References to the "Company," "Spindletop Health Acquisition Corp.," "our," "us"
or "we" refer to Spindletop Health Acquisition Corp. 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 report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a newly organized blank check company incorporated on February 17, 2021
as a Delaware corporation and formed for the purpose of effect a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination with one or more businesses (the "Business Combination").
Our sponsor is Spindletop Health Sponsor Group, LLC, a Delaware limited
liability company (the "Sponsor"). The registration statement for our initial
public offering was declared effective on November 3, 2021. On November 8, 2021,
we consummated the IPO of 23,000,000 units (the "Units") including 3,000,000
Units as part of the underwriters' over-allotment option. Each Unit consists of
one share of our Class A common stock, par value $0.0001 per share ("Class A
common stock"), and one-half of one of our redeemable warrants ("Public
Warrant"), with each whole Public Warrant entitling the holder thereof to
purchase one share of Class A common stock for $11.50 per share, subject to
adjustment. The Units were sold at a price of $10.00 per Unit, generating gross
proceeds to us of $230,000,000.
Simultaneously with the closing of the IPO, we completed the private sale of an
aggregate of 12,600,000 warrants (the "Private Placement Warrants"), including
1,200,000 Private Placement Warrants related to the underwriters' fully
exercising their over-allotment option, at a purchase price of $1.00 per Private
Placement Warrant, to the Sponsor, generating gross proceeds to us of
$12,600,000.
Upon the closing of the IPO, $10.20 per Unit sold in the IPO is held in a "Trust
Account" and may only be invested in U.S. "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 of Rule
2a-7 promulgated under the Investment Company Act, which invest only in direct
U.S. government treasury obligations. Except with respect to interest earned on
the funds held in the Trust Account that may be released to us to pay its tax
obligations, the proceeds from the IPO and the sale of the Private Placement
Warrants will not be released from the Trust Account until the earliest to occur
of: (a) the completion of our initial Business Combination, (b) the redemption
of any shares of our Class A common stock sold in the IPO (the "public shares")
properly submitted in connection with a stockholder vote to amend our amended
and restated certificate of incorporation (i) to modify the substance or timing
of our obligation to provide for the redemption of the public shares in
connection with the initial Business Combination or to redeem 100% of our public
shares if it does not complete its initial Business Combination within 15 months
from the closing of the IPO or (ii) with respect to any other material
provisions relating to stockholders' rights or pre-initial Business Combination
activity, and (c) the redemption of our public shares if we are unable to
complete the initial Business Combination within 15 months from the closing of
the IPO, subject to applicable law. The proceeds deposited in the Trust Account
could become subject to the claims of our creditors which would have priority
over the claims of our public stockholders.
We will have 15 months from the closing of the IPO to complete an initial
Business Combination (the "Combination Period") (or extended (a) to 18 months if
we have filed (i) a Form 8-K including a definitive merger or acquisition
agreement or (ii) a proxy statement, registration statement or similar filing
for an initial business combination but have not completed the initial business
combination within such 15-month period or (b) two instances by an additional
three months each instance for a total of up to 18 months or 21 months,
respectively, by depositing into the trust account for each three month
extension in an amount of $0.10 per share). However, if we are unable to
complete its initial 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 aper-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
its taxes (less up to $100,000 of interest to pay dissolution expenses), divided
by the number of then outstanding public shares, which redemption will
completely extinguish public stockholders' rights as stockholders (including the
right to receive further liquidating distributions, if any), and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and board of directors, liquidate and
dissolve, subject in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
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Results of Operations
As of September 30, 2022, we had not commenced any operations. All activity for
the period from February 17, 2021 (inception) through September 30, 2022,
relates to our formation and the Initial Public Offering and since the closing
of the IPO, the search for a prospective initial Business Combination. We have
neither engaged in any operations nor generated any revenues to date. We will
not generate any operating revenues until after the completion of our initial
Business Combination, at the earliest. We will generate non-operating income in
the form of interest income on cash and cash equivalents from the proceeds
derived from the Initial Public Offering. We expect 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 three months ended September 30, 2022, we had net income of $1,154,014,
which consisted of a change in the fair value of warrant liabilities of
$723,000, and earnings from investments held in trust account of $1,065,986,
partially offset by operating costs of $421,615 and provision for income tax of
$213,357.
