UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 12, 2022, the registrant had
GIGCAPITAL5, INC.
Quarterly Report on Form 10-Q
Table of Contents
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Page |
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PART I. |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
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Item 3. |
23 |
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Item 4. |
23 |
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PART II. |
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Item 1. |
24 |
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Item 1A. |
24 |
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Item 2. |
25 |
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Item 3. |
26 |
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Item 4. |
26 |
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Item 5. |
26 |
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Item 6. |
27 |
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28 |
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i
PART I—FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited).
GIGCAPITAL5, INC.
Condensed Balance Sheets
(Unaudited)
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June 30, 2022 |
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December 31, 2021 |
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ASSETS |
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Current assets |
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Cash |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Cash and marketable securities held in Trust Account |
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Interest receivable on cash and marketable securities held in Trust Account |
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Other long-term assets |
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— |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Payable to related parties |
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Other current liabilities |
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Total current liabilities |
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Warrant liability |
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Deferred underwriting fee payable |
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Total liabilities |
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Commitments and contingencies (Note 5) |
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Common stock subject to possible redemption, |
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Stockholders’ deficit |
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Preferred stock, par value of $ |
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Common stock, par value of $ |
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Additional paid-in capital |
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— |
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— |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ deficit |
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( |
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( |
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TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
1
GIGCAPITAL5, INC.
Condensed Statements of Operations and Comprehensive Loss
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended |
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Period from January 19, 2021 (Date of Inception) through |
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2022 |
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2021 |
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June 30, 2022 |
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June 30, 2021 |
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Revenues |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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General and administrative expenses |
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— |
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Loss from operations |
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( |
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— |
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( |
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( |
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Other income (expense) |
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Other income |
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— |
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— |
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Interest income on cash and marketable securities held in Trust Account |
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— |
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— |
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Loss before provision for income taxes |
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( |
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— |
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( |
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( |
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Provision for income taxes |
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— |
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— |
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Net loss and comprehensive loss |
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$ |
( |
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$ |
— |
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$ |
( |
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$ |
( |
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Net income attributable to common stock subject to possible redemption |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Basic and diluted weighted-average shares outstanding, common stock subject to possible redemption |
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— |
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— |
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Basic and diluted net income per share, common stock subject to possible redemption |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Net loss attributable to common stockholders |
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$ |
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$ |
— |
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$ |
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$ |
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Weighted-average common shares outstanding, basic and diluted (1) |
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Basic and diluted net loss per share, non-redeemable common stock |
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$ |
( |
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$ |
— |
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$ |
( |
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$ |
( |
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_____________________________
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(1) |
For the period from January 19, 2021 (date of inception) through June 30, 2021, the weighted-average common shares outstanding, basic and diluted excluded up to |
The accompanying notes are an integral part of these condensed financial statements.
2
GIGCAPITAL5, INC.
Condensed Statements of Stockholders’ Deficit
(Unaudited)
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Common Stock |
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Additional |
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Three Months Ended June 30, 2022 |
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Shares |
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Amount |
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Paid-In Capital |
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Accumulated Deficit |
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Stockholders’ Deficit |
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Balance as of March 31, 2022 |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Shares subject to redemption |
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— |
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— |
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( |
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— |
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( |
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Reclass of negative additional paid-in capital to accumulated deficit |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance as of June 30, 2022 |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Common Stock |
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Additional |
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Three Months Ended June 30, 2021 |
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Shares |
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Amount |
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Paid-In Capital |
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Accumulated Deficit |
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Stockholders’ Deficit |
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Balance as of March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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Balance as of June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Common Stock |
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Additional |
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Six Months Ended June 30, 2022 |
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Shares |
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Amount |
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Paid-In Capital |
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Accumulated Deficit |
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Stockholders’ Deficit |
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Balance as of December 31, 2021 |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Shares subject to redemption |
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— |
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— |
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( |
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— |
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( |
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Reclass of negative additional paid-in capital to accumulated deficit |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance as of June 30, 2022 |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Common Stock |
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Additional |
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Period from January 19, 2021 (date of inception) through June 30, 2021 |
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Shares |
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Amount |
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Paid-In Capital |
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Accumulated Deficit |
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Stockholders’ Deficit |
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Balance as of January 19, 2021 (Date of Inception) |
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$ |
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$ |
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$ |
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$ |
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Sale of common stock to Founder at $ |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance as of June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these condensed financial statements.
3
GIGCAPITAL5, INC.
