The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the audited
consolidated 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 "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 on
January 14, 2021 for the purpose of effecting an Initial Business Combination.
We intend to effectuate our Initial Business Combination using cash from the
proceeds of the IPO and the sale of the Private 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 an Initial
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, 2021 were organizational activities,
those necessary to prepare for our IPO 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.
For the period from January 14, 2021 (inception) through December 31, 2021, we
had a net loss of $663,517, which primarily consisted of formation and operating
costs of $759,636, partially offset by interest earned from the Trust Account of
$5,442 and a change in fair value of overallotment liability of $90,677.
Liquidity and Capital Resources
Our liquidity needs up to August 9, 2021 had been satisfied through a payment
from the Sponsor of $25,000 (see Note 5 to the financial statements) for the
Class B Common Stock to cover certain offering costs and the loan under an
unsecured promissory note from the Sponsor of $300,000 (see Note 5 to the
financial statements). In addition, to finance transaction costs in connection
with an Initial Business Combination, Sponsor or an affiliate of the Sponsor or
certain of our officers and directors may, but are not obligated to, provide us
with Working Capital Loans (see Note 5 to the financial statements). As of
December 31, 2021, there were no amounts outstanding under any Working Capital
Loans.
On August 9, 2021, we consummated our IPO of 10,000,000 Units at $10.00 per
Unit, which is discussed in Note 3 to the financial statements, and the sale of
4,200,000 Private Warrants which is discussed in Note 4 to the financial
statements, at a price of $1.00 per Private Warrant in a private placement to
the Sponsor that closed simultaneously with the IPO. On August 18, 2021, the
underwriter of the IPO partially exercised their over-allotment option and
purchased an additional 492,480 Units, generating an aggregate of gross proceeds
of $4,924,800 (see Note 3 to the financial statements). Simultaneously with the
exercise of the underwriters' over-allotment option, our Sponsor purchased an
additional 98,496 Private Warrants, generating aggregate gross proceeds of
$98,496 (see Note 4 to the financial statements). As payment for services
including the exercise of the over-allotment option, the underwriters received
209,850 Representative Shares for nominal consideration.
Transaction costs related to the IPO and partial over-allotment exercise and the
over-allotment amounted to $6,265,859 consisting of $3,672,368 of deferred
underwriting commissions, $2,098,500 of fair value of the Representative Shares
and $494,991 of other cash offering costs.
After consummation of the IPO on August 9, 2021, and the partial over-allotment
exercise on August 18, 2021, we had $2,023,122 in our operating bank account,
and working capital of $1,475,504. As of December 31, 2021, we had $769,484 of
cash in our operating bank account and working capital of $931,264. We will be
using these funds for paying existing accounts payable, identifying and
evaluating prospective Initial Business Combination candidates, performing due
diligence on prospective target businesses, paying for travel expenditures in
connection with travel to and from the offices, farms or similar locations of
prospective
56
--------------------------------------------------------------------------------
target businesses or their representatives or owners, selecting the target
business to merge with or acquire, and structuring, negotiating and consummating
the Initial Business Combination.
We have until November 9, 2022 to consummate an Initial Business Combination (or
February 9, 2023 if we exercise our option to extend the date). It is uncertain
that we will be able consummate an Initial Business Combination by either date.
If an Initial Business Combination is not consummated by the required dates,
there will be a mandatory liquidation and subsequent dissolution. In connection
with the Company's assessment of going concern considerations in accordance with
the authoritative guidance in ASC Topic 205-40, "Presentation of Financial
Statements - Going Concern", management has determined that mandatory
liquidation, and subsequent dissolution, should the Company be unable to
complete a business combination, 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 and liabilities should the Company be required to
liquidate after November 9, 2022 (or February 9, 2023, if extended).
Off-Balance Sheet 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 or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for general and administrative services, including
office space, utilities and administrative support. We began incurring these
fees on August 4, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Initial Business Combination or our
liquidation.
Critical Accounting Policies
The preparation of condensed 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:
Offering Costs Associated with Initial Public Offering
We comply with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin Topic 5A, "Expenses of Offering." Offering costs consist of legal,
accounting, underwriting and other costs incurred through the balance sheet date
that are related to the Public Offering. Offering costs amounted to $6,265,859
and were allocated among Class A Common Stock subject to possible redemption,
the Public Warrants and Private Warrants, and stockholders' deficit upon the
completion of the IPO.
Common Stock Subject to Possible Redemption
We account for our shares of Class A Common Stock subject to possible redemption
in accordance with the guidance in ASC Topic 480, "Distinguishing Liabilities
from Equity." Shares of Class A Common Stock subject to mandatory redemption (if
any) are classified as a liability instrument and are measured at fair value.
Conditionally redeemable shares of common stock (including 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, shares of
common stock are classified as stockholders' deficit. Our shares of Class A
Common Stock sold in the IPO feature certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, as of December 31, 2021, 10,492,480 shares
of Class A Common Stock subject to possible redemption are presented at
redemption value as temporary equity, outside of the stockholders' deficit
section of our balance sheet.
57
--------------------------------------------------------------------------------
Warrant Instruments
We account for warrants issued in connection with the IPO and the Private
Placement in accordance with the guidance contained in ASC 480 and ASC 815,
"Derivatives and Hedging." Under that provision, warrants that do not meet the
criteria for equity treatment would be classified as liabilities. The Public
Warrants and Private Warrants do meet the criteria for equity treatment, and
therefore are included as part of stockholder's deficit on the balance sheet. As
of December 31, 2021, there were 5,246,240 Public Warrants and 4,298,496 Private
Warrants outstanding.
Net Loss Per Common Share
We apply the two-class method in calculating earnings per share. Net loss per
share of common stock is computed by dividing the pro rata net loss between the
redeemable shares of Class A Common Stock and the non-redeemable shares of Class
A Common Stock and Class B Common Stock by the weighted average number of shares
of common stock outstanding for each of the periods. The calculation of diluted
loss per share does not consider the effect of the warrants and rights issued in
connection with the IPO since the exercise of the warrants are contingent upon
the occurrence of future events and the inclusion of such warrants would be
anti-dilutive. The warrants are exercisable for 9,544,736 shares of Class A
Common Stock in the aggregate. Shares subject to forfeiture are not included in
weighted-average shares outstanding until the forfeiture restriction lapses.
Subsequent measurement of the Class A Common Stock to redemption value is not
considered in the calculation because redemption value closely approximates fair
value.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") 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) ("ASU 2020-06")
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective for the Company in years
beginning after December 15, 2023 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
We are currently assessing the impact, if any, that ASU 2020-06 would have on
our financial position, results of operations or cash flows.
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.
© Edgar Online, source Glimpses