References to the "Company," "C5 Acquisition Corporation," "our," "us" or "we"
refer to C5 Acquisition Corporation, references to "management" or "management
team" refer to the Company's officers and directors and references to the
"Sponsor" refer to C5 Sponsor LLC. The following discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the unaudited condensed financial statements and the notes
thereto contained elsewhere in this Quarterly Report on Form 10-Q (this
"Quarterly Report"). Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes, and oral statements made from time to time by
representatives of the Company may include, forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act and are intended to be covered by the safe
harbor created thereby. The Company has based these forward-looking statements
on management's current expectations, projections and forecasts about future
events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about the Company that may cause its actual
business, financial condition, results of operations, performance and/or
achievements to be materially different from any future business, financial
condition, results of operations, performance and/or achievements expressed or
implied by these forward- looking statements. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those
described in the Company's other filings with the SEC. The words "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intends," "may," "might,"
"plan," "possible," "potential," "predict," "project," "target," "goal,"
"shall," "should," "will," "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. In addition, any statements that refer to
expectations, projections, forecasts or other characterizations of future events
or circumstances, including any underlying assumptions, are forward-looking
statements.
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Overview
We are a blank check company formed under the laws of the State of Delaware on
March 30, 2021 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 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 revenues to date.
Our only activities from March 30, 2021 (inception) through September 30, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and the search for 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 expect to generate
non-operating income in the form of interest income on marketable securities
held after the Initial Public Offering. 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 three months ended September 30, 2022, we had a net income of $653,152,
which consists of operating costs of $424,847 offset by interest earned on
marketable securities held in the Trust Account of $1,323,353. Operating costs
for the three months ended September 30, 2022, consist primarily of professional
fees ($70,700), directors and officers insurance ($149,707), franchise tax
($50,000) and related party administration fee ($105,000). In addition, during
the three months ended September 30, 2022, the Company recorded an income tax
provision of $245,354 due to the increase in interest income during the period.
For the three months ended September 30, 2021, we had a net loss of $74, which
consists of formation and operating costs.
For the nine months ended September 30, 2022, we had a net income of $54,834,
which consists of operating costs of $1,385,278 offset by interest earned on
marketable securities held in the Trust Account of $1,702,948. Operating costs
for the nine months ended September 30, 2022, consist mostly of professional
fees ($273,491), directors and officers insurance ($426,340), franchise tax
($148,767), listing fees ($140,062) and related party administration fee
($302,581). In addition, during the nine months ended September 30, 2022, the
Company recorded an income tax provision of $262,836 due to the increase in
interest income during the period.
For the period from March 30, 2021 (inception) through September 30, 2021, we
had a net loss of $856, which consists of formation and operating costs.
Liquidity and Capital Resources
On January 11, 2022, we consummated the Initial Public Offering of 28,750,000
Units at a price of $10.00 per Unit, which includes the full exercise by the
underwriters of the over-allotment option to purchase an additional 3,750,000
Units, generating gross proceeds of $287,500,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 15,035,500
Private Placement Warrants at a price of $1.00 per Private Placement Warrant in
a private placement to our Sponsor, generating gross proceeds of $15,035,500.
Following the Initial Public Offering, the full exercise of the over-allotment
option by the underwriters and the sale of the Private Placement Warrants, a
total of $293,250,000 was placed in the Trust Account and as of September 30,
2022, we had $1,126,634 of cash held outside of the Trust Account, after payment
of costs related to the Initial Public Offering, and available for working
capital purposes. Transaction costs amounted to $16,368,261 consisting of
$5,750,000 of underwriting fees, $10,062,500 of deferred underwriting fees
payable and $555,761 of other offering costs.
