You should read the following discussion and analysis of our financial condition
and results of operations together with our historical consolidated financial
statements and the related notes thereto appearing elsewhere in this Annual
Report. The objective of the following discussion and analysis is to provide
material information relevant to your assessment of the financial condition and
results of operations of our company, including an evaluation of the amounts and
certainty of cash flows from operations and from outside sources, and to better
allow you to view our company from management's perspective. Some of the
information contained in this discussion and analysis or set forth elsewhere in
this Annual Report, including information with respect to our plans and strategy
for our business and related financing, includes forwardlooking statements that
involve risks and uncertainties. As a result of many factors, including those
factors set forth in the "Risk Factors" section of this Annual Report, our
actual results could differ materially from the results described in or implied
by the forwardlooking statements contained in the following discussion and
analysis.
Overview
We are a recently incorporated blank check company, incorporated as a Delaware
corporation for the purpose of effecting a merger, share exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We have not selected any business combination target and
we have not, nor has anyone on our behalf, initiated any substantive
discussions, directly or indirectly, with any business combination target. We
intend to effectuate our initial business combination using cash from the
proceeds of the IPO and the Private Placements, our capital stock, debt or a
combination of cash, stock and debt.
On December 13, 2021, we completed our IPO of 20,000,000 Units, each Unit
comprised of one share of Class A Common Stock and one-half of one warrant to
purchase one share of Class A Common Stock (the "Public Warrants"), and the
simultaneous Private Placement of an aggregate of 9,560,000 Private Placement
Warrants to our sponsor. On January 6, 2022, the underwriter partially exercised
its option to purchase additional Units to cover over-allotments, if any, and
purchased an additional 2,250,000 Units, generating gross proceeds of
$22,500,000. Also on January 6, 2022, in connection with the underwriter's
partial exercise of its over-allotment option, we completed the Additional
Private Placement of an additional 787,500 Private Placement Warrants to our
sponsor, at a price of $1.00 per Private Placement Warrant, generating gross
proceeds of $787,500. An aggregate of $225,837,500 in proceeds from the IPO and
the Private Placements has been placed in the Trust Account.
As of December 31, 2021, we had cash of $1,923,321 and working capital of
$490,881. 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 and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from March 5, 2021 (inception) through December 31, 2021,
were organizational activities, those necessary to prepare for the IPO, and the
search for a target company for an initial business combination. We will not
generate any operating revenues until after completion of our initial business
combination. We will generate non-operating income in the form of interest
income on cash and cash equivalents. Other than the exercise by the underwriter
of its overallotment option on January 6, 2022, which generated gross proceeds
of $22,500,000, there has been no significant change in our financial or trading
position and no material adverse change has occurred since the date of our
audited financial statements. We have incurred and expect to continue to incur
increased 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 March 5, 2021 (inception) through December 31, 2021, we had
a net income of $12,051,436, which consists of a gain in fair value of the
derivative warrant liabilities of $16,234,800, a gain in the fair value of the
over-allotment option of $94,929 and interest income on marketable securities
held in the trust account of $654 offset by operating costs of $383,144,
transaction costs related to derivative warrant liabilities of $836,603 and the
excess fair value of private warrants over proceeds of $3,059,200.
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Liquidity and Capital Resources
Until the consummation of our IPO, our only source of liquidity was an initial
purchase of Class B Common Stock by our sponsor and loans from our sponsor, as
described in Note 1 to our financial statements. As of December 31, 2021, the
Trust Account had a balance of $203,000,654. In connection with the IPO,
including the underwriter's exercise of its overallotment option on January 6,
2022, and Private Placements, an aggregate of $225,837,500 in proceeds was
placed in the Trust Account. The funds in the Trust Account have been or will be
invested only in U.S. government treasury bills with a maturity of 185 days or
less or in money market funds that meet certain conditions under Rule 2a-7 under
the Investment Company Act and that invest only in direct U.S. government
obligations. 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 taxes payable and deferred underwriting commissions) to complete our
initial business combination. Delaware franchise tax is based on our authorized
shares or on our assumed par and non-par capital, whichever yields a lower
result. Under the authorized shares method, each share is taxed at a graduated
rate based on the number of authorized shares with a maximum aggregate tax of
$200,000 per year. Under the assumed par value capital method, Delaware taxes
each $1,000,000 of assumed par value capital at the rate of $400; where assumed
par value would be (1) our total gross assets, divided by (2) our total issued
shares of common stock, multiplied by (3) the number of our authorized shares.
Our annual franchise tax obligation is expected to be capped at the maximum
amount of annual franchise taxes payable by us as a Delaware corporation of
$200,000. Our annual income tax obligations will depend on the amount of
interest and other income earned on the amounts held in the Trust Account. We
expect the only taxes payable by us out of the funds in the Trust Account will
be income and franchise taxes. We expect the interest earned on the amount in
the Trust Account will be sufficient to pay our taxes. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our initial 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.
