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, incorporated as a Cayman Islands exempted company
for the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses. Lazard Ltd, an affiliate of our sponsor, intends to use resources
across its international financial advisory and asset management businesses to
source and evaluate attractive, high growth private companies. Although we are
not limited to a particular industry or geographic region in our identification
and acquisition of a target company, we believe the growth-oriented subsectors
of the healthcare, technology, energy transition, financial and consumer sectors
present particularly attractive investment opportunities. Our activities through
December 31, 2021, related to our formation, our IPO, which was consummated on
February 12, 2021, and thereafter searching for and evaluating potential
business combination targets. During the fiscal period ended December 31, 2020,
our efforts were limited to organizational activities.
Results of Operations
We do not expect to generate any operating revenues until after the completion
of our initial business combination. We generate non-operating income in the
form of interest income on cash equivalents held in the trust account. We
incurred expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as due diligence
expenses.
For the year ended December 31, 2021, we had a net loss of $1,663,133, which
consisted of interest income on the cash equivalents held in the trust account
of $33,252, a change in fair value on the warrants sold in the IPO and the
private placement warrants of $4,535,000, offset by operating costs of
$5,516,891. Operating costs primarily relate to professional fees of $501,950,
due diligence costs of $3,787,613, insurance costs of $894,152, administrative
support fees of $220,000, and regulatory and compliance costs of $101,808, other
costs of $11,368. Additionally, the Company incurred offering costs that were
expensed related to the closing of our IPO of $714,494.
For the period from December 10, 2020 (inception) through December 31, 2020, we
had a net loss of $7,000, which consisted of formation costs.
Liquidity and Capital Resources
On February 12, 2021, we consummated our IPO of 57,500,000 of our units,
including 7,500,000 units sold upon exercise in full of the underwriter's
over-allotment option. Each unit consists of one Class A ordinary share of the
Company, $0.0001 par value per share, and one-fifth of one public warrant, with
each whole public warrant entitling the holder thereof to purchase one Class A
ordinary share at an exercise price of $11.50 per share, subject to adjustment.
The units were sold at an offering price of $10.00 per unit, generating gross
proceeds of $575,000,000. Goldman Sachs & Co. LLC acted as Book-Running Manager.
The securities sold in the IPO were registered under the Securities Act on a
registration statement on Form S-1 (No. 333-252408), which was declared
effective by the SEC on February 9, 2021.
Simultaneously with the consummation of the IPO and the issuance and sale of the
units, the Company consummated the sale to the sponsor of 9,000,000 private
placement warrants, with each private placement warrant exercisable to purchase
one Class A ordinary share at $11.50 per share subject to adjustment, at a price
of $1.50 per
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private placement warrant, generating total proceeds of $13,500,000. The private
placement warrants are identical to the public warrants, except that, so long as
they are held by the sponsor or its permitted transferees, (i) they will not be
redeemable by us, (ii) they (including the Class A ordinary shares issuable upon
exercise of these private placement warrants) may not, subject to certain
limited exceptions, be transferred, assigned or sold by our sponsor until 30
days after the completion of our initial business combination, (iii) they may be
exercised by the holders on a cashless basis and (iv) they will be entitled to
registration rights.
A total of $575,000,000, comprised of $563,500,000 of the proceeds from the IPO
and $11,500,000 of the proceeds of the sale of the private placement warrants,
was placed in the trust account. Transaction costs amounted to $32,476,988,
consisting of $11,500,000 of underwriting fees (a net underwriting fee of
$8,500,000 after giving effect to the underwriter's reimbursement of the Company
for $3,000,000 of financial advisory fees payable by the Company to Lazard
Frères & Co. LLC), $20,125,000 of deferred underwriting fees (as may be reduced
as a result of the underwriter's reimbursement to the Company for certain
financial advisory fees payable by the Company to Lazard Frères & Co. LLC) and
$851,988 of professional fees and other offering related costs.
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
taxes payable and deferred underwriting commissions), to complete our initial
business combination. We may withdraw interest income (if any) to pay taxes, if
any. Any 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial business combination, the sponsor has, on
August 5, 2021, amended the working capital loan to increase the borrowing limit
from $1,300,000 to $2,000,000 to be provided to us to fund our expenses relating
to investigating and selecting a target business and other working capital
requirements prior to our initial business combination. On March 30, 2022, the
Sponsor further amended the working capital loan to provide additional borrowing
up to a total borrowing of $5,000,000. If we complete our initial business
combination, we may repay such loaned amounts out of the proceeds of the trust
account released to us. 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.
