IPVA InterPrivate II Acquisition Corp

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us” or the “Company” refer to InterPrivate II Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to InterPrivate Acquisition Management II, 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 and the Annual 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 Securities Exchange Act of 1934, as amended (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 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 Annual Report. 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 September 10, 2020 for the purpose of effectuating 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.

Proposed Transaction

On May 11, 2022, the Company, TMPST Merger Sub I Inc., a Delaware corporation and newly formed, wholly-owned direct subsidiary of the Company (“First Merger Sub”), TMPST Merger Sub II LLC, a Delaware limited liability company and newly formed, wholly-owned direct subsidiary of the Company (“Second Merger Sub”), and Getaround, Inc., a Delaware corporation (“Getaround”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). If the Merger Agreement and the transactions contemplated thereby are adopted and approved by the Company’s stockholders (and the other closing conditions are satisfied or waived in accordance with the Merger Agreement), and the business combination is subsequently completed, (a) First Merger Sub will merge with and into Getaround (the “First Merger”), with Getaround being the surviving corporation of the First Merger, and (b) immediately following the First Merger, Getaround will merge with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Mergers” and, collectively with the Mergers and other transactions described in the Merger Agreement, the “Proposed Transaction”), with Second Merger Sub being the surviving company of the Second Merger. In addition, in connection with the consummation of the Proposed Transaction (the “Closing”), the Company will be renamed “Getaround, Inc.” and is referred to herein as “Pubco.”

Under the Merger Agreement, holders of Getaround’s equity interests are expected to receive approximately $800,000,000 (“the Base Purchase Price”) in aggregate consideration in the form of Pubco Class A common stock, par value $0.0001 per share (“Pubco Class A Common Stock”), equal to the quotient obtained by dividing (i) the Base Purchase Price by (ii) the per share price of $10.00 at the Closing. In addition to the Base Purchase Price, Pubco will issue up to an additional 34,000,000 shares of Pubco Class A Common Stock up to an additional 11,000,000 shares of Pubco Class A Common Stock to certain personnel of Getaround as earnout consideration in tranches based upon the volume weighted average price of Pubco Class A Common Stock for any twenty trading days within a period of thirty consecutive trading days at any time following the Closing until the seven year anniversary of the Closing. These price targets range from $13.50 to $55.

9,333,333 shares of Pubco Class A Common Stock issuable as part of the Base Purchase Price will be set aside in an escrow account at Closing (the “Escrow Shares”). 1,000,000 Escrow Shares will be set aside and allocated as agreed upon by the Company and Getaround, including for the benefit of public stockholders who do not redeem their Class A common stock in connection with the Proposed Transaction (the “Non-Redeeming Public Holders”). In the event of a PIPE Investment (as defined below), a number of Escrow Shares equal to (i) 8,333,333 multiplied by (ii) a fraction, (A) the numerator of which will be the lesser of (y) the PIPE Investment Amount (as defined below) and (z) $125,000,000 and (B) the denominator of which will be $125,000,000 (the “PIPE Protection Shares”), will be set aside for the benefit of the PIPE investors. Further, a remaining portion of the Escrow Shares, including any remaining PIPE Protection Shares not allocated will be set aside and allocated as agreed upon by the Company and Getaround, including, in case the PIPE Investment Amount is less than $125,000,000, for the benefit of some or all of the Non-Redeeming Public Holders.

Pursuant to the terms of the Merger Agreement and a letter agreement entered into on November 7, 2022 between the Company and Getaround (the “Escrow Shares Allocation Agreement”), the Escrow Shares will be allocated promptly following the Closing to: (i) non-redeeming public holders of Class A Stock, whether acquired in InterPrivate II’s initial public offering or acquired in the secondary market (the “Public Stockholders”), (ii) the designees of EarlyBirdCapital, and (iii) the holders of the Class B Stock including the Sponsor and the current and former independent directors of InterPrivate II (collectively, the “Bonus Share Recipients”, and the Escrow Shares entitled to be received by the Bonus Share Recipients, the “Bonus Shares”). The Bonus Shares will be apportioned pro rata to each Bonus Share Recipient based on the number of shares of Class A Stock held immediately following the Closing as a percentage of the total number of shares of Class A Stock that remain outstanding after giving effect to redemptions and the automatic conversion of the Founder Shares into shares of Class A Stock. However, the holders of the Representative Shares and the Founder Shares (collectively, the “Initial Stockholders”) have agreed pursuant to the Escrow Shares Allocation Agreement to re-allocate to the Getaround equityholders the number of Bonus Shares which exceed the number that the Initial Stockholders would have received on a pro rata basis if no Public Stockholders elect to exercise their redemption rights.

