References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to VMG Consumer Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, references to the
"Sponsor" refer to VMG Consumer Acquisition Holdings, LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the condensed 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 Securities Exchange Act of 1934, as amended (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 final prospectus for its Initial Public Offering filed with the U.S.
Securities and Exchange Commission (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 under the laws of the State of Delaware on
March 25, 2021 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other 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 Warrants, and forward purchase securities, our
capital stock, debt or a combination of cash, stock and debt.
The full impact of the COVID-19 outbreak continues to evolve. Management
continues to evaluate the impact of the COVID-19 outbreak on the industry and
has concluded that while it is reasonably possible that the virus could have a
negative effect on the Company's financial position, including liquidity,
capital resources, government assistance, going concern considerations and
results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these condensed financial
statements. The condensed financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through December 31, 2022 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, the Company's search for a target business with which to
complete a Business Combination and activities in connection with the proposed
Transactions. We do not expect to generate any operating revenues until after
the completion of our initial Business Combination. We generate non-operating
income in the form of interest income on marketable securities. We are incurring
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.
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For the three months ended December 31, 2022, we had a net income of $784,461,
which consists of formation and operating costs of $409,367, unrealized gain on
marketable securities held in the Trust Account of $1,657,717 and income tax
expense of $463,889.
For the three months ended December 31, 2021, we had a net loss of $162,162,
which consists of formation and operating costs of $162,998 and unrealized gain
on marketable securities held in the Trust Account of $836.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, the Company's only source
of liquidity was an initial purchase of shares of Class B common stock by the
Sponsor and loans from our Sponsor.
On November 15, 2021, we consummated the Initial Public Offering of 23,000,000
Units, inclusive of the underwriters' election to exercise their option to
purchase an additional 3,000,000 Units, at a price of $10.00 per Unit,
generating gross proceeds of $230,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 11,700,000 Private
Placement Warrants to the Sponsor at a price of $1.00 per warrant, generating
gross proceeds of $11,700,000.
Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of $234,600,000 was placed in the Trust Account. We incurred
$17,691,825 in transaction costs, including $4,600,000 of underwriting fees and
$5,041,825 of other costs and $8,050,000 in deferred underwriting fees.
For the three months ended December 31, 2022, cash used in operating activities
was $360,995. This was made up of Net income of $784,461 and changes in
operating assets and liabilities of $512,261, and a $1,657,717 gain on
marketable securities. For the three months ended December 31, 2021, cash used
in operating activities was $1,049,580. This was made up of a Net loss of
$162,162 and changes in operating assets and liabilities of $902,915, a $836
gain on marketable securities, and formation costs of 16,333.
As of December 31, 2022 and September 30 2022, we had marketable securities held
in the Trust Account of $237,105,963 and $235,448,246, respectively. We may
withdraw interest to pay our income taxes, if any. We intend to use
substantially all of the funds held in the Trust Account, including any amounts
representing interest earned on the Trust Account (which interest shall be net
of taxes payable and excluding deferred underwriting commissions) to complete
our Business Combination. To the extent that our share capital 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 December 31, 2022 and September 30 2022, we had cash of $174,281 and
$535,276, respectively. 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, structure, negotiate and complete a Business
Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors 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 warrants, at a price of $1.00 per warrant unit at the option of
the lender. The warrants would be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our 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, we may have insufficient funds available to operate our business prior
to our initial Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon completion of
our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. The liquidation
deadline for the Company is also within the
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next twelve months if an initial Business Combination is not consummated. The
Company cannot assure that its plans to consummate an initial Business
Combination will be successful.
As a result of the above, in connection with the Company's assessment of going
concern considerations in accordance with 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 liquidity conditions raise
substantial doubt about the Company's ability to continue as a going concern
through approximately one year from the date of filing. These unaudited
condensed 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 did not have any off-balance sheet arrangements as of December 31, 2022 and
September 30, 2022.
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 $0.35 per Unit, or $8,050,000
in the aggregate. The deferred fee will be waived by the underwriters in the
event that the Company does not complete a Business Combination, subject to the
terms of the underwriting agreement.
Administrative Support Agreement
The Company agreed to pay the Sponsor a total of $10,000 per month, commencing
on the effective date of the Initial Public Offering, for office space,
utilities, secretarial and administrative support services provided to members
of the management team. Upon completion of the initial Business Combination or
the liquidation, we will cease paying these monthly fees. For the three months
ended December 31, 2022, we incurred and paid $30,000 in administrative support
fees for the period.
Critical Accounting Policies
The preparation of unaudited condensed 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 condensed 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:
Class A Common Stock Subject to Possible Redemption
The Company accounts for its 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 is classified as a liability instrument
and is measured at fair value. Conditionally redeemable Class A common stock
(including shares of 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 the Company's control) is
classified as temporary equity. At all other times, Class A common stock is
classified as stockholders' equity. The Company's Class A common stock
represented by Public Shares features certain redemption rights that are
considered to be outside of the Company's control and subject to occurrence of
uncertain future events. Accordingly, as of December 31, 2022 and September 30,
2022, all Class A common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders' deficit
section of the Company's condensed balance sheets.
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Net income (loss) per Share of Common Stock
The Company complies with accounting and disclosure requirements of ASC 260,
"Earnings Per Share". Net income (loss) per share of common stock is computed by
dividing net income (loss) by the weighted average number of shares issued and
outstanding during the period.
The Company has two classes of shares, which are referred to as Class A common
stock and Class B common stock (the "Founder Shares"). Earnings are shared pro
rata between the two classes of shares on the assumption that the consummation
of the initial Business Combination is the most likely outcome. Accretion
associated with the redeemable shares of Class A common stock is excluded from
income (loss) per share as the redemption value approximates fair value.
As of December 31, 2022, the Company has not considered the effect of warrants
sold in the Initial Public Offering and Private Placement to purchase common
stock in the calculation of diluted income (loss) per share, since the exercise
of the warrants are contingent upon the occurrence of future events. As of
December 31, 2022, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into common stock
and then share in the earnings of the Company since the effect of those would be
antidilutive under the treasury stock method. As a result, diluted income (loss)
per share is the same as basic loss per share for the period presented.
Recent accounting standards
In August 2020, the FASB issued a standard (ASU No. 2020-06) to reduce the
complexity of accounting for convertible debt and other equity-linked
instruments. For certain convertible debt instruments with a cash conversion
feature, the changes are a trade-off between simplifications in the accounting
model (no separation of an "equity" component to impute a market interest rate,
and simpler analysis of embedded equity features) and a potentially adverse
impact to diluted EPS by requiring the use of the if-converted method. The new
standard will also impact other financial instruments commonly issued by both
public and private companies. For example, the separation model for beneficial
conversion features is eliminated simplifying the analysis for issuers of
convertible debt and convertible preferred stock. Also, certain specific
requirements to achieve equity classification and/ or qualify for the derivative
scope exception for contracts indexed to an entity's own equity are removed,
enabling more freestanding instruments and embedded features to avoid
mark-to-market accounting. The amendments are effective for smaller reporting
companies for fiscal years beginning after December 15, 2023, including interim
periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. The standard can either be adopted on a modified
retrospective or a full retrospective basis. The Company adopted ASU No. 2020-06
upon its incorporation. The impact to the Company's condensed balance sheets,
statements of operations and cash flows was not material.
The Company's management does not believe that any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the accompanying condensed financial statement.
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VMG CONSUMER ACQUISITION CORP. 
