of Class A shares outstanding (basic and diluted)   36,000,000    36,000,000    36,000,000    36,000,000    36,000,000    19,564,706 
                               
Basic and diluted net (loss) per Class B share  $(0.10)   (0.05)   (0.02)   (0.02)   (0.04)   (2.00)
                               
Weighted average number of Class B Shares outstanding (basic and diluted)   9,000,000    9,000,000    9,000,000    9,000,000    9,000,000    5,338,971 

 

 

 

5

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Liquidity, Capital Resources and Financial Position

 

 

   December 31, 2020   December 31, 2019 
ASSETS          
           
Current assets          
Cash  $2,114,670   $4,182,004 
Prepaid income taxes   493,996    - 
Prepaid expenses   151,409    141,647 
   Total current assets   2,760,075    4,323,651 
           
Investments held in Trust Account   364,043,313    362,255,356 
           
Total assets  $366,803,388   $366,579,007 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)          
           
Current          
Accounts payable and accrued liabilities  $751,891   $176,738 
Due to related party   -    35,737 
Income taxes payable   -    193,963 
   Total current liabilities   751,891    406,438 
           
Deferred underwriters' commission   13,500,000    13,500,000 
           
Total liabilities  $14,251,891   $13,906,438 
           
Commitments and Contingencies          
Class A Restricted Voting Shares, 36,000,000 shares subject to redemption   363,312,252    361,646,410 
           
Stockholders' Equity (Deficiency)          
Class A Restricted Voting Shares, unlimited shares authorized; 0 shares issued and outstanding (excluding 36,000,000 shares subject to possible redemption) at both December 31, 2020 and 2019   -    - 
Class B Shares, unlimited shares authorized; 9,000,000 shares issued and outstanding at both December 31, 2020 and 2019   25,000    25,000 
Additional paid-in capital   -    - 
Accumulated deficit   (10,785,755)   (8,998,841)
Total stockholders' deficiency  $(10,760,755)  $(8,973,841)
           
Total liabilities and stockholders' deficiency  $366,803,388   $366,579,007 

 

The funds raised relating to Class A Restricted Voting Units totaling $360,000,000 have been held in cash and cash equivalents in escrow with a Canadian chartered bank. The current cash is invested in U.S treasury bills with 1-month terms of investment. The escrow balance includes the $360,000,000 funds raised relating to Class A Restricted Voting Units and cumulative interest earned on the escrow account totaling $4,537,332 as of December 31, 2020 and cumulative interest earned totaling $2,255,356 as of December 31, 2019. Interest earned on the escrow balance totaled $49,631 for the three months ended December 31, 2020 and $1,632,001 for the three months ended December 31, 2019.In accordance with the terms of the Offering, all amounts raised through the issuance of the Class A Restricted Voting Units were deposited into the escrow account and can only be released upon certain prescribed conditions being met.

 

6

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

The Corporation’s intent is for all or substantially all of the funds held in the escrow account to be used to complete a Qualifying Acquisition, or several Qualifying Acquisitions, which would likely close concurrently. As noted in the Prospectus, the fair market value of any Qualifying Acquisition (or the aggregate fair market value of the Corporation’s combined Qualifying Acquisitions, if there are more than one) must, unless exemptive relief is obtained from the Exchange, not be less than 80% of the assets held in the escrow account at the time the agreement is entered into (excluding the deferred underwriting commission and applicable taxes payable on interest and other amounts earned in the escrow account). If, after redemptions, debt or the Corporation’s capital stock is used as consideration to consummate a Qualifying Acquisition, the remaining proceeds held in the escrow account may be used to fund general ongoing expenses. Such funds could be used in a variety of ways, including continuing or expanding the post-Qualifying Acquisition entity’s operations, for strategic acquisitions by such new entity, for payment of dividends and for marketing, research and development of existing or new products, or for other purposes.

 

As at December 31, 2020, the Corporation had cash, excluding restricted amounts held in the escrow account, totaling $2,114,670 and $4,182,004 as at December 31, 2019, which is available to fund its ongoing working capital requirements. The Corporation anticipates generating negative cash flows from operating activities on a quarterly basis until a Qualifying Acquisition has been completed and, thereafter cashflow will depend on the nature and success of the Qualifying Acquisition. The expenses relating to ongoing operating activities include professional fees, general and administration expenses related to being a public company, and costs associated with identifying and negotiating a Qualifying Acquisition.

 

Currently, the Corporation does not expect to raise additional funds to meet its operating expenditures until the consummation of a Qualifying Acquisition. Management expects, but it cannot be assured, that the Corporation will have sufficient funds outside of the escrow account to operate the business.

 

To the extent that we require additional funding for general ongoing expenses or in connection with our Qualifying Acquisition, the Corporation may seek funding by way of unsecured loans from our sponsor and/or its affiliates, which loans must be on reasonable commercial terms. The lender under the loans would not have recourse against the funds held in the escrow account, and thus the loans will not reduce the value thereof. Such loans will collectively be subject to a maximum aggregate principal amount equal to 10% of the escrowed funds. Such loans may be repayable in cash or be convertible into shares and/or Warrants, however no such repayment or conversion shall occur prior to the closing of the Qualifying Acquisition. The Corporation will not obtain any other form of debt financing except: (i) in the ordinary course for short term trade, accounts payable and general ongoing expenses; or (ii) contemporaneous with, or after, the completion of a Qualifying Acquisition.