For the period from March 5, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $42,318. Net income was $12,051,436
primarily as a result of the gain in fair value of the derivative warrant
liabilities of $16,234,800, due to a decrease in the overallotment liability of
$94,929 and interest income of $654. These amounts were offset by transaction
costs related to derivative warrant liabilities of $836,603, and the excess fair
value of private warrants over proceeds of $3,059,200 and changes in operating
assets and liabilities used $340,826 of cash from operating activities.
For the period from March 5, 2021 (inception) through December 31, 2021, net
cash used in investing activities of $203,000,000 was the result of the amount
of net proceeds from our IPO and Private Placements being deposited into the
Trust Account.
For the period from March 5, 2021 (inception) through December 31, 2021, net
cash provided by financing activities of $204,965,639 was comprised of
$200,000,000 in proceeds from the issuance of Units in our IPO, net of the
underwriter's discount paid and $4,000,000 in proceeds from the issuance of the
Private Placement Warrants to our sponsor, $300,000 in proceeds from the
issuance of a promissory note to our sponsor, cash of $25,000 received from our
sponsor for the issuance of Class B common stock offset in part by the payment
of $619,361 for offering costs associated with the IPO and repayment of the
outstanding balance on the promissory note to our sponsor of $300,000.
As of December 31, 2021, we held approximately $1,923,321 outside the Trust
Account. We expect to use these funds primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices or similar locations of prospective target
businesses or their representatives or owners, review corporate documents and
material agreements of prospective target businesses, structure, negotiate and
complete a business combination, and to pay taxes to the extent the interest
earned on the Trust Account is not sufficient to pay our taxes.
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As of December 31, 2021, we had cash and cash equivalents of $1,923,321 and
working capital of $490,881. In order to fund working capital deficiencies or
finance transaction costs in connection with an intended initial business
combination, our sponsor, any affiliate of our sponsor, or our officers or
directors may, but none of them is obligated to, loan us funds as may be
required. If we complete our initial business combination, we would repay such
loaned amounts out of the proceeds of the Trust Account released to us. In the
event that our initial 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. These warrants would be identical
to the Private Placement Warrants. The terms of such loans, if any, have not
been determined and no written agreements exist with respect to such loans. We
do not expect to seek loans from parties other than our sponsor, or another
affiliate of our sponsor, or our officers and directors, as we do not believe
third parties will be willing to loan such funds and provide a waiver against
any and all rights to seek access to funds in our Trust Account.
We expect our primary liquidity requirements prior to an initial business
combination to include the approximately $790,000 that we have paid for
directors and officers insurance, approximately $300,000 for legal, accounting,
due diligence, travel and other expenses in connection with any business
combinations; approximately $150,000 for legal and accounting fees related to
regulatory reporting requirements; approximately $85,000 for the NYSE continued
listing fees; approximately $180,000 for office space, administrative and
support services; and approximately $255,000 for general working capital that
will be used for miscellaneous expenses and reserves net of estimated interest
income.
These amounts are estimates and may differ materially from our actual expenses.
In addition, we could use a portion of the funds held outside the Trust Account
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 or investors 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 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. In addition, we may target businesses with enterprise values that
are greater than we could acquire with the net proceeds of our IPO and the
Private Placements, and, as a result, if the cash portion of the purchase price
exceeds the amount available from the Trust Account, net of amounts needed to
satisfy redemptions by public stockholders, we may be required to seek
additional financing to complete such proposed initial business combination. We
may also obtain financing prior to the closing of our initial business
combination to fund our working capital needs and transaction costs in
connection with our search for and completion of our initial business
combination. There is no limitation on our ability to raise funds through the
issuance of equity or equity-linked securities or through loans, advances or
other indebtedness in connection with our initial business combination,
including pursuant to forward purchase agreements or backstop arrangements we
may enter into. 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.
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The net proceeds held in the Trust Account may be used as consideration to pay
the sellers of a target business with which we ultimately complete our initial
business combination and to pay the deferred underwriting commissions. If our
initial business combination is paid for using equity or debt, or not all of the
funds released from the Trust Account are used for payment of the consideration
in connection with our initial business combination or the redemption of our
public shares, we may apply the balance of the cash released to us from the
Trust Account for general corporate purposes, including for maintenance or
expansion of operations of the post-transaction company, the payment of
principal or interest due on indebtedness incurred in completing our initial
business combination, to fund the purchase of other companies or for working
capital.
