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
July 7, 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 are an emerging growth company and, as such, the
Company is subject to all of the risks associated with emerging growth
companies.
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 revenues to date.
Our only activities since inception through December 31, 2021 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. 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 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.
For the year ended December 31, 2021, we had net income of $19,129,061, which
consists of change in fair value of warrant liabilities of $20,115,431, interest
earned on marketable securities held in the Trust Account of $80,210, unrealized
gain on marketable securities held in the Trust Account of $3,239, and interest
income from bank accounts of $231, offset by operating costs of $1,070,050.
For the period from July 7, 2020 (inception) through December 31, 2020, we had a
net loss of $18,897,292, which consists of operating costs of $ 239,059, change
in fair value of warrant liability of $18,347,920, transaction costs allocable
to warrants of $345,956 and an unrealized loss on marketable securities held in
our Trust Account of $2,627, offset by interest earned on marketable securities
held in the Trust Account of $38,270.
Liquidity and Capital Resources
On October 5, 2020, we consummated the Initial Public Offering of 20,000,000
Units, at $10.00 per unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,750,000 Private Placement Warrants to the Sponsor at a price of
$1.00 per warrant, generating gross proceeds of $7,750,000.
On October 23, 2020, the underwriters partially exercised their over-allotment
option, resulting in an additional 40,000 Units issued for total gross proceeds
of $400,000. As a result of the underwriters' election to partially exercise
their over-allotment option a total of 10,000 Founders Shares are no longer
subject to forfeiture and 740,000 Founders Shares were forfeited. In connection
with the underwriters' partial exercise of their over-allotment option, we also
consummated the sale of an additional 12,000 Private Placement Warrants at $1.00
per Private Placement Warrant, generating total proceeds of $12,000. A total of
$404,000 was deposited into the Trust Account, bringing the aggregate proceeds
held in the Trust Account to $202,404,000.
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We incurred $11,434,768 in transaction costs, including $4,008,000 of
underwriting fees, $7,014,000 of deferred underwriting fees and $412,768 of
other costs.
For the year ended December 31, 2021, cash used in operating activities was
$761,184. Net income of $19,129,061 was affected by interest earned on
marketable securities held in the Trust Account of $80,210, unrealized gain on
marketable securities held in the Trust Account of $3,239 and the change in fair
value of warrant liabilities of $20,115,431. Changes in operating assets and
liabilities provided $308,635 of cash for operating activities.
For the period from July 7, 2020 (inception) through December 31, 2020, cash
used in operating activities was $241,974. Net loss of $18,897,292 was affected
by the change in fair value of warrant liabilities of $18,347,920, transaction
costs allocable to warrant liabilities of $345,956, interest earned on
marketable securities held in the Trust Account of $38,270, and an unrealized
loss on marketable securities held in the Trust Account of $2,627. Changes in
operating assets and liabilities used $2,915 of cash from operating activities.
As of December 31, 2021, we had cash and marketable securities held in the Trust
Account of $202,523,092. 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 and income taxes payable),
to complete our Business Combination. We may withdraw interest to pay franchise
and income taxes. During the periods ended December 31, 2021 and 2020, we did
not withdraw any interest earned on the Trust Account. 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.
As of December 31, 2021, we had cash of $ 544,121 outside of the Trust Account.
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, the initial stockholders or an affiliate
of the initial stockholders or certain of our directors and officers may, but
are not obligated to, loan us funds as may be required. If we complete a
Business Combination, we would repay such loaned 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 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 identical of the post-Business
Combination entity, at a price of $1.00 per warrant. The warrant would be
identical to the Private Placement Warrants.
Liquidity and Going Concern
We will need to raise additional capital through loans or additional investments
from our Sponsor, stockholders, officers, directors, or third parties. Our
officers, directors and Sponsor may, but are not obligated to, loan us funds,
from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion, to meet our working capital needs. Accordingly, we may
not be able to obtain additional financing. 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 a potential transaction, and reducing overhead
expenses. We cannot provide any assurance that new financing will be available
to us on commercially acceptable terms, if at all. These conditions raise
substantial doubt about our ability to continue as a going concern through
October 5, 2022, the date that we will be required to cease all operations,
except for the purpose of winding up, if a Business Combination is not
consummated. These conditions raise substantial doubt about our ability to
continue as a going concern.
In connection with the Company's assessment of going concern considerations in
accordance with the Financial Accounting Standards Board's ("FASB's") Accounting
Standards Update ("ASU") 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 raise additional funds to alleviate liquidity needs
as well as complete a Business Combination by October 5, 2022, then the Company
will cease all operations except for the purpose of liquidating. The liquidity
condition and date for mandatory liquidation and subsequent dissolution raise
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 October 5, 2022.
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Off-Balance Sheet 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 an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support. We began incurring these fees on September 30, 2020 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 Unit, or $7,014,000
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.
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. We have identified the following any critical accounting policies:
Warrant Liabilities
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 ordinary shares, 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.
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 common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and 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' equity section of our balance sheet.
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Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period.
Accretion associated with the redeemable shares of Class A common shares is
excluded from income (loss) per common share as the redemption value
approximates fair value.
Recent Accounting Standards
In August 2020, the FASB 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. 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 other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that
could cause economic uncertainty and volatility in the financial markets, many
of which are beyond our control. Our business could be impacted by, among other
things, downturns in the financial markets or in economic conditions, increases
in oil prices, inflation, increases in interest rates,supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgencesand the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predictthe likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our businessand our ability to complete an initial business combination.
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