The following discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements reflecting our
current expectations, estimates and assumptions concerning events and financial
trends that may affect our future operating results or financial position.
Actual results and the timing of events may differ materially from those
contained in these forward-looking statements due to a number of factors,
including those discussed in the sections entitled "Risk Factors" and
"Forward-Looking Statements" appearing elsewhere in this Annual Report on Form
10-K.
Overview
We are a blank check company incorporated on February 5, 2021 as a Cayman
Islands exempted company and formed for the purpose of effecting a Business
Combination. We intend to effectuate our initial business combination using cash
from the proceeds of the Initial Public Offering and the Private Placement of
the Private Placement Units, 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.
On July 30, 2021, we consummated our IPO of 25,000,000 Units, at $10.00 per
Unit, generating gross proceeds of $250.0 million, and incurring offering costs
of approximately $13.75 million, of which $8.75 million was for deferred
underwriting commissions. We granted the underwriter a 45-day option to purchase
up to an additional 3,750,000 Units at the IPO price to cover over-allotments,
if any. On August 3, 2021, the underwriters partially exercised the
over-allotment option, and the closing of the issuance and sale of the
additional 3,250,000 Over-Allotment Units occurred on August 5, 2021. The
issuance by the Company of the Over-Allotment Units at a price of $10.00 per
unit resulted in total gross proceeds of approximately $32.5 million.
Simultaneously with the closing of the IPO, we consummated the Private Placement
of 800,000 units, at a price of $10.00 per Private Placement Unit with the
Sponsor, generating gross proceeds of $8.0 million. Simultaneously with the
issuance and sale of the Over-Allotment Units, the Company consummated the
Private Placement with the Sponsor of 65,000 Additional Private Placement Units,
generating total proceeds of $650,000.
Upon the closing of the IPO and the Private Placement, approximately
$250.0 million ($10.00 per Unit) of the net proceeds of the IPO and certain of
the proceeds of the Private Placement were placed in a Trust Account, located in
the United States with Continental Stock Transfer & Trust Company acting as
trustee, and will be invested only in United States "government securities"
within the meaning of Section 2(a)(16) of the Investment Company Act, having a
maturity of 185 days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act which invests only
in direct U.S. government treasury obligations, as determined by us, until the
earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below. In addition, a certain
anchor investor advanced an aggregate amount of approximately $500,681 to the
Company to cover the purchase of Private Placement Units. In April 2021, the
Company repaid $681 to the anchor investor. Upon the closing of the IPO, the
remaining advance of $500,000 was applied to the purchase of the Private
Placement Units which the Company has since repaid.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the sale of Private Placement Units, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. There is no assurance that we will
be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on the
interest earned on the Trust Account) at the time of the signing of the
agreement to enter into the initial Business Combination. However, we will only
complete a Business Combination if the post-transaction company owns or acquires
50% or more of the outstanding voting securities of the prospective partner
company or otherwise acquires a controlling interest in the prospective party
company sufficient for it not to be required to register as an investment
company under the Investment Company Act.
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If we are unable to complete a Business Combination within the Combination
Period, we will (i) cease all operations except for the purpose of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously
released to us to pay our income taxes, if any (less up to $100,000 of interest
to pay dissolution expenses) divided by the number of the then-outstanding
Public Shares, which redemption will completely extinguish public shareholders'
rights as shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and the
board of directors, liquidate and dissolve, subject in the case of clauses
(ii) and (iii), to our obligations under Cayman Islands law to provide for
claims of creditors and the requirements of other applicable law. There will be
no redemption rights or liquidating distributions with respect to our warrants,
which will expire worthless if we fail to consummate a Business Combination
within the Combination Period.
As of December 31, 2022 and December 31, 2021, we held cash of $726,869 and
$2,124,185, respectively, current liabilities of $1,268,564 and $193,254,
respectively, and deferred underwriting compensation of $9,887,500. Further, we
expect to continue to incur significant costs in the pursuit of our initial
business combination. 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 operating revenues
to date. Our only activities for the year ended December 31, 2022 and for the
period from February 5, 2021 (inception) through December 31, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and, after our Initial Public Offering, 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 will generate non-operating income in the form of interest and
dividend income on cash and investments 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 year ended December 31, 2022, we recorded net income of $9,055,597,
which resulted from a gain on fair value of warrant liability of $7,793,783 and
interest and dividend income on investments held in the Trust Account in the
amount of $4,074,730, partially offset by operating and formation costs of
$2,812,916.
