References to the "Company," "us," "our" or "we" refer to
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "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 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
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 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.
Overview
We are a newly organized blank check company incorporated on
Our sponsor is
Simultaneously with the closing of the IPO, we completed the private sale of an
aggregate of 4,950,000 warrants, including 90,000 warrants issued in connection
with the exercise in full by the underwriter of its option to purchase
additional Units (the "Private Placement Warrants") to the Sponsor at a purchase
price of
Upon the closing of the IPO, management has agreed that an amount equal to at least$10.15 per Unit sold in the IPO, including the proceeds of the private placement warrants, will be held in a trust account (the "Trust Account"), located inthe United States withContinental Stock Transfer & Trust Company acting as trustee, and will invest only inU.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in directU.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay taxes, if any, the proceeds from the IPO and the sale of the private placement warrants will not be released from the Trust Account until the earliest of (i) the completion of initial Business Combination, (ii) the redemption of the Company's public shares if we are unable to complete an initial 20
--------------------------------------------------------------------------------
Table of Contents
Business Combination within 18 months from the closing of the IPO, subject to applicable law, or (iii) the redemption of the Company's public shares properly submitted in connection with a stockholder vote to amend its amended and restated certificate of incorporation to modify the substance or timing of the Company's obligation to redeem 100% of its public shares if the Company has not consummated an initial Business Combination within 18 months from the closing of the IPO or with respect to any other material provisions relating to stockholders' rights or pre-initial Business Combination activity. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders. We will have only 18 months from the closing of the IPO to complete the initial Business Combination (the "Combination Period"). However, if we are unable to complete the initial Business Combination within 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 (which interest shall be net of taxes payable and up to$100,000 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 liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company's remaining stockholders and the Company's board of directors, liquidate and dissolve, subject, in each case, to the Company's obligations underDelaware law to provide for claims of creditors and the requirements of other applicable law.
Liquidity and Capital Resources
In connection with our assessment of going concern considerations in accordance with Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management believes that the funds which the Company has available following the completion of the IPO will enable it to sustain operations for a period of at least one-year from the issuance date of these financial statements. Accordingly, substantial doubt about our ability to continue as a going concern as disclosed in previously issued financial statements has been alleviated. Prior to the completion of the IPO, we lacked the liquidity needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. We have since completed our IPO at which time capital in excess of the funds deposited in the trust and/or used to fund offering expenses was released to us for general working capital purposes. Accordingly, management has since reevaluated the Company's liquidity and financial condition and determined that sufficient capital exists to sustain operations one year from the date the financial statements are issued and therefore substantial doubt has been alleviated.
Risks and Uncertainties
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 our 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 these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
As ofDecember 31, 2021 , we had not commenced any operations. All activity for the period fromFebruary 16, 2021 (inception) throughDecember 31, 2021 relates to our formation and the IPO and since the closing of the IPO, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering and held in out Trust Account. We expect to incur increased 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 period from
21
--------------------------------------------------------------------------------
Table of Contents
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Administrative Services Agreement
Commencing on the date the Units are first listed on the Nasdaq, we have agreed
to pay the Sponsor a total of
Registration and Stockholder Rights
The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of this offering, (ii) Private Placement Warrants, which will be issued in a private placement simultaneously with the closing of this offering and the shares of Class A common stock underlying such private placement warrants, (iii) private placement warrants that may be issued upon conversion of working capital loans and (iv) the forward purchase shares that may be purchased pursuant to the related forward purchase agreements will have registration rights to require us to register a sale of any of our securities held by them prior to the consummation of our initial business combination pursuant to a registration rights agreement to be signed prior to or on the effective date of this 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 our completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Engagement of Services
On
On
Underwriter Agreement
The underwriters' were due a commission of
The underwriters are entitled to deferred underwriting commissions of
Certain qualified institutional buyers or institutional accredited investors
(none of which are affiliated with any member of the Company's management team,
the Sponsor or any other anchor investor)(the "
The anchor investors have not been granted any stockholder or other rights that
are in addition to those granted to our other public stockholders, and will only
be issued equity interests in our sponsor, with no right to control our sponsor
or vote or dispose of any securities held by our sponsor. Further, unlike some
anchor investor arrangements of other blank check companies, the anchor
investors are not required to (i) hold any units, Class A common stock or
warrants they may purchase in this offering or thereafter for any amount of
time, (ii) vote any shares of Class A common stock they may own at the
applicable time in favor of our initial business combination or (iii) refrain
from exercising their right to redeem their public shares at the time of our
initial business combination. The anchor investors will have the same rights to
the funds held in the Trust Account with respect to the Class A common stock
underlying the units they may purchase in the IPO as the rights afforded to the
Company's other public stockholders. The excess of the fair value of the Founder
Shares was determined to be an offering cost in accordance with Staff Accounting
Bulletin Topic 5A. Accordingly, offering cost associated with the IPO includes
22
--------------------------------------------------------------------------------
Table of Contents
Forward Purchase Shares
The price to be paid for forward purchase shares will be reduced to or below
• to$9.20 if the aggregate purchase price paid by the forward purchaser at$10.00 per share would exceed the lesser of (i) a specified dollar amount and (ii) a specified percentage of the aggregate purchase price paid by the purchasers of the SPAC's Class A common stock in private placements that occur on or prior to the date of the SPAC's initial business combination ("PIPEs"); • and to below$9.20 if the price per share in any PIPE is less than$9.20 (in which case the price per share paid by the forward purchaser will be at an 8% discount from the price per share in such PIPE).
