This Annual 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 Annual Report including, without limitation,
statements under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" regarding our financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. When used in this Annual Report, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to us or our management, identify forward-looking statements.
Such forward-looking statements are based on the beliefs of management, as well
as assumptions made by, and information currently available to, our management.
Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors detailed in our
filings with the SEC, including those set forth in the Registration Statement
relating to the proposed SuperBac Business Combination.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Annual Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated on March 11, 2021 as a Cayman Islands
exempted company for the purpose of effecting a Business Combination. While our
efforts in identifying a prospective target business for our initial Business
Combination will not be limited to a particular industry or geographic region,
we intend to initially focus our search on identifying a prospective target
business within the Brazil focus sectors. We intend to effectuate our initial
Business Combination using cash from the proceeds of our Initial Public
Offering, shares issued to the owners of the target, debt issued to bank or
other lenders or the owners of the target, additional equity raised through a
public or private offering, or a combination of the foregoing.
We expect to incur significant costs in the pursuit of our initial Business
Combination. We cannot assure you that our plans to raise capital or to complete
our initial Business Combination will be successful.
On August 3, 2021, we consummated our Initial Public Offering of 20,000,000
Units. Each Unit consisted of one Public Share and one-third of one of our
redeemable warrants, with each whole warrant entitling the holder thereof to
purchase one of our Class A ordinary shares for $11.50 per share. The Units were
sold at a price of $10.00 per Unit, generating gross proceeds of $200,000,000.
We granted the underwriter a 45-day option to purchase up to 3,000,000
additional Units solely to cover over-allotments.
Simultaneously with the consummation of our Initial Public Offering, we
completed the Private Placement of 4,000,000 Private Warrants to XPAC Sponsor,
LLC, our Sponsor, at a purchase price of $1.50 per warrant, generating gross
proceeds of $6,000,000. The proceeds from the sale of the Private Warrants were
added to the net proceeds from the Initial Public Offering held in the Trust
Account.
On August 16, 2021, the underwriter partially exercised the over-allotment
option and on August 19, 2021, purchased an additional 1,961,131 Units (the
"Over-Allotment Units") at $10.00 per Unit, generating additional gross proceeds
of $19,611,310. In addition, we issued 261,485 Private Warrants to the Sponsor.
If we do not complete our initial Business Combination within 24 months from the
closing of our Initial Public Offering, the proceeds from the sale of the
Private Warrants will be used to fund the redemption of the Public Shares
(subject to the requirements of applicable law) and the Private Warrants will
expire worthless.
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Following the closing of our Initial Public Offering, $219,611,310 ($10.00 per
Unit) from the net proceeds of the sale of the Units in the Initial Public
Offering and the sale of the Private Warrants were placed in the Trust Account
established for the benefit of our Public Shareholders. The Trust Account is
invested in interest-bearing U.S. government securities and the income earned on
those investments is also for the benefit of our Public Shareholders.
Our management has broad discretion with respect to the specific application of
the net proceeds of Initial Public Offering and the Private Placement, although
substantially all of the net proceeds are intended to be applied generally
towards consummating a Business Combination.
Recent Developments
Proposed Superbac Business Combination
On April 25, 2022, the Company entered into a Business Combination Agreement (as
amended from time to time, the "Business Combination Agreement") with (i)
SUPERBAC PubCo Holdings Inc. ("PubCo"), (ii) BAC1 Holdings Inc., a direct wholly
owned subsidiary of PubCo ("Merger Sub 1"), (iii) BAC2 Holdings Inc., a direct
wholly owned subsidiary of PubCo ("Merger Sub 2"), and (iv) SuperBac
Biotechnology Solutions S.A., a corporation incorporated under the laws of the
Federative Republic of Brazil ("SuperBac").
