References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to International Media Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Content Creation Media LLC The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the unaudited condensed financial
statements and the notes thereto contained elsewhere in this 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" 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
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 (as defined below) filed with the U.S. Securities and Exchange
Commission (the "SEC"). The Company's filings with the SEC 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 on January 15, 2021 in Delaware and
formed for the purpose of effectuating a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses, which we refer to throughout this Quarterly Report as
our "initial business combination". We intend to effectuate our initial business
combination using cash from the proceeds of our initial public offering (the
"Initial Public Offering") and the private placement of the Private Units (as
defined below), the proceeds of the sale of our shares in connection with our
initial business combination (pursuant to forward purchase agreements or
backstop agreements we may enter into following the consummation of the Initial
Public Offering or otherwise), shares issued to the owners of the target, debt
issued to bank or other lenders or the owners of the target, or a combination of
the foregoing.
The issuance of additional shares in connection with an initial business
combination:
? may significantly dilute the equity interest of our investors who would not
have pre-emption rights in respect of any such issuance;
may subordinate the rights of holders of shares of common stock if we issue
? shares of preferred stock with rights senior to those afforded to our shares of
common stock;
could cause a change in control if a substantial number of shares of our common
? stock is 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 stock ownership or voting rights of a person seeking to obtain
control of us; and
? may adversely affect prevailing market prices for our common stock, rights
and/or warrants.
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Similarly, if we issue debt securities or otherwise incur significant debt, 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 security is payable on demand;
our inability to obtain necessary additional financing if the debt security
? contains covenants restricting our ability to obtain such financing while the
debt security is outstanding;
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 common
stock if declared, our ability to pay expenses, make capital expenditures and
acquisitions, and fund 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;
limitations on our ability to borrow additional amounts for expenses, capital
? expenditures, acquisitions, debt service requirements, and execution of our
strategy; and
? other purposes and other disadvantages compared to our competitors who have
less debt.
We expect to continue to incur significant costs in the pursuit of our initial
business combination 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 for the period from January 1, 2022 through March
31, 2022 were organizational activities, after IPO related to 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
cash and cash equivalents held after the Initial Public Offering. 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 01, 2022 through March 31, 2022, we had a net loss
of $315,979, which resulted from franchise tax expense of $48,767, formation and
operating costs of $409,908 and was offset in part by a change in the fair value
of our warrant liability of $119,535 and interest and dividend income on
investments held in the trust account of $23,161.
Liquidity and Capital Resources
For the period from January 01, 2022 through March 31, 2022, net cash used in
operating activities was $312,023.
For the period from January 01, 2022 through March 31, 2022, net cash provided
by financing activities was $195,000, which was due to proceeds from promissory
note - related party of $195,000.
As of March 31, 2022, we had $107,684 in our operating bank account.
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On August 2, 2021, we consummated the Initial Public Offering of 20,000,000
units (the "Units"), at $10.00 per Unit, generating gross proceeds of
$200,000,000. Each Unit consists of one share of common stock ("Public Share"),
one right ("Public Right") and one redeemable warrant ("Public Warrant"). Each
Public Right entitles the holder to receive one-twentieth of one share of common
stock at the closing of our initial business combination. Each Public Warrant
entitles the holder to purchase three-fourths of one share of common stock at an
exercise price of $11.50 per whole share.
Simultaneously with the closing of the Initial Public Offering, the Sponsor
purchased an aggregate of 714,400 units (the "Private Units"), at a price of
$10.00 per Private Unit ($7,144,000 in the aggregate). Each Private Unit
consists of one share of common stock ("Private Share"), one right ("Private
Right") and one warrant ("Private Warrant"). Each Private Right entitles the
holder to receive one-twentieth of one share of common stock at the closing of
our initial business combination. Each Private Warrant entitles the holder to
purchase three-fourths of one share of common stock at an exercise price of
$11.50 per whole share.
