The following discussion and analysis of the Company's 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" of this annual report. 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," "Item 1A. Risk Factors" and elsewhere in this annual report.
Overview
We are a blank check company incorporated on January 4, 2021 as a Delaware
corporation and formed for the purpose of effecting a merger, consolidation,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses or entities. Prior to
the Initial Public Offering, we had not selected any specific business
combination target and we had not, nor had anyone on our behalf, engaged in any
substantive discussions, directly or indirectly, with any business combination
target with respect to an initial business combination with us. 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. The issuance of
additional shares of our stock in a business combination:
may significantly dilute the equity interest of investors in the Initial Public
· Offering, which dilution would increase if the anti-dilution provisions in the
Class B common stock resulted in the issuance of shares of Class A common stock
on a greater than one-to-one basis upon conversion of the Class B common stock;
· may subordinate the rights of holders of our Class A common stock if preferred
stock is issued with rights senior to those afforded our Class A common stock;
could cause a change of control if a substantial number of shares of our common
· stock are issued, which may affect, among other things, our ability to use our
net operating loss carry forwards, if any, and could result in the resignation
or removal of our present officers and directors; and
may have the effect of delaying or preventing a change of control of us by
diluting the stock ownership or voting rights of a person seeking to obtain
· control of us; and may adversely affect prevailing market prices for our
Class A common stock and/or public warrants. Similarly, if we issue debt
securities or otherwise incur significant indebtedness, it could result in:
· default and foreclosure on our assets if our operating revenues after an
initial business combination are insufficient to repay our debt obligations;
acceleration of our obligations to repay the indebtedness even if we make all
· principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
· our immediate payment of all principal and accrued interest, if any, if the
debt is payable on demand;
our inability to obtain necessary additional financing if the debt contains
· covenants restricting our ability to obtain such financing while the debt is
outstanding;
· our inability to pay dividends on our common stock;
using a substantial portion of our cash flow to pay principal and interest on
· our debt, which will reduce the funds available for dividends on our common
stock if declared and our ability to pay expenses, make capital expenditures,
complete acquisitions and fund other general corporate purposes;
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· limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate; and
increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
· limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our competitors
who have less debt.
As of December 31, 2022 and December 31, 2021, we had cash of $1,165,854 and
$1,025,367, respectively. Further, we expect to continue to incur significant
costs in the pursuit of our acquisition plans. We cannot assure you that our
plans to raise capital or to complete our initial business combination will be
successful.
Recent Developments
On March 21, 2023, we filed a definitive proxy statement with the SEC in
connection with the solicitation of proxies for the Special Meeting. At the
Special Meeting, our stockholders will be asked to vote on the Extension
Amendment Proposal and a proposal to amend the Certificate of Incorporation to
(a) allow holders of shares of Class B Common Stock to convert such shares into
shares of Class A Common Stock at the election of the holder and (b) provide
that the provision in the Certificate of Incorporation granting holders of
shares of Class B Common Stock the exclusive right to elect and remove any
director shall no longer apply when there are no shares of Class B Common Stock
outstanding. Our public stockholders will have the opportunity to redeem their
public shares upon implementation of the Extension.
In March 2023, Silicon Valley Bank and Signature Bank (the "Closed Banks") were
closed and the FDIC was appointed receiver of the Closed Banks. The FDIC, in
coordination with the Treasury Department and the Federal Reserve Board, has
agreed to make all depositors whole, including those with uninsured deposits.
The Company does not have any banking relationships with either of the Closed
Banks, therefore there are not any potential adverse direct consequences to the
company. The Company is not aware of any instances where any potential adverse
indirect consequences would affect the company, and in addition and any
potential indirect impact has been mitigated by the actions taken by the
government to guarantee access to all deposits of the Closed Banks.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities and
those necessary to prepare for the Initial Public Offering. We will not generate
any operating revenues until after completion of our initial business
combination, and we will generate non-operating income in the form of interest
income on cash and cash equivalents. There has been no significant change in our
financial or trading position and no material adverse change has occurred since
the date of our audited financial statements.
For the year ended December 31, 2022, we had net income of $1,109,552,
consisting of interest income from the Trust assets of $3,313,492, partially
offset by operating and formation costs of $1,587,018 and income taxes of
$616,922.
For the period beginning January 4, 2021 (inception) through December 31, 2021,
we had a net loss of $504,671, consisting of operating and formation costs of
$526,714, partially offset by interest income from the Trust assets of $22,043.
Liquidity and Capital Resources
Our liquidity needs have been satisfied prior to the completion of the Initial
Public Offering through receipt of $25,000 from the sale of the Founder Shares
and up to $750,000 in loans from our Sponsor under an unsecured promissory note.
On October 14, 2021, we consummated the Initial Public Offering of 23,000,000
Units, including the issuance of 3,000,000 Units as a result of the
underwriters' full exercise of their option to purchase additional Units. The
Units sold in the initial public offering were sold at an offering price of
$10.00 per Unit, generating total gross proceeds of $230,000,000. Simultaneously
with the closing of the Initial Public Offering, we consummated a private
placement transaction to our Sponsor of an aggregate of 6,500,000 Private
Placement Warrants at a price of $1.00 per Private Placement Warrant totaling
$6,500,000. Upon closing of the Initial Public Offering, the proceeds of the
Initial Public Offering of $230,000,000 were deposited in the Trust Account. The
funds in the Trust Account will be invested only in U.S. government treasury
bills with a maturity of 185 days or less or in money market funds that meet
certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and
that invest only in direct U.S. government obligations. In
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the event that our offering expenses and other operating expenses exceed our
estimate of $1,500,000, we may fund such excess with loans or additional
investments from our Sponsor, members of our management team or any of their
respective affiliates or other third parties. Conversely, in the event that the
offering expenses and other operating expenses are less than our estimate of
$1,500,000, the excess would be held outside of 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 (which
interest shall be net of permitted withdrawals and deferred underwriting
commissions), to complete our initial business combination. We will make
permitted withdrawals from the Trust Account to pay our taxes, including
franchise taxes and income taxes. Delaware franchise tax is based on our
authorized shares or on our assumed par and non-par capital, whichever yields a
lower result. Under the authorized shares method, each share is taxed at a
graduated rate based on the number of authorized shares with a maximum aggregate
tax of $200,000 per year. Under the assumed par value capital method, Delaware
taxes each $1,000,000 of assumed par value capital at the rate of $400; where
assumed par value would be (1) our total gross assets following the Initial
Public Offering, divided by (2) our total issued shares of common stock
following the Initial Public Offering, multiplied by (3) the number of our
authorized shares following the Initial Public Offering. Based on the number of
shares of our common stock authorized and outstanding and our estimated total
gross proceeds after the completion of the Initial Public Offering, our annual
franchise tax obligation is expected to be capped at the maximum amount of
annual franchise taxes payable by us as a Delaware corporation of $200,000. 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 only taxes
payable by us out of the funds in the Trust Account will be income and franchise
taxes. We expect the interest earned on the amount in the Trust Account will be
sufficient to pay our taxes. 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.
Prior to the completion of our initial business combination, our principal use
of working capital will be to fund our activities to identify and evaluate
target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, structure, negotiate
and complete a business combination, and to pay taxes to the extent the interest
earned on the Trust Account is not sufficient to pay our taxes.
We expect our primary liquidity requirements during that period to include
approximately $400,000 for legal, accounting, due diligence, travel and other
expenses in connection with any business combinations; approximately $60,093 for
regulatory reporting requirements; approximately $85,000 for NYSE continued
listing fees; approximately $240,000 for office space, administrative and
support services, including under the Administrative Services Agreement; reserve
for liquidation expenses; and approximately $214,907 for other miscellaneous
expenses. These amounts are estimates and may differ materially from our actual
expenses.
In addition, we may pay commitment fees for financing, fees to consultants to
assist us with our search for a target business or as a down payment or to fund
a "no-shop" provision (a provision designed to keep target businesses from
"shopping" around for transactions with other companies or investors on terms
more favorable to such target businesses) with respect to a particular proposed
business combination, although we do not have any current intention to do so. If
we entered into an agreement where we paid for the right to receive exclusivity
from a target business, the amount that would be used as a down payment or to
fund a "no- shop" provision would be determined based on the terms of the
specific business combination and the amount of our available funds at the time.
Our forfeiture of such funds (whether as a result of our breach or otherwise)
could result in our not having sufficient funds to continue searching for, or
conducting due diligence with respect to, prospective target businesses.
