References to the "Company," "Frontier Investment Corp," "our," "us" or "we" in
this Quarterly Report on Form 10-Q refer to Frontier Investment Corp. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited 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 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. For information identifying important factors that could cause
actual results to differ materially from those anticipated in the
forward-looking statements, please refer to Item 1A below and the Risk Factors
section of the Company's Annual Report on Form 10-K filed with 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 on February 23, 2021 as a Cayman
Islands exempted company for the purpose of effecting a merger, share exchange,
asset acquisition, share 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 shares, debt or a
combination of cash, equity 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 inception through September 30, 2022 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and subsequent to our 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. We generate non-operating income in the form of interest income on
marketable securities held after the Initial Public Offering. 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 $489,212,
which consisted of an increase in fair value of warrant liabilities of $66,667
and interest income of $902,748, partially offset by general and administrative
expenses of $316,869 and administrative fees for related party transactions of
$30,000.
For the nine months ended September 30, 2022, we had net income of $4,777,868,
which consisted of a decrease in fair value of warrant liabilities of $6,523,751
and interest income of $192,965, partially offset by general and administrative
expenses of $2,848,848 and administrative fees for related party transactions of
$90,000.
For the three months ended September 30, 2021, we had net income of $3,531,202,
consisting of general and administrative expenses of $104,281, transaction costs
allocable to warrant liabilities of $383,507, gain on change in fair value of
derivative warrant liabilities of $4,016,583 and interest income of $2,407.
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For the period from February 23, 2021 (inception) through September 30, 2021, we
had net income of $3,518,770, consisting of general and administrative expenses
of $116,713, transaction costs allocable to warrant liabilities of $383,507,
gain on change in fair value of derivative warrant liabilities of $4,016,583 and
interest income of $2,407.
Liquidity and Going Concern
As of September 30, 2022 we had cash of $763,054 and a working capital
deficiency of $1,868,281.
On July 6, 2021, we consummated our Initial Public Offering of 20,000,000 units,
at $10.00 per unit, generating gross proceeds of $200,000,000. Simultaneously
with the closing of the Initial Public Offering, we consummated a the Private
Placement Transaction in which the Sponsor purchased 6,125,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant, generating gross
proceeds of $6,125,000.
Upon the consummation of the Initial Public Offering and the Private Placement
Transaction, $200,000,000 of cash was placed in a U.S.-based trust account
maintained by Continental Stock Transfer & Trust Company, acting as trustee,
from the net proceeds of the sale of our Initial Public Offering and a portion
of the proceeds from the Private Placement Transaction. We incurred transaction
costs totaling $11,000,000 of the proceeds of the Initial Public Offering in
underwriters' fees (which amount includes $7,000,000 of the underwriters'
deferred discount) and $1,125,000 of other offering costs.
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
taxes payable and deferred underwriting commissions), to complete our Business
Combination. We may withdraw interest income (if any) to pay income taxes, if
any. Our annual income tax obligations will depend on the amount of interest and
other income earned on the amounts held in the trust account. We expect the
interest income earned on the amount in the trust account (if any) will be
sufficient to pay our income taxes. To the extent that our equity 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 partner business or businesses,
make other acquisitions and pursue our growth strategies.
At September 30, 2022, we held $763,054 inside our operating bank account and a
working capital deficiency of $1,868,281. 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 partner businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
The Company's mandatory liquidation date is July 6, 2023.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. If we complete our Business Combination,
we may repay such loaned amounts out of the proceeds of the trust account
released to us. In the event that our 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
of the post-business combination company at a price of $1.00 per warrant at the
option of the lender. The warrants would be identical to the Private Placement
Warrants. The terms of such loans, if any, have not been determined and no
written agreements exist with respect to such loans. Prior to the completion of
our Business Combination, we do not expect to seek loans from parties other than
our Sponsor, members of our management team or any of their affiliates as we do
not believe third parties will be willing to loan such funds and provide a
waiver against any and all rights to seek access to funds in our trust account.
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 Class A Ordinary 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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We have determined that the Combination Period is less than one year from the
date of the issuance of the financial statements. There is no assurance that the
Company's plans to consummate a Business Combination will be successful within
the Combination Period. As a result, there is substantial doubt that the Company
can sustain operations for a period of at least one-year from the issuance date
of these condensed financial statements without additional funding. The
condensed financial statements do not include any adjustments that might result
from the outcome of the uncertainty.
Risks and Uncertainties
Our 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 unaudited condensed financial statements included in Item 1 of this Form
10-Q. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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 are not determinable as of the date of the
unaudited condensed financial statements and the specific impact on our
financial condition, results of operations, and cash flows is also not
determinable as of the date of these unaudited condensed financial statements
included in Item 1 of this Form 10-Q.
Off-Balance Sheet Arrangements
We have 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 nonfinancial 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 our Sponsor
a monthly fee of $10,000 for office space, secretarial and administrative
services. We began incurring these fees on the date our units were listed on
Nasdaq and will continue to incur these fees monthly until the earlier of the
completion of an initial Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,000,000
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 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:
Derivative Warrant Liabilities
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value on the grant date and is then
re-valued at each reporting date, with changes in the fair value reported in the
statements of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is evaluated at the end of each reporting period. Derivative liabilities
are classified in the balance sheet as current or non-current based on whether
or not net-cash settlement or conversion of the instrument could be required
within 12 months of the balance sheet date.
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Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in
accordance with the guidance enumerated in ASC 480 "Distinguishing Liabilities
from Equity". Class A Ordinary Shares subject to mandatory redemption are
classified as a liability instrument and are measured at fair value.
Conditionally redeemable Class A Ordinary Shares (including ordinary shares 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
the Company's control) are classified as temporary equity. At all other times,
ordinary shares are classified as shareholders' equity. The Company's Class A
Ordinary Shares feature certain redemption rights that are considered by the
Company to be outside of the Company's control and subject to the occurrence of
uncertain future events. Accordingly, at September 30, 2022 and December 31,
2021, all of the Class A Ordinary Shares subject to possible redemption in the
amount of $201,199,596 and $200,000,000, respectively, are presented as
temporary equity, outside of the shareholders' equity section of the Company's
balance sheet.
Net Income per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Net income per ordinary share is computed by
dividing net income by the weighted average number of ordinary shares
outstanding for the period. The Company applies the two-class method in
calculating income per ordinary share. Remeasurement associated with the
redeemable Class A ordinary share is excluded from income per ordinary share as
the redemption value approximates fair value. The calculation of diluted income
per share of ordinary share does not consider the effect of the warrants issued
in connection with the (i) Initial Public Offering, and (ii) the private
placement since the exercise of the warrants is contingent upon the occurrence
of future events. As of September 30, 2022, the Company did not have any
dilutive securities or other contracts that could, potentially, be exercised or
converted into ordinary shares and then share in the earnings of the Company. As
a result, diluted net income per ordinary share is the same as basic net income
per ordinary share for the periods presented.
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)". This ASU reduces the number of
accounting models for convertible debt instruments and convertible preferred
stock and amends the guidance for the derivatives scope exception for contracts
in an entity's own equity to reduce form-over-substance-based accounting
conclusions. In addition, this ASU improves and amends the related EPS guidance.
This standard is effective for us on January 1, 2024, including interim periods
within those fiscal years. Adoption is either a modified retrospective method or
a fully retrospective method of transition. The Company is currently assessing
the impact the new guidance will have on its financial statements.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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