The proceeds from the Private Units was added to the proceeds from the Initial
Public Offering to be held in the trust account. If we do not complete our
initial business combination within 12 months (or up to 18 months if our time to
complete a business combination is extended), the proceeds of the sale of the
Private Units will be used to fund the redemption of the Public Shares (subject
to the requirements of applicable law) and the Private Units and all underlying
securities will be worthless. There will be no redemption rights or liquidating
distributions from the trust account with respect to the rights and warrants
included in the Private Units.
On August 6, 2021, in connection with the underwriters' exercise in full of
their option to purchase up to 3,000,000 additional Units to cover
over-allotments, if any, we consummated the sale of an additional 3,000,000
Units, at $10.00 per Unit, generating gross proceeds of $30,000,000.
Simultaneously with the closing of the exercise of the over-allotment option, we
consummated the sale of an additional 82,500 Private Units, at a price of $10.00
per Private Unit, in a private placement to our Sponsor, generating gross
proceeds of $825,000.
We intend to use substantially all of the net proceeds of the Initial Public
Offering and the private placement, including the funds held in the trust
account, in connection with our initial business combination and to pay our
expenses relating thereto, including deferred underwriting commissions payable
to the underwriters in an amount equal to 3.5% ($8,050,000) of the total gross
proceeds raised in the Initial Public Offering upon consummation of our initial
business combination. To the extent that our capital stock is used in whole or
in part as consideration to effect our initial business combination, the
remaining proceeds held in the trust account as well as any other net proceeds
not expended will be used as working capital to finance the operations of the
target business. Such working capital funds could be used in a variety of ways
including continuing or expanding the target business' operations, for strategic
acquisitions and for marketing, research and development of existing or new
products. Such funds could also be used to repay any operating expenses or
finders' fees which we had incurred prior to the completion of our initial
business combination if the funds available to us outside of the trust account
were insufficient to cover such expenses.
In connection with the Company's assessment of going concern considerations in
accordance with FASB'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 August 2, 2022 to consummate a Business Combination. The
Company may elect, if requested by the Sponsor, to extend the period of time to
consummate a Business Combination up to two times, each by an additional three
months (or up to 18 months total) subject to the Sponsor depositing into the
Trust Account $0.10 per share subject to redemption ($2.3 million for 23,000,000
shares) on or prior to the date of each applicable deadline and for each three
month extension ($4.6 million if both extensions are elected). 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, 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 August 2, 2022.
We believe that the $107,684 in our operating bank account as of March 31, 2022
and $555,000 of additional funds available to us at our discretion under the
Post IPO Promissory Note (as mentioned below), will be sufficient to allow us to
operate for at least the next 12 months, assuming that a business combination is
not consummated during that time. Over this time period, we will be using these
funds for identifying and evaluating prospective business combination
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing
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corporate documents and material agreements of prospective target businesses,
selecting the target business to consummate our initial business combination
with and structuring, negotiating and consummating the business combination.
We expect our primary liquidity requirements during that period to include
approximately $157,904 for accounting, audit and other third-party expenses
attendant to the structuring and negotiation of a business combination; $451,069
for due diligence, consulting, travel and miscellaneous expenses incurred during
search for initial business combination target; and approximately $25,000 for
working capital that will be used for miscellaneous expenses and reserves.
These amounts are estimates and may differ materially from our actual expenses.
In addition, we could use a portion of the funds not being placed in trust to
pay commitment fees for financing, fees to consultants to assist us with our
search for a target business or as a down payment or to fund a "no-shop"
provision (a provision designed to keep target businesses from "shopping" around
for transactions with other companies on terms more favorable to such target
businesses) with respect to a particular proposed business combination, although
we do not have any current intention to do so. If we entered into an agreement
where we paid for the right to receive exclusivity from a target business, the
amount that would be used as a down payment or to fund a "no-shop" provision
would be determined based on the terms of the specific business combination and
the amount of our available funds at the time. Our forfeiture of such funds
(whether as a result of our breach or otherwise) could result in our not having
sufficient funds to continue searching for, or conducting due diligence with
respect to, prospective target businesses.
