Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements in this section regarding our
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 our management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, our 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. All subsequent written or oral
forward-looking statements attributable to us or persons acting on our behalf
are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the notes thereto contained elsewhere in this Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 24, 2020, for the purpose of effecting a business combination with one
or more businesses. We intend to effectuate our business combination using cash
from the remaining 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.
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 September 24, 2020 (inception) through December 31,
2022 were organizational activities, those necessary to prepare for the initial
public offering and subsequent to the initial public offering, identifying a
target company for a business combination and subsequent to entering into the
Merger Agreement, pursuing the completion of the Near 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 and unrealized gains on marketable securities held in a trust
account, and gains or losses from the change in fair value of the warrant
liabilities and the Working Capital Loan. 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, 2022, we had net income of $5,032,569, which
consists of change in fair value of the warrant liabilities of $7,205,710,
change in fair value of the Working Capital Loan of $341,057, and interest
earned on marketable securities held in the trust account of $1,760,120,
partially offset by formation and operational costs of $3,900,302 and provision
for income taxes of $374,016.
For the year ended December 31, 2021, we had a net loss of $406,026, which
consists of the change in fair value of the warrant liabilities of $1,642,290,
unrealized gain on marketable securities held in trust account of $2,211 and
interest earned on marketable securities held in the trust account of $78,398,
offset by formation and operational costs of $1,605,912 and transaction costs
allocated to warrant liabilities of $523,013.
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Near Business Combination
On May 18, 2022, we entered into the Near Merger Agreement with Near, Merger Sub
1 and Merger Sub 2. Near, a global leader in privacy-led data intelligence,
curates one of the world's largest sources of intelligence on people, places and
products. Near processes data from over 1.6 billion unique user IDs, in over 70
million places across 44 countries to empower marketing and operational data
leaders to confidently reach, understand and market to consumers and optimize
their business results. Near has offices in Los Angeles, Silicon Valley, Paris,
Bangalore, Singapore, Sydney and Tokyo. Near serves major enterprises in retail,
real estate, restaurants, tourism, technology, marketing and other industries.
Pursuant to the Near Merger Agreement, at the closing of the transactions
contemplated by the Near Merger Agreement, (i) Merger Sub 1 and Near will
consummate the First Merger (as defined in the Near Merger Agreement), pursuant
to which Merger Sub 1 will be merged with and into Near, with Near continuing as
the surviving corporation and a wholly owned subsidiary of the Company, as a
result of which all of the issued and outstanding capital stock of Near will no
longer be outstanding and will automatically be cancelled and will cease to
exist in exchange for the right to receive the Merger Consideration (as defined
in the Near Merger Agreement), and (ii) Near, as the surviving corporation and a
wholly owned subsidiary of the Company after the First Merger, will merge with
and into Merger Sub 2, with Merger Sub 2 continuing as the surviving entity, as
a result of which all of the issued and outstanding capital stock of Near will
no longer be outstanding and will automatically be cancelled and will cease to
exist and each membership interest of Merger Sub 2 will remain outstanding as a
membership interest of the surviving entity. Following the Near Business
Combination, the Company will change its name to "Near Intelligence, Inc.", or
such other name as may be mutually agreed to by the Company and Near.
For a full description of the Near Merger Agreement and the proposed Near
Business Combination, please see "Item 1. Business."
Extensions
On July 7, 2022, the Company's stockholders approved the First Extension,
extending the date by which the Company must consummate its initial business
combination from July 11, 2022 to January 11, 2023 (or such earlier date,
subject to certain conditions of the Near Merger Agreement, as determined by the
board of directors). In connection with the First Extension, the Company issued
two promissory notes in the aggregate principal amount of up to $2,060,070,
pursuant to which the sponsor and Near loaned the Company an aggregate of
$2,060,070 and deposited into the trust account to cover the six months of
extension payments (each in the amount of $343,345) paid in connection with the
First Extension.
On January 6, 2023, the Company's stockholders approved the Second Extension,
extending the date by which the Company must consummate its initial business
combination from January 11, 2023 to April 11, 2023 (or such earlier date as
determined by the board of directors). If the Company's initial business
combination, such as the Near Business Combination, is not consummated by
April 11, 2023, then the Company's existence will terminate, and the Company
will distribute the remaining amounts in the trust account as provided in the
Company's amended and restated certificate of incorporation.
In connection with the First Extension, the Company's stockholders holding
6,845,606 public shares exercised their right to redeem such shares for a pro
rata portion of the funds in the trust account. As a result, $68,488,348
(approximately $10.00 per share) was removed from the trust account to pay such
holders. In connection with the Second Extension, stockholders holding 9,786,530
public shares exercised their right to redeem their shares for a pro rata
portion of the funds in the trust account. As a result, approximately
$101 million (approximately $10.32 per public share) was removed from the trust
account to pay such holders and approximately $6.376 million remained in the
trust account. Following redemptions, the Company has 617,864 public shares
outstanding as of the date of this Annual Report.
For a full description of the First Extension and Second Extension, please see
"Item 1. Business."
