All statements other than statements of historical fact included in this Annual
Report on Form 10-K including, without limitation, statements under "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. When used in this Annual Report on Form 10-K, words
such as "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes 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.
Overview
We are a blank check company formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar Business Combination with one or more target businesses. We intend to
effectuate our Business Combination using cash from the proceeds of our Initial
Public Offering and the sale of the placement units that occurred simultaneously
with the completion of our Initial Public Offering, 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 a 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, 2022 were
organizational activities and those necessary to prepare for the Initial Public
Offering, described below, and since the Initial Public Offering, the search for
a prospective 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 expect to generate non-operating income in the
form of interest income from the proceeds of the Initial Public Offering placed
in the Trust Account. We expect that we will continue to 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, 2022, we had a net income of $1,623,367, which
primarily consisted of operating expenses of $1,569,618, accrual of Delaware
franchise taxes of $282,342, interest and dividend income on investments held in
our Trust Account of $1,411,854, change in fair value of warrant liabilities of
$1,997,334 and income tax provision of $216,203.
For the period from January 25, 2021 (inception) through December 31, 2021, we
had a net income of $2,738,756, which primarily consisted of a change in fair
value of warrant liabilities of $7,632,666 and over-allotment income of $95,104
offset by other expense of fair value in excess of sale of private warrants in
the amount of $4,636,666, operating expenses of $182,920, accrual of Delaware
franchise taxes of $114,262 and transaction costs allocated to warrant issuance
of $57,041.
46
--------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources
The registration statement for the Company's Initial Public Offering was
declared effective on October 14, 2021. On October 19, 2021, the Company
consummated the Initial Public Offering of 10,000,000 Units with respect to the
Common Stock included in the Units being offered (the "Public Shares") at $10.00
per Unit generating gross proceeds of $100,000,000, which is discussed in Note
4. The company has selected December 31 as its fiscal year end.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the sale of 7,133,333 Private Placement Warrants at a price of $0.75
per Private Placement Warrant in a private placement to the Sponsor, for gross
proceeds of $5,350,000 which is described in Note 4.
On December 22, 2022, at a Special Meeting of the Company's shareholders, the
Company's shareholders approved (i) the Charter Amendment Proposal, an amendment
to the Company's second amended and restated certificate of incorporation, which
amended an existing option included in the Company's second amended certificate
of incorporation, and which had provided the Company the ability to extend the
deadline by which the Company must consummate a Business Combination by up to
three months, or from January 19, 2023 to April 19, 2023, to instead provide for
an extension to consummate a Business Combination by up to six months, or from
January 19, 2023 to July 19, 2023 and (ii) the Trust Amendment Proposal, an
amendment to the Company's Investment Management Trust Agreement to provide that
the Company may extend the time period to complete a Business Combination up to
and until July 19, 2023, on a monthly basis, by, at the Company's option,
depositing into the Company's Trust Account the lesser of (x) $100,000 and (y)
$0.05 for each share of the Company's Common Stock which remains outstanding as
of the date of such monthly deposit. The Monthly Extension Option is exercisable
by the Company in six single-month increments. At the Special Meeting, holders
of 8,980,535 shares of Common Stock of the Company exercised their right to
redeem their shares for cash at an approximate redemption price of $10.24 per
share, resulting in an aggregate payment to such redeeming shareholders of
approximately $92,009,330. As of April 18, 2023, the Company had exercised four
of the six Monthly Extension Options available to it, depositing $50,973.25 into
the Trust Account in connection with each such exercise, and resulting in funds
in the Trust Account as of such date of approximately $10,828,307.47.
As of December 31, 2022, approximately $57,810,572 was withdrawn from the
Company's Trust Account in connection with the payments of such redemption
amounts, with the remainder of such payments being withdrawn promptly thereafter
such that the balance of the Trust Account as of January 31, 2023 was
$10,578,661. For a more detailed discussion of the Company's Special Meeting,
please see the section of this Annual Report on Form 10-K entitled "Extension of
Date to Consummate an Initial Business Combination."
Offering costs for the Initial Public Offering amounted to $6,101,730,
consisting of $2,000,000 of underwriting fees, $3,500,000 of deferred
underwriting fees payable (which are held in the Trust Account) and $601,730 of
other costs. As described in Note 1, the $3,500,000 of deferred underwriting fee
payable is contingent upon the consummation of a Business Combination on or
prior to July 19, 2023 (or such earlier applicable date if we opt not to
continue to exercise our remaining Monthly Extension Options), subject to the
terms of the underwriting agreement. Following the closing of the Initial Public
Offering, $101,500,000 ($10.15 per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering and the Private Placement Warrants was
placed in a Trust Account.