We do not believe we will need to raise additional funds following the Initial
Public Offering in order to meet the expenditures required for operating our
business. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial 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 initial
business combination. Moreover, we may need to obtain additional financing
either to complete our initial business combination or because we become
obligated to redeem a significant number of our Public Shares upon completion of
our initial 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. 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.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2022.
Contractual Obligations
Promissory Notes - Related Party
On February 1, 2021, we issued an unsecured promissory note to the Sponsor (the
"Initial Promissory Note"), pursuant to which we could borrow up to an aggregate
of $300,000 to cover expenses related to the Initial Public Offering. On April
6, 2021 and June 17, 2021, we issued additional unsecured promissory notes to
the Sponsor (the "Additional Promissory Notes" and, together with the "Initial
Promissory Note", the "IPO Promissory Notes"), pursuant to which we may borrow
up to an additional aggregate principal amount of $200,000. The IPO Promissory
Notes were non-interest bearing and payable on the earlier of (i) December 31,
2021 or (ii) the consummation of the Initial Public Offering. The outstanding
balance under the Promissory Notes was repaid on August 6, 2021.
On January 14, 2022, we issued an unsecured promissory note to the Sponsor (the
"Post-IPO Promissory Note"), pursuant to which we could borrow up to an
aggregate of $500,000 in two installments of (i) up to $300,000 during the month
of March 2022, and (ii) up to $200,000 during the month of June 2022 at our
discretion. The Post-IPO Promissory Note is non-interest bearing and payable
promptly after the date on which we consummate an initial business combination.
On March 29, 2022, we amended and restated the Post-IPO Promissory Note, such
that the aggregate amount we can borrow at our discretion under the note
increased from $500,000 in two installments as described above, to up to
$750,000 in three installments of (i) up to $195,000 no later than February 28,
2022, (ii) up to 355,000 no later than April 30, 2022, and (iii) up to $200,000
no later than June 30, 2022. No other terms were amended pursuant to this
amendment and restatement. As of March 31, 2022 and December 31, 2021, the
amount outstanding on the promissory note was $195,000 and $0 respectively.
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Underwriting Agreement
On July 28, 2021, in connection with the Initial Public Offering, we entered
into an underwriting agreement with Chardan Capital Markets, LLC, as
representative of the underwriters named therein.
Pursuant to the underwriting agreement, the underwriters were paid a cash
underwriting discount of $0.20 per Unit sold in the Initial Public Offering, or
$4,600,000 in the aggregate, upon the closing of the Initial Public Offering and
full exercise of the over-allotment option. In addition, $0.35 per Unit sold in
the Initial Public Offering, or $8,050,000 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 an initial business combination, subject to
the terms of the underwriting agreement.
Right of First Refusal
Subject to certain conditions, we granted Chardan, the representative of the
underwriters in the Initial Public Offering, for a period of 18 months after the
date of the consummation of our business combination, a right of first refusal
to act as book-running manager, with at least 30% of the economics, for any and
all future public and private equity and debt offerings. In accordance with
FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a
duration of more than three years from the effective date of the registration
statement for the Initial Public Offering.
Chief Financial Officer Agreement
On February 8, 2021, we entered into an agreement with Vishwas Joshi to act as
our Chief Financial Officer for a period of twenty-four months from the date of
listing of the Company on NASDAQ. We have agreed to pay Mr. Joshi up to
$400,000, subject to successfully completing our initial business combination.
If we do not complete a business combination, we have agreed to pay Mr. Joshi
$40,000. As of March 31, 2022, we have accrued $20,000 as expense.
Consulting Agreements
We have engaged Ontogeny Capital L T D ("Ontogeny") to act as a management
consulting and corporate advisor in the preparation of corporate strategies,
management support and business plans for us. We paid Ontogeny $40,000 at the
time of signing the engagement agreement and $35,000 upon the filing of the
registration statement relating to the Initial Public Offering. We paid Ontogeny
an aggregate of $1,650,000 upon the closing of the Initial Public Offering and
exercise of the underwriters' over-allotment option. In addition, upon the
consummation of our initial business combination, we have agreed to pay Ontogeny
$2,875,000 for certain management consulting and corporate advisory services.
