You should read the following discussion of our financial condition and results
of operations in conjunction with our unaudited condensed financial statements
for the period ended September 30, 2022, and related notes included elsewhere in
this filing and our audited consolidated financial statements and accompanying
notes included in Item 8 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021, filed with the SEC on April 19, 2022 (the "2021
Form 10-K"). This discussion and analysis and other parts of this filing contain
forward-looking statements based upon current beliefs, plans and expectations
that involve risks, uncertainties and assumptions. Our actual results and the
timing of selected events could differ materially from those anticipated in
these forward-looking statements as a result of several factors, including those
set forth under "Risk Factors" and elsewhere in this filing and those set forth
in Part I, Item 1A. "Risk Factors" in the 2021 Form 10-K and under the heading
"Forward-Looking Statements" in this Quarterly Report on Form 10-Q.
Overview
We are a blank check company incorporated on March 8, 2021, as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities (the "Business
Combination"). We intend to effectuate our initial Business Combination using
cash from the proceeds of our initial public offering ("IPO") and the sale of
the private placement warrants, our shares, debt or a combination of cash,
equity and debt.
The issuance of additional shares of our common stock in a Business Combination:
may significantly dilute the equity interest of investors in the IPO, which
? dilution would increase if the anti-dilution provisions in the Class B common
stock resulted in the issuance of Class A common stock on a greater
than one-to-one basis upon conversion of the Class B common stock;
may subordinate the rights of holders of shares of our Class A common stock if
? shares of preferred stock are issued with rights senior to those afforded our
Class A common stock;
could cause a change in control if a substantial number of shares of our
? Class A common stock are issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could result
in the resignation or removal of our present officers and directors;
may have the effect of delaying or preventing a change of control of us by
? diluting the share ownership or voting rights of a person seeking to obtain
control of us; and
May adversely affect prevailing market prices for our units, shares of Class A
? common stock and/or warrants; and may not result in adjustment to the exercise
price of our warrants.
Similarly, if we issue debt or otherwise incur significant debt, it could result
in:
? default and foreclosure on our assets if our operating revenues after an
initial Business Combination are insufficient to repay our debt obligations;
acceleration of our obligations to repay the indebtedness even if we make all
? principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt is payable on demand;
our inability to obtain necessary additional financing if the debt contains
? covenants restricting our ability to obtain such financing while the debt is
outstanding;
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? our inability to pay dividends on our Class A common stock;
using a substantial portion of our cash flow to pay principal and interest on
? our debt, which will reduce the funds available for dividends on our Class A
common stock if declared, expenses, capital expenditures, acquisitions and
other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
limitations on our ability to borrow additional amounts for expenses, capital
? expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our competitors
who have less debt.
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 from March 8, 2021 (inception) through September 30, 2022,
were organizational activities, those necessary to prepare for our IPO, and the
search for a target company for an initial Business Combination. We do not
expect to generate any operating revenues until after the completion of our
initial Business Combination. We expect to generate non-operating income in the
form of interest income on marketable securities held in the trust account
established at the time of the IPO to hold certain proceeds from the IPO and the
concurrent sale of the private placement warrants ("Trust Account following")
the IPO. 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 $222,640,
which consists of formation and operating costs of $379,100, which was offset by
a gain on marketable securities (net), dividends and interest, held in Trust
Account of $601,740.
For the nine months ended September 30, 2022, we had a net loss of $559,203,
which consists of formation and operating costs of $1,301,314 which was offset
by the provision for income taxes of $109,576 a gain on marketable securities
(net), dividends and interest, held in Trust Account of $851,687.
For the three months ended September 30, 2021, we did not have a net loss or
income as the Company had primarily performed its formation activities in
previous quarters.
For the period from March 8, 2021 (inception) through September 30, 2021, we had
a net loss of $10,060 consisting of formation and operating costs of the
Company.
Liquidity, Capital Resources and Going Concern
Our liquidity needs were satisfied prior to the completion of our IPO through
$18,750 paid by our sponsor, Everest Consolidator Sponsor, LLC (the "Sponsor")
(after giving effect to the repurchase by us of 1,437,500 shares of our Class B
common stock from our sponsor for an aggregate purchase price of $6,250) to
cover certain of our offering and formation costs in exchange for the issuance
of the founder shares to our Sponsor.
We generated gross proceeds of $178,550,000 from the (i) the sale of the units
in the IPO, after deducting offering expenses, underwriting commissions, but
excluding deferred underwriting commissions, and (ii) the sale of the private
placement warrants. Of this amount, $175,950,000 was deposited into the Trust
Account, which includes $6,037,500 of deferred underwriting commissions. The
proceeds held in the Trust Account are invested in U.S. government treasury
obligations with a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company Act which invest
only in direct U.S. government treasury obligations.
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For the nine months ended September 30, 2022, cash used in operating activities
was $816,112. In addition, the Company used cash in financing activities of
$166,203 to pay offering costs during the nine months ended September 30, 2022.
