The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes included elsewhere in this Annual Report. Some of the information
contained in this discussion and analysis or set forth elsewhere in this Annual
Report, including information with respect to our plans and strategy for our
business, includes forward-looking statements that involve risks, uncertainties
and other factors that could cause actual results to differ materially from
those made, projected or implied in the forward-looking statements. Please see
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the "Risk Factors" section for a discussion of the uncertainties, risks and
assumptions associated with these statements. For a complete discussion of
forward-looking statements, see the section above entitled "Cautionary Note
Regarding Forward-Looking Statements; Risk Factor Summary."
Overview
We are a blank check company incorporated in Delaware in October 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, which we refer to throughout this Annual Report on Form 10-K as our
initial business combination. We have not selected any specific
business-combination target and hawse have not, nor has anyone on our behalf,
initiated any substantive discussions, directly or indirectly, with any
business-combination target.
As of December 31, 2021, the Company had not yet commenced any operations. All
activity for the period from October 28, 2020 (inception) through December 31,
2021 relates to the Company's formation and the initial public offering ("IPO")
described below. The Company will not generate any operating revenues until
after the completion of its initial Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income on
cash and cash equivalents from the proceeds derived from the IPO.
The registration statement for the Company's IPO was declared effective on
January 25, 2021 (the "Effective Date"). On January 28, 2021, the Company
consummated the IPO of 10,350,000 units (the "Units" and, with respect to the
shares of Class A common stock included in the Units sold, the "Public Shares"),
at $10.00 per Unit, generating gross proceeds of $103,500,000, which offering is
further described in Note 2.
Simultaneously with the closing of the IPO, the Company consummated the sale of
5,738,000 warrants (the "Private Placement Warrants") at a price of $1.00 per
Private Placement Warrant in a private placement to LMFAO Sponsor LLC, a Florida
limited liability company (the "Sponsor"), generating gross proceeds of
$5,738,000.
Transaction costs for the IPO amounted to $6,211,902 consisting of $2,070,000 of
underwriting discount, $3,622,500 of deferred underwriting fee, the fair value
of the shares issued to the underwriters of $1,000 deemed as underwriters'
compensation, and $518,402 of other offering costs. In addition, $974,009 of
cash was held outside of the Trust Account (as defined below) as of the date of
the IPO and became available for working capital purposes at such time.
Following the closing of the IPO on January 28, 2021, an amount of $105,570,000
($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and
the sale of the Private Placement Warrants was placed in a trust account ("Trust
Account") which will be invested in U.S. government securities, within the
meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 180 days or less or in any open-ended investment company that holds
itself out as a money market fund meeting the conditions of Rule 2a-7 of the
Investment Company Act, as determined by the Company. Except with respect to
interest earned on the funds held in the Trust Account that may be released to
the Company to pay its franchise and income tax obligations (less up to $100,000
of interest to pay dissolution expenses), the proceeds from the IPO and the sale
of the Private Placement Warrants will not be released from the Trust Account
until the earliest of (a) the completion of the Company's initial Business
Combination, (b) the redemption of any Public Shares properly submitted in
connection with a stockholder vote to amend the Company's amended and restated
certificate of incorporation, and (c) the redemption of the Company's Public
Shares if the Company is unable to complete the initial Business Combination
within 18 months from the closing of the IPO (or up to 21 months from the
closing of the IPO if the Company extends the period of time to consummate a
business combination, as described in more detail in the prospectus for the
IPO), subject to applicable law. The proceeds deposited in the Trust Account
could become subject to the claims of the Company's creditors, if any, which
could have priority over the claims of the Company's public stockholders.
COVID-19 Update
The full long-term impact of COVID-19 could adversely affect the economies and
financial markets worldwide, and the business of any potential target business
with which we consummate a business combination could be materially and
adversely affected. We may be unable to complete a business combination if
continued concerns relating to COVID-19 restrict travel, limit the ability to
have meetings with potential investors, or the target company's personnel,
vendors, and services providers are unavailable to negotiate and consummate a
transaction in a timely manner. The extent to which COVID-19 impacts our search
for a business combination will depend on future developments, which are highly
uncertain and cannot be predicted, including new information that may emerge
concerning the severity of COVID-19 and the actions to contain COVID-19 or treat
its impact, among others. If the disruptions posed by COVID-19 or other matters
of global concern continue for an extensive period of time, our ability to
consummate a business combination, or the operations of a target business with
which we ultimately consummate a business combination, may be materially
adversely affected.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from October 28, 2020 (inception) through December 31, 2021
were organizational activities, the initial public offering, and since the
closing of our initial public offering, the search for a prospective initial
business combination. We do not expect to generate any operating revenues until
after the completion of our initial business combination. We generate
non-operating income in the form of interest income on cash and marketable
securities held in trust account. We will incur increased expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as expenses in the pursuit of our acquisition
plans.
For the year ended December 31, 2021, we had net income of approximately $75
thousand, which consisted of approximately $1.2 million gain on warrant
liability revaluation, approximately $11 thousand of investment income earned on
marketable securities held in trust account, and offset by approximately $1.1
million of operating expenses.
For the period from October 28, 2020 (inception) through December 31, 2020, we
had a net loss of approximately $5 thousand, which consisted of operating and
formation costs.
Revenues
The Company did not generate any revenue during the twelve months ended December
31, 2021 or October 28, 2020 (inception) through December 31, 2020.
