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
on March 17, 2021 for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses. We intend to effectuate our Business Combination using
cash from the proceeds of our Initial Public Offering and the sale of the
Private Placement Warrants, our ordinary shares, debt or a combination of cash,
shares 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, those necessary to prepare for our Initial Public
Offering, described below, and our 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 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 in
connection with searching for, and completing, a Business Combination.
For the period from March 17, 2021 (inception) through December 31, 2021, we had
net income of $7,930,074, which consisted of $2,543,064 of general and
administrative expenses, $37,157 of investment income, $1,995 of unrealized
losses on investments held in the Trust Account, and $10,437,976 of changes in
the fair value of the warrant liabilities.
Liquidity and Capital Resources
On July 23, 2021, we consummated the Initial Public Offering of 24,000,000
Units, generating gross proceeds of $240,000,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 6,333,334
Private Placement Warrants at a price of $1.50 per Private Placement Warrant in
a private placement to our Sponsor, generating gross proceeds of $9,500,000. On
August 3, 2021, the underwriters notified the Company of their intention to
partially exercise their over-allotment option. As such, on August 5, 2021, the
Company consummated the sale of an additional 1,911,379 Units, at $10.00 per
Unit, and the sale of an additional 254,850 Private Placement Warrants, at $1.50
per Private Warrant, generating total gross proceeds of $19,496,065.
Following the Initial Public Offering, the sale of the Private Placement
Warrants, and the exercise of the over-allotment option by the underwriters, a
total of $259,113,790 ($10.00 per Unit) was placed in the Trust Account. We
incurred $15,406,275 in Initial Public Offering related costs, including
$5,182,276 of underwriting fees, $9,068,983 of deferred underwriting fees and
$1,155,016 of other costs.
For the period from March 17, 2021 (inception) through December 31, 2021, cash
used in operating activities was $2,193,464. Net income of $7,930,074 was
affected by expenses paid by the Sponsor through the promissory note and
advances of $206,428, interest earned on investments held in the Trust Account
of $37,157, unrealized losses on investments held in the Trust Account of
$1,995, changes in the fair value of warrants liabilities of $10,437,976 and
transaction costs allocated to warrants liabilities of $701,000. Changes in
operating assets and liabilities used $557,828 of cash for operating activities.
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As of December 31, 2021, we had investments held in the Trust Account of
$259,148,952. We intend to use the funds held in the Trust Account, including
any amounts representing interest earned on the Trust Account (less taxes
payable), to complete our Business Combination. To the extent that our share
capital 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, 2021, we had cash of $1,170,049. 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. Up to $1,500,000 of such loans may be convertible into warrants
upon consummation of the Business Combination at a price of $1.50 per warrant.
The warrants would be identical to the Private Placement Warrants.
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.
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
Commencing on July 20, 2021, we agreed to pay our Sponsor a total of $10,000 per
month for office space, utilities, secretarial and administrative support
services provided to members of our management team. Upon completion of the
initial Business Combination or our liquidation, we will cease paying these
monthly fees. In addition, commencing on July 20, 2021 and until completion of
our Business Combination or liquidation, we will be required to reimburse our
Sponsor or its affiliates monthly for compensation expenses of employees
dedicated to us (including the Chief Financial Officer) not to exceed $900,000
per year. We recognized approximately $646,000 in connection with such services
for the period from March 17, 2021 (inception) to December 31, 2021.
The holders of Founder Shares, Private Placement Warrants, and securities that
may be issued upon conversion of Working Capital Loans, if any, are entitled to
registration rights pursuant to a registration rights agreement. These holders
will be entitled to make up to three demands, excluding short form demands, that
we register such securities. In addition, these holders will have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
The underwriters are entitled to a deferred fee of three and half percent
(3.50%) of the gross proceeds of the Initial Public Offering, or $9,068,983. 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.
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Critical Accounting Policies and 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 period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We evaluated the Public Warrants and Private Placement Warrants in accordance
with ASC 815-40, "Derivatives and Hedging - Contracts in Entity's Own Equity",
and concluded that a provision in the Warrant Agreement related to certain
tender or exchange offers precludes the Warrants from being accounted for as
components of equity. As the Warrants meet the definition of a derivative as
contemplated in ASC 815, the Warrants are recorded as derivative liabilities on
the balance sheet and measured at fair value at inception (on the date of the
Initial Public Offering) and at each reporting date in accordance with ASC 820,
"Fair Value Measurement", with changes in fair value recognized in the statement
of operations in the period of change.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in FASB ASC Topic 480 "Distinguishing Liabilities
from Equity." The Class A ordinary shares subject to mandatory redemption (if
any) are classified as liability instruments and are measured at fair value.
Conditionally redeemable shares of Class A ordinary shares (including Class A
ordinary shares that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company's control) are classified as temporary
equity. At all other times, Class A ordinary shares are classified as
stockholders' equity. The Company's Class A ordinary shares feature certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, as of
December 31, 2021, Class A ordinary shares subject to possible redemption are
presented as temporary equity, outside of the stockholders' deficit section of
the Company's balance sheet.
Net income per ordinary share
Net income per share is computed by dividing net income by the weighted-average
number of ordinary shares outstanding during the period. The contractual formula
utilized to calculate the redemption amount approximates fair value. The Class
feature to redeem at fair value means that there is effectively only one class
of shares. Changes in fair value are not considered a dividend for the purposes
of the numerator in the earnings per share calculation. Net income per ordinary
share is computed by dividing the pro rata net income between the Class A
ordinary shares and the Class B ordinary shares by the weighted average number
of ordinary shares outstanding for each of the periods. The calculation of
diluted income per ordinary stock does not consider the effect of the warrants
issued in connection with the Initial Public Offering and the Private Placement
since the exercise of the warrants are contingent upon the occurrence of future
events and the inclusion of such warrants would be anti-dilutive.
Recent accounting standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("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 other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" and under the JOBS Act are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We are electing to delay the
adoption of new or revised accounting standards, and as a result, we may not
comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for non-emerging growth companies. As
such, our audited condensed financial statements may not be comparable to
companies that comply with public company effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the audited condensed
financial statements (auditor discussion and analysis) and (iv) disclose certain
executive compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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