References to the "Company," "FoxWayne Enterprises Acquisition Corp.,"
"FoxWayne," "our," "us" or "we" refer to FoxWayne Enterprises 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 consolidated 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 Securities Exchange Act of 1934, as amended (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 that was incorporated in Delaware on September 17,
2020. We were 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 (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 FoxWayne Enterprises Acquisition Sponsor LLC, a Delaware limited
liability company. On January 22, 2021, we consummated our initial public
offering of 5,750,000 units, which includes 750,000 additional units to cover
over-allotments, at $10.00 per unit, generating gross proceeds of $57.5 million,
and incurring offering costs of approximately $4.2 million, of which
approximately $2.0 million was for deferred underwriting commissions.
Simultaneously with the closing of the initial public offering, we consummated
the private placement of 2,800,000 Private Placement Warrants at a price of
$1.00 per Private Placement Warrant to the Sponsor, generating proceeds of $2.8
million.
Upon the closing of the initial public offering and the private placement,
approximately $58.1 million ($10.10 per unit) of the net proceeds of the initial
public offering and certain of the proceeds of the private placement was placed
in the Trust Account located in the United States with Continental Stock
Transfer & Trust Company acting as Trustee, and invested only in U.S. government
treasury bills with a maturity of 185 days or less or in money market funds
investing solely in U.S. Treasuries and meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), as determined by us, until the earlier of: (i) the completion of
a business combination and (ii) the distribution of the Trust Account as
described below. As of June 30, 2022, there was approximately $58.2 million in
the Trust Account.
Our management has broad discretion with respect to the specific application of
the net proceeds of the initial public offering and the sale of the Private
Placement Warrants, 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
(excluding the deferred underwriting commissions and taxes payable) at the time
of the agreement to enter into the initial Business Combination. However, we
will only complete a business combination if the post-business combination
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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Effective as of April 15, 2022, our Board of Directors approved an extension of
the time to consummate a Business Combination by an additional three-month
period from April 22, 2022 to July 22, 2022, and a loan in the amount of
$150,000 to the Company from our Sponsor, a portion of which ($143,750) was used
to fund a cash contribution to the Trust Account, in an amount equal to $0.025
for each share unit issued in the Initial Public Offering, for the three month
extension of the time to consummate a Business Combination.
On July 12, 2022, we held our annual meeting of stockholders (the "Annual
Meeting"). At our Annual Meeting, our stockholders (i) approved a proposal to
amend the Company's Second Amended and Restated Certificate of Incorporation to
(A) extend the date by which the Company has to consummate a business
combination for three months, from July 22, 2022 (the "Original Termination
Date") to October 22, 2022 (the "Extended Date") and (B) allow the Company,
without another stockholder vote, to elect to extend the date to consummate a
business combination for three months after the Extended Date, for a total of up
to six months after the Original Termination Date.
On July 20, 2022, stockholders holding 4,406,322 shares of our Class A common
stock exercised their right to redeem such shares for a pro rata portion of the
funds in the Company's Trust Account.
Effective as of July 20, 2022, our Board of Directors approved an extension of
the time to consummate a Business Combination by an additional three-month
period from July 22, 2022 to October 22, 2022. In connection with the extension,
we funded a cash contribution to the Trust Account in the amount of $16,796 (the
"Deposit") (based on $0.0125 for each share unit issued in the Company's initial
public offering that was outstanding at the time the Extension was approved by
the Board).
If we are unable to complete a Business Combination by October 22, 2022, or
thereafter by January 22, 2023 (if further extended) (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 us to pay
our taxes (less up to $50,000 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), subject to
applicable law, and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining stockholders and the Board
of Directors, dissolve and liquidate, subject in each case to our obligations
under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
Recent Developments
Loans from Our Officers & Directors
Beginning in September 2021, we issued promissory notes to affiliates of our
Sponsor, including certain of the Company's officers and directors, to provide
us with additional working capital or to fund Extension Payments prior to us
completing an initial Business Combination. The promissory notes are
non-interest bearing, non-convertible, and payable upon the consummation of our
initial Business Combination. If a Business Combination is not consummated, the
promissory notes will not be repaid by the Company and all amounts owed
thereunder will be forgiven except to the extent that we have funds available to
us outside of the Trust Account. As of June 30, 2022 and December 31, 2021, we
have borrowed $1,034,999 and $100,000, respectively, under such promissory
notes.
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Liquidity and Capital Resources
As of June 30, 2022, we had cash of approximately $7,000 and a working capital
deficit of approximately $2.1 million.
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the payment of $25,000 from our Sponsor to purchase
1,437,500 shares of our Class B common stock, par value $0.0001 per share (the
"Founder Shares") and proceeds from an officer of the Company pursuant to a
promissory note (the "Note"). We repaid $1,615 of the outstanding Note balance
on December 31, 2020 and repaid the remaining amount of $40,510 in full on
January 26, 2021. Subsequent to the consummation of the Initial Public Offering,
our needs liquidity have been satisfied through the net proceeds from the
consummation of the Initial Public Offering and the Private Placement held
outside of the Trust Account as well as from borrowings under non-convertible
promissory notes issued to affiliates of our Sponsor, including certain of the
Company's officers and directors. As of June 30, 2022 and December 31, 2021, we
have borrowed $1,034,999 and $100,000, respectively, under such promissory
notes.
