References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Banyan Acquisition Corporation. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Banyan Acquisition Sponsor LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Our
forward-looking statements include, but are not limited to, statements regarding
our or our management team's expectations, hopes, beliefs, intentions or
strategies regarding the future. In addition, any statements that refer to
projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements, including that the
conditions of the Proposed Business Combination are not satisfied. For
information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements,
please refer to the Risk Factors section of the Company's Annual Report filed on
Form 10-K as filed with the U.S. Securities and Exchange Commission (the "SEC")
on March 31, 2022. The Company's securities filings can be accessed on the EDGAR
section of the SEC's website at www.sec.gov. Except as expressly required by
applicable securities law, the Company disclaims any intention or obligation to
update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation on March 10,
2021 and formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses ("Initial Business Combination"). We
intend to effectuate our Initial Business Combination using cash from the
proceeds of the Initial Public Offering and the sale of the Private Placement
Warrants, the proceeds of the sale of our shares in connection with our Initial
Business Combination (pursuant to forward purchase agreements or backstop
agreements we may enter into or otherwise), shares issued to the owners of the
target, debt issued to bank or other lenders or the owners of the target, or a
combination of the foregoing or other sources.
As indicated in the accompanying financial statements, at June 30, 2022 we had
$704,508 in cash and working capital of approximately $671,021. Further, we
expect to continue to incur significant costs in the pursuit of our Initial
Business Combination. We cannot assure our stockholders that our plans to
complete an Initial 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 March 10, 2021 (inception) through June 30, 2022 were
organizational activities and those related to our intent to effectuate an
Initial Business Combination. We do not expect to generate any operating
revenues until after completion of our Initial Business Combination. We will
generate non-operating income in the form of interest income on the cash and
cash equivalents held in the Trust Account. No material adverse change has
occurred since the date of our audited financial statements. We expect to
continue to 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 in connection with searching for, and completing, an Initial
Business Combination.
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For the three months ended June 30, 2022, we had net income of $1,450,175, which
consisted of $254,963 in expenses, a $38,227 unrealized loss on short term
investments held in the trust account, and a $108,421 provision for income
taxes, offset by a $1,459,707 gain on the change in the fair value of warrant
liabilities and $392,079 of interest income.
For the six months ended June 30, 2022, we had net income of $10,892,813, which
consisted of $1,178,478 in expenses, a $38,227 unrealized loss on short term
investments held in the trust account, and a $108,421 provision for income
taxes, offset by a $11,760,463 gain on the change in the fair value of warrant
liabilities and $457,476 of interest income.
Liquidity and Capital Resources
As of June 30, 2022, we had cash of $704,508. Until the consummation of the
Initial Public Offering, our only source of liquidity was an initial purchase of
common stock by the Sponsor and loans from our Sponsor.
On January 24, 2022, we consummated our Initial Public Offering of 24,150,000
Units, including the issuance of 3,150,000 Units as a result of the
underwriters' exercise of their over-allotment option in full. Each Unit sold
consisted of one share of Class A common stock and one-half of one redeemable
Warrant, with each whole Warrant entitling the holder thereof to purchase one
share of Class A common stock at a price of $11.50 per share, subject to
adjustment. The Units were sold at an offering price of $10.00 per Unit,
generating gross proceeds of $241,500,000 which is further described in Note 3
of the financial statements accompanying this Annual Report. Simultaneously with
the closing of our Initial Public Offering, we completed the private placement
of 11,910,000 Private Placement Warrants to the Sponsor, BTIG and I-Bankers,
including 1,260,000 Private Placement Warrants as a result of the underwriters'
exercise of their over-allotment option in full, at a purchase price of $1.00
per Private Placement Warrant, generating total proceeds to us of $11,910,000,
which is further described in Note 4 of the financial statements accompanying
this Annual Report.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $246,330,000
was placed in the Trust Account, comprised of $237,720,000 of the proceeds from
the Initial Public Offering (which amount includes $9,660,000 of the deferred
underwriting discount payable upon consummation of our Initial Business
Combination) and $8,610,000 of the proceeds of the sale of the Private Placement
Warrants.
As of June 30, 2022, we had treasury securities held in the Trust Account of
$246,749,249 (including approximately $457,476 of interest income and $38,227 of
unrealized loss on 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 June 30, 2022, 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 (which
interest shall be net of taxes payable thereon and excluding deferred
underwriting commissions) to complete our Initial Business Combination. We may
withdraw interest to pay taxes, and we expect the only taxes payable by us out
of the funds in the Trust Account will be related to income and franchise taxes,
which we expect the interest earned on the amount in the Trust Account will be
sufficient to pay. To the extent that shares of our common stock or debt is
used, in whole or in part, as consideration to complete our Initial 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.
As of June 30, 2022, we had available to us $704,508 of cash held outside the
Trust Account. We intend to use these funds 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,
structure and negotiate and complete a business combination, and to pay taxes to
the extent the interest earned on the Trust Account is not sufficient to pay our
taxes.
