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 annual 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 blank check company formed under the laws of the State of Delaware on
September 29, 2020, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. We intend to effectuate our
business combination using cash from the 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 operating revenues
to date. Our only activities from inception through December 31, 2021 were
organizational activities and those necessary to prepare for the initial public
offering, and identifying a target company for a business combination. 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 investments 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 year ended December 31, 2021, we had net income of $6,533,337, which
consisted of income of $8,323,195 derived from the changes in fair value of the
warrant liabilities and $23,702 of interest earned on investments held in the
trust account, partially offset by general and administrative expenses of
$1,130,094 and IPO-related transaction costs associated with the warrant
liabilities of $683,466.
For the period from September 29, 2020 (inception) through December 31, 2020, we
had a net loss of $3,292, which consisted of formation and operating expenses.
Liquidity and Capital Resources
Until the consummation of the initial public offering, our only source of
liquidity was an initial purchase of common stock by the sponsor and a loan from
the sponsor.
On January 19, 2021, we consummated the initial public offering of 25,000,000
units, at a price of $10.00 per unit, which includes a partial exercise by the
underwriters of their over-allotment option in the amount of 3,200,000 units, at
a price of $10.00 per unit, generating gross proceeds of $250,000,000.
Simultaneously with the closing of the initial public offering, the company
consummated the sale of 7,000,000 warrants at a price of $1.00 per private
placement warrant in a private placement to the sponsor, generating gross
proceeds of $7,000,000.
Following the initial public offering, the partial exercise of the
over-allotment option, and the sale of the private placement warrants, a total
of $250,000,000 was placed in the trust account. We incurred $14,329,577 in
transaction costs, including $5,000,000 of cash underwriting fees, $8,750,000 of
deferred underwriting fees and $579,577 of other offering costs.
As of December 31, 2020, the outstanding balance under the loan from the sponsor
was $100,000, which was repaid at the closing of the initial public offering on
January 19, 2021. There were no amounts outstanding at December 31, 2021.
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 fees 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.
Cash flows used in operating activities were $838,113 for the year ended
December 31, 2021, attributable to working capital changes due to payment of
general and administrative expenses.
As of December 31, 2021, we had cash of $607,255. Until the consummation of a
business combination, the company will be using the funds not held in the trust
account for identifying and evaluating prospective acquisition candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to acquire, and structuring,
negotiating and consummating the business combination. The company expects that
it will need to raise additional capital through loans or additional investments
from the sponsor or its stockholders, officers, directors, or third parties. The
company's officers and directors and the sponsor may, but are not obligated to
(except as described above), loan the company funds, from time to time, in
whatever amount they deem reasonable in their sole discretion, to meet the
company's working capital needs. If the company is 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. The
company 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 the company's 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.
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In connection with the company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board's ("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 the company be
unable to complete a business combination, also 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 January 19, 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, 2021. 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 long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below and an
agreement to pay an affiliate of the sponsor a monthly fee of $10,000 for office
space, secretarial, and administrative support services.
We began incurring these fees on January 13, 2021 and will continue to incur
these fees monthly until the earlier of the completion of the business
combination or our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $8,750,000
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.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
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 financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480, "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption are classified as a liability instrument and are
measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the
holder or subject to possible 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,
Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders' (deficit) equity section
of our balance sheet.
Under ASC 480-10-S99, we have elected to recognize changes in the redemption
value immediately as they occur and adjust the carrying value of the security to
equal the redemption value at the end of each reporting period. This method
views the end of the reporting period as if it was also the redemption date for
the security.
Immediately upon the closing of the initial public offering, we recognized the
accretion from initial book value to redemption amount value. The change in the
carrying value of redeemable Class A common stock resulted in charges against
additional paid-in capital and accumulated deficit.
Warrant Liabilities
We account for the warrants in accordance with the guidance contained in ASC
815-40 under which the warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the warrants as
liabilities at their fair value and adjusts the warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in the
statements of operations. The public warrants for periods where no observable
traded price was available and the private placement warrants are valued using a
Monte Carlo Simulation. For periods subsequent to the detachment of the public
warrants from the units, the public warrant's quoted market price was used as
the fair value as of each relevant date.
Net (Loss) Income Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share". The Company has two classes of shares, which are referred
to as Class A common stock and Class B common stock. Earnings and losses are
shared pro rata between the two classes of shares. Net income per common share
is computed by dividing net income by the weighted average number of common
shares outstanding for the period. Accretion associated with the redeemable
shares of Class A common stock is excluded from earnings per share as the
redemption value approximates fair value.
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Recent Accounting Standards
In August 2020, the FASB 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 January 1, 2024 and should be applied on a
full or modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06
would have on our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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