You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our unaudited condensed financial
statements and related notes included in Part I, Item 1 of this Quarterly
Report. This discussion and other parts of this report contain forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in Part I, Item 1A "Risk Factors" of our Annual Report on
Form 10-K for the year ended December 31, 2021, as supplemented by Part II, Item
1A "Risk Factors" of our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2022 and June 30, 2022 and this Quarterly Report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are not historical facts and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Quarterly Report on Form 10-Q including, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form 10-K filed with the SEC on April 1, 2022,the
Company's Quarterly Report on Form 10-Q filed with the SEC on May 13, 2022, the
Company's Quarterly Report on Form 10-Q filed with the SEC on August 11, 2022
and this Quarterly Report. The Company's securities filings can be accessed on
the EDGAR section of the SEC's website at www.sec.gov. Except as expressly
required by applicable securities law, the Company disclaims any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on February 11, 2021. We were incorporated for the purpose of effecting a
merger, share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses that we have not yet
identified. The registration statement for the Company's Initial Public Offering
was declared effective on November 17, 2021. On November 22, 2021, we
consummated the Initial Public Offering of 27,600,000 Units, including the
issuance of 3,600,000 Units as a result of the underwriters' full exercise of
their over-allotment option, at $10.00 per Unit, generating gross proceeds of
$276.0 million, and incurring offering costs of approximately $16.3 million, of
which approximately $9.7 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 7,520,000 Private Placement Warrants at a price of
$1.00 per Private Placement Warrant to the Sponsor, generating proceeds of
approximately $7.5 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$276.0 million ($10.00 per Unit) of net proceeds, including the net proceeds of
the Initial Public Offering and certain of the proceeds of the Private
Placement, were placed in a trust account with Continental Stock Transfer &
Trust Company acting as trustee and invested in United States "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, as determined by us, until the earlier of: (i)
the completion of a business combination and (ii) the distribution of the trust
account as described below.
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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 Warrants, 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 any deferred underwriters fees and taxes payable on the
income earned on the trust account) at the time we signed 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 complete a business combination within 18 months from the
closing of the Initial Public Offering, or May 22, 2023, or during any Extension
Period, we will (i) cease all operations except for the purpose 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
interest earned on the funds held in the trust account (less taxes payable and
up to $100,000 of interest to pay dissolution expenses), divided by the number
of then outstanding Public Shares, which redemption will completely extinguish
public shareholders' rights as shareholders (including the right to receive
further liquidating distributions, if any) and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject, in the
case of clauses (ii) and (iii), to our obligations under Cayman Islands law to
provide for claims of creditors and in all cases subject to the other
requirements of applicable law. In such event, the Rights and warrants will
expire and be worthless.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $100,000 in cash, working capital
deficit of approximately $23,000 and the ability to borrow up to an aggregate of
$1,200,000 under the 2022 Note (as defined below).
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the payment of $25,000 from the Sponsor to cover certain
expenses on behalf of us in exchange for issuance of our Class B ordinary
shares, and loan proceeds from the Sponsor of approximately $167,000 under a
promissory note (the "2021 Note"). We partially repaid approximately $166,000 of
the 2021 Note upon closing of the Initial Public Offering and repaid the
remaining balance of approximately $1,000 on November 24, 2021. Subsequent to
the consummation of the Initial Public Offering, our liquidity has been
satisfied through the net proceeds from the consummation of the Initial Public
Offering and the Private Placement held outside of the trust account and from
the 2022 Note.
On April 1, 2022, we entered into a convertible promissory note with our Sponsor
the ("2022 Note"). Pursuant to the 2022 Note, we may borrow from the Sponsor,
from time to time, up to an aggregate of $1,500,000. Borrowings under the 2022
Note do not bear interest. The 2022 Note will mature on the earlier to occur of
(i) 18 months from the closing of the Initial Public Offering (or up to any
Extension Period, if applicable) or (ii) the effective date of the Company's
initial Business Combination. If the Company completes a Business Combination,
the Company will repay the 2022 Note out of the proceeds of the Trust Account
released to the Company. Otherwise, the 2022 Note will be repaid only out of
funds held outside the Trust Account. Up to $1,500,000 of such loans may be
converted into Private Placement Warrants of the post-Business Combination
entity at a price of $1.00 per warrant at the option of the Sponsor. The 2022
Note contains customary events of default, including those relating to the
Company's failure to repay the principal amount due upon maturity of the 2022
Note and certain bankruptcy events. In July 2022, we borrowed $300,000 under the
2022 Note. As of September 30, 2022, $300,000 was outstanding under the 2022
Note.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, Presentation of Financial Statements - Going
Concern," we have until May 22, 2023 to consummate an initial Business
Combination. It is uncertain that we will be able to consummate an initial
Business Combination by this time. If an initial Business Combination is not
consummated by this date, there will be a mandatory liquidation and subsequent
dissolution of the Company. We have determined that the mandatory liquidation,
should an initial Business Combination not occur, and potential subsequent
dissolution raises 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 May 22, 2023.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our entire activity since inception up to September 30, 2022 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
business combination. We do not expect to generate any operating revenues until
after the completion of our initial business combination. We generate
non-operating income in the form of investment income from the trust account. We
will continue to 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. Additionally, we recognize non-cash gains and losses
within other income (expense) related to changes in recurring fair value
measurement of our derivative liabilities at each reporting period.
