The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the "initial business combination"). Our Sponsor is DC
Rainier SPV LLC, a Delaware limited liability company ("Sponsor"). While we may
pursue an initial business combination target in any industry or geographic
region, we intend to focus on established, technology focused businesses that
have an aggregate enterprise value of approximately $500 million to $2.0 billion
and would benefit from access to public markets and the operational and
strategic expertise of our management team and board of directors. We will seek
to capitalize on the significant experience of our management team in
consummating an initial business combination with the ultimate goal of pursuing
attractive returns for our shareholders.
The Registration Statement for our initial public offering was declared
effective on October 4, 2021 (the "Initial Public Offering"). On October 7,
2021, we consummated the Initial Public Offering of 17,250,000 units (the
"Units") consisting of one share of common stock of the Company, par value
$0.0001 per share (the "Common Stock") and one redeemable warrant ("Warrant"),
each Warrant entitling the holder thereof to purchase three-fourths of one share
of Common Stock for $11.50 per share. The Units were sold at $10.00 per Unit
including the full exercise of the underwriters' over-allotment option,
generating gross proceeds of $172.5 million, and incurring transaction costs of
approximately $12.3 million, consisting of $6.9 million of deferred underwriting
fees, approximately $1.1 million of other offering costs, and approximately $4.3
million as a cost of the Initial Public Offering in accordance with Staff
Accounting Bulletin Topic 5A and 5T.
Simultaneously with the closing of the Initial Public Offering, the Company
completed the private sale of 596,200 Units (the "Private Placement Units") at a
purchase price of $10.00 per Private Placement Unit (the "Private Placement"),
to the Sponsor and the Company's CEO and CFO, generating gross proceeds to the
Company of approximately $6.0 million. The Private Placement Units are identical
to the Units sold in the IPO.
Upon the closing of our IPO, approximately $176 million ($10.00 per Unit) of the
net proceeds of the Initial Public Offering and certain of the proceeds of the
Private Placement was placed in a trust account (the "Trust Account") located in
the United States with American Stock Transfer & Trust Company, and invested
only in U.S. "government securities," within the meaning set forth in
Section 2(a)(16) of the Investment Company Act, with a maturity of one hundred
eighty-five (185) days or less, or in money market funds meeting the conditions
of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under the
Investment Company Act, which invest only in direct U.S. government treasury
obligations, as determined by the Company, until the earlier of: (i) the
completion of our initial business combination and (ii) the distribution of the
Trust Account as otherwise permitted under our amended and restated certificate
of incorporation.
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Proposed Business Combination
On March 23, 2022, we entered into that certain Business Combination Agreement,
as amended by that certain First Amendment to Business Combination Agreement,
dated as of June 19, 2022 (the "Merger Agreement"), by and among us, Hub Cyber
Security (Israel) Ltd., a company organized under the laws of the State of
Israel (the "HUB Security"), and Rover Merger Sub, Inc., a Delaware corporation
and wholly owned subsidiary of HUB Security ("Merger Sub"), pursuant to which,
among other things, Merger Sub will merge with and into us, with us as the
surviving corporation in the merger as a direct, wholly owned subsidiary of HUB
Security (the "HUB Business Combination"). Subject to the terms of the Merger
Agreement, as amended, and customary adjustments set forth therein, the
aggregate consideration for the HUB Business Combination and related
transactions is expected to be approximately $226,885,000 of equity
consideration, as set forth in the Merger Agreement, which amount includes the
funds in the Trust Account and PIPE Financing commitments. The Merger Agreement,
as amended, provided that the outside date for the closing of the HUB Business
Combination was January 22, 2023, which date was subsequently extended to
February 28, 2023.
The Merger Agreement contains customary representations, warranties and
covenants of the parties thereto. The consummation of the proposed Merger is
subject to certain conditions as further described in the Merger Agreement.
