References to the "Company," "Brookline Capital Acquisition Corp.," "Brookline,"
"our," "us" or "we" refer to Brookline Capital Acquisition Corp. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the unaudited interim 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 that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form
10-Q
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These
forward-looking statements are also made in reliance upon the safe harbor
provision of the Private Securities Litigation Reform Act of 1995. We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on May 27, 2020. We were
formed for the purpose of effecting a merger, share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). We are an emerging growth company and,
as such, we are subject to all of the risks associated with emerging growth
companies.
Our Sponsor is Brookline Capital Holdings, LLC, a Delaware limited liability
company (the "Sponsor"), an affiliate of Brookline Capital Markets, a division
of Arcadia Securities, LLC ("Brookline"). The registration statement for our
Initial Public Offering was declared effective on January 28, 2021. On
February 2, 2021, we consummated our Initial Public Offering of 5,750,000 units
(the "Units" and, with respect to the common stock included in the Units being
offered, the "Public Shares"), including 750,000 additional Units to cover
over-allotments (the "Over-Allotment Units"), at $10.00 per Unit, generating
gross proceeds of $57.5 million, and incurring offering costs of approximately
$1.3 million.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 247,000 private placement units
(each, a "Private Placement Unit" and collectively, the "Private Placement
Units") at a price of $10.00 per unit to the Sponsor, generating proceeds of
approximately $2.5 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement,
approximately $58.1 million ($10.10 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 ("Trust Account") in the United States maintained by
Continental Stock Transfer & Trust Company, as trustee, and will be invested
only in U.S "government securities" within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940, as amended, or the Investment Company Act,
having a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S.
government treasury obligations, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
Our management has broad discretion with respect to the specific application of
the net proceeds of its Initial Public Offering and the sale of Private
Placement Units, although substantially all of the net proceeds are intended to
be applied generally toward consummating a Business Combination. Our initial
Business Combination must be with one or more operating businesses or assets
with a fair market value equal to at least 80% of the net assets held in the
Trust Account (excluding the amount of taxes payable on the income earned on the
Trust Account) at the time we sign a definitive agreement in connection with the
initial Business Combination. However, we will only complete a Business
Combination if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an
investment company under the Investment Company Act.
If we are unable to consummate a Business Combination within the Combination
Period, we will (i) cease all operations except for the purposes of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including any interest earned on the Trust Account not previously
released to us to pay its tax obligations and up to $100,000 of interest to pay
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expenses, divided by the number of then outstanding Public Shares, which
redemption will completely extinguish public stockholders' rights as
stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and; (iii) as promptly as reasonably
possible following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate, subject in each
case to our obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights
or liquidating distributions with respect to our warrants, which will expire if
we fail to complete a Business Combination within the Combination Period.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $352,000 in our operating bank
account, and working capital of approximately $402,000. The balance of the cash
proceeds generated from the Initial Public Offering and Private Placement was
transferred into the Trust Account.
Our liquidity needs to date have been satisfied through a payment of $25,000
from the Sponsor to pay for certain offering costs in exchange for issuance of
the Founder Shares (as defined in Note 4), the loan under the Note of
approximately $116,000 (as defined in Note 4), and the net proceeds from the
consummation of the Private Placement not held in the Trust Account. We fully
repaid the Note on February 2, 2021. In addition, in order to finance
transaction costs in connection with an Initial Business Combination, our
officers, directors and initial stockholders may, but are not obligated to,
provide us Company Working Capital Loans (see Note 4). As of June 30, 2021,
there were no amounts outstanding under any Working Capital Loans.
Until the consummation of a Business Combination, we will be using the funds not
held in the Trust Account for identifying and evaluating prospective acquisition
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to acquire, and
structuring, negotiating and consummating the Business Combination. We will need
to raise additional capital through loans or additional investments from our
Sponsor, shareholders, officers, directors, or third parties. Our officers,
directors and Sponsor may, but are not obligated to, loan us funds from time to
time or at any time, in whatever amount they deem reasonable in their sole
discretion, to meet our working capital needs. Accordingly, we may not be able
to obtain additional financing. If we are 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.
We cannot provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial
doubt about the Company's ability to continue as a going concern until the
earlier of the consummation of the Business Combination or the date the Company
is required to liquidate, May 2, 2022. These financial statements do not include
any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible
that the virus could have a negative effect on our financial position, results
of our operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the condensed financial statements. The
condensed financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception through June 30, 2021 related to our
formation, the preparation for an Initial Public Offering, and since our Initial
Public Offering, our activity has been limited to the search for a prospective
initial Business Combination. We will not generate any operating revenues until
the closing and completion of our initial Business Combination.
For the three months ended June 30, 2021, we had a loss of approximately
$282,000, which consisted of approximately $113,000 of general and
administrative expenses, $30,000 of administrative expenses - related party,
approximately $20,000 of franchise tax expense, a
non-operating
loss of approximately $120,000 for changes in fair value of derivative warrant
liabilities, partially offset by approximately $2,000 net gain from investments
held in the Trust Account.
For the six months ended June 30, 2021, we had a loss of approximately $452,000,
which consisted of approximately $195,000 of general and administrative
expenses, $50,000 of administrative expenses - related party, approximately
$42,000 of franchise tax expense, a
non-operating
loss of approximately $169,000 for changes in fair value of derivative warrant
liabilities, partially offset by approximately $4,000 net gain from investments
held in the Trust Account.

