All statements other than statements of historical fact included in this Report
including, without limitation, statements under "Item 7. 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.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the 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 blank check company incorporated on August 12, 2020 as a Delaware
corporation and formed for the purpose of effecting a business combination. On
December 9, 2022, we announced that we had signed a non-binding letter of intent
for our initial business combination with the Target. We intend to negotiate and
consummate a business combination with the Target, but we are not able to assure
you whether we will complete a business combination with the Target or with any
other target business. We also have neither engaged in any operations nor
generated any revenue to date. Based on our business activities, the Company is
a "shell company" as defined under the Exchange Act because we have no
operations and nominal assets consisting almost entirely of cash.
On December 11, 2020, we consummated our initial public offering of 30,000,000
units, including 3,900,000 units issued to the underwriters based on a partial
exercise of their over-allotment option. Each unit consists of one share of
Class A common stock and one-half of one redeemable warrant, with each whole
warrant entitling the holder thereof to purchase one share of Class A common
stock for $11.50 per share. The units were sold at a price of $10.00 per unit,
generating gross proceeds of $300 million. Simultaneously with the consummation
of the initial public offering, we completed the private placement of an
aggregate of 8,000,000 warrants to the Sponsor at a purchase price of $1.00 per
warrant, generating gross proceeds of $8 million. Prior to the consummation of
the initial public offering, on August 12, 2020, we issued an aggregate of
8,625,000 shares of our Class B common stock to our Sponsor for an aggregate
purchase price of $25,000 in cash. On November 30, 2020, our Sponsor surrendered
an aggregate of 1,437,500 founder shares to us for no consideration, resulting
in our Sponsor holding an aggregate of 7,503,750 founder shares. On December 11,
2020 the underwriters partially exercised their over-allotment option, and as a
result, 975,000 founder shares were no longer subject to forfeiture and 3,750
founder shares were forfeited for no consideration. Accordingly, this resulted
in our Sponsor holding an aggregate of 7,500,000 founder shares.
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A total of $300,000,000, comprised of $292,000,000 of the proceeds from the
initial public offering (which amount includes $10,500,000 of the underwriters'
deferred discount) and $8,000,000 of the proceeds of the sale of the private
placement warrants, was placed in a U.S.-based trust account at J.P. Morgan
Chase Bank, N.A., maintained by CST, acting as trustee.
On December 5, 2022, in order to mitigate the risk of being deemed an
unregistered investment company, we instructed CST to liquidate the securities
held in the trust account and instead hold all funds in the trust account in an
interest-bearing bank deposit account. As a result, following such change, we
will likely receive minimal, if any, interest, on the funds held in the trust
account.
As of December 31, 2022, there was $16,975,796 in cash held in the trust
account.
On June 10, 2022, we held a special meeting of stockholders. At the June Special
Meeting, the Company's stockholders approved an amendment to the Company's
Amended and Restated Certificate of Incorporation to extend the date by which
the Company must complete its initial business combination from June 11, 2022 to
October 11, 2022. In connection with the June Special Meeting, stockholders
holding an aggregate of 24,944,949 shares of the Company's Class A common stock
exercised their right to redeem their shares for approximately $10.01 per share
of the funds held in the Company's trust account, leaving approximately
$50,600,000 in cash in the trust account after satisfaction of such redemptions.
Prior to the June Special Meeting, on June 9, 2022, we entered into non
redemption agreements with certain of our existing stockholders holding an
aggregate of 1,250,000 shares of Class A common stock. Pursuant to the June
Non-Redemption Agreements, the June Non-Redeeming Stockholders agreed to (a) not
redeem any shares of Class A common stock held by them on the date of the
Non-Redemption Agreements in connection with the June Extension Amendment
Proposal, (b) vote all of their Shares in favor of the June Extension Amendment
Proposal and any initial business combination presented by the Company for
approval by its stockholders, and (c) not Transfer (as such term is defined in
the June Non-Redemption Agreements) any of their shares until the earlier of
October 11, 2022 and consummation of the Company's initial business combination.
