References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to StoneBridge Acquisition Corporation. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to StoneBridge Acquisition Sponsor, 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, as amended (the "Securities Act"),
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 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. 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 Registration Statement filed with the "SEC". 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 for the purpose of effecting a merger,
capital share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more target businesses. We intend to
effectuate our business combination using cash from the proceeds of our IPO and
the sale of the placement units that occurred simultaneously with the completion
of our IPO, our capital share, debt or a combination of cash, share 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 September 30, 2022 were
organizational activities and those necessary to prepare for the IPO, described
below, and since the IPO, the search for a prospective initial business
combination. We do not expect to generate any operating revenues until after the
completion of an initial business combination, at the earliest. We expect to
generate non-operating income in the form of interest income from the proceeds
of the IPO placed in the trust account. We expect that we will incur increased
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 three months ended September 30, 2022, we had a net income of $1,239,550
majorly consisting of investment income from trust account of $911,773, interest
income from checking account $793, on decrease in fair value of warrants of
$620,000 and operating expenses of $293,016 (majorly consisting of legal and
professional expenses, Insurance expense and General and administrative
expenses).
For the nine months ended September 30, 2022, we had a net income of $8,631,943
majorly consisting of investment income from trust account of $1,204,892,
interest income from checking account $917, on decrease in fair value of
warrants of $8,192,000 and
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operating expenses of $765,866 (majorly consisting of legal and professional
expenses, Insurance expense and General and administrative expenses).
For the three months ended September 30, 2021, we had a net income of $8,390,319
majorly consisting of decrease in fair value of warrants of $10,368,000,
offering costs incurred for warrant issue of $757,003, fair value in excess of
sale of private warrants of $1,000,000, investment income from trust account of
$2,034, interest income from checking account of $10, a change in fair value of
the derivative liability of $190,208, operating expenses of $412,930 (majorly
consisting of Insurance expense and General and administrative expenses).
For the period from February 2, 2021 (inception) through September 30, 2021, we
had a net loss of $8,382,899, which is primarily due to decrease in fair value
of warrants of $10,368,000, offering costs incurred for warrant issue of
$757,003, fair value in excess of sale of private warrants of $1,000,000,
investment income from trust account of $2,034, interest income from checking
account of $10, a change in fair value of the derivative liability of $190,208,
operating expenses of $420,350 (majorly consisting of Insurance expense and
General and administrative expenses).
Liquidity and Capital Resources
On July 20, 2021, we consummated our initial public offering of 20,000,000 Units
at $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously
with the closing of the initial public offering, we consummated the private
placement of an aggregate of 8,000,000 Private Placement Warrants to our Sponsor
at a price of $1.00 per warrant, generating gross proceeds of $8,000,000.
Following our IPO, a total of $202,000,000 was placed in the trust account. We
incurred $13,577,812 in transaction costs, including $4,000,000 of underwriting
fees, $9,000,000 of deferred underwriting fees and $577,812 of other offering
costs in connection with the IPO and the sale of the Private Placement Warrants.
For the nine months ended September 30, 2022 cash used in operating activities
was $498,983, which consisted of a net income of $8,631,943, investment income
from trust account in the amount $1,204,892, change in the fair value of the
warrant liability in the amount of $8,192,000, offset by the changes in prepaid
expenses in the amount $227,669, due to affiliates in the amount of $90,000 and
accounts payable in the amount $51,703.
For the period February 2, 2021 (inception) through September 30, 2021, net cash
used in operating activities was $833,400, which consisted of net income of
$8,382,899, investment income from trust account in the amount $2,034, offering
costs related to warrant issuance of $757,003, Fair value in excess of sale of
private warrants of $1,000,000, change in fair value of derivative liability of
$190,208, decrease in the fair value of warrant liabilities of $10,368,000,
offset by the changes in prepaid expenses in the amount $581,440 and accounts
payable in the amount $168,380.