For the nine months ended September 30, 2022, we had net income of $9,905,932,
which consisted of a change in the fair value of warrant liabilities of
$10,145,681 and earnings from investments held in trust account of $1,399,251,
partially offset by operating costs of $1,412,493 and provision for income tax
of $226,507.
For the three months ended September 30, 2021, we had net income of $0.
For the period from February 17, 2021 (inception) to September 30, 2021, we had
net loss of $2,668, which consisted of formation costs.
Liquidity, Capital Resources and Going Concern
As of September 30, 2022, we had $724,671 in our operating bank account, and a
working capital of $1,026,093 (excluding income and Delaware franchise taxes
payable which are payable from earnings in the Trust Account).
Our liquidity needs up to September 30, 2022 had been satisfied through a
payment from the Sponsor of $25,000 for the founder shares to cover certain
offering costs and the loan under two unsecured promissory notes from the
Sponsor of $300,000 and the proceeds from the consummation of the Private
Placement not held in the Trust Account. The promissory note was paid in full on
November 8, 2021. In addition, in order to finance transaction costs in
connection with a Business Combination, the Sponsor, initial stockholders,
officers, directors or their affiliates may, but are not obligated to, provide
us Working Capital Loan. As of September 30, 2022 and December 31, 2021, there
were no amounts outstanding under any Working Capital Loans.
On November 8, 2021, we consummated the IPO of 23,000,000 units (the "Units")
including 3,000,000 Units as part of the underwriters' over-allotment option.
The Units were sold at a price of $10.00 per Unit, generating gross proceeds of
$230,000,000. Simultaneously with the closing of the IPO we completed the
private sale of 12,600,000 Private Placement Warrants, including 1,200,000
Private Placement Warrants related to the underwriters' fully exercising their
over-allotment option, at a purchase price of $1.00 per Private Placement
Warrant to the Sponsor, generating gross proceeds of $12,600,000.
We anticipate that the cash held outside of the Trust Account as of
September 30, 2022, will be sufficient to allow us to operate for at least the
next 12 months from the issuance of these financial statements, assuming that a
Business Combination is not consummated during that time. However, until
consummation of a Business Combination, we will be using the funds not held in
the Trust Account, and may use Working Capital Loans (as defined in Note 5) from
the Sponsor, our officers and directors, or their respective affiliates (which
is described in Note 5), for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the Business Combination.
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 undertaking in-depth due diligence and negotiating the Business
Combination is less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to the Business
Combination. Moreover, we will need to raise additional capital through loans
from our Sponsor, officers, directors, or third parties. None of the Sponsor,
officers or directors are under any obligation to advance funds to, or to invest
in, the Company. If we are unable to raise additional capital, we may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit
of our business plan, and reducing overhead expenses. We cannot provide any
assurance that new financing will be available to it on commercially acceptable
terms, if at all.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," management has determined that the mandatory liquidation and
subsequent dissolution, should we be unable to complete a Business Combination,
raises substantial doubt about the Company's ability to continue as a going
concern. We have until February 8, 2023 (or up to August 8, 2023 if extended as
described above) to consummate a Business Combination. Our amended and restated
certificate of incorporation provides that we must complete our initial business
combination within 15 months from the closing of our Initial Public Offering (or
extended (a) to 18 months if we have filed (i) a Form 8-K including a definitive
merger or acquisition agreement or (ii) a proxy statement, registration
statement or similar filing for an initial business combination but have not
completed the initial business combination within such 15-month period or
(b) two instances by an additional three months each instance for a total of up
to 18 months or 21 months, respectively, by depositing into the trust account
for each three month extension in an amount of $0.10 per share). It is uncertain
that the Company will be able to consummate a Business Combination by this time
or if the Company has the financial resources to extend the mandatory
liquidation date beyond February 8, 2023 by depositing into the Trust Account
for each three-month extension an amount of $0.10 per share. If a Business
Combination is not consummated or the mandatory liquidation date is not extended
by February 8, 2023, there will be a mandatory liquidation and subsequent
dissolution. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after February 8, 2023.
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Contractual Obligations
Other than the administrative services agreement and deferred underwriting
commission, we do not have any long-term debt obligations, capital lease
obligations, operating lease obligations, purchase obligations or long-term
liabilities.
