Special Note Regarding Forward-Looking Statements
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 included in "Item 8. Financial Statements and Supplementary Data"
of this Annual Report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
All statements other than statements of historical fact included in this Annual
Report including, without limitation, statements under "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 Annual 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.
Overview
We are a blank check company incorporated in the Cayman Islands on January 18,
2021 and formed for the purpose of effecting a merger, amalgamation, share
exchange, asset acquisition, share purchase, reorganization or other similar
business combination with one or more target businesses. We intend to complete
our business combination using cash from the proceeds of the initial public
offering and the sale of the placement units that occurred simultaneously with
the completion of the initial public offering, our shares, debt or a combination
of cash, shares 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 January 18, 2021 (inception) through December 31, 2021,
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and, after the 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 at the earliest. 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 in
connection with completing a Business Combination.
For the period from January 18, 2021 (inception) through December 31, 2021, we
had net income of $6,105,749, which consists of the change in fair value of
warrant liabilities of $9,155,175 and interest earned on marketable securities
held in the Trust Account of $69,499, offset by transaction costs allocable to
warrants of $1,625,720 and general and administrative expenses of $1,493,205 .
Liquidity and Capital Resources
On March 8, 2021, we consummated the Initial Public Offering of 80,000,000 Units
at $10.00 per Unit, generating gross proceeds of $800,000,000. Simultaneously
with the closing of the Initial Public Offering, we consummated the sale of
1,920,000 Placement Units at a price of $10.00 per Placement Unit in a private
placement to the Sponsor and Millennium, generating gross proceeds of
$19,200,000.
On March 9, 2021, the underwriters partially exercised their over-allotment
option, resulting in an additional 5,147,760 Units issued for an aggregate
amount of $51,477,600.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Placement Units, a total of
$851,477,600 was placed in the Trust Account. We incurred $47,481,502 in
offering related costs, including $16,000,000 of underwriting fees, $30,831,268
of deferred underwriting fees and $650,234 of other offering costs.
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For the period from January 18, 2021 (inception) through December 31, 2021, cash
used in operating activities was $1,603,945. Net income of $6,105,749 was
affected by formation costs paid by the Sponsor in exchange for the issuance of
Founder Shares in the amount of $5,000, operating costs paid by the Sponsor
through promissory notes of $150, transaction costs allocable to warrants of
$1,625,720, interest earned on marketable securities held in the Trust Account
of $69,499 and the change in fair value of warrant liabilities of $9,155,175.
Changes in operating assets and liabilities used $115,890 of cash for operating
activities.
As of December 31, 2021, we had marketable securities held in the Trust Account
of $851,547,099 (including $69,499 of interest income) consisting of money
market funds which are primarily invested in U.S. Treasury securities with a
maturity of 185 days or less. We may withdraw interest from the Trust Account to
pay taxes, if any. 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), to complete our Business Combination. To the
extent that our share capital 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 $965,671 held outside the Trust Account.
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, 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 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. The working capital loans would either be repaid upon
consummation of a Business Combination or, at the lender's discretion, up to
$2,000,000 of such loans may be converted into units of the post-Business
Combination entity at a price of $10.00 per unit. The units would be identical
to the Placement Units. As of December 31, 2021, there were no working capital
loans outstanding.
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 public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Going Concern
We have until March 8, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a Business Combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. Management intends to complete a Business
Combination prior to March 8, 2023. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after March 8, 2023.
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
or an affiliate of the sponsor a monthly fee of $25,000 for office space,
administrative and shared personnel support services. We began incurring these
fees on March 4, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the business combination or the Company's
liquidation. On June 9, 2021, the administrative services agreement was amended
and restated to increase the monthly charge for office space, administrative and
shared personnel support services payable to an affiliate of the sponsor from
$25,000 to $40,000.
The underwriters are entitled to a deferred fee of $30,831,268, 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 the Company completes
a business combination, subject to the terms of the underwriting agreement.
46
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:
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 share purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. We account for 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.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption are classified
as a liability instrument and measured at fair value. Conditionally redeemable
Class A ordinary shares (including Class A 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 our
control) are classified as temporary equity. At all other times, Class A
ordinary shares are classified as shareholders' deficit. Our Class A ordinary
shares feature certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
Class A ordinary shares subject to possible redemption are presented at
redemption value as temporary equity, outside of the shareholders' deficit
section of our balance sheet. Under ASC 480-10-S99, the Company has elected to
recognize changes in the redemption value immediately as they occur and adjust
the carrying value of the security to equal the redemption value at the end of
each reporting period. This method would view the end of the reporting period as
if it were also the redemption date for the security.
Net Income Per Ordinary Share
We comply with the 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. We have two classes of shares, which are referred to as Class A ordinary
shares and Class B ordinary shares. Income and losses are shared pro rata
between the two classes of shares. Accretion associated with the redeemable
Class A ordinary shares is excluded from earnings per share as the redemption
value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("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) ("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 for fiscal years beginning after December
15, 2023 and should be applied on a full or modified retrospective basis, with
early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 on
January 18, 2021 (inception). 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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