In connection with the Closing, the Founder Shares will automatically convert into shares of Pubco Class A Common Stock on a one-for-one basis and will continue to be subject to the transfer restrictions applicable to the Founder Shares.

The Merger Agreement contains customary representations and warranties, covenants and closing conditions, including, but not limited to, approval by the Company’s stockholders of the Merger Agreement and the Proposed Transaction. The terms of the Merger Agreement and other related ancillary agreements entered into or to be entered into in connection with the Closing of the Proposed Transaction, including those briefly described below, are summarized in more detail in the Company’s Form 8-K filed with the SEC on May 13, 2022.

Convertible Notes

In connection with the execution of the Merger Agreement, the Company entered into a subscription agreement (the “Subscription Agreement”) with an investor to purchase convertible promissory notes (the “Convertible Notes”) in an aggregate principal amount of at least $100 million, up to a maximum of $175 million under certain conditions. The Convertible Notes will be convertible into shares of Pubco Class A Common Stock (subject to adjustments as provided in the indenture governing the Convertible Notes) at an initial conversion rate of 86.96 shares of Pubco Class A Common Stock per $1,000 principal amount of Convertible Notes, representing an initial conversion price of $11.50 per share, subject to a downward adjustment to 115% of the average daily VWAP of Pubco Class A Common Stock for the 90 trading days after the Closing Date, subject to a minimum conversion price of $9.21 per share, subject to adjustments to such rate as provided in the indenture, including adjustments in connection with certain issuances or deemed issuances of Pubco Class A Common Stock at a price less than the then-effective conversion price, at any time prior to the close of business on the second scheduled trading day immediately before the maturity date of the Convertible Notes. In connection with the execution of the Subscription Agreement for the purchase of the Convertible Notes, the Company agreed to issue warrants (the “Notes Warrants”), each representing the right to purchase one share of Pubco Class A Common Stock, that are exercisable for shares of Pubco Class A Common Stock having an aggregate value equal to $3.5 million, based upon a value of $1.25 per Note Warrant; provided that such value shall be adjusted upward or downward to reflect the VWAP reported by Bloomberg LP (subject to customary proportionate adjustments affecting the outstanding shares of Pubco Class A Common Stock) of the equivalent publicly-traded warrants of the Company during the 90 trading days following the Closing Date, subject to a maximum upward or downward adjustment of $0.75 per Note Warrant. Notwithstanding the foregoing, the Company shall have the right to pay cash in lieu of issuing the Note Warrants; provided that such cash amount will be equal to $3.5 million. The Company also agreed to pay the investor within 100 trading days following the Closing Date, a fee equal to $5.25 million.

The Company’s obligations under the Convertible Notes will be (a) guaranteed by second Merger Sub and certain of its and the Company’s subsidiaries and (b) secured by collateral consisting of substantially all of the assets of Pubco and its subsidiary guarantors pursuant to security documents to be entered into upon the issuance of the Convertible Notes.

The Convertible Notes will bear interest at the rate of 8.00% per annum if Pubco elects to pay interest in cash or 9.50% per annum if Pubco elects to pay interest in-kind, and interest will be paid semi-annually. Upon the occurrence, and during the continuation, of an event of default, an additional 2.00% will be added to the stated interest rate. The Convertible Notes will mature on the fifth anniversary of issuance and will be redeemable at any time by Pubco, in whole but not in part, for cash, at par plus accrued and unpaid interest to, but excluding, the redemption date, plus, certain make-whole premiums as specified in the indenture governing the Convertible Notes.