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For the nine months ended September 30, 2022, cash used in operating activities
was $1,892,119 which consisted of the net income of $54,834, interest earned on
marketable securities held in the Trust Account of $1,702,948 and changes in
operating assets and liabilities used $244,005 of cash from operating
activities.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $294,935,292, including $1,702,948 of interest income (of which $17,656 have
been withdrawn to pay franchise taxes), consisting of mutual funds invested
primarily in U.S. Treasury Bills with a maturity of 185 days or less. We may
withdraw interest from the Trust Account to pay taxes, if any. We intend to use
substantially all of the funds held in the Trust Account, including any amounts
representing interest earned on the Trust Account to complete our Business
Combination. We may withdraw interest to pay franchise and income taxes. 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 September 30, 2022, we had cash of $1,126,634. 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 connection with the Company's assessment of going concern considerations in
accordance with Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that the Company currently has less than 12 months
from the date these financial statements were issued to complete a Business
Combination within the Combination Period (initial completion without an
extension ends on April 11, 2023), the mandatory liquidation requirement that
the Company cease all operations, redeem the public shares and thereafter
liquidate and dissolve raises substantial doubt about the ability to continue as
a going concern. These conditions raise substantial doubt about the Company's
ability to continue as a going concern for a period of time within one year
after the date that the financial statements are issued. Management has
determined that the Company has funds that are sufficient to fund the working
capital needs of the Company until the consummation of an initial business
combination or the winding up of the Company as stipulated in the Company's
amended and restated certificate of incorporation. The accompanying financial
statements have been prepared in conformity with US GAAP, as defined above,
which contemplate continuation of the Company as a going concern. These
unaudited financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, an affiliate of the
Sponsor, or our officers and directors 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 $2,000,000 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, including as to exercise price,
exercisability and exercise period. The terms of such loans by our officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans. The loans would be repaid upon consummation of a Business
Combination, without interest.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a 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 Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our 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 Business Combination. If we are unable
to complete our 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 Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 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
As of September 30, 2022, we do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities. Commencing on
the date the Units are first listed on the NYSE, the Company has agreed to pay
the Sponsor a total of $35,000 per month for office space, utilities and
secretarial and administrative support for up to 15 months, which includes up to
approximately $22,000 per month payable to our Chief Financial Officer and
consultants to assist us with our search for a target business. Upon completion
of the Initial Business Combination or the Company's liquidation, the Company
will cease paying these monthly fees.
The underwriters will be entitled to a deferred fee of $0.35 per Unit, or
$10,062,500 in the aggregate. The deferred fee will be waived by the
underwriters in the event that we do not 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 critical accounting policies:
Offering Costs associated with Initial Public Offering
The Company complies with the requirements of the Financial Accounting Standards
Board ASC 340-10-S99-1 and SEC Staff Accounting Bulletin ("SAB") Topic 5A,
"Expenses of Offering." Offering costs were allocated to the separable financial
instruments issued in the Initial Public Offering based on a relative fair value
basis, compared to total proceeds received. Offering costs associated with the
Units were allocated between temporary equity and the Public Warrants by the
relative fair value method. Offering costs of $555,761 consisted principally of
costs incurred in connection with preparation for the Initial Public Offering.
These offering costs, together with the underwriter fees of $15,812,500, were
allocated between temporary equity, the Public Warrants and the Private Warrants
in a relative fair value method upon completion of the Initial Public Offering.
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A 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 stockholder's 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 stockholder's (deficit) equity section of our balance
sheet.
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Net Loss per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." Net loss per share of common stock is computed
by dividing net loss by the weighted average number of shares of common stock
outstanding for the period. The Company applies the two-class method in
calculating earnings per share. The remeasurement adjustment associated with the
redeemable shares of Class A Common Stock is excluded from earnings per share as
the redemption value approximates fair value.
The calculation of diluted loss per share of common stock does not consider the
effect of the warrants issued in connection with the (i) Initial Public Offering
and (ii) the Private Placement. As a result, diluted earnings per share of
common stock is the same as basic earnings per common stock for the periods
presented. As of September, 2022, the warrants are exercisable to purchase
16,000,000 shares of Class A common stock in the aggregate. As of September 30,
2021, there were no shares or warrants outstanding.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset
or paid to transfer of a liability, in an orderly transaction between market
participants at the measurement date. US GAAP establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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