The information in this Management's Discussion and Analysis should be read in
conjunction with the accompanying unaudited financial statements and notes.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the Private Securities Litigation Reform Act of 1995. The words "believe,"
"may," "estimate," "continue," "anticipate," "intend," "should," "plan,"
"could," "target," "potential," "is likely," "will," "expect" and similar
expressions are intended to identify forward-looking statements. All statements
other than statements of historical facts contained in this report, including
among others, our strategy, future operations, future financial position, future
revenue, projected costs, prospects, plans, objectives of management and
expected market growth are forward-looking statements. Our actual results and
financial condition may differ materially from those express or implied in such
forward-looking statements. Therefore, you should not rely on any of these
forward-looking statements.
For a further list and description of various risks, relevant factors and
uncertainties that could cause future results or events to differ materially
from those expressed or implied in our forward-looking statements, see the "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" sections in this report, our Annual Report on Form 10-K
for the fiscal year ended December 31, 2021, and our other filings with the
Securities and Exchange Commission (the "SEC"). All forward-looking statements
in this report are made only as of the date hereof or as indicated and represent
our views as of the date of this report. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is not possible
for us to predict all of them. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as the result of new information,
future events or otherwise, except as required by law.
Overview
We are a blank check company incorporated on May 20, 2021 as a Delaware
corporation and formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
similar Business Combination with one or more businesses or entities. We intend
to effectuate our initial 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 raise capital or to
complete our initial business combination will be successful.
Results of Operations
We have neither engaged in any operations (other than searching for a business
combination after our IPO) nor generated any operating revenues to date. Our
only activities from January 1, 2022 through June 30, 2022 were operating
activities, to search for business combination after our IPO. We do not expect
to generate any operating revenues until after the completion of our initial
business combination. We expect to generate non-operating income in the form of
interest earned on investments held after the IPO. 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 period from May 20, 2021 (inception) through June 30, 2021, we had no
income as a result of no formation and operational costs and no interest earned
on no investments held in the trust Account.
For the period from January 1 through March 31, 2022, we had a loss of $171,917,
which consisted of formation and operational costs of $183,884 offset by
interest earned on investments held in the trust Account of $11,967.
For the period from April 1 through June 30, 2022, we had an income of $64,568,
which consisted of formation and operational costs of $137,279, and income taxes
of $6,387, offset by interest earned on investments held in the trust Account of
$208,234.
For the period from January 1, 2022, through June 30, 2022, we had a net loss of
$107,349, which consisted of formation and operational costs of $321,163, and
income taxes of $6,387, offset by interest earned on investments held in the
Trust Account of $220,201.
Liquidity and Capital Resources
On June 30, 2021 we had $25,000 in cash and a working capital deficit of
$29,000. Further, we incurred and expected to continue to incur significant
costs in pursuit of our financing and acquisition plans. Our liquidity needs
were satisfied prior to the completion of this offering through a capital
contribution from our sponsor of $25,000 for the founder shares and up to
$300,000 in loans available from our sponsor under an unsecured promissory note.
We estimated that the net proceeds from our offering will be held in the trust
account. The proceeds held in the trust account were to be invested only in U.S.
government treasury obligations with a maturity of 180 days or less or in money
market funds meeting certain conditions under Rule 2a-7 under the Investment
Company Act which invest only in direct U.S. government treasury obligations. We
expected the interest earned on the amount in the trust account will be
sufficient to pay our income taxes.
On November 12, 2021, we consummated our IPO of 14,375,000 Units, inclusive of
the underwriters' election to fully exercise their option to purchase an
additional 1,875,000 Units, at a price of $10.00 per Unit, generating gross
proceeds of $143,750,000. Simultaneously with the closing of our IPO, we
consummated the sale of 6,920,500 Private Placement Warrant to our sponsor,
Imperial Capital and I-Bankers at a price of $1.00 per Private Placement Warrant
generating gross proceeds of $6,920,500.
Following our IPO, the full exercise of the over-allotment option by the
underwriters and the sale of the Private Placement Warrants, a total of
$146,625,000 was placed in the Trust Account. We incurred $8,333,135 in
transaction costs, including $2,875,000 of underwriting fees, $5,031,250 of
deferred underwriting fees and $426,885 of other offering costs.
For the period from January 1, 2022 through June 30, 2022, cash used in
operating activities was $319,178. Net loss of $106,068 was affected by interest
earned on investments held in the Trust Account of $220,201 and changes in
operating assets and liabilities used $1,985 of cash for operating activities.
As of June 30, 2022, we had cash and investments held in the Trust Account of
$146,672,717. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account
to complete our initial business combination. We may withdraw interest to pay
taxes. During the period ended June 30, 2022, we withdrew money twice from the
Trust Account, once to reimburse the cash account that paid 2021 franchise tax,
and a second time to reimburse the cash account that paid the first installment
of 2022 franchise tax. To the extent that our capital stock 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.
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As of June 30, 2022, we had $283,149 of cash held outside of the Trust Account.
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 finance transaction costs in connection with a business combination,
our sponsor or an affiliate of our sponsor, or certain of the Company's officers
and directors may, but are not obligated to, loan the Company funds as may be
required. Up to $1,500,000 of such working capital loans may be convertible into
warrants equivalent to the Private Placement 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, the Company 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.
We monitor the adequacy of our working capital in order to meet the expenditures
required for operating our business prior to our initial business combination.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a business combination is 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
consummation of our initial business combination, in which case we may issue
additional securities or incur debt in connection with such business
combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our initial
business combination. If we are unable to complete our initial business
combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Account. In addition,
following our initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 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.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $5,031,250
in the aggregate. The deferred fee will become payable to the underwriters from
the amounts held in the Trust Account solely in the event that we complete our
initial business combination, subject to the terms of the underwriting
agreement, which was attached as an exhibit to our registration statement on
form S-1 filed with the SEC in connection with our IPO (File No. 333-260090).
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:
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Warrant Liabilities
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to our
own common stock, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the
time of warrant issuance and as of each subsequent quarterly period end date
while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in-capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption 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' equity. 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' equity section of our balance sheet.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net Loss per Common Share
Net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period. At June 30,
2022, the Company did not have any dilutive securities and/or other contracts
that could, potentially, be exercised or converted into shares of common stock
and then share in the earnings of the Company. As a result, diluted loss per
share is the same as basic loss per share for the period presented.
Remeasurement associated with the redeemable common stock is excluded from loss
per common share as the redemption value approximates fair value.
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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