The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this report (the
"Quarterly Report"). Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes forward-looking statements. These forward-looking
statements 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. 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. 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. For example, statements made
relating to future business combinations, use of proceeds of past securities
offerings, future loans and conversions of warrants are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intends," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking. Factors that might cause or contribute to such
forward-looking statements include, but are not limited to, those set forth in
the Risk Factors section of the Company's Annual Report on Form 10-K for the
year ended December 31, 2021 filed with the U.S. Securities and Exchange
Commission, as supplemented in this Quarterly Report. The following discussion
should be read in conjunction with our financial statements and related notes
thereto included elsewhere in this Quarterly Report.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a Business Combination. We consummated our Public
Offering on March 29, 2021. We intend to use the cash proceeds from our Public
Offering and the Private Placement described below as well as additional
issuances, if any, of our capital stock, debt or a combination of cash, stock
and debt to complete the Business Combination. We expect to incur significant
costs in the pursuit of our acquisition plans. There can be no assurance that
our plans to raise capital or to complete our initial Business Combination will
be successful.
The Company's management team is led by Tilman Fertitta, our Co-Chairman and
Chief Executive Officer, and Richard Handler, our Co-Chairman and President. Mr.
Fertitta is the sole shareholder of TJF, LLC ("TJF") and Mr. Handler is the
Chief Executive Officer of Jefferies Financial Group Inc. ("JFG"), and its
largest operating subsidiary, Jefferies Group LLC, a global investment banking
firm. The Company's sponsors are TJF and JFG (collectively, the "Sponsors").
Liquidity and Capital Resources
On March 29, 2021, we consummated a $500,000,000 Public Offering consisting of
50,000,000 Units at a price of $10.00 per Unit. Each Unit consists of one share
of the Company's Class A common stock, $0.0001 par value and one-fourth of one
redeemable Public Warrant. Simultaneously, with the closing of the Public
Offering, we consummated a $12,500,000 Private Placement of an aggregate of
8,333,333 Sponsor Warrants at a price of $1.50 per warrant. Upon closing of the
Public Offering and Private Placement on March 29, 2021, $500,000,000 in
proceeds (including $17,500,000 of deferred underwriting commissions) from the
Public Offering and Private Placement was placed in the Trust Account. The
remaining $12,500,000 held outside of trust was used to pay underwriting
commissions of $10,000,000, loans to our Sponsors, and deferred offering and
formation costs, and for working capital.
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As of September 30, 2022, we had an unrestricted balance of $52,473, as well as
cash, marketable securities and accrued interest held in the Trust Account of
$503,317,449. Our working capital needs will be satisfied through the funds,
held outside of the Trust Account, from the Public Offering and Private
Placement. Interest on funds held in the Trust Account may be used to pay income
taxes and franchise taxes, if any. Further, TJF and JUSH have each agreed,
pursuant to the A&R Convertible Notes, to loan us up to $1,000,000, or an
aggregate of $2,000,000, as may be required for ongoing business expenses and
the Business Combination. As of September 30, 2022, $1,503,712 had been borrowed
under the A&R Convertible Notes. TJF and JUSH each have the option to convert
any amounts outstanding under their respective A&R Convertible Note, up to an
aggregate amount of $1,500,000, into warrants at a price of $1.50 per warrant
which would be identical to the Sponsor Warrants.
We did not have any off-balance sheet arrangements as of September 30, 2022 and
December 31, 2021.
As of September 30, 2022 and December 31, 2021, we did not have any long-term
debt, capital or operating lease obligations.
The Company entered into an administrative services agreement in which we will
pay Fertitta Entertainment, Inc., (an affiliate of TJF) for office space,
secretarial and administrative services provided to members of our management
team, in an amount not to exceed $20,000 per month commencing on the date of
effectiveness of the Public Offering and ending on the earlier of the completion
of a Business Combination or liquidation.
Going Concern
In connection with our assessment of going concern considerations in accordance
with the authoritative guidance in Financial Accounting Standard Board ("FASB")
Accounting 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 and subsequent dissolution, should we be unable
to complete a Business Combination before March 29, 2023, raises substantial
doubt about our ability to continue as a going concern. If a Business
Combination is not consummated by March 29, 2023, 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 March 29, 2023.
Results of Operations
We have neither engaged in any significant business operations nor generated any
revenues to date. All activities to date relate to the Company's formation and
its Public Offering and search for a suitable Business Combination. We generate
non-operating income in the form of interest income on cash, cash equivalents,
and marketable securities held in the Trust Account. We 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 as we
locate a suitable Business Combination.