One of the forward purchasers and/or its affiliates is expected to purchase the
Company's public units. If such forward purchaser and/or any of its affiliates
sell more than 50% of the aggregate number of the public units purchased in the
IPO or, following the separate trading of the public shares and the public
warrants, the public shares that are a component of the public units that are
purchased by the forward purchaser or any of its affiliates in the IPO, in sales
that are consummated on or prior to the initial business combination, then the
price per share for the forward purchase shares will remain at
The following assumptions were utilized in the determination of fair value for
the
• Each forward purchase share is one share of the Company's Class A common stock. No payment is due from the forward purchaser until immediately before the initial business combination. The purchase price is$10.00 per forward purchase share, subject to the discounted purchase price. The discounted purchase price is either at$9.20 per share or at an 8% discount to the PIPE price if the PIPE is priced below$9.20 . • The conditions upon obtaining a$9.20 purchase price are within the control of the holder of the forward purchase share (the "FPA holder") because theFPA holder will control the aggregate purchase price of the forward purchase shares to be purchased by theFPA holder and, in the case of the forward purchaser that is expected to purchase public units, such forward purchaser and its affiliates will control whether such forward purchaser and its affiliates sell or redeem more than 50% of the public units (or, following the separate trading of the public shares and the public warrants, the public shares) on or prior to the initial business combination. TheFPA holder that is expected to purchase public units is assumed to have no negative economic impact from not selling or redeeming more than 50% of the public units (or, following the separate trading of the public shares and the public warrants) on or prior to the initial business combination since such forward purchaser would be selling at market price, without knowledge of future pricing, so that not selling or redeeming and realizing the 8% discount to market price on its future purchase is actually a positive feature to suchFPA holder. Therefore, the Company's management assumed that the likelihood of theFPA holder to have a$10.00 purchase price is de minimus. • Management assumed a PIPE would be priced below$9.20 per share only 5% of the time and would be priced at$9.00 per share when it is priced below$9.20 per share.
The purchase of forward purchase shares by
23
--------------------------------------------------------------------------------
Table of Contents
Each of the forward purchasers has the right to transfer all or a portion of its rights and obligation to purchase the forward purchase shares to one or more transferees who are affiliates of the forward purchaser (the "forward transferees"), subject to compliance with applicable securities laws. Any such forward transferee will be subject to the same terms and conditions under the relevant forward purchase agreement. The forward purchase shares will be identical to the shares of Class A common stock underlying the units being sold in the IPO, except that they will be subject to certain registration rights and transfer restrictions. The funds from the sale of the forward purchase shares will be used as part of the consideration to the sellers in the initial Business Combination and any excess funds will be used for working capital in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their public shares and is intended to provide the Company with a minimum funding level for the initial Business Combination.
Critical Accounting Policies
Deferred Offering Costs
We comply with the requirements of the ASC 340-10-S99-1. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. Offering costs are allocated to the separable financial instruments to be issued in the IPO based on a relative fair value basis, compared to total proceeds received. Upon closing of the IPO onNovember 5, 2021 , offering costs amounted to$10,757,787 consisting of$2,000,000 of underwriting commissions,$6,050,000 of deferred underwriting commissions, an excess of fair value of the Founder Shares acquired by theAnchor Investors of$3,386,739 , and$556,048 of other offering costs (before$1,235,000 of offering costs reimbursed by the underwriter), of the total offering costs,$10,247,056 was charged to temporary equity and the remaining$510,731 is included in equity.
Forward Purchase Agreement liability
We account for the 3,000,000 forward purchase shares issued pursuant to the forward purchase agreements (the "FPA") in accordance with the guidance contained in ASC 815-40. Such guidance provides that because theFPA shares do not meet the criteria for equity treatment thereunder, eachFPA share must be recorded as a liability. Accordingly, we classify eachFPA share as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, theFPA liability will be adjusted to fair value, with the change in fair value recognized in the statement of operations.
Common Stock Subject to Possible Redemption
All of the 11,500,000 common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance withSEC and its staff's guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all shares of Class A common stock have been classified outside of permanent equity.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of common stock outstanding during the period, excluding common
stock subject to forfeiture by the Sponsor. Weighted average shares were reduced
for the effect of an aggregate of 375,000 common stock that were subject to
forfeiture if the over-allotment option was not exercised by the underwriters.
At
24
--------------------------------------------------------------------------------
Table of Contents
Warrants
We account for the 10,700,000 warrants issued in connection with the IPO (comprised of 5,750,000 Public Warrants and 4,950,000 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that the warrants described are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.
Recent Accounting Pronouncements
InAugust 2020 , 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 effectiveJanuary 1, 2022 and should be applied on a full or modified retrospective basis. OnFebruary 16, 2021 , the date of the Company's inception, the Company adopted the new standard.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's financial statements.
© Edgar Online, source