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OFFON

DA32 LIFE SCIENCE TECH ACQUISITION CORP.

(DALS)
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DA32 LIFE SCIENCE TECH ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/15/2021 | 04:15pm EST
References to the "Company," "DA32 Life Sciences Tech Acquisition Corp.," "our,"
"us" or "we" refer to DA32 Life Sciences Tech Acquisition Corp. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the unaudited interim condensed
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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form
10-Q
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on April 16, 2021. We were
formed for the purpose of effecting a merger, share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). We are an emerging growth company and,
as such, we are subject to all of the risks associated with emerging growth
companies.
Our sponsor is DA32 Sponsor LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for the Company's Initial Public Offering
was declared effective on July 27, 2021. On July 30, 2021, the Company
consummated its Initial Public Offering of 20,000,000 shares of Class A common
stock (the "Public Shares"), at an offering price of $10.00 per Public Share,
generating gross proceeds of $200.0 million, and incurring offering costs of
approximately $9.3 million, inclusive of $5.6 million in deferred underwriting
commissions.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the private placement ("Private Placement") of 650,000 shares of
Class A common stock (the "Private Placement Shares"), at a price of $10.00 per
Private Placement Share to the Sponsor, generating gross proceeds of
$6.5 million (Note 4) paid on August 3, 2021.
Upon the closing of the Initial Public Offering and the Private Placement,
$200.0 million ($10.00 per Public Share) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement were placed
in a trust account ("Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and invested only
in U.S. "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 which invest only in direct U.S.
government treasury obligations, as determined by the Company, until the earlier
of: (i) the completion of a Business Combination and (ii) the distribution of
the Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of Private
Placement Shares, although substantially all of the net proceeds are intended to
be applied generally toward consummating a Business Combination. There is no
assurance that we will be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(net of amounts disbursed to management for working capital purposes, if
permitted, and excluding the amount of any deferred underwriting commissions) at
the time of the agreement to enter into the initial Business Combination.
However, we will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the voting securities of the target or
otherwise acquires a controlling interest in the target sufficient for it not to
be required to register as an investment company under the Investment Company
Act.

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If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or July 30, 2023, or during any extended
period of time that we may have to consummate a Business Combination as a result
of an amendment to the Certificate of Incorporation (the "Combination Period"),
we will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter,
redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its taxes (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish Public
Stockholders' rights as stockholders (including the right to receive further
liquidating distributions, if any), and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders
and the board of directors, liquidate and dissolve, subject in each case to the
Company's obligations under Delaware law to provide for claims of creditors and
the requirements of other applicable law.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $2.0 million in our operating
bank account, and working capital of approximately $2.4 million (not taking into
account approximately $90,000 in tax obligations that may be paid using
investment income earned in Trust Account).
Our liquidity needs to date have been satisfied through a cash payment of
$25,000 from our Sponsor to purchase the Founder Shares, the loan of
approximately $200,000 from the Sponsor pursuant to the Note, and the proceeds
from the consummation of the Private Placement not held in the Trust Account.
The Company fully repaid the Note upon closing of the Initial Public Offering.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company's officers and directors may, but are not obligated to, provide the
Company Working Capital Loans. As of September 30, 2021, there were no amounts
outstanding under any Working Capital Loan.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or certain of our officers and directors to meet our needs through the earlier
of the consummation of a Business Combination or one year from this filing. Over
this time period, we will be using these funds for paying existing accounts
payable, identifying and evaluating prospective initial Business Combination
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the Business Combination.
Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible
that the virus could have a negative effect on our financial position, results
of our operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the unaudited condensed financial
statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity from inception up to September 30, 2021, was for our
formation and the Initial Public Offering and, subsequent to the Initial Public
Offering, the search for a prospective target for an initial Business
Combination. We will not be generating any operating revenues until the closing
and completion of our initial Business Combination.
For the three months ended September 30, 2021, we had a net loss of
approximately $271,000, which consisted of approximately $197,000 in general and
administrative expenses, $35,000 in administrative expenses - related party and
approximately $49,000 in franchise tax expenses, partially offset by
approximately $9,000 in gain on investments held in Trust Account.

