The statements in the discussion and analysis regarding industry outlook, our
expectations regarding the performance of our business and the forward-looking
statements are subject to numerous risks and uncertainties, including, but not
limited to, the risks and uncertainties described in "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements." Our actual results may
differ materially from those contained in or implied by any forward-looking
statements. You should read the following discussion together with the sections
entitled "Risk Factors"," "Business", the audited financial statements,
including the related notes, appearing elsewhere in this Annual Report, and the
preliminary prospectus/proxy statement to be included in a Registration
Statement on Form F-4 that MNG will file with the SEC relating to the proposed
business combination with MNG. All references to years, unless otherwise noted,
refer to our fiscal years, which end on December 31.
Overview
We are a Delaware corporation structured as a blank check company formed on
August 24, 2020, for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or 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 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 raise capital or to
complete our initial business combination will be successful.
On December 20, 2022, we held a special meeting at which our stockholders
approved the Charter Amendment and the Trust Amendment. The Charter Amendment
and the Trust Amendment extend the date by which we must consummate our initial
business combination to the Extended Date.
In connection with the stockholder vote to approve the Extension, the holders of
30,291,421 shares of Class A Common Stock properly exercised their right to
redeem their shares for cash at a redemption price of approximately $10.11 per
share, for an aggregate redemption amount of approximately $306.3 million,
leaving approximately $42.6 million in the trust account immediately following
the redemptions.
Proposed Business Combination
On December 6, 2022, we entered into the Business Combination Agreement with
MNG, HoldCo, IntermediateCo, FinCo, and Merger Sub. If the Business Combination
Agreement and the transactions contemplated thereby are adopted and approved by
our stockholders, and the Business Combination is subsequently completed, Merger
Sub will merge with and into the Company, with the Company continuing as the
surviving company after the Merger, as a result of which the Company will become
an indirect, wholly-owned subsidiary of MNG.
The Proposed Business Combination and the Business Combination Agreement are
more fully described in Note 1 to the financial statements included in Item 8 of
this Annual Report.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2022 were organizational activities,
those necessary to prepare for the initial public offering, described below,
and, after our initial public offering, identifying a target company for a
business combination and, after signing the Business Combination Agreement,
completing the Proposed 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, along with non-operating income or expense
related to the change in fair value of the warrant liabilities and the Sponsor
Convertible Promissory Note. 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.
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For the year ended December 31, 2022, we had a net income of $13,802,503, which
consists of interest earned on marketable securities held in the trust account
of $4,759,341, interest earned on the operating bank account of $15, partial
reversal of transaction costs incurred in connection with IPO of $350,123, and
change in fair value of warrant liabilities of $12,536,310, partially offset by
formation and operational costs of $2,893,920, change in fair value of
convertible promissory note - related party of $11,080, unrealized loss on
marketable securities held in the trust account of $122, and provision for
income taxes of $938,164.
For the year ended December 31, 2021, we had a net income of $19,323,177, which
consists of interest earned on marketable securities held in the trust account
of $155,704, unrealized gain on marketable securities held in the trust account
of $5,765, change in fair value of convertible promissory note - related party
of $60,511 and change in fair value of warrant liabilities of $20,935,690,
partially offset by formation and operational costs of $1,834,493.
Liquidity and Capital Resources
On December 22, 2020, we consummated the initial public offering of 34,500,000
units, at $10.00 per unit, which included the full exercise by the underwriters
of their over-allotment option in the amount of 4,500,000 units, generating
gross proceeds of $345,000,000. Simultaneously with the closing of the initial
public offering and the full over-allotment option, we consummated the sale of
8,900,000 private placement warrants to the sponsor at a price of $1.00 per
warrant, generating gross proceeds of $8,900,000.
Following the initial public offering, the full exercise of the over-allotment
option, and the sale of the private placement warrants, a total of $345,000,000
was placed in the trust account. Transaction costs amounted to $19,455,706,
consisting of $6,900,000 of underwriting fees, net of reimbursement, $12,075,000
of deferred underwriting fees and $480,706 of other offering costs.
