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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
November 9, 2020, for the purpose of effecting a Business Combination. We intend
to effectuate our Business Combination using cash from the proceeds of our
Public Offering and the sale of the Private Placement Warrants, our capital
stock, debt or a combination of cash, stock and debt.
On November 9, 2020, our Sponsor purchased an aggregate of 7,187,500 Founder
Shares of our Class B common stock for an aggregate purchase price of $25,000 or
approximately $0.003 per share. On November 19, 2020, we effectuated a 0.8-for-1
reverse split of the Founder Shares, resulting in an aggregate outstanding
amount of 5,750,000 Founder Shares. Our Sponsor transferred an aggregate of
125,000 of its Founder Shares to the Initial Stockholders and a Consultant.
On January 20, 2021, we consummated our Public Offering of 23,000,000 Units of
the Company, including 3,000,000 Units issued pursuant to the exercise of the
underwriter's over-allotment option. Each Unit consists of one share of Class A
common stock and one-third of one public Warrant, each whole Warrant entitling
the holder thereof to purchase one share of Class A common stock at an exercise
price of $11.50 per share of Class A common stock. The Units were sold at a
price of $10.00 per share, generating gross proceeds to us of $230,000,000.
Simultaneously with the IPO Closing Date, we completed the private sale of an
aggregate of 2,840,000 warrants to our Sponsor at a price of $1.50 per Private
Placement Warrant, each exercisable to purchase one share of Class A common
stock at $11.50 per share, generating gross proceeds to us of $4,260,000. The
Private Placement Warrants have terms and provisions that are identical to those
of the public Warrants sold as part of the Units in the Public Offering, except
that the Private Placement Warrants may be physical (cash) or net share
(cashless) settled and are not redeemable so long as they are held by the
Sponsor or its permitted transferees. The sale of the Private Placement Warrants
was made pursuant to the exemption from registration contained in
Section 4(a)(2) of the Securities Act.
On the IPO Closing Date, $230,000,000 of the gross proceeds from the Public
Offering and the sale of the Private Placement Warrants were deposited in the
Trust Account with the Trustee. Of the $4,260,000 held outside of the Trust
Account, $2,760,000 was used to pay underwriting discounts and commissions,
$458,681 was used to repay notes payable to our Sponsor and advances from our
Sponsor and the balance was available to pay accrued offering and formation
costs, business, legal and accounting due diligence on prospective acquisitions
and continuing general and administrative expenses. Funds held in the Trust
Account have been invested only in U.S. government treasury bills with a
maturity of one hundred and eighty-five (185) days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act of 1940, as amended, that invest only in direct U.S. government obligations.
Funds will remain in the Trust Account until the earliest of (i) the completion
of the Business Combination; (ii) the redemption of any shares of Class A common
stock properly tendered in connection with a stockholder vote to amend our
amended and restated certificate of incorporation to modify the substance or
timing of our obligation to redeem 100% of such shares of Class A common stock
if we do not complete a Business Combination within 24 months from the IPO
Closing Date and (iii) the redemption of 100% of the shares of Class A common
stock if we are unable to complete a Business Combination within 24 months from
the IPO Closing Date (subject to applicable law).
On March 8, 2021, we announced that the holders of our Units may elect to
separately trade the Class A common stock and Warrants included in the Units on
the NASDAQ under the symbols "GNAC" and "GNACW," respectively. Those Units not
separated will continue to trade on the NASDAQ under the symbol "GNACU."
We may pursue a target business in any stage of its corporate evolution or in
any industry, sector or geographic region.
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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.
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, 2021 were
organizational activities and those necessary to prepare for our Public
Offering, described below. 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 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, 2021, we had net income of $6,619,992, which
consists of $9,015,866 million derived from changes in fair value of warrant
liabilities, $270,990 derived from the change in fair value of the convertible
promissory note and interest earned on marketable securities held in Trust
Account of $21,427, offset by transaction costs related to warrant liabilities
of $609,099 operating costs of $2,688,291.
