References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to Belong Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Belong Acquisition Sponsor, LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the condensed financial statements and the notes
thereto contained elsewhere in this Quarterly 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 and Section 21E of 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 Company's Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC"). 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 incorporated in Delaware on December 29, 2020,
formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, share purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering
and the sale of the Private Placement Units, our shares, debt or a combination
of cash, shares 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.
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
subsequent to the Initial Public Offering, 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, at the earliest. 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.
For the three months ended September 30, 2022, we had net income of $671,050
which consisted of change in fair value of warrant liabilities of $388,750 and
interest earned on marketable securities held in Trust Account of $676,382,
partially offset by operating and formation costs of $284,230 and provision for
income taxes of $109,852.
For the nine months ended September 30, 2022, we had net income of $3,646,059
which consisted of change in fair value of warrant liabilities of $3,654,250 and
interest earned on marketable securities held in Trust Account of $894,044,
partially offset by operating and formation costs of $785,062 and provision for
income taxes of $117,173.
For the three months ended September 30, 2021, we had net income of $2,446,608
which consisted of change in fair value of warrant liabilities of $3,032,250 and
interest earned on marketable securities held in Trust Account of $1,343,
partially offset by operating and formation costs of $178,381 and transaction
cost related to warrant liability of $408,604.
For the period from January 1, 2021 (commencement of operations) through
September 30, 2021, we had net income of $2,445,608 which consisted of change in
fair value of warrant liabilities of $3,032,250 and interest earned on
marketable securities held in Trust Account of $1,343, partially offset by
operating and formation costs of $179,381 and transaction cost related to
warrant liability of $408,604.
Liquidity and Capital Resources
On July 27, 2021, we consummated the Initial Public Offering of 15,000,000
Units, generating gross proceeds of $150,000,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 550,000
Private Placement Units at a price of $10.00 per Private Placement Unit in a
private placement to our Sponsor, generating gross proceeds of $5,500,000.
Following the Initial Public Offering and the sale of the Private Placement
Units, a total of $150,000,000 was placed in the Trust Account. We incurred
$8,693,703 in Initial Public Offering related costs, including $3,000,000 of
underwriting fees, $5,250,000 of deferred underwriting fees and $443,703 of
other costs.
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For the nine months ended September 30, 2022, cash used in operating activities
was $805,035. Net income of $3,646,059 was affected by non-cash charges (income)
related to change in fair value of warrant liabilities of $3,654,250 and
interest earned on marketable securities held in Trust Account of $894,044.
Changes in operating assets and liabilities provided $97,200 of cash for
operating activities.
For the period from January 1, 2021 (commencement of operations) through
September 30, 2021, cash used in operating activities was $571,539. Net income
of $2,445,608 was affected by non-cash charges (income) related to change in
fair value of warrant liabilities of $3,032,250, interest earned on marketable
securities held in Trust Account of $1,343 and transaction costs related to
warrant liability of $408,604. Changes in operating assets and liabilities used
$392,158 of cash for operating activities.
As of September 30, 2022, we had investments held in the Trust Account of
$150,585,273 (including $585,273 of interest income) consisting of money market
funds 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
withdrew $ 313,283 of the interest earned from the Trust Account for our tax
obligations.
We intend to use the funds held in the Trust Account, including any amounts
representing interest earned on the Trust Account (less taxes payable), to
complete our Business Combination. To the extent that our share capital 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.
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. If we complete a Business Combination, we will repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into units
upon consummation of the Business Combination at a price of $10.00 per unit.
The units would be identical to the Private Placement Units. As of September 30,
2022, there were no amounts outstanding under these loans.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. 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.
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Going Concern
In connection with our assessment of going concern considerations in accordance
with the Financial Accounting Standard Board ("FASB") Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," we have until January 27, 2023 to consummate a
Business Combination. It is uncertain that we will be able to consummate a
Business Combination by this time. If a Business Combination is not consummated
by this date and an extension has not been requested by the Sponsor and approved
by our stockholders, there will be a mandatory liquidation and subsequent
dissolution of the Company. Management has determined that the mandatory
liquidation, should a Business Combination not occur and an extension not
requested by the Sponsor, and potential subsequent dissolution raise substantial
doubt about our ability to continue as a going concern. No adjustments have been
made to the carrying amounts of assets or liabilities should we be required to
liquidate after January 27, 2023. We intend to continue to search for and seek
to complete a Business Combination before the mandatory liquidation date. We are
within 12 months of our mandatory liquidation date as of the time of filing of
this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We had no obligations, assets or liabilities, which 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 an
affiliate of the Sponsor a monthly fee of $10,000 for office space,
administrative and shared personnel support. We began incurring these fees on
July 23, 2021 and will continue to incur these fees monthly until the earlier of
the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per share, or
$5,250,000 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America 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 condensed 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 Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. 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 a binomial lattice model. For periods subsequent to the
detachment of the Public Warrants from the Units, the Public Warrant quoted
market price was used as the fair value as of each relevant date.
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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 ASC 480. Class A common stock subject to
mandatory redemption is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common shares (including common stock that
features redemption rights that are 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
occurrence of uncertain future events. Accordingly, Class A common stock subject
to possible redemption is presented as temporary equity, outside of the
stockholders' deficit section of our condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Immediately upon the closing of the
Initial Public Offering, the Company recognized the accretion from initial book
value to redemption amount value. Increases or decreases in the carrying amount
of redeemable common stock are affected by charges against additional paid in
capital and accumulated deficit.
Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. 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. Accretion associated with the redeemable Class A common shares is
excluded from earnings per share as the redemption value approximates fair
value.
Recent Accounting Standards
In August 2020, the FASB issued 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 for fiscal years beginning after December
15, 2023 and should be applied on a full or modified retrospective basis, with
early adoption permitted beginning on January 1, 2021. We are currently
assessing the impact, if any, that ASU 2020-06 would have on our financial
position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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