For the three months ended September 30, 2022, we had net income of
approximately $964,000, which consisted of approximately $1.2 million gain from
investments held in the trust account, partially offset by approximately
$159,000 in general and administrative expenses and $30,000 in related party
general and administrative expenses.
For the three months ended September 30, 2021, we had a net loss of
approximately $13,000, which consisted entirely of general and administrative
expenses.
For the nine months ended September 30, 2022, we had net income of approximately
$332,000, which consisted of approximately $1 million gain from investments held
in the trust account, partially offset by approximately $602,000 in general and
administrative expenses and approximately $90,000 in related party general and
administrative expenses.
For the period from February 11, 2021 (inception) through September 30, 2021, we
had a net loss of approximately $52,000, which consisted entirely of general and
administrative expenses.
Commitments and Contingencies
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that
may be issued upon conversion of working capital loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of working capital loans and upon conversion
of the Founder Shares) were entitled to registration rights pursuant to a
registration rights agreement dated November 17, 2021 requiring us to register
such securities for resale (in the case of the Founder Shares, only after
conversion to Class A ordinary shares). The holders of these securities are
entitled to make up to three demands, excluding short form demands, that we
register such securities. In addition, the holders have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the initial Business Combination. 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 November 17, 2021 to purchase
up to 3,600,000 additional Units at the Initial Public Offering price less the
underwriting discounts and commissions. On November 22, 2021, the underwriters
consummated the exercise in full of the over-allotment option.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $5.5 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately $9.7
million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. 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.
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Related Party Loans
Our Sponsor agreed to loan us up to $300,000 pursuant to a promissory note,
dated February 12, 2021 which was later amended and restated on July 30, 2021
(the "2021 Note"). The 2021 Note was non-interest bearing, unsecured and due
upon the closing of the Initial Public Offering. We borrowed approximately
$167,000 under the 2021 Note. We repaid primarily all of the 2021 Note upon
closing of the Initial Public Offering and repaid the remaining balance of
approximately $1,000 on November 24, 2021.
On April 1, 2022, we entered into a convertible promissory note (the "2022
Note") with our Sponsor. Pursuant to the 2022 Note, we may borrow from the
Sponsor, from time to time, up to an aggregate of $1,500,000. Borrowings under
the 2022 Note do not bear interest. The 2022 Note will mature on the earlier to
occur of (i) 18 months from the closing of our initial public offering (or up to
any extension period, if applicable) or (ii) the effective date of an initial
business combination. If we complete a business combination, we will repay the
2022 Note out of the proceeds of the trust account released to us. Otherwise,
the 2022 Note will be repaid only out of funds held outside the trust account.
Up to $1,500,000 of such loans may be converted into Private Placement Warrants
of the post-business combination entity at a price of $1.00 per warrant at the
Sponsor's option. The 2022 Note contains customary events of default, including
those relating to the Company's failure to repay the principal amount due upon
maturity of the 2022 Note and certain bankruptcy events. In July 2022, we
borrowed $300,000 under the 2022 Note. As of September 30, 2022, $300,000 was
outstanding under the 2022 Note.
Administrative Services Agreement
On November 17, 2021, the Company agreed to pay an affiliate of the Sponsor
$10,000 per month for office space, secretarial and administrative support
services provided to members of the management team through the earlier of
consummation of the initial Business Combination and the liquidation. For the
three months ended September 30, 2022 and 2021, the Company incurred expenses of
$30,000 and $0, respectively, under this agreement. For the nine months ended
September 30, 2022 and for the period from February 11, 2021 (inception) through
September 30, 2021, the Company incurred expenses of approximately $90,000 and
$0, respectively, under this agreement.
In addition, the Sponsor, officers and directors, or their respective
affiliates, will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on the Company's behalf such as identifying potential
target businesses and performing due diligence on suitable Business
Combinations. The Company's audit committee will review on a quarterly basis all
payments that were made by the Company to the Sponsor, executive officers or
directors, or their affiliates. Any such payments prior to an initial Business
Combination will be made using funds held outside the Trust Account.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in accordance
with accounting principles generally accepted in the United States of America
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. A summary of our
significant accounting policies is included in Note 2 to our unaudited condensed
financial statements in Part I, Item 1 of this Quarterly Report. Certain of our
accounting policies are considered critical, as these policies are the most
important to the depiction of our unaudited condensed financial statements and
require significant, difficult or complex judgments, often employing the use of
estimates about the effects of matters that are inherently uncertain. Such
policies are summarized in the Management's Discussion and Analysis of Financial
Condition and Results of Operations section in our 2021 Annual Report on Form
10-K filed with the SEC on April 1, 2022. There have been no significant changes
in the application of our critical accounting policies during the nine months
ended September 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed financial statements included in Part I,
Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
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Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected 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, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company", we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal control 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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