 

Otherwise, the Corporation may seek to raise additional funds through a rights offering in respect of shares available to its shareholders, in accordance with the requirements of applicable securities legislation, and subject to placing the required funds raised in the Escrow Account in accordance with applicable Exchange rules and other conditions as described in the Prospectus.

 

As of the date of filing the Corporation does not have any off-balance sheet financing arrangements and has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Share Capital

 

 

As of the date of this MD&A, the Corporation had 36,000,000 Class A Restricted Voting Shares and 9,000,000 Class B Shares issued and outstanding. In addition, the Corporation had an aggregate of 30,000,000 Warrants issued and outstanding, comprised of 18,000,000 Warrants which formed part of the Class A Restricted Voting Units and 12,000,000 Founders’ Warrants issued to our sponsor.

 

Related Party Transactions

 

 

The Corporation has entered into an administrative services agreement with our Sponsor for an initial term of 18 months, subject to possible extension, for office space, utilities, and administrative support, which may include payment for services of related parties, for, but not limited to, various administrative, managerial, or operational services, or to help effect the Qualifying Acquisition. The Corporation has agreed to pay up to $10,000 per month, plus applicable taxes for such services. For the year ended December 31, 2020 and for the period from July 8, 2019 (Inception) to December 31, 2019, the Corporation paid $120,000 and $45,161, respectively in respect of these services. In April 2020, the Corporation agreed to pay the Sponsor until a Qualifying Acquisition is consummated for overhead costs incurred on behalf of the Corporation. The Corporation paid the Sponsor $278,952 for the year ended December 31, 2020 related to these costs.

 

The Corporation has further agreed to reimburse an affiliate of the sponsor for any out-of-pocket expenses incurred by directors, officers and consultants of the Corporation which were paid by the affiliate relating to certain activities on the Corporation’s behalf, including identifying and negotiating a Qualifying Acquisition. The Corporation incurred $117,676 and $160,668 related to out-of-pocket expenses paid during for the year ended December 31, 2020 and for the period from July 8, 2019 (Inception) to December 31, 2019, respectively, of which $0 and $35,737 are reported as due to related party at December 31, 2020 and December 31, 2019, respectively.

 

Amounts due to related party are non-interest bearing.

 

Proposed Acquisitions

 

 

See “Subsequent Events” for a description of the proposed Qualifying Acquisition.

 

Significant Accounting Policies and Critical Accounting Estimates

 

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). For further information about the accounting policies used by the Corporation, please refer to the Corporation’s Financial Statements and notes thereto for the year ended December 31, 2020 and the period from July 8, 2019 (Inception) to December 31, 2019. Preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the dates presented and the reported amounts of revenues and expenses during the periods presented. Significant estimates inherent in the preparation of the accompanying financial statements include the assumptions related to the concentration of credit risk, the fair value of financial instruments, assumptions related to the possible redemption of Class A Restricted Voting Shares, offering costs associated with the IPO and income taxes, including the valuation allowance against deferred tax assets. For further information about the accounting policies used by the Company, please refer to the Company’s financial statements and notes thereto for the year ended December 31, 2020 and the period from July 8, 2019 (inception) to December 31, 2019.

 

Controls and Procedures

 

 

Under their supervision, the Chief Executive Officer and Chief Financial Officer have implemented disclosure controls and procedures and internal controls over financial reporting appropriate for the nature of operations of the Corporation. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Corporation in the reports it files or submits under securities legislation is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and reported to management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow required disclosures to be made in a timely fashion. The Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Rule 13a-15(b) of the Exchange Act) and has concluded that certain of the Corporation’s disclosure controls and procedures are not effective as of December 31, 2020 due to the material weaknesses in the internal control over financial reporting as described below.

 

Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Corporation’s design of its internal controls over financial reporting is based on the principles set out in the “Internal Control – Integrated Framework (2013)” issued by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Based on the assessment under the framework in Internal Control—Integrated Framework (2013), BCAC management concluded that BCAC's internal control over financial reporting was not effective as of December 31, 2020 and December 31, 2019 due to the existence of a material weakness in BCAC's internal controls over complex accounting transactions. A material weakness is a deficiency, or combination of control deficiencies, in internal control that adversely affects the company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness related to the restatement of the financial statements from IFRS to GAAP. As part of this restatement, BCAC, together with its outside technical advisors, incorrectly applied GAAP to the accounting for a complex accounting transaction within the equity instruments as part of the restatement to GAAP. This incorrect application of GAAP was subsequently discovered by BCAC's auditors and was adjusted prior to the approval by the audit committee and the board of directors and issuance of the final financial statements for the years ended December 31, 2020 and December 31, 2019. As a result, however, in the course of making the assessment of the effectiveness of internal control over financial reporting, BCAC identified a material weakness in its internal control over financial reporting. The material weakness related to the restatement of the financial statements from IFRS to GAAP, having insufficient technical resources to appropriately evaluate for complex accounting transactions within the equity instruments, and was addressed by BCAC and has not resulted in a material misstatement.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Management of the Corporation has also concluded that notwithstanding the existence of the material weaknesses, the financial statements of the Corporation, present fairly, in all material respects, the Corporation’s financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

 

Managing Risk

 

 

Except as otherwise disclosed in this MD&A and in the Financial Statements, there have been no significant changes to the nature and scope of the risks faced by the Corporation as described in the AIF, which is available on SEDAR at www.sedar.com. These business risks should be considered by interested parties when evaluating the Corporation’s performance and its outlook.

 

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