References to the "Company," "our," "us" or "we" refer to Rosecliff Acquisition
Corp I. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
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. 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 "Cautionary Note
Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on
November 17, 2020 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 Placement Warrant, 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.
Recent Developments
On March 11, 2022, Rosecliff, GT Gettaxi Listco, GT Gettaxi Limited, GT Gettaxi
SPV, GT Gettaxi Merger Sub 1, Gett Merger Sub, Inc., and Dooboo Holding Limited,
and Merger Sub entered into a Termination of the Business Combination Agreement
pursuant to which the parties mutually agreed to terminate the Business
Combination Agreement, effective immediately. As per the Company's Current
Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the
"SEC") on November 11, 2021, Rosecliff requested that the Target's management
undertake a thorough analysis of its financial projections. Following the
conclusion of that process, and extensive mutual efforts to negotiate an
appropriate valuation adjustment, both parties agreed to terminate the Business
Combination Agreement.
As a result of the termination of the Business Combination Agreement, the
Business Combination Agreement is of no further force and effect, and certain
transaction agreements entered into in connection with the Business Combination
Agreement, including, but not limited to, the Investors' Rights Agreement, dated
as of November 9, 2021 and to be effective as of the closing of the Business
Combination, by and among Rosecliff, a Delaware limited liability company, and
certain holders, will either be terminated or no longer be effective, as
applicable, in accordance with their respective terms.
Rosecliff intends to continue to pursue the consummation of a business
combination with an appropriate target.
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, 2021 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 year ended December 31, 2021, we had a net loss of $2,148,278, which
consists of formation and operating costs of $3,420,593 and transaction costs
allocated to warrant liability of $438,283, offset by change in fair value of
warrant liabilities of $1,683,358 and interest earned on investment held in
Trust Account of $27,240.
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For the period from November 17, 2020 (inception) through December 31, 2020, we
had a net loss of $675, which consists of formation and operating costs.
Liquidity, Capital Resources and Going Concern
On February 17, 2021, we consummated the Initial Public Offering of 25,300,000
Units at $10.00 per Unit, generating gross proceeds of $253,000,000 which is
described in Note 3. Simultaneously with the closing of the Initial Public
Offering, the Company consummated the sale of 4,706,667 Private Placement
Warrant at a price of $1.50 per Private Placement Warrant in a private placement
to the Sponsor, generating gross proceeds of $7,060,000, which is described in
Note 4.
For the year ended December 31, 2021, cash used in operating activities was
$825,593. Net loss of $2,148,278 was affected by transaction costs associated
with Initial Public Offering of $438,283, change in fair value of warrant
liabilities of $1,683,358 and interest income on investment held in the Trust
Account of $27,240. Changes in operating assets and liabilities provided
$2,595,000 of cash for operating activities.
For the period November 17, 2020 (inception) through December 31, 2020, cash
used in operating activities was $0. Net loss of $675 was affected by changes in
operating assets and liabilities provided $675 of cash for operating activities.
As of December 31, 2021, we had U.S. Treasury Funds held in the Trust Account of
$253,027,240 consisting of fixed income securities. Interest income on the
balance in the Trust Account may be used by us to pay taxes. 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 December 30, 2021, we had cash of $769,432. 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 units at
a price of $10.00 per unit, at the option of the lender. The units would be
identical to the Private Placement Warrants.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Update ("ASU") 205-40, "Disclosure
of Uncertainties about an Entity's Ability to Continue as a Going Concern," the
Company has until February 17, 2023 to consummate a Business Combination. It is
uncertain that the Company will be able to consummate a Business Combination by
this time. Additionally, the Company may not have sufficient liquidity to fund
the working capital needs of the Company through one year from the issuance of
these financial statements. If a Business Combination is not consummated by this
date, there will be a mandatory liquidation and subsequent dissolution of the
Company. Management has determined that the liquidity condition and mandatory
liquidation, should a Business Combination not occur, and potential subsequent
dissolution, 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 February 17,
2023. The Company intends to complete the proposed Business Combination before
the mandatory liquidation date. However, there can be no assurance that the
Company will be able to consummate any Business Combination by February 17,
2023. In addition, the Company may need to raise additional capital through
loans or additional investments from its Sponsor, stockholders, officers,
directors or third parties. The Company's officers, directors and Sponsor may,
but are not obligated to, loan the Company funds, from time to time or at any
time, in whatever amount they deem reasonable in their sole discretion, to meet
the Company's working capital needs. Accordingly, the Company may not be able to
obtain additional financing. If the Company is unable to raise additional
capital, the Company 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 a potential transaction, 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 through the liquidation date of February 17, 2023
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The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in above to the financial
statements, if the Company is unable to raise additional funds to alleviate
liquidity needs as well as complete a Business Combination by the close of
business on February 17, 2022, then the Company will cease all operations except
for the purpose of liquidating. This date for mandatory liquidation and
subsequent dissolution raises substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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 an agreement to pay an
affiliate of one of our executive officers a monthly fee of $10,000 for office
space, support and administrative services. We began incurring these fees on
February 11, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,855,000
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 the Company
completes 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.
Warrant Liabilities
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 ASC 480
and ASC 815. The Company accounts for warrants in accordance with the guidance
in ASC 480 and ASC 815, Derivatives and Hedging ("ASC 815") and determined that
the Warrants do not meet the criteria for equity treatment thereunder. The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the Company's own
common stock, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of
warrant issuance and as of each subsequent quarterly period end date while the
warrants are outstanding.
Accordingly, the Company recognizes the 8,433,333 Public Warrants and 4,706,667
Private Placement Warrants as liabilities at fair value and adjusts the
instruments to fair value at each reporting period. The liabilities are subject
to re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in the Company's statement of operations. The estimated
fair value of the Public Warrants were measured at fair value using a binomial
lattice model incorporating the Cox-Ross-Rubenstein methodology.
The measurement of the Public Warrants after the separation of the Public
Warrants from the Units is classified as Level 1 due to the use of an observable
market quote in an active market. For periods subsequent to the separation of
the Public Warrants from the Units, the closing price of the Public Warrant was
used as the fair value for the warrants as of each relevant date. At December
31, 2021 the Private Placement Warrants transferred to Level 2 due to the use of
an observable market quote for a similar asset in an active market. See Notes 8
and 10.
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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 ASC Topic 480. Shares of Class A 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 feature redemption rights that is 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 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,
25,300,000 shares of Class A common stock subject to possible redemption are
presented as temporary equity, outside of the stockholders' equity section of
our balance sheets.
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of ordinary shares,
which are referred to as Class A common stock and Class B common stock. Income
and losses are shared pro rata between the two classes of stock.. Net income
(loss) per common share is calculated by dividing the net income (loss) by the
weighted average shares of common stock outstanding for the respective period.
Accretion associated with the redeemable shares of Class A common stocks is
excluded from earnings per share as the redemption value approximates fair
value.
Recent Accounting Pronouncements
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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