We believe that amounts not held in trust will be sufficient to pay the costs
and expenses to which such proceeds are allocated through June 13, 2023. This
belief is based on the fact that while we may begin preliminary due diligence of
a target business in connection with an indication of interest, we intend to
undertake in-depth due diligence, depending on the circumstances of the relevant
prospective acquisition, only after we have negotiated and signed a letter of
intent or other preliminary agreement that addresses the terms of a business
combination. However, if our estimate of the costs of undertaking in-depth due
diligence and negotiating a business combination is less than the actual amount
necessary to do so, or if our sponsor exercises its extension option, we may be
required to raise additional capital, the amount, availability and cost of which
is currently unascertainable. If we are required to seek additional capital, we
could seek such additional capital through loans or additional investments from
our sponsor, members of our management team or any of their respective
affiliates, but such persons are not under any obligation to loan funds to, or
otherwise invest in, us.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our sponsor or an affiliate of our sponsor
or our officers and directors to meet our needs through the earlier of the
consummation of our initial business combination or one year from the date of
this filing.
Off-Balance Sheet Financing Arrangements; Commitments and Contractual
Obligations
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
Our executive offices are at 2655 Northwinds Parkway, Alpharetta, GA 30009. The
cost for our use of this space is included in the $10,000 per month fee we pay
to our sponsor for office space, administrative and shared personnel support
services. We consider our current office space adequate for our current
operations.
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 expenses during the
periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
Class A Common Stock Subject to Possible Redemption
We account for the Class A Common Stock subject to possible redemption in
accordance with the guidance enumerated in Accounting Standards Codification
("ASC") 480 "Distinguishing Liabilities from Equity". Common stock subject to
mandatory redemption is classified as a liability instrument and is 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 we consider to be outside of our control and subject to
the occurrence of uncertain future events. Accordingly, at December 31, 2021,
the 20,000,000 shares of Class A Common Stock subject to possible redemption in
the amount of $203,000,000 is presented as temporary equity, outside of the
stockholders' deficit section of our balance sheet.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of redeemable Class A Common Stock to equal the redemption
value at the end of each reporting period. Immediately upon the closing of the
IPO, we recognized a measurement adjustment from initial book value to
redemption amount value. The change in the carrying value of redeemable Class A
Common Stock resulted in charges against additional paid-in capital and
accumulated deficit.
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Net income per share
Net income per share is computed by dividing net income by the weighted average
number of shares of common stock outstanding during the period. We apply the
two-class method in calculating earnings per share. Earnings and losses are
shared pro rata between the two classes of shares. The calculation of diluted
income per share of common stock does not consider the effect of the warrants
issued in connection with the (i) Public Offering and (ii) Private Placement,
because the warrants are contingently exercisable, and the contingencies have
not yet been met. As a result, diluted earnings per ordinary share is the same
as basic earnings per ordinary share for the periods presented. As a result,
diluted earnings per ordinary share is the same as basic earnings per ordinary
share for the periods presented. As of December 31, 2021, the Public Warrants
are exercisable to purchase an aggregate of 10,000,000 shares of Class A Common
Stock.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging." Our derivative
instruments are recorded at fair value as of the closing date of the IPO
(December 13, 2021) and re-valued at each reporting date, with changes in the
fair value reported in the statements of operations. Derivative assets and
liabilities are classified on the balance sheet as current or non-current based
on whether or not net-cash settlement or conversion of the instrument could be
required within 12 months of the balance sheet date. We have determined the
Public Warrants and the Private Placement Warrants are a derivative instrument.
As the Warrants and the Private Placement Warrants meet the definition of a
derivative, such warrants are measured at fair value at issuance and at each
reporting date in accordance with ASC 820, "Fair Value Measurement", with
changes in fair value recognized in the statement of operations in the period of
change.
Warrant Instruments
We account for the Public Warrants and the Private Placement Warrants in
accordance with the guidance contained in Financial Accounting Standards Board
("FASB") ASC 815, "Derivatives and Hedging" whereby under that provision, the
Public Warrants and the Private Placement Warrants do not meet the criteria for
equity treatment and must be recorded as a liability. Accordingly, we classify
the warrant instrument as a liability at fair value and adjust the instrument to
fair value at each reporting period. This liability will be re-measured at each
balance sheet date until the Public Warrants and the Private Placement Warrants
are exercised or expire, and any change in fair value will be recognized in our
statement of operations. The fair value at issuance was calculated using a Monte
Carlo simulation model to value the Public Warrants and the Private Placement
Warrants. The valuation models utilize inputs and other assumptions and may not
be reflective of the price at which they can be settled. Such warrant
classification is also subject to re-evaluation at each reporting period. Upon
issuance of the Private Warrants, we recorded a charge to the statement of
operations of $3,059,200 for the excess fair value of private warrant
liabilities over the proceeds received.
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