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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on
us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or assumptions, and actual
results, events or performance may be materially different from those expressed or implied by these forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s
expectations, hopes, beliefs, intentions, plans or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Factors that might cause or contribute to actual results, events or performance differing from such
forward-looking statements include, but are not limited to, those set forth in the Risk Factors section of the Company’s registration statement on Form S-1, as amended, and the Company’s final prospectus for our initial public offering (“IPO”)
filed with the SEC on August 16, 2021 (“Final Prospectus”). The following discussion should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.
Overview
We are a blank check company formed under the laws of the State of Delaware on April 1, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other
similar business combination (the “Business Combination”) with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of our IPO, our capital stock, debt or a combination of cash, stock and debt. We
are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
As indicated in the accompanying unaudited condensed financial statements, as of September 30, 2021, we had approximately $748,000 in cash and working capital of approximately $984,000. Further, we expect to incur
significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our IPO, and, since the closing of
our IPO, preparation for the search for Business Combination candidates. On August 17, 2021 we consummated our IPO of 15,000,000 units (the “Units”), as described below under “—Liquidity and Capital
Resources.” Subsequent to our IPO, we will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest income on cash and cash equivalents from the
proceeds of the IPO and the Private Placement (as defined below). There has been no significant change in our financial or trading position since the date of our audited financial statements filed as an exhibit to our Current Report on Form 8-K
filed with the SEC on August 25, 2021. 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. We expect our expenses
to increase substantially since the closing of our IPO.
Our entire activity from April 1, 2021 (inception) through September 30, 2021 was, except as noted above, related to organizational activities and
those necessary to prepare for the Initial Public Offering. Although we consummated the Initial Public Offering, we will not be generating any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended September 30, 2021, we had net loss of $1,281,869, which consisted of $67,092 general and administrative expenses, a change
in fair value of derivative liabilities of $783,333, a warrant offering expense of $289,574 and offering costs related to transferring founder shares to anchor investors of $141,870.
For the period from April 1, 2021 (inception) through September 30, 2021, we had net loss of $1,283,799, which consisted of $69,022 general and
administrative expenses, a change in fair value of derivative liabilities of $783,333, a warrant offering expense of $289,574 and offering costs related to transferring founder shares to anchor investors of $141,870.
Liquidity and Capital Resources
Until the consummation of the IPO, our liquidity needs were satisfied through the receipt of $25,000 from the sale of the Class B common stock (the “founder shares”) to our initial stockholders and up to $300,000 in
loans from our Sponsor under an unsecured promissory note. As of the IPO date of August 17, 2021, the Company had drawn approximately $69,000 from the promissory note.
The registration statement for our IPO was declared effective on August 12, 2021. On August 17, 2021 we consummated our IPO of
15,000,000 Units at $10.00 per share. Each Unit consists of one share of Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant, with each warrant entitling the holder thereof to purchase one share of Class A
common stock at a price of $11.50 per share, subject to adjustment. Certain investment funds managed by affiliates of the Sponsor purchased an aggregate of 1,500,000 Units in the IPO. As part of the IPO, certain institutional investors and
qualified institutional buyers (the “Institutional Anchor Investors”) not then affiliated with us, our Sponsor, or our officers, directors, or any member of the Company’s management purchased an aggregate of $127,900,000 of Units. The IPO
generated net proceeds of $146,466,375 and offering costs of $8,703,625, which includes $3,000,000 of underwriting fees, $5,250,000 in deferred underwriting commissions, $453,625 of other offering costs, and an estimated additional $80,000 in
other offering expenses that will be paid (or net proceeds of $141,216,375 giving effect to deferred underwriting commissions). No payments for offering expenses, and no payments from the net offering proceeds, were made by us to our directors,
officers or their associates, persons owning 10% or more of any class of equity securities of the Company or affiliates of the Company, except that offering expenses have been funded in part by the outstanding promissory note with our Sponsor, as
disclosed above.
Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) of 3,333,333 warrants (“Private Warrants”) at a price of $1.50 per Private Warrant, generating total
proceeds of $5,000,000, to the Sponsor. Substantially concurrently with the closing of the Private Placement, the Sponsor sold an aggregate of 66,666 Private Warrants to the Institutional Anchor Investors. The Private Warrants are identical to the
warrants sold in the IPO, except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. The purchasers of the
Private Warrants have agreed not to transfer, assign or sell any of the securities purchased in the Private Placement, including the underlying shares of Class A common stock (except to certain permitted transferees), until 30 days after the
consummation of the Company’s initial business combination.
Upon the closing of the IPO and the Private Placement, a total amount of $150,000,000 ($10.00 per share) from the net proceeds of the IPO and certain of the proceeds of the Private Placement was placed in a Trust
Account (“Trust Account”) located in the United States with Computershare Trust Company, N.A. acting as trustee. The funds are invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company
Act of 1940 having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 which invest 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.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our initial
Business Combination. We may withdraw 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 an initial 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 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, structure, negotiate and complete an initial Business Combination.
In order to fund working capital deficiencies or to 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 expect to repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans may be
repaid only out of funds held outside of the Trust Account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Warrants issued
to our Sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor 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.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial Business Combination. However, if our estimates of the costs of
identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 Class A common stock upon completion of our
initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
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 an affiliate of the Sponsor a monthly fee of $10,000 for office
space, secretarial and administrative services provided to the Company. We began incurring these fees on August 17, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s
liquidation.
Additionally, pursuant to the underwriting agreement entered into in connection with the IPO, the underwriter is entitled to a deferred fee of $0.35 per Unit, or $5,250,000 in the aggregate. The deferred fee will
become payable to the underwriter 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.