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We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our Initial Business
Combination, other than any funds available from loans from our Sponsor, its
affiliates or members of our management team. However, if our estimates of the
costs of identifying a target business, undertaking in-depth due diligence and
negotiating an Initial 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 Initial Business Combination. In order to fund working
capital deficiencies or finance transaction costs in connection with an intended
Initial Business Combination, our Sponsor or an affiliate of our Sponsor or
certain of our directors and officers may, but are not obligated to, loan us
funds as may be required. If we complete our Initial Business Combination, we
may repay such loaned amounts out of the proceeds of the Trust Account released
to us. Otherwise, such loans may be repaid only out of funds held outside the
Trust Account. In the event that our Initial 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 to repay such loaned amounts. Up to $1,800,000 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.
The terms of such loans, if any, have not been determined and no written
agreements exist with respect to such loans. Prior to the completion of our
Initial Business Combination, we do not expect to seek loans from parties other
than our Sponsor or an affiliate of our Sponsor as we do not believe third
parties will be willing to loan such funds and provide a waiver against any and
all rights to seek access to funds in our Trust Account.
Additionally, we may need to obtain additional financing either to complete our
Initial Business Combination or because we become obligated to redeem a
significant number of our public shares upon completion of our Initial Business
Combination, in which case we may issue additional securities or incur debt in
connection with such business combination. If we have not consummated our
Initial Business Combination within the required time period because we do not
have sufficient funds available to us, we will be forced to cease operations and
liquidate the Trust Account.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 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 an agreement to pay an affiliate
of our Sponsor a monthly fee of $10,000 for office space, operational support
and secretarial and administrative services. We became contractually obligated
to pay these fees on January 19, 2022 and will continue to be contractually
obligated to pay these fees monthly until the earlier of the completion of the
Initial Business Combination and our liquidation. For the three and six months
ended June 30, 2022, the Sponsor waived its right to receive such fees from the
Company.
The underwriters are entitled to a deferred fee of $0.40 per Unit, 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 an
Initial Business Combination and certain other conditions are met.
Critical Accounting Policies
The preparation of condensed 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. We have not identified any critical accounting policies and
estimates.
Warrant Liability
The Company expects to account for warrants for the Company's common stock that
are not indexed to its own shares as liabilities at fair value on the balance
sheet once issued. The warrants are subject to remeasurement at each balance
sheet date and any change in fair value is recognized as a component of other
income (expense), net on the statement of operations. The Company will continue
to adjust the liability for changes in fair value until the earlier of the
exercise or expiration of the common stock warrants. At that time, the portion
of the warrant liability related to the common stock warrants will be
reclassified to additional paid-in capital.
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Class A Common Stock Subject to Possible Redemption
The Company will account for its common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) will be
classified as a liability instrument and will be measured at fair value.
Conditionally redeemable common stock (including common stock 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 the
Company's control) is classified as temporary equity. At all other times, common
stock is classified as stockholders' equity. The Company's Class A common stock
includes certain redemption rights that are considered to be outside of the
Company's control and subject to the occurrence of uncertain future events. As
of June 30, 2022 and December 31, 2021, there were 24,150,000 and zero shares of
Class A common stock subject to possible redemption issued or outstanding,
respectively.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable shares of common stock to equal the
redemption value at the end of each reporting period. Such changes are reflected
in additional paid-in capital, or in the absence of additional capital, in
accumulated deficit.
Net Income Per Share of Common Stock
Net income per share of common stock is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
Share of common stock subject to possible redemption at June 30, 2022, which are
not currently redeemable and are not redeemable at fair value, have been
excluded from the calculation of basic net income per share of common stock
since such shares, if redeemed, only participate in their pro rata share of the
Trust Account earnings. The Company has not included the Public Warrants and the
Private Placement Warrants in the calculation of diluted loss per share, since
the exercise of the warrants is contingent upon the occurrence of future events
and the inclusion of such warrants would be anti-dilutive. As a result, diluted
net income per share of common stock is the same as basic net income per share
of common stock for the periods presented.
The Company's statement of operations includes a presentation of net income per
share of common stock subject to possible redemption and allocates the net
income into the two classes of shares in calculating net income per common
stock, basic and diluted. For redeemable Class A common stock, net income per
share of common stock is calculated by dividing the net income by the weighted
average number of shares of Class A common stock subject to possible redemption
outstanding since original issuance. For non-redeemable shares of Class B common
stock, net income per share is calculated by dividing the net income by the
weighted average number of shares of non-redeemable Class B common stock
outstanding for the period. Non-redeemable Class B common stock includes the
Founder Shares, as these shares do not have any redemption features and do not
participate in the income earned on the Trust Account. As of June 30, 2022, the
Company did not have any dilutive securities or other contracts that could,
potentially, be exercised or converted into shares of common stock and then
share in the earnings of the Company.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board issued ASU No. 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): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU
2020-06"), which simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. ASU 2020-06 removes certain
settlement conditions that are required for equity contracts to qualify for the
derivative scope exception and it also simplifies the diluted earnings per share
calculation in certain areas. ASU 2020-06 is effective for fiscal years
beginning after December 15, 2023, including interim periods within those
fiscal years, with early adoption permitted. We are currently assessing the
impact, if any, that ASU 2020-06 would have on our financial position, results
of operations or cash flows.
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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