In connection with the June Non-Redemption Agreements, Gary Teplis, the Chief
Executive Officer of the Company, agreed to pay to each June Non-Redeeming
Stockholder $0.033 per share in cash per month through the Termination Date as a
result Gary Teplis contibuted a total of $184,929 as part of the executed June
Non-Redemption Agreements.
On October 6, 2022, we held a special meeting of stockholders. At the October
Special Meeting, the Company's stockholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to extend the date
by which the Company must complete a business combination from October 11, 2022
to April 11, 2023. In connection with the October Special Meeting, stockholders
holding an aggregate of 3,382,949 shares of the Company's Class A common stock
exercised their right to redeem their shares for approximately $10.05 per share
of the funds held in the Company's trust account, leaving approximately
$16,810,087 in cash in the trust account after satisfaction of such redemptions.
Prior to the October Special Meeting, on October 5, 2022, we entered into a
non-redemption agreement with one of our existing stockholders holding an
aggregate of 223,124 shares of Class A common stock, par value $0.0001, of the
Company. Pursuant to the October Non-Redemption Agreement, the October
Non-Redeeming Stockholder agreed to (a) not redeem the shares in connection with
the October Extension Amendment Proposal and (b) vote all of its shares in favor
of the October Extension Amendment Proposal.
In connection with the October Non-Redemption Agreement, Gary Teplis, the Chief
Executive Officer of the Company, agreed to pay to the October Non-Redeeming
Stockholder $0.05 per Share per month through April 11, 2023, in a single cash
payment within 45 days from the date of the October Non-Redemption Agreement as
a result Gary Teplis contibuted a total $66,937 as part of the executed October
Non-Redemption Agreements.
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As of December 31, 2022, a total of $16,975,795.93 was held in the trust
account. The trust account is held in an interest-bearing bank deposit account
and the income earned on the deposit account is also for the benefit of our
public stockholders.
Our management has broad discretion with respect to the specific application of
the net proceeds of the initial public offering and the Private Placement,
although substantially all of the net proceeds are intended to be applied
generally towards consummating a business combination.
Letter of Intent
On December 9, 2022, we entered into a LOI for a business combination the
Target. The Target, a leader in its medical device field with a product that is
commercially available and approved for use in over 30 countries, seeks
additional expansion in the U.S. and globally.
Under the terms of the LOI, Altitude and the Target would be become a combined
entity, with the Target's existing equity holders rolling 100% of their equity
into the combined public company. The proposed transaction values the Target at
an enterprise value of $480 million and calls for the combined company to have
at least $30 million in net cash at the time of closing. Altitude expects to
announce additional details regarding the proposed business combination when a
definitive merger agreement is executed, which is expected in the first quarter
of 2023.
Completion of a business combination with the Target is subject to, among other
matters, the completion of due diligence, the negotiation of a definitive
agreement providing for the transaction, satisfaction of the conditions
negotiated therein and approval of the transaction by the board and stockholders
of both Altitude and the Target. There can be no assurance that a definitive
agreement will be entered into or that the proposed transaction will be
consummated on the terms or timeframe currently contemplated, or at all.
Nasdaq Deficiency Notice
On January 9, 2023, the Company received the Deficiency Notice from Nasdaq
indicating that the Company failed to hold an annual meeting of stockholders
within 12 months after its fiscal year ended December 31, 2021, as required by
Nasdaq Listing Rule 5620(a). The Company submitted a plan to regain compliance
and Nasdaq granted the Company until April 11, 2023, its current liquidation
date, to regain compliance.
Preliminary Proxy Statement
On March 6, 2023, we filed a preliminary proxy statement seeking stockholder
approval for the Extension Amendment Proposal, the Founder Share Amendment
Proposal, the Redemption Limitation Amendment Proposal and the Director Election
Proposal.