At the lender's discretion, up to $2,000,000 of such loans may be convertible
into warrants of the post-business combination entity at a price of $1.50 per
warrant at the option of the lender. The warrants would be identical to the
private placement warrants.
The sponsor or an affiliate of the sponsor may, but is not obligated to, loan us
additional funds as may be required. However, the terms of such additional loans
have not been determined and no written agreements exist with respect to such
loans. Prior to the completion of our initial business combination, we do not
expect to seek loans from parties other than our sponsor or its affiliates 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 may need to obtain additional financing to complete our initial business
combination, either because the transaction requires more cash than is available
from the proceeds held in the trust account, or because we become obligated to
redeem a significant number of our public shares upon completion of the business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination. If we have not consummated our
initial business combination within the required time period because we do not
have sufficient funds available to us, we would be forced to cease operations
and liquidate the trust account.
Off-balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be
considered off-balance sheet arrangements. 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.
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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 entered into any non-financial agreements involving assets.
Contractual Obligations
At December 31, 2021, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities other than as
described below.
On February 10, 2021, we entered into an administrative support agreement
pursuant to which we have agreed to pay an affiliate of the sponsor a total of
$20,000 per month for office space, administrative and support services. Upon
the earlier of the completion of the initial business combination and the
Company's liquidation, we will cease paying these monthly fees. The underwriter
of the IPO received a cash underwriting discount of $0.20 per Unit, or
$11,500,000 in the aggregate, upon the closing of the IPO. In addition, the
underwriter will be entitled to deferred commissions of $0.35 per Unit, or
$20,125,000 in the aggregate. The deferred underwriting discount will be paid to
the underwriter solely in the event that the Company completes a business
combination within the time required, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and expenses during the periods reported.
Estimates, by their nature, are based on judgment and available information.
Therefore, actual results could materially differ from those estimates and could
have a material impact on the financial statements. We have identified the
following as our critical accounting policies.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of ASC Topic 260, Earnings
Per Share. Net income (loss) per share of ordinary shares is computed by
dividing net income by the weighted average number of ordinary shares
outstanding during the period, excluding ordinary shares subject to forfeiture.
We apply the two-class method in calculating earnings per share, whereby the net
income (loss) is allocated ratably to the two classes of ordinary shares.
As of December 31, 2021, we had outstanding warrants to purchase up to
20,500,000 Class A ordinary shares. The weighted average of these shares was
excluded from the calculation of diluted net income (loss) per share of ordinary
shares since the exercise of the warrants is contingent upon the occurrence of
future events. As of December 31, 2020, the Company had 1,875,000 Class B
ordinary shares that were subject to forfeiture depending on the extent to which
the underwriter's over-allotment option was exercised. These Class B ordinary
shares were excluded from the calculation of the basic and diluted weighted
average number of non-redeemable Class B ordinary shares outstanding at December
31, 2020, and basic and diluted net loss per share of non-redeemable Class B
ordinary shares at December 31, 2020.
As of December 31, 2021 and 2020, we did not have any dilutive securities or
other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in our earnings. As a result, diluted income (loss) per
ordinary share is the same as basic income (loss) per ordinary share for the
year ended December 31, 2021 and the period from December 10, 2020 (inception)
through December 31, 2020.
Deferred Offering Costs
We comply with the requirements of the ASC Topic 340-10-S99-1 and SEC Staff
Accounting Bulletin Topic 5A -"Expenses of Offering." Offering costs in
connection with our IPO amounted to $32,476,988, consisting of $11,500,000 of
underwriting discount, $20,125,000 of deferred underwriting commissions and
$851,988 of other
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offering costs. These costs were allocated to the Class A ordinary shares and
the one-fifth warrants included in the Units sold in the IPO and $31,762,494 was
charged to permanent equity and $714,494 was expensed.
Warrants
Under ASC Topic 815, we have classified issued warrants as liabilities
remeasured at fair value, with changes in fair value each period reported to
earnings.
Class A Ordinary Shares Subject to Possible Redemption
In accordance with ASC 480, redemption provisions not solely within the control
of the Company require the security to be classified outside of permanent
equity. Accordingly, all of the 57,500,000 Class A ordinary shares included in
the Units were classified outside of permanent equity.
Recent accounting pronouncements
In August 2020, the Financial Accounting Standards Board issued 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 for small reporting companies
beginning January 1, 2024 and should be applied on a full or modified
retrospective basis. 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.
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