References to "we", "us", "our" or the "Company" are to ShoulderUp Technology
Acquisition Corp., except where the context requires otherwise. The following
discussion should be read in conjunction with our interim condensed financial
statements and related notes thereto included elsewhere in this report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on May 20, 2021, for the
purpose of effecting a merger, stock exchange, asset acquisition, stock
purchase, reorganization or other similar business combination with one or more
businesses.
On November 19, 2021, we consummated our IPO of 30,000,000 units, at $10.00 per
unit, generating gross proceeds of $300 million.
Simultaneously with the closing of the IPO, we consummated the private placement
of 1,350,000 private units for an aggregate purchase price of $13,500,000.
Upon the closing of our IPO on November 19, 2021, $306,000,000 ($10.20 per unit)
from the net proceeds of the sale of the units in the initial public offering
and the sale of private shares were placed in the Trust Account.
If we are unable to complete the initial business combination within 18 months
from the closing of the IPO , we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem 100% of the outstanding public shares, at a
per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account, including interest earned on the funds held in the Trust
Account and not previously released to us but net of taxes payable (and less up
to $100,000 of interest to pay dissolution expenses), divided by the number of
then outstanding public shares, which redemption will completely extinguish
public stockholders' rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and our board of directors, liquidate and
dissolve, subject (in the case of (ii) and (iii) above) to our obligations under
Delaware law to provide for claims of creditors and the requirements of other
applicable law.
We cannot assure you that our plans to complete our initial business combination
will be successful.
Results of Operations
Our entire activity from inception up to September 30, 2022 was for our
formation and preparation for our IPO, and subsequent to the IPO, identifying a
target company for a business combination. We will not generate any operating
revenues until the closing and completion of our initial business combination,
at the earliest.
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For the three months ended September 30, 2022, we had net income of
approximately $901,000, which consisted of income from investments held in the
Trust Account and operating account of approximately $1.4 million, offset by
general and administrative expenses of approximately $140,000, franchise tax
expense of approximately $50,000, and income tax expense of approximately
$290,000.
For the three months ended September 30, 2021, we had net loss of $1,944, which
was resulted entirely from formation costs.
For the nine months ended September 30, 2022, we had net income of approximately
$547,000, which consisted of the income from investments held in the Trust
Account and operating account of approximately $1.8 million, offset by general
and administrative expenses of approximately $770,000, franchise tax expense of
approximately $150,000, and income tax expense of approximately $358,000.
For the period from May 20, 2021 (inception) through September 30, 2021, we had
net loss of $3,030, which was resulted entirely from formation costs.
Liquidity and Going Concern Consideration
As of September 30, 2022, we had approximately $446,000 in our operating bank
account, and working capital of approximately $115,000. In addition, we have
$600,000 in subscription receivable, which will be used to satisfy our liquidity
needs. Our liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the cash contribution of $25,000 from the
Sponsor to purchase Founder Shares, and an advance from the Sponsor of
approximately $29,000 under the due to related party. We repaid $24,000 on
November 19, 2021 and the remaining $5,000 remains outstanding and is due on
demand. Subsequent to the consummation of the Initial Public Offering, our
liquidity has been satisfied through the net proceeds from the consummation of
the Initial Public Offering, over-allotment and the Private Placement held
outside of the Trust Account. Over this time period, the Company will be using
the funds outside of the Trust Account for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination.
Of the net proceeds from the IPO and associated Private Placements, $306,000,000
of cash was placed in the Trust Account and $1,656,890 of cash was held outside
of the Trust Account and was available for the Company's working capital
purposes.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, provide the Company
Working Capital Loans, as defined below. As of September 30, 2022, there were no
amounts outstanding under any Working Capital Loans. Based on the foregoing,
management believes that the Company will have the borrowing capacity from its
Sponsor or an affiliate of its Sponsor, or its officers and directors to meet
our needs through the consummation of a Business Combination. However, in
connection with the Company's assessment of going concern considerations in
accordance with 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 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 May 19, 2023.
The condensed financial statements do not include any adjustment that might be
necessary if the Company is unable to continue as a going concern. The Company
intends to complete a Business Combination before the mandatory liquidation
date. Over this time period, the Company will be using the funds outside of the
Trust Account for paying existing accounts payable, identifying and evaluating
prospective initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
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Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited interim condensed financial statements,
which have been prepared in accordance with United States generally accepted
accounting principles. The preparation of these condensed financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our condensed financial statements. On an ongoing
basis, we evaluate our estimates and judgments, including those related to fair
value of financial instruments and accrued expenses. We base our estimates on
historical experience, known trends and events and various other factors that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. We have identified
the following as our 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 ASC 480. Class A common stock subject to
mandatory redemption (if any) is classified as liability instruments and are
measured at fair value. Conditionally redeemable Class A common stock (including
Class A 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) are classified as temporary equity. At all
other times, Class A common stock is classified as stockholders' equity. The
Company's Class A common stock feature certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, as of September 30, 2022 and December 31,
2021, 30,000,000 shares of Class A common stock subject to possible redemption
is presented at redemption value as temporary equity outside of the
stockholders' deficit section of the condensed balance sheets.
We have elected to recognize changes in redemption value immediately as they
occur and adjust the carrying value of redeemable common stock to equal the
redemption value at the end of each reporting period. Increases or decreases in
the carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Derivative Financial Instruments
The Company evaluates its equity-linked financial instruments to determine if
such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, "Derivatives and Hedging" ("ASC
815"). For derivative financial instruments that are classified as liabilities,
the derivative instrument is initially recognized at fair value with subsequent
changes in fair value recognized in the statements of operations each reporting
period.
The Company accounted for the 12,650,000 warrants included in the Units sold in
the Initial Public Offering and the 8,875,000 Private Placement Warrants in
accordance with the guidance contained in ASC 815. Such guidance provides that
the warrants described above are not precluded from equity classification.
Equity-classified contracts are initially measured at fair value (or allocated
value). Subsequent changes in fair value are not recognized as long as the
contracts continue to be classified in equity.
Net Income (Loss) Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of 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 shares. Net loss per common share is calculated
by dividing the net loss by the weighted average shares of common stock
outstanding for the respective period.
The calculation of diluted net loss does not consider the effect of the warrants
underlying the Units sold in the Initial Public Offering (including the
consummation of the Over-allotment) and the private placement warrants to
purchase an aggregate of 15,675,000 shares of Class A common stock in the
calculation of diluted loss per share, because their inclusion would be
anti-dilutive under the treasury stock method. As a result, diluted net loss per
share is the same as basic net loss per share for the three and nine months
ended September 30, 2022. Accretion associated with the redeemable Class A
common stock is excluded from earnings per share as the redemption value
approximates fair value.
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