Results of Operations
As of December 31, 2022, we have not commenced any operations. All activity for
the period from August 12, 2020 (inception) through December 31, 2022, relates
to our formation and initial public offering, and, since the completion of the
IPO, searching for a target to consummate a business combination. We will not
generate any operating revenues until after the completion of a business
combination, at the earliest. We generate non-operating income in the form of
interest income on cash deposits 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 year ended December 31, 2022, we had a net income of $9,342,644 which
included unrealized gain on change in fair value of warrants of $12,065,834,
interest income earned on the proceeds in the trust account of $654,735 and
interest income earned on the operating bank account of $4, partially offset by
operating costs of $3,339,747 and income tax provision of $38,180.
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For the year ended December 31, 2021, we had a net income of $15,225,829, which
included unrealized gain on change in fair value of warrants of $20,358,180,
gain on settlement of payable of $860,699, interest income earned on the
proceeds in the trust account of $26,714 and interest income earned on the
operating bank account of $24, partially offset by operating costs of
$6,019,788.
Liquidity and Capital Resources
As of December 31, 2022, we had cash outside our trust account of $760 available
for working capital needs. All remaining cash was held in the trust account and
is generally unavailable for our use prior to an initial business combination.
On December 11, 2020, we consummated the IPO of 30,000,000 Units, at $10.00 per
Unit, generating gross proceeds of $300,000,000.
Simultaneously with the closing of the IPO, we consummated the sale of 8,000,000
warrants, at a price of $1.00 per Private Warrant, generating gross proceeds of
$8,000,000.
In connection with the IPO, the underwriters were granted a 45-day option from
the date of the prospectus to purchase up to 3,915,000 additional Units to cover
over-allotments, if any. On December 11, 2020, the underwriters partially
exercised their Over-Allotment Option and purchased an additional 3,900,000
Units. The unexercised portion of the over-allotment option was forfeited.
Following our IPO and the sale of the Private Warrants, a total of $300,000,000
($10.00 per Unit) was placed in the trust account. We incurred $17,107,057 in
IPO related costs, including $6,000,000 of underwriting fees, $10,500,000 of
deferred underwriting discount and $607,057 of other costs.
As of December 31, 2022, we had investments held in the trust account of
$16,975,896.93 (including approximately consisting of cash held in an
interest-bearing bank deposit account. Interest income on the balance in the
trust account may be used by us to pay taxes.
For the year ended December 31, 2022, cash used in operating activities was
$123,494. Net income of $9,342,644 was impacted by interest income earned on the
trust account of $654,735, unrealized gain on change in fair value of warrants
of $12,065,834, and changes in operating assets and liabilities, which provided
$3,002,565 of cash for operating activities.
For the year ended December 31, 2021, cash used in operating activities was
$721,275. Net income of $15,225,829 was impacted by interest income earned on
the trust account of $26,714, gain on settlement of payable of $860,699,
unrealized gain on change in fair value of warrants of $20,358,180, and changes
in operating assets and liabilities, which provided $5,298,489 of cash for
operating activities.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account
(excluding the deferred underwriters' discount) to complete our initial business
combination. We may withdraw interest to pay our taxes and liquidation expenses
if we are unsuccessful in completing a business combination. We estimate our
annual franchise tax obligations to be $200,000, which is the maximum amount of
annual franchise taxes payable by us as a Delaware corporation per annum, which
we may pay from funds from the initial public offering held outside of the trust
account or from interest earned on the funds held in the trust account and
released to us for this purpose. Our annual income tax obligations will depend
on the amount of interest and other income earned on the amounts held in the
trust account reduced by our operating expense and franchise taxes. We expect
the interest earned on the amount in the trust account will be sufficient to pay
our income taxes. To the extent that our equity or debt is used, in whole or in
part, as consideration to complete our initial 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.
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On June 2, 2021, we issued an unsecured promissory note to the Sponsor for an
aggregate available principal amount of $300,000 to be used for a portion of the
expenses of the business combination. This loan is non-interest bearing,
unsecured and due at the earlier of December 31, 2021 or the closing of the
business combination. As of December 31, 2022 and 2021, there was $0 balance
under the promissory note.
