GIGL 5 References in this report (the "Quarterly Report") to "we," "us," "our" or the "Company" refer toGigCapital5, Inc. References to our "management" or our "management team" refer to our officers and directors, and references to the "Founder" refer toGigAcquisitions5, LLC . The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this "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. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek," "may," "might," "plan," "possible," "potential," "should, "would" and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's final prospectus for our initial public offering filed with theU.S. Securities and Exchange Commission (the "SEC"). The Company's securities filings can be accessed on the EDGAR section of theSEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a newly organized Private-to-Public Equity (PPE) company, also known as a blank check company or special purpose acquisition vehicle, incorporated in theState of Delaware and formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with one or more businesses or entities. We have not identified an acquisition target. We intend to effectuate our initial Business Combination using cash from the proceeds from the sale of units (the "Public Units") in our initial public offering (the "Offering"), the sale of the units (the "Private Placement Units") to our Founder and Underwriters, the sale of common stock to our Founder, our common equity or any preferred equity that we may create in accordance with the terms of our charter documents, debt, or a combination of cash, common or preferred equity and debt. The Public Units sold in the Offering each consisted of one share of common stock, and one redeemable warrant to purchase our common stock. The Private Placement Units were substantially similar to the Public Units sold in the Offering, but for certain differences in the warrants included in each of them. For clarity, the warrants included in the Public Units are referred to herein as the "public warrants", and the warrants included in the Private Placement Units are referred to herein as the "private warrants".
The issuance of additional shares of common stock or the creation of one or more classes of preferred stock during our initial Business Combination:
• may significantly dilute the equity interest of investors in the Offering
who would not have pre-emption rights in respect of any such issue;
• may subordinate the rights of holders of common stock if the rights,
preferences, designations and limitations attaching to the preferred
shares are senior to those afforded our shares of common stock;
• could cause a change in control if a substantial number of shares ofcommon 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 shares of common stock.
15
--------------------------------------------------------------------------------Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after our
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 any document
governing such debt contains covenants restricting our ability to obtain
such financing while the debt security is outstanding;
• our inability to pay dividends on our shares of 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
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.
We expect to incur significant costs in the pursuit of our acquisition plans. 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. For the period fromJanuary 19, 2021 (date of inception) throughSeptember 30, 2021 , our only activities have been organizational activities, those necessary to prepare for the Offering and to identify a target business for the Business Combination. We do not expect to generate any operating revenues until after completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held in the Trust Account atOppenheimer & Co., Inc. inNew York, New York withContinental Stock Transfer & Trust Company acting as trustee, which was funded after the Offering to hold an amount of cash and marketable securities equal to that raised in the Offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited balance sheet ofSeptember 29, 2021 as filed with theSEC onOctober 5, 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. For the three months endedSeptember 30, 2021 , we had a net loss of$204,228 , which consisted of operating expenses of$142,971 , a provision for income taxes of$38 and other expense from the change in fair value of warrant liability of$61,346 , that were partially offset by interest income on marketable securities held in the Trust Account of$127 . For the period fromJanuary 19, 2021 (date of inception) toSeptember 30, 2021 , we had a net loss of$239,977 , which consisted of operating expenses of$178,720 , a provision for income taxes of$38 and other expense from the change in fair value of warrant liability of$61,346 , that were partially offset by interest income on marketable securities held in the Trust Account of$127 .
Liquidity and Capital Resources
During the period fromJanuary 19, 2021 (date of inception) toSeptember 30, 2021 , the Founder purchased a net of 5,735,000 Founder Shares, after giving effect to the forfeiture onSeptember 23, 2021 of 4,312,500 Founder Shares, for an aggregate purchase price of$25,000 , or$0.0043592 per share. The Company also issued 5,000 insider shares toMr. Weightman , its Treasurer and Chief Financial Officer, pursuant to the Insider Shares Grant Agreement datedSeptember 23, 2021 between the Company andMr. Weightman . The 5,000 shares granted toMr. Weightman are subject to forfeiture and cancellation if he resigns or the services are terminated for cause prior to the completion of the Business Combination. OnSeptember 28, 2021 , the Company consummated the Initial Public Offering ("IPO") of 23,000,000 Public Units, including the issuance of 3,000,000 Public Units as a result of the Underwriters' exercise in full of their over-allotment option. The Public Units were sold at a price of$10.00 per Public Unit, generating gross proceeds to the Company of$230,000,000 . 16 -------------------------------------------------------------------------------- As ofSeptember 30, 2021 , we held cash and marketable securities in the amount of$232,300,000 (excluding$127 of interest earned but not received) in the trust account. The marketable securities consisted of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in directU.S. government obligations. Interest income earned from the funds held in the Trust Account may be used by us to pay taxes. For the nine months endedSeptember 30, 2021 , cash used in operating activities was$25,799 , consisting of a net loss of$239,977 , interest earned on marketable securities held in the Trust Account of$127 , plus an increase in prepaid expenses and other current assets of$725,400 and an increase in other assets of$346,580 , that were partially offset by the increase in liabilities of$1,129,739 , due to increase in accounts payable, including payable to related parties, and accrued liabilities of$1,129,701 , and other current liabilities of$38 , and an increase in the fair value of the warrant liability of$61,346 and stock-based compensation of$95,200 . We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable by us), to acquire a target business or businesses to complete our initial Business Combination and to pay our expenses relating thereto. We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations to be approximately$200,000 . Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. To the extent that our capital stock is used in whole or in part as consideration to affect our initial Business Combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business or businesses. Such working capital funds could be used in a variety of ways including continuing or expanding the target business' operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders' fees which we had incurred prior to the completion of our initial Business Combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses. As ofSeptember 30, 2021 , we had cash of$2,051,697 held outside the Trust Account. If the proceeds not held in the Trust Account become insufficient to allow us to operate for at least 12 months from the closing date of the Offering, assuming that a Business Combination is not consummated during that time, we intend to manage our cash flow through the timing and payment of expenses or, if necessary, raise additional funds from the Sponsor to ensure the proceeds not held in the Trust Account will be sufficient to allow us to operate for at least the next 12 months. In the event that additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to the Company or at all. Over this time period, we intend to use these funds primarily for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination. If our estimates of the costs of undertaking in-depth due diligence and negotiating our 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 consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. In order to finance operating and/or transaction costs in connection with a Business Combination, our Founder, executive officers, directors, or their affiliates may, but are not obligated to, loan us funds. In the event that our initial 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$1,500,000 of such loans may be convertible into units of the post-Business Combination entity at a price of$10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units.
