This Quarterly Report on Form 10-Q includes forward-looking statements. These
forward-looking statements are based on our current expectations and beliefs
concerning future developments and their potential effects on us. There can be
no assurance that future developments affecting us will be those that we have
anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or assumptions, and actual
results, events or performance may be materially different from those expressed
or implied by these 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, plans 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," "intends," "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. Factors that
might cause or contribute to actual results, events or performance differing
from such forward-looking statements include, but are not limited to, those set
forth in the Risk Factors section of the Company's registration statement on
Form S-1, as amended, and the Company's final prospectus for our initial public
offering ("IPO") filed with the SEC on August 16, 2021 ("Final Prospectus"). The
following discussion should be read in conjunction with our unaudited condensed
financial statements and related notes thereto included elsewhere in this
report.
Overview
We are a blank check company formed under the laws of the State of Delaware on
April 1, 2021 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination (the "Business Combination") with one or more businesses. We intend
to effectuate our Business Combination using cash from the proceeds of our IPO,
our capital stock, debt or a combination of cash, stock and debt. We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
As indicated in the accompanying unaudited condensed financial statements, as of
September 30, 2021, we had approximately $748,000 in cash and working capital of
approximately $984,000. Further, we expect to incur significant costs in the
pursuit of our initial Business Combination. We cannot assure you that our plans
to raise capital or to complete our initial Business Combination will be
successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities, those
necessary to prepare for our IPO, and, since the closing of our IPO, preparation
for the search for Business Combination candidates. On August 17, 2021 we
consummated our IPO of 15,000,000 units (the "Units"), as described below under
"-Liquidity and Capital Resources." Subsequent to our IPO, we will not 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 cash and cash equivalents from the proceeds of the IPO and the Private
Placement (as defined below). There has been no significant change in our
financial or trading position since the date of our audited financial statements
filed as an exhibit to our Current Report on Form 8-K filed with the SEC on
August 25, 2021. We expect 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. We expect our expenses to
increase substantially since the closing of our IPO.
Our entire activity from April 1, 2021 (inception) through September 30, 2021
was, except as noted above, related to organizational activities and those
necessary to prepare for the Initial Public Offering. Although we consummated
the Initial Public Offering, we will not be generating any operating revenues
until the closing and completion of our initial Business Combination.
For the three months ended September 30, 2021, we had net loss of $1,281,869,
which consisted of $67,092 general and administrative expenses, a change in fair
value of derivative liabilities of $783,333, a warrant offering expense of
$289,574 and offering costs related to transferring founder shares to anchor
investors of $141,870.
For the period from April 1, 2021 (inception) through September 30, 2021, we had
net loss of $1,283,799, which consisted of $69,022 general and administrative
expenses, a change in fair value of derivative liabilities of $783,333, a
warrant offering expense of $289,574 and offering costs related to transferring
founder shares to anchor investors of $141,870.
Liquidity and Capital Resources
Until the consummation of the IPO, our liquidity needs were satisfied through
the receipt of $25,000 from the sale of the Class B common stock (the "founder
shares") to our initial stockholders and up to $300,000 in loans from our
Sponsor under an unsecured promissory note. As of the IPO date of August 17,
2021, the Company had drawn approximately $69,000 from the promissory note.
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The registration statement for our IPO was declared effective on August 12,
2021. On August 17, 2021 we consummated our IPO of 15,000,000 Units at $10.00
per share. Each Unit consists of one share of Class A common stock, par value
$0.0001 per share, and one-third of one redeemable warrant, with each 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. Certain investment funds
managed by affiliates of the Sponsor purchased an aggregate of 1,500,000 Units
in the IPO. As part of the IPO, certain institutional investors and qualified
institutional buyers (the "Institutional Anchor Investors") not then affiliated
with us, our Sponsor, or our officers, directors, or any member of the Company's
management purchased an aggregate of $127,900,000 of Units. The IPO generated
net proceeds of $146,466,375 and offering costs of $8,703,625, which includes
$3,000,000 of underwriting fees, $5,250,000 in deferred underwriting
commissions, $453,625 of other offering costs, and an estimated additional
$80,000 in other offering expenses that will be paid (or net proceeds of
$141,216,375 giving effect to deferred underwriting commissions). No payments
for offering expenses, and no payments from the net offering proceeds, were made
by us to our directors, officers or their associates, persons owning 10% or more
of any class of equity securities of the Company or affiliates of the Company,
except that offering expenses have been funded in part by the outstanding
promissory note with our Sponsor, as disclosed above.