Condensed Statements of Cash Flows
(Unaudited)
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Six Months Ended June 30, 2022 |
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Period from January 19, 2021 (Date of Inception) through June 30, 2021 |
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OPERATING ACTIVITIES |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Change in fair value of warrant liability |
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( |
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— |
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Interest earned on cash and marketable securities held in Trust Account |
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( |
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— |
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Change in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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— |
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Other long-term assets |
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— |
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Accounts payable |
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Accrued liabilities |
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Payable to related parties |
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— |
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Other current liabilities |
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— |
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Net cash used in operating activities |
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( |
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— |
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FINANCING ACTIVITIES |
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Proceeds from sale of common stock to Founders |
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— |
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Borrowing from related party |
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— |
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Payment of offering costs |
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— |
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( |
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Net cash provided by financing activities |
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— |
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Net increase (decrease) in cash during period |
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( |
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Cash, beginning of period |
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— |
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Cash, end of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES |
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Change in value of common stock subject to possible redemption |
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$ |
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$ |
— |
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Offering costs included in accounts payable |
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$ |
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$ |
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Offering costs included in accrued liabilities |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
4
GIGCAPITAL5, INC.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General
GigCapital5, Inc. (the “Company”) was incorporated in the state of Delaware on
As of June 30, 2022, the Company had not commenced any operations. All activity for the period from January 19, 2021 (date of inception) through June 30, 2022 relates to the Company’s formation, the initial public offering (the “Offering”), as described in Note 3, and identifying a target Business Combination, as described below. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Offering. The Company has selected December 31 as its fiscal year end.
On September 23, 2021, the registration statement on Form S-1 (File No. 333-254038), as amended, relating to the Offering of the Company was declared effective by the U.S. Securities and Exchange Commission (the “SEC”). The Company entered into an underwriting agreement with Wells Fargo Securities, LLC and William Blair & Company, L.L.C. (collectively, the “Underwriters”) on September 23, 2021 to conduct the Offering of
On September 28, 2021, the Company consummated the Offering of
Simultaneously with the closing of the Offering, the Company consummated the closing of a private placement sale (the “Private Placement”) to the Company’s sponsor GigAcquisitions5, LLC, a Delaware limited liability company (the “Founder” or “Sponsor”), of
Following the closing of the Offering, net proceeds in the amount of $
Transaction costs amounted to $
The Trust Account
The funds in the Trust Account have been invested only in
5
Account may be used to pay for business, legal and accounting due diligence expenses on acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes none of the funds held in the Trust Account will be released until the earlier of: (1) the completion of the Business Combination; (2) the redemption of
Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” must be with one or more target businesses that together have a fair market value equal to at least
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to redeem their shares to the Company in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by New York Stock Exchange (“NYSE”) rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $
If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of common stock have been recorded at their redemption amount and classified as temporary equity. The amount held in the Trust Account as of June 30, 2022 and December 31, 2021 was $
6
Additionally, there was $
Notwithstanding the foregoing redemption rights, if the Company seeks stockholder approval of its initial Business Combination in conjunction with a stockholder vote pursuant to a proxy solicitation (meaning the Company would not conduct redemptions pursuant to the tender offer rules), the amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming its shares of common stock with respect to an aggregate of more than
The Company will have 12 months from September 28, 2021, the closing date of the Offering, to complete its initial Business Combination (or up to 18 months in total if the Company extends the period of time to consummate its initial Business Combination up to six times by an additional one month each time; provided that at the beginning of each one-month extension, the Sponsor (or its designees) must deposit into the Trust Account funds equal to thirty-three hundredths of one percent (0.33%) of the gross proceeds of the offering (including such proceeds from the exercise of the Underwriters’ over-allotment option) for each one-month extension of the time period to complete the initial Business Combination, in each case, in exchange for a non-interest bearing, unsecured promissory note). If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the Offering price per Public Unit in the Offering.
Going Concern Consideration
As of June 30, 2022, the Company had $
In connection with the Company's assessment of going concern considerations, management has determined that the liquidity condition and the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a Business Combination by the liquidation date of September 28, 2022 (or up to March 28, 2023, if applicable), raises substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after September 28, 2022.
If the proceeds not held in the Trust Account become insufficient to allow the Company to operate for at least 12 months from the closing date of the Offering, assuming that a Business Combination is not consummated during that time, the Company intends to manage its cash flow through the timing and payment of expenses or, if necessary,
7
raising additional funds from the Sponsor to ensure the proceeds not held in the Trust Account will be sufficient to allow it to operate for the lesser of 12 months or all available extension periods. In the event that additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to the Company or at all. Over this time period, the Company intends to use these funds primarily 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the accompanying condensed financial statements. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 31, 2022. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022 or any future interim period.
