The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" included elsewhere in this Annual Report on
Form 10-K. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of many factors, including those set forth under "Special Note Regarding
Forward-Looking Statements" and "Item 1A. Risk Factors" included elsewhere in
this Annual Report on Form 10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on
August 25, 2020 for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our business
combination using cash from the proceeds of our 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 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 from August 25, 2020 (inception) through December 31, 2021
were organizational activities, those necessary to prepare for our initial
public offering, described below, and 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. 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 year ended December 31, 2021, we had a net loss of $660,312, which
consists of operating and formation costs of $2,368,051 and transaction costs
incurred in connection with our initial public offering of $536,079, offset by
changes in fair value of warrant liabilities of $2,215,245 and interest earned
on marketable securities held in trust account of $28,573.
For the period from August 25, 2020 (inception) through December 31, 2020, we
had a net loss of $3,952 which consists of operating and formation costs.
Liquidity and Capital Resources
On January 29, 2021, we consummated our initial public offering of 25,875,000
units at $10.00 per unit, generating gross proceeds of $258,750,000, which is
described in Note 3. Simultaneously with the closing of the initial public
offering, we consummated the sale of 7,175,000 private placement warrant at a
price of $1.00 per private placement warrant in a private placement to the
sponsor, generating gross proceeds of $7,175,000, which is described in Note 4.
Following our initial public offering, the full exercise of the over-allotment
option, and the sale of the founder shares, a total of $258,750,000 was placed
in the trust account. We incurred $14,667,474 in initial public offering related
costs, including $5,175,000 of underwriting fees, net of reimbursement, and
$436,224 of other costs.
For the year ended December 31, 2021, cash used in operating activities was
$927,502. Net loss of $660,312 was affected by interest earned on marketable
securities held in the trust account of $28,573, change in fair value of warrant
liabilities of $2,215,245 and transaction costs incurred in connection with our
initial public offering of $536,079. Changes in operating assets and liabilities
used $1,440,549 of cash for operating activities.
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For the period from August 25, 2020 (inception) through December 31, 2020, cash
used in operating activities was $0. Net loss of $3,952 was affected by the
changes in operating assets and liabilities.
As of December 31, 2021, we had marketable securities held in the trust account
of $258,778,573 (including $28,573 of interest income) consisting of U.S.
Treasury Bills 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 December
31, 2021, we have 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 business combination. To the extent that
our capital stock 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.
As of December 31, 2021, we had cash of $661,275. 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, our 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 would 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 $1,000,000 of such loans may be convertible into warrants
at a price of $1.00 per warrant, at the option of the lender. The warrants would
be identical to the private placement warrants.
Liquidity and Going Concern
We will need to raise additional capital through loans or additional investments
from our sponsor, stockholders, officers, directors, or third parties. Our
officers, directors and sponsor may, but are not obligated to, loan us funds,
from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion, to meet our working capital needs. Accordingly, we may
not be able to obtain additional financing. If we are unable to raise additional
capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead
expenses. We cannot provide any assurance that new financing will be available
to us on commercially acceptable terms, if at all. These conditions raise
substantial doubt about our ability to continue as a going concern through
January 23, 2023, the date that we will be required to cease all operations,
except for the purpose of winding up, if a business combination is not
consummated. These conditions raise substantial doubt about our ability to
continue as a going concern.
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.
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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 one of our executive officers a monthly fee of $10,000 for office
space, utilities and secretarial and administrative support. We began incurring
these fees on January 26, 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
$9,056,250 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 Estimates
The preparation of 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 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 account for the warrants in accordance with the guidance contained in ASC
815-40-15-7D and 7F, 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 adjusts 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 condensed statements of operations.
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. Shares of Class A common stock subject
to mandatory redemption are classified as a liability instrument and are
measured at fair value. Conditionally redeemable common stock (including common
stock that features 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) is classified as temporary equity. At all other
times, common stock is 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,
shares of Class A common shares subject to possible redemption are presented as
temporary equity, outside of the stockholders' equity section of our balance
sheet.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding during the period. We apply the
two-class method in calculating net loss per common share. Accretion associated
with the redeemable shares of Class A common stock is excluded from net loss per
common share as the redemption value approximates fair value.
Recent Accounting Standards
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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In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06 - "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, 2022 and should be applied on a full or modified
retrospective basis. 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.
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