Overview
We are a blank check company incorporated on August 10, 2020, for the purpose of
effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses or
entities. We have not selected any business combination target and we have not,
nor has anyone on our behalf, initiated any substantive discussions, directly or
indirectly, with any business combination target. We intend to effectuate our
initial business combination using cash from the proceeds of our offering and
the sale of the private placement warrants, our shares, debt or a combination of
cash, equity 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 revenues to date.
Our only activities from inception to September 30, 2022, were organizational
activities, those necessary to prepare for the initial public offering,
described below, and, after the initial public offering, 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 in connection with completing a business
combination.
For the nine months ended September 30, 2022, we had a net income of $5,729,967,
which consisted of the change in the fair value of the warrant liability of
$5,099,076 and interest earned on investment held in the trust account of
$1,868,964 offset by general and administrative expenses of $893,736 and income
tax expense of $344,337.
For the nine months ended September 30, 2021, we had a net loss of $2,382,142,
which consisted of the change in the fair value of the warrant liability of
$4,910,274 and interest earned on investment held in the trust account of
$82,283 offset by general and administrative expenses of $2,610,415.
For the three months ended September 30, 2022, we had a net income of
$1,184,499, which consisted of the change in the fair value of the warrant
liability of $708,054 and interest earned on investment held in the trust
account of $953,413 offset by general and administrative expenses of $287,277
and incomes taxes of $189,691.
For the three months ended September 30, 2021, we had a net income of
$3,440,529, which consisted of the change in the fair value of the warrant
liability of $4,166,100 and interest earned on investment held in the trust
account of $15,795 offset by general and administrative expenses of $741,366.
Liquidity and Capital Resources
On January 11, 2021, we consummated our initial public offering (the "Initial
Public Offering") of 34,500,000 units (the "Units" and, with respect to the
class A common stock included in the Units sold, the "Public Shares"), which
included the exercise in full by the underwriters of their overallotment option
in the amount of 4,500,000 Units, at $10 per unit, generating gross proceeds of
$345,000,000. Simultaneously with the closing of the IPO, the Company
consummated the sale, in a private placement, of 900,000 units (each, a "Private
Placement Unit" and collectively, the "Private Placement Units") to the Sponsor
at a price of $10.00 per Private Placement Unit, generating total proceeds of
$9,000,000.
For the nine months ended September 30, 2022, cash used in operating activities
was $946,998. Net income of $5,729,967 was decreased by $5,099,076 for the
change in the fair value of the warrant liability and interest earned on
investment held in the trust account of $1,868,964 offset by an increase of
$291,075 in net operating assets and liabilities.
We intend to use substantially all of the funds held in our trust account,
including any amounts representing interest earned on the trust account (which
interest shall be net of taxes payable) to complete our initial business
combination. We may withdraw interest to pay our taxes. Delaware franchise tax
is based on our authorized shares or on our assumed par and non-par capital,
whichever yields a lower result. Under the authorized shares method, each share
is taxed at a graduated rate based on the number of authorized shares with a
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maximum aggregate tax of $200,000 per year. We expect the interest earned on the
amount in the trust account will be sufficient to pay our taxes. To the extent
that our capital stock or debt is used, in whole or in part, as consideration to
complete our initial 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, we had cash available to us of approximately $97,000
held outside the trust account. We will use these funds primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
structure, negotiate and complete a business combination, and to pay taxes to
the extent the interest earned on the trust account is not sufficient to pay our
taxes.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial business combination, our sponsors or our
officers and directors may, but are not obligated to, loan us funds as may be
required. If we complete our initial business combination, we may repay such
loaned amounts out of the proceeds of the trust account released to us. In the
event that our initial 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.
If the 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, the Company may have insufficient funds
available to operate our business prior to a Business Combination. Moreover, the
Company may need to obtain additional financing either to complete a Business
Combination or because the Company becomes obligated to redeem a significant
number of public shares upon consummation of a Business Combination, in which
case the Company may issue additional securities or incur debt in connection
with such Business Combination. Subject to compliance with applicable securities
laws, the Company would only complete such financing simultaneously with the
completion of a Business Combination. If the Company is unable to complete a
Business Combination because it does not have sufficient funds available, the
Company will be forced to cease operations and liquidate the Trust Account. In
addition, following a Business Combination, if cash on hand is insufficient, the
Company may need to obtain additional financing in order to meet its
obligations.