As of September 30, 2022, we had cash and marketable securities held in the
trust account of $203,211,194. We intend to use substantially all of the funds
held in the trust account, including any amounts representing dividend earned on
the trust account to complete our business combination. To the extent that our
capital share or debt is used, in whole or in part, as consideration to complete
a 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 September 30, 2022, the Company had $171,539 in its operating bank
accounts, $203,211,194 in securities held in the Trust Account to be used for a
Business Combination or to repurchase or redeem its Ordinary Shares in
connection therewith and working capital of $63,489. As of September 30, 2022
$1,211,194 of the amount on deposit in the Trust Account represented dividend
income. Management expects to incur significant costs in pursuit of its
acquisition plans. The Company believes it will need to raise additional funds
in order to meet the expenditures required for operating its business and to
consummate a business combination. If the Company is unable to complete the
Business Combination due to insufficient funds, the Company will be forced to
cease operations and liquidate the Trust Account. In addition, following the
Business combination, if cash on hand is insufficient, the Company may need to
obtain additional financing in order to meet its obligations.
In connection with the Company's assessment of going concern considerations in
accordance with the authoritative guidance in Financial Accounting Standard
Board ("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 that if the Company is unable to raise additional
funds to alleviate liquidity needs, obtain approval for an extension of the
deadline or complete a Business Combination by October 20, 2022, then the
Company will cease all operations except for the purpose of liquidating. The
Company has until October 20, 2022, 15
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months (initial period) from the closing of the IPO, to consummate a Business
Combination, with a further extension of three months i.e. from October 20, 2022
to January 20, 2023. ("extended period") It is uncertain that the Company will
be able to consummate a Business Combination by the specified period. If a
Business Combination is not consummated by January 20, 2023 (extended period),
there will be a mandatory liquidation and subsequent dissolution. The liquidity
condition and date for mandatory liquidation and subsequent dissolution raise
substantial doubt about the Company's ability to continue as a going concern one
year from the date that these financial statements are issued. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with 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.
The underwriters are entitled to a deferred fee of $0.45 per Unit, or $9,000,000
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 we complete a
business combination, subject to the terms of the underwriting agreement.
JOBS Act
On April 5, 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 will qualify as an "emerging growth company" and
under the JOBS Act will be 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 financial statements may not be
comparable to companies that comply with public company effective dates.
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 control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (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 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 executive
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our IPO or until we are no
longer an "emerging growth company," whichever is earlier.
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.
Critical Accounting Estimates
Critical accounting estimates are estimates where (a) the nature of the estimate
is material due to the levels of subjectivity and judgment necessary to account
for highly uncertain matters or the susceptibility of such matters to change and
(b) the impact of the
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estimate on financial condition or operating performance is material. The
Company believes these to be estimates used as inputs in the valuation of the
derivative warrant liability. These estimates are the probability of a
successful business combination by January 20, 2023, and the implied volatility
of the Public and Private Warrants.
Accounting for Warrants
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 480,
Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and
Hedging ("ASC 815"). 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 ordinary shares, 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.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter with changes in fair value
recognized in the statements of operations in the period of change.
Ordinary Share Subject to Possible Redemption
We account for our ordinary share subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary share subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable ordinary share (including ordinary share 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, ordinary
share is classified as shareholders' equity. Our ordinary share features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary share subject to
possible redemption is presented as temporary equity, outside of the
shareholders' equity section of our balance sheets. The Company recognizes
changes in redemption value immediately as they occur and adjusts the carrying
value of redeemable ordinary share to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of
redeemable ordinary share are affected by charges against additional paid in
capital and accumulated deficit.
Net income per Ordinary 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 ordinary shares and Class B ordinary shares. Net income per share is
computed by dividing net loss by the weighted average number of ordinary share
outstanding during the period, excluding ordinary share subject to forfeiture by
the Sponsor. We did not consider the effect of the warrants issued in connection
with the initial public offering and the private placement in the calculation of
diluted income per ordinary share because their exercise is contingent upon
future events. As a result, diluted net income per ordinary share is the same as
basic net income per ordinary share.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update ("ASU") No. 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): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity, which
simplifies accounting for convertible instruments by removing major separation
models required under current GAAP. The ASU removes certain settlement
conditions that are required for equity contracts to qualify for the derivative
scope exception, and it also simplifies the diluted earnings per share
calculation in certain areas. ASU 2020-06 is effective for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted. The Company adopted ASU 2020-06 on January
1, 2021, with no impact upon adoption.
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions
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that are measured at fair value. The ASU applies to both holders and issuers of
equity and equity-linked securities measured at fair value. The amendments in
this ASU are effective for the Company in fiscal years beginning after December
15, 2023, and interim periods within those fiscal years. Early adoption is
permitted for both interim and annual financial statements that have not yet
been issued or made available for issuance. The Company is considering the
impact of this pronouncement on the financial statements.
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