Liquidity and Going Concern
On January 11, 2021, we consummated the initial public offering of 17,250,000
units, at a price of $10.00 per unit, which included the full exercise by the
underwriters of their over-allotment option in the amount of 2,250,000 units,
generating gross proceeds of $172,500,000. Simultaneously with the closing of
the initial public offering, we consummated the sale of 5,200,000 private
placement warrants to the sponsor at a price of $1.00 per private placement
warrant generating gross proceeds of $5,200,000.
36
Following the initial public offering, the full exercise of the over-allotment
option, and the sale of the private placement warrants, a total of $172,500,000
was placed in the trust account. We incurred $14,303,235 in transaction costs,
including $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting
fees, $4,411,238 of fair value of the Founder Shares attributable to the anchor
investor and $404,497 of other offering costs.
For the year ended December 31, 2022, net cash used in operating activities was
$2,103,271. Net income of $5,032,569 was affected by change in fair value of the
warrant liabilities of $7,205,710, change in fair value of the Working Capital
Loan of $341,057, deferred tax provision of $71,622 and interest earned on
marketable securities held in the trust account of $1,760,120. Changes in
operating assets and liabilities provided $2,099,425 of cash for operating
activities primarily because of the increase in accounts payable and accrued
expenses.
For the year ended December 31, 2021, net cash used in operating activities was
$970,669. Net loss of $406,026 was affected by change in fair value of the
warrant liabilities of $1,642,290, interest earned on marketable securities held
in the trust account of $78,398, transaction costs allocated to warrants of
$523,013 and an unrealized gain on marketable securities held in trust account
of $2,211. Changes in operating assets and liabilities provided $635,243 of cash
for operating activities.
At December 31, 2022, we had cash and marketable securities held in the trust
account of $107,332,749 (including approximately $1,228,739 of interest income,
including unrealized loss) 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, 2022, we had withdrawn $579,359 of
interest earned from the trust account to pay for the Company's previously
unpaid and accrued tax obligations.
We intend to use substantially all of the funds held in the trust account and
any additional funds available under the financing arrangement described in Note
5 to the accompanying consolidated financial statements, including any amounts
representing interest earned on the trust account (less deferred underwriting
commissions and income taxes payable), to complete our business combination. 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.
At December 31, 2022, we had cash of $101,161 and borrowing capacity under the
Working Capital Loan of $275,000. As of December 31, 2022, $1,225,000 was
borrowed under the Working Capital Loan. The fair value of the note as of
December 31, 2022 was $421,900. We intend to use the funds held outside the
trust account and this borrowing capacity primarily for completing the Company's
business combination.
Subsequent to December 31, 2022, the Sponsor advanced the Company $275,000.
The Company's liquidity needs prior to the consummation of the initial public
offering were satisfied through the proceeds of $25,000 from the sale of Founder
Shares, and loans from the sponsor of approximately $89,000. The loan was repaid
in full on January 11, 2021. Subsequent to the consummation of the initial
public offering, the Company's liquidity has been satisfied through the net
proceeds received from the consummation of the initial public offering, the sale
of private placement warrants, and the Working Capital Loan.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our sponsor or an affiliate of our
sponsor or certain of our officers and directors may, but are not obligated to,
make Working Capital Loans. Such Working Capital Loans would be evidenced by
promissory notes. If we complete a business combination, we may repay the notes
out of the proceeds of the trust account released to us. 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 the notes, but no proceeds from our
trust account would be used for such repayment. On January 21, 2022, we issued a
promissory in the principal amount of up to $1,500,000 to our sponsor. The note
is non-interest bearing and payable upon the consummation of a business
combination or may be convertible into warrants of the post-business combination
entity at a price of $1.00 per warrant at the option of the lender. The warrants
would be identical to the private placement warrants (see Note 8 to the
accompanying consolidated financial statements). As of December 31, 2022, the
Company had drawn $1,225,000 on the Working Capital Loan and had $275,000
available to draw.
37
As indicated in the accompanying consolidated financial statements, at December
31, 2022, the Company had $101,161 in cash, $107,332,749 in cash and marketable
securities held in the trust account to be used for a business combination or to
repurchase or redeem its common stock in connection therewith and working
capital deficit of $4,570,315, which excludes $125,394 of interest earned on the
trust account which is available to pay Delaware franchise taxes payable and
income taxes payable. As of December 31, 2022, $1,228,739 of the amount on
deposit in the trust account represented interest income, which is available to
pay the Company's tax obligations.
Until the consummation of a business combination, the Company has used and will
be using the funds not held in the trust account and any additional funds
available under the financing arrangement described below for completing the
Company's business combination.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's ASC Subtopic 205-40, "Presentation of Financial
Statements - Going Concern," the Company has until April 11, 2023, to consummate
an initial business combination. It is uncertain that the Company 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 Company
may not have sufficient liquidity to fund the working capital needs of the
Company through one year from the issuance of these consolidated financial
statements. Management has 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 April 11, 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, 2022. 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 capital lease obligations, operating lease obligations or
long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $6,037,500
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.