Pursuant to the Business Combination Agreement, the parties thereto have agreed,
among other things, that, on the terms and subject to the conditions set forth
therein: (i) prior to the Initial Merger (as defined below), SuperBac will cause
to be formed an exempted company incorporated with limited liability in the
Cayman Islands ("Newco") that will join as a party to the Business Combination
Agreement, (ii) on or prior the Acquisition Merger (as defined below), certain
SuperBac shareholders will, directly or indirectly, contribute their SuperBac
shares into Newco in exchange for ordinary shares of Newco, (iii) on the Initial
Closing Date (as defined in the Business Combination Agreement), the Company
will merge with and into Merger Sub 1, with Merger Sub 1 being the surviving
entity (the "Initial Merger" and the effective time of the Initial Merger, the
"Initial Merger Effective Time"), and (iv) at least one day following the
Initial Merger, Merger Sub 2 will merge with and into Newco (the "Acquisition
Merger" and together with the Initial Merger, the "Mergers"), with Newco being
the surviving entity and becoming a wholly owned subsidiary of PubCo.
In addition, pursuant to the Business Combination Agreement, at the Initial
Merger Effective Time, (i) each Unit outstanding shall be automatically detached
and the holder thereof shall be deemed to hold one Class A ordinary share of the
Company and one-third of a warrant of the Company, (ii) each issued and
outstanding Class A ordinary share and Class B ordinary share of the Company
(other than any dissenting shares) will be canceled and converted into the right
to receive one Class A ordinary share of PubCo, and (iii) each outstanding and
unexercised warrant to acquire Class A ordinary of the Company will be converted
into the right to purchase one Class A ordinary share of PubCo, subject to the
same terms and conditions existing prior to such conversion.
Pursuant to the transactions contemplated by the Business Combination Agreement,
upon completion of the Mergers, SuperBac will become an indirect subsidiary of
PubCo, with PubCo indirectly owning at least ninety-five percent (95%) but
potentially less than one hundred percent (100%) of the equity interests in
SuperBac.
In connection with the proposed SuperBac Business Combination, on April 25,
2022, SuperBac, the Company, the Company's directors and officers, PubCo and the
Sponsor entered into a Sponsor Support Agreement (the "Sponsor Support
Agreement"), pursuant to which, among other things, the Sponsor agreed to, and
to cause proprietary investment vehicles (i.e. holding investments in a
'principal' or 'own account' capacity) of the Sponsor or its affiliates (if any)
(to the extent permitted by applicable law) to, and the independent directors of
the Company agreed to, among other things, (a) vote in favor of (i) the Mergers
and each of the other transactions contemplated by the Business Combination
Agreement or any of the other Transaction Documents (as defined in the Business
Combination Agreement) (the "Transactions"), and (ii) the other Transaction
Proposals (as defined in the Business Combination Agreement), (b) waive the
anti-dilution rights in respect of XPAC Securities (as defined in the Business
Combination Agreement) under Article 17.3 of the Company's articles of
association, (c) appear at the Company's shareholders' meeting for purposes of
constituting a quorum, (d) vote against any proposals that would impede the
Transactions or any other Transaction Proposal, (e) not redeem any XPAC
Securities held by it, (f) not transfer any XPAC Securities held by the Sponsor
or such affiliates prior to the Acquisition Merger, (g) release the Company,
SuperBac and the Acquisition Entities (as defined in the Business Combination
Agreement) from all claims in respect of or relating to the period prior to
closing of the Acquisition Merger, subject to the provisions and exceptions set
forth therein, and (h) a lock-up of its PubCo ordinary shares and PubCo warrants
that are held as of closing of the
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Acquisition Merger, during the periods of one year and 30 days, respectively,
commencing as of the closing of the Acquisition Merger, subject to certain
exceptions.
In addition, on April 25, 2022, PubCo, the Company, SuperBac and certain
SuperBac shareholders entered into a shareholder voting and support agreement
(the "Voting and Support Agreement") pursuant to which, such SuperBac
shareholders, among other things, have agreed to vote to approve the
Transactions and such other actions as contemplated in the Business Combination
Agreement for which the approval of SuperBac shareholders is required.