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For the period from April 16, 2021 (inception) through September 30, 2021, we
had a net loss of approximately $323,000, which consisted of approximately
$199,000 in general and administrative expenses, $35,000 in administrative
expenses-related party and $90,000 in franchise tax expenses, partially offset
by approximately $9,000 in gain on investments held in Trust Account.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities were first listed on NASDAQ and
continuing until the earlier of our consummation of a Business Combination or
our liquidation, we agreed to pay the Sponsor a total of $10,000 per month for
office space, secretarial and administrative services provided to members of our
management team. For the three months ended September 30, 2021, and for the
period from April 16, 2021 (inception) through September 30, 2021, the Company
incurred expenses of $20,000 under this agreement, included in administrative
expenses - related party on the accompanying unaudited condensed statements of
operations. As of September 30, 2021, no amounts were outstanding for these
services.
The Sponsor, officers and directors, or any of their respective affiliates will
be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable
Business Combinations. Our audit committee will review on a quarterly basis all
payments that were made to the Sponsor, officers or directors, or their
affiliates.
Wolfe Strategic Services Agreement
On July 27, 2021, we entered into an agreement that provides that, commencing on
the date that our securities were first listed on Nasdaq, we shall pay our Chief
Financial Officer, Christopher Wolfe, $7,500 per month for his services prior to
the initial Business Combination.
During the three months ended September 30, 2021, and the period from April 16,
2021 (inception) through September 30, 2021, we incurred $15,000 in expenses for
these services which is included in administrative expenses-related party on the
accompanying statements of operations.
Registration Rights
The holders of Founder Shares, Private Placement Shares, and shares of Class A
common stock that may be issued upon conversion of Working Capital Loans, if
any, will be entitled to registration rights pursuant to a registration rights
agreement. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that the Company register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
completion of the initial Business Combination. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The underwriters did not earn any underwriting commissions on the 4,000,000
Affiliated Shares. Except for the Affiliated Shares, the underwriters were
entitled to an upfront underwriting discount of $0.20 per share, or $3.2 million
in the aggregate, paid upon the closing of the Initial Public Offering, and a
deferred underwriting commissions of $0.35 per share, or $5.6 million in the
aggregate will be 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
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:

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Investments held in the Trust Account
Our portfolio of investments is comprised of U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 185 days or less, or investments in money market funds that invest
in U.S. government securities and generally have a readily determinable fair
value, or a combination thereof. When our investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities. When our investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading
securities and investments in money market funds are presented on the balance
sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities is included in gain
from investments held in the Trust Account in the accompanying unaudited
condensed statement of operations. The estimated fair values of investments held
in the Trust Account are determined using available market information.
Class A common stock subject to possible redemption
Class A 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 shares of Class A 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, Class A common
stock are classified as stockholders' equity. Our Class A common stock features
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, as of
September 30, 2021, 20,000,000 shares of Class A common stock subject to
possible redemption at the redemption amount were presented at redemption value
as temporary equity, outside of the stockholders' equity section of our
unaudited condensed balance sheet.
Effective with the closing of the Initial Public Offering, we recognized the
accretion from initial book value to redemption amount, which resulted in
charges against additional
paid-in
capital (to the extent available) and accumulated deficit.
Net income (loss) per common shares
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average shares of
common stock outstanding for the respective period. Accretion associated with
the redeemable Class A common stock is excluded from earnings per share as the
redemption value approximates fair value.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying unaudited condensed financial statements.
Off-Balance
Sheet Arrangements
As of September 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

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JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for
non-emerging
growth companies. As a result, the unaudited condensed financial statements may
not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. 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 auditor'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 auditor's
report providing additional information about the audit and the unaudited
condensed 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 our Initial Public
Offering or until we are no longer an "emerging growth company," whichever is
earlier.

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