Simultaneously with the consummation of the IPO, we consummated the private
placement ("Private Placement") of 3,333,333 warrants ("Private Warrants") at a
price of $1.50 per Private Warrant, generating total proceeds of $5,000,000, to
the Sponsor. Substantially concurrently with the closing of the Private
Placement, the Sponsor sold an aggregate of 66,666 Private Warrants to the
Institutional Anchor Investors. The Private Warrants are identical to the
warrants sold in the IPO, except that the Private Warrants are non-redeemable
and may be exercised on a cashless basis, in each case so long as they continue
to be held by the initial purchasers or their permitted transferees. The
purchasers of the Private Warrants have agreed not to transfer, assign or sell
any of the securities purchased in the Private Placement, including the
underlying shares of Class A common stock (except to certain permitted
transferees), until 30 days after the consummation of the Company's initial
business combination.
Upon the closing of the IPO and the Private Placement, a total amount of
$150,000,000 ($10.00 per share) from the net proceeds of the IPO and certain of
the proceeds of the Private Placement was placed in a Trust Account ("Trust
Account") located in the United States with Computershare Trust Company, N.A.
acting as trustee. The funds are invested only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940 having a maturity of 180 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act
of 1940 which invest only in direct U.S. government treasury obligations, as
determined by us, until the earlier of (i) the completion of a Business
Combination and (ii) the distribution of 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,
excluding deferred underwriting commissions, to complete our initial Business
Combination. We may withdraw interest from the Trust Account to pay taxes, if
any. To the extent that our share capital or debt is used, in whole or in part,
as consideration to complete an 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.
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,
structure, negotiate and complete an initial Business Combination.
In order to fund working capital deficiencies or to finance transaction costs in
connection with an intended initial 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 our initial
Business Combination, we expect to 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 of the Trust Account. Up to $1,500,000 of such loans
may be convertible into warrants at a price of $1.50 per warrant at the option
of the lender. The warrants would be identical to the Private Warrants issued to
our Sponsor. The terms of such loans, if any, have not been determined and no
written agreements exist with respect to such loans. 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.
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. 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. 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 Class A common stock upon
completion of our initial Business Combination, in which case we may issue
additional securities or incur debt in connection with such Business
Combination.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
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 the Sponsor a monthly fee of $10,000 for office space, secretarial
and administrative services provided to the Company. We began incurring these
fees on August 17, 2021 and will continue to incur these fees monthly until the
earlier of the completion of a Business Combination and the Company's
liquidation.
Additionally, pursuant to the underwriting agreement entered into in connection
with the IPO, the underwriter is entitled to a deferred fee of $0.35 per Unit,
or $5,250,000 in the aggregate. The deferred fee will become payable to the
underwriter 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.
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Related Party Transactions
On April 9, 2021, one of our founders purchased an aggregate of 8,625,000
founder shares for an aggregate purchase price of $25,000, or approximately
$0.003 per share. On April 19, 2021, the founder shares were assigned to our
Sponsor for the same purchase price that was initially paid by one of our
founders. In July 2021, our Sponsor returned to us, for no consideration, an
aggregate of 4,312,500 founder shares, which were canceled, resulting in an
aggregate of 4,312,500 founder shares then outstanding and held by our initial
shareholders. The purchase price of the founder shares was determined by
dividing the amount of cash contributed to the company by the number of founder
shares issued. On July 6, 2021, our Sponsor transferred 25,000 founder shares to
each of Muneer Satter, William Ulrich and Richard Spencer, our independent
director nominees (for a total of 75,000 founder shares) at their original
purchase price. In connection with the closing of the IPO, our Sponsor sold an
amount up to 75,000 founder shares to each Institutional Anchor Investor at
their original purchase price, or 650,000 founder shares in aggregate. The
Company granted the underwriter a 45-day option from the date of the Final
Prospectus to purchase up to 2,250,000 additional Units to cover
over-allotments, if any, at the IPO price, less underwriting discounts and
commissions. Following the expiration of the underwriter's over-allotment
option, an aggregate of 3,750,000 founder shares were issued and outstanding as
of September 30, 2021 (reflecting the forfeiture by our Sponsor of 562,500
founder shares).
Certain investment funds managed by an affiliate of our Sponsor purchased an
aggregate of 1,500,000 Units as part of the IPO. The Units were sold at the
public offering price of $10.00 per Unit, generating gross proceeds to us of
$15,000,000.
On August 12, 2021, we entered into an Administrative Services Agreement
pursuant to which we will also pay our Sponsor or an affiliate of our Sponsor a
total of $10,000 per month, for up to 24 months for administrative and support
services. Upon completion of our initial business combination or our
liquidation, we will cease paying these monthly fees.
Our Sponsor, officers and directors or any of their respective affiliates will
be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations. Our audit committee
will review on a quarterly basis all payments that were made by us to our
Sponsor, officers, directors or our or any of their affiliates and will
determine which expenses and the amount of expenses that will be reimbursed.
There is no cap or ceiling on the reimbursement of out-of-pocket expenses
incurred by such persons in connection with activities on our behalf.
