Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
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 unaudited condensed financial
statements and the notes thereto included in this Report under "Item 1 Financial
Statements". Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties.
Overview
We are a Delaware corporation structured as a blank check company formed for the
purpose of effecting a business combination. We intend to effectuate our initial
business combination using cash from the proceeds of the IPO and the sale of the
private placement warrants, our capital stock, debt or a combination of cash,
stock and debt. We are an emerging growth company and, as such, we are subject
to all of the risks associated with emerging growth companies.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to
complete our initial business combination will be successful.
Recent Developments
On November 10, 2022, the Company filed a definitive proxy statement for the
Special Meeting to, among other things, approve proposals to amend the Company's
charter and trust agreement to change the date by which the Company would be
required to consummate a business combination from March 5, 2023 to a date to be
determined by the board, in its sole discretion, no later than December 30,
2022.
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, those
necessary to prepare for our IPO and identifying a target company for our
initial business combination. We do not expect to generate any operating
revenues until after completion of our initial business combination. We generate
non-operating income in the form of interest income on cash and cash equivalents
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 three months ended September 30, 2022, we had net income of $1,886,769,
due primarily to a decrease in the fair value of our warrants of $926,390,
income tax expense of $309,851, and interest income from the trust account of
$1,525,480, partially offset by $255,250 of formation and operating costs,
consisting primarily of general and administrative expenses.
For the nine months ended September 30, 2022, we had net income of $9,303,006,
due primarily to a decrease in the fair value of our warrants of $8,562,175,
income tax expense of $351,422, and interest income from the trust account of
$1,999,536, partially offset by $907,283 of formation and operating costs,
consisting primarily of general and administrative expenses.
For the three months ended September 30, 2021, we had a net income of
$4,038,765. We incurred $573,577 of formation and operating costs consisting
mostly of general and administrative expenses. We had investment income of
$5,210 on our amounts held in Trust and in the fair value of our warrants of
$4,607,132.
For the nine months ended September 30, 2021, we had a net income of
$11,006,215. We incurred $1,085,707 of formation and operating costs consisting
mostly of general and administrative expenses and offering expense related to
warrant issuance of $864,511. We had investment income of $11,666 on our amounts
held in Trust and change in the fair value of our warrants of $12,944,767.
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We reclassified a portion of the offering costs associated with the IPO
originally charged to temporary equity, to an expense in the statements of
operations in the amount of $864,511 based on a relative fair value basis. The
change in the fair value of the warrants was a decrease in the liability of
$926,390 and an increase in the liability of $4,607,132, respectively, for the
three months ended September 30, 2022 and 2021. The change in the fair value of
the warrants was a decrease in the liability of $8,562,175 and an increase in
the liability of $12,944,767, respectively, for the nine months ended September
30, 2022 and 2021.
Liquidity and Capital Resources
As of September 30, 2022, we had cash held outside the trust account of $132,012
available for working capital needs, respectively. All remaining cash held in
the trust account is generally unavailable for our use, prior to an initial
business combination, and is restricted for use either in a business combination
or to redeem common stock. As of September 30, 2022, none of the amount in the
trust account was available to be withdrawn as described above.
Through September 30, 2022, our liquidity needs were satisfied through receipt
of $25,000 from the sale of the founder shares, and the remaining net proceeds
from the IPO and the sale of private placement warrants.
On December 1, 2021, we issued the Note to our sponsor in the principal amount
of up to $1,500,000. The Note was issued in connection with advances the sponsor
has made, and may make in the future, to us for working capital expenses. As of
September 30, 2022 and December 31, 2021, the outstanding balance of the Note
was $950,000 and $550,000, respectively.
As of September 30, 2022 and December 31, 2021, we did not have any 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. 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.