Related Party Transactions
On April 9, 2021, one of our founders purchased an aggregate of 8,625,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. On April 19, 2021, the founder shares were
assigned to our Sponsor for the same purchase price that was initially paid by one of our founders. In July 2021, our Sponsor returned to us, for no consideration, an aggregate of 4,312,500 founder shares, which were canceled, resulting in an
aggregate of 4,312,500 founder shares then outstanding and held by our initial shareholders. The purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the number of founder shares issued.
On July 6, 2021, our Sponsor transferred 25,000 founder shares to each of Muneer Satter, William Ulrich and Richard Spencer, our independent director nominees (for a total of 75,000 founder shares) at their original purchase price. In connection
with the closing of the IPO, our Sponsor sold an amount up to 75,000 founder shares to each Institutional Anchor Investor at their original purchase price, or 650,000 founder shares in aggregate. The Company granted the underwriter a 45-day
option from the date of the Final Prospectus to purchase up to 2,250,000 additional Units to cover over-allotments, if any, at the IPO price, less underwriting discounts and commissions. Following the expiration of the underwriter’s
over-allotment option, an aggregate of 3,750,000 founder shares were issued and outstanding as of September 30, 2021 (reflecting the forfeiture by our Sponsor of 562,500 founder shares).
Certain investment funds managed by an affiliate of our Sponsor purchased an aggregate of 1,500,000 Units as part of the IPO. The Units
were sold at the public offering price of $10.00 per Unit, generating gross proceeds to us of $15,000,000.
On August 12, 2021, we entered into an Administrative Services Agreement pursuant to which we will also pay our Sponsor or an affiliate of our Sponsor a total of $10,000 per month, for up to 24 months for
administrative and support services. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Our Sponsor, officers and directors or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our Sponsor, officers, directors or our or any of their affiliates and will
determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
Our Sponsor agreed to loan us up to $300,000 under an unsecured promissory note (the “Note”) to be used for a portion of the expenses of the IPO. We
fully repaid the Note and the amount Due to Sponsor on September 8, 2021 out of the $1,000,000 of offering proceeds that were allocated for the payment of offering expenses (other than underwriting commissions) not held in the trust account. As
of September 30, 2021, there were no amounts outstanding on the Note since this is no longer available to us.
In addition, in order to fund working capital deficiencies or to 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 expect to repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such
loans may be repaid only out of funds held outside the trust account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private
Warrants issued to our Sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor
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.
Our Sponsor committed, pursuant to a written agreement, to purchase an aggregate of 3,333,333 Private Warrants at a price of $1.50 per warrant in the Private Placement. Each Private Warrant is exercisable to purchase
one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Our Sponsor will be permitted to transfer the Private Warrants held by it to certain permitted transferees, including our officers and directors and other
persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as our Sponsor. Otherwise, these warrants will not, subject to certain
limited exceptions, be transferable or salable until 30 days after the completion of our initial business combination. Simultaneously with the consummation of the IPO, we consummated the Private Placement of 3,333,333 Private Warrants at a price of
$1.50 per Private Warrant, generating total proceeds of $5,000,000, to the Sponsor. Substantially concurrently with the closing of the Private Placement, one or more of the Institutional Anchor Investors purchased Private Warrants from our Sponsor,
in an aggregate amount of 66,666 Private Warrants, at the same price per Private Warrant paid by our Sponsor for such warrants. The Private Warrants will be non-redeemable so long as they are held by our Sponsor, any Institutional Anchor Investor
or their permitted transferees (except as described under “Description of Securities — Warrants — Public Stockholders’ Warrants — Redemption of Warrants” in the Final Prospectus). The Private Warrants may also be exercised by our Sponsor, any
applicable Institutional Anchor Investor, or their permitted transferees for cash or on a cashless basis and our Sponsor, any applicable institutional anchor investor and their permitted transferees will also have certain registration rights
related to the Private Warrants (including the shares of Class A common stock issuable upon exercise of the Private Warrant), as described below. Otherwise, the Private Warrants have terms and provisions that are identical to those of the warrants
sold as part of the Units in the IPO.
Pursuant to a registration rights agreement with our initial stockholders entered into on the closing date of the IPO, we may be required to register certain securities for sale under the Securities Act. These
holders, and holders of warrants issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the
Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. We
will bear the costs and expenses of filing any such registration statements. See “Principal Stockholders — Registration Rights” in the Final Prospectus.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed 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 unaudited condensed financial statements, and income and expenses during the periods reported. Actual
results could materially differ from those estimates.
Warrant Liabilities
The Company accounts for warrants for shares of the Company’s Class A common stock that are not indexed to its own stock as liabilities
at fair value on the balance sheet in accordance with ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity. The warrants are
subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statement of operations. The Company will continue to adjust the liability for changes in fair
value until the earlier of the exercise or expiration of the common stock warrants.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in FASB ASC Topic
480 “Distinguishing Liabilities from Equity.” The shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of Class A common
stock (including Class A 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, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to
the occurrence of uncertain future events. Accordingly, as of September 30, 2021, 15,000,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of the
Company’s balance sheet.
Net Loss per Share of Common Stock
We apply the two-class method in calculating earnings per share. Net income (loss) per share of Class A common stock is calculated by
dividing weighted net loss by the weighted average number of shares of Class A common stock outstanding during the period. Net income (loss) per share of Class B common stock is calculated by dividing weighted net loss by the weighted average
number of shares of Class B common stock outstanding during the period.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act will be allowed to
comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised
accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an
“emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii)
provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), (iv) disclose certain executive compensation related
items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation and (v) comply with the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,”
whichever is earlier.