Emerging Growth Company
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 Exchange Act) 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 election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting 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 accounting standard at the time private companies adopt the new or revised standard.
Net Loss Per Share of Common Stock
The Company’s condensed statements of operations and comprehensive loss include a presentation of income per share for common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per share, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held in the Trust Account, net of tax, by the weighted-average number of common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, net of tax, by the weighted-average number of non-redeemable common stock outstanding for the period, basic and diluted.
When calculating its diluted net loss per share, the Company has not considered the effect of (i) the incremental number of shares of common stock to settle warrants sold in the Offering and Private Placement, as calculated using the treasury stock method and (ii) the shares issued to Mr. Weightman subject to forfeiture representing
8
Reconciliation of Net Loss Per Common Share
In accordance with the two-class method, the Company’s net loss is adjusted for net income that is attributable to common stock subject to redemption, net of tax, as these shares only participate in the income of the Trust Account and not the losses of the Company.
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Three Months Ended June 30, |
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Six Months Ended |
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Period from January 19, 2021 (Date of Inception) through |
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2022 |
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2021 |
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June 30, 2022 |
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June 30, 2021 |
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Common stock subject to possible redemption |
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Numerator: Earnings allocable to common stock subject to redemption |
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Interest earned on marketable securities held in Trust Account, net of taxes |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Net income attributable to common stock subject to possible redemption |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Denominator: Weighted average common shares subject to redemption |
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Basic and diluted weighted average shares outstanding, common stock subject to possible redemption |
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— |
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— |
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Basic and diluted net income per share, common stock subject to possible redemption |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Non-Redeemable common stock |
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Numerator: Net loss minus net earnings - Basic and diluted |
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Net loss |
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$ |
( |
) |
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$ |
— |
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$ |
( |
) |
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$ |
( |
) |
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Less: net income attributable to common stock subject to redemption |
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( |
) |
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— |
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( |
) |
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— |
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Net loss attributable to non-redeemable common stock |
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$ |
( |
) |
|
$ |
— |
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|
$ |
( |
) |
|
$ |
( |
) |
|
Denominator: Weighted average non-redeemable common shares |
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Weighted-average non-redeemable common shares outstanding, basic and diluted |
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Basic and diluted net loss per share, non-redeemable common stock |
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$ |
( |
) |
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$ |
— |
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$ |
( |
) |
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$ |
( |
) |
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash balances that at times may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.
9
Cash and Marketable Securities Held in Trust Account
As of June 30, 2022, the assets held in the Trust Account consisted of money market funds investing in U.S. Treasury Bills and cash.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which at times, may exceed federally insured limits. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the condensed balance sheets primarily due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity with 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 statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Offering Costs
Offering costs in the amount of $
Common Stock Subject to Possible Redemption
Common stock subject to mandatory redemption (if any) 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 the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features 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 June 30, 2022 and December 31, 2021, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets. As of June 30, 2022 and December, 2021,
Stock-based Compensation
Stock-based compensation related to restricted stock awards is based on the fair value of common stock on the grant date. The shares underlying the Company’s restricted stock award to Mr. Weightman is subject to forfeiture if he resigns or is terminated for cause prior to the completion of the Business Combination. Therefore, the related stock-based compensation will be recognized upon the completion of a Business Combination, unless the related shares are forfeited prior to a Business Combination occurring.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
10
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. There were
Warrant Liability
The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the condensed balance sheets. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense) on the condensed statements of operations and comprehensive loss. 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. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified to additional paid-in capital.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 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. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company assessed the potential impact of ASU 2020-06 and determined it would not have a material impact on the condensed financial statements as presented.
The Company 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.
3. OFFERING
On September 28, 2021, the Company completed the Offering whereby the Company sold
Each Public Warrant will become exercisable on the later of
11
in the Warrant Agreement. Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants in whole and not in part at a price of $
On November 1, 2021, the Company announced that the holders of the Company’s Public Units may elect to separately trade the securities underlying such Public Units which commenced on November 4, 2021. Any Public Units not separated will continue to trade on the NYSE under the symbol “GIA.U.” Any underlying shares of common stock and warrants that are separated will trade on the NYSE under the symbols “GIA,” and “GIA.WS,” respectively.