For the period from February 5, 2021 (inception) through December 31, 2021, we
recorded net income of $482,355, which resulted from a gain on fair value of
warrant liability of $2,807,641, a change in the fair value of the
over-allotment option liability of $69,334, a gain on the expiration of the
over-allotment liability of $67,345, a gain on the forfeiture of warrants
accounted for as liabilities of $45,834, and interest and dividend income on
investments held in the Trust Account in the amount of $8,321, partially offset
by, a loss on sale of warrants of $1,213,542, expensed offering costs of
$540,944, and operating and formation costs of $761,634.
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Liquidity, Capital Resources and Going Concern
For the year ended December 31, 2022, net cash used in operating activities was
$1,397,316, which was due to the change in fair value of the warrant liability
of $7,793,783, and interest and dividend income on the investments held in the
Trust Account of $4,074,730, partially offset by a net income of $9,055,597 and
changes in working capital of $1,415,600.
For the period from February 5, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $1,103,298, which was due to the change in
fair value of the warrant liability of $2,807,641, changes in working capital of
$341,664, a change in the fair value of the over-allotment option liability of
$69,334, a gain on the expiration of the over-allotment liability of $67,345, a
gain on the forfeiture of warrants accounted for as liabilities of $45,834, and
interest and dividend income on the investments held in the Trust Account of
$8,321, partially offset by a non-cash loss on the sale of warrants of
$1,213,542 and expensed offering costs added back to net income of $540,944, and
net income of $482,355.
There were no investing activities for the year ended December 31, 2022.
For the period from February 5, 2021 (inception) through December 31, 2021, net
cash used in investing activities of $282,500,000 was the result of the amount
of net proceeds from our IPO and the Private Placement being deposited to the
Trust Account.
There were no financing activities for the year ended December 31, 2022.
For the period from February 5, 2021 (inception) through December 31, 2021, net
cash provided by financing activities was $285,727,483, which was due to
proceeds from our IPO, net of underwriter's discount paid, less reimbursement
from the underwriters, of $278,019,000, proceeds from sale of Private Placement
Units of $8,650,000, an advance from an anchor investor of $501,362, proceeds
from a promissory note with an affiliate of our Sponsor of $178,167, and
proceeds from the issuance of units (the "Founder Units") to an affiliate of our
Sponsor of $25,000, offset in part by the payment of offering costs of $967,198,
the repayment of a portion of the advance from the anchor investor of $500,681,
and the repayment of the promissory note with an affiliate of our Sponsor of
$178,167.
As of December 31, 2022 and December 31, 2021, we had cash of $726,869 and
$2,124,185 held outside the Trust Account, respectively. We will use these funds
to primarily identify and evaluate prospective partner businesses, perform
business due diligence on prospective partner businesses, travel to and from the
offices, plants or similar locations of prospective partner businesses or their
representatives or owners, review corporate documents and material agreements of
prospective partner businesses, and structure, negotiate and complete a business
combination.
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. We may withdraw interest income (if any) to pay income
taxes, if any. 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 interest income earned on the amount in the Trust Account (if any)
will be sufficient to pay our income taxes. To the extent that our equity 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 prospective partner,
make other acquisitions and pursue our growth strategies.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial 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 our initial
business combination, we may repay such loaned amounts. 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 units of the post-business
combination company at a price of $10.00 per unit at the option of the lender.
The units would be identical to the Private Placement Units. The terms of such
loans, if any, have not been determined and no written agreements exist with
respect to such loans. Prior to the completion of our initial business
combination, we do not expect to seek loans from parties other than our Sponsor,
members of our management team or any of their affiliates 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.