For the year ended December 31, 2022, there was $588,916 of cash used in
operating activities. Net cash provided by investing activities was $58,225,408
and Net cash used in financing activities was $57,810,572 mainly reflecting the
redemption of Common Stock.
For the period January 25, 2021 (inception) through December 31, 2021, there was
$501,884 of cash used in operating activities. Net cash paid in investing
activities was $101,500,000 and Net cash provided by financing activities was
$102,773,270 mainly reflecting the proceeds of our Initial Public Offering and
subsequent deposit into the Trust Account.
At December 31, 2022, we had cash and marketable securities held in the Trust
Account of $44,688,320. 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 income taxes payable), to complete our Business Combination.
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.
At December 31, 2022, we had cash of $597,306 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.
On January 18, 2023, the Company and our Sponsor separately entered into an
agreement whereby the Company issued a promissory note (the "Promissory Note")
to the Sponsor pursuant to which the Company may borrow up to $1,500,000.00 in
cash from time to time to fund working capital requirements, including with
respect to the funding of Monthly Extension Options. As of March 31, 2023, the
Promissory Note was undrawn and no amounts were outstanding under such
Promissory Note.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company's officers and directors may, but are not obligated to, loan the Company
funds as may be required (the "Working Capital Loans"). If the Company completes
a Business Combination, the Company would repay the Working Capital Loans out of
the proceeds of the Trust Account released to the Company. Otherwise, the
Working Capital Loans would be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, the Company
may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to
repay the Working Capital Loans. Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written
agreements exist with respect to such loans. As of December 31, 2022, the
Company had no borrowings under the Working Capital Loans.
We have received several letters from Nasdaq regarding our compliance with the
exchanges continued listing requirements. Please see he risk factor entitled
"Nasdaq may delist our securities from trading on its exchange, which could
limit investors' ability to make transactions in our securities and subject us
to additional trading restrictions" for further information.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements as of December 31, 2022. We do not participate in
transactions that create relationships with 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.
47
--------------------------------------------------------------------------------
Table of Contents
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters of our Initial Public Offering are entitled to deferred
underwriting commissions of $3,500,000 in the aggregate. The deferred fee will
become payable to the underwriters of our Initial Public Offering 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.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the financial statements (auditor discussion and analysis) and
(iv) disclose certain executive compensation related items such as the
correlation between executive compensation and performance and comparisons of
executive compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of our Initial Public
Offering or until we are no longer an "emerging growth company," whichever is
earlier.
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.
Common Stock Subject to Possible Redemption
We account for our Common Stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity" ("ASC 480"). Common Stock subject to
mandatory redemption is classified as a liability instrument and is 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, Common Stock subject to
possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our balance sheets. The Company recognizes
changes in redemption value immediately as they occur and adjusts the carrying
value of redeemable Common Stock to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of
redeemable Common Stock are affected by charges against additional paid in
capital and accumulated deficit.
Net Income per Share of Common Stock
Net income per share is computed by dividing net income by the weighted average
number of shares of Common Stock outstanding during the period, excluding shares
of Common Stock subject to forfeiture by the Sponsor. At December 31, 2022, the
Company did not have any dilutive securities and/or other contracts that could,
potentially, be exercised or converted into shares of Common Stock and then
share in the earnings of the Company. As a result, diluted income per share is
the same as basic income per share for the period presented.
48
--------------------------------------------------------------------------------
Table of Contents
Accounting for Warrants
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the instruments'
specific terms and applicable authoritative guidance in ASC 480 and ASC 815,
Derivatives and Hedging ("ASC 815"). The assessment considers whether the
instruments are free standing financial instruments pursuant to ASC 480, meet
the definition of a liability pursuant to ASC 480, and whether the instruments
meet all of the requirements for equity classification under ASC 815, including
whether the instruments are indexed to the Company's own common shares and
whether the instrument holders could potentially require "net cash settlement"
in a circumstance outside of the Company's control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, was conducted at the time of warrant issuance and as of each
subsequent period end date while the instruments are outstanding. Management has
concluded that the public warrants qualify for equity accounting treatment and
the Private Placement Warrants issued pursuant to the warrant agreement qualify
for liability accounting treatment.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The Company adopted ASU 2020-06 on
January 25, 2021 (inception). Adoption of the ASU did not impact the Company's
financial position, results of operations or cash flows.
The Company has reviewed other recent accounting pronouncements and concluded
that they are either not applicable to the Company or no material effect is
expected on the financial statement as a result of future adoption
© Edgar Online, source Glimpses