Moreover, on April 25, 2022, certain SuperBac shareholders entered into a
lock-up agreement (the "Lock-up Agreement"), pursuant to which, subject to
certain exceptions, and following the closing of the Acquisition Merger: (i)
Luiz Chacon, SuperBac's founder and CEO (together with his controlled
shareholding vehicles and permitted transferees, the "Founder") has agreed to a
two-year lock-up period (other than the sale of up to R$70.0 million of ordinary
shares of PubCo), and (ii) substantially all of the other SuperBac shareholders
have agreed a six-month lock-up period. In addition, the PubCo Class A ordinary
shares issued in connection with the "net exercise" of certain existing SuperBac
stock options shall be subject to a three-year lock-up period and subject to
forfeiture upon terms substantially equivalent to the vesting and forfeiture
provisions that were applicable to the SuperBac stock options. On May 26, 2022,
one additional SuperBac shareholder holding approximately 0.4% of the
outstanding share capital of SuperBac entered into a joinder agreement (the
"Lock-up Joinder Agreement") with the Company, by which such SuperBac
shareholder agreed to be bound by the provisions of the Lock-Up Agreement and
subject itself to a lock-up period of six months from closing of the Business
Combination.
In addition, as contemplated by the Business Combination Agreement, on April 26,
2022, SuperBac and certain SuperBac shareholders entered into an investment
agreement (the "Investment Agreement"), pursuant to which, among other things,
(i) all shareholders of SuperBac other than the Founder have agreed to, directly
or indirectly, contribute their SuperBac shares into Newco in exchange for newly
issued Class A ordinary shares of Newco, and (ii) the Founder has agreed to,
directly or indirectly, contribute his SuperBac shares into Newco in exchange
for newly issued Class B ordinary shares of Newco, in each case, as and to the
extent contemplated by the Investment Agreement. On May 26, 2022, one additional
SuperBac shareholder holding approximately 0.4% of the outstanding share capital
of SuperBac entered into a joinder agreement (the "Investment Agreement
Joinder") with SuperBac and the Company, by which such SuperBac shareholder
agreed to become a party, to be bound by, and to comply with the Investment
Agreement in the same manner as if he was an original signatory to the
Investment Agreement.
Consummation of the Transactions is subject to customary conditions, including
(i) approval by the Company's and SuperBac's shareholders (certain of which
SuperBac shareholder approvals were obtained on May 12, 2022, with other
approvals remaining outstanding), (ii) the absence of any law or governmental
order which has the effect of making consummation of the Transactions illegal or
which otherwise prevents or prohibits consummation of the Transactions, (ii) the
effectiveness of the Registration Statement filed in connection with the
proposed SuperBac Business Combination, (iii) PubCo's initial listing
application with Nasdaq in connection with the Transactions shall have been
conditionally approved and Class A ordinary shares of PubCo to be issued in
connection with the Transactions shall have been approved for listing on the
Nasdaq Capital Market, subject to official notice of issuance, and (iv) material
accuracy of representations and warranties, and material compliance with
covenants, in the Business Combination Agreement.
In addition, the obligations of SuperBac to consummate the Transactions are
subject, among others, to: (i) the condition that the Post-Redemption Trust
Account Balance (as defined in the Business Combination Agreement), plus the
PIPE Gross Proceeds (as defined in the Business Combination Agreement) (minus
any unreimbursed Excess of Company Transaction Expenses (as defined in the
Business Combination Agreement)), in each case, to be made available to PubCo at
the Acquisition Closing, shall be at least $150,000,000 (the "Minimum Cash
Condition"), and (ii) at the Acquisition Closing, the Company having at least
$5,000,001 in tangible net assets after giving effect to the XPAC Share
Redemptions (as defined in the Business Combination Agreement).
The Business Combination Agreement provides that, following the date of the
Business Combination Agreement, but prior to the Initial Merger Effective Time
(as defined in the Business Combination Agreement), (i) one or more investors
may agree to make, subject to SuperBac's reasonable consent, one or more private
investments to subscribe for and purchase Class A ordinary shares of PubCo for
an aggregate purchase price of up to $220 million at a price per share equal to
$10.00 (a form of subscription agreement for any such investment is included as
a schedule to the Business Combination Agreement), and (ii) with the prior
written consent of SuperBac (which consent may be withheld in its sole and
absolute discretion), certain other private investments may be entered into in
accordance with the terms set forth in the Business Combination Agreement, in an
effort to satisfy the Minimum Cash Condition.
