LARR HEALPAR 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 as a
The consummation of the Transactions are subject to the satisfaction or waiver
of certain customary closing conditions contained in the Business Combination
Agreement, including, among other things, the Company and ZyVersa shall have
received aggregate commitments of at least
The parties to the Business Combination Agreement have made customary representations and warranties, and have agreed to certain customary covenants in the Business Combination Agreement, including, among others, covenants with respect to the conduct of the Company, ZyVersa and Merger Sub, and their subsidiaries, prior to the closing of the Transactions.
The Business Combination Agreement may be terminated by the Company or ZyVersa,
under certain circumstances, including, among others, (i) by mutual written
consent of the Company and ZyVersa, (ii) by either the Company or ZyVersa if the
Effective Time shall not have occurred prior to
We intend to effectuate our initial business combination using cash from the proceeds of the IPO and the sale of the private units, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to backstop agreements we may enter into following the consummation of the IPO or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
? may significantly dilute the equity interest of investors in the IPO,
which dilution would increase if the anti-dilution provisions in the
Class B common stock resulted in the issuance of Class A shares on a
greater than one-to-one basis upon conversion of the Class B common
stock;
? may subordinate the rights of holders of our common stock if preferred
stock is issued with rights senior to those afforded our common stock;
? could cause a change in control if a substantial number of shares of
our common stock is 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;
? may have the effect of delaying or preventing a change of control of us
by diluting the stock ownership or voting rights of a person seeking to
obtain control of us; and
? may adversely affect prevailing market prices for our Class A common
stock and warrants.
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Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, 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, our ability to pay expenses,
make capital expenditures and acquisitions, and fund 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;
? limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, and
execution of our strategy; and
? other purposes and other disadvantages compared to our competitors who
have less debt.
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 the IPO. Following the IPO, we will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after the IPO. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. After the IPO, 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 expenses as we conduct due diligence on prospective business combination candidates. We expect our expenses to increase substantially after the closing of the IPO.
For the three-month period ended
For the nine-month period ended
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Liquidity, Capital Resources Going Concern
On
Simultaneously with the closing of the IPO, the Company consummated a private
placement with the Sponsors of 317,600 units in the aggregate, each unit
consisting of one Class A common stock of the Company and three-fourths of one
redeemable warrant, each at a purchase price of
A total of
On
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account (less
deferred underwriting commissions), to complete our initial business
combination. We may withdraw interest to pay taxes. We estimate our annual
franchise tax obligations, based on the number of shares of our common stock
authorized and outstanding after the completion of the IPO, to be
Prior to the completion of our initial business combination, we will have
available to us the approximately
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsors or an affiliate of our sponsors or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete our initial business combination, we would repay such loaned amounts. 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. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsors or an affiliate of our sponsors as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We expect our primary liquidity requirements during that period to include
approximately
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These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a "no-shop" provision (a provision designed to keep target businesses from "shopping" around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a "no-shop" provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
We do not believe we will need to raise additional funds following the IPO 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 business combination. In addition, we are targeting businesses larger than we could acquire with the net proceeds of the IPO and the sale of the private units, and may as a result be required to seek additional financing to complete such proposed initial business combination. 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.
There is no assurance that the Company's plans to consummate a business combination will be successful within the Combination Period as well as the liquidity to fund operations. As a result, there is substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued or are available to be issued.
For the nine months ended
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Our sponsors, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsors, officers or directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsors or an affiliate of our sponsors or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. 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. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsors or an affiliate of our sponsors as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
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Our sponsors have agreed to waive their redemption rights with respect to their
founder shares (i) in connection with the consummation of a business
combination, (ii) in connection with a stockholder vote to amend our amended and
restated certificate of incorporation to modify the substance or timing of our
obligation to allow redemption in connection with our initial business
combination or certain amendments to our charter prior thereto or to redeem 100%
of our public shares if we do not complete our initial business combination
within 12 months from the completion of the IPO (or up to 18 months from the
closing of the IPO, at the election of the Company, in two separate three month
extensions subject to satisfaction of certain conditions, including the deposit
Pursuant to a registration rights agreement we entered into with our initial
stockholders on
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in
Net Loss per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share". The Company has two classes of stock, which are referred to as Class A Common Stock and Class B Common Stock. Income and losses are shared pro rata between the two classes of stock. Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
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. As of
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Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, "Derivatives and Hedging." For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The over-allotment option is deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and is accounted for as a liability pursuant to ASC 480. The warrants issued in connection with the Initial Public Offering and the Private Placement are recorded in equity as they qualify for equity treatment under ASC 815-40.
Class A common stock subject to possible redemption
The Company accounts for its Class A common stock subject to possible redemption
in accordance with the guidance enumerated in ASC 480 "Distinguishing
Liabilities from Equity." Common stock subject to mandatory redemption is
classified as a liability instrument and are measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within the
Company's control) are classified as temporary equity. At all other times,
common stock is classified as stockholders' equity. The Company's Class A common
stock feature certain redemption rights that are considered by the Company to be
outside of the Company's control and subject to the occurrence of uncertain
future events. Accordingly, at
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