The following discussion and analysis of the Company's 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 "Cautionary Note Regarding
Forward-Looking Statements," "Item 1A. Risk Factors" and elsewhere in this
Annual Report on Form 10-K.
Overview
We are a blank check company incorporated in the Cayman Islands on August 14,
2020 formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, our shares, debt or a
combination of cash, shares 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.
Recent Developments
On February 1, 2021, the Company entered into a Merger Agreement with First
Merger Sub, Second Merger Sub and PlayStudios, relating to a proposed Business
Combination transaction between the Company and PlayStudios (the "Transaction").
Pursuant to the Merger Agreement, First Merger Sub will merge with and into
PlayStudios, with PlayStudios surviving such merger as a wholly owned subsidiary
of the Company and immediately following the First Merger, PlayStudios will
merge with and into Second Merger Sub, with Second Merger Sub being the
surviving entity of the Second Merger and a wholly owned subsidiary of the
Company (the "Second Merger" and, together with the First Merger, the
"Mergers").
As a result of the Mergers, among other things, each outstanding share of common
stock of PlayStudios ("PlayStudios Common Stock") and each share of preferred
stock of PlayStudios ("PlayStudios Preferred Stock") issued and outstanding as
of the effective time of the First Merger (the "Effective Time") will be
cancelled in exchange for the right to receive Cash Electing Share (as defined
in the Merger Agreement) or New PlayStudios Class A Common Stock (as defined in
the Merger Agreement).
The Transaction will be consummated subject to the deliverables and provisions
as further described in the Merger Agreement.
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Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through December 31, 2020 were
organizational activities and those necessary to prepare for the Initial Public
Offering, identifying a target for our Business Combination, and activities in
connection with the proposed acquisition of PlayStudios. 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 income on marketable securities held after the Initial Public Offering.
We expect that we will 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 in connection with searching for, and
completing, a Business Combination.
For the period from August 14, 2020 (inception) through December 31, 2020, we
had a net loss of $238,958, which consisted of formation and operating costs of
$264,690 offset by interest earned on marketable securities held in the Trust
Account of $22,174 and an unrealized gain on marketable securities held in the
Trust Account of $3,558.
Liquidity and Capital Resources
On October 27, 2020, we consummated the Initial Public Offering of 20,000,000
Units, at a price of $10.00 per Unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 4,333,333 Private Placement Warrants to the Sponsor at a price of
$1.50 per Private Placement Warrant generating gross proceeds of $6,500,000.
On November 9, 2020, we issued an additional 1,525,000 Units for total gross
proceeds of $15,250,000 in connection with the underwriters' partial exercise of
their over-allotment option. Simultaneously with the partial closing of the
over-allotment option, we also consummated the sale of an additional 203,334
Private Placement Warrants at $1.50 per Private Placement Warrant, generating
total proceeds of $305,000.
Following the Initial Public Offering, the exercise of the over-allotment option
in part, and the sale of the Private Placement Warrants, a total of $215,250,000
was placed in the Trust Account. We incurred $12,363,821 in transaction costs,
including $4,305,000 of underwriting fees, $7,533,750 of deferred underwriting
fees and $525,071 of other costs.
For the period from August 14, 2020 (inception) through December 31, 2020, cash
used in operating activities was $932,462. Net loss of $238,958 was impacted by
interest earned on marketable securities held in the Trust Account of $22,174
and an unrealized gain on marketable securities of $3,558. Changes in operating
assets and liabilities used $673,522 of cash from operating activities.
As of December 31, 2020, we had marketable securities held in the Trust Account
of $215,275,732. We intend to use substantially all of the funds held in the
Trust Account, including any amounts representing interest earned on the Trust
Account, which interest shall be net of taxes payable and excluding deferred
underwriting commissions, to complete our Business Combination. We may withdraw
interest from the Trust Account to pay taxes, if any. To the extent that our
share capital or debt is used, in whole or in part, as consideration to complete
a 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, 2020, we had cash of $1,061,717 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, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs 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. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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 warrants, at a
price of $1.50 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
In the event the merger with Playstudios does not close, 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. These conditions raise substantial doubt about the
Company's ability to continue as a going concern if a Business Combination is
not consummated.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2020. 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 the Sponsor
a monthly fee of $10,000 for office space, secretarial and administrative
support services provided to the Company. We began incurring these fees on
October 22, 2020 and will continue to incur these fees monthly until the earlier
of the completion of a Business Combination and the Company's liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,533,750
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 a
Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("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. We have identified the following critical accounting policies:
Class A Ordinary Shares Subject to Redemption
We account for our Class A Ordinary Shares subject to possible conversion in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Class A Ordinary Shares subject to
mandatory redemption are classified as a liability instrument and are measured
at fair value. Conditionally redeemable Ordinary Shares (including Ordinary
Shares 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, Ordinary Shares are classified as shareholders' equity. Our Class A
Ordinary Shares feature certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events.
Accordingly, Class A Ordinary Shares subject to possible redemption are
presented at redemption value as temporary equity, outside of the shareholders'
equity section of our balance sheet.
Net Loss Per Ordinary Share
We apply the two-class method in calculating earnings per share. Ordinary Shares
subject to possible redemption, which are not currently redeemable and are not
redeemable at fair value, have been excluded from the calculation of basic net
loss per Ordinary Share since such shares, if redeemed, only participate in
their pro rata share of the Trust Account earnings. Our net income is adjusted
for the portion of income that is attributable to Ordinary Shares subject to
redemption, as these shares only participate in the earnings of the Trust
Account and not our income or losses.
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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