On December 6, 2022, the Representatives in our initial public offering, agreed,
on behalf of the underwriters, to a reduction of their deferred underwriting fee
of up to $0.35 per unit. Pursuant to an amendment to the underwriting agreement,
the deferred underwriting fee from any remaining funds on deposit in the trust
account and/or any other funds available in connection with the Business
Combination, which will be payable at closing of the Business Combination is as
follows: (i) $5,000,000 of the deferred underwriting fee (the "Minimum Deferred
Underwriting Fee") will be due and payable in cash to the underwriters, upon the
closing of the Business Combination irrespective of the amount of Available Cash
(as defined in the Business Combination Agreement); (ii) if the Available Cash
is equal to or greater than $30.0 million and up to $100.0 million, an
additional amount equal to up to $4.0 million of the deferred underwriting fee
will be due and payable in cash to the underwriters upon the closing of the
Business Combination, which additional amount will be linearly determined in
relation to the amount of the Available Cash and will be at least $0 and up to
$4.0 million; and (iii) if the Available Cash is equal to or greater than $100.0
million and up to $345.0 million, an additional amount of up to $3,075,000 of
the deferred underwriting fee will be due and payable in cash to the
underwriters upon the closing of the Business Combination, which additional
amount will be linearly determined in relation to the amount of the Available
Cash and will be at least $0 and up to $3,075,000 (such additional amounts in
clauses (ii) and (iii) being referred to herein as an "Incremental Deferred
Underwriting Commission," and together with the Minimum Deferred Underwriting
Fee, the "Deferred Underwriting Fee"). As a result of the amendment, the
reduction in deferred fees was split on a pro rata basis between additional
paid-in capital and other income based upon the original amount of the deferred
underwriting fee's allocation to the liability-classified instruments in the
initial public offering. Therefore, the deferred underwriting fee was reduced by
$6,365,867, of which $350,123 is shown in the condensed statement of operations
as the partial reversal of transaction costs incurred in connection with IPO and
$6,015,744 is charged to additional paid-in capital in the statement of
stockholders' deficit. As a result of the reduction, the outstanding deferred
underwriting fee payable was reduced to $5,709,133.
For the year ended December 31, 2022, net cash used in operating activities was
$1,445,811. Net income of $13,802,503 was affected by the change in fair value
of warrant liabilities of $12,536,310, partial reversal of transaction costs
incurred in connection with IPO of $350,123, change in fair value of convertible
promissory note - related party of $11,080, interest earned on marketable
securities held in trust account of $4,759,341 and an unrealized gain on
marketable securities held in trust account of $122. Changes in operating assets
and liabilities provided $2,386,258 of cash from operating activities primarily
due to a decrease in prepaid expenses and an increase in accounts payable and
accrued expenses and income taxes payable.
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For the year ended December 31, 2021, net cash used in operating activities was
$1,299,101. Net income of $19,323,177 was affected by the change in fair value
of warrant liabilities of $20,935,690, change in fair value of convertible
promissory note - related party of $60,511, interest earned on marketable
securities held in trust account of $155,704 and an unrealized gain on
marketable securities held in trust account of $5,765. Changes in operating
assets and liabilities provided $535,392 of cash from operating activities.
For the year ended December 31, 2022, net cash used in financing activities was
$305,909,116 as a result of the drawdowns on the Sponsor Convertible Promissory
Note (defined below) and redemption of Class A common stock in connection with
the Extension vote.
For the year ended December 31, 2021, net cash provided by financing activities
was $320,111 as a result of the drawdowns on the Sponsor Convertible Promissory
Note.
At December 31, 2022 we had cash held in the trust account of $42,563,076.
Interest income on the balance in the trust account may be used by us to pay
taxes. As of December 31, 2022, net cash provided by investing activities was
$307,366,982 as a result of permitted withdrawals of interest earned on the
trust account to pay our franchise and income taxes and the redemption of
Class A common stock amounting to $306,349,500 in connection with the Extension
vote.
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
deferred underwriting commissions, franchise taxes, and 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.
At December 31, 2022, we had cash of $23,935 outside of the trust account,
accounts payable and accrued expenses of $2,176,154, and income taxes payable of
$365,164. We intend to use the funds held outside the trust account in addition
to the remaining amount unborrowed on the Sponsor Convertible Promissory Note of
$239,505 primarily to complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, the sponsor or an affiliate of the
sponsor or certain of our directors and officers may, but are not obligated to,
lend us funds as may be required. If we complete a business combination, we
would repay such lent 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 lent amounts but no proceeds from our trust account would
be used for such repayment. On September 13, 2021, our sponsor agreed to lend us
an aggregate of up to $1,000,000 pursuant to a convertible promissory note for
working capital purposes (the "Sponsor Convertible Promissory Note"). At
December 31, 2022, there was $760,495 of cumulative cash advanced under the
Sponsor Convertible Promissory Note. The Sponsor Convertible Promissory Note was
valued using the fair value method. The change in the fair value of the note
recorded in the statements of operations for the year ended December 31, 2022,
was $11,080, resulting in a fair value of the Sponsor Convertible Promissory
Note of $482,600. For the year ended December 31, 2021, the change in fair value
of the note recorded in the statements of operations was $60,511, resulting in a
fair value of the Sponsor Convertible Promissory Note of $259,600.
