References to the "Company," "DA32 Life Sciences Tech Acquisition Corp. ," "our," "us" or "we" refer toDA32 Life Sciences Tech Acquisition Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSEC filings. Overview We are a blank check company incorporated inDelaware onApril 16, 2021 . We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the "Business Combination"). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. Our sponsor isDA32 Sponsor LLC , aDelaware limited liability company (the "Sponsor"). The registration statement for the Company's Initial Public Offering was declared effective onJuly 27, 2021 . OnJuly 30, 2021 , the Company consummated its Initial Public Offering of 20,000,000 shares of Class A common stock (the "Public Shares"), at an offering price of$10.00 per Public Share, generating gross proceeds of$200.0 million , and incurring offering costs of approximately$9.3 million , inclusive of$5.6 million in deferred underwriting commissions. Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement ("Private Placement") of 650,000 shares of Class A common stock (the "Private Placement Shares"), at a price of$10.00 per Private Placement Share to the Sponsor, generating gross proceeds of$6.5 million (Note 4) paid onAugust 3, 2021 . Upon the closing of the Initial Public Offering and the Private Placement,$200.0 million ($10.00 per Public Share) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account ("Trust Account") located inthe United States withContinental Stock Transfer & Trust Company acting as trustee, and invested only inU.S. "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in directU.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. 16 -------------------------------------------------------------------------------- Table of Contents If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, orJuly 30, 2023 , or during any extended period of time that we may have to consummate a Business Combination as a result of an amendment to the Certificate of Incorporation (the "Combination Period"), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to$100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders' rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in each case to the Company's obligations underDelaware law to provide for claims of creditors and the requirements of other applicable law. Liquidity and Capital Resources As ofSeptember 30, 2021 , we had approximately$2.0 million in our operating bank account, and working capital of approximately$2.4 million (not taking into account approximately$90,000 in tax obligations that may be paid using investment income earned in Trust Account). Our liquidity needs to date have been satisfied through a cash payment of$25,000 from our Sponsor to purchase the Founder Shares, the loan of approximately$200,000 from the Sponsor pursuant to the Note, and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note upon closing of the Initial Public Offering. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company's officers and directors may, but are not obligated to, provide the Company Working Capital Loans. As ofSeptember 30, 2021 , there were no amounts outstanding under any Working Capital Loan. Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds 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. Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Results of Operations Our entire activity from inception up toSeptember 30, 2021 , was for our formation and the Initial Public Offering and, subsequent to the Initial Public Offering, the search for a prospective target for an initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination. For the three months endedSeptember 30, 2021 , we had a net loss of approximately$271,000 , which consisted of approximately$197,000 in general and administrative expenses,$35,000 in administrative expenses - related party and approximately$49,000 in franchise tax expenses, partially offset by approximately$9,000 in gain on investments held in Trust Account. 17 -------------------------------------------------------------------------------- Table of Contents For the period fromApril 16, 2021 (inception) throughSeptember 30, 2021 , we had a net loss of approximately$323,000 , which consisted of approximately$199,000 in general and administrative expenses,$35,000 in administrative expenses-related party and$90,000 in franchise tax expenses, partially offset by approximately$9,000 in gain on investments held in Trust Account. Contractual Obligations Administrative Services Agreement Commencing on the date that our securities were first listed on NASDAQ and continuing until the earlier of our consummation of a Business Combination or our liquidation, we agreed to pay the Sponsor a total of$10,000 per month for office space, secretarial and administrative services provided to members of our management team. For the three months endedSeptember 30, 2021 , and for the period fromApril 16, 2021 (inception) throughSeptember 30, 2021 , the Company incurred expenses of$20,000 under this agreement, included in administrative expenses - related party on the accompanying unaudited condensed statements of operations. As ofSeptember 30, 2021 , no amounts were outstanding for these services. The Sponsor, officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers or directors, or their affiliates. Wolfe Strategic Services Agreement OnJuly 27, 2021 , we entered into an agreement that provides that, commencing on the date that our securities were first listed on Nasdaq, we shall pay our Chief Financial Officer,Christopher Wolfe ,$7,500 per month for his services prior to the initial Business Combination. During the three months endedSeptember 30, 2021 , and the period fromApril 16, 2021 (inception) throughSeptember 30, 2021 , we incurred$15,000 in expenses for these services which is included in administrative expenses-related party on the accompanying statements of operations. Registration Rights The holders of Founder Shares, Private Placement Shares, and shares of Class A common stock that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Underwriting Agreement The underwriters did not earn any underwriting commissions on the 4,000,000 Affiliated Shares. Except for the Affiliated Shares, the underwriters were entitled to an upfront underwriting discount of$0.20 per share, or$3.2 million in the aggregate, paid upon the closing of the Initial Public Offering, and a deferred underwriting commissions of$0.35 per share, or$5.6 million in the aggregate will be payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. Critical Accounting Policies This management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting policies: 18 -------------------------------------------------------------------------------- Table of Contents Investments held in the Trust Account Our portfolio of investments is comprised ofU.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest inU.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised ofU.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain from investments held in the Trust Account in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. Class A common stock subject to possible redemption Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A 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 features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as ofSeptember 30, 2021 , 20,000,000 shares of Class A common stock subject to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders' equity section of our unaudited condensed balance sheet. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. Net income (loss) per common shares We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value. Recent Accounting Pronouncements Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements. Off-Balance Sheet Arrangements As ofSeptember 30, 2021 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. 19 -------------------------------------------------------------------------------- Table of Contents JOBS Act The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act 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, the unaudited condensed 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 auditor's attestation report on our system of internal controls 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 auditor's report providing additional information about the audit and the unaudited condensed 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 our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.
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