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Item 2. Management’s Discussion and Analysis

2023-10-05 compared with 2023-07-17 · 32 added, 18 removed, 79 unchanged (39% of the section changed)

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For information identifying some of the important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the discussion under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A.

Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 filed with the U.S.

Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 and our quarterly report on Form 10-Q for the quarter ended March 31, 2023 filed with the U.S.

Securities and Exchange Commission (the “SEC”).

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On June 9, 2023, the Company’s stockholders approved a proposal to amend the Company’s amended and restated certificate of incorporation (the “Extension Amendment Proposal”) to extend the time that the Company has to consummate its initial business combination from June 14, 2023 to September 14, 2023 (the “Extended Date”) and to allow the board of directors of the Company, without another stockholder vote, to elect to further extend the date to consummate an initial business combination after the Extended Date up to six times, by an additional month each time, up to March 14, 2024, providing the Company a 21-month period (or up to 27-month period) from the closing of the IPO to consummate its initial Business Combination.

As of March 31, 2023, we had not yet commenced any operations.

All activity for the three months ended March 31, 2023, and 2022 relates to our formation, our IPO and our pursuit of a target company with which to effect our initial business combination.

As of June 30, 2023, we had not yet commenced any operations.

All activity from inception through June 30, 2023 relates to our formation, our IPO and our pursuit of a target company with which to effect our initial business combination.

The Company has selected December 31 as its fiscal year end.

Results of Operations and Known Trends or Future Events

Our entire activity from inception through March 31, 2023 relates solely to our formation, our IPO and, since the closing of our IPO, a search for a business combination candidate.

Our entire activity from inception through June 30, 2023 relates solely to our formation, our IPO and, since the closing of our IPO, a search for a business combination candidate.

We have not generated any operating revenues to date, and we will not generate any operating revenues until after completion of our initial business combination.

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We have incurred and expect to continue 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 March 31, 2023, we had net income of $1,184,465, which consisted of $2,525,300 dividend income on marketable securities held in the Trust Account, offset by a $542,100 loss on the change in fair value of the warrant liability, $76,671 in legal and accounting expenses, $49,315 of franchise tax expense, $129,063 of insurance expense, and $23,729 of administrative expenses and bank fees expenses.

For the three months ended March 31, 2022, we had net income of $10,369,840, which consisted of a $10,852,000 gain on the change in fair value of warrant liabilities, a $22,304 unrealized gain on marketable securities held in the Trust Account, offset by $264,030 in legal and accounting expenses, $49,315 of franchise tax expense, $129,063 of insurance expense, and $62,056 of administrative expenses and bank fees expenses.

For the three months ended June 30, 2023, we had net income of $1,657,247, which consisted of $2,864,209 dividend income on marketable securities held in the Trust Account, and a gain of $141,150 on the change in fair value of the warrant liability, offset by a $386,961 financing expense related to the excess fair value of Class B common stock transferred by the Sponsor, provision for income tax of $591,012, $78,770 in legal and accounting expenses, $49,863 of franchise tax expense, $98,532 of insurance expense, $98,311 of administrative expenses, $42,500 of listing fees, and $2,163 of bank fees.

For the six months ended June 30, 2023, we had net income of $2,841,712, which consisted of $5,389,508 dividend income on marketable securities held in the Trust Account, offset by a loss of $400,950 on the change in fair value of the warrant liability, a $386,961 financing expense related to the excess fair value of Class B common stock transferred by the Sponsor, provision for income tax of $1,110,969, $155,441 in legal and accounting expenses, $99,178 of franchise tax expense, $227,594 of insurance expense, $120,403 of administrative expenses, $42,500 of listing fees, and $3,800 of bank fees.

For the three months ended June 30, 2022, we had net income of $3,371,189, which consisted of a $3,427,000 gain on the change in fair value of warrant liabilities and $310,960 of dividend income on marketable securities held in the Trust Account, offset by $83,098 in legal and accounting expenses, $49,863 of franchise tax expense, $129,063 of insurance expense, $90,124 of listing fees, and $14,623 of administrative expenses and bank fees expenses.

For the six months ended June 30, 2022, we had net income of $13,741,030, which consisted of a $14,279,000 gain on the change in fair value of warrant liabilities and $333,264 of dividend income on marketable securities held in the Trust Account, offset by

$347,128 in legal and accounting expenses, $99,178 of franchise tax expense, $258,125 of insurance expense, $90,124 of listing fees, and $76,679 of administrative expenses and bank fees expenses.

Liquidity and Capital Resources

As of March 31, 2023 and December 31, 2022, we had cash of $16,721 and $50,858, respectively, and working capital deficit of $1,728,262 and $929,527, respectively.

As of March 31, 2023, net cash provided by operating activities was $1,578,970.

Net income of $1,184,465 was adjusted by a $542,100 loss on the change in fair value of the warrant liability and changes in operating assets and liabilities of $764,597, offset by $912,193 of accrued dividend on marketable securities held in the Trust Account.

As of March 31, 2022, net cash used in operating activities was $1,503,029.

Net income of $10,369,840 was adjusted by a $10,852,000 gain on the change in fair value of the warrant liability, changes in operating assets and liabilities of $998,565, and a $22,304 unrealized gain on marketable securities held in the Trust Account.

As of June 30, 2023 and December 31, 2022, we had cash of $461,464 and $50,858, respectively, and working capital deficit of $199,924,069 and $929,527, respectively.

As of June 30, 2023, net cash provided by operating activities was $4,334,318.

Net income of $2,841,712 was increased by a $400,950 loss on the fair value of the warrant liability, a $386,961 non-cash financing expense related to the transfer of Class B shares by the Sponsor, and a $1,710,491 increase in changes in operating assets and liabilities, offset by a decrease for $1,005,796 of accrued dividends on marketable securities held in the Trust Account.

