The following discussion and analysis of the Company's 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 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 Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 24, 2020 for the purpose of effectuating 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.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial business combination,
including the Transaction.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from September 24, 2020 (inception) through December 31,
2022 were organizational activities, the initial public offering and identifying
a target company for a business combination, including NioCorp. 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. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as due diligence expenses in connection with our
search for targets for our initial business combination.
For the year ended December 31, 2022, we had a net loss of $7,878,010, which
consists of operating costs of $7,356,748, loss on the change in fair value of
warrant liabilities of $4,016,667 and a provision for income taxes of $827,236,
offset by the interest earned on marketable securities held in the trust account
of $4,322,641.
For the year ended December 31, 2021, we had net income of $10,096,611, which
consists of a gain on the change in fair value of warrant liabilities of
$12,076,667, a gain on the change in fair value of over-allotment option of
$138,932, and interest earned on marketable securities held in the trust account
of $16,667, offset by the operating costs of $1,391,322 and warrant transaction
costs of $744,333.
The Transaction
On September 25, 2022, the Company, NioCorp and Merger Sub entered into the
NioCorp Business Combination Agreement. As a result of the Transaction, we will
become a subsidiary of NioCorp.
The terms of the NioCorp Business Combination Agreement, which contains
customary representations and warranties, covenants, closing conditions and
other terms relating to the Transaction, as well as the terms of the Ancillary
Agreements, are summarized in Note 6 to the accompanying financial statements
and are incorporated herein.
Liquidity and Capital Resources
On March 22, 2021, we consummated the initial public offering of 30,000,000
units at $10.00 per unit, generating gross proceeds of $300,000,000.
Simultaneously with the closing of the initial public offering, we consummated
the sale of 5,666,667 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant in a private placement to the sponsor, generating gross
proceeds of $8,500,000. We incurred transaction costs of $17,025,820, consisting
of $6,000,000 of underwriting fees, $10,500,000 of deferred underwriting fees
($5,000,000 upon the consummation of the NioCorp Business Combination due to a
fee reduction) and $525,820 of other offering costs.
For the year ended December 31, 2022, cash used in operating activities was
$2,149,968. Net loss of $7,878,010 was affected by the change in fair value of
warrant liabilities of $4,016,667 and interest earned on marketable securities
held in the trust account of $4,322,641. Changes in operating assets and
liabilities provided $6,034,016 of cash for operating activities.
For the year ended December 31, 2021, cash used in operating activities was
$1,272,765. Net income of $10,096,611 was affected by the change in fair value
of warrant liabilities of $12,076,667, the change in fair value of
over-allotment option $138,932, interest earned on marketable securities held in
the trust account of $16,667, and warrant transaction costs of $744,333. Changes
in operating assets and liabilities provided $118,557 of cash for operating
activities.
As of December 31, 2022, we had marketable securities held in the trust account
of $303,162,732 (including $3,162,732 of interest income) consisting of a money
market fund invested in U.S. Treasury Bills. Interest income on the balance in
the trust account may be used by us to pay taxes. Through December 31, 2022, we
have withdrawn $1,176,576 interest earned from the trust account to pay
franchise and income taxes.
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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.
As of December 31, 2022, we had cash of $2,483. We intend to use the funds held
outside the trust account primarily to pay the operating costs incurred in
connection with the pending 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 Working Capital Loans may be
convertible 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 November 14, 2022 and January 11, 2023, the Company issued two
unsecured promissory notes in the principal amount of $250,000 and $235,000,
respectively, to the sponsor for working capital purposes. The notes are
non-interest bearing and payable on the earlier of: (i) March 22, 2023 or, if
the Company has extended, in accordance with its organizational documents, the
deadline by which it must complete its initial business combination, then such
date, as extended by which the Company must complete the business combination,
or (ii) the date on which the Company consummates the business combination. As
of December 31, 2022 and 2021, $250,000 and $0 of Working Capital Loans were
outstanding, respectively. As of February 23, 2023, the outstanding capital
loans were $485,000.
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.