Further, our Sponsor, officers and directors or their respective affiliates may,
but are not obligated to, loan us funds as may be required (the "Working Capital
Loans"). If we complete a business combination, we would repay the Working
Capital Loans. In the event that a business combination does not close, we may
use a portion of proceeds held outside the trust account to repay the Working
Capital Loans, but no proceeds held in the trust account would be used to repay
the Working Capital Loans. Such Working Capital Loans would be evidenced by
promissory notes. The notes would either be repaid upon consummation of a
business combination, without interest, or, at the lender's discretion. As of
December 31, 2022 and 2021, no Working Capital Loans have been issued.
At December 31, 2022 and 2021, the Company owed the Sponsor or its affiliates
$802,644 and $100,000 related to advances, respectively. Although management
expects that it will be able to raise additional capital to support its planned
activities and complete a business combination on or prior to April 11, 2023, it
is uncertain whether it will be able to do so. 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.
Off-Balance Sheet Financing Arrangements
We did not have any off-balance sheet arrangement as of December 31, 2022.
Contractual Obligations
As of December 31, 2022, we did not have any long-term debt, capital or
operating lease obligations.
We entered into an administrative services agreement pursuant to which we will
pay an affiliate of one of our directors for office space and secretarial and
administrative services provided to members of our management team, in an amount
not to exceed $10,000 per month. We have incurred $120,000 of administrative
service fees for the years ended December 31, 2022 and 2021, respectively.
Critical Accounting Estimate
The preparation of 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 estimates:
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires the
Company's 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 financial statements and the reported amounts of
revenues and expenses during the reporting period.
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Making estimates requires management to exercise significant judgment. It is at
least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the financial
statements, which management considered in formulating its estimate, could
change in the near term due to one or more future confirming events. The
warrants liabilities are the Company's most significant estimate. Accordingly,
the actual results could differ significantly from those estimates.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified on the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date. We have
determined that the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation
of proceeds from the issuance of convertible debt into its equity and debt
components. We apply this guidance to allocate IPO proceeds from the Units
between Class A common stock and warrants, using the residual method by
allocating IPO proceeds first to fair value of the warrants and then the Class A
common stock.
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 the Financial Accounting Standards Board's
("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing
Liabilities from Equity." Common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A 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
our control) are classified as temporary equity. At all other times, common
stock is classified as stockholders' deficit. Our Class A common stock feature
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of
December 31, 2022 and 2021, the 1,672,102 and 30,000,000 Class A common stock
subject to possible redemption, respectively, are presented as temporary equity,
outside of the stockholders' deficit section of our balance sheets.
Net Income (Loss) Per Common Stock
We have two classes of shares, which are referred to as Class A common stock and
Class B common stock. Earnings and losses are shared pro rata between the two
classes of shares. The 23,000,000 shares of Class A common stock potentially
issuable upon the exercise of outstanding warrants to purchase our shares were
excluded from diluted earnings per share for the years ended December 31, 2022
and 2021 because the warrants are contingently exercisable, and the
contingencies have not yet been met. As a result, diluted net income (loss) per
common stock is the same as basic net income (loss) per common stock for the
periods presented.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update ("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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share
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calculation in certain areas. ASU 2020-06 is effective January 1, 2024 and
should be applied on a full or modified retrospective basis, with early adoption
permitted on January 1, 2021. Adoption of the ASU did not impact the Company's
financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" under the JOBS Act and are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We have elected not to opt out of such extended
transition period which means that when a standard is issued or revised and it
has different application dates for public or private companies, we, as an
emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of
our financial statements with another public company which is neither an
emerging growth company nor an emerging growth company which has opted out of
using the extended transition period difficult or impossible because of the
potential differences in accounting standards used.. Additionally, subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an independent registered public accounting firm's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the independent registered public accounting firm's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis), and (iv) disclose certain
executive compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of this offering or until we are no longer an "emerging
growth company," whichever is earlier.
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