The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto contained elsewhere in this report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties. 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
"Cautionary Note Regarding Forward-Looking Statements," "Item 1A. Risk Factors"
and elsewhere in this report.
47
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 15, 2020 for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business combination with one or more businesses or entities,
which we refer to as our initial business combination. We intend to effectuate
our initial business combination using cash derived from the proceeds of our
initial public offering, including the partial exercise of the underwriters'
over-allotment option, and the private placements 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 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 through December 31, 2022 were organizational activities,
those necessary to prepare for our initial public offering, described below,
and, subsequent to our initial public offering, identifying a target company for
our initial business combination. We do not expect to generate any operating
revenues until after the completion of our initial business combination, at the
earliest. 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 in connection with
searching for, and completing, an initial business combination.
For the year ended December 31, 2022, we had a net loss of $920,680, which
consists of operating costs of $3,125,483 and a provision for income taxes of
$467,748, offset by interest earned on marketable securities held in the trust
account of $1,274,372, an unrealized gain on marketable securities held in the
trust account of $1,397,925 and interest income earned on our bank account of
$254.
For the year ended December 31, 2021, we had a net loss of $682,065, which
consists of formation and operating costs of $556,006, stock-based compensation
expense of $143,327, offset by interest on marketable securities held in the
trust account of $14,751, an unrealized gain on marketable securities held in
the trust account of $2,498 and interest income earned on our bank account of
$19.
Liquidity and Capital Resources
Until the consummation of our initial public offering, our only source of
liquidity was an initial purchase of founder shares by our sponsor and loans
from our sponsor.
On October 13, 2021, we consummated our initial public offering of 15,000,000
units, at $10.00 per unit, generating total gross proceeds of $150,000,000.
Simultaneously with the consummation of our initial public offering, we
consummated the private placement of an aggregate of 6,200,000 private placement
warrants to our sponsor and Stifel Venture at a price of $1.00 per private
placement warrant, generating total gross proceeds of $6,200,000.
On October 19, 2021, the underwriters of our initial public offering notified us
of their exercise of the over-allotment option in part and concurrent forfeiture
of the remaining portion of such option. As such, on October 22, 2021, the
underwriters purchased 1,500,000 additional units at $10.00 per additional unit
upon the closing of the partial exercise of the over-allotment option,
generating total gross proceeds of $15,000,000. Simultaneously with the closing
of the partial exercise of the over-allotment option, we consummated the private
placement of an aggregate of 375,000 additional private placement warrants to
our sponsor and Stifel Venture at $1.00 per additional private placement
warrant, generating total gross proceeds of $375,000.
Of the aggregate 16,500,000 units sold in our initial public offering,
14,857,500 units were purchased by our anchor investors. In connection with the
closing of our initial public offering, each anchor investor acquired from our
sponsor an indirect economic interest in certain founder shares (937,500 founder
shares in the aggregate) at a purchase price of $0.10 per share. Our sponsor has
agreed to distribute such founder shares to the anchor investors pro rata based
on their indirect ownership interest in such founder shares after the completion
of our initial business combination.
Following our initial public offering, including the partial exercise of the
over-allotment option, and the private placements, a total of $166,650,000 was
placed in the trust account. We incurred $15,892,398 in initial public offering
related costs, consisting of $2,475,000 of underwriting fees, $6,600,000 of
deferred underwriting fees, $541,773 of other offering costs, and $6,275,625 for
the fair value of the founder shares attributable to the anchor investors.
For the year ended December 31, 2022, cash used in operating activities was
$1,248,835. Net loss of $920,680 was affected by interest earned on marketable
securities held in the trust account of $1,274,372, an unrealized gain on
marketable securities held in the trust account of $1,397,925 and a deferred tax
liability of $293,654. Changes in operating assets and liabilities reflected a
source of cash of $2,050,578 from operating activities during such period.
48
For the year ended December 31, 2021, cash used in operating activities was
$826,598. Net loss of $682,065 was affected by stock-based compensation expense
of $143,327, interest earned on marketable securities held in the trust account
of $14,751 and an unrealized gain on marketable securities held in the trust
account of $2,498. Changes in operating assets and liabilities used $270,611 of
cash for operating activities.
As of December 31, 2022, we had cash and marketable securities held in the trust
account of $168,830,546 (including approximately $1,274,372 of interest income,
and an unrealized gain of $1,397,925) consisting of 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. From inception through December 31,
2022, we withdrew an aggregate of $509,000 in interest earned from the trust
account to pay for taxes.
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 taxes payable), to complete our initial
business combination. To the extent that our capital 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 December 31, 2022, we had cash of $366,794 held 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 our initial business
combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial business combination, our sponsor or our officers,
directors or their affiliates may, but are not obligated to, loan us funds as
may be required. If we complete our initial business combination, we would repay
such loaned amounts. In the event that our initial business combination does not
close, such loaned amounts would be forgiven. Up to $1,500,000 of such working
capital loans may be convertible into warrants of the post-combination entity at
a price of $1.00 per warrant. The warrants would be identical to the private
placement warrants.
