This Quarterly Report on Form 10-Q includes forward-looking statements. These
forward-looking statements are based on our current expectations and beliefs
concerning future developments and their potential effects on us. There can be
no assurance that future developments affecting us will be those that we have
anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other assumptions that
may cause actual results or performance to be materially different from those
expressed or implied by these forward-looking statements. Our forward-looking
statements include, but are not limited to, statements regarding our or our
management team's expectations, hopes, beliefs, intentions or strategies
regarding the future. In addition, any statements that refer to projections,
forecasts or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking statements. The words
"anticipate," "believe," "continue," "could," "estimate," "expect," "intends,"
"may," "might," "plan," "possible," "potential," "predict," "project," "should,"
"would" and similar expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not forward-looking.
Factors that might cause or contribute to such forward-looking statements
include, but are not limited to, those set forth in the Risk Factors section of
the Company's registration statement and prospectus for the Company's offering
filed with the SEC. The following discussion should be read in conjunction with
our unaudited condensed financial statements and related notes thereto included
elsewhere in this report.
Overview
We are a blank check company incorporated on April 22, 2021 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). We
consummated our Public Offering (as defined below) on September 24, 2021 and are
currently in the process of locating suitable targets for our initial Business
Combination. We intend to use the cash proceeds from our Public Offering and the
Private Placement described below as well as additional issuances, if any, of
our capital stock, debt or a combination of cash, stock and debt to complete the
Business Combination.
We expect to incur significant costs in the pursuit of our initial Business
Combination. We cannot assure you that our plans to raise capital or to complete
our initial Business Combination will be successful.
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Liquidity and Capital Resources
On September 24, 2021, the Company consummated its $304,750,000 Public Offering
consisting of 30,475,000 units at a price of $10.00 per unit ("Unit"). Each Unit
consists of one share of the Company's Class A common stock, $0.0001 par value
(the "Class A Common Stock") and one-half of one redeemable warrant (each, a
"Public Warrant"). Simultaneously, with the closing of the Public Offering, the
Company consummated a $14,440,000 private placement ("Private Placement") of an
aggregate of 9,626,667 warrants ("Private Placement Warrants") at a price of
$1.50 per warrant. Upon closing of the Public Offering and Private Placement on
September 24, 2021, $310,845,000 in proceeds from the Public Offering and
Private Placement was placed in a U.S.-based trust account maintained by
Continental Stock Transfer & Trust Company, acting as trustee (the "Trust
Account"). The Company also used funds held outside of the Trust Account to pay
underwriting commissions of $6,095,000 and deferred offering and formation
costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $1,456,560. Net income of $20,024,836 was attributable to the change in fair
value of warrant liabilities of $9,600,759, gain on settlement of deferred
underwriting commissions of $10,666,250, interest earned on marketable
securities held in the Trust Account of $1,701,943 and changes in operating
assets and liabilities which provided $487,556 in cash from operating
activities.
As of September 30, 2022, the Company had cash and marketable securities held in
the Trust Account of $312,272,552. The Company intends to use substantially all
of the funds held in the Trust Account, including any amounts representing
interest earned on the Trust Account to complete a Business Combination. The
Company may withdraw interest to pay franchise and income taxes. During the
three months ended September 30, 2022, the Company withdrew $307,310 from the
Trust Account for franchise and income taxes. To the extent that the Company's
capital stock or debt is used, in whole or in part, as consideration to complete
a 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 its growth strategies.
As of September 30, 2022, the Company had an unrestricted cash balance of
$81,518 held outside the Trust Account. The Company intends 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.
Further, the Sponsor or an affiliate of the Sponsor or certain of the Company's
officers and directors may, but are not obligated to, loan the Company funds as
may be required. If the Company completes a Business Combination, the Company
will repay such additional loaned amounts, without interest, upon consummation
of the Business Combination. In the event that a Business Combination does not
close, the Company may use a portion of the working capital held outside the
Trust Account to repay such additional loaned amounts but no proceeds from the
Trust Account would be used for such repayment. Up to $1,500,000 of such
additional loans (if any) are 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, including as to exercise price, exercisability and
exercise period. Except for the foregoing, the terms of such additional loans
(if any) have not been determined and no written agreements exist with respect
to such loans.
If the Company is unable to complete a business combination by March 24, 2023,
then the Company will cease all operations except for the purpose of
liquidating. In connection with the Company's assessment of going concern
considerations in accordance with FASB ASC Topic 205-40, "Presentation of
Financial Statements-Going Concern," management has determined that the
liquidity condition and mandatory liquidation on March 24, 2023 and subsequent
dissolution raises substantial doubt about the Company's ability to continue as
a going concern. No adjustments have been made to the carrying amounts of assets
or liabilities should the Company be required to liquidate after March 24, 2023.
