The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our 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 "Cautionary Note Regarding
Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 30, 2020, 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, 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.
Recent Developments
Merger Agreement
On December 18, 2022, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") by and among the Company, Edify Merger Sub, Inc., a
Nevada corporation and direct, wholly owned subsidiary of the Company ("Merger
Sub"), and Unique Logistics International, Inc., a Nevada corporation (the
"Unique Logistics").
The Merger Agreement provides, among other things, that on the terms and subject
to the conditions of the Merger Agreement, and in accordance with the Nevada
Revised Statutes (the "NRS") and other applicable laws, Merger Sub will merge
with and into Unique Logistics (the "Merger"), with Unique Logistics being the
surviving corporation of the Merger (Unique Logistics, in its capacity as the
surviving corporation of the Merger, the "Surviving Corporation") and a
wholly-owned subsidiary of the Company.
The proposed Merger is expected to be consummated after receipt of the required
approvals from the stockholders of the Company and Unique Logistics and the
satisfaction of certain other conditions summarized below.
Closing Merger Consideration
At the effective time of the Merger, each share of common stock, par value
$0.001 per share, of the Unique Logistics ("Unique Logistics' Common Stock")
(other than excluded shares and dissenting shares) will be cancelled and
automatically deemed for all purposes to represent the right to receive a number
of shares of Class A Common Stock, par value $0.0001 per share, of Buyer ("Buyer
Class A Common Stock") equal to the quotient of (i) the Per Share Consideration
Value (as defined herein), divided by (ii) $10.00 (subject to equitable
adjustment) (the "Common Exchange Ratio"). The "Per Share Consideration Value"
equals the quotient of (i) $282 million, divided by (ii) the sum of (A) the
number of shares of Unique Logistics' Common Stock, plus (B) the number of
shares of Unique Logistics' Common Stock into which all of the shares of Unique
Logistics' convertible preferred stock, par value $0.001 per share, of the
Unique Logistics (collectively, the "Unique Logistics' Convertible Preferred
Stock") would convert, in each case, as of immediately prior to the Merger,
taking into account the effects of the Transactions in accordance with the
certificate of designations applicable to such Unique Logistics' Convertible
Preferred Stock.
At the effective time of the Merger:
each share of Unique Logistics' Series A Convertible Preferred Stock (other
than excluded shares and dissenting shares) will be cancelled and automatically
? deemed for all purposes to represent the right to receive a number of shares of
the Company's Class A Common Stock equal to the product of (i) the number of
shares of Unique Logistics' Common Stock
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into which such share of Unique Logistics' Series A Convertible Preferred Stock
is convertible, taking into account the effects of the Transactions in
accordance with the certificate of designation applicable to such Unique
Logistics' Convertible Preferred Stock, and (ii) the Common Exchange Ratio;
each share of Unique Logistics' Series B Convertible Preferred Stock (other
than Excluded Shares and Dissenting Shares) will be cancelled and automatically
deemed for all purposes to represent the right to receive a number of shares of
the Company's Class A Common Stock equal to the product of (i) the number of
? shares of Unique Logistics' Common Stock into which such share of Unique
Logistics' Series B Convertible Preferred Stock is convertible, taking into
account the effects of the Transactions in accordance with the certificate of
designation applicable to such Unique Logistics' Convertible Preferred Stock,
and (ii) the Common Exchange Ratio;
each share of Unique Logistics' Series C Convertible Preferred Stock (other
than excluded shares and dissenting shares) will be cancelled and automatically
deemed for all purposes to represent the right to receive a number of shares of
the Company's Class A Common Stock equal to the product of (i) the number of
? shares of Unique Logistics' Common Stock into which such share of Unique
Logistics' Series C Convertible Preferred Stock is convertible, taking into
account the effects of the Transactions in accordance with the certificate of
designation applicable to such Unique Logistics' Convertible Preferred Stock,
and (ii) the Common Exchange Ratio; and
each share of Unique Logistics' Series D Convertible Preferred Stock (other
than excluded shares and dissenting shares) will be cancelled and automatically
deemed for all purposes to represent the right to receive a number of shares of
the Company's Class A Common Stock equal to the product of (i) the number of
? shares of Unique Logistics' Common Stock into which such share of Company
Series D Convertible Preferred Stock is convertible, taking into account the
effects of the Transactions in accordance with the certificate of designation
applicable to such Unique Logistics' Convertible Preferred Stock, and (ii) the
Common Exchange Ratio.