The Company has until January 11, 2023, to consummate a Business Combination. If
a Business Combination is not consummated by this date and an extension not
requested by the Sponsor, there will be a mandatory liquidation and subsequent
dissolution of the Company. Although the Company intends to consummate a
Business Combination on or before January 11, 2023, it is uncertain that the
Company will be able to consummate a Business Combination by this time.
Management has determined that the mandatory liquidation, should a Business
Combination not occur, and an extension is not requested by the Sponsor, and
potential subsequent dissolution raises substantial doubt about the Company's
ability to continue as a going concern. The Company's plan is to complete a
business combination or obtain an extension on or prior to January 11, 2023,
however it is uncertain that the Company will be able to consummate a Business
Combination or obtain an extension by this time. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after January 11, 2023.
On October 28, 2022, the Company filed a Preliminary Proxy Statement on Schedule
14A (the "Proxy Statement") relating to a special meeting of stockholders that
is anticipated to be held in December 2022 to approve an amendment to the
Company's amended and restated certificate of incorporation (the "Charter
Amendment") which would, if implemented, allow the Company to unwind and redeem
all of its outstanding public shares in advance of the mandatory liquidation
date of January 11, 2023 (or April 11, 2023, if the Company has executed a
letter of intent, agreement in principle or definitive agreement for an initial
business combination on or before January 11, 2023). If implemented, the Charter
Amendment would also allow the Company to remove the Redemption Limitation (as
defined in the amended and restated certificate of incorporation) to allow the
Company to redeem public shares notwithstanding the fact that such redemption
would result in the Company having net tangible assets of less than $5,000,001,
and to remove up to $100,000 of interest earned on the amount on deposit in the
Trust Account prior to redeeming the public shares in connection with the
special meeting in order to pay dissolution expenses. The Company will also seek
stockholder approval to amend the Trust Agreement to change the date on which
the trustee must commence liquidation of the Trust Account to the time and date
immediately following the filing of the Charter Amendment with the Secretary of
State of the State of Delaware.
Since its IPO, the Company's management has reviewed over 90 potential targets
and conducted extensive due diligence for over two dozen of such targets, 14 of
which received illustrative proposals and three of which received letters of
intent from the Company. However, the Company has not entered into an agreement
to effect a business combination with any of these potential targets for a
variety of reasons, including, among other things: (i) the parties' inability to
reach an agreement on valuation; (ii) the Company's preliminary assessment of
the relevant target company's business model, customer concentration,
competitive landscape and
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corresponding risks to future financial performance; (iii) the Company's
preliminary assessment of the relevant target company's ability to execute its
business and financial plans and scale its business; and (iv) alternative
options available to potential targets, such as pursuing a traditional IPO or
waiting for the capital markets to improve before pursuing a listing. Changes in
the regulatory landscape due to proposed SEC rules have further affected the
Company's prospects for consummating a business combination. In addition, on
August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was signed
into federal law. The IR Act provides for among other things a new US federal
1% excise tax on certain repurchase of stock by publicly traded US domestic
corporations. The excise tax is imposed on the repurchasing corporation itself,
not its stockholders from which shares are repurchased. Any redemptions or
other repurchases that occur after December 31, 2022 may be subject to the
excise tax. As a result, the Company has determined to seek the approval of its
stockholders to, among other things, complete an early unwind in 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 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 the Sponsor
a monthly fee of $10,000 for office space, administrative and support services,
provided to the Company upon completion of our initial public offering.
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 identified the following critical accounting policies:
Warrant Liability
We account for the warrants issued in connection with our initial public
offering in accordance with the guidance contained in ASC 815-40 under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The initial fair value of the public warrants was estimated using
the closing public market price and the Modified Black Scholes Model for the
private placement warrants.
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common
stock subject to mandatory redemption are classified as a liability instrument
and are measured at fair value. Conditionally redeemable common stock (including
shares of common stock 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 our control) are classified as temporary equity. At all
other times, Class A common stock are 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, Class A common stock subject to possible redemption are presented
as temporary equity, outside of the stockholders' equity section of our balance
sheet.
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
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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. As
we are a smaller reporting company, adoption of ASU 2020-06 will be required for
fiscal years beginning after December 15, 2023, including interim periods with
those fiscal years. The Company is still evaluating the impact of ASU 2020-06
and will adopt as required.
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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