The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and related notes included herein. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of many
factors, including those set forth elsewhere in this Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on
August 5, 2020 for the purpose of entering into a merger, share exchange, asset
acquisition, stock purchase, recapitalization, reorganization or similar
business combination with one or more businesses or entities. We intend to
effectuate our initial business combination using cash from the proceeds of the
initial public offering and the sale of the private placement warrants, our
capital stock, debt or a combination of cash, stock 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 an initial
business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2021 were organizational activities,
those necessary to prepare for the initial public offering, described below, and
to identify a target company for an initial business combination. 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 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 and
transaction expenses.
For the year ended December 31, 2021, we had net income of $2,100,223 which
consists of the change in fair value of warrant liabilities of $3,912,915,
change in fair value of convertible promissory note - related party of $303,460
and interest earned on marketable securities held in the trust account of
$64,088, and unrealized gain on marketable securities held in the trust account
of $1,371, offset by operational costs related to potential business
combinations that were pursued of $2,181,611.
For the period from August 5, 2020 (inception) through December 31, 2020, we had
a net loss of $4,187,718, which consisted of formation and operating costs of
$121,087, change in fair value of warrant liabilities of $4,069,896, and
transaction costs incurred in connection with the initial public offering of
$11,564 offset by interest income on marketable securities held in the trust
account of $11,521 and an unrealized gain on marketable securities held in the
trust account of $3,308.
Liquidity and Capital Resources
On November 17, 2020, we consummated the initial public offering of 11,000,000
units, at $10.00 per unit, generating gross proceeds of $110,000,000.
Simultaneously with the closing of the initial public offering, we consummated
the sale of 4,800,000 private placement warrants at a price of $1.00 per private
placement warrant in a private placement to our sponsor and EarlyBirdCapital,
Inc., generating gross proceeds of $4,800,000.
On November 19, 2020, in connection with the underwriters' partial exercise of
their over-allotment option, we consummated the sale of an additional 1,618,600
units at a price of $10.00 per unit, generating total gross proceeds of
$16,186,000. In addition, we also consummated the sale of an additional 485,580
private placement warrants at $1.00 per private placement warrant, generating
total gross proceeds of $485,580.
Following the initial public offering, the partial exercise of the
over-allotment option, and the sale of the private placement warrants,
$111,100,000 was placed in the trust account on November 18, 2020 and
$16,347,860 was placed in the trust account on November 20, 2020, respectively,
for a total of $127,447,860. We incurred $2,880,354 in the initial public
offering related costs, including $2,523,720 of underwriting fees and $356,634
of other costs.
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For the year ended December 31, 2021, cash used in operating activities was
$744,981. Net income of $2,100,223 was affected by the change in fair value of
warrant liabilities of $3,912,915, change in fair value of convertible
promissory note - related party of $303,460, interest earned on marketable
securities held in the trust account of $64,088, and an unrealized gain on
marketable securities held in our trust account of $1,371. Changes in operating
assets and liabilities provided $1,436,630 of cash for operating activities.
For the period from August 5, 2020 (inception) through December 31, 2020, cash
used in operating activities was $147,816. Net loss of $4,187,718 was affected
by interest earned on marketable securities held in the trust account of
$11,521, changes in fair value of warrant liabilities of $4,069,896, transaction
costs incurred in connection with the initial public offering of $11,564 and
unrealized gain on marketable securities held in the trust account of $3,308.
Changes in operating assets and liabilities used $26,729 of cash for operating
activities.
As of December 31, 2021, we had primarily marketable securities held in the
trust account of $128,790,008 (including $80,288 of interest income and
unrealized gains, net of unrealized losses) consisting of securities held in a
money market fund that invests in U.S. Treasury securities with a maturity of
180 days or less. Interest income on the balance in the trust account may be
used by us to pay taxes. Through December 31, 2021, we did not withdraw any
interest earned on the trust account to pay our taxes.
We intend to use substantially all of the funds held in the trust account, to
acquire a target business and to pay our expenses relating thereto upon
consummation of our initial business combination for assisting us in connection
with our initial business combination. To the extent that our capital stock is
used in whole or in part as consideration to effect an initial business
combination, the remaining funds held in the trust account will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business' operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders' fees which we had
incurred prior to the completion of our initial business combination if the
funds available to us outside of the trust account were insufficient to cover
such expenses.
As of December 31, 2021, we had cash of $278,197 held outside the trust account.
We intend to use the funds held outside the trust account for identifying and
evaluating prospective acquisition candidates, performing business due diligence
on prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating the
initial business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with an initial business combination, the Insiders, or certain of our
officers and directors or their affiliates may, but are not obligated to, loan
us funds as may be required. If we complete our initial business combination, we
would repay such loaned amounts. 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. Up to $1,500,000 of such loans
may be convertible into warrants, at a price of $1.00 per warrant, at the option
of the lender. The units would be identical to the private placement warrants.
