References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Mountain Crest Acquisition Corp. V. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Mountain Crest Global Holdings LLC. 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 Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC") on March 31, 2022. The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
April 8, 2021 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or 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 Units, 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 revenues to date.
Our only activities from April 8, 2021 (inception) through June 30, 2022 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and identifying a target company for a Business
Combination. We do not expect to generate any operating revenues until after the
completion of our Business Combination. We generate non-operating income in the
form of interest income on marketable securities 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 June 30, 2022, we had a net loss of $41,213, which
consists of general and administrative expenses of $123,819 and a provision for
income taxes of $10,567, offset by interest earned on investments held in the
Trust Account of $93,173.
For the six months ended June 30, 2022, we had a net loss of $163,093, which
consists of general and administrative expenses of $252,647 and a provision for
income taxes of $10,567, offset by interest earned on investments held in the
Trust Account of $100,121.
For the period from April 8, 2021 (inception) through June 30, 2021, we had a
net loss of $1,000, which consists of general and administrative expenses.
Liquidity and Capital Resources
On November 16, 2021, we consummated the Initial Public Offering of 6,000,000
Units and, with respect to the shares of common stock included in the Units
sold, the Public Shares at $10.00 per Unit, generating gross proceeds of
$60,000,000. Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 205,000 Private Units at a price of $10.00 per Private
Unit in a private placement to the Sponsor generating gross proceeds of
$2,050,000.
On November 18, 2021, the underwriters fully exercised their over-allotment
option, resulting in an additional 900,000 Units issued for an aggregate amount
of $9,000,000. In connection with the underwriters' full exercise of their
over-allotment option, the Company also consummated the sale of an additional
18,000 Private Units at $10.00 per Private Unit, generating total proceeds of
$180,000. A net total of $9,000,000 was deposited into the Trust Account,
bringing the aggregate proceeds held in the Trust Account to $69,000,000.
Following the full exercise of the over-allotment option, and the sale of the
Private Units, a total of $69,000,000 was placed in the Trust Account. We
incurred $5,090,361 consisting of $1,380,000 of underwriting fees, $2,070,000 of
deferred underwriting fees and $1,640,361 of other offering costs.
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For the six months ended June 30, 2022, cash used in operating activities was
$281,696. Net loss of $163,093 was affected by interest earned on investments
held in the Trust Account of $100,121. Changes in operating assets and
liabilities used $18,482 of cash for operating activities.
For the period from April 8, 2021 (inception) through June 30, 2021, cash used
in operating activities was $0. Net loss of $1,000 was affected by the changes
in operating assets and liabilities which provided $1,000 of cash operating
activities.
As of June 30, 2022, we had marketable securities held in the Trust Account of
$69,099,822 (including $99,822 of interest income) consisting of U.S. Treasury
Bills with a maturity of 185 days or less. Interest income on the balance in the
Trust Account may be used by us to pay taxes. Through June 30, 2022, we have
withdrawn $1,142 of interest earned from the Trust Account.
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
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.
As of June 30, 2022, we had cash of $193,984. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a 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.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a 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 Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Going Concern
We have until November 16, 2022 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a Business Combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after
November 16, 2022.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 2022. 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 an agreement to pay an
affiliates, or advisors a total of up to $10,000 per month for office space,
utilities, out of pocket expenses, and secretarial and administrative support.
The arrangement will terminate upon the earlier of the Company's consummation of
a Business Combination or its liquidation.
The underwriters are entitled to a deferred fee of $0.30 per unit, or $2,070,000
in the aggregate will be payable to the underwriters for deferred underwriting
commissions. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed 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 identified the following critical accounting policies:
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Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that
features redemption rights that are either within the control of the holder or
subject to 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 common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, the common stock subject
to possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our condensed balance sheets.
Net Loss Per Common Share
We comply with accounting and disclosure requirements of Financial Accounting
Standards Board ("FASB") ASC 260, Earnings Per Share. The statement of
operations include a presentation of loss per redeemable public share and loss
per non-redeemable share following the two-class method of income per share. In
order to determine the net loss attributable to both the public redeemable
shares and non-redeemable shares, we first considered the total loss allocable
to both sets of shares. This is calculated using the total net loss less any
dividends paid. For purposes of calculating net loss per share, any
remeasurement of the accretion to redemption value of the common shares subject
to possible redemption was considered to be dividends paid to our public
stockholders. Subsequent to calculating the total loss allocable to both sets of
shares, we split the amount to be allocated using a ratio of 76% for the Public
Shares and 24% for the non-redeemable shares for the three and six months ended
June 30, 2022, reflective of the respective participation rights.
As of June 30, 2022, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into common shares
and then share in our earnings. As a result, diluted loss per share is the same
as basic loss per share for the periods presented.
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, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. 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.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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