Liquidity and Going Concern
We will need to raise additional capital through loans or additional investments
from the sponsor, stockholders, officers, directors, or third parties. Our
officers, directors and the sponsor may, but are not obligated to, loan us
funds, from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion, to meet our working capital needs. Accordingly, we may
not be able to obtain additional financing. If we are unable to raise additional
capital, we 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. We cannot provide any assurance that new financing will be available
to us on commercially acceptable terms, if at all. These conditions raise
substantial doubt about our ability to continue as a going concern one year from
the date that our financial statements included in this Report are issued.
In connection with the Company's assessment of going concern considerations in
accordance with the Financial Accounting Standards Board's ("FASB's") Accounting
Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," the Company has until March
22, 2023, to consummate a business combination, including the Transaction. 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 and an extension
of the period of time the Company has to complete a business combination has not
been approved by the Company's stockholders, there will be a mandatory
liquidation and subsequent dissolution of the Company. We have determined that
our insufficient capital and mandatory liquidation, should a business
combination not occur, and an extension not approved by the stockholders of the
Company, and potential subsequent dissolution raise substantial doubt about the
Company's ability to continue as a going concern one year from the date these
financial statements are issued. No adjustments have been made to the carrying
amounts of assets or liabilities should the Company be required to liquidate
after March 22, 2023. We intend to continue to complete a business combination,
including the Transaction before the mandatory liquidation date. The Company is
within 12 months of its mandatory liquidation date as of the time of filing of
this Report.
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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 December 31, 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
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 total of $20,000 per month for office space,
administrative and support services. We began incurring these fees on March 17,
2021 and will continue to incur these fees monthly until the earlier of the
completion of the business combination or our liquidation.
The underwriters of the initial public offering of the Company were initially
entitled to a deferred fee of $0.35 per unit, or $10,500,000 in the aggregate.
On September 6, 2022, we entered a fee reduction agreement with the underwriters
pursuant to which the underwriters have agreed to forfeit $5,500,000 of the
aggregate $10,500,000 deferred fee contingent upon the Closing. Upon the
Closing, the deferred fee will be paid to the underwriters as follows: (1)
$2,000,000 in cash from the amounts held in the trust account and (2) $3,000,000
in NioCorp Common Shares, subject to the terms of the underwriting agreement.
We have entered into an advisory agreement with BTIG, pursuant to which we will
pay BTIG a total of $2,000,000 for advisory services relating to our search for
and consummation of an initial Business Combination. On September 14, 2022, we
entered a fee reduction agreement with BTIG pursuant to which BTIG agreed to
forfeit its right to receive $1,047,618 of the advisory fee contingent upon the
Closing. Upon the Closing the remainder of the advisory fee will become payable
in $382,382 in cash and $570,000 in NioCorp Common Shares. If a Business
Combination is not consummated, BTIG will not be entitled to the advisory fee.
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 issued in connection with our initial public
offering in accordance with the guidance contained in ASC 815-40-15-7D 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 statements of
operations. The fair value of the Private Placement Warrants was estimated using
a Monte Carlo simulation approach. The fair value of the public warrants was
estimated using the close price of the public warrants as of December 31, 2022
and 2021.
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Class A Common Stock Subject to Possible Redemption
We account for our Class A 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' deficit. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, Class A common stock
subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders' deficit section of our balance sheets.
Net (Loss) Income Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share". We have two classes of common stock, which are referred to
as Class A common stock and Class B common stock. Net (loss) income per common
stock is computed by dividing net (loss) income by the weighted average number
of common shares outstanding for the period. Accretion associated with the
redeemable shares of Class A common stock is excluded from earnings per common
share as the redemption value approximates fair value.
The calculation of diluted (loss) income per share does not consider the effect
of the warrants issued in connection with the (i) initial public offering and
(ii) the private placement to purchase an aggregate of 15,666,667 shares of
Class A common stock in the calculation of diluted (loss) income per share,
since the exercise of the warrants is contingent upon the occurrence of future
events.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("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 us; however no significant impact on the financial statements is
anticipated.
Management does not believe that any other recently issued accounting standards,
if currently adopted, would have a material effect on our financial statements.
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