References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to
Special Note Regarding Forward-Looking Statements
This Quarterly Report (including, without limitation, statements under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Our forward-looking statements include, but are not limited to, statements regarding our or our management team's expectations, hopes, beliefs, intentions or strategies regarding the future and any other statements that are not statements of current or historical facts. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements may be identified by the use of forward-looking terminology, including the words "anticipates," "believes," "continues," "could," "estimates," "expects," "intends," "plans," "may," "might," "plan," "possible," "potential," "projects," "predicts," "will," "would," or "should," or, in each case, their negative or other variations or comparable terminology, but the absence of these words does not mean that a statement is not forward-looking.
We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report, and undue reliance should not be placed on forward-looking statements. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods. The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks, uncertainties and assumptions include, but are not limited to, the following risks, uncertainties, assumptions and other factors:
? our ability to select an appropriate target business or businesses; ? our ability to complete our initial business combination (our "Business Combination"); 18 ? our expectations around the performance of a prospective target business or businesses; ? our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial Business Combination; ? our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial Business Combination; ? our potential ability to obtain additional financing to complete our initial Business Combination; ? our pool of prospective target businesses, including the location and industry of such target businesses; ? the ability of our officers and directors to generate a number of potential business combination opportunities; ? our public securities' potential liquidity and trading; ? the lack of a market for our securities; ? the availability to us of funds from interest income on the balance of the trust account into which certain proceeds of our initial public offering were placed (the "Trust Account"); ? the Trust Account not being subject to claims of third parties; ? our financial performance; or ? the other risks and uncertainties discussed under the heading "Risk Factors" and elsewhere in this Quarterly Report, in our Annual Report on Form 10-K for the year endedDecember 31, 2021 and in our registration statement on Form S-1 (File No. 333-254062) filed in connection with our initial public offering.
The foregoing risks and uncertainties may not be exhaustive. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Overview
We are an early stage blank check company incorporated on
The issuance of additional shares of our common or preferred stock in our initial Business Combination:
? may significantly dilute the equity interest of investors in our initial public offering; 19 ? may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our 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 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 to finance our initial Business Combination, 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, expenses, capital expenditures, acquisitions and other general corporate purposes; ? limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; ? 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
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 and consummate our initial public offering and,
subsequent to completion of our initial public offering on
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We account for the Public Warrants and Private Placement Warrants issued in connection with our initial public offering as warrant liabilities and not equity. As a result, we are required to measure the fair value of the Warrants when they are issued and then at the end of each reporting period and to recognize changes in the fair value from the prior period in our operating results for each current period. Such amounts can be material and can be either other income or other expense. We account for all of the Class A common stock issued in our initial public offering as redeemable stock and not permanent equity and so we report negative stockholders' equity and expect to continue to do so.
General and administrative expenses - For the three months ended
Other income (expense) - In addition to operating costs, for the three months
ended
Liquidity and Capital Resources
Our liquidity needs prior to the completion of our initial public offering were
satisfied through receipt of
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 taxes payable), if any, to complete our initial
Business Combination. We will make withdrawals from the Trust Account to pay our
taxes, including franchise taxes and income taxes.
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Prior to the completion of our initial Business Combination, in addition to our costs associated with operating as a listed public company, 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 an initial 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
As indicated in the accompanying financial statements, at
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
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We do not believe we will need to raise additional funds following our 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 upon completion of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such initial Business Combination. In addition, we intend to target businesses with enterprise values that are greater than we could acquire with the net proceeds of our 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 forward purchase agreements or backstop arrangements we may enter into following the consummation of our initial public offering. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial 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.
Off-balance sheet financing arrangements
As of
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 entered into any agreements for non-financial assets.
Contractual obligations
At
Also, commencing on
Upon completion of the initial Business Combination or our liquidation, the Company will cease paying or accruing these monthly fees.
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, we may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that our initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
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Critical Accounting Estimates and Policies
The preparation of financial statements and related disclosures in conformity
with
Accounting estimates:
A critical accounting estimate to our financial statements is the estimated fair
value of our warrant liability. Fair value is defined as the price that would be
received for sale of an asset or paid for transfer of a liability, in an orderly
transaction between market participants at the measurement date.
? Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; ? Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ? Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The estimated fair value of the warrant liability at inception of the Warrants,
Since the hierarchy gives the highest priority to unadjusted quoted prices in
active markets, at
For reference, each
Net Income or Loss per Share of Common Stock:
We comply with accounting and disclosure requirements of
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We have not considered the effect of the Warrants sold in our initial public offering and private placement to purchase an aggregate of 18,576,712 shares of Class A common stock in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per share of common stock is the same as basic income (loss) per share of common stock for the period presented.
We have two classes of shares: our Class A common stock and our Class B common stock. Income and losses are shared pro rata among the two classes of common stock. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the respective period.
The following table reflects the net income per share after allocating income between the shares based on outstanding shares.
March 31, 2022 Class A ClassB Numerator :
Basic and diluted net income per share of common stock: Allocation of income - basic and diluted
$ 4,607,000 $ 1,535,000
Denominator:
Basic and diluted weighted average share of common stock: 34,093,000 11,364,000
Basic and diluted net income per share of common stock
Fair Value of Financial Instruments:
The fair value of our assets and liabilities, which qualify as financial instruments under FASB ASC 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the balance sheets primarily due to their short-term nature.
Offering Costs:
We comply with the requirements of FASB ASC 340-10-S99-1 and
Income Taxes:
We follow the asset and liability method of accounting for income taxes under FASB ASC 740, "Income Taxes" ("ASC 740") Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the balance sheet carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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Our currently taxable income consists of interest income on the Trust Account
net of taxes. Our general and administrative costs are generally considered
start-up costs and are not currently deductible. During the three months ended
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing
authorities. There were no unrecognized tax benefits as of
Redeemable Common Stock:
All of the 34,092,954 public shares sold as part of the units in our initial
public offering contain a redemption feature which allows for the redemption of
public shares if we hold a stockholder vote or if there is a tender offer for
shares in connection with a business combination. In accordance with FASB ASC
480, "Distinguishing Liabilities from Equity" ("ASC 480"), redemption provisions
not solely within our control requires the security to be classified outside of
permanent equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity's equity instruments, are excluded from the
provisions of ASC 480. Although we did not specify a maximum redemption
threshold, our charter provides that in no event will we redeem our public
shares in an amount that would cause our net tangible assets (i.e., total assets
less intangible assets and liabilities) to be less than
While redemptions cannot cause our net tangible assets to fall below
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of the securities at the end of each reporting period.
Increases or decreases in the carrying amount of redeemable Class A common stock
are affected by adjustments to additional paid-in capital. Accordingly, at
Gross proceeds of our initial public offering$ 340,930,000 Less: Proceeds allocated to Public Warrants (11,935,000 ) Offering costs (19,018,000 )
Plus: Accretion of carrying value to redemption value 30,953,000
Shares of Class A common stock subject to redemption
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Derivative warrant liabilities
We account for Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance FASB ASC 480 and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to our own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the Warrants are outstanding.
For issued or modified Warrants that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the Warrants accounted for as liabilities are charged to operations when the Warrants are issued. The fair value of the Warrants was estimated using a binomial lattice simulation approach.
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