References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
are not historical facts, and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in
this Form 10-Q including, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intends," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and variations thereof and similar words and
expressions are intended to identify such forward-looking statements. Such
forward-looking statements relate to future events or future performance, but
reflect management's current beliefs, based on information currently available.
A number of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's final prospectus for its initial public offering filed with the
Overview
We are a blank check company incorporated as a
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Business Combination with
On
On
Pursuant to the Merger Agreement, among other things, in accordance with the
General Corporation Law of the
Merger Consideration
Pursuant to the Merger Agreement, stockholders of Estrella immediately prior to
the Effective Time collectively will receive from us, in the aggregate, a number
of newly issued shares of common stock of the Company, par value
The Merger also calls for additional agreements, including, among others, the
Lock-Up Agreement and the Support Agreement, as described elsewhere in the Form
S-4 (as defined below) filed with the
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The Company has filed with the
Changes in Our Certifying Accountant
Based on information provided by
On
On
Promissory Notes
On
The Notes bear no interest and are payable in full upon the earlier to occur of (i) the consummation of the Company's business combination or (ii) the date of expiry of the term of the Company (the "Maturity Date"). The following shall constitute an event of default: (i) A failure to pay the principal within five business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of the Company's obligations thereunder; (iv) any cross defaults; (v) an enforcement proceedings against the Company; and (vi) any unlawfulness and invalidity in connection with the performance of the obligations thereunder, in which case the Notes may be accelerated.
The payees of the Notes, Running Lion and Tradeup INC. (collectively, the
"Payees"), respectively, have the right, but not the obligation, to convert
their Notes, in whole or in part, respectively, into private shares of the
common stock (the "Conversion Shares") of the Company, as described in the
prospectus of the Company (File Number 333-253322), by providing the Company
with written notice of the intention to convert at least two business days prior
to the closing of a business combination. The number of Conversion Shares to be
received by the Payees in connection with such conversion shall be an amount
determined by dividing (x) the sum of the outstanding principal amount payable
to such Payee by (y)
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through
For the three months ended
For three months endedSeptember 30, 2021 , we had a net loss of$107,547 , which consisted of formation and operating costs$10,514 and franchise tax expenses of$97,600 and offset by dividend earned on investment held in Trust Account of$567 . 21
For the nine months ended
For the period from
Liquidity and Capital Resources
Until the consummation of the IPO, our only source of liquidity was an initial purchase of common stock by the Sponsor and loans from our Sponsor.
On
On
Following the closings of the IPO on
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing dividend and interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our business combination. We may withdraw dividend and interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a 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.
We 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, 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 the Company completes the initial business combination, it would
repay such loaned amounts. In the event that the initial business combination
does not close, the Company may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts but no proceeds from the
Trust Account would be used for such repayment. Up to
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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 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 business combination or because we become obligated to redeem a significant number of our 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. A
s of
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be
considered off-balance sheet arrangements as of
Contractual Obligations
As of
The holders of the founder shares, the Private Placement Shares, and any common stock that may be issued upon conversion of working capital loans (and any underlying securities) will be entitled to registration rights pursuant to a registration and shareholder rights agreement entered into in connection with the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to our completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in
conformity with accounting principles generally accepted in
Emerging Growth Company Status
The Company is an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the "JOBS Act"), As an emerging growth company, the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with US GAAP requires 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 statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents.
Investments held in Trust Account
The Company classifies its
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, " Other Assets and Deferred Costs - SEC Materials " ("ASC 34010S99") andSEC Staff Accounting Bulletin Topic 5A, " Expenses of Offering ". Offering costs consisting principally of underwriting, legal, accounting and other expenses that are directly related to the IPO and charged to shareholders' equity upon the completion of the IPO.
Warrants
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
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 equity 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 as liabilities 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.
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Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) are classified as
a liability instrument and are measured at fair value. Conditionally redeemable
common stock (including common stock that feature redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within the Company's control) are
classified as temporary equity. At all other times, common stock is classified
as stockholders' equity. The Company's public shares feature certain redemption
rights that are considered to be outside of the Company's control and subject to
occurrence of uncertain future events. Accordingly, as
of
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
The fair value of the Company's financial assets and liabilities reflects management's estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
· Level 1 - inputs to the valuation methodology are quoted prices (unadjusted)
for identical assets or liabilities in active markets.
· Level 2 - inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
· Level 3 - inputs to the valuation methodology are unobservable and significant
to the fair value. Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes ("ASC 740"). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise's unaudited condensed financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
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The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and
no amounts accrued for interest and penalties as of
The Company has identified
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is incorporated in the
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings Per Share. In order to determine the net income (loss)
attributable to both the redeemable shares and non-redeemable shares, the
Company first considered the undistributed income (loss) allocable to both the
redeemable common stock and non-redeemable common stock and the undistributed
income (loss) is calculated using the total net loss less any dividends paid.
The Company then allocated the undistributed income (loss) ratably based on the
weighted average number of shares outstanding between the redeemable and
non-redeemable common stock. Any remeasurement of the accretion to redemption
value of the common stock subject to possible redemption was considered to be
dividends paid to the public stockholders.
For the three and nine months ended
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