For the period from November 9, 2020 (inception) through December 31, 2020, we
had a net loss of $1,282, which consisted of formation expenses.
Liquidity and Capital Resources
On January 20, 2021, the Company consummated the Public Offering of 23,000,000
Units, which includes the full exercise by underwriter of its over-allotment
option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross
proceeds of $230,000,000. Simultaneously with the closing of the Public
Offering, the Company consummated the sale of 2,840,000 Private Placement
Warrants at a price of $1.50 per Private Placement Warrant in a private
placement to the Sponsor, generating gross proceeds of $4,260,000.
Following the Public Offering, the full exercise of the over-allotment option,
and the sale of the Private Placement Warrants, a total of $230,000,000 was
placed in the Trust Account. We incurred $13,156,274 in transaction costs,
including $2,760,000 of underwriting fees, net of reimbursement, $9,890,000 of
deferred underwriting fees and $506,274 of other offering costs.
For the year ended December 31, 2021, net cash used in operating activities was
$2,787,283. Net income of $6,619,992 was affected by items such as, change in
fair value of warrant liabilities of $9,015,866, change in fair value of
convertible promissory note of $270,990, interest earned on marketable
securities held in trust account of $21,427, and transaction costs associated
with the Public Offering of $609,099. Changes in operating assets and
liabilities used $708,091 of cash from operating activities.
At December 31, 2021, we had cash held in the Trust Account of $230,021,427. We
are using substantially all of the funds held in the trust account, including
any amounts representing interest earned on the trust account (less deferred
underwriting commissions and income taxes payable), to complete our business
combination. To the extent that our share capital 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, 2021, we had cash of $69,053 held outside of the Trust Account.
We are using 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
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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
of the post-Business Combination entity, at a price of $1.50 per warrant. 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 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.
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 described below.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$9,890,000. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
Additionally, the deferred fee includes an additional $0.08 per unit, or
$1,840,000 in the aggregate that was due in December 2021. In December 2021, the
Company paid $1,825,600 to the underwriters. The fees were paid by the Sponsor
and are included as a liability, due to the Sponsor on the balance sheet.
Pursuant to an agreement between the Company and its attorneys, certain fees
have been deferred and will become payable only if the Company consummates a
Business Combination. If a Business Combination does not occur, the Company will
not be required to pay these contingent fees. As of the closing of the Public
Offering, the amount of these contingent fees was approximately $342,690. There
can be no assurances that the Company will complete a Business Combination.
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, 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.
Class A Common Stock Subject to Possible Redemption
We account for our 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, if any,
are classified as a liability instrument and are measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not
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solely within our control) is classified as temporary equity. At all other
times, common stock is 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,
shares of Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' (deficit) equity section of our
balance sheets.
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC
815-40-15-7D and 7F 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 and
the public Warrants for periods where no observable traded price was available
are valued using a Monte Carlo simulation. 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.
Net Income (Loss) Per Common Share
The Company has two classes of shares, which are referred to as Class A common
stock and Class B common stock (the "Common Stock"). Earnings and losses are
shared pro rata between the two classes of shares. Private and public warrants
to purchase 10,506,667 shares of Common Stock at $11.50 per share were issued on
January 20, 2021. No warrants were exercised during the year ended December 31,
2021 and for the period from November 9, 2020 (inception) through December 31,
2020. The 10,506,667 potential common shares for outstanding warrants to
purchase the Company's stock were excluded from diluted earnings per share in
2021 as the exercise price of the warrants was less than the average market
price for the period. The deemed dividend associated with the redeemable shares
of Class A common stock is included in income (loss) per common share in the IPO
quarter and year to date calculation in which the IPO occurred. As a result,
diluted net income (loss) per common share is the same as basic net loss per
common share for the period.
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 is currently assessing the impact, if any, that ASU
2020-06 would have on its financial position, results of operations or cash
flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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