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 Delaware corporation and formed
for the purpose of effecting a merger, consolidation, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities. We have not selected any
specific business combination target and we have not, nor has anyone on our
behalf, engaged in any substantive discussions, directly or indirectly, with any
business combination target with respect to an initial business combination with
us. We intend to effectuate our initial business combination using cash from the
proceeds of this offering and the sale of the private placement warrants, our
capital stock, debt or a combination of cash, stock and debt.
On December 14, 2021, we consummated the initial public offering (the "IPO") of
17,250,000 units (the "Units"), including the issuance of 2,250,000 Units as a
result of the underwriters' exercise of their over-allotment option in full.
Each Unit consists of one share of our Class A common stock, par value $0.0001
per share (the "Class A Common Stock"), and one-half of one of our redeemable
public warrants (each whole warrant, a "Public Warrant"), with each whole Public
Warrant entitling the holder thereof to purchase one share of Class A Common
Stock for $11.50 per share, subject to adjustment. The Units were sold at a
price of $10.00 per Unit, generating gross proceeds of $172,500,000.
On December 14, 2021, simultaneously with the consummation of the IPO, we
completed the private sale (the "Private Placement") of an aggregate of
5,725,000 warrants (the "Private Placement Warrants") to Trajectory Alpha
Sponsor LLC at a purchase price of $1.00 per Private Placement Warrant,
generating gross proceeds of $5,725,000.
The net proceeds from the IPO, together with certain of the proceeds from the
Private Placement, $174,225,000 in the aggregate (the "Offering Proceeds"), were
placed in a U.S.-based trust account maintained by Continental Stock Transfer &
Trust Company, acting as trustee.
Transaction costs amounted to $22,323,737, consisting of $1,500,000 of cash
underwriting commissions, $5,366,378 of fair value shares of Class B Common
Stock issued to the underwriter, $6,262,500 of deferred underwriting
commissions, $8,658,646 of the excess of fair value of the shares of Class B
Common Stock acquired by Anchor Investors, and $536,213 of other offering costs.
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As indicated in the accompanying financial statements, as of December 31, 2021,
we had $2,300,375 in cash and working capital of $1,957,301. Further, we expect
to continue to incur significant costs in the pursuit of our acquisition plans.
We cannot assure you that our plans to raise capital or to complete our initial
business combination will be successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities and
those necessary to prepare for the IPO and since the IPO the selection of a
business combination. Following this offering, we will not generate any
operating revenues until after completion of our initial business combination.
We will generate non-operating income in the form of interest income on cash and
cash equivalents in the form of specified U.S. government treasury bills or
specified money market funds after this offering. There has been no significant
change in our financial or trading position and no material adverse change has
occurred since the date of our audited financial statements. After this
offering, we expect to 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. We expect our expenses to increase
substantially after the closing of this offering.
For the period from February 1, 2021 (inception) through December 31, 2021, we
had net loss of $211,041, which consisted of formation and operating costs of
$220,750 (including franchise taxes of $183,064), partially offset by interest
income on investments held in trust account of $9,709.
Liquidity and Capital Resources
As of December 31, 2021, the Company had $2,300,375 in cash and a working
capital of $1,957,301.
The Company's liquidity needs up to December 14, 2021 had been satisfied through
a payment from the Sponsor of $25,000 for the founder shares to cover certain
offering costs, the loan under an unsecured promissory note from the Sponsor of
$45,250 (see Note 5) and $15,800 in borrowings from a related party. After the
IPO a payment was made to a related party out of proceeds of the offering of
$14,775 in excess of borrowings and other related parties were due $22,557.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, we will use these funds to pay existing accounts
payable, identify and evaluate prospective initial Business Combination
candidates, perform due diligence on prospective target businesses, pay for
travel expenditures, select the Target Business to merge with or acquire, and
structure, negotiate and consummate the Business Combination.
Off-Balance Sheet Financing Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Commitments and Contractual Obligations
Other than the below, we do not have any long-term debt obligations, capital
lease obligations, operating lease obligations, purchase obligations or
long-term liabilities.
Administrative Services Agreement
Subsequent to the closing of the IPO, we will pay the Sponsor $10,000 per month
for office space and secretarial and administrative 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. As of December 31,
2021, we recognized $7,484 for the administrative support services expense.
