The following discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this Annual Report
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on April 15, 2021. We were incorporated for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar
business combination with one or more businesses or entities.
On November 12, 2021, we consummated our initial public offering of 20,010,000
Units, including the issuance of 2,610,000 Units as a result of the
underwriters' exercise of their over-allotment option, at a purchase price of
$10.00 per Unit. Each Unit consists of one Class A ordinary share and one-half
of one redeemable warrant. Each whole warrant will entitle the holder to
purchase one Class A ordinary share at a price of $11.50 per share, subject to
adjustment. Each warrant will become exercisable 30 days after the completion of
the initial business combination and will expire five years after the completion
of the initial business combination, or earlier upon redemption or liquidation.
We have only 15 months (or within 18 months if we extend the period of time to
consummate the initial business combination in accordance with the terms
described in this Annual Report) from the closing of the initial public offering
to consummate the initial business combination. If we are unable to consummate
an initial business combination within 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 us to pay the
income taxes, if any, (less up to $100,000 of interest to pay dissolution
expenses) divided by the number of the then outstanding public shares, which
redemption will completely extinguish public shareholders' rights as
shareholders (including the right to receive further liquidation distributions,
if any); and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining shareholders and board of directors,
liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.
Since completing our initial public offering, we have reviewed, and continue to
review, a number of opportunities to enter into a business combination with an
operating business, including entering into discussions with potential target
businesses, but we are not able to determine at this time whether we will
complete a business combination with any of the target businesses that we have
reviewed or had discussions with or with any other target business. Although we
may pursue an acquisition in any industry or geography, we intend to capitalize
on the ability of our management team to identify, acquire and operate a
business that may provide opportunities for attractive risk-adjusted returns. We
cannot assure you that our plans to complete our initial business combination
will be successful.
Results of Operations
Our entire activity from April 15, 2021 (inception) up to December 31, 2021 was
in preparation for our initial public offering. We will not generate any
operating revenues until the closing and completion of our initial business
combination, at the earliest.
For the period from April 15, 2021 (inception) through December 31, 2021, we had
net income of $5,194,932, which consisted of unrealized income on changes in
fair value of warrant liabilities of $6,913,639 and interest and dividend income
of $9,409, offset by formation and operating costs of $471,666, stock based
compensation of $694,109 and transaction costs incurred in connection with
warrants of $562,341.
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Liquidity, Capital Resources and Management's Plan
As of December 31, 2021, we had $689,927 in cash and working capital of
$920,397.
Our liquidity needs up to December 31, 2021 had been satisfied through a payment
from our sponsor of $25,000 for the founder shares to cover certain offering
costs, the loan under an unsecured promissory note from our sponsor of $200,000,
which had been repaid on November 22, 2021, and due to related party of
$256,192. On November 12, 2021, we commenced the initial public offering of
20,010,000 units at $10.00 per unit and consummated the private placement of
10,399,000 private placement warrants to our sponsor, at a price of $1.00 per
private placement warrant in a private placement, then $2,369,957 of the
proceeds was deposited in the operating bank account to be used as our working
capital.
In addition, in order to 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, provide the working
capital loans, as defined below. As of December 31, 2021, there were no amounts
outstanding under any working capital loans.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until February 12, 2023 (absent
any extensions of such period by the Sponsor, pursuant to the terms described
above) to consummate the proposed Business Combination. It is uncertain that the
Company will be able to consummate the proposed Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution of the Company. Management has
determined that the mandatory liquidation, should a business combination not
occur, and potential subsequent dissolution, 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 February 12, 2023. The Company intends to complete the
proposed 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 February 12, 2023.
Critical Accounting Policies and Estimates
The preparation of the financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reporting period. Actual results could differ from those estimates. We have
identified the following as our critical accounting policies and estimates:
Investment Held in Trust Account
At December 31, 2021, the assets held in the trust account were held in cash and
U.S. Treasury securities. We classify our United States Treasury securities as
held-to-maturity in accordance with Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") Topic 320 "Investments-Debt
and Equity Securities." Held-to-maturity securities are those securities which
we have the ability and intent to hold until maturity. Held-to-maturity treasury
securities are recorded at amortized cost and adjusted for the amortization or
accretion of premiums or discounts.