4. RELATED PARTY TRANSACTIONS
Founder Shares
During the period from January 19, 2021 (date of inception) to December 31, 2021, the Founder purchased
Private Placement
The Founder purchased from the Company an aggregate of
Each Private Placement Warrant will become exercisable on the later of
The Company’s Founder and Insiders have agreed not to transfer, assign or sell any of their respective Founder Shares, shares held by the Insiders, Private Placement Units, shares or other securities underlying such Private Placement Units that they may hold until the date that is (i) in the case of the Founder Shares or shares held by the Insiders, the earlier of (A)
12
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least
Unlike the Public Warrants included in the Public Units sold in the Offering, if held by the original holder or its permitted transferees, the Private Placement Warrants are not redeemable by the Company and, subject to certain limited exceptions, will be subject to transfer restrictions until one year following the consummation of the Business Combination. If the Private Placement Warrants are held by holders other than the initial holders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by holders on the same basis as the Public Warrants.
If the Company does not complete a Business Combination, then a portion of the proceeds from the sale of the Private Placement Units will be part of the liquidating distribution to the public stockholders.
Administrative Services Agreement and Other Agreements
The Company agreed to pay $
On September 23, 2021, the Company entered into a Strategic Services Agreement with Mr. Weightman, its Treasurer and Chief Financial Officer, who holds
5. COMMITMENTS AND CONTINGENCIES
Registration Rights
On September 23, 2021, the Company entered into a registration rights agreement with its Founder and Insiders. These holders will be entitled to make up to two demands, excluding short form registration demands, that the Company 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 the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the registration rights agreement.
Underwriters Agreement
The Company granted the Underwriters a
The Company paid an underwriting discount of $
The Underwriters will use their commercially reasonable efforts to provide the Company with the following services: 1) originating and introducing the Company to potential targets for a Business Combination; 2) arranging
13
non-deal roadshows on behalf of the Company in connection with a proposed Business Combination; 3) assisting the Company in meeting its securities exchange listing requirements following the closing of the Offering; and 4) providing capital markets advice and liquidity to the Company following the closing of the Offering. If the Company uses its best efforts (and the Underwriters use commercially reasonable efforts) to obtain financing in private placements or privately negotiated transactions, but notwithstanding such efforts, the Company does not have sufficient cash necessary to consummate the Business Combination and pay the deferred underwriting commission, the Company and the Underwriters will cooperate in good faith to come to a mutually-satisfactory solution with respect to the payment of the deferred underwriting commission so as to ensure that the Company’s obligation to pay the deferred underwriting commission shall not impede the closing of the Business Combination.
6. STOCKHOLDERS’ DEFICIT
Common Stock
The authorized common stock of the Company includes up to
Preferred Stock
The Company is authorized to issue
Warrants (Public Warrants and Private Placement Warrants)
Warrants will be exercisable at $
Each warrant will become exercisable on the later of
14
Under the terms of the Warrant Agreement, the Company has agreed to use its best efforts to file a new registration statement under the Securities Act, following the completion of the Company’s initial Business Combination, for the registration of the shares of common stock issuable upon exercise of the warrants included in the Public Units and Private Placement Units.
As of June 30, 2022 and December 31, 2021, there were
Stock-based Compensation
Included in the outstanding shares of common stock are
7. FAIR VALUE MEASUREMENTS
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:
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Level 1: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
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Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
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Level 3: |
Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities. |
The Company has determined that the Private Placement Warrants are subject to treatment as a liability, as the transfer of the warrants to anyone other than the purchasers or their permitted transferees would result in these warrants having substantially the same terms as the Public Warrants. The Public Warrants did not start trading separately until November 4, 2021, so the Company initially determined the fair value of each warrant using a Black-Scholes option-pricing model, which requires the use of significant unobservable market values. Accordingly, the Private Placement Warrants were initially classified as Level 3 financial instruments. After the Public Warrants started trading separately, the Company determined that the fair value of each Private Placement Warrant approximates the fair value of a Public Warrant. Accordingly, the Private Placement Warrants are valued upon observable data and are classified as Level 2 financial instruments.
15
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
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Description: |
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Level |
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June 30, 2022 |
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December 31, 2021 |
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Assets: |
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Cash and marketable securities held in Trust Account |
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1 |
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$ |
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$ |
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Liabilities: |
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Warrant liability |
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2 |
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$ |
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$ |
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The marketable securities held in the Trust Account are considered trading securities as they are generally used with the objective of generating profits on short-term differences in price and therefore, the realized and unrealized gain and loss are recorded in the condensed statements of operations and comprehensive loss for the period presented.