Unique Logistics' stockholders will also have the opportunity to earn up to
1,250,000 additional shares of the Company's Class A Common Stock if (i) the
trading price of Company's Class A Common Stock exceeds $12.00 per share during
the seven-year period following the date that is sixty days after the date of
the closing (the "Closing") of the transactions contemplated by the Merger
Agreement (the "Transactions") or (ii) the Company or the Surviving Corporation
or any of its Subsidiaries' consummate a merger, consolidation, tender offer,
exchange offer or business combination or sale of all or substantially all of
its assets (each, a "Sale Transaction"), in which the fair value of the
consideration (including all forms of consideration, including contingent
consideration) payable in respect of each outstanding share of Company's Class A
Common Stock in such Sale Transaction equals or exceeds $12.00 per share (on a
fully diluted basis), subject to the terms of the Merger Agreement. Company
stockholders will also have the opportunity to earn 1,250,000 additional shares
of Company's Class A Common Stock if the trading price of the Company's Class A
Common Stock exceeds $15.00 per share in the same circumstances as above.
For additional information, refer to the Company's Current Report on Form 8-K,
as filed with the SEC on December 19, 2022.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through December 31, 2022 were
organizational activities and 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 initial Business Combination. We generate non-operating income
in the form of interest income on marketable securities held in the Trust
Account. We expect that we will incur increased 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 searching
for, and completing, a Business Combination.
For the year ended December 31, 2022, we had net income of approximately $11.1
million, which consists of income of approximately $9.0 million derived from the
change in fair value of warrant liabilities and interest earned on marketable
securities held in Trust Account of approximately $3.8 million, offset by
general and administrative expenses of approximately $1.2 million and provision
for income taxes of approximately $0.7 million.
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For the year ended December 31, 2021, we had net income of approximately $11.9
million, which consists of income of approximately $17.0 million derived from
the change in fair value of warrant liabilities and interest earned on
marketable securities held in Trust Account of approximately $0.03 million,
offset by general and administrative expenses of approximately $1.1 million and
transaction costs incurred in connection with the IPO of approximately $4.1
million.
Liquidity and Capital Resources
On January 20, 2021, we consummated the Initial Public Offering of 27,600,000
Units, at a price of $10.00 per Units, which included the full exercise by the
underwriters of their over-allotment option in the amount of 3,600,000 Units,
generating gross proceeds of $276,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 5,640,000 Private
Placement Warrants to the Sponsor at a price of $1.00 per Private Placement
Warrant generating gross proceeds of $5,640,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $276,000,000
was placed in the Trust Account, and we had $1,305,151 of cash held outside of
the Trust Account, after payment of costs related to the Initial Public
Offering, and available for working capital purposes.
For the year ended December 31, 2022, cash used in operating activities was
$1,504,835. Net income of $11,124,257 was affected by interest earned on
marketable securities held in Trust Account of $3,796,223 and change in fair
value of warrant liabilities of $9,249,600. Changes in operating assets and
liabilities provided $416,731 of cash for operating activities.
For the year ended December 31, 2021, cash used in operating activities was
$1,178,843. Net income of $11,891,223 was composed of interest earned on
marketable securities held in Trust Account of $26,092, change in fair value of
warrant liabilities of $17,043,600, transaction costs incurred in connection
with the IPO of $943,412, and a loss on initial issuance of private warrants of
$3,158,400. Changes in operating assets and liabilities used $102,186 of cash
for operating activities.