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On December 2, 2022, the Company, PubCo, Merger Sub 1, Merger Sub 2, Newco and
SuperBac entered into the First Amendment Agreement to the Business Combination
Agreement ("First BCA Amendment"), pursuant to which the parties thereto amended
the Business Combination Agreement to extend the date by which either the
Company or SuperBac can terminate the Business Combination Agreement if the
transactions contemplated thereby have not been consummated by such date from
November 21, 2022 to January 31, 2023 (and if such date is not a business day,
then the next following business day). The First BCA Amendment is filed as
Exhibit 2.2 to this Annual Report on Form 10-K and the foregoing description of
the First BCA Amendment is qualified in its entirety by reference thereto.
On December 19, 2022, SuperBac held an ordinary and extraordinary general
meeting of its shareholders (the "December 2022 Shareholder Meeting") for the
purposes of (i) approving in an ordinary general meeting of its shareholders,
SuperBac's financial statements for the year ended December 31, 2021 and the
total remuneration of SuperBac's directors for the 2022 fiscal year, and (ii)
approving in an extraordinary general meeting of its shareholders, the entry
into of the First BCA Amendment, and the terms and conditions of a proposed
issuance of non-convertible debt by Superbac Indústria e Comércio de
Fertilizantes S.A. (a wholly-owned subsidiary of SuperBac) (including the
collateral and/or guarantees of such debt) in an aggregate principal amount not
to exceed the equivalent in Brazilian reais of US$ 50.0 million. Each of the
matters to be approved by SuperBac's shareholders in the December 2022
Shareholder Meetings was duly approved.
On February 9, 2023, the Company, PubCo, Merger Sub 1, Merger Sub 2, Newco and
SuperBac entered into the Second Amendment Agreement to the Business Combination
Agreement ("Second BCA Amendment"), pursuant to which the parties thereto
amended the Business Combination Agreement to extend the date by which either
the Company or SuperBac can terminate the Business Combination Agreement if the
transactions contemplated thereby have not been consummated by such date from
January 31, 2023 to February 28, 2023 (and if such date is not a business day,
then the next following business day). The Second BCA Amendment is filed as
Exhibit 2.3 to this Annual Report on Form 10-K and the foregoing description of
the Second BCA Amendment is qualified in its entirety by reference thereto. As
of the date that this Annual Report on Form 10-K was filed with the SEC, the
Business Combination Agreement has not been amended to extend the aforementioned
date beyond February 28, 2023. Accordingly, pursuant to the terms of the
Business Combination Agreement, the Business Combination Agreement can be
terminated by the Company or SuperBac at any time.
SuperBac is a pioneering biotechnology company in the Brazilian market with an
established platform to promote the substitution of harmful synthetic chemicals
for more sustainable, biologically-based alternatives. With over two decades of
experience in the research, development, manufacture, and distribution of
biologically-based blends of naturally-occurring, non-GMO microorganisms for use
in a wide variety of agricultural, industrial and household applications,
SuperBac's unique, proprietary and multi-disciplinary biotech development
platform is capable of identifying, isolating and testing the properties of
various strains of bacteria for commercial and domestic applications, which it
then uses to create new solutions that can be manufactured at an industrial
scale. SuperBac believes that it is well-positioned for further expansion as a
national leader in crop nutrition and poised for diversification into crop
protection and other industry sectors.
For more information about the Business Combination Agreement and the proposed
SuperBac Business Combination, see the Registration Statement that PubCo filed
with the SEC, relating to the proposed SuperBac Business Combination. Unless
specifically stated, this Annual Report on Form 10-K does not give effect to the
proposed SuperBac Business Combination and does not contain the risks associated
with the proposed SuperBac Business Combination. Such risks and effects relating
to the proposed SuperBac Business Combination were included in the Registration
Statement that PubCo filed with the SEC relating to the proposed SuperBac
Business Combination.