Additionally, there was $
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this report (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to GigCapital5, Inc. References to our “management” or our “management team” refer to our officers and directors. References to the “Sponsor” or “Founder” refer to GigAcquisitions5, LLC. References to the “Insiders” refer to Mr. Weightman, our Treasurer and Chief Financial Officer, and Interest Solutions, LLC, a Connecticut limited liability company and an affiliate of ICR, LLC, an investor relations firm providing services to the Company. References to "Initial Stockholders" refer to the Founder together with the Insiders. References to "Founder Shares" refer to the initial shares of common stock purchased by the Founder. References to "Insider Shares" refer to shares of common stock granted to the Insiders. References to "Private Placement Units" refer to the units sold to the Founder in a private placement. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 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 Quarterly Report 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 “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek,” “may,” “might,” “plan,” “possible,” “potential,” “should, “would” 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 Annual Report on Form 10-K filed on March 31, 2022 with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a newly organized Private-to-Public Equity (PPE) company, also known as a blank check company or special purpose acquisition vehicle, incorporated in the State of Delaware and formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with one or more businesses or entities. We intend to effectuate our initial business combination using cash from the proceeds from the sale of the Pubic Units in our initial public offering (the “IPO”), the sale of the Private Placement Units to our Founder, the sale of common stock to our Founder, our common equity or any preferred equity that we may create in accordance with the terms of our charter documents, debt, or a combination of cash, common or preferred equity and debt. The Public Units sold in the IPO each consisted of one share of common stock, and one redeemable warrant to purchase our common stock (no fractional shares will be issued upon exercise of the warrants). The Private Placement Units were substantially similar to the Public Units sold in the IPO, but for certain differences in the warrants included in each of them. For clarity, the warrants included in the Public Units are referred to herein as the “public warrants”, and the warrants included in the Private Placement Units are referred to herein as the “private warrants”.
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The issuance of additional shares of common stock or the creation of one or more classes of preferred stock during our initial business combination:
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may significantly dilute the equity interest of investors in the IPO who would not have pre-emption rights in respect of any such issue; |
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may subordinate the rights of holders of common stock if the rights, preferences, designations and limitations attaching to the preferred shares are senior to those afforded our shares of common stock; |
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could cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
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may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
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may adversely affect prevailing market prices for our shares of common stock. |
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
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default and foreclosure on our assets if our operating revenues after our initial business combination are insufficient to repay our debt obligations; |
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
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our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
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our inability to obtain necessary additional financing if any document governing such debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
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our inability to pay dividends on our shares of common stock; |
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans 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. For the period from January 19, 2021 (date of inception) through June 30, 2022, our only activities have been organizational activities, those necessary to prepare for the IPO and to search for a target business for the business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and marketable securities held in a trust account (the “Trust Account”) at Oppenheimer & Co., Inc. in New York, New York with Continental Stock Transfer & Trust Company acting as trustee, which was funded after the IPO to hold an amount of cash and marketable securities equal to that raised in the IPO. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements as of and for the period ended December 31, 2021 as filed
18
with the SEC on March 31, 2022. 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 June 30, 2022, we had a net loss of $636,074, which consisted of operating expenses of $973,852 and a provision for income taxes of $89,562, that were partially offset by interest income on marketable securities held in the Trust Account of $300,140 and other income from the change in fair value of the warrant liability of $127,200. For the three months ended June 30, 2021, we did not incur any expenses or have any income.
For the six months ended June 30, 2022, we had a net loss of $1,006,009, which consisted of operating expenses of $1,586,735 and a provision for income taxes of $94,677 that were partially offset by interest income on marketable securities held in the Trust Account of $317,653 and other income from the change in fair value of the warrant liability of $357,750. For the period from January 19, 2021 (date of inception) through June 30, 2021, we had a net loss of $35,749, which consisted of operating expenses of $35,749.
Liquidity and Capital Resources
During the period from January 19, 2021 (date of inception) to December 31, 2021, the Founder purchased a net of 5,735,000 Founder Shares, after giving effect to the forfeiture on September 23, 2021 of 4,312,500 Founder Shares, for an aggregate purchase price of $25,000, or $0.0043592 per share. The Company also issued 5,000 Insider Shares to Mr. Weightman, its Treasurer and Chief Financial Officer, pursuant to the Insider Shares Grant Agreement dated September 23, 2021 between the Company and Mr. Weightman. The 5,000 shares granted to Mr. Weightman are subject to forfeiture and cancellation if he resigns or the services are terminated for cause prior to the completion of the business combination.