As of December 31, 2022, we had $19,376,793 in the trustee's cash operating
account, and $775,917 held in the Trust Account consisting of securities held in
a money market fund and government bonds that invests in United States
government treasury bills, bonds or notes 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, 2022, we had withdrawn $988,872 of interest earned
from Trust Account to pay taxes and $258,680,733 from Trust Account in
connection with the redemption of common stock. 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. To the extent that our capital stock is used
in whole or in part as consideration to effect a 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 Business Combination if the funds available to us outside of
the Trust Account were insufficient to cover such expenses.
As of December 31, 2022, we had cash of $67,944. 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, 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 may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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, 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 Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or
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because we become obligated to redeem a significant number of our public shares
upon consummation of our Business Combination, in which case we may issue
additional securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our Business
Combination. If we are unable to complete our Business Combination because we do
not have sufficient funds available to us, we will be forced to cease operations
and liquidate the Trust Account. In addition, following our Business
Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
Going Concern
As of December 31, 2022, the Company had $67,944 in its operating bank account,
$19,376,793 in the trustee's cash operating account, and $775,917 in money
market securities held in the Trust Account to be used for a Business
Combination, or to repurchase or redeem its stock in connection therewith and a
working capital deficit of $899,400, which excludes the permitted withdrawal
should the Company elect to withdraw from the Trust Account for franchise and
income taxes payable of $68,061. As of December 31, 2022, $3,796,223 of the
amount on deposit in the Trust Account represented interest income. Interest
income earned on the Trust Account is available to pay the Company's tax
obligations. As of December 31, 2022, $988,872 was withdrawn from the Trust
Account to pay the Company's tax obligations.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board Accounting Standards Update
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," management has determined that if the Company is unable to
complete a Business Combination by April 20, 2023 (the date that is 27 months
from the closing date of the IPO) (the "Amended Date") and on a monthly basis up
to three times from the Amended Date to July 20, 2023 (the date that is 30
months from the closing date of the IPO), then the Company will cease all
operations except for the purpose of liquidating. The date for mandatory
liquidation and subsequent dissolution coupled with the current liquidity raises
substantial doubt about the Company's ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after April 20, 2023. The Company
intends to complete a Business Combination before the mandatory liquidation
date. However, there can be no assurance that the Company will be able to
consummate any business combination by April 20, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2022. 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 described below, an agreement
to pay the Sponsor a monthly fee of $10,000 for office space, utilities and
secretarial, and administrative and support services. We began incurring these
fees on January 14, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per share, or
$9,660,000 in the aggregate. The deferred fee will become 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. Subject to the consummation of the proposed business combination, the
underwriters have agreed to reduce the amount of their deferred fees by
$6,016,800. As the waiver is solely subject to the consummation of the proposed
business combination, the Company did not alter the fee payable as the
probability of the transaction closing is not yet certain.
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
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liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and income and expenses during the period reported. Actual
results could materially differ from those estimates. We have not identified any
critical accounting policies.
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in
Accounting Standards Codification ("ASC") 815-40 under which the Warrants do not
meet the criteria for equity treatment and must be recorded as liabilities.
Accordingly, we classify the Warrants as liabilities at their fair value and
adjust the 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
are valued using the Black-Scholes Option Pricing Model. The Public Warrants for
periods where no observable traded price was available were valued using a
binomial/lattice model. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in ASC Topic 480, "Distinguishing Liabilities
from Equity." Shares of Class A common stock subject to mandatory redemption are
classified as a liability instrument and are 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, the Class A common stock
subject to possible redemption is presented as temporary equity, outside of the
stockholders' deficit section of our balance sheets.
Net Income per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding for the period. The Company has two
classes of shares, which are referred to as Class A common stock and Class B
common stock. Accretion associated with the redeemable shares of Class A common
stock is excluded from earnings per share as the redemption value approximates
fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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