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Registration and Stockholder Rights
The holders of the founder shares, Private Placement Warrants and warrants that
may be issued upon conversion of working capital loans (and any shares of common
stock issuable upon the exercise of the Private Placement Warrants or warrants
issued upon conversion of the working capital loans and upon conversion of the
founder shares) will be entitled to registration rights pursuant to a
registration rights agreement to be signed prior to or on the effective date of
the Initial Public Offering requiring us to register such securities for resale
(in the case of the founder shares, only after conversion to shares of Class A
common stock). The holders of these securities will be entitled to make up to
three demands, excluding short form registration demands, that we register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent our completion
of the initial Business Combination and rights to require us to register for
resale such securities pursuant to Rule 415 under the Securities Act. However,
the registration rights agreement provides that no sales of these securities
will be effected until after the expiration of the applicable lock-up period, as
described herein. We will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting Agreement
The underwriter had a 45-day option from the date of the IPO to purchase up to
an additional 2,250,000 Units to cover over-allotments. On December 14, 2021,
the underwriter fully exercised its over-allotment option.
The underwriter was paid an underwriting commission of $0.10 per unit, or
$1,500,000 in the aggregate, upon the closing of the IPO. The underwriter was
also issued 662,434 shares of Class B Common Stock (as defined below) with a
fair value of $5,366,378, or $8.10 per share. We valued those shares using a
Black-Scholes Model. In addition, $6,262,500 is payable to the underwriter for
deferred underwriting commissions. The deferred underwriting commission will
become payable to the underwriter from the amounts held in the Trust Account
solely in the event that we complete the Business Combination, subject to the
terms of the underwriting agreement.
The underwriters have agreed (i) to waive their conversion rights (or right to
participate in any tender offer) with respect to such shares in connection with
the initial business combination and (ii) to waive their rights to liquidating
distributions from the trust account with respect to such shares if we fail to
complete the initial business combination within the completion window.
The Founder Shares received by the underwriter have been deemed compensation by
FINRA and are therefore subject to a 180-day lock-up pursuant to FINRA Rule
5110(e)(1). Additionally, these Founder Shares may not be sold, transferred,
assigned, pledged or hypothecated or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the economic
disposition of the securities by any person for a 180-day period following the
effective date of this prospectus except to any selected dealer participating in
the offering and the bona fide officers or partners of the underwriter and any
such participating selected dealer. The underwriter has agreed that the Founder
Shares they receive will not be sold or transferred by them (except to certain
permitted transferees) until after we completed an initial Business Combination.
We granted the holders of Founder Shares the registration rights. In compliance
with FINRA Rule 5110, the underwriter's registration rights are limited to
demand and "piggy back" rights for periods of five and seven years,
respectively, from the effective date of this prospectus with respect to the
registration under the Securities Act of the Founder Shares.
Critical Accounting Policies and Estimates
The preparation of the financial statement in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statement.
Making estimates requires management to exercise significant judgment. It is at
least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the financial
statement, which management considered in formulating its estimate, could change
in the near term due to one or more future confirming events. Accordingly, the
actual results could differ significantly from those estimates. We have
identified the following as our critical accounting policies:
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Offering Costs
We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A - "Expenses of Offering". Offering costs consist of
legal, accounting, underwriting fees and other costs incurred through the
Initial Public Offering date that are directly related to the Initial Public
Offering. Offering costs were charged to temporary equity upon the completion of
the Initial Public Offering.
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 Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." 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
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 in temporary equity. At all other times, common stock
is classified as stockholders' equity. Our Class A common stock feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, at December 31, 2021, the
17,250,000 Class A common stock is presented at redemption value as temporary
equity, outside of the stockholders' deficit section of our balance sheet.
Net Loss per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share". Net loss per common stock is computed by dividing net loss
by the weighted average number of common stock for the period. We have two
classes of stock, which are referred to as Class A common stock and Class B
common stock. Earnings and losses are shared pro rata between the two classes of
stock. We apply the two-class method in calculating earnings per share.
Remeasurement adjustments associated with the redeemable Class A common stock is
excluded from earnings per share as the redemption value approximates fair
value.
The calculation of diluted loss per share does not consider the effect of the
warrants issued in connection with the (i) IPO, and (ii) the private placement
because the warrants are contingently exercisable, and the contingencies have
not yet been met. The warrants are exercisable to purchase 14,350,000 Class A
common stock in the aggregate. As of December 31, 2021, the Company did not have
any dilutive securities or other contracts that could, potentially, be exercised
or converted into common stock and then share in the earnings of the Company. As
a result, diluted net loss per common stock is the same as basic net loss per
common stock for the periods presented.
Recent Accounting Pronouncements
In August 2020, the 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, 2024 and should be
applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. We are currently assessing the impact, if any,
that ASU 2020-06 would have on our financial position, results of operations or
cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.
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 a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of 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: (1) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act; (2) 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; (3) 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
(4) 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 this offering or
until we are no longer an "emerging growth company," whichever is earlier.
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