The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Cautionary Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 31, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or 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 through December 31, 2021 were organizational activities,
those necessary to prepare for the initial public offering, described below,
and, subsequent to the initial public offering, identifying 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 generate
non-operating income in the form of interest income on marketable securities
held in the trust account (defined below). 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 year ended December 31, 2021, we had a net income of $5,268,961, which
consists of the change in fair value of warrant liabilities of $6,756,458 and
interest earned on marketable securities held in the trust account of $17,003,
offset by formation and operational costs of $1,022,676 and transaction costs
related to the initial public offering of $481,824.
Liquidity and Capital Resources
On March 19, 2021, we consummated the initial public offering of 25,000,000
units at $10.00 per unit, generating gross proceeds of $250,000,000.
Simultaneously with the closing of the initial public offering, we consummated
the sale of 4,500,000 private placement warrants at a price of $1.50 per private
placement warrant in a private placement to the sponsor generating gross
proceeds of $6,750,000.
Following the initial public offering and the sale of the private placement
warrants, a total of $250,000,000 was placed in a trust account (the "trust
account"). We incurred $14,246,969 in initial public offering related costs,
including $5,000,000 of underwriting fees, $8,750,000 of deferred underwriting
fees and $496,969 of other offering costs.
On May 6, 2021, in connection with the underwriters' exercise of their
over-allotment option in full, we consummated the sale of an additional
3,750,000 units at a price of $10.00 per unit, generating total gross proceeds
of $37,500,000. In addition, we also consummated the sale of an additional
500,000 private placement warrants at $1.50 per private placement warrant,
generating gross proceeds of $750,000. A total of $37,500,000 of the net
proceeds from the sale of the additional units and private placement warrants
was placed in the trust account, bringing the aggregate proceeds placed in the
trust account to $287,500,000.
For the year ended December 31, 2021, cash used in operating activities was
$1,052,786. Net income of $5,268,961 was affected by non-cash changes in fair
value of warrant liabilities of $6,756,458, interest earned on marketable
securities held in trust account of $17,003 and transaction costs associated
with the initial public offering of $481,824. Other changes in operating assets
and liabilities used $30,110 of cash for operating activities.
As of December 31, 2021, we held investments in the trust account in the amount
of $287,517,003 (including approximately $17,003 of interest earned). Interest
income on the balance in the trust account may be used by us to pay taxes.
Through December 31, 2021, we have not withdrawn any interest earned from 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 (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.
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As of December 31, 2021, we had cash of $366,612. 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 order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, the sponsor, or certain of our officers
and directors or their affiliates 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 $1,500,000 of such loans may be convertible into, at the
option of the lender. The warrants would be identical to the private placement
warrants.
On February 25, 2022, we issued a promissory note to our sponsor pursuant to
which we may borrow up to an aggregate principal amount of $500,000. The
promissory note is non-interest bearing and payable upon consummation of our
initial business combination. At our sponsor's discretion, the promissory note
may be converted into warrants of the post-business combination entity at a
price of $1.50 per warrant. The warrants would be identical to the private
placement warrants.
On March 18, 2022, we amended and restated the promissory note originally issued
to our sponsor on January 8, 2021, to extend the due date of amounts outstanding
under the promissory note to the earlier of December 31, 2022 and the date of
consummation of our initial business combination.
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.
Going Concern
We have until March 19, 2023 to consummate a business combination. It is
uncertain that we will be able to consummate a business combination by this
time. If a business combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a business combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. Management plans to consummate a business
combination prior to the mandatory liquidation date. No adjustments have been
made to the carrying amounts of assets or liabilities should we be required to
liquidate after March 19, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per unit, or
$10,062,500 in the aggregate . The deferred fee will become payable to the
underwriters 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.
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:
Warrant Liabilities
We account for the warrants in accordance with the guidance contained in ASC
815-40-15 under which the warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the warrants as
liabilities at their fair value and adjust the warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our
statement of operations. The private placement warrants and the warrants
included as part of the units in the initial public offering (the "public
warrants" and together with the private placement warrants, the "warrants") for
periods where no observable traded price was available are valued using a
lattice model, specifically a binomial lattice model incorporating the
Cox-Ross-Rubenstein methodology. For periods subsequent to the detachment of the
public warrants from the units, the public warrant quoted market price was used
as the fair value as of each relevant date.
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Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and 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 at redemption value as temporary equity,
outside of the stockholders' equity section of our balance sheet.
Net Income per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common stock outstanding for the period. We have two classes
of shares which are referred to as Class A common stock and Class B Common
stock. Income is shared pro rata between the two classes of shares. Net income
per common share is calculated by dividing the net income by the weighted
average shares of common stock outstanding for the respective period. Accretion
associated with the redeemable shares of Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued 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. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. The impact of the adoption of ASU 2020-06 is being
assessed by the company, however no significant impact on the financial
statements is anticipated.
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.
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