Results of Operations
We have neither engaged in any significant business operations nor generated any
revenues to date. All activities to date relate to our formation and Initial
Public Offering and since then to the search for a target business. We will not
generate any operating revenues until after the completion of our Business
Combination, at the earliest. We will generate non-operating income in the form
of interest income from the proceeds derived from our Initial Public Offering
and will recognize other income and expense related to the change in fair value
of our warrant liabilities. 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. We have selected December 31 as our
fiscal year end.
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For the year ended December 31, 2022, we had a net income of $1,911,455, which
consisted of a $3,951,535 gain on the fair value of warrant liabilities, a
$3,108,539 gain on investments held in the Trust Account and a $13,844 gain on
foreign exchange, offset by $5,162,463 in operating, general and administrative
expenses.
For the period from March 11, 2021 (inception) through December 31, 2021, we had
a net income of $5,339,595, which consisted of a $7,862,415 gain on the fair
value of warrant liabilities and a $6,421 gain on investments held in the Trust
Account, offset by $2,009,696 in operating, general and administrative expenses,
$519,498 in offering expenses allocated to warrant issuance incurred and a $47
foreign exchange loss.
Liquidity and Capital Resources
As of December 31, 2022, we had cash outside the Trust Account of $44,659,
available for working capital needs. All remaining cash was held in the Trust
Account and is generally unavailable for our use, prior to our initial Business
Combination.
On August 3, 2021, we completed the sale of 20,000,000 Units at $10.00 per Unit,
generating gross proceeds of $200,000,000.
Simultaneous with the closing of our Initial Public Offering, we completed the
sale of 4,000,000 Private Warrants at a price of $1.50 per Private Unit in a
private placement to XPAC Sponsor LLC, generating gross proceeds of $6,000,000.
On August 19, 2021, the underwriter purchased an additional 1,961,131 of our
Units at $10.00 per Unit, generating additional gross proceeds of $19,611,310 to
us. In addition, we sold an additional 261,485 Private Warrants to the Sponsor.
Our liquidity needs had been satisfied prior to the completion of the Initial
Public Offering through the payment by our initial stockholders of $25,000 to
cover certain of our offering costs in consideration for the issuance of Founder
Shares to our initial shareholders and up to $300,000 in loans available from
our Sponsor. On December 27, 2021, the promissory note was amended to be payable
upon consummation of the Business Combination. As of December 31, 2022, we had
$300,000 outstanding under the promissory note. Subsequent to the consummation
of our Initial Public Offering, our liquidity needs have been satisfied through
the net proceeds from the consummation of our Initial Public Offering and our
Private Placement held outside of the Trust Account.
Prior to our initial Business Combination, we will be using the funds held
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.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable (if any) and deferred underwriting commissions), to complete our
initial Business Combination. We may withdraw interest income (if any) to pay
income taxes, if any. To the extent that our equity 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial Business Combination, our Sponsor, an
affiliate of our Sponsor or certain of our directors and officers 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. Otherwise, such loans may be repaid only out
of funds held outside the Trust Account. 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 to repay such loaned amounts. Up to $1,500,000 of
such loans may be convertible into warrants at a price of $1.50 per warrant at
the option of the lender. The warrants would be identical to the Private
Warrants issued to our Sponsor. The terms of such loans, if any, have not been
determined and no written agreements exist with respect to such loans. We do not
expect to seek loans from parties other than our Sponsor or an affiliate of our
Sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
Trust Account. As of December 31, 2022, there was no amount outstanding under
any Working Capital Loans.
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We expect our primary liquidity requirements prior to our initial Business
Combination to include approximately $350,000 for legal, accounting, due
diligence, travel and other expenses associated with structuring, negotiating
and documenting successful Business Combinations; $150,000 for legal and
accounting fees related to regulatory reporting requirements; $58,000 for Nasdaq
continued listing fees; $442,000 for general working capital that will be used
for miscellaneous expenses and reserves.
These amounts are estimates and may differ materially from our actual expenses.