Our Sponsor agreed to loan us up to $300,000 under an unsecured promissory note
(the "Note") to be used for a portion of the expenses of the IPO. We fully
repaid the Note and the amount Due to Sponsor on September 8, 2021 out of the
$1,000,000 of offering proceeds that were allocated for the payment of offering
expenses (other than underwriting commissions) not held in the trust account. As
of September 30, 2021, there were no amounts outstanding on the Note since this
is no longer available to us.
In addition, in order to fund working capital deficiencies or to finance
transaction costs in connection with an intended initial 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 our initial business combination, we expect to 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. Up to
$1,500,000 of such loans may be convertible into warrants at a price of $1.50
per warrant at the option of the lender. The warrants would be identical to the
Private Warrants issued to our Sponsor. The terms of such loans, if any, have
not been determined and no written agreements exist with respect to such loans.
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.
Our Sponsor committed, pursuant to a written agreement, to purchase an aggregate
of 3,333,333 Private Warrants at a price of $1.50 per warrant in the Private
Placement. Each Private Warrant is exercisable to purchase one share of Class A
common stock at a price of $11.50 per share, subject to adjustment. Our Sponsor
will be permitted to transfer the Private Warrants held by it to certain
permitted transferees, including our officers and directors and other persons or
entities affiliated with or related to them, but the transferees receiving such
securities will be subject to the same agreements with respect to such
securities as our Sponsor. Otherwise, these warrants will not, subject to
certain limited exceptions, be transferable or salable until 30 days after the
completion of our initial business combination. Simultaneously with the
consummation of the IPO, we consummated the Private Placement of 3,333,333
Private Warrants at a price of $1.50 per Private Warrant, generating total
proceeds of $5,000,000, to the Sponsor. Substantially concurrently with the
closing of the Private Placement, one or more of the Institutional Anchor
Investors purchased Private Warrants from our Sponsor, in an aggregate amount of
66,666 Private Warrants, at the same price per Private Warrant paid by our
Sponsor for such warrants. The Private Warrants will be non-redeemable so long
as they are held by our Sponsor, any Institutional Anchor Investor or their
permitted transferees (except as described under "Description of Securities -
Warrants - Public Stockholders' Warrants - Redemption of Warrants" in the Final
Prospectus). The Private Warrants may also be exercised by our Sponsor, any
applicable Institutional Anchor Investor, or their permitted transferees for
cash or on a cashless basis and our Sponsor, any applicable institutional anchor
investor and their permitted transferees will also have certain registration
rights related to the Private Warrants (including the shares of Class A common
stock issuable upon exercise of the Private Warrant), as described below.
Otherwise, the Private Warrants have terms and provisions that are identical to
those of the warrants sold as part of the Units in the IPO.
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Pursuant to a registration rights agreement with our initial stockholders
entered into on the closing date of the IPO, we may be required to register
certain securities for sale under the Securities Act. These holders, and holders
of warrants issued upon conversion of working capital loans, if any, are
entitled under the registration rights agreement to make up to three demands
that we register certain of our securities held by them for sale under the
Securities Act and to have the securities covered thereby registered for resale
pursuant to Rule 415 under the Securities Act. In addition, these holders have
the right to include their securities in other registration statements filed by
us. We will bear the costs and expenses of filing any such registration
statements. See "Principal Stockholders - Registration Rights" in the Final
Prospectus.
Critical Accounting Policies and Estimates
The preparation of unaudited 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 unaudited condensed
financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates.
Warrant Liabilities
The Company accounts for warrants for shares of the Company's Class A common
stock that are not indexed to its own stock as liabilities at fair value on the
balance sheet in accordance with ASC 815-40, Derivatives and Hedging: Contracts
in Entity's Own Equity. The warrants are subject to re-measurement 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.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption
in accordance with the guidance in FASB ASC Topic 480 "Distinguishing
Liabilities from Equity." The shares of Class A common stock subject to
mandatory redemption (if any) are classified as liability instruments and are
measured at fair value. Conditionally redeemable shares of Class A common stock
(including Class A 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) are classified as
temporary equity. At all other times, Class A common stock is classified as
stockholders' equity. The Company's Class A common stock features certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, as of
September 30, 2021, 15,000,000 shares of Class A common stock subject to
possible redemption are presented as temporary equity, outside of the
stockholders' deficit section of the Company's balance sheet.
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Net Loss per Share of Common Stock
We apply the two-class method in calculating earnings per share. Net income
(loss) per share of Class A common stock is calculated by dividing weighted net
loss by the weighted average number of shares of Class A common stock
outstanding during the period. Net income (loss) per share of Class B common
stock is calculated by dividing weighted net loss by the weighted average number
of shares of Class B common stock outstanding during the period.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We 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 a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of 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 controls over financial reporting pursuant to Section 404, (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), (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation and (v) comply with the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved. These exemptions will apply for a
period of five years following the completion of our IPO or until we are no
longer an "emerging growth company," whichever is earlier.
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