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Contractual Obligations
Administrative Support Agreement
Commencing on the effective date of the prospectus, the Company agreed to pay an
affiliate of the Sponsor a total of $10,000 per month for office space,
secretarial and administrative services provided to the Company. Upon completion
of the initial Business Combination or the Company's liquidation, the Company
will cease paying these monthly fees.
We incurred $30,000 and $50,000 in general and administrative expenses in the
accompanying unaudited condensed statements of operations for the three and six
months ended June 30, 2021, respectively.
Registration and Stockholder Rights
The holders of the Founder Shares, Representative Shares, Private Placement
Units and units that may be issued upon conversion of Working Capital Loans (and
in each case holders of their component securities, as applicable) are entitled
to registration rights pursuant to a registration rights agreement signed upon
the effective date of the Initial Public Offering. These holders are entitled to
make up to three demands, excluding short form registration demands, that the
Company registered such securities for sale under the Securities Act. In
addition, these holders will have "piggy-back" registration rights to include
their securities in other registration statements filed by us. However, the
holders of the Representative Shares may not exercise demand and "piggyback"
registration rights after five (5) and seven (7) years after the effective date
of the registration statement for our Initial Public Offering and may not
exercise demand rights on more than one occasion. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a
45-day
option from the date of the final prospectus included in the Initial Public
Offering to purchase up to 750,000 additional Units at the Initial Public
Offering price less the underwriting discounts and commissions. On February 2,
2021, the underwriters fully exercised the over-allotment option.
The underwriters were entitled to an underwriting discount of $0.15 per unit, or
$862,500 in the aggregate, paid upon the closing of the Initial Public Offering.
Critical Accounting Policies
Investments Held in Trust Account
Our portfolio of investments is comprised solely of U.S. government securities,
within the meaning set forth in Section 2(a)(16) of the Investment Company Act,
with a maturity of 185 days or less, or investments in money market funds that
invest in U.S. government securities and generally have a readily determinable
fair value, or a combination thereof. When our investments held in the Trust
Account are comprised of U.S. government securities, the investments are
classified as trading securities. When our investments held in the Trust Account
are comprised of money market funds, the investments are recognized at fair
value. Trading securities and investments in money market funds are presented on
the condensed balance sheets at fair value at the end of each reporting period.
Gains and losses resulting from the change in fair value of these securities is
included in net gain from investments held in the Trust Account in the
accompanying unaudited condensed statements of operations. The estimated fair
values of investments held in the Trust Account are determined using available
market information.
Common stock subject to possible redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in the Financial Accounting Standards Board's ("FASB")
Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities
from Equity" ("ASC 480"). Shares of common stock subject to mandatory redemption
(if any) are classified as liability instruments and are measured at fair value.
Shares of 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, shares of
common stock are classified as stockholders' equity. Our common stock features
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, at June 30,
2021, 5,263,743 shares of common stock subject to possible redemption at the
redemption amount were presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). 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.

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The 2,875,000 warrants issued in connection with the Initial Public Offering
(the "Public Warrants") are classified as equity. The 123,500 Private Placement
Warrants are recognized as derivative liabilities in accordance with ASC 815.
Accordingly, we recognize the Private Placement Warrants as liabilities at fair
value and adjust the instruments to fair value at each reporting period. The
liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our condensed statements of operations. The fair value of the
Private Placement Warrants are measured using a Monte Carlo simulation model.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs
incurred through the Initial Public Offering that were directly related to the
Initial Public Offering. Offering costs are allocated to the separable financial
instruments issued in the Initial Public Offering based on a relative fair value
basis, compared to total proceeds received. Offering costs associated with
warrant liabilities are expensed as incurred, presented as
non-operating
expenses in the condensed statements of operations. Offering costs associated
with the Public Shares were charged to stockholders' equity upon the completion
of the Initial Public Offering.
Net loss per common shares
Net loss per share is computed by dividing net loss by the weighted-average
number of common shares outstanding during the periods.
Our unaudited condensed statements of operation include a presentation of loss
per share for common shares subject to redemption in a manner similar to the
two-class
method of income per share. Net loss per share, basic and diluted for Public
Shares is calculated by dividing the investment income earned on the Trust
Account, net of applicable income and franchise taxes available to be withdrawn
from the Trust Account by the weighted average number of Public Shares
outstanding for the period.
Net loss per share, basic and diluted for Founder Shares is calculated by
dividing the net loss, less net income attributable to Public Shares, resulting
in a net loss, by the weighted average number of
non-redeemable
common shares outstanding for the periods.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
Off-Balance
Sheet Arrangements
As of June 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing 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, the condensed financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be adopted by the
PCAOB 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 certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.

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