Until the consummation of a Business Combination, we will be using the funds not
held in the Trust Account for identifying and evaluating prospective acquisition
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to acquire, and
structuring, negotiating and consummating the Business Combination. 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.
Although we intend to diligently work towards identifying a target to consummate
a Business Combination within the Combination Period, no assurance can be
provided that we will be successful in identifying a target and/or consummating
a Business Combination within the Combination Period. 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, suspending
the pursuit of a Business Combination. We cannot provide any assurance that new
financing will be available to on commercially acceptable terms, if at all.
Further, our plans to raise capital and to consummate an initial Business
Combination may not be successful. These liquidity conditions and the mandatory
liquidation date and subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern, until the earlier of the
consummation of the Business Combination or the date the Company is required to
liquidate, October 22, 2022 (or January 22, 2023, if further extended). The
condensed consolidated financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the condensed consolidated financial statements. The condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to June 30, 2022, has been in preparation
for our formation and the Initial Public Offering, and since the Initial Public
Offering, our search for a prospective target for a Business Combination. We
will not generate any operating revenues until, at the earliest, the closing and
completion of our initial Business Combination.
For the three months ended June 30, 2022, we had net loss of approximately
$14,000, which consisted of general and administrative expenses of approximately
$157,000, general and administrative expenses to a related party of $30,000, and
franchise tax expense of approximately $72,000, partially offset by a
non-operating gain of approximately $171,000 resulting from the change in fair
value of derivative liabilities and income from investments held in the Trust
Account of approximately $74,000.
For the three months ended June 30, 2021, we had net loss of approximately $1.6
million, which consisted of general and administrative expenses of approximately
$193,000, general and administrative expenses to related party of $30,000,
franchise tax expense of approximately $43,000, change in fair value of
derivative liabilities of $1.3 million, partially offset by income from
investment held in the Trust Account of approximately $1,000.
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For the six months ended June 30, 2022, we had net income of approximately $2.7
million, which consisted of a non-operating gain of approximately $3.1 million
resulting from the change in fair value of derivative liabilities and income
from investments held in the Trust Account of approximately $79,000, partially
offset by general and administrative expenses of approximately $302,000, general
and administrative expenses to a related party of $60,000, and franchise tax
expense of approximately $114,000.
For the six months ended June 30, 2021, we had net loss of approximately $1.7
million, which consisted of general and administrative expenses of approximately
$381,000, general and administrative expenses to related party of $60,000,
franchise tax expense of approximately $85,000, financing costs to derivative
warrant liabilities of approximately $212,000, change in fair value of
derivative liabilities of $997,000, partially offset by income from investment
held in the Trust Account of approximately $2,500.
Contractual Obligations
Registration and Stockholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans or Extension Loans, if any,
(and any shares of 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 signed upon the
consummation of the Initial Public Offering. 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
the completion of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of Initial Public
Offering to purchase up to 750,000 additional Units to cover over-allotments, if
any, at the Initial Public Offering price less the underwriting discounts and
commissions. The underwriter exercised its over-allotment option in full on
January 22, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
approximately $1.2 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, the underwriters will be entitled to a
deferred fee of $0.35 per Unit, or approximately $2.0 million 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.
We issued EF Hutton (formerly Kingswood Capital Markets), division of Benchmark
Investments, Inc. ("EF Hutton"), the Representative of the underwriters (the
"Representative"), and/or its designees, 50,000 shares of Class A common stock
(the "Representative's Shares") upon the consummation of the Initial Public
Offering. EF Hutton agreed not to transfer, assign or sell any such shares until
the completion of the initial Business Combination. In addition, EF Hutton
agreed (i) to waive its redemption rights with respect to such shares in
connection with the completion of the initial Business Combination and (ii) to
waive its rights to liquidating distributions from the Trust Account with
respect to such shares if we fail to complete our initial Business Combination
within the Combination Period. We recorded the fair value of the 50,000
Representative Shares, $500,000, charged as an offering cost to the Class A
common stock subject to possible redemption.
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy is not determinable as of the date of these
condensed consolidated financial statements, and the specific impact on the
Company's condensed consolidated financial condition, results of operations, and
cash flows is also not determinable as of the date of these financial
statements.
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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 the Company's financial position, results of its
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the condensed consolidated financial
statements. The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. A summary of our significant accounting policies is
included in Note 2 to our condensed consolidated financial statements in Part I,
Item 1 of this Quarterly Report. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our condensed consolidated financial statements and require significant,
difficult or complex judgments, often employing the use of estimates about the
effects of matters that are inherently uncertain. Such policies are summarized
in the Management's Discussion and Analysis of Financial Condition and Results
of Operations section in our 2021 Annual Report on Form 10-K filed with the SEC
on March 31, 2022. There have been no significant changes in the application of
our critical accounting policies during the six months ended June 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed consolidated financial statements included
in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
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
consolidated 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 Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the 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 Chief
Executive Officer'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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FOXWAYNE ENTERPRISES ACQUISITION CORP. 
