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 "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on
Form 10-K.
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Overview
We are a blank check company formed under the laws of the State of Delaware on
September 2, 2020, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. We intend to effectuate our
Business Combination using cash from the proceeds of the Initial Public Offering
and the sales 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 raise capital or to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities through December 31, 2021 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 initial 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 in
connection with searching for, and completing, a Business Combination.
For the year ended December 31, 2021, we had net income of $6,955,943, which
consisted of a change in fair value of warrant liabilities of $12,353,695 and
interest earned on marketable securities held in the Trust Account of $86,099
offset by operating and formation costs of $3,217,590, transaction costs
allocated to warrant liabilities of $794,263, and a loss on initial issuance of
Private Placement Warrants of $1,471,998.
For the period from September 2, 2020 (inception) through December 31, 2020, we
had a net loss of $1,000, which consisted of operating and formation costs.
Liquidity and Capital Resources
On February 2, 2021, we consummated the Initial Public Offering of 21,999,960
Units, at a price of $10.00 per Unit, which included the full exercise by the
underwriters of their over-allotment option in the amount of 2,869,560 Units,
generating gross proceeds of $219,999,600. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 6,399,992 Private
Placement Warrants to the Sponsor at a price of $1.00 per Private Placement
Warrant generating gross proceeds of $6,399,992.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $219,999,600
was placed in the Trust Account, and we had $1,517,076 of cash held outside of
the Trust Account, after payment of costs related to the Initial Public
Offering, and available for working capital purposes. We incurred $12,630,102 in
transaction costs, including $4,399,992 of underwriting fees, $7,699,986 of
deferred underwriting fees and $530,124 of other offering costs.
For the year ended December 31, 2021, cash used in operating activities was
$1,479,836. Net income of $6,955,943 was affected by the change in fair value of
warrant liabilities of $12,353,695, a loss on initial issuance of Private
Placement Warrants of $1,471,998, transaction costs allocated to warrant
liabilities of $794,263 and interest earned on marketable securities held in the
Trust Account of $86,099. Changes in operating assets and liabilities provided
$1,737,754 of cash for operating activities.
For the period from September 2, 2020 (inception) through December 31, 2020,
cash used in operating activities was $0. Net loss of $1,000 was affected by the
changes in operating assets and liabilities.
As of December 31, 2021, we had cash and marketable securities held in the Trust
Account of $220,085,699. 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, 2021, we had cash of $50,039. 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
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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.
On July 23, 2021 and October 26, 2021, the Company's founders committed to
provide us with an aggregate of $2,500,000 in loans. The loans, if issued, will
be non-interest bearing, unsecured and will be repaid upon the consummation of a
Business Combination. If the Company does not consummate a Business Combination,
all amounts loaned to the Company will be forgiven except to the extent that we
have funds available outside of the Trust Account to repay such loans.
On February 25, 2022, the Company entered into a non-interest bearing promissory
note with the sponsor for a principal of $500,000 "the Sponsor Loan." The
promissory note under the Sponsor Loan is payable on the earlier of (i) January
28, 2023 and (ii) the consummation of a Business Combination. The principal
balance may be prepaid at any time.
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
(except as described above), 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 $1.00 per warrant, at the option of the
lender. The warrants would be identical to the Private Placement Warrants.
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 in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, then notwithstanding the Sponsor Loan, 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 Business Combination because we do
not have sufficient funds available to us, we will be forced to cease operations
and liquidate the Trust Account. In addition, following our Business
Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
Going Concern
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 February 3, 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 not requested by the Sponsor,
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 is not requested by the Sponsor, 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 February 3, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. 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, purchase obligations, or long-term liabilities, other than i) the
Sponsor Loan, and ii) an agreement to pay an affiliate of the Sponsor a monthly
fee of $10,000 for office space,
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utilities, secretarial and administrative support services. We began incurring
these fees on January 28, 2021 and will continue to incur these fees monthly
until the earlier of the completion of the Business Combination and our
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,699,986
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 the Company
completes 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.
Warrant Liabilities
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815 under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust 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 fair value of the Public Warrants were initially estimated using
a Monte Carlo simulation approach. For periods subsequent to the detachment of
the Public Warrants from the Units, the close price of the Public Warrant price
was used as the fair value as of each relevant date. The fair value of the
Private Placement Warrants were valued using a Modified Black Scholes Option
Pricing Model.
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' equity (deficit) section
of our balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common stock outstanding during the period.
Accretion associated with the redeemable shares of Class A common stock is
excluded from income (loss) per common share as the redemption value
approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update No.2020-06,
"Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU
2020-06"), which simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. ASU 2020-06 removes certain
settlement conditions that are required for equity contracts to qualify for the
derivative scope exception and it also simplifies the diluted earnings per share
calculation in certain areas. ASU 2020-06 is effective for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted. The Company adopted ASU 2020-06 effective
as of January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the
Company's financial statements.
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 consolidated financial statements.
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