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 Annual Report on 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 Annual Report on Form
10-K.
Overview
We are a blank check company incorporated as a Delaware public benefit
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our initial
business combination using cash from the proceeds of our Initial Public Offering
and the private placement of the private placement warrants, 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 our Initial Public Offering or otherwise), shares
issued to the owners of the target, debt issued to banks or other lenders or the
owners of the target, or a combination of the foregoing.
The registration statement for our IPO was declared effective on February 4,
2021. On February 9, 2021, we consummated the IPO of 31,625,000 units (including
4,125,000 units issued to the Underwriters pursuant to the exercise in full of
the over-allotment option granted to the Underwriters) ("Units" and, with
respect to the Class A common stock included in the Units being offered, the
"Public Shares"), at $10.00 per Unit, generating gross proceeds of $316.3
million, and incurring offering costs of approximately $17.4 million, inclusive
of $10.6 million in deferred underwriting commissions.
Simultaneously with the closing of the IPO, we consummated the private placement
("Private Placement") of 9,325,000 warrants at a price of $1.00 per warrant
("Private Placement Warrants" and, together with the warrants included in the
Units, the "Warrants") to the Sponsor, generating gross proceeds of
approximately $9.3 million.
Upon the closing of the IPO and the Private Placement on February 9, 2021,
$316.3 million ($10.00 per Unit) of the net proceeds of the sale of the Units in
the IPO and the Private Placement were placed in a trust account ("Trust
Account") located in the United States with Continental Stock Transfer & Trust
Company acting as trustee, and invested only in U.S. "government securities,"
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as
amended (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 invest only in direct U.S. government
treasury obligations, as determined by the Company, until the earlier of: (i)
the completion of a Business Combination and (ii) the distribution of the Trust
Account as described below.
If we have not completed a Business Combination within 24 months from the
closing of the IPO, 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 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 the remaining stockholders and our
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.
Recent Developments
On April 12, 2021, the Staff of the Securities and Exchange Commission ("SEC")
released the Staff Statement on Accounting and Reporting Considerations for
Warrants Issued by Special Purpose Acquisition Companies ("SPACs") (the
"Statement"). The SEC Staff Statement addresses certain accounting and reporting
considerations related to warrants of a kind similar to those issued by the
Company at the time of its IPO in February 2021.
54
--------------------------------------------------------------------------------
Table of Contents
The Warrants were classified as equity in the Company's previously issued
audited balance sheet as of February, 2021. In light of the Statement and
guidance in Accounting Standards Codification ("ASC") 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", in particular as applicable to
certain provisions in the Warrants related to tender or exchange offer
provisions as well as provisions that provided for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the
warrant, the Company evaluated the terms of the Warrant Agreement entered into
in connection with the Company's IPO and concluded that the Company's Warrants
include provisions that, based on ASC 815-40, preclude the Warrants from being
classified as components of equity. The Warrants are not eligible for an
exception from derivative accounting, and therefore should be classified as a
liability measured at fair value, with changes in fair value reported each
period in earnings.
Results of Operations
For the year ended December 31, 2021, we had a net income of approximately $10.5
million, which included a gain from the change in fair value of warrant
liabilities of $15.1 million, offset by a loss from operations of $1.7 million,
offering cost expense allocated to warrants of $1.0 million, and expense for
excess in fair value over cash received for private placement warrants of $1.9
million.
For the period from December 16, 2020 (Inception) through December 31, 2020, we
had a net loss of $2,412 which consisted of operating costs.
Our business activities from inception to December 31, 2021 consisted primarily
of our formation and completing our IPO, and since the offering, our activity
has been limited to identifying and evaluating prospective acquisition targets
for a Business Combination.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of Class B common stock by our Sponsor and
advances from our Sponsor.
On February 9, 2021, we consummated our Initial Public Offering of 31,625,000
units (the "Units"), including 4,125,000 Units sold pursuant to the full
exercise of the underwriters' option to purchase additional Units. Each Unit
consists of one share of Class A common stock, $0.0001 par value per share (the
"Class A Common Stock"), and one-half of one redeemable warrant (the "Public
Warrants"), each whole Public Warrant entitling the holder thereof to purchase
one share of Class A Common Stock at an exercise price of $11.50 per share,
subject to adjustment. The Units were sold at an offering price of $10.00 per
Unit, generating gross proceeds of $316,250,000 (before underwriting discounts
and commissions and offering expenses). Simultaneously with the closing of the
Initial Public Offering, we consummated the sale of 9,325,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant in a private
placement to our stockholders, generating gross proceeds of $9,325,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Placement Warrants, a total of $316,250,000
was placed in the Trust Account, and we had approximately $3.2 million of cash
held outside of the Trust Account and working capital of approximately $2.6
million. We incurred approximately $17.4 million in transaction costs, including
$10.6 million of deferred underwriting fees that will be paid to the
underwriters from the amounts held in the Trust Account solely in the event the
Company completes its initial Business Combination.
