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 on Form 10-K.
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 on Form
10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on
August 27, 2020 for the purpose of entering into a merger, share exchange, asset
acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more businesses or entities (the "Business
Combination"). We intend to effectuate our Business Combination using cash from
the proceeds of the Initial Public Offering and the sale of the Private
Placement Shares, our capital stock, debt or a combination of cash, stock 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 August 27, 2020 (inception) through December 31, 2021
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and 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 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.
For the year ended December 31, 2021, we had a net loss of $1,923,038, which
consists of general and administrative expenses of $1,763,483 and stock
compensation expense of $180,000, offset by interest income on marketable
securities held in the Trust Account of $20,445.
For the period from August 27, 2020 (inception) through December 31, 2020, we
had a net loss of $264,719, which consists of operating costs of $244,346, stock
compensation expense of $22,500, and an unrealized loss on marketable securities
held in our Trust Account of $981, offset by interest income on marketable
securities held in the Trust Account of $3,108.
Liquidity and Capital Resources
On November 23, 2020, we consummated the Initial Public Offering of 10,000,000
Public Shares at a price of $10.00 per Public Share, generating gross proceeds
of $100,000,000. Simultaneously with the closing of the Initial Public Offering,
we consummated the sale of 500,000 Private Placement Shares at a price of $10.00
per Private Placement Share in a private placement to our Sponsor, generating
gross proceeds of $5,000,000.
On December 10, 2020, we consummated the sale of an additional 352,040 Shares,
at $10.00 per Share, and the sale of an additional 7,041 Private Placement
Shares, at $10.00 per Private Placement Share, generating total gross proceeds
of $3,590,810. Following the Initial Public Offering and the sale of the Private
Placement Shares, a total of $103,520,402 of the net proceeds was deposited into
the Trust Account.
For the year ended December 31, 2021, cash used in operating activities was
$1,208,074. Net loss of $1,923,038 was affected by stock compensation expense of
$180,000, interest earned on marketable securities held in the Trust Account of
$20,445, and changes in operating assets and liabilities provided $555,409 of
cash for operating activities.
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For the period from August 27, 2020 (inception) through December 31, 2020, cash
used in operating activities was $714,521. Net loss of $264,719 was affected by
stock-based compensation expense of $22,500, interest earned on marketable
securities held in the Trust Account of $3,108, an unrealized loss on marketable
securities held in our Trust Account $981. Changes in operating assets and
liabilities used $470,175 of cash from operating activities.
As of December 31, 2021, we had marketable securities held in the Trust Account
of $103,542,974 (including approximately $22,572 of interest income and
unrealized losses, net) consisting of U.S. Treasury Bills with a maturity of 185
days or less. Interest income on the balance in the Trust Account may be used by
us to pay taxes. Through December 31, 2021, we have not withdrawn any interest
earned from 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 to
complete our Business Combination. We may withdraw interest to pay franchise and
income taxes. During the period ended December 31, 2020, we did not withdraw any
interest earned on the Trust Account. To the extent that our capital stock 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 $628,006 outside of 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. Up to $1,500,000 of such loans may be convertible into shares at
a price of $10.00 per share, at the option of the lender. The shares would be
identical to the Private Placement Shares.
Going Concern
In connection with the our assessment of going concern considerations in
accordance with Financial Accounting Standards Board's Accounting Standards
Codification Topic 205-40, "Presentation of Financial Statements - Going
Concern," we have until November 23, 2022, to consummate an initial business
combination. It is uncertain that we will be able to consummate an initial
business combination by this time. If an initial business combination is not
consummated by this date, there will be a mandatory liquidation and subsequent
dissolution of the Company. Additionally, the we may not have sufficient
liquidity to fund the working capital needs of the Company through one year from
the issuance of these financial statements. We have determined that the
liquidity condition and mandatory liquidation, should an initial business
combination not occur, and potential subsequent dissolution raises substantial
doubt about the Company's ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after November 23, 2022.
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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
a monthly fee of $10,000 for office space, secretarial and administrative
support. We began incurring these fees on November 18, 2020 and will continue to
incur these fees monthly until the earlier of the completion of the Business
Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Share, or
$3,623,214 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.
We intend to enter into forward purchase agreements pursuant to which Samsara
BioCapital has agreed to purchase an aggregate of up to 2,500,000 shares (the
"forward purchase shares"), for a purchase price of $10.00 per share, or an
aggregate of $25,000,000, in a private placement to close concurrently with the
closing of a Business Combination. The obligations under the forward purchase
agreements will not depend on whether any Public Shares are redeemed by the
public stockholders. The Sponsor's obligation to purchase forward purchase
shares will, among other things, be conditioned on the Business Combination
(including the target assets or business, and the terms of the Business
Combination) being reasonably acceptable to the Sponsor and on a requirement
that such initial Business Combination is approved by a unanimous vote of the
Company's Board of Directors. The forward purchase shares will be identical to
the shares of Class A common stock included in the Public Shares being sold in
the Initial Public Offering, except that they will be subject to certain
registration rights.
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:
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common
stock subject to mandatory redemption is classified as a liability instrument
and is measured at fair value. Conditionally redeemable common stock (including
common stock that features 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) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our common stock
features certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, the
Class A common stock subject to possible redemption is presented as temporary
equity, outside of the stockholders' deficit section of our balance sheets.
Net Loss per Common Share
We calculate earnings per share to allocate net income (loss) evenly to Class A
and Class B ordinary shares. This presentation contemplates a Business
Combination as the most likely outcome, in which case, both classes of common
stock share pro rata in the income (loss) of the Company.
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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 January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
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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