On September 28, 2021, the Company consummated the IPO of 23,000,000 Public Units, including the issuance of 3,000,000 Public Units as a result of the Underwriters’ exercise in full of their over-allotment option. The Public Units were sold at a price of $10.00 per Public Unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the closing of the IPO, the Company consummated the closing of the Private Placement to the Sponsor of 795,000 Private Placement Units, at a price of $10.00 per Private Placement Unit. The Private Placement generated aggregate gross proceeds of $7,950,000.
Following the closing of the IPO, net proceeds in the amount of $225,400,000 from the sale of the Public Units and proceeds in the amount of $6,900,000 from the sale of Private Placement Units, for a total of $232,300,000, were placed in the Trust Account.
As of June 30, 2022, we held cash and marketable securities in the amount of $232,464,793 (including $164,793 of interest earned) in the Trust Account. In addition, there was interest receivable to the Trust Account of $158,838. The marketable securities consisted of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Interest income earned from the funds held in the Trust Account may be used by us to pay taxes. For the six months ended June 30, 2022, tax relating to interest earned on the Trust Account totaled $94,677.
For the six months ended June 30, 2022, cash used in operating activities was $366,391, consisting of a net loss of $1,006,009, interest earned on marketable securities held in the Trust Account of $317,653 and a decrease in the fair value of the warrant liability of $357,750, that were partially offset by the increases in payable to related parties of $358,786, accounts payable of $165,179, accrued liabilities of $324,016, and other current liabilities of $91,777, and the decreases in other long-term assets of $165,230 and prepaid expenses and other current assets of $210,033.
For the period from January 19, 2021 (date of inception) to June 30, 2021, no cash was used in operating activities. The Company incurred a net loss of $35,749, which was offset by an increase of $25,749 in accounts payable and an increase of $10,000 in accrued liabilities.
There were no cash flows from investing activities during the six months ended June 30, 2022 or the period from January 19, 2021 (date of inception) through June 30, 2021.
There were no cash flows from financing activities during the six months ended June 30, 2022. During the period from January 19, 2021 (date of inception) through June 30, 2021, financing activities provided cash of $45,212 due to the proceeds from borrowing from a related party of $125,000 and from the sale of common stock to the Founder of $25,000, partially offset by the payment of offering costs of $104,788.
19
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable by us). We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations to be approximately $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. To the extent that our capital stock is used in whole or in part as consideration to affect our initial business combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business or businesses. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.
As of June 30, 2022, we had cash of $55,158 held outside the Trust Account. We believe that the proceeds not held in the Trust Account may not be sufficient to allow us to operate for at least the next 12 months. Since the closing of the IPO, we have used the funds held outside the Trust Account primarily 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. The Company intends to manage its cash flow through the timing and payment of expenses or, if necessary, raising additional funds from the Sponsor to ensure the proceeds not held in the Trust Account will be sufficient to allow it to operate for at least the next 12 months.
If our estimates of the costs of undertaking in-depth due diligence and negotiating our 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 consummate our initial business combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In order to finance operating and/or transaction costs in connection with a business combination, our Founder, executive officers, directors, or their affiliates may, but are not obligated to, loan us funds. In the event that our initial 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 $1,500,000 of such loans may be convertible into units of the post-business combination entity at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units.
Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
As of June 30, 2022, we have not entered into any off-balance sheet financing arrangements. 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. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
As of June 30, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay our Founder a monthly fee of $30,000 for office space, administrative services and secretarial support. We began incurring these fees on September 24, 2021, and will continue to incur these fees monthly until the earlier of the completion of the business combination or our liquidation.
On September 23, 2021, the Company entered into a Strategic Services Agreement with Mr. Weightman, its Treasurer and Chief Financial Officer, who holds 5,000 Insider shares. Mr. Weightman is initially receiving $2,500 per month for his services and such amount could increase to up to $15,000 per month dependent upon the scope of services provided, as may be mutually agreed by the parties. The Company will pay Mr. Weightman for services
20
rendered since September 23, 2021 and on a monthly basis thereafter for all services rendered after the consummation of the Offering.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Emerging Growth Company
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 Exchange Act) 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 election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.