On September 17, 2021, we entered into a consulting agreement, effective as of
September 1, 2021, with F. Jacob Cherian, pursuant to which we engaged Mr.
Cherian to provide financial advisory services to us for a period of 12 months.
In consideration for his services, we agreed to pay Mr. Cherian a monthly
consulting fee of $12,000 per month.
On October 29, 2021, we entered into a letter of engagement and terms of
business (the "Letter of Engagement") with Sterling Media Ltd ("Sterling
Media"), pursuant to which we engaged Sterling Media to provide strategic media
coverage for us commencing on October 29, 2021 and ending on June 30, 2022 (the
"Term of Engagement Letter"). In consideration for the services Sterling Media
provides to us, we agreed to pay Sterling Media a total fee of £20,000 during
the Term of Engagement Letter in accordance with the terms of the Letter of
Engagement. An additional mutually agreed financial fee may be awarded to
Sterling Media for deals secured by Sterling Media that may result in clearly
significant brand enhancement and/or potential future income for us.
On October 29, 2021, we also entered into a consulting agreement with Priyanka
Agarwal, pursuant to which we engaged Ms. Agarwal to provide strategy,
management and financial advisory services to us, as specified in the consulting
agreement, commencing on October 29, 2021 and ending on October 28, 2022 (the
"Term of Consulting Agreement"). In consideration for the services Ms. Agarwal
provides to us, we agreed to pay Ms. Agarwal a monthly consulting fee of $11,250
per month for the duration of the Term of Consulting Agreement in accordance
with the payment schedule provided in the consulting agreement. In addition, we
shall reimburse Ms. Agarwal for her reasonable and documented travel expenses
incurred at our request.
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On January 12, 2022, we entered into a letter of engagement with Chardan Capital
Markets, LLC ("Chardan"), pursuant to which we engaged Chardan to provide
capital markets advisory services commencing from January 12, 2022 and ending on
the close of a potential placement related to our initial business combination.
In consideration for the services Chardan will provide to us, we agreed to pay
Chardan a total fee of 5% of the aggregate sales price of securities sold in the
financing transaction plus reimbursement of out-of-pocket expenses capped at
$25,000.
On January 12, 2022, we also entered into a letter of engagement with Chardan,
pursuant to which we engaged Chardan to provide merger and acquisition advisory
services commencing from January 12, 2022 and ending on close of our initial
business combination. In consideration for the services Chardan provides to us,
we agreed to pay Chardan a total fee equal to: (i) if we enter into a business
combination involving a party other than a target introduced by Chardan,
one-half of one percent (0.5%) of the aggregate value of the business
combination; and (ii) if we consummate a business combination with a target
introduced by Chardan, three percent (3%) of the first $100 million aggregate
value of the target, two percent (2.0%) of the aggregate value of the target
greater than $100 million but less than $200 million, and one percent (1.0%) of
the aggregate value of the target greater than $200 million but less than $300
million, paid at the close of the business combination plus reimbursement of
out-of-pocket expenses capped at $25,000.
On March 18, 2022, we entered into an engagement letter with Ontogeny Capital
relating to corporate advisory & management consultancy services for the purpose
of raising capital in form of a private investment in public equity ("PIPE")
financing. Ontogeny Capital will receive a contingent fee equal to 5% of the
gross proceeds of securities sold in the PIPE up to $75 million in gross
proceeds and 5.5% of the gross proceeds of securities sold in the PIPE from $75
million up to $150 million in gross proceeds. The engagement letter also
provides for an additional incremental discretionary fee of 0.5% of gross
proceeds if the gross proceeds of securities sold in a PIPE are above $150
million.
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:
Net Loss Per Share of Common Stock
Net loss per common share is computed by dividing net loss by the
weighted-average number of shares of common stock outstanding during the period.