As of June 30, 2022, net cash used in operating activities was $1,541,262.

Net income of $13,741,030 was decreased by a $14,279,000 gain on the fair value of the warrant liability, $1,005,796 of accrued dividends on marketable securities held in the Trust Account, and a $846,818 decrease in changes in operating assets and liabilities.

As of June 30, 2023, net cash used in investing activities was $3,923,712, comprised of purchases of marketable securities held in the Trust Account of $4,383,712, offset by proceeds from marketable securities held in the Trust Account of $460,000.

As of June 30, 2022, net cash used in investing activities was $176,790 comprised of purchases of marketable securities held in the Trust Account.

As of June 30, 2023, there was no net cash provided by financing activities.

As of June 30, 2022, net cash provided by financing activities was $240,131, comprised of $156,550 of payments made by the Sponsor on behalf of the Company and receipt of $83,581 repayment for due from related party balance.

We expect to use our working capital primarily for legal and accounting fees related to our regulatory reporting requirements, fees for office space, utilities, and secretarial and administrative services, continued listing fees on the New York Stock Exchange (“NYSE”), and for expenses in connection with identifying and evaluating target businesses, performing business due diligence on prospective target businesses, travelling to and from the offices or similar locations of prospective target businesses or their representatives or owners, reviewing corporate documents and material agreements of prospective target businesses and structuring, negotiating and completing a business combination.

Specifically, we expect that our primary liquidity requirements over the next 12 months from March 31, 2023 will include, among other things, approximately $180,000 for office space, utilities, and secretarial and administrative services pursuant to our agreement with our sponsor to pay our sponsor $15,000 per month for these services until our initial business combination or liquidation;

Specifically, we expect that our primary liquidity requirements over the next 12 months from June 30, 2023 will include, among other things, approximately $180,000 for office space, utilities, and secretarial and administrative services pursuant to our agreement with our sponsor to pay our sponsor $15,000 per month for these services until our initial business combination or liquidation;

$300,000 for legal, accounting, due diligence, travel and other expenses in connection with any business combination;

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These warrants would be identical to the private placement warrants.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within 12 months from March 31, 2023.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within 12 months from June 30, 2023.

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 public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.

In addition, we may target businesses with enterprise values that are greater than we could acquire with the net proceeds from our IPO and the Private Placement, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial business combination.

In addition, we may target businesses

with enterprise values that are greater than we could acquire with the net proceeds from our IPO and the Private Placement, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial 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.

On May 25, 2023, pursuant to the terms of the amended and restated certificate of incorporation of the Company, the Sponsor converted 4,200,000 shares of the Company’s Class B common stock held by it on a one-for-one basis into shares of the Company’s Class A common stock, resulting in an aggregate of 27,200,000 shares of Class A common stock issued and outstanding, comprised of 4,200,000 shares of Class A common stock held by the Sponsor and not subject to possible redemption and 23,000,000 shares of Class A common stock subject to possible redemption.

On June 9, 2023, the holders of 18,849,935 shares of Class A common stock properly exercised their right to redeem their shares in connection with the vote on the Extension Amendment Proposal for $197,694,657 in cash, resulting in 4,150,065 shares of Class A common stock issued and outstanding that are subject to possible redemption and $43,525,120 remaining in the Trust Account.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2023 or December 31, 2022.

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2023 or December 31, 2022.

We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

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Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities as of March 31, 2023 or December 31, 2022.

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities as of June 30, 2023 or December 31, 2022.

Pursuant to the underwriting agreement for our IPO, the underwriter of our IPO was entitled to a deferred fee of $0.35 per unit, or $8,050,000 in the aggregate, 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.

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The $8,050,000 waived fee was recorded to accumulated deficit.

Non-redemption Agreements

On May 25, 2023, the Company and the Sponsor entered into Non-Redemption Agreements with unaffiliated third parties in exchange for such third parties agreeing (i) not to redeem an aggregate of 4,000,000 shares of Class A common stock sold in its initial public offering (the “Non-Redeemed Shares”) in connection with the Special Meeting and (ii) to vote in favor of the Extension Amendment Proposal and the Extension at the Special Meeting (other than with respect to certain shares acquired or to be acquired pursuant to the Non-Redemption Agreements).

In exchange for the foregoing commitments, the Sponsor has agreed to transfer to such third parties an aggregate of up to 1,499,996 shares of Class B common stock held by the Sponsor, with 500,000 of such shares to be transferred to such third parties promptly upon consummation of the Extension, and an additional 166,666 shares to be transferred to such third parties monthly beginning on September 14, 2023 and up to, and including, February 14, 2024, if the board of directors of the Company elects to further extend the deadline to consummate an initial business combination at or prior to such date, in each case, if such third parties continue to hold such Non-Redeemed Shares through the Special Meeting.

The Company accounted for the Non-Redemption Agreements in accordance with Staff Accounting Bulletin Topic 5T (“SAB Topic 5T”).

The Company considered the Sponsor’s transfer of Class B common stock to the unaffiliated third parties in exchange for the Non-Redemption Agreements as a capital contribution by the Sponsor, and recognized the excess fair value of the transferred Class B common stock as a financing expense on the condensed statements of operations for the three and six months ended June 30, 2023.

The Company determined the excess fair value of the 500,000 Class B shares transferred to such third parties upon the consummation of the Extension to be $386,961.

Critical Accounting Estimates

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Actual results could materially differ from those estimates.

We have not identified any critical accounting estimates as of March 31, 2023.

We have not identified any critical accounting estimates as of June 30, 2023.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis