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. 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," "Item 1A. Risk Factors" and elsewhere in this Annual Report.
Overview
We are a blank check company formed under the laws of the State of Delaware for
the purpose of effecting a merger, share exchange, asset acquisition, stock
purchase, recapitalization, reorganization or other similar business combination
with one or more businesses or entities. We intend to effectuate our business
combination using cash from the proceeds of the IPO 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 complete a business
combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2022 were organizational activities,
those necessary to prepare for the IPO, described below, and identifying a
target for our 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 net income of $29,196,383, which
consists of a change in fair value of warrant liabilities of $24,327,600,
interest earned on marketable securities held in the trust account of
$8,012,147, offset by operating costs of $1,507,012, an unrealized loss on
marketable securities held in our trust account of $11,277 and provision for
income taxes of $1,625,075.
For the year ended December 31, 2021, we had a net loss of $3,357,927, which
consists of a change in fair value of warrant liabilities of $973,200, operating
costs of $1,924,838 and transactions cost related to warrants of $598,246,
offset by interest income on marketable securities held in the trust account of
$129,753 and an unrealized gain on marketable securities held in our trust
account of $8,604.
Liquidity, Capital Resources and Going Concern
On February 17, 2021, we consummated the IPO of 55,200,000 Units at a price of
$10.00 per Unit, which includes the full exercise by the underwriters of the
over-allotment option, at $10.00 per Unit, generating gross
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proceeds of $552,000,000. Simultaneously with the closing of the IPO, we
consummated the sale of 14,040,000 Private Placement Warrants to the Sponsor at
a price of $1.00 per warrant, generating gross proceeds of $14,040,000.
Following the IPO, the exercise of the over-allotment option and the sale of the
Private Placement Warrants, a total of $552,000,000 was placed in the trust
account. We incurred $29,883,354 in transaction costs, including $10,048,000 of
underwriting fees, net of $992,000 reimbursed from the underwriters, $19,320,000
of deferred underwriting fees and $515,354 of other costs.
As of December 31, 2022, we had cash and marketable securities held in the trust
account of $558,882,227 (including $8,139,227 of interest income partially
offset by permitted withdrawals of $1,257,000) 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 and to pay working capital expenses
subject to an annual limit of $1,000,000 (to the extent available). The Company
withdrew $1,257,000 to pay tax obligations and fund working capital needs,
during the year ended December 31, 2022.
For the year ended December 31, 2022, cash used in operating activities was
$894,415. Net income of $29,196,383 was affected by a change in fair value of
warrant liabilities of $24,327,600, interest earned on marketable securities
held in the trust account of $8,012,147, deferred tax provision of $334,099 and
an unrealized gain on marketable securities held in the trust account of
$11,277. Changes in operating assets and liabilities provided $1,903,573 of cash
for operating activities.
For the year ended December 31, 2021, cash used in operating activities was
$2,450,346. Net loss of $3,357,927 was affected by the change in fair value of
warrant liabilities of $973,200, the portion of the offering costs allocable to
the warrant liabilities of $598,246, interest earned on marketable securities
held in the trust account of $129,753 and an unrealized gain on marketable
securities held in the trust account of $8,604. Changes in operating assets and
liabilities used $525,508 of cash for operating activities.
In February 2023, we instructed the trustee with respect to the trust account to
liquidate the marketable securities held in the trust account and thereafter to
hold all funds in the trust account in cash. As a result, we will receive
minimal interest, if any, on the funds held in 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 deferred
underwriting commissions and 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 $1,413,885. 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 initial stockholders 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 warrants identical to the
Private Placement Warrants, at a price of $1.00 per warrant at the option of the
lender.
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
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in-depth due diligence and negotiating a business combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our business combination. Moreover, we may need to
obtain additional financing either to complete our business combination or
because we become obligated to redeem a significant number of our Public Shares
upon consummation of our 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 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 upon expiration of the
completion window. 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.
In connection with the Company's assessment of going concern considerations in
accordance with ASC Subtopic 205-40, Presentation of Financial Statements- Going
Concern, the Company had until February 17, 2023 to consummate a business
combination. The Company has entered into a non-binding letter of intent that
sets forth the preliminary terms and conditions of a potential business
combination with a private company that meets the Company's investment criteria
and principles and with which the Company has had discussions over an extended
period of time. As a result, the Company now has until May 17, 2023 to complete
a business combination. It is uncertain that the Company will be able to
negotiate a definitive agreement for a business combination and consummate a
business combination by this time. If a business combination is not consummated
by this date and an extension not obtained by the Sponsor, there will be a
mandatory liquidation and subsequent dissolution of the Company. Management has
determined that the potential mandatory liquidation and 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 17, 2023. The
Company intends to complete a business combination before the mandatory
liquidation date.
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
The Company agreed, commencing on February 11, 2021 through the earlier of the
Company's consummation of a business combination and its liquidation, to pay an
affiliate of the Sponsor a total of $30,000 per month for office space,
administrative and support services.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$19,320,000 in the aggregate. The deferred fee will be waived by the
underwriters in the event that the Company does not 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
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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Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible conversion in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A 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' deficit section of our
balance sheets.
Warrant Liabilities
The Company accounts for the Warrants in accordance with the guidance contained
in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, the Company
classifies the Warrants as liabilities at their fair value and adjusts the
Warrants to fair value at each reporting period. This liability is subject to
re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our statements of operations. The Public Warrants
and Private Placement Warrants for periods where no observable traded price was
available are valued using a Monte Carlo simulation and a modified Black-Scholes
model, respectively. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date.
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of Financial
Accounting Standards Board ASC 260, "Earnings Per Share." Net income (loss) per
common share is computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the period. Remeasurement associated
with the redeemable shares of Class A common stock is excluded from net income
(loss) per common share as the redemption value approximates fair value.
Recent Accounting Standards
The Company's 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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