Contemporaneously with the execution of the Merger Agreement, HUB Security
entered into subscription agreements (the "PIPE Subscription Agreements") with
certain qualified institutional buyers and accredited investors (the
"Subscribers"), pursuant to which, among other things, the Subscribers have
agreed to subscribe for ordinary shares of HUB Security that will be issued in
connection with the closing of the HUB Business Combination (the "PIPE Shares"),
for aggregate gross proceeds of approximately $50,000,000 at a purchase price of
$10.00 per share, in a private placement (the equity financing under all
Subscription Agreements, collectively, the "PIPE Financing"). The purpose of the
PIPE Financing is to raise additional capital for use in connection with the HUB
Business Combination. The PIPE Shares will be identical to ordinary shares of
HUB Security that will be issued to our existing stockholders at the time of the
closing of the HUB Business Combination, except that the PIPE Shares will not be
entitled to any redemption rights and will not be registered with the SEC. The
closing of the sale of PIPE Shares will be contingent upon the substantially
concurrent consummation of the HUB Business Combination.
See the definitive proxy statement/prospectus filed by us with the Securities
and Exchange Commission (the "SEC") on December 9, 2022, Supplement No. 1 to the
definitive proxy statement/prospectus filed with the SEC on December 22, 2022
and Supplement No. 2 to the definitive proxy statement/prospectus filed with the
SEC on December 29, 2022 (as amended or supplemented, the "proxy
statement/prospectus"), for additional information.
Extension and Redemptions
On December 21, 2022, we held a special meeting of stockholders, where the
stockholders approved an amendment (the "Extension Amendment") to our amended
and restated certificate of incorporation with the Delaware Secretary of State
to (i) extend the date by which the Company has to consummate a business
combination from January 7, 2023 to March 1, 2023 and (ii) expand the methods
that the Company may employ to not become subject to the "penny stock" rules of
the Securities and Exchange Commission.
In connection with the vote to approve the Extension Amendment, the holders of
14,535,798 shares of common stock properly exercised their right to redeem their
shares for cash at a redemption price of approximately $10.3003 per share, for
an aggregate redemption amount of approximately $149.7 million. As such,
approximately 84.3% of the public shares were redeemed and approximately 15.7%
of the public shares remain outstanding. After the satisfaction of such
redemptions, the balance in our Trust Account was approximately $28.5 million.
Business Combination Meeting
On January 4, 2023, we held a special meeting of stockholders (the "Merger
Meeting") to consider and vote upon, among other things, the HUB Business
Combination and related matters. Each of the proposals presented at the Merger
Meeting, as more fully described in the proxy statement/prospectus, was
approved. The submission of the HUB Business Combination to the stockholders
entitled holders of public shares to redeem their shares for their pro rata
portion of the funds held in the Trust Account. In connection with the Merger
Meeting, as of February 21, 2023, we received requests for redemption from
holders with respect to 2,580,436 public shares. These redemptions were in
addition to the 14,535,798 shares of common stock that were tendered for
redemption in connection with the special meeting of the Company's stockholders
held on December 21, 2022.
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Results of Operations
Our entire activity since inception up to December 31, 2022 was in preparation
for our formation, our initial public offering, and since the closing of our
initial public offering, a search for business combination candidates. We will
not generate any operating revenues until the closing and completion of our
initial business combination. We generate non-operating income in the form of
interest income on investments held in trust account. 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 year ended December 31, 2022, we had a net loss of approximately
$1,491,000 which consisted of approximately $2,828,000 in general and
administrative expenses, related party administrative fees of $120,000, $160,000
in franchise tax expense, approximately $346,000 in income tax expense, and
approximately $5,000 in interest expense, offset by income from our investments
held in the trust account of approximately $1,968,000.
For the period from February 10, 2021 (inception) through December 31, 2021, we
had a net loss of approximately $234,000 which consisted of approximately
$170,000 in general and administrative expenses, related party administrative
fees of approximately $28,000, and approximately $40,000 in franchise tax
expense, partially offset by income from our investments held in the trust
account of approximately $4,000.
Liquidity and Capital Resources
As of December 31, 2022, we had $114,248 in cash and no cash equivalents.
Our liquidity needs up to the Initial Public Offering were satisfied through
receipt of a $25,000 capital contribution from our Sponsor, certain of our
executive officers and directors, and A.G.P./Alliance Global Partners (the
"Representative"), in exchange for the issuance of the founder shares, and loans
from our Sponsor and certain executive officers for an aggregate amount of
$975,000 to cover organizational expenses and expenses related to the Initial
Public Offering pursuant to a promissory note (the "Note").