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We have incurred and expect to continue to incur significant costs in pursuit of
our initial business combination. As such, we may have insufficient funds
available to operate our business through one year from the date that these
financial statements are filed, if we do not complete a business combination
prior to such date. 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 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. In addition, we intend to target businesses
larger than we could acquire with the net proceeds of our IPO and the sale of
the private placement warrants and may as a result be required to seek
additional financing to complete such proposed initial 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 business combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
As of December 31, 2022, the Company had $726,869 in cash held outside of the
Trust Account and a working capital deficit of $347,748, which may not be
sufficient for the Company to operate for at least the next 12 months from the
issuance of the financial statements. The Sponsor or an affiliate of the
Sponsor, or certain of the Company's officers and directors may, but are not
obligated to, loan the Company funds as may be required under the Working
Capital Loans (as defined in Note 5). There is no assurance that the Company's
attempts to find a partner for an initial business combination will be
successful or successful within the Combination Period or that the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors
will loan the Company funds as may be required under the Working Capital Loans
(as defined in Note 5).
The Company will have until July 30, 2023 to complete a Business Combination. If
a Business Combination is not consummated by July 30, 2023 there will be a
mandatory liquidation and subsequent dissolution of the Company.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Codification ("ASC") Topic 205-40
Presentation of Financial Statements-Going Concern, management has determined
the factors disclosed above and the July 30, 2023 Combination Period deadline
raise substantial doubt about the Company's ability to continue as a going
concern through one year from the date that these financial statements are
filed. These financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities that
might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2022 or
December 31, 2021.
Contractual Obligations
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 3,750,000
additional Units to cover over-allotments at the IPO price, less the
underwriting discounts and commissions. On August 5, 2021, the underwriters
partially exercised the over-allotment option to purchase an additional
3,250,000 Units at an offering price of $10.00 per Unit for an aggregate
purchase price of $32,500,000. On September 11, 2021, the remaining option
expired.
The underwriters were paid a cash underwriting discount of $0.20 per Unit, or
$5,650,000 in the aggregate, upon the closing of the IPO and partial exercise of
the over-allotment option. In addition, $0.35 per unit, or $9,887,500 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 a
Business Combination, subject to the terms of the underwriting agreement.
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 income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Net Income Per Ordinary Share
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Net income per ordinary share is computed by dividing net income by the
weighted-average number of ordinary shares outstanding during the period.
Accretion associated with the redeemable Class A ordinary shares is excluded
from net income per share as the redemption value approximates fair value.
Therefore, the income per share calculation allocates income shared pro rata
between Class A and Class B ordinary shares. As a result, the calculated net
income per share is the same for Class A and Class B ordinary shares. We have
not considered the effect of the warrants sold in the IPO, Private Placement,
and warrants included in the founder units issued to our Sponsor to purchase an
aggregate of 12,059,166 shares in the calculation of diluted income per share,
since the exercise of the warrants is contingent upon the occurrence of future
events.
Class A Ordinary Shares Subject to Possible Redemption
All of the 28,250,000 Class A ordinary shares sold as part of the units in the
IPO contain a redemption feature which allows for the redemption of such Public
Shares in connection with our liquidation, if there is a shareholder vote or
tender offer in connection with the Business Combination and in connection with
certain amendments to the Company's amended and restated memorandum and articles
of association. In accordance with SEC and its staff's guidance on redeemable
equity instruments, which has been codified in Accounting Standards Codification
("ASC") 480, Distinguishing Liabilities from Equity ("ASC 480"), redemption
provisions not solely within our control require ordinary shares subject to
redemption to be classified outside of permanent equity. Therefore, all Public
Shares have been classified outside of permanent equity.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying
amount of redeemable ordinary shares are affected by charges against additional
paid in capital and accumulated deficit.
Warrant Liabilities
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 and ASC Topic 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 ordinary shares, 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. The initial fair value of the Public Warrants was
estimated using a binomial/lattice model and the initial and subsequent fair
value of the Founder Warrants and Private Placement Warrants was estimated using
a Black-Scholes Option Pricing Model. Due to the options pricing model not
producing a meaningful volatility for the Founder Warrants and Private Placement
Warrants as of December 31, 2022, the fair value of the Founder Warrants and
Private Placement Warrants were set equal to the fair value of the Public
Warrants.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("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 January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. We adopted ASU 2020-06 on February 5, 2021 (inception).
Adoption of the ASU did not impact our financial position, results of operations
or cash flows.
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Our management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
accompanying financial statements.
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