The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the condensed 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. 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 "Special Note Regarding Forward-Looking Statements," and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated on
We have not selected any specific business combination target. However, our
management team had been actively in discussions with potential business
combination partners in their capacity as officers of
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
? may significantly dilute the equity interest of investors in our Class A common stock, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock; ? may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; ? could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; ? may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and ? may adversely affect prevailing market prices for our Class A common stock and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; ? acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; 26 ? our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; ? our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; ? our inability to pay dividends on our common stock; ? using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; ? limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; ? increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; ? limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and ? other purposes and other disadvantages compared to our competitors who have less debt.
As indicated in the accompanying financial statements, at
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities for the period from
Prior to the closing of the Public Offering, we had no activity in relation to the Company's operations.
For the period from
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 search and due diligence expenses and we expect those expenses to increase substantially.
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Liquidity and Capital Resources
In
The net proceeds from the Public Offering and Private Placement were
approximately
For the period from
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 taxes payable and deferred underwriting commissions), to complete our Initial Business Combination. We may withdraw interest income (if any) to pay income taxes, if any. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We do not expect the interest income earned on the amount in the Trust Account (if any) will be sufficient to pay our income and franchise taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our Initial 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.
We account for all of the Class A common stock issued in our Public Offering as redeemable stock and not permanent equity and so we report negative stockholders' equity.
Subsequent to our Public Offering and prior to the completion of our Initial
Business Combination, we have available to us proceeds held outside the Trust
Account (initially, approximately
We do not believe we will need to raise additional funds following our Public Offering in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 initial business combination. Moreover, we may need to obtain additional financing either to complete our Initial Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such business combination.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. 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.
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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 entered into any agreements for non-financial assets.
Contractual Obligations
In connection with the Public Offering, the Company agreed to pay
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP 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. The Company has identified the following as its critical accounting policies:
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Net Income or Loss per Common Share:
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." Net income or loss per common share is computed by dividing net income or loss applicable to common shareholders by the weighted average number of common shares outstanding during the period plus, to the extent dilutive, the incremental number of common shares to settle warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 18,999,705 Class A common shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per common share is the same as basic income (loss) per common share for the period presented.
The Company has two classes of shares, which are referred to as Class A common shares and Class B common shares. Income and losses are shared pro rata among the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding during the respective period.
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The following table reflects the net loss per share for the period from
Class A Class B
Numerator:
Basic and diluted net income per common share: Allocation of net loss - basic and diluted$ 181,000 $ 232,000 Denominator: Basic and diluted weighted average common shares: 3,556,000 4,579,000 Basic and diluted net loss per common share$ (0.05 ) $ (0.05 ) Accounting for Warrants:
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the instruments'
specific terms and applicable authoritative guidance in
Management has concluded that the Public Warrants and Private Placement Warrants issued in connection with the Company's Public Offering, pursuant to the warrant agreements, qualify for equity accounting treatment.
Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and
Class A Common Stock Subject to Possible Redemption:
All of the 19,490,000 shares of Class A common stock sold as part of a Unit in
the Public Offering discussed in Note 3 contain a redemption feature which
allows for the redemption of common shares under the Company's liquidation or
tender offer/stockholder approval provisions. In accordance with FASB ASC 480,
redemption provisions not solely within the control of the Company require the
security to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity's
equity instruments, are excluded from the provisions of FASB ASC 480. Although
the Company did not specify a maximum redemption threshold, its articles of
association provide that in no event will it redeem its Public Shares in an
amount that would cause its net tangible assets (tangible assets less intangible
assets and liabilities) to be less than
The Company recognizes changes immediately as they occur and adjusts the
carrying value of the securities at the end of each reporting period. Increases
or decreases in the carrying amount of redeemable Class A common stock are
affected by adjustments to additional paid-in capital. Accordingly, at
Gross proceeds of Public Offering$ 194,900,000 Less: Offering costs (32,347,000 )
Plus: Accretion of carrying value to redemption value 34,296,000 Class A common shares subject to redemption
$ 196,849,000 30
Recent Accounting Standards
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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