Net Loss Per Common Share
Our condensed statements of operations and comprehensive loss include a presentation of income per share for common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per share, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of tax, by the weighted-average number of common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, net of tax, by the weighted-average number of non-redeemable common stock outstanding for the period, basic and diluted.
When calculating our diluted net loss per share, we have not considered the effect of (i) the incremental number of shares of common stock to settle warrants sold in the IPO and Private Placement, as calculated using the treasury stock method and (ii) the shares issued to Mr. Weightman subject to forfeiture representing 5,000 shares of common stock underlying a restricted stock award for the period it was outstanding. Since we were in a net loss position during the period after deducting net income attributable to common stock subject to redemption, diluted net loss per common share is the same as basic net loss per common share for the period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.
21
In accordance with the two-class method, our net loss is adjusted for net income that is attributable to common stock subject to redemption, net of tax, as these shares only participate in the income of the Trust Account and not our losses. Accordingly, net loss per common share, basic and diluted, is calculated as follows:
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|
|
Three Months Ended June 30, |
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|
Six Months Ended |
|
|
Period from January 19, 2021 (Date of Inception) through |
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2022 |
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|
2021 |
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|
June 30, 2022 |
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June 30, 2021 |
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||||
|
Common stock subject to possible redemption |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to common stock subject to redemption |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account, net of taxes |
|
$ |
210,578 |
|
|
$ |
— |
|
|
$ |
222,976 |
|
|
$ |
— |
|
|
Net income attributable to common stock subject to possible redemption |
|
$ |
210,578 |
|
|
$ |
— |
|
|
$ |
222,976 |
|
|
$ |
— |
|
|
Denominator: Weighted average common shares subject to redemption |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, common stock subject to possible redemption |
|
|
23,000,000 |
|
|
|
— |
|
|
|
23,000,000 |
|
|
|
— |
|
|
Basic and diluted net income per share, common stock subject to possible redemption |
|
$ |
0.01 |
|
|
$ |
— |
|
|
$ |
0.01 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable common stock |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Net loss minus net earnings - Basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(636,074 |
) |
|
$ |
— |
|
|
$ |
(1,006,009 |
) |
|
$ |
(35,749 |
) |
|
Less: net income attributable to common stock subject to redemption |
|
|
(210,578 |
) |
|
|
— |
|
|
|
(222,976 |
) |
|
|
— |
|
|
Net loss attributable to non-redeemable common stock |
|
$ |
(846,652 |
) |
|
$ |
— |
|
|
$ |
(1,228,985 |
) |
|
$ |
(35,749 |
) |
|
Denominator: Weighted average non-redeemable common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average non-redeemable common shares outstanding, basic and diluted |
|
|
6,540,000 |
|
|
|
8,735,000 |
|
|
|
6,540,000 |
|
|
|
7,180,920 |
|
|
Basic and diluted net loss per share, non-redeemable common stock |
|
$ |
(0.13 |
) |
|
$ |
— |
|
|
$ |
(0.19 |
) |
|
$ |
(0.00 |
) |
Common Stock subject to possible redemption
Common stock subject to mandatory redemption (if any) 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 as temporary equity. At all other times, common stock is classified as stockholders’ deficit. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of June 30, 2022 and December 31, 2021, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of our condensed balance sheets.
Warrant Liability
The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the condensed balance sheets. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense) on the
22
condensed statements of operations and comprehensive loss. 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. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified to additional paid-in capital.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 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. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company assessed the potential impact of ASU 2020-06 and determined it would not have a material impact on the condensed financial statements as presented.
The Company 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control over Financial Reporting
During our most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
23
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, we supplement the risk factors disclosed in our Annual Report on Form 10-K that was filed with the SEC on March 31, 2022 and our Quarterly Report on Form 10-Q that was filed with the SEC on May 16, 2022 with the following risk factors. Any of these factors disclosed in our Annual Report on Form 10-K or herein could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Recent volatility in capital markets may affect our ability to obtaining financing for our initial business combination through sales of our shares of common stock or issuance of indebtedness.
