The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report (the "Quarterly Report"). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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 16E of 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 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 final prospectus for its initial public offering filed with the
Overview
We are a blank check company incorporated on
The issuance of additional shares in connection with a business combination to the owner of the target or other investors:
? may significantly dilute the equity interest of investors in our initial public
offering, which dilution would increase if the anti-dilution provisions in the
Class B common stock resulted in the issuance of Class A common stock on a
greater than one-to-one basis upon conversion of the Class B common stock;
? may subordinate the rights of holders of Class A common stock if shares of
preferred stock are issued with rights senior to those afforded our Class A
common stock;
? could cause a change in control if a substantial number of shares of our Class
A common stock are issued, which may affect, among other things, our ability to
use our net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to obtain
control of us; and
? may adversely affect prevailing market prices for our Class A common stock
and/or warrants. 19
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an
initial business combination are insufficient to repay our debt obligations;
? acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt is payable on demand;
? our inability to obtain necessary additional financing if the debt contains
covenants restricting our ability to obtain such financing while the debt is
outstanding;
? our inability to pay dividends on our Class A common stock;
? using a substantial portion of our cash flow to pay principal and interest on
our debt, which will reduce the funds available for dividends on our Class A
common stock if declared, expenses, capital expenditures, acquisitions and
other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
? limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our competitors
who have less debt.
We expect to incur significant costs in the pursuit of our initial business combination. 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 (other than searching for a Business
Combination after our initial public offering) nor generated any revenues to
date. Our only activities from inception through
For the three months ended
For the six months ended
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Liquidity and Capital Resources
On
Following the initial public offering and the sale of the Private Placement
Warrants, a total of
As of
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 interest income that is used to pay franchise and income taxes) 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.
We have raised and may need to raise additional funds in order to meet the expenditures required for operating our business. 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 amounts 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 completion 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of the Company's
officers and directors or their affiliates may, but are not obligated to, loan
us funds as may be required on a non-interest bearing basis. If we complete a
Business Combination, we would repay the Working Capital Loans out of the
proceeds of the Trust Account released to us. Otherwise, the Working Capital
Loans would be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination does not close, we may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but
no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The Working Capital Loans would either be repaid upon consummation of a
Business Combination, without interest, or, at the lender's discretion, up to
21
On
If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. We cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
As a result of the above, in connection with the Company's assessment of going
concern considerations in accordance ASC Topic 205-40 Presentation of Financial
Statements - Going Concern, management has determined that the liquidity
condition and date for mandatory liquidation and dissolution raise substantial
doubt about the Company's ability to continue as a going concern through
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the
As a result of the above, in connection with our 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," we have determined that the
liquidity condition and date for mandatory liquidation and dissolution raise
substantial doubt about our ability to continue as a going concern through
As a result of the above, in connection with the Company's assessment of going
concern considerations in accordance with Financial Accounting Standard Board's
("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that the liquidity condition and date for mandatory
liquidation and dissolution raise substantial doubt about the Company's ability
to continue as a going concern through
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Off-Balance Sheet Financing Arrangements
As of
Contractual Obligations
As of
The underwriters are entitled to underwriting discounts and commissions of 5.5%
of the proceeds of the Initial Public Offering, of which 2.0% (
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in
Warrant Derivative Liability
In accordance with ASC 815-40, Derivatives and Hedging: Contracts in an Entities Own Equity, entities must consider whether to classify contracts that may be settled in its own stock, such as warrants, as equity of the entity or as an asset or liability. If an event that is not within the entity's control could require net cash settlement, then the contract should be classified as an asset or a liability rather than as equity. We have determined because the terms of Public Warrants include a provision that entitles all warrant holders to receive cash for their warrants in the event of a qualifying cash tender offer, while only certain of the holders of the underlying shares of common stock would be entitled to receive cash, our warrants should be classified as derivative liability measured at fair value, with changes in fair value each period reported in earnings. Further if our Sponsor Warrants are held by someone other initial purchases of the Sponsor Warrants or their permitted transferees, the Sponsor Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Because the terms of the Sponsor Warrants and Public Warrants are so similar, we classified both types of warrants as a derivative liability measured at fair value. Volatility in our common stock and Public Warrants may result in significant changes in the value of the derivatives and resulting gains and losses on our statement of operations.
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 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 Class A 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, Class A 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 section of our balance sheet.
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Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 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 for the period. The Company applies the two-class method in calculating income (loss) per common share. 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.
The calculation of diluted income (loss) per common share does not consider the
effect of the warrants issued in connection with the (i) Initial Public
Offering, and (ii) the private placement since the exercise of the warrants is
contingent upon the occurrence of future events. As of
Recent Accounting Standards
In
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 condensed financial statements.
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