Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report.





Recent Developments

On November 21, 2022, the Company, NEXT and Merger Sub entered into the NEXT Merger Agreement pursuant to which (i) Merger Sub will be merged with and into NEXT, and NEXT will become a wholly-owned subsidiary of the Company, which will change its name to "NXTCLEAN Fuels Inc.," or such other name as mutually agreed to by the Company and NEXT; and (ii) each stockholder of NEXT will receive newly-issued Company securities, including, as applicable, shares of Class A common stock and/or options or warrants pursuant to which Class A common stock will be issued. Prior to, and contingent upon, the closing of the NEXT Business Combination, the Company is to effect a recapitalization pursuant to which all convertible debt shall be converted into common stock.

On March 1, 2023, NEXT announced Lisa A. Holmes, MSHR, has been appointed to the board of directors.

For a full description of the NEXT Merger Agreement and the proposed NEXT Business Combination, please see "Item 1. Business."

On March 22, 2023, we filed with the SEC a proxy statement on Schedule 14A in connection with a proposal to amend our amended and restated certificate of incorporation to extend the date by which we must complete an initial business combination from April 14, 2023 to December 14, 2023, or such earlier date as determined by the Company's board of directors. If the Extension Amendment Proposal is approved and the board of directors decides to implement the Extension, the sponsor or its designees have agreed to contribute to us loans equal to the lesser of (x) $35,000 or (y) $0.035 for each public share that is not redeemed for each calendar month (commencing on April 15, 2023 and ending on the 14th day of each subsequent month), or portion thereof, that is needed by the Company to complete the business combination until December 14, 2023. Our shareholders will vote on the Extension Amendment Proposal at the special meeting of stockholder scheduled to be held on April 10, 2023. In connection with the Extension Amendment Proposal, holders of our public shares are entitled to redeem their public shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares. For more information, please see our proxy statement on Schedule 14A filed with the SEC on March 22, 2023.





Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from January 4, 2021 (inception) through December 31, 2022 were organizational activities, those necessary to prepare for our initial public offering, and 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. 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, 2022, we had a net income of $4,892,914, which consists of interest income on marketable securities held in the trust account and bank account of $2,539,764 and change in fair value of warrant liability of $4,420,646, offset by operating costs of $1,548,829 and offering costs allocated to warrants at the IPO date of $27,670.

For the period from January 4, 2021 (inception) through December 31, 2021, we had net loss of $3,758, which consisted of formation and operating costs of $3,768, partially offset by bank interest income of $10.

Liquidity, Going Concern and Capital Resources

On January 14, 2022, we consummated our initial public offering of 17,250,000 units, at $10.00 per unit, generating gross proceeds of $172,500,000. Simultaneously with the closing of the IPO, we completed the private placement of an aggregate of 8,037,500 private placement warrants at a price of $1.00 per private placement warrant, generating gross proceeds of $8,037,500.

Following the IPO, the full exercise of the over-allotment option, and the sale of the private placement warrants, a total of $175,950,000 was placed in the trust account. We incurred $10,799,030 in IPO-related costs, including $3,450,000 of underwriting commissions, $6,900,000 of deferred underwriting commissions, and $449,030 of other offering costs, partially offset by the reimbursement of $1,035,000 of offering expenses by the underwriters.

For the year ended December 31, 2022, cash used in operating activities was $1,378,921. Net income of $4,892,914 was affected by interest earned on marketable securities held in the trust account of $2,537,410, financing costs of warrant issuance of $27,670, deferred tax benefit of $119,625 and change in fair value of the warrant liability of $4,420,646. Changes in operating assets and liabilities provided $538,926 in cash for operating activities.

For the period from January 4, 2021 (inception) through December 31, 2021, cash used in operating activities was $2,121.

As of December 31, 2022, we had marketable securities held in the trust account of $178,487,410 (including approximately $2,537,410 of interest income) consisting of securities held in a money market fund 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 December 31, 2022, we have not withdrawn any interest earned from the trust account.





                                       31

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 $451,473. 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 Working Capital Loans may be convertible into private placement-equivalent 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.

In connection with the Company's assessment of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," the Company has until April 2023, to consummate a business combination. It is uncertain that the Company will be able to consummate a business combination by this time. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company until one year from the issuance of these financial statements. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate in April 2023. The Company intends to complete a business combination before the mandatory liquidation date.

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 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 $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the initial business combination or liquidation, the Company will cease paying these monthly fees.

The underwriters are entitled to a deferred underwriting discount of 4.0% of the gross proceeds of the IPO upon the completion of the Company's initial business combination.

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:





                                       32





Warrant Liability

The Company accounts for private placement warrants for shares of the Company's common stock that are not indexed to its own shares as liabilities at fair value on the balance sheet. The private placement warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants. At that time, the portion of the warrant liability related to the warrants will be reclassified to additional paid-in capital.

Class A Common Stock Subject to Possible Redemption

The Company's Class A common stock sold as part of the units in the IPO contains a redemption feature which allows for the redemption of such public shares in connection with the Company's liquidation, or if there is a stockholder vote or tender offer in connection with the Company's initial business combination. In accordance with ASC 480-10-S99, the Company classifies such public shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The public shares sold as part of the units in the IPO will be issued with other freestanding instruments (i.e., public warrants) and as such, the initial carrying value of public shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The public shares are subject to ASC 480-10-S99 and are currently not redeemable as the redemption is contingent upon the occurrence of events mentioned above. According to ASC 480-10-S99-15, no subsequent adjustment is needed if it is not probable that the instrument will become redeemable.

Net Income (Loss) Per Share of Common Stock

Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Remeasurement adjustment associated with the redeemable shares of Class A common stock is excluded from income (loss) per share of common stock as the redemption value approximates fair value.





Recent Accounting Standards

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06- "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 for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

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.

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 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.


                                       33

© Edgar Online, source Glimpses