As the Public Shares are considered to be redeemable at fair value, and a
redemption at fair value does not amount to a distribution different than other
stockholders, redeemable and non-redeemable common stock are presented as one
class of stock in calculating net loss per share. We have not considered the
effect of the warrants sold in the Initial Public Offering and private placement
to purchase an aggregate of 17,847,675 shares in the calculation of diluted
income per share, since the exercise of the warrants are contingent upon the
occurrence of future events.
Warrant Liability
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in ASC 480, Distinguishing Liabilities from
Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to our common stock,
among other conditions for equity classification. This assessment, which
requires the use of professional judgment, is conducted at the time of warrant
issuance and as of each subsequent quarterly period end date while the warrants
are outstanding.
Common Stock Subject to Possible Redemption
All of the 23,000,000 Public Shares sold as part of the Units in the Initial
Public Offering contain a redemption feature which allows for the redemption of
such Public Shares in connection with our liquidation, if there is a stockholder
vote or tender offer in connection with the initial business combination and in
connection with certain amendments to our Amended and Restated Certificate of
Incorporation. In accordance with SEC and its staff's guidance on redeemable
equity instruments, which has been codified in ASC
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480-10-S99, redemption provisions not solely within our control require common
stock subject to redemption to be classified outside of permanent equity.
Therefore, all redeemable Public Shares have been classified outside of
permanent equity.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of redeemable common stock to equal the redemption value at
the end of each reporting period. Increases or decreases in the carrying amount
of redeemable common stock are affected by charges against additional paid-in
capital and accumulated deficit.
Share Based Payment Arrangements
On July 7, 2021, the Sponsor entered into agreements with two independent
directors to transfer 95,000 Founder Shares to each director, subject to and
upon closing of our initial business combination. As such, under ASC 718, these
shares are transferred subject to a performance condition and compensation
expense will be recognized at the date of a business combination when earned.
On July 22, 2021, the Sponsor sold 30,000 of its Founder Shares to each of its
five independent directors (the "Directors") (or 150,000 Founder Shares in
total) for cash consideration of approximately $0.004 per share. These awards
are subject to ASC 718. In accordance with ASC 718, the Company recognized
compensation expense in an amount equal to the number of Founders Shares sold
times the grant date fair value per share less the amount initially received for
the purchase of the Founders Shares. The value of the Founder Shares sold to the
Directors was determined to be $787,500 as of July 22, 2021. As such, the
Company recognized compensation expense of $786,848 within stock-based
compensation expense in the Company's Statements of Operations for the period
from January 15, 2021 (inception) through December 31, 2021.
On September 17, 2021, the Sponsor sold 25,000 of its Founder Shares to an
additional independent director (the "Additional Director") for consideration of
approximately $0.004 per share. These awards are subject to ASC 718. In
accordance with ASC 718, the Company recognized compensation expense in an
amount equal to the number of Founders Shares sold times the grant date fair
value per share less the amount initially received for the purchase of the
Founders Shares. The value of the Founder Shares sold to the Additional Director
was determined to be $141,250 as of September 17, 2021. As such, the Company
recognized compensation expense of $141,150 within stock-based compensation
expense in the Company's Statements of Operations for the period from January
15, 2021 (inception) through December 31, 2021.
On September 17, 2021, the Sponsor sold 75,000 of its Founder Shares to an
independent consultant (the "Consultant") for consideration of approximately
$0.004 per share. These awards are subject to ASC 718. In accordance with ASC
718, the Company recognized compensation expense in an amount equal to the
number of Founders Shares sold times the grant date fair value per share less
the amount initially received for the purchase of the Founders Shares. The value
of the Founder Shares sold to the Consultant was determined to be $423,750 as of
September 17, 2021. As such, the Company recognized compensation expense of
$423,450 within stock-based compensation expense in the Company's Statements of
Operations for the period from January 15, 2021 (inception) through December 31,
2021.
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