We expect that we will need to raise additional capital through loans or
additional investments from our sponsor, stockholders, officers, directors, or
third parties. Our officers, directors and sponsor may, but are not obligated
to, loan us funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet our working capital needs.
Accordingly, we may not be able to obtain additional financing. If we are unable
to raise additional capital, we may be required to take additional measures to
conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of a potential transaction, and
reducing overhead expenses. We cannot provide any assurance that new financing
will be available to us on commercially acceptable terms, if at all. These
conditions raise substantial doubt about our ability to continue as a going
concern.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 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 have agreed, commencing on November 12, 2020 through the earlier of our
consummation of an initial business combination and our liquidation, to pay an
affiliate of our management a total of $10,000 per month for office space,
utilities and secretarial support. For the year ended December 31, 2021, we
incurred $120,000 in fees for these services. At December 31, 2021 and 2020,
fees of $0 and $20,000 are included in accounts payable and accrued expenses in
the accompanying balance sheets, respectively.
We granted the underwriters a 45-day option from the date of the initial public
offering to purchase up to 1,650,000 additional units to cover over-allotments,
if any, at the initial public offering price less the underwriting discounts and
commissions. On November 19, 2020, the underwriters partially exercised their
over-allotment option to purchase an additional 1,618,600 units at $10.00 per
unit and forfeited the remaining over-allotment option.
We have engaged EarlyBirdCapital as an advisor in connection with an initial
business combination to assist us in holding meetings with its stockholders to
discuss the potential initial business combination and the target business'
attributes, introduce us to potential investors that are interested in
purchasing our securities in connection with an initial business combination,
assist us in obtaining stockholder approval for the initial business combination
and assist us with our press releases and public filings in connection with the
initial business combination. We will pay EarlyBirdCapital a cash fee for such
services upon the consummation of an initial business combination in an amount
equal to 3.5% of the gross proceeds of the initial public offering, or
$4,416,510 (exclusive of any applicable finders' fees which might become
payable); provided that up to 30% of the fee may be allocated at our sole
discretion to other FINRA members that assist us in identifying and consummating
an initial business combination.
Additionally, we will pay EarlyBirdCapital a cash fee equal to 1.0% of the total
consideration payable in an initial business combination if EarlyBirdCapital
introduces us to the target business with which we complete an initial business
combination.
We have engaged various law firms to provide legal due diligence services and
business combination services related to a potential target company. All fees
and expenses related to the various engagements will be deferred and are to be
paid fully upon the closing of any initial business combination. The law firms
will not be entitled to any fees or expense reimbursement if we do not
consummate an initial business combination within our deadline. Deferred fees of
$1,009,868 related to these legal services have been accrued as of December 31,
2021.
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 Liabilities
We account for the private placement warrants in accordance with the guidance
contained in ASC 815-40-15-7D and 7F under which the private placement warrants
do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the private placement warrants as
liabilities at their fair value and adjusts the private placement 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 statements of operations. The private placement warrants for
periods where no observable traded price was available were valued by using a
binomial lattice simulation model.
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Convertible Promissory Note
We account for our convertible promissory note under ASC 815, Derivatives and
Hedging ("ASC 815"). Under 815-15-25, the election can be at the inception of a
financial instrument to account for the instrument under the fair value option
under ASC 825. We have made such election for our convertible promissory note.
Using fair value option, the convertible promissory note is required to be
recorded at its initial fair value on the date of issuance, and each balance
sheet date thereafter. Changes in the estimated fair value of the note are
recognized as non-cash change in the fair value of the convertible promissory
note in the statements of operations. The fair value of the option to convert
the convertible promissory note into private placement warrants was valued by
utilizing a binomial lattice model incorporating the Cox-Ross-Rubenstein
methodology.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and 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 as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for the period.
Accretion associated with the redeemable shares of common stock is excluded from
net income (loss) per common share because the redemption value approximates
fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards 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" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 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 impact of the adoption of ASU 2020-06 is being
assessed by us; however no significant impact on the financial statements is
anticipated.
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.
Factors That May Adversely Affect Our Results of Operations
Our results of operation and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
volatility in the financial markets or economic conditions, increase of oil
price and interest rate, inflation, supply chain disruption, decline in consumer
confidence and spending, the on-going effects of the COVID-19 pandemic,
including resurgences and the emergence of new variants, and geopolitical
instability, such as the military conflict in Ukraine. We cannot at this time
fully predict one or more of the above events, their duration or magnitude of,
or the extent to, which they may negatively impact our business and our ability
to complete an initial business combination.
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