Management plans to consummate a Business Combination prior to March 24, 2023,
however there can be no assurance that one will be completed.
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Results of Operations and Known Trends or Future Events
We have neither engaged in any significant business operations nor generated any
revenues to date. All activities to date relate to the Company's formation and
the Public Offering (the "Public Offering"). We expect to generate non-operating
income in the form of interest income on cash, cash equivalents, and marketable
securities that will be held in the Trust Account (as defined below). We expect
to incur increased expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses as we locate a suitable Business Combination.
For the three months ended September 30, 2022, we had a net income of
$1,218,043, which consists of interest earned on marketable securities held in
the Trust Account of $895,362, and the change in fair value of warrant
liabilities of $994,567, offset by operating costs of $507,883 and provision for
income taxes of $164,003. For the period from April 22, 2021 to September 30,
2021, we had a net loss of $1,566,987, which consists of interest earned on
marketable securities held in the Trust Account of $2,015 offset by loss on the
change in fair value of warrant liabilities of $152,375, warrant issuance
transactions costs of $1,277,720 and operating costs of $138,907. For the nine
months ended September 30, 2022, we had a net income of $20,024,836, which
consists of interest earned on marketable securities held in the Trust Account
of $1,701,943, the change in fair value of warrant liabilities of $9,600,759,
and gain on settlement of deferred underwriting commissions of $10,666,250,
offset by operating costs of $1,645,253 and provision for income taxes of
$298,863. Through September 30, 2022 our efforts have been limited to
organizational activities, activities relating to the Public Offering,
activities relating to identifying and evaluating prospective acquisition
candidates and activities relating to general corporate matters. We have not
generated any revenue, other than interest income earned on the proceeds held in
the Trust Account. As of September 30, 2022, $312,272,552 was held in the Trust
Account (including $10,666,250 of deferred underwriting discounts and
commissions and approximately $8.9 million from the Private Placement) and we
had cash outside of the Trust Account of $81,518 and $1,016,289 in accounts
payable and accrued expenses.
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $20,000 for office space, utilities
and secretarial, and administrative support services to the Company. We began
incurring these fees on September 25, 2021 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination or the
Company's liquidation.
The underwriters were entitled to a deferred fee of $0.35 per Unit, or
$10,666,250 in the aggregate, payable to the underwriter from the amounts held
in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement. In June 2022,
the underwriters waived their deferred fee, resulting in a gain from settlement
of deferred underwriting commissions of $10,666,250.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and Warrants that
may be issued upon conversion of working capital loans (and any Class A common
stock issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of working capital loans and upon conversion
of the Founder Shares) are entitled to registration rights pursuant to a
registration rights agreement, requiring the Company to register such securities
for resale. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to our completion of our initial
business combination. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the unaudited condensed
financial statements and accompanying notes. Actual results could differ from
those estimates. The Company has identified the following as its critical
accounting policies:
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Warrant Liability
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. We account for the Warrants in accordance with the guidance
contained in ASC 815-40 under which the Warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, we classify
the Warrants as liabilities at their fair value and adjust the Warrants to fair
value at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statements of operations. The Private Placement Warrants and
the Public Warrants for periods where no observable traded price was available
are valued using the Black-Scholes option and the Monte Carlo simulation model,
respectively. For periods subsequent to the detachment of the Public Warrants
from the Units, the Public Warrant quoted market price will be used as the fair
value as of each relevant date.
Investments Held in Trust Account
The proceeds held in the trust account (the "Trust Account") were invested in
permitted United States "government securities" within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act that invest only in direct U.S. government treasury
obligations.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common
stock subject to mandatory redemption are classified as a liability instrument
and is measured at redemption value. Conditionally redeemable common stock
(including common stock that features redemption rights that is either within
the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company's control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders' equity. The Company's Class A common stock features certain
redemption rights that are considered to be outside of the Company's control and
subject to occurrence of uncertain future events. Accordingly, Class A common
stock subject to possible redemption is presented as temporary equity, outside
of the stockholders' equity section of the Company's unaudited condensed balance
sheets.
Net Income (Loss) Per Share
Net income (loss) per share of common stock is computed by dividing net income
(loss) by the weighted average number of common stock outstanding for the
period. The Company applies the two-class method in calculating earnings per
share. Accretion associated with the redeemable shares of Class A common stock
is excluded from earnings per share as the redemption value approximates fair
value.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("ASU") 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) ("ASU 2020-06")
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be
applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company is currently assessing the impact, if
any, that ASU 2020-06 would have on its financial position, results of
operations or cash flows.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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Off-Balance Sheet Arrangement
We did not have any off-balance sheet arrangements as of September 30, 2022 as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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