Net Income Per Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Earnings and losses are shared pro rata between the
two classes of shares. The 20,404,000 potential common shares for outstanding
warrants to purchase our shares were excluded from diluted earnings per share
for the period from April 15, 2021 (Inception) to December 31, 2021 because the
warrants are contingently exercisable, and the contingencies have not yet been
met. As a result, diluted net income per common share is the same as basic net
income per common share for the periods.
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Warrant Liabilities
We accounted for the 20,404,000 warrants issued in connection with the initial
public offering (the 10,005,000 public warrants and the 10,399,000 private
placement warrants, assuming the underwriters' over-allotment option is not
exercised) in accordance with the guidance contained in ASC 815-40. Such
guidance provides that because the warrants do not meet the criteria for equity
treatment thereunder, each warrant must be recorded as a liability. Accordingly,
we classified each warrant as a liability at its fair value. This liability is
subject to re-measurement at each balance sheet date. With each such
re-measurement, the warrant liabilities will be adjusted to fair value, with the
change in fair value recognized in our statement of operations.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as a
liability instrument and measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares 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, ordinary shares are classified as
shareholders' equity. Our Class A ordinary shares feature certain redemption
rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, 20,010,000 Class A ordinary
shares subject to possible redemption are presented at redemption value as
temporary equity, outside of the shareholders' deficit section of our balance
sheet.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period.
Offering Costs associated with the Initial Public Offering
Offering costs consist of underwriting, legal, accounting and other expenses
incurred through the balance sheet date that are directly related to the initial
public offering. We comply with the requirements of the ASC 340-10-S99-1 and SEC
Staff Accounting Bulletin ("SAB") Topic 5A-"Expenses of Offering". Offering
costs are allocated to the separable financial instruments issued in the initial
public offering based on a relative fair value basis compared to total proceeds
received. Offering costs associated with warrant liabilities were expensed, and
offering costs associated with the Class A ordinary shares were charged to
temporary equity. We incurred offering costs amounting to $11,816,317 as a
result of our initial public offering consisting of $4,002,000 of underwriting
commissions, $7,003,500 of deferred underwriting commissions, and $810,817 of
other offering costs. We recorded $11,253,976 of offering costs as a reduction
of temporary equity in connection with the Class A ordinary shares included in
the Units. We immediately expensed $562,341 of offering costs in connection with
the public warrants and private placement warrants that were classified as
liabilities.
Recent Accounting Pronouncements
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, 2024 and should be applied on a full or
modified retrospective basis. We are currently evaluating the impact of the ASU
on the financial position, results of operations and cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on our financial statements.
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Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
Registration and Shareholder Rights
The holders of the founder shares, private placement warrants and warrants that
may be issued upon conversion of Extension Loans and working capital loans (and
any Class A ordinary shares issuable upon the exercise of the private placement
warrants and warrants that may be issued upon conversion of Extension Loans and
Working Capital Loans) will be entitled to registration rights pursuant to a
registration and shareholder rights agreement to be signed prior to or on the
effective date of the initial public offering. The holders of these securities
are entitled to certain demand and "piggy back" registration rights. We will
bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriters Agreement
On November 12, 2021, we paid a cash underwriting discount of 2.0% per Unit, or
$4,002,000. Upon completion of the initial business combination, $7,003,500,
which constitutes the underwriters' deferred commissions will be paid to the
underwriters from the funds held in the trust account, and the remaining funds,
less amounts used to pay redeeming shareholders, will be released to us and can
be used to pay all or a portion of the purchase price of the business or
businesses with which the initial business combination occurs or for general
corporate purposes, including payment of principal or interest on indebtedness
incurred in connection with the initial business combination, to fund the
purchases of other companies or for working capital. The underwriters will not
be entitled to any interest accrued on the deferred underwriting discounts and
commissions.
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