For the year ended December 31, 2021, net cash used in operating activities was
approximately $1.6 million, net cash used in investing activities was
approximately $316.3 million, and net cash provided by financing activities was
approximately $318.8 million.
At December 31, 2021, we had cash held in the Trust Account of $316,273,116. 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 (if applicable) and deferred underwriting commissions) and the
proceeds from the sale of the forward purchase shares to complete our Business
Combination. To the extent that our shares 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 post-Business Combination entity, make other acquisitions and
pursue our growth strategies.
55
--------------------------------------------------------------------------------
Table of Contents
At December 31, 2021, we had cash of $1,013,843 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, properties 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
would repay such loaned amounts. 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 $2,000,000 of such loans may be
convertible into warrants, at the price of $1.00 per warrant at the option of
the lender.
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 estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating and consummating 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 Business Combination. 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 our public shares upon
consummation of our 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 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities. The underwriters are entitled to a
deferred fee of $0.35 per share, or $10,631,250 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 we complete a Business Combination, subject to
the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Except as set forth below, there have been no significant changes in our
critical accounting policies as discussed in the final prospectus filed by us
with the SEC on February 8, 2021.
56
--------------------------------------------------------------------------------
Table of Contents
Warrants Liability
We evaluated the Warrants in accordance with ASC 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity" and concluded that a provision in
the Warrant Agreement related to certain tender or exchange offers as well as
provisions that provided for potential changes to the settlement amounts
dependent upon the characteristics of the holder of the warrant, precludes the
Warrants from being accounted for as components of equity. As the Warrants meet
the definition of a derivative as contemplated in ASC 815 and are not eligible
for an exception from derivative accounting, the Warrants are recorded as
derivative liabilities on the Balance Sheet and measured at fair value at
inception (on the date of the IPO) and at each reporting date in accordance with
ASC 820, "Fair Value Measurement", with changes in fair value recognized in the
Statements of Operations in the period of change.
Common Stock Subject to Possible Redemption
All of the 31,625,000 Class A Common Stock sold as part of the Units in the
Public Offering contain a redemption feature which allows for the redemption of
such public shares in connection with the Company's liquidation, if there is a
stockholder vote or tender offer in connection with the Business Combination and
in connection with certain amendments to the Company's second amended and
restated certificate of incorporation. In accordance with the SEC and its
staff's guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within the control of the
Company require common stock subject to redemption to be classified outside of
permanent equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity's equity instruments, are excluded from the
provisions of ASC 480. Accordingly, at December 31, 2021, all shares of Class A
common stock subject to possible redemption is presented as temporary equity,
outside of the stockholders' equity section of the Company's balance sheets.
The Company recognizes 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.
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. The Company has two classes of shares,
Class A Common Stock and Class B Common Stock. Earnings and losses are shared
pro rata between the two classes of shares. The Company has not considered the
effect of warrants sold in the Initial Public Offering and the private placement
to purchase 25,137,500 shares of Class A common stock in the calculation of
diluted income (loss) per share, since the exercise of the warrants are
contingent upon the occurrence of future events. As a result, diluted net income
(loss) per common share is the same as basic net income (loss) per common share
for the period presented.
The Company's statement of operations applies the two-class method in
calculating net income (loss) per share. Basic and diluted net income per common
share for Class A common stock and Class B common stock is calculated by
dividing net income attributable to the Company by the weighted average number
of shares of Class A common stock and Class B common stock outstanding,
allocated proportionally to each class of common stock
Recent Accounting Standards
In August 2020, the FASB issued 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): Accounting for Convertible Instruments and Contracts
in an Entity's Own Equity ("ASU 2020-06"), which simplifies accounting for
convertible instruments by removing major separation models required under
current GAAP. The ASU also removes certain settlement conditions that are
required for equity-linked contracts to qualify for scope exception, and it
simplifies the diluted earnings per share calculation in certain areas. The
Company adopted ASU 2020-06 at January 1, 2021. Adoption of the ASU did not
impact the Company's financial position, results of operations or cash flows.
57
--------------------------------------------------------------------------------
Table of Contents
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.
© Edgar Online, source Glimpses