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 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 Form 10-K, and in the
section titled, "Risk Factors" contained in our IPO prospectus dated November
10, 2020.
Overview
We are a blank check company incorporated on August 10, 2020 as a Delaware
corporation and formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
similar business combination with one or more businesses or entities. 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.
Results of Operations
We have neither engaged in any operations (other than searching for a business
combination after our IPO) nor generated any revenues to date. Our only
activities from August 10, 2020 (inception) through December 31, 2021 were
organizational activities, those necessary to prepare for the IPO, described
below. We have not and 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 earned on investments held after
the IPO. 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 year ended December 31, 2021, we had net income of $1,167,625, which
consisted of formation and operational costs and transaction costs totaling
$1,828,072 offset by interest and dividends earned on investments held in the
trust account of $71,697. The net income also includes the decrease in fair
value of the private warrants of $2,924,000.
For the period from August 10, 2020 (inception) through December 31, 2020, we
had a net loss of $1,947,942, which consisted of formation and operational costs
and transaction costs totaling $132,550 offset by interest earned on investments
held in the Trust Account of $20,608. The net loss also includes the increase in
fair value of the Private Warrants of $1,836,000.
Liquidity, Capital Resources and Going Concern
On November 13, 2020, we consummated the IPO of 23,000,000 units, inclusive of
the underwriters' election to fully exercise their option to purchase an
additional 3,000,000 units, at a price of $10.00 per unit, generating gross
proceeds of $230,000,000. Simultaneously with the closing of the IPO, we
consummated the sale of 6,800,000 private warrants to our sponsor at a price of
$1.00 per private warrant generating gross proceeds of $6,800,000.
Following the IPO, the full exercise of the over-allotment option by the
underwriters and the sale of the private warrants, a total of $230,000,000 was
placed in the trust account. We incurred $13,173,201 in transaction costs,
including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting
fees and $523,201 of other offering costs. Of these total transaction costs,
$8,714 related to the issuance of the private warrants were charged to expense
and the remaining $13,164,487 were charged to the initial carrying value of the
temporary equity upon the completion of the IPO.
We have incurred and expect to incur additional significant costs in pursuit of
our financing and acquisition plans including a business combination. In
connection with management's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial
Statements-Going Concern," management has determined that these considerations
taken together, the mandatory liquidation and subsequent dissolution raise
substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after November 13, 2022. The consolidated
financial statements do not include any adjustments that might be necessary if
we are unable to continue as a going concern.
For the year ended December 31, 2021, cash used in operating activities was
$1,248,678. This amount is derived by reducing the net income of $1,167,625, by
the non-cash increase in the fair value of the private warrants of $2,924,000,
interest and dividends earned on investments held in the trust account of
$71,697, and changes in operating assets and liabilities, which provided
$579,394 of cash.
For the period from August 10, 2020 (inception) through December 31, 2020, cash
used in operating activities was $300,634. This amount is derived by reducing
the net loss of $1,947,942, by the non-cash increase in the fair value of the
Private Warrants of $1,836,000, transaction costs of $8,714, interest earned on
investments held in the Trust Account of $20,608, and changes in operating
assets and liabilities, which used $176,798 of cash.
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As of December 31, 2021 and 2020, we had cash and investments held in the trust
account of $230,092,305 and $230,020,608, respectively. We intend to use
substantially all of the funds held in the trust account, including any amounts
representing interest earned on the trust account, to complete our business
combination. We may withdraw interest to pay taxes. During the year ended
December 31, 2021 or the period ended December 31, 2020, we did not withdraw any
interest or dividend income from the trust account. 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 $152,487 of cash held outside of the trust
account. 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 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.
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,
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 $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 warrants.
We do not believe we will need to raise additional funds from non-affiliates 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, 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 consummation 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 initial
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 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 or long-term liabilities, other than an agreement to pay our sponsor
a monthly fee of $10,000 for office space, utilities and secretarial support
services. We began incurring these fees on November 10, 2020 and will continue
to incur these fees monthly until the earlier of the completion of our initial
business combination and its liquidation.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $8,050,000
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.
Further, certain legal fees will become payable solely in the event that we
successfully completes a business combination. The amount of such fees at
December 31, 2021 was approximately $1.5 million. Due to the contingent nature
of a business combination, and the uncertainty surrounding the successful
completion of a business combination, this amount is not included in our balance
sheet as of December 31, 2021 nor has it been included as an expense in the
statement of operations for the year then ended.
Critical Accounting Policies and Estimates
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 and
estimates:
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Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." 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 common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our balance sheet.
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
calculated by dividing the net income (loss) by the weighted average number of
common shares outstanding for the respective period. The Company has not
considered the effect of warrants sold in the IPO and private placement to
purchase 14,900,000 shares of common stock in the calculation of diluted income
per share, since the exercise of the warrants are contingent upon the occurrence
of future events and the inclusion of such warrants would be anti-dilutive.
Warrant Liability
The Company accounts 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 Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("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 the Company's own 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.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issues
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 January 1, 2022 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.
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