Going Concern
As of December 31, 2022, we had $366,794 in our operating bank accounts,
$168,830,546 of cash and marketable securities held in the trust account to be
used for our initial business combination or to repurchase or redeem stock in
connection therewith and working capital deficit of $1,638,300, which excludes
franchise taxes payable of $40,050 and income taxes payable of $25,184, of which
such amount will be paid from interest earned on the trust account as well as
$3,203 of franchise taxes paid out of operating funds not yet reimbursed from
the trust account. As of December 31, 2022, $2,180,546 of the amount on deposit
in the trust account represented interest income that is available to pay our
tax obligations.
We may raise additional capital through loans or additional investments from our
sponsor or our stockholders, officers, directors, or third parties. Our officers
and directors, our sponsor or their affiliates may but are not obligated to loan
us funds, from time to time, in whatever amount they deem reasonable in their
sole discretion, to meet our working capital needs. Based on the foregoing, we
believe we will have sufficient cash to meet our needs through the earlier of
consummation of our initial business combination or April 13, 2023, the deadline
to complete our initial business combination pursuant to our amended and
restated certificate of incorporation (unless otherwise amended by
stockholders).
However, if our estimate 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, or if our
stockholders approve an extension to the mandatory liquidation date beyond April
13, 2023, we may have insufficient funds available to operate our business prior
to our initial business combination. Moreover, 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. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our initial
business combination. If we do not complete our initial 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
initial business combination, if cash on hand is insufficient, we may need to
obtain additional financing in order to meet our obligations.
49
If we do not consummate our initial business combination, or effect an
extension, by April 13, 2023, there will be a mandatory liquidation and
subsequent dissolution of our company. In connection with our assessment of
going concern considerations in accordance with Financial Accounting Standards
Board's ("FASB") Accounting Standards Codification ("ASC") Topic 205-40,
"Presentation of Financial Statements - Going Concern," we have determined that
the liquidity condition due to insufficient working capital and mandatory
liquidation, should our initial business combination not occur, and potential
subsequent dissolution raises substantial doubt about our ability to continue as
a going concern for at least one year from the date that the financial
statements are issued. No adjustments have been made to the carrying amounts of
assets or liabilities should we be required to liquidate after April 13, 2023.
The financial statements do not include any adjustment that might be necessary
if we are unable to continue as a going concern.
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 obligations, capital lease obligations,
operating lease obligations, purchase obligations or other long-term
liabilities, other than an agreement to pay our sponsor a monthly fee of $25,000
for general and administrative services, including office space, utilities and
administrative support. We began incurring these fees on October 7, 2021 and
will continue to incur these fees monthly until the earlier of the completion of
our initial business combination and our liquidation.
The underwriters of our initial public offering are entitled to a deferred fee
of $0.40 per unit sold in our initial public offering, or $6,600,000 in the
aggregate. Subject to the terms of the underwriting agreement, the deferred fee
(i) will become payable to the underwriters from the amounts held in the trust
account solely in the event that we complete our initial business combination
and (ii) will be waived by the underwriters in the event that we do not complete
our initial business combination.
Critical Accounting Policies and Estimates
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 period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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 are
classified as a liability instrument and are measured at fair value.
Conditionally redeemable shares of Class A common stock (including Class A
common stock that features redemption rights that is 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, shares of Class A common stock are 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, Class A common stock subject to possible redemption is
presented at redemption value as temporary equity, outside of the stockholders'
deficit section of our balance sheets.
Share-Based Payment Arrangements
We measure and recognize compensation expense for all share-based payments on
their estimated fair values measured as of the grant date. These costs are
recognized as an expense in the statements of operations upon vesting, once the
applicable performance conditions are met, with an offsetting increase to
additional paid-in capital. Forfeitures are recognized as they occur.
Net Loss per Common Share
Net loss per common share of common stock is computed by dividing net loss by
the weighted average number of common shares issued and outstanding during the
period. Subsequent measurement of the redeemable shares of Class A common stock
is excluded from loss per ordinary share as the redemption value approximates
fair value. We calculate our earnings per share to allocate net loss pro rata to
shares of Class A and Class B common stock. This presentation contemplates a
business combination as the most likely outcome, in which case, both classes of
common stock share pro rata in the losses of our company.
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Income Taxes
We account for income taxes under ASC 740, "Income Taxes." ASC 740, Income
Taxes, requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statements and tax
basis of assets and liabilities and for the expected future tax benefit to be
derived from tax loss and tax credit carry forwards. ASC 740 additionally
requires a valuation allowance to be established when it is more likely than not
that all or a portion of deferred tax assets will not be realized. We also
recognized accrued interest and penalties related to unrecognized tax benefits
as income tax expense. We have identified the United States as our only "major"
tax jurisdiction. We are subject to income taxation by major taxing authorities
since inception. These examinations may include questioning the timing and
amount of deductions, the nexus of income among various tax jurisdictions and
compliance with federal and state tax laws. We do not expect that the total
amount of unrecognized tax benefits will materially change over the next twelve
months.
Recent Accounting Standards
In August 2020, the 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. We adopted ASU 2020-06 effective January 1, 2021.
The adoption of ASU 2020-06 did not have an impact on our financial statements.
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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