Upon the occurrence of a Fundamental Change (as defined in the indenture governing the Convertible Notes), the investor will have the right, at its option, to require Pubco to repurchase for cash all or any portion of its Convertible Notes in principal amounts of $1,000 or an integral multiple thereof, at a fundamental change repurchase price equal to the principal amount of the Convertible Notes to be repurchased plus certain make-whole premiums, plus accrued and unpaid interest to, but excluding, the repurchase date. The indenture governing the Convertible Notes will include restrictive covenants that, among other things, will limit the ability of Pubco to incur additional debt, make restricted payments and limit the ability of Pubco to incur liens. The indenture will also contain customary events of default.

In addition to the customary conditions to closing provided in the Subscription Agreement, the obligations of the investor to purchase the Convertible Notes are conditioned upon, among other things, and are expected to close concurrently with, the consummation of the Mergers.

PIPE Investment

The Company and Getaround anticipate that after the execution of the Merger Agreement, certain investors will agree to make private investments in the Company (the “PIPE Investment”) in an aggregate amount to be mutually agreed by the Company and Getaround (the “PIPE Investment Amount”), which amount will exclude any amount raised pursuant to the Subscription Agreement described above, to purchase shares of Pubco Class A Stock to be consummated immediately prior to the consummation of the Proposed Transaction, on the terms and subject to the conditions of the subscription agreements to be executed and delivered by the Company and the investors.

Getaround Holders Support Agreement

Certain stockholders of Getaround will enter into a support agreement with the Company and Getaround, pursuant to which, among other things, such holders will agree to provide an executed irrevocable written consent approving the Proposed Transaction within forty-eight hours after the execution of the Merger Agreement.

Sponsor Support Agreement

Concurrently with the execution of the Merger Agreement, the Sponsor entered into a sponsor support agreement (the “Sponsor Support Agreement”) with the Company and Getaround, pursuant to which the Sponsor agreed to, among other things, vote in favor of the Merger Agreement and the Proposed Transaction.

Registration Rights and Lock-Up Agreement

In connection with the consummation of the First Merger, the Company, the Sponsor and Jeffrey Harris, Matthew Luckett and Tracey Brophy Warson (the “Sponsor Holders”), EarlyBird Capital and certain equity holders of Getaround (the “Legacy Holders” and, together with the Sponsor Holders and EarlyBird Capital, the “Holders”) will enter into an Amended and Restated Registration Rights Agreement. Pursuant to the terms of the Amended and Restated Registration Rights Agreement, (a) the Holders will be granted registration rights with respect to their respective Pubco shares, and (b) the Sponsor Holders and the Legacy Holders will agree not to effect any sale or distribution of certain equity securities of Pubco held by any of them during the lock-up period described therein in each case, on the terms and subject to the conditions set forth therein.

Results of Operations  

We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 2022 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.

The three months ended September 30, 2022 compared to the three months ended September 30, 2021

For the three months ended September 30, 2022 and 2021, we had a net loss of $248,537 versus a net loss of $15,485, respectively, a change of $233,052. This change was primarily driven by increases in operating costs of $740,848 and an offset of $568,200 for changes in fair value of warrant liabilities and an increase in the provision for income taxes of $271,311. We recorded income for the change in fair value of warrant liabilities of $165,867 for the three months ended September 30, 2022 compared to $734,067 for the three months ended September 30, 2021. The change in fair value of warrant liabilities is due to the decrease in warrant values from an ending balance of $ 4,115,552 as of December 31, 2021 to $ 236,980 as of September 30, 2022 as a result of current market conditions.

Period-to-period changes in our results also include interest income on marketable securities held in the Trust Account for the three months ended September 30, 2022 of $336,544 compared to $30,522 for the three months ended September 30, 2021, and we had an unrealized gain on marketable securities held in the Trust Account for the three months ended September 30, 2022 of $1,027,141 compared to an unrealized loss of $14,144 for the three months ended September 30, 2021.

The nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

For the nine months ended September 30, 2022 and, 2021, we had a net loss of $220,264 versus a net loss of $2,585,255, respectively, a change of $2,364,991. This change was primarily driven by increases in operating costs of $3,881,451 and an offset of $4,791,338 for changes in fair value of warrant liabilities, and an increase in the provision for income taxes of $322,368. There were no warrant transaction costs for the nine months ended September 30, 2022 compared to $6,835 for the nine months ended September 30, 2021. We recorded income for the change in fair value of warrant liabilities of $3,878,572 for the nine months ended September 30, 2022 compared to a loss of $912,766 for the nine months ended September 30, 2021.

Period-to-period changes in our results also include interest income on marketable securities held in the Trust Account for the nine months ended September 30, 2022 of $823,607 compared to $54,504 for the nine months ended September 30, 2021, and we had an unrealized gain on marketable securities held in the Trust Account for the nine months ended September 30, 2022 of $983,987 compared to an unrealized loss of $17,547 for the nine months ended September 30, 2021.

Liquidity and Capital Resources  

On March 9, 2021, we consummated the Initial Public Offering of 25,875,000 Units which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,375,000 Units, at $10.00 per Unit, generating gross proceeds of $258,750,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,616,667 Private Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to the Sponsor and EarlyBirdCapital, generating gross proceeds of $6,925,000.

For the nine months ended September 30, 2022, cash used in operating activities was $502,057. Net loss of $220,264 was affected by a non-cash income related to the change in warrant liability of $3,878,572, interest earned on marketable securities held in the Trust Account of $823,607 and an unrealized loss on marketable securities held in in the Trust Account of $983,987. Changes in operating assets and liabilities used $5,404,373 of cash for operating activities primarily due to accrued expenses.

As of September 30, 2022, we had marketable securities held in the Trust Account of $260,207,445 including interest income of $823,607 and unrealized losses of $983,987 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. Through September 30, 2022, we have withdrawn $ 421,391 from the Trust Account related to payments for Delaware franchise taxes and federal income taxes.

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, 2022, we had cash of $40,119 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. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.

We will need to raise additional capital through loans or additional investments from our initial stockholders, officers or directors. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern through one year and one day from the issuance of this report.

Off-Balance Sheet Arrangements  

We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of September 30, 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.

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 a monthly fee of $10,000 for office space, administrative and 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.

We have entered into an agreement, pursuant to which we will pay the Vice President a total of $10,000 per month for assisting us in negotiating and consummating an initial Business Combination. Upon completion of the Business Combination or the Company’s liquidation, the agreement will terminate and the Company will cease paying these monthly fees.

We engaged EarlyBirdCapital as our advisor in connection with the Business Combination to assist us in holding meetings with our stockholders to discuss the potential Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with the Business Combination, assist us in obtaining stockholder approval for the Business Combination, and assist us with its press releases and public filings in connection with the Business Combination. On July 5, 2022, the BCMA was amended, and as a result Morgan Stanley is no longer required to perform any services under the BCMA and is not entitled to receive any compensation thereunder. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount equal to 1.75% of the gross proceeds of the Initial Public Offering (exclusive of any applicable finders’ fees which might become payable).

We have issued to EarlyBirdCapital, and/or its designees, 200,000 representative shares (the “representative shares”) for nominal consideration. The holders of the representative shares have agreed not to transfer, assign or sell any such shares without our prior consent until the completion of our initial business combination. In addition, the holders of the representative shares have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business combination within 24 months from the closing of the Public Offering.

Critical Accounting Policies  

The preparation of condensed financial statements and related disclosures in conformity with GAAP 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 Classification  

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. As of September 30, 2022 and December 31, 2021, the Private Placement Warrants were accounted for as liabilities, and the Public Warrants were accounted for as temporary equity.

Common Stock Subject to Possible Redemption  

We account for our common stock subject to possible conversion in accordance with the guidance in ASC 480. 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 the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.  

Net Income (Loss) Per Share of Common Stock

Net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

The Company has not considered the effect of the Public Warrants and the Private Placement Warrants to purchase shares of common stock in the calculation of diluted net income (loss) per share, since the exercise of such warrants into shares of common stock is contingent upon the occurrence of future events and their inclusion would be anti-dilutive. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods presented.

Non-redeemable common stock includes the Founder Shares and other shares of common stock that do not have redemption features.

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.