Going Concern
We anticipate that the $132,012 held outside of the trust account as of
September 30, 2022, might not be sufficient to allow us to operate until March
5, 2023, the end of the Combination Period and the period we have to consummate
an initial business combination, assuming that a business combination is not
consummated during that time. Until consummation of our business combination, we
will use the funds not held in the trust account, and any additional Working
Capital Loans from the initial stockholders, our officers and directors, or
their respective affiliates (which is described in Note 5 to our unaudited
condensed financial statements), for identifying and evaluating prospective
acquisition candidates, performing business due diligence on prospective target
businesses, traveling to and from the offices, plants or similar locations of
prospective target businesses, reviewing corporate documents and material
agreements of prospective target businesses, selecting the target business to
acquire and structuring, negotiating and consummating the business combination.
We can raise additional capital through Working Capital Loans from the initial
stockholders, our officers, directors, or their respective affiliates (which is
described in Note 5 to our unaudited condensed financial statements) or through
loans from third parties. None of the sponsor, officers or directors are under
any obligation to advance funds to, or to invest in us. If we are unable to
raise additional capital, it may be required to take additional measures to
conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of its business plan, and reducing
overhead expenses. We cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about our ability to continue as a going concern for a
reasonable period of time, which is considered to be one year from the issuance
date of the financial statements.
Our Combination Period is until March 5, 2023, meaning we have 24 months from
the closing of the IPO, to consummate a business combination. However, if we are
unable to complete a business combination within the Combination Period, we will
redeem 100% of the outstanding public shares for a pro rata portion of the funds
held in the trust account, equal to the aggregate amount then on deposit in the
trust account including interest earned on the funds held in the trust account
and not previously released to us, divided by the number of then outstanding
public shares, subject to applicable law and as further described in the
registration statement, and then seek to dissolve and liquidate. There is a
possibility that a business combination might not happen within the Combination
Period.
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Contractual Obligations
As of September 30, 2022 and December 31, 2021, we did not have any long-term
debt, capital or operating lease obligations.
We entered into an administrative support agreement pursuant to which we pay our
sponsor for office space and secretarial and administrative services provided to
members of our management team, in an amount not to exceed $10,000 per month.
Since March 5, 2021, we have paid the sponsor a total of $10,000 per month for
office space and administrative support services. Upon completion of the initial
business combination or our liquidation, we will cease paying these monthly
fees. We incurred $30,000 in such fees for the three months ended September 30,
2022 and 2021. We incurred $90,000 and $69,677 in such fees for the nine months
ended September 30, 2022 and 2021, respectively.
Critical Accounting Estimates
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to the ASC
Topic 480, "Distinguishing Liabilities from Equity" and ASC Topic 815-15,
"Derivatives and Hedging". The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is reassessed at the end of each reporting period.
Derivative Warrant Liabilities
We issued an aggregate of 17,433,333 warrants in connection with our IPO and
private placement, which, are recognized as derivative liabilities in accordance
with ASC Topic 815-40, "Derivatives and Hedging". Accordingly, we recognize the
warrants as liabilities at fair value and adjust the instruments to fair value
at each reporting period. The liabilities are subject to remeasurement at each
balance sheet date until exercised, and any change in fair value is recognized
in our statements of operations. At the IPO, we utilized a Monte Carlo
simulation model to determine the initial value of the public warrants and
private warrants. At September 30, 2022 and December 31, 2021, we used the
quoted stock price in the active market to value the public warrants and a Monte
Carlo simulation model to value the private warrants with changes in fair value
charged to the statements of operations.
Conversion Feature of Promissory Note
On December 1, 2021, we issued the Note to our sponsor. The Note was issued in
connection with advances the sponsor has made, and may make in the future, to us
for working capital expenses. The lender may elect to convert up to $1,500,000
of the unpaid principal balance of the Note into warrants, each warrant
exercisable for one share of our Class A common stock upon the consummation of
an initial business combination. This embedded conversion feature is subject to
remeasurement at each balance sheet date until exercised, and any change in fair
value is recognized in our statements of operations. It is valued using the
Geske compound valuation model and at both issuance date and September 30, 2022,
its value was de minimis.
Recent Accounting Standards
Our 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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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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