In addition, we could use a portion of the funds not being placed in trust to
pay commitment fees for financing, fees to consultants to assist us with our
search for a target business or as a down payment or to fund a "no-shop"
provision (a provision designed to keep target businesses from "shopping" around
for transactions with other companies or investors on terms more favorable to
such target businesses) with respect to a particular proposed Business
Combination, although we do not have any current intention to do so. If we
entered into an agreement where we paid for the right to receive exclusivity
from a target business, the amount that would be used as a down payment or to
fund a "no-shop" provision would be determined based on the terms of the
specific Business Combination and the amount of our available funds at the time.
Our forfeiture of such funds (whether as a result of our breach or otherwise)
could result in our not having sufficient funds to continue searching for, or
conducting due diligence with respect to, prospective target businesses.
As of December 31, 2022, we had $44,659 in cash and working capital deficit of
$5,075,585. We have incurred and expect to continue to incur significant costs
in pursuit of our acquisition plans. In order to meet our financial needs
between the current period and the consummation of a Business Combination, our
Sponsor or its affiliates can, but are not obligated to, provide funding through
Working Capital Loans. These conditions raise substantial doubt about our
ability to continue as a going concern for a period of time within one year
after the date that the financial statements are issued. There is no assurance
that our plan to consummate a Business Combination will be successful or
successful within the Combination Period. Our financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
If we are not able to consummate a Business Combination before August 3, 2023
(or by any extension in such time period as a result of a shareholder vote to
amend our amended and restated memorandum and articles of association), we will
commence an automatic winding up, dissolution and liquidation. Management has
determined that the automatic liquidation, should a Business Combination not
occur, and potential subsequent dissolution also raises substantial doubt about
our ability to continue as a going concern. There can be no assurance that we
will be able to complete a Business Combination by August 3, 2023. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after August 3, 2023.
Off-Balance Sheet Financing Arrangements
We did not have any off-balance sheet arrangement as of December 31, 2022 as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
As of December 31, 2022, we did not have any long-term debt, capital or
operating lease obligations.
We entered into an administrative services agreement pursuant to which our
Sponsor may charge us a $10,000 per month fee for office space, administrative
and support services. As of December 31, 2022, our Sponsor has not charged us,
and does not intend to charge us in the future, any amount in relation to the
provision of these services.
Critical Accounting Policies
Management's discussion and analysis of our results of operations and liquidity
and capital resources are based on our audited financial statements. We describe
our significant accounting policies in Note 2 - Summary of Significant
Accounting Policies, of the Notes to Financial Statements included in this
report. Our audited financial statements have been prepared in accordance with
U.S. GAAP. Certain of our accounting policies require that management apply
significant judgments in defining the appropriate assumptions integral to
financial estimates. On an ongoing basis, management reviews the accounting
policies, assumptions, estimates and judgments to ensure that our financial
statements are presented fairly and in accordance with U.S. GAAP. Judgments are
based on historical experience, terms of existing contracts, industry trends and
information available from outside sources, as appropriate. However, by their
nature, judgments are subject to an inherent degree of uncertainty, and,
therefore, actual results could differ from our estimates.
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Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and other
Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's
Own Equity (Subtopic 815-40). The new guidance eliminates the beneficial
conversion and cash conversion accounting models for convertible instruments. It
also amends the accounting for certain contracts in an entity's own equity that
are currently accounted for as derivatives because of specific settlement
provisions. In addition, the new guidance modifies how particular convertible
instruments and certain contracts that may be settled in cash or shares impact
the diluted EPS computation. This guidance is effective as of January 1, 2024
for smaller reporting companies (early adoption is permitted effective January
1, 2021). The Company is currently evaluating the effect the updated standard
will have on its financial position, results of operations or financial
statement disclosure.
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 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 currently
assessing what impact, if any, that ASU 2022-03 would have on its financial
position, results of operations or cash flows.
We have considered all new accounting pronouncements and have concluded that
there are no new pronouncements that may have a material impact on our results
of operations, financial condition, or cash flows, based on the current
information.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" under the JOBS Act and are 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.
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 independent registered public accounting firm's
attestation report on our system of internal control over financial reporting
pursuant to Section 404, (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 independent registered public accounting firm'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 the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of the Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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