The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on
Form 10-K.
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Overview
We are a blank check company formed under the laws of the State of Delaware on
December 30, 2020 for the purpose of effecting a merger, share exchange, asset
acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more businesses or entities. We intend to
effectuate our Business Combination using cash from the proceeds of the Initial
Public Offering and the sale of the Private Placement Units, 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 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 January 1, 2021 (commencement of operations) through
December 31, 2021 were organizational activities, those necessary to prepare
for, the Initial Public Offering, described below, and 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.
For the period from January 1, 2021 (commencement of operations) through
December 31, 2021, we had a net loss of $579,194, which consists of an
unrealized loss on marketable securities held in our Trust Account of $1,181,
interest income on marketable securities held in the Trust Account of $16,475,
and interest income on operating account of $25, offset by operating costs of
$594,513.
Liquidity and Going Concern
On June 17, 2021, we completed the Initial Public Offering of 5,500,000 Units,
at $10.00 per Unit, generating gross proceeds of $55,000,000. Simultaneously
with the closing of the Initial Public Offering, we consummated the sale of
283,750 Units at a price of $10.00 per Private Placement Unit in a private
placement to the Sponsor, generating gross proceeds of $2,837,500.
On June 29, 2021, in connection with the underwriters' partial exercise of their
over-allotment option, we consummated the sale of an additional 329,980 Units at
a price of $10.00 per Unit, generating total gross proceeds of $3,299,800. In
addition, we also consummated the sale of an additional 8,250 Private Placement
Units at $10.00 per Private Unit, generating total gross proceeds of $82,500.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Placement Units, a total of
$58,299,805 was placed in the Trust Account. We incurred $2,343,755 in Initial
Public Offering related costs, including $1,457,495 of underwriting fees and
$886,260 of other costs, which includes $411,896 of fair value of the Unit
Purchase Option.
For the period from January 1, 2021 (commencement of operations) through
December 31, 2021, cash used in operating activities was $583,498. Net loss of
$579,194 was affected by interest earned on marketable securities held in the
Trust Account of $16,475 and an unrealized loss on marketable securities held in
the Trust Account of $1,181. Changes in operating assets and liabilities
provided $10,990 of cash for operating activities.
As of December 31, 2021, we had cash and marketable securities held in the Trust
Account of $58,315,099 consisting of U.S. Treasury Bills with a maturity of
185 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 have not withdrawn any
interest earned from the Trust Account.
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
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our 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.
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As of December 31, 2021, we had cash of $434,638. 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, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, 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 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 units at
a price of $10.00 per unit, at the option of the lender. The units would be
identical to the Private Units.
The Company will need to raise additional capital through loans or additional
investments from its Sponsor, shareholders, officers, directors, or third
parties. The Company's officers, directors and Sponsor may, but are not
obligated to, loan the Company funds, from time to time or at any time, in
whatever amount they deem reasonable in their sole discretion, to meet the
Company's working capital needs. Accordingly, the Company may not be able to
obtain additional financing. If the Company is unable to raise additional
capital, it 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. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern for at least one year from the date that the financial statement was
issued. These 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 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 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 general and administrative services, including
office space, utilities and administrative support. We began incurring these
fees on June 14, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
We have engaged EarlyBirdCapital the underwriter in the Initial Public Offering,
as an advisor in connection with our Business Combination to assist in holding
meetings with the Company stockholders to discuss the potential Business
Combination and the target business' attributes, introduce the Company to
potential investors that are interested in purchasing its securities in
connection with its initial Business Combination, assist in obtaining
stockholder approval for the Business Combination and assist with press releases
and public filings in connection with the Business Combination. The Company will
pay EarlyBirdCapital a cash fee for such services upon the consummation of its
initial business combination in an amount equal to 3.5% of the gross proceeds of
the 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,
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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:
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 sheet.
Net Loss Per Common Share
Net loss per common stock is computed by dividing net loss by the weighted
average number of common shares outstanding during the period. We apply the
two-class method in calculating earnings per share. Accretion associated with
the redeemable shares of Class A common stock is excluded from loss per share as
the redemption value approximates fair value.
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 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.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company adopted ASU 2020-06 on January 1, 2021. The adoption of ASU
2020-06 did not have an impact on the Company's financial statements.
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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