As indicated in the accompanying financial statements, at December 31, 2022 and
December 31, 2021, we had $1,165,854 and $1,025,367 in cash, respectively.
Further, we have incurred and expect to continue to incur significant costs in
pursuit of our financing and acquisition plans. Management's plans to address
this uncertainty through the Initial Public Offering are discussed below. We
cannot assure you that our plans to raise capital or to consummate an initial
business combination will be successful. These factors, among others, raise
substantial doubt about our ability to continue as a going concern.
We expect to fund our working capital requirements prior to the time of our
initial business combination from the net proceeds of the Initial Public
Offering and the sale of the Private Placement Warrants not held in the Trust
Account, which will be approximately $1,000,000 in working capital after the
payment of approximately $1,500,000 in expenses relating to the Initial Public
Offering, permitted withdrawals from the interest earned on the Trust Account,
permitted withdrawals to pay tax obligations, and
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permitted working capital withdrawals that are subject to an annual limit of
$1,000,000. In addition, our Sponsor, an affiliate of our Sponsor or our
officers and directors may, but none of them is obligated to, loan us funds as
may be required to fund our working capital requirements. If we complete our
initial business combination, we would repay such loaned amounts out of the
proceeds of the Trust Account released to us. In the event that our 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 $1.00 per warrant at the
option of the lender. The warrants would be identical to the Private Placement
Warrants issued to our Sponsor. The terms of such loans by our Sponsor, an
affiliate of our Sponsor or our officers and directors, if any, have not been
determined and no written agreements exist with respect to such loans. We do not
expect to seek loans from parties other than our Sponsor, an affiliate of our
Sponsor or our officers and directors, if any, 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 need to raise additional funds following the Initial Public Offering
in order to meet the expenditures required for operating our business. However,
if our estimates of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating an initial 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 initial business combination.
Moreover, we may need to obtain additional financing either to complete our
initial business combination or because we become obligated to redeem a
significant number of our public shares in connection with our initial business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination. In addition, we intend to target
businesses with enterprise values that are greater than we could acquire with
the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, and, as a result, if the cash portion of the purchase price
exceeds the amount available from the Trust Account, net of amounts needed to
satisfy redemptions by public stockholders, we may be required to seek
additional financing to complete such proposed initial business combination. We
may also obtain financing prior to the closing of our initial business
combination to fund our working capital needs and transaction costs in
connection with our search for and completion of our initial business
combination. There is no limitation on our ability to raise funds through the
issuance of equity or equity-linked securities or through loans, advances or
other indebtedness in connection with our initial business combination,
including pursuant to backstop arrangements we may enter into following the
consummation of the Initial Public Offering. Subject to compliance with
applicable securities laws, we would only complete such financing simultaneously
with the completion of our business combination. If we are unable to complete
our initial business combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our initial business combination, if cash on
hand is insufficient, we may need to obtain additional financing in order to
meet our obligations.
In connection with the Company's assessment of going concern considerations in
accordance with Account Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that the mandatory liquidation date and subsequent
dissolution, should the Company be unable to complete a Business Combination,
raises substantial doubt about the Company's ability to continue as a going
concern. The Company has until April 13, 2023 to consummate a Business
Combination. It is uncertain that it 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. No
adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after April 13, 2023.
For year ended December 31, 2022, the net increase in cash was $140,487. For the
year ended December 31, 2022, cash used in operating activities was $1,137,262
primarily as a result of the interest earned on the Trust asset. For the year
ended December 31, 2022, cash provided by investing activities was $1,277,749 as
a result of cash withdrawn from the Trust account for taxes and working capital.
For the year ended December 31, 2022, cash provided by financing activities was
$0.
For the period from January 4, 2021 (inception) through December 31, 2021, the
net increase in cash was $1,025,367. For the period from January 4, 2021
(inception) through December 31, 2021, cash used in operating activities was
$538,848 primarily as a result of the net loss. For the period from January 4,
2021 (inception) through December 31, 2021, cash used in investing activities
was $230,000,000 and was for the cash deposited into the Trust account. For the
period from January 4, 2021 (inception) through December 31, 2021, cash provided
by financing activities was $231,564,215 and primarily relates to the Initial
Public Offering.
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