Administrative Services Agreement
Commencing on the date that our securities are first listed on Nasdaq, we agreed
to pay the Sponsor $20,000 per month for office space, utilities and secretarial
and administrative support services. Upon completion of the initial Business
Combination or our liquidation, we will cease paying these monthly fees. For the
three and nine months ended September 30, 2022, the Company incurred $60,000 and
$180,000 and paid $40,000 and $160,000 of fees for these services. For the three
months ended September 30, 2021 and for the period from February 17, 2021
(inception) through September 30, 2021, the Company did not incur any fees for
these services.
Registration Rights
The holders of the founder shares, Private Placement Warrants, and warrants that
may be issued upon conversion of Working Capital Loans will have registration
rights to require us to register a sale of any of its securities held by them
pursuant to a registration rights agreement to be signed prior to or on the
effective date of the IPO. These holders will be entitled to make up to three
demands, excluding short form registration demands, that we register such
securities for sale under the Securities Act. In addition, these holders will
have "piggy-back" registration rights to include their securities in other
registration statements filed by us.
Underwriter Agreement
We granted the underwriters a 45-day option to purchase up to 3,000,000
additional Units to cover any over-allotments at the IPO price less the
underwriting discounts and commissions. At the time of the IPO, the underwriters
fully exercised their over-allotment option.
On November 8, 2021, we paid a cash underwriting commission of $0.20 per unit,
or $4,600,000, (including the commission related to the underwriters' exercise
of the over-allotment option).
The underwriters are entitled to deferred underwriting commissions of $0.35 per
unit, or $8,050,000 in the aggregate (including the commission related to the
underwriters' exercise of the over-allotment option). 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 for the offering.
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Critical Accounting Policies and Estimates
The preparation of the financial statement in conformity with US GAAP requires
the Company's management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statement and the reported amounts
of expenses during the reporting period. Actual results could differ from those
estimates.
Warrant Liability
The Company accounts for the 24,100,000 warrants issued in connection with the
IPO and Private Placement in accordance with the guidance contained in FASB ASC
815 "Derivatives and Hedging" whereby under that provision the warrants do not
meet the criteria for equity treatment and must be recorded as a liability.
Accordingly, the Company classifies the warrant instruments as a liability at
fair value and adjusts the instruments to fair value at each reporting period.
This liability will be re-measured at each balance sheet date until the warrants
are exercised or expire, and any change in fair value will be recognized in the
Company's statements of operations. The fair value of warrants will be estimated
using an internal valuation model. The valuation model will utilize inputs such
as assumed share prices, volatility, discount factors and other assumptions and
may not be reflective of the price at which they can be settled. Such warrant
classification is also subject tore-evaluation at each reporting period.
Deferred Offering Costs
We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A- "Expenses of Offering". Deferred offering costs
consist principally of professional and registration fees incurred through the
balance sheet date that are directly related to the Public Offering. Offering
costs are charged to temporary equity or the statement of operations based on
the relative value of the Warrants to the proceeds received from the Units sold
upon the completion of the IPO. Accordingly, on November 8, 2021, offering costs
totaling $13,423,194 (consisting of $4,600,000 of underwriting fees, $8,050,000
of deferred underwriting fees and $773,194 of other offering costs) were
recognized with $580,637 which were allocated to the Public and Private
Warrants, included in accumulated deficit and $12,842,557 included in temporary
equity.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Class A 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 in temporary equity. At all other times, common stock
is classified as stockholders' equity. Our Class A common stock feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, at September 30, 2022 and
December 31, 2021, the 23,000,000 shares of Class A common stock is presented at
redemption value as temporary equity, outside of the stockholders' deficit
section of our balance sheets.
Net Income (Loss) Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share". Net income (loss) per common stock is computed by dividing
net income (loss) by the weighted average number of common stock outstanding for
the period. Remeasurement adjustments associated with the redeemable shares of
common stock is excluded from earnings per share as the redemption value
approximates fair value.
We have two classes of shares, which are referred to as Class A common stock and
Class B common stock. Earnings and losses are shared pro rata between the two
classes of shares. We have not considered the effect of the warrants sold in the
Initial Public Offering and the Private Placement to purchase an aggregate of
24,100,000 of our Class A common stock in the calculation of diluted loss per
share, since their exercise is contingent upon future events. As a result,
diluted net income per common share is the same as basic net income per common
share.
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Recent Accounting Pronouncements
In August 2020, 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. On February 17, 2021, the
date of the Company's inception, the Company adopted the new standard.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
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