Operating Expenses
During the year ended December 31, 2021, operating expenses were approximately
$1.1 million from $5 thousand for the year ended December 31, 2020. This change
reflects formation, administrative and legal costs during the current year.
Gain on Warrant Liability
During the year ended December 31, 2021, the Company recognized a gain on
warrant liability revaluation equal to approximately $1.2 million since the fair
market value of the warrants were less than the face redemption value of such
warrants.
Other income
During the year ended December 31, 2021, investment income earned in the Trust
account was $11 thousand compared to $0 thousand for the year ended December 31,
2020.
Income Tax Provision (Benefit)
The Company did not record an income tax benefit or expense for the year ended
December 31, 2021 or 2020.
Under ASC 740-10-30-5, Income Taxes, deferred tax assets should be reduced by a
valuation allowance if, based on the weight of available evidence, it is
more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or
all of the deferred tax assets will not be realized. The Company considers all
positive and negative evidence available in determining the potential
realization of deferred tax assets including, primarily, the recent history of
taxable earnings or losses. Based on operating losses reported by the Company
during 2020 and 2021, the Company concluded there was not sufficient positive
evidence to overcome this recent operating history. As a result, the Company
believes that a valuation allowance continues to be necessary based on the
more-likely-than-not threshold noted above. The Company recorded a valuation
allowance of approximately $17 thousand and less than $1 thousand for the year
ended December 31, 2021 and 2020, respectively.
Net Loss
During the year ended December 31, 2021, the Company generated net income of $75
thousand as compared to a net loss of $5 thousand for the year ended December
31, 2020 for the reasons mentioned above.
Liquidity and Capital Resources
As of December 31, 2021, we had cash and cash equivalents of approximately $52
thousand compared with $38 thousand at December 31, 2020. Our material cash
requirements as of December 31, 2021 were expenses resulting from being a public
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company (for legal, financial reporting, accounting and auditing compliance), as
well as expenses incurred in the pursuit of our acquisition plans.
Through December 31, 2021, our liquidity needs have been satisfied through the
cash generated from our IPO and held outside the trust account, a payment of
$25,000 from our sale of our founder shares to our sponsor, and a loan from our
sponsor for $151,413, which we repaid in full on January 28, 2021.
On January 28, 2021, we consummated our initial public offering of 10,350,000
units. Each unit consists of one share of our Class A common stock and one
redeemable warrant, with each warrant entitling the holder thereof to purchase
one share of Class A common stock for $11.50 per share. The units were sold at a
price of $10.00 per unit, generating gross proceeds of $103,500,000.
Simultaneously with the closing of our initial public offering, we consummated
the sale of 5,738,000 private placement warrants, at a price of $1.00 per
private placement warrant, in a private placement to our sponsor, generating
gross proceeds of $5,738,000.
Following the closing of our initial public offering and the sale of the private
placement warrants, an aggregate amount of $105,570,000 (which amount includes
the deferred underwriting discount) was placed in the trust account established
in connection with the initial public offering. Transaction costs amounted to
$6,211,902, consisting of $2,070,000 in underwriting discount, $3,622,500 in
deferred underwriting discount, the fair value of the shares issued to the
underwriters of $1,000 deemed as underwriters' compensation, and $518,402 of
other offering costs.
Net cash used in operations was $1,169 thousand during the year ended December
31, 2021 compared with $113 thousand during the year ended December 31, 2020.
Net cash used in investing activities was approximately $105,570 thousand during
the year ended December 31, 2021 as compared to net cash used in investing
activities of $0 during the year ended December 31, 2020. Net cash provided by
financing activities was $106,753 thousand during the year ended December 31,
2021 as compared $151 thousand for the year ended December 31, 2020.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account not
previously released to us (less taxes payable) to complete our initial business
combination. We may withdraw interest to pay our franchise and income taxes. To
the extent that our equity or debt is used, in whole or in part, as
consideration to complete our initial business combination, we may apply the
balance of the cash released to us from the trust account for general corporate
purposes, including for maintenance or expansion of operations of the
post-transaction company, the payment of principal or interest due on
indebtedness incurred in completing our initial business combination, to fund
the purchase of other companies or for working capital.
As of December 31, 2021, we had cash of $52 thousand. 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 of prospective target businesses or their
representatives or owners, review corporate documents and material agreements of
prospective target businesses, and structure, negotiate, complete a business
combination, and implement our plan of dissolution.
In order to finance transaction costs in connection with a business combination,
our sponsor or an affiliate of the sponsor, or certain of our officers and
directors may, but are not obligated to, loan us funds as may be required. Such
loans, or working capital loans, would be convertible into private
placement-equivalent warrants at a price of $1.00 per warrant (which, for
example, would result in the holders being issued 1,500,000 warrants if
$1,500,000 of notes were so converted), at the option of the lender. Such
warrants would be identical to the private placement warrants, including as to
exercise price, exercisability and exercise period. In the event that a business
combination does not close, we may use a portion of proceeds held outside the
trust account to repay the working capital loans but no proceeds held in the
trust account would be used to repay the working capital loans.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
We did not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities at
December 31, 2021 and 2020.
The underwriter of our initial public offering is entitled to underwriting
discounts and commissions of 5.5%, of which 2.0% ($2,070,00) was paid at the
closing of our initial public offering, and 3.5% ($3,622,500) was deferred. The
deferred
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underwriting discount will become payable to the underwriter 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. The underwriter
is not entitled to any interest accrued on the deferred underwriting discount.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with Generally Accepted Accounting Principles 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 not
identified any critical accounting policies.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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