On January 21, 2022, the Company issued a promissory note with respect to the
Working Capital Loans in the principal amount of up to $1,500,000 to the
Sponsor. The Working Capital Loan is non-interest bearing and payable upon the
consummation of a Business Combination or may be convertible into warrants of
the post-Business Combination entity at a price of $1.00 per warrant at the
lender's discretion. As of December 31, 2022, $1,225,000 was borrowed under the
Working Capital Loan. The fair value of the promissory note as of December 31,
2022 was $421,900.
On July 7, 2022, the Company issued an unsecured promissory note to the Sponsor
for up to an aggregate principal amount of $2,060,070 to be deposited into the
Trust Account in connection with the Extension. The Company was to deposit up
to six equal installments of the Extension Funds, or $343,345, into the Trust
Account on a monthly basis for each month of the Extension and such amount will
be distributed either to: (i) all of the holders of the Public Shares upon the
Company's liquidation or (ii) holders of Public Shares who elect to have their
shares redeemed in connection with the consummation of the Company's initial
Business Combination. The Extension Funds note is not convertible and bears no
interest and is due and payable upon the earlier of the date on which the
Company consummates its initial Business Combination or the date of the
liquidation of the Company. As of December 31, 2022, an aggregate of $1,373,380
has been drawn down on the Extension Funds and deposited into the Trust Account
to cover the first four months of the extension.
On November 23, 2022, the Company issued a promissory note (the "Near Extension
Note"), dated as of November 18, 2022, in the aggregate principal amount of up
to $686,690, to Near. The Near Extension Note relates to the final two payments
of the Company's extension funds of $343,345 each to be deposited into the Trust
Account for each month in which the date by which the Company must consummate
its initial business combination is extended, from July 11, 2022 until January
11, 2023. As of December 31, 2022, the full amount of $686,690 has been drawn
down on the Near Extension Note and deposited into the Trust Account.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in
conformity with GAAP 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 consolidated financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates.
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Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks. The Company accounts for warrants as either
equity-classified or liability-classified instruments based on an assessment of
the warrant's specific terms and applicable authoritative guidance in FASB ASC
480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives
and Hedging ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480 and 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 the Company's own shares of common stock, 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. For the private placement warrants, the fair value was
estimated using a binomial lattice model incorporating the Cox-Rss-Rubenstein
methodology at the closing date of the initial public offering and as of
December 31, 2021. For the public warrants, the fair value was estimated using a
binomial lattice model incorporating the Cox-Rss-Rubenstein methodology at the
closing date of the initial public offering and the level 1 quoted prices in an
active market as of December 31, 2022.
Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Class A common stock subject to mandatory redemption is classified as a
liability instrument and 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 Class A common stock features certain redemption rights that are considered
to be outside of our control and subject to occurrence of uncertain future
events. Accordingly, all shares of Class A common stock subject to possible
redemption are presented at redemption value as temporary equity, outside of the
stockholders' equity section of our balance sheets.
Net Loss Per Share of Common Stock
Net loss per share of common stock is computed by dividing net loss by the
weighted average number of shares of common stock outstanding for the period.
The Company applies the two-class method in calculating loss per share of common
stock. Re-measurement associated with the redeemable shares of Class A common
stock is excluded from loss per common share as the redemption value
approximates fair value. Net income or loss is allocated among the classes of
ordinary shares based on weighted average shares outstanding.
The calculation of diluted loss per share of common stock does not consider the
effect of the warrants issued in connection with the (i) initial public
offering, and (ii) the private placement since the exercise of the warrants is
contingent upon the occurrence of future events. The warrants are exercisable to
purchase 13,825,000 shares of Class A common stock in the aggregate. As of
December 31, 2022 and 2021, the Company did not have any other dilutive
securities or other contracts that could, potentially, be exercised or converted
into common stock and then share in the earnings of the Company. As a result,
diluted net loss per common share is the same as basic net loss per common share
for the periods presented.
39
Convertible Instruments
The Company evaluated the accounting for its promissory notes that feature
conversion options in accordance with ASC Topic 815, Derivatives and Hedging
Activities ("ASC 815"). ASC 815 requires companies to bifurcate conversion
options from their host instruments and account for them as freestanding
derivative financial instruments according to certain criteria. The criteria
includes circumstances in which (a) the economic characteristics and risks of
the embedded derivative instrument are not clearly and closely related to the
economic characteristics and risks of the host contract, (b) a promissory note
that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under otherwise applicable GAAP with changes in
fair value reported in earnings as they occur and (c) a separate instrument with
the same terms as the embedded derivative instrument would be considered a
derivative instrument. However, the Company has elected to account for its
Working Capital Loan at fair value, as described in Note 10 to the accompanying
consolidated financial statements.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
consolidated financial statements.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in Ukraine. We cannot at
this time fully predict the likelihood of one or more of the above events, their
duration or magnitude or the extent to which they may negatively impact our
business and our ability to complete an initial business combination.
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