As of September 30, 2022, we had cash of $472,447 and marketable securities held
in the Trust Account of $176,802,890 (including $601,740 of interest income
earned for the nine months ended September 30, 2022) consisting of securities
held in a money market fund that invests in U.S. Treasury securities with a
maturity of 180 days or less. Interest income on the balance in the Trust
Account may be used by us to pay taxes. Through September 30, 2022, we did not
withdraw any interest earned on the Trust Account to pay our 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
taxes payable and deferred underwriting commissions), to complete our initial
Business Combination. We may withdraw interest income (if any) to pay taxes. Our
annual income tax obligations will depend on the amount of interest and other
income earned on the amounts held in the Trust Account. We expect the interest
income earned on the amount in the Trust Account (if any) will be sufficient to
pay our taxes. To the extent that our equity 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.
The $472,447 held outside of the Trust Account as of September 30, 2022, may not
be sufficient to allow the Company to operate for at least the next 12 months
from the issuance of the financial statements contained in this Form 10-Q,
assuming that a Business Combination is not consummated during that time. The
Company may need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors, or third
parties. The Company's officers, directors and Sponsor may, but are not
obligated to, loan the Company funds, from time to time or at any time, in
whatever amount they deem reasonable in their sole discretion, to meet the
Company's working capital needs. Accordingly, the Company may not be able to
obtain additional financing. If the Company is unable to raise additional
capital, it 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. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all.
The Company has 15 months from the closing of the IPO (absent any extensions of
such period by the Sponsor, pursuant to the terms described above) to consummate
the initial Business Combination. It is uncertain whether the Company will be
able to consummate the proposed Business Combination by this date. If a Business
Combination is not consummated by this date, then, unless that time is extended
(as provided above, or pursuant to a stockholder vote), there will be a
mandatory liquidation and subsequent dissolution of the Company.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern, assuming a Business Combination is not consummated. These
financial statements do not include any adjustments relating to the recovery of
the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company believes that the proceeds raised in the initial public offering and
the funds potentially available from loans from the sponsor or any of their
affiliates will be sufficient to allow the Company to meet the expenditures
required for operating its business. However, if the 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, the Company may have insufficient funds available to operate its business
prior to the initial Business Combination. Moreover, the Company may need to
obtain additional financing either to complete the Business Combination or
because the Company becomes obligated to redeem a significant number of public
shares upon completion of the Business Combination, in which case the Company
may issue additional securities or incur debt in connection with such Business
Combination.
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Contractual Obligations and Commitments
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any Class A common
stock issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of Working Capital Loans) are entitled to
registration rights pursuant to a registration rights agreement entered into
prior to the closing of the Initial Public Offering. The holders of these
securities may at any time, and from time to time, request in writing that the
Company register the resale of any or all of these securities on Form S-3 or any
similar short form registration statement that may be available at such time;
provided, however, that the Company shall not be obligated to effect such
request through an underwritten offering. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination. The Company
will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per unit, or $6,037,500
in the aggregate. Subject to the terms of the underwriting agreement, (i) the
deferred fee will be placed in our Trust Account and will be released to the
underwriters only upon the completion of our initial Business Combination and
(ii) the deferred fee will be waived by the underwriters in the event that we do
not complete an initial Business Combination.
Administrative Services Agreement
We have entered into an Administrative Services Agreement pursuant to which the
Company will pay an affiliate of the Sponsor a total of $10,000 per month for
office space, secretarial and administrative services to the company. We began
incurring these fees on November 29, 2021 and will continue to incur these fees
monthly until the earlier of the completion of the initial Business Combination
or the Company's liquidation. For the three-month period ended September 30,
2022, the Company expensed $30,000 for the services provided through the
Administrative Services Agreement. For the nine-month period ended September 30,
2022, the Company expensed $92,425 for the services provided through the
Administrative Services Agreement. As of September 30, 2022, the Company's
liability to the Sponsor was $30,000 under the Administrative Service agreement,
which is included in the Due to Related Party balance.
Critical Accounting Policies and Estimates
The Company prepares its financial statements and accompanying notes in
conformity with accounting principles generally accepted in the United States of
America, which require management to make estimates and assumptions about future
events that affect reported amounts. Estimations are considered critical
accounting estimates based on, among other things, its impact on the portrayal
of the Company's financial condition, results of operations, or liquidity, as
well as the degree of difficulty, subjectivity, and complexity in its
deployment. Critical accounting estimates address accounting matters that are
inherently uncertain due to unknown future resolution of such matters.
Management routinely discusses the development, selection, and disclosure of
each critical accounting estimates. There have been no significant changes to
the Company's estimates and assumptions during the period ended September 30,
2022, and for the period from March 8, 2021 (inception) through September 30,
2021. Reference should be made to the financial statements and related notes
included in the 2021 Form 10-K for a full description of other significant
accounting policies.
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Recent accounting standards
In August 2020, the Financial Accounting Standards Board ("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, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. Management is currently evaluating the new guidance but does
not expect the adoption of this guidance to have a material impact on the
Company's 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.
Jumpstart Our Business Startups Act of 2012
Under the JOBS Act, an "emerging growth company" can take advantage of an
extended transition period for complying with new or revised accounting
standards. This provision allows an "emerging growth company" to delay the
adoption of new or revised accounting standards that have different transition
dates for public and private companies until those standards would otherwise
apply to private companies. We meet the definition of an "emerging growth
company" and have elected to use this extended transition period for complying
with new or revised accounting standards until the earlier of the date we
(x) are no longer an emerging growth company, or (y) affirmatively and
irrevocably opt out of the extended transition period provided in the JOBS Act.
As a result, our condensed financial statements and the reported results of
operations contained therein may not be directly comparable to those of other
public companies.
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