For the three months ended September 30, 2022 and 2021, we had net income of
$5,467,610 and $321,123, respectively. Net income for the three months ended
September 30, 2022 included $320,650 of general and administrative costs related
the formation of the Company and on-going expenses as we search for a Business
Combination and $60,000 in management fees, offset by $2,592,257 in earnings on
the Trust Account assets, a gain on warrant derivative liability of $3,541,667
and income tax provision of $285,664. Net income for the three months ended
September 30, 2021 related to $876,559 of general and administrative costs for
on-going expenses as we search for a Business Combination and $60,000 in
management fees, offset by a gain of $1,250,000 in the change in the fair value
of the warrant derivative liability and $7,682 in earnings on the Trust Account
assets.
For the nine months ended September 30, 2022 and 2021, we had net income of
$19,955,859 and $10,268,480. Net income for the nine months ended September 30,
2022 included $1,123,786 of general and administrative costs related to the
formation of the Company and on-going expenses as we search for a Business
Combination and $180,000 in management fees, offset by $3,428,572 in earnings on
the Trust Account assets, a gain on warrant derivative liability of $17,916,666
and income tax provision of $85,593. Net income for the nine months ended
September 30, 2021 related to $1,172,311 of general and administrative costs
related to the formation of the Company and on-going expenses as we search for a
Business Combination, $140,000 in management fees, and $942,390 in offering
costs expensed, were offset by a gain of $12,500,000 in the change in the fair
value of the warrant derivative liability and $23,181 in earnings on the Trust
Account assets.
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Critical Accounting Policies
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the unaudited financial statements and accompanying notes. Actual results could
differ from those estimates. The Company has identified the following as its
critical accounting policies:
Warrant Derivative Liability
In accordance with FASB ASC 815-40, Derivatives and Hedging: Contracts in an
Entity's Own Equity, an entity must consider whether to classify contracts that
may be settled in its own stock, such as warrants, as equity of the entity or as
an asset or liability. If an event that is not within the entity's control could
require net cash settlement, then the contract should be classified as an asset
or a liability rather than as equity. We have determined because the terms of
Public Warrants include a provision that entitles all warrantholders to cash for
their warrants in the event of a qualifying cash tender offer, while only
certain of the holders of the underlying shares of common stock would be
entitled to cash, our warrants should be classified as derivative liability
measured at fair value, with changes in fair value each period reported in
earnings. Further if our Sponsor Warrants are held by someone other than the
Sponsors, JUSH or their permitted transferees, the Sponsor Warrants will be
redeemable by the Company and exercisable by such holders on the same basis as
the Public Warrants. Because the terms of the Sponsor Warrants and Public
Warrants are so similar, we classified both types of warrants as a derivative
liability measured at fair value. Volatility in our Common Stock and Public
Warrants may result in significant changes in the value of the derivatives and
resulting gains and losses on our statement of operations.
Redeemable Shares
All of the 50,000,000 Public Shares sold as part of the Public Offering contain
a redemption feature as described in our Annual Report on Form 10-K for the year
ended December 31, 2021 filed by the Company with the SEC on April 14, 2022. In
accordance with FASB ASC 480, "Distinguishing Liabilities from Equity",
redemption provisions not solely within the control of the Company require the
security to be classified outside of permanent equity. Although the Company's
Charter provides a minimum net tangible asset threshold of $5,000,001, the
Company has determined all of the 50,000,000 Public Shares should be included in
temporary equity, classified outside of permanent equity, regardless of the
minimum net tangible assets required by the Company's Charter.
Income per Common Share
Basic net income per common share is computed by dividing net income applicable
to common stockholders by the weighted average number of common shares
outstanding during the period. All shares of Class B common stock are assumed to
convert to shares of Class A common stock on a one-for-one basis. For the three
and nine months ended September 30, 2022 and 2021, the Company did not have any
dilutive warrants, securities or other contracts that could, potentially, be
exercised or converted into common stock. As a result, diluted income per common
share is the same as basic income per common share for all periods presented.
The income per common share calculation allocates income shared pro rata between
Class A and Class B common stock. As a result, the calculated net income per
share is the same for Class A and Class B shares of common stock. For the three
months ended September 30, 2022 and 2021, the Company reported basic and diluted
net income per common share of $0.09 and $0.01, respectively. For the nine
months ended September 30, 2022 and 2021, the Company reported basic and diluted
net income per common share of $0.32 and $0.16, respectively.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
accompanying financial statements.
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