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. 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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
October 22, 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 revenues to date.
Our only activities for the year ended December 31, 2022 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, and the search for 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 after the Initial Public Offering.
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, 2022, we had net income of $6,960,758 which
consists of by interest earned on investments held in the Trust Account of
$2,885,369 and the change in fair value of warrant liabilities and forward
purchase asset/liability of $7,909,486, partially offset by operating costs of
$3,303,458 and income taxes of $530,639.
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For the year ended December 31, 2021, we had net income of $3,749,355, which
consists of operating costs of $1,017,989 and costs associated with warrant
liabilities of $591,948 offset by interest earned on investments held in the
Trust Account of $40,937 and the change in fair value of warrant liabilities and
forward purchase asset/liability of $5,318,355.
Liquidity and Capital Resources
There is no current commitment on the part of any financing source to provide
additional capital and no assurances can be provided that such additional
capital will ultimately be available. As of December 31, 2022, the Company had a
working capital deficit of approximately $2.2 million and cash of approximately
$1.3 million. This condition raises substantial doubt about the Company's
ability to continue as a going concern for a period of time within one year
after the date that the financial statements are issued. There is no assurance
that the Company's plans to raise additional capital (to the extent ultimately
necessary) will be successful. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
On May 18, 2021, we consummated the Initial Public Offering of 23,000,000 Units
at a price of $10.00 per Unit, generating gross proceeds of $230,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 6,600,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement to our Sponsor, generating gross
proceeds of $6,600,000.
Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of $230,000,000 was placed in the Trust Account and as of
December 31, 2022, we had $1,263,707 of cash held outside of the Trust Account,
after payment of costs related to the Initial Public Offering, and available for
working capital purposes. Of this $1,263,707 of cash held outside of the Trust
Account as of December 31, 2022, $700,000 that had been withdrawn the pay
estimated taxes will be returned to the Trust Account because actual taxes were
lower than estimated. We incurred $13,707,892 in transaction costs, including
$4,600,000 of underwriters' discount paid, $8,050,000 of deferred underwriting
commissions and $1,067,892 of other fees.
On December 14, 2022, we held the Meeting, where our stockholders approved the
Extension Amendment Proposal to extend the date by which the company must
consummate its initial business combination from May 18, 2023 to May 18, 2024,
or such earlier date as determined by the company's board of directors.
In connection with the vote to approve the Extension Amendment Proposal,
stockholders holding 19,896,459 shares of the company's Class A common stock
exercised their right to redeem such shares for a pro rata portion of the funds
in the company's trust account. As a result, $199,650,204 (approximately $10.03
per share) was removed from the company's trust account to pay such holders.
3,103,541 of the public shares issued in our IPO remain outstanding.
Following the Meeting, on December 14, 2022, the company's board of directors
waived the condition to the Extension Amendment Proposal providing that no more
than $75 million of redemptions occur.
For the year ended December 31, 2022, cash used in operating activities was
$2,514,162. Interest earned on investments held in the Trust Account of
$2,885,369, the change in fair value of warrant liabilities and forward purchase
asset/liability of $7,909,486 and changes in operating assets and liabilities,
which provided $1,319,935 of cash from operating activities, contributed to net
income of $6,960,758.
As of December 31, 2022, we had cash held in the Trust Account of $31,685,865.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account to
complete our Business Combination. We may withdraw interest to pay franchise and
income taxes. During the year ended December 31, 2022, we withdrew interest
earned on the Trust Account of $1,638,019. 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 December 31, 2022, we had cash of $1,263,707 outside of the Trust Account.
Of this $1,263,707 of cash held outside of the Trust Account as of December 31,
2022, $700,000 that had been withdrawn the pay estimated taxes will be returned
to the Trust Account because actual taxes were lower than estimated. 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.
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In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the sponsor, an affiliate of the
sponsor, or our officers and directors 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. Up to $1,500,000 of such loans may be convertible into warrants,
at a price of $1.00 per warrant at the option of the lender. The warrants would
be identical to the Private Placement Warrants, including as to exercise price,
exercisability and exercise period. 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. The loans would be repaid upon consummation of a Business
Combination, without interest.
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. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our Business
Combination. If we are unable to complete our 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 Business
Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 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
affiliate of the sponsor a monthly fee of $10,000 for office space and
administrative support to the company. We began incurring these fees on May 13,
2021 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and the company's liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,050,000
in the aggregate. The deferred fee will be waived by the underwriters in the
event that we do not complete a Business Combination, subject to the terms of
the underwriting agreement.
Critical Accounting Estimates
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 identified the following critical accounting policies and
estimates:
Warrant Instruments
The Company accounts for the Public Warrants and the Private Placement Warrants
issued in connection with the Initial Public Offering and the Private Placement
in accordance with the guidance contained in FASB ASC 815, " Derivatives and
Hedging" whereby under that provision the Public Warrants and the Private
Placement Warrants do not meet the criteria for equity treatment and must be
recorded as a liability. Accordingly, the Company classifies the warrant
instrument as a liability at fair value and adjust the instrument to fair value
at each reporting period. This liability will be re-measured at each balance
sheet date until the Public Warrants and the Private Placement Warrants are
exercised or expire, and any change in fair value will be recognized in the
Company's statement of operations. The fair value of the Public Warrants and the
Private Placement Warrants are estimated primarily using
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market information. The Company's valuation model utilizes inputs and other
assumptions and may not be reflective of the price at which they can be settled.
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