Following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
As ofSeptember 30, 2021 , we have not entered into any off-balance sheet financing arrangements. 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
17
--------------------------------------------------------------------------------
secretarial support. We began incurring these fees on September 24, 2021 and
will continue to incur these fees monthly until the earlier of the completion of
the Business Combination or the liquidation of the Company.
On September 23, 2021 , the Company entered into a Strategic Services Agreement
with Mr. Weightman , its Treasurer and Chief Financial Officer, who holds 5,000
insider shares. Mr. Weightman is initially receiving $2,500 per month for his
services and such amount could increase to up to $15,000 per month dependent
upon the scope of services provided, as may be mutually agreed by the parties.
The Company will pay Mr. Weightman for services rendered since September 23,
2021 and on a monthly basis thereafter for all services rendered after the
consummation of the Offering.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States of America ("GAAP") 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:
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.
Net Loss Per Common Share
Our condensed statements of operations and comprehensive loss includes a presentation of income per share for common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per share, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account by the weighted-average number of common stock subject to possible redemption outstanding since original issuance. Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted-average number of non-redeemable common stock outstanding for the period, basic and diluted. When calculating our diluted net loss per share, we have not considered the effect of (i) the incremental number of shares of common stock to settle warrants sold in the Offering and Private Placement, as calculated using the treasury stock method and (ii) the shares issued toMr. Weightman subject to forfeiture representing 5,000 shares of common stock underlying a restricted stock award for the periods it was outstanding. Since we were in net loss position during the period after deducting net income attributable to common stock subject to redemption, diluted net loss per common share is the same as basic net loss per common share for the periods presented as the inclusion of all potential common shares outstanding would have been anti-dilutive. 18 -------------------------------------------------------------------------------- In accordance with the two-class method, our net loss is adjusted for net income that is attributable to common stock subject to redemption, as these shares only participate in the income of the Trust Account and not our losses. Accordingly, net loss per common share, basic and diluted, is calculated as follows: Period from January 19, 2021 For the Three (Date of Inception) Months Ended through September 30, 2021 September 30, 2021 Common stock subject to possible redemption Numerator: Earnings allocable to common stock subject to redemption Interest earned on marketable securities held in Trust Account, net of taxes $ 89 $ 89
Net income attributable to common stock subject to possible redemption
$ 89 $ 89
Denominator: Weighted-average common shares subject
to redemption
Basic and diluted weighted-average shares
outstanding, common stock subject to possible
redemption 750,000 270,588
Basic and diluted net income per share, common stock subject to possible redemption
$ 0.00 $ 0.00
Non-Redeemable common stock
Numerator: Net loss minus net earnings - Basic and
diluted
Net loss $ (204,228 ) $ (239,977 )
Less: net income attributable to common stock subject to redemption
(89 ) (89 )
Net loss attributable to non-redeemable common stock $ (204,317 ) $
(240,066 )
Denominator: Weighted-average non-redeemable common
shares
Weighted-average non-redeemable common shares
outstanding, basic and diluted 9,699,293 8,779,216
Net loss per share non-redeemable common stock, basic
and diluted $ (0.02 ) $ (0.03 )
Common Stock subject to possible redemption
Common stock subject to mandatory redemption (if any) 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, as ofSeptember 30, 2021 , common stock subject to possible redemption is presented as temporary equity, outside of the stockholders' deficit section of our condensed balance sheet.
Warrant Liability
The Company accounts for warrants for shares of the Company's common stock that are not indexed to its own stock as liabilities at fair value on the condensed balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other expense on the condensed statements of operations and comprehensive loss. 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. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified to additional paid-in capital.
Recent Accounting Pronouncements
InAugust 2020 , theFinancial Accounting Standards Board 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 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 for fiscal years beginning afterDecember 15, 2021 and should be applied on a full or modified retrospective basis. Early adoption is permitted, but no earlier than fiscal years beginning afterDecember 15, 2020 , including interim 19
-------------------------------------------------------------------------------- periods within those fiscal years. The Company adopted ASU 2020-06 effectiveJanuary 19, 2021 . The adoption of ASU 2020-06 did not have a material impact on the Company's condensed financial statements.
We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial statements.
© Edgar Online, source
