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 our management, as well as assumptions made by, and information
currently available to, the 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 our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K. 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 formed under the laws of the State of Delaware on
November 24, 2020 for the purpose of entering into a merger, share exchange,
asset acquisition, stock purchase, recapitalization, reorganization or other
similar business combination with one or more businesses or entities (the
"Business Combination"). We intend to effectuate our Business Combination using
cash from the proceeds of the Initial Public Offering and the sale of the
Private Placement Units, 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 complete a Business
Combination will be successful.
Results of Operations
We have not generated any revenues to date. Our only activities from November
24, 2020 (inception) through December 31, 2022 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, 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 loss of $581,523, which
consists of formation and operational costs of $1,593,491 and provision for
income tax of $214,321, offset by interest earned on marketable securities held
in the Trust Account of $1,226,289.
For the year ended December 31, 2021, we had a net loss of $8,480, which
consists of formation and operational costs.
Liquidity and Capital Resources
On January 11, 2022, we consummated the Public Offering of 7,500,000 Units, at
$10.00 per Unit, generating gross proceeds of $75,000,000. Simultaneously with
the closing of the IPO, we consummated the sale of 5,250,000 warrants, at a
price of $1.00 per warrant in a private placement to (i) the Sponsor which
purchased 5,062,500 warrants (the "Sponsor Warrants") at a price of $1.00 per
Sponsor Warrant, each exercisable to purchase one share of Common Stock at
$11.50 per share, generating total proceeds of $5,062,500 and (ii) Raymond James
& Associates, Inc., which purchased an aggregate of 187,500 warrants at a price
of $1.00 per warrant, each exercisable to purchase one share of Common Stock at
$11.50 per share ("RJ Warrants" and, together with the Sponsor Warrants, the
"Private Placement Warrants").
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On January 14, 2022, the underwriter fully exercised their over-allotment option
with respect to the 1,125,000 option units. As a result, the underwriters were
due an additional $225,000 underwriter discount and are entitled to an
additional $393,750 in a deferred underwriting discount. In lieu of receiving
$225,000 in cash for the underwriter discount, the underwriters paid $196,875 in
cash and received 28,125 Private Placement Warrants.
Following the closing of the IPO on January 11, 2022 and the underwriters' fully
exercise of over-allotment option on January 14, 2022, $87,975,000 ($10.20 per
Unit) from the net proceeds of the sale of the Units in the IPO and
over-allotment and the sale of the Private Placement Warrants was placed in a
trust account (the "Trust Account"). We incurred $5,063,802 consisting of
$1,725,000 of underwriting discount, $3,018,750 of deferred underwriting
discount, and $320,052 of other offering costs.
For the year ended December 31, 2022, cash used in operating activities was
$1,192,622. Net loss of $581,523 was affected by interest earned on marketable
securities held in the Trust Account of $1,226,289. Changes in operating assets
and liabilities provided $615,190 of cash for operating activities.
For the year ended December 31, 2021, we did not have cash used in operating
activities.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $89,201,289 (including $1,226,289 of interest income) consisting of U.S.
Treasury Bills with a maturity of 185 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.
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 $762,326. 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 loans may be convertible into Private
Placement 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.
The Company will need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors, or third
parties. The Company's officers, directors and Sponsor may, but are not
obligated to, loan the Company funds, from time to time or at any time, in
whatever amount they deem reasonable in their sole discretion, to meet the
Company's working capital needs. Accordingly, the Company may not be able to
obtain additional financing. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until July 11, 2023 to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by this time. If a Business Combination is
not consummated by this date and an extension has not been requested by the
Sponsor and approved by the Company's stockholders, 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 an
extension not requested by the Sponsor, and potential subsequent dissolution
raise 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 after July 11, 2023. The
Company intends to continue to search for and seek to
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complete a Business Combination before the mandatory liquidation date. The
Company is within 12 months of its mandatory liquidation date as of the time of
filing of this Annual Report on Form 10-K.
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 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, other than an agreement to pay an
affiliate of the Sponsor, a total of $10,000 per month for general and
administrative services including office space, utilities, and secretarial
support. Upon completion of the initial business combination or liquidation, we
will cease paying these monthly fees.
The underwriters are entitled to deferred underwriting commissions of $0.35 per
unit, or $3,018,750 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 an Initial Business Combination, subject to the terms of the
underwriting agreement for the offering.
Critical Accounting Estimates
The preparation of consolidated 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 consolidated 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:
Derivative Warrants
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its financial instruments, including
issued warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and ASC
815-15. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at
the end of each reporting period.
Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A 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 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, shares of Class A common
stock subject to possible redemption are presented at redemption value as
temporary equity, outside of the stockholders' equity section of our balance
sheets.
Net Loss Per Shares of Common Stock
We comply with the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net loss per share of common stock is computed by dividing
net loss by the weighted average number of shares of common stock outstanding
during the period, excluding common stock subject to forfeiture. As of December
31, 2022 and 2021, we did not have any dilutive securities and other contracts
that could, potentially, be exercised or converted into common stock and then
share in the earnings. As a result, diluted loss per common share is the same as
basic loss per common share for the period presented.
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Recent Accounting Pronouncements
Our 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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