On October 7, 2021, we consummated the Initial Public Offering of 17,250,000
Units, including the full exercise of the underwriters' over-allotment option,
at a price of $10.00 per Unit, generating gross proceeds of $172.5 million.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 596,200 Private Placement Units (the "Private Placement Units") at a
price of $10.00 per Private Placement Unit in a Private Placement (the "Private
Placement"), generating gross proceeds of $5,962,000.
Following the Initial Public Offering and the Private Placement, a total of
$175,950,000 was placed in the Trust Account and we had $1,494,623 of cash held
outside of the Trust Account, after payment of costs related to the Initial
Public Offering, and available for working capital purposes. We incurred
$12,333,704 in transaction costs, including $6,900,000 in deferred underwriting
fees, $1,087,360 in other offering costs related to the Initial Public Offering
and $4,346,344 as a cost of the Initial Public Offering in accordance with Staff
Accounting Bulletin Topic 5A and 5T.
We intend to use substantially all of the net proceeds of the Initial Public
Offering, including the funds held in the Trust Account, to acquire a target
business or businesses and to pay our expenses relating thereto. To the extent
that our share capital is used in whole or in part as consideration to effect
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. 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.
In addition, in the short term and long term, in connection with a business
combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our sponsor or an affiliate of our sponsor
or our officers and directors to meet our needs through the earlier of the
consummation of our initial business combination or one year from the date of
this filing. Over this time period, we will be using these funds for paying
existing accounts payable, identifying and evaluating prospective initial
business combination candidates, performing due diligence on
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prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
Registration Rights
The holders of the founder shares, Private Placement Units and warrants that may
be issued upon conversion of working capital loans, if any, and any shares of
common stock issuable upon the exercise of the Private Placement Warrants will
be entitled to registration rights pursuant to a registration rights agreement.
These holders will be entitled to certain demand and "piggyback" registration
rights. We will bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement and Business Combination Agreement
The Company paid an underwriting discount of $0.0333 per Unit, or $500,000 in
the aggregate, at the closing of the Initial Public Offering. An additional fee
equal to 4.0% of the gross proceeds of the Initial Public Offering, or
$6,900,000, will be payable to the Representative for services rendered in
connection with the business combination. This business combination fee will
become payable to the Representative from the amounts held in the Trust Account
solely in the event that the Company completes an initial business combination,
subject to the terms of the underwriting agreement and the business combination
agreement, each dated October 4, 2021.
Administrative Services Agreement
Commencing on the date that our securities were first listed on The Nasdaq
Global Market and continuing until the earlier of our consummation of an initial
business combination or our liquidation, we have agreed to pay an affiliate of
our Sponsor a total of $10,000 per month for office space, utilities,
secretarial support and administrative services, subject to deferral until
consummation of our initial business combination. We recorded administrative
services expenses of $28,000 for the period from February 10, 2021 (inception)
to December 31, 2021, in general and administrative expenses in connection with
the related agreement in the accompanying statement of operations.
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 expenses during the
periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
Common stock subject to possible redemption
We account for the common stock subject to possible redemption in accordance
with the guidance in ASC 480, Distinguishing Liabilities from Equity. Common
stock subject to mandatory redemption are classified as a liability instrument
and are measured at fair value. Conditionally redeemable common stock (including
common stock that feature 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) are classified as temporary equity. At all other
times, common stock are classified as stockholders' equity. The Company's common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events.
Risks and Uncertainties
Our management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that while it is reasonably possible that the virus could have a
negative effect on our financial position, results of operations and/or search
for a target company, the specific impact is not readily determinable as of the
balance date.
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Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material impact on our
financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Emerging Growth Company Status
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things,
(i) provide an auditor's attestation report on our system of internal controls
over financial reporting, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies, (iii) comply with any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five (5) years following the completion of our Initial Public Offering
or until we otherwise no longer qualify as an "emerging growth company."
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