Going Concern
As of December 31, 2022, we had $23,935 in our operating bank account,
$42,563,076 in cash held in the trust account to be used for a business
combination, or to repurchase or redeem our stock in connection therewith, and a
working capital deficit of $2,020,661, which excludes the permitted withdrawal
should we elect to withdraw from the trust account for franchise taxes payable
of $40,050 or income taxes payable of $365,164. As of December 31, 2022,
$3,912,576 of the amount on deposit in the trust account represented interest
income, $122 of which was recorded as an unrealized loss. Interest income earned
on the trust account is available to pay our tax obligations. Through
December 31, 2022, $1,017,481 was withdrawn from the trust account to pay our
tax obligations.
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We may raise additional capital through loans or additional investments from the
sponsor or an affiliate of the sponsor or certain of our directors and officers.
The sponsor may but is not obligated to (except as described below), lend the
Company funds, from time to time in whatever amounts it deems reasonable in its
sole discretion, to meet our working capital needs. As discussed above, on
September 13, 2021, the sponsor agreed to lend us up to an aggregate of
$1,000,000 for working capital purposes pursuant to the Sponsor Convertible
Promissory Note. We had drawn an aggregate of $760,495 under the convertible
promissory note as of December 31, 2022, which includes drawdowns of $120,000 on
September 13, 2021, $114,311 on October 5, 2021, $70,800 on October 26, 2021,
$15,000 on November 29, 2021, $150,000 on January 31, 2022, $150,000 on
March 31, 2022, $27,384 on November 9, 2022, and $113,000 on December 27, 2022.
There can be no assurance that we will be able to obtain additional financing
prior to completing a business combination, however. Moreover, we may need to
obtain additional financing either to complete our business combination or
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 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 the
Business Combination and reducing overhead expenses. We cannot provide any
assurance that new financing will be available to us on commercially acceptable
terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with ASC Subtopic 205-40, Presentation of Financial Statements -
Going Concern, pursuant to our amended and restated certificate of
incorporation, as amended, we have until June 22, 2023, or such earlier date as
determined by our board of directors, to consummate a business combination. If a
business combination is not consummated by June 22, 2023, there will be a
mandatory liquidation and subsequent dissolution of the Company after June 22,
2023. Although we intend to consummate a business combination on or before
June 22, 2023, it is uncertain that we will be able to consummate a business
combination by June 22, 2023. This, as well as our liquidity condition, raise
substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after June 22, 2023.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2022.
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 an
affiliate of our sponsor a monthly fee of $10,000 for certain administrative,
research, transaction and other support services. We began incurring these fees
on December 22, 2020 and will continue to incur these fees monthly until the
earlier of the completion of the business combination and our liquidation. In
addition, for the year ended December 31, 2022, we reimbursed such affiliate of
the Sponsor for certain costs incurred on our behalf in the amount of $120,000
which is included in general and administrative expenses in the accompanying
statement of operations.
The underwriters are entitled to the Deferred Underwriting Fee. The Deferred
Underwriting 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, as amended. We
entered into an amendment to the underwriting agreement that reduced the total
deferred underwriting fee as of December 31, 2022 (See Note 6).
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Critical Accounting Policies
We prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America. The preparation of financial
statements also requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, costs and expenses and related
disclosures. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. Actual
results could differ significantly from the estimates made by our management.
Our critical accounting policies are presented below:
Warrant Liabilities and Convertible Note - Related Party
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to our
own Class A common stock, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the
time of warrant issuance and as of each subsequent quarterly period end date
while the warrants are outstanding. The Company accounts for its Sponsor
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. The
Company has made such election for its Sponsor Convertible Promissory Note.
Using fair value option, the Sponsor 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 Sponsor Convertible
Promissory Note in the statements of operations. The fair value of the option to
convert into private placement warrants was valued utilizing the closed-form
model.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations.
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 Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common
stock subject to mandatory redemption is classified as a liability instrument
and is 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, all
of 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 (Loss) per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per 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. We apply the two-class method in calculating income (loss) per
common share. Re-measurement associated with the redeemable shares of Class A
common stock is excluded from income (loss) per common share as the redemption
value approximates fair value.
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The calculation of diluted income (loss) per common share does not consider the
effect of the warrants issued in connection with the (i) initial public
offering, and (ii) the private placement since the exercise of the warrants is
contingent upon the occurrence of future events, and (iii) any warrants that
could be acquired through conversion of convertible debt. As of December 31,
2022, there are currently 4,208,579 shares of Class A common stock in the
aggregate which does not include the warrants that could be issued as a result
of the conversion option in the Sponsor Convertible Promissory Note. As of
December 31, 2022 and 2021, we did not have any dilutive securities or other
contracts that could, potentially, be exercised or converted into common stock
and then share in the earnings of the Company. As a result, diluted net income
(loss) per common share is the same as basic net income (loss) per common share
for the periods presented.
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