The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under 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. 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.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on the Company's behalf are qualified in their entirety by this
paragraph.
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 formed under the laws of the State of Delaware on
December 15, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our initial
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 an initial
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 December 31, 2021 were organizational activities,
those necessary to prepare for the initial public offering, described below, and
identifying a target company for an initial business combination. We do not
expect to generate any operating revenues until after the completion of our
initial business combination. We generate non-operating income in the form of
interest income on marketable securities held in a trust account located in the
United States. 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, 2021, we had net income of $335,708, which
consists of the change in fair value of warrant liabilities of $3,114,125 and
interest earned on marketable securities held in trust account of $15,421,
offset by general and administrative expenses of $2,321,741 and transaction
costs allocable to warrant liabilities of $472,097.
For the period from December 15, 2020 (inception) through December 31, 2020, we
had net loss of $770, which consisted of general and administrative expenses.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial business combination.
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Liquidity and Capital Resources
On March 4, 2021, we consummated the initial public offering of 25,000,000 units
at $10.00 per unit, generating gross proceeds of $250,000,000. Simultaneously
with the closing of the initial public offering, we consummated the sale of
4,666,667 private placement warrants at a price of $1.50 per private placement
warrant in a private placement to the sponsor, generating gross proceeds of
$7,000,000.
On March 17, 2021, in connection with the underwriters' exercise of their
over-allotment option in full, we consummated the sale of an additional
3,750,000 units at a price of $10.00 per unit, generating total gross proceeds
of $37,500,000. In addition, we also consummated the sale of an additional
500,000 private placement warrants at $1.50 per private placement warrant,
generating total gross proceeds of $750,000.
Following the initial public offering, the full exercise of the over-allotment
option and the sale of the private placement warrants, a total of $287,500,000
was placed in the trust account. We incurred $6,180,484 in initial public
offering related costs, including $5,750,000 of underwriting fees and $430,484
of other costs.
For the year ended December 31, 2021, cash used in operating activities was
$1,396,143. Net income of $335,708 was affected by the change in fair value of
the warrant liabilities of $3,114,125, transaction costs allocable to the
warrant liabilities of $472,097, interest earned on marketable securities held
in trust account of $15,421 and operating costs paid through a promissory note
of $450. Changes in operating assets and liabilities provided $925,148 of cash
for operating activities.
For the period from December 15, 2020 (inception) through December 31, 2020,
cash used in operating activities was $0. Net loss of $770 was affected by
operating costs paid through a promissory note.
As of December 31, 2021, we had marketable securities held in the trust account
of $287,515,421 (including $15,421 of interest income). Interest income on the
balance in the trust account may be used by us to pay taxes. Through December
31, 2021, we had not withdrawn any interest earned from the trust account.
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 initial business combination. To the
extent that our capital stock 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.
As of December 31, 2021, we had cash of $197,153. 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 an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with an initial 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 an initial business combination, we
would repay such loaned amounts. In the event that an initial 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 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.
On February 9, 2022, the sponsor committed to provide the Company an aggregate
of up to $1,500,000 in loans for working capital purposes. These loans will be
non-interest bearing, unsecured and will be repaid upon the consummation of a
business combination. If the Company does not consummate a business combination,
all amounts loaned to the Company in connection with these loans will be
forgiven except to the extent that the Company has funds available to it outside
of its trust account. As a result, management has determined that sufficient
capital exists to sustain operations for at least one year from the issuance
date of these financial statements and therefore substantial doubt has been
alleviated.
On February 14, 2022, the Company issued a promissory note in the principal
amount of up to $1,500,000 to the sponsor. The note was issued in connection
with advances the sponsor has made, and may make in the future, to the Company
for working capital expenses. If the Company completes an initial business
combination, the Company would repay the note out of the proceeds of the trust
account released to the Company. Otherwise, the note would be repaid only out of
funds held outside the trust account. In the event that an initial business
combination does not close, the Company may use a portion of the working capital
held outside the trust account to repay the note but no proceeds from the trust
account would be used to repay the note. At the election of the sponsor, all or
a portion of the unpaid principal
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amount of the note may be converted into warrants of the Company at a price of
$1.50 per warrant (the "Conversion Warrants"). The Conversion Warrants and their
underlying securities are entitled to the registration rights set forth in the
note. The issuance of the note was made pursuant to the exemption from
registration contained in Section 4(a)(2) of the Securities Act.
The Company may raise additional capital through loans or additional investments
from the sponsor or its stockholders, officers, directors, or third parties. The
Company's officers and directors and the sponsor may, but are not obligated to
loan the Company funds, from time to time, in whatever amount they deem
reasonable in their sole discretion, to meet the Company's working capital
needs. Based on the foregoing, the Company believes it will have sufficient cash
to meet its needs through the earlier of consummation of an initial business
combination or at least one year from the issue of these financial statements,
the deadline to complete an initial business combination pursuant to the
Company's amended and restated certificate of incorporation (unless otherwise
amended by stockholders).
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. 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 per month for office space, secretarial and
administrative services. We began incurring these fees on March 2, 2021 and will
continue to incur these fees monthly until the earlier of the completion of our
initial business combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per unit, or
$10,062,500. The deferred fee will become payable to the underwriters from the
amounts held in the trust account solely in the event that the Company completes
an initial business combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
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 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 Accounting
Standards Codification ("ASC") 480 and ASC 815. We account for the public
warrants and private placement warrants (together with public warrants, 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.
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 Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is 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 Class A common stock features certain
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redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' (deficit) equity section of our balance sheets.
Net Income (Loss) per Share of Common Stock
The Company complies with accounting and disclosure requirements of Financial
Accounting Standards Board ("FASB") ASC Topic 260, "Earnings Per Share". The
Company has 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 share of common stock is calculated by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding for the respective 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.
Recent Accounting Standards
In August 2020, the FASB issued 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 GAAP. ASU 2020-06 removes certain settlement conditions that are
required for equity contracts to qualify for the derivative scope exception and
it also simplifies the diluted earnings per share calculation in certain areas.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption
permitted. We adopted ASU 2020-06 effective as of January 1, 2021. The adoption
of ASU 2020-06 did not have an impact on our financial statements.
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 financial statements.
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