With uncertainty in the capital markets and other factors, financing for our initial business combination may not be available on terms favorable to us or at all. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our shares of common stock. Any debt financing secured by us could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may limit the operations and growth of the surviving company of our initial business combination. If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to complete our initial business combination.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of securities in the Trust Account, we would likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
The funds in the Trust Account have, since our Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, and we expect that we will (if a period to complete a business combination is ever extended to 24 months or longer from the closing of the Initial Public Offering subject to the required stockholders’ approval), on or prior to the 24-month anniversary of the effective date of the Registration Statement, instruct Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash until the earlier of consummation of our initial business combination or liquidation of the Company. Following such liquidation, we would likely receive minimal interest, if any, on the funds held in the Trust Account. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the Trust Account and thereafter to hold all funds in the Trust Account in cash would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
In addition, even prior to the 24-month anniversary of the effective date of the IPO Registration Statement, we may be deemed to be an investment company. The longer that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to
24
liquidate the securities held in the Trust Account at any time, even prior to the 24-month anniversary, and instead hold all funds in the Trust Account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Founder Shares
During the period from January 19, 2021 (date of inception) to December 31, 2021, the Founder purchased a net 5,735,000 shares of common stock (the “Founder Shares”), after giving effect to the forfeiture on September 23, 2021 of 4,312,500 Founder Shares, for an aggregate purchase price of $25,000, or $0.0043592 per share. Founder Shares are identical to the common stock included in the public units sold in the IPO except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below.
The Founder Shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Each holder of Founder Shares is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act.
Private Placement
The Founder purchased from the Company an aggregate of 795,000 Private Placement Units, at a price of $10.00 per Private Placement Unit in a private placement that occurred simultaneously with the completion of the IPO (the “Private Placement”). Each Private Placement Unit consists of one share of the Company’s common stock, $0.0001 par value and one Private Placement Warrant. Each whole Private Placement Warrant will be exercisable for $11.50 per share, and the exercise price of the Private Placement Warrants may be adjusted in certain circumstances as described in Note 6 of the Notes to Unaudited Condensed Financial Statements. Unlike the warrants included in the Public Units sold in the IPO, if held by the original holder or its permitted transferees, the warrants included in the Private Placement Units are not redeemable by the Company and subject to certain limited exceptions, will be subject to transfer restrictions until one year following the consummation of the business combination. If the warrants included in the Private Placement Units are held by holders other than the initial holders or their permitted transferees, the warrants included in the Private Placement Units will be redeemable by the Company and exercisable by holders on the same basis as the warrants included in the IPO.
The Private Placement Units were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The Founder is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act.
Insider Shares
The Company issued 5,000 Insider Shares to Mr. Weightman, its Treasurer and Chief Financial Officer, pursuant to the Insider Shares Grant Agreement dated September 23, 2021 between the Company and Mr. Weightman. The 5,000 shares granted to Mr. Weightman are subject to forfeiture and cancellation if he resigns or the services are terminated for cause prior to the completion of the business combination.
The Company also issued 10,000 Insider Shares to Interest Solutions, LLC, a Connecticut limited liability company and an affiliate of ICR, LLC, an investor relations firm providing services to the Company (“ICR”). The 10,000 Insider Shares granted to ICR are not subject to forfeiture. The grant date fair value of the 10,000 shares was expensed upon issuance.
Use of Proceeds
On September 23, 2021, the SEC declared the Company’s initial Registration Statement on Form S-1 (File No 333-254038), in connection with the IPO of $200.0 million, effective.
The Company entered into an underwriting agreement with Wells Fargo Securities, LLC and William Blair & Company, L.L.C. (collectively, the “Underwriters”) on September 23, 2021 to conduct the IPO of 20,000,000 public units (the “Public Units”) in the amount of $200.0 million in gross proceeds, with a 45-day option provided to the Underwriters to purchase up to 3,000,000 additional Public Units solely to cover over-allotments, if any, in the amount of up to $30.0 million in additional gross proceeds. Each Public Unit consists of one share of the Company’s common
25
stock, $0.0001 par value, and one redeemable warrant (a “Public Warrant”). Each whole Public Warrant is exercisable for one share of common stock at a price of $11.50 per full share.
On September 28, 2021, the Company consummated the IPO of 23,000,000 units, including the issuance of 3,000,000 Public Units as a result of the Underwriters’ exercise in full of their over-allotment option. The Public Units were sold at a price of $10.00 per Public Unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the closing of the IPO, the Company consummated the closing of the Private Placement to the Company’s Founder of 795,000 Private Placement Units, at a price of $10.00 per Private Placement Unit. The Private Placement generated aggregate gross proceeds of $7,950,000.
After deducting the underwriting discounts and commissions and offering expenses paid, the total net proceeds in the amount of $225,400,000 from the sale of the Public Units, net proceeds in the amount of $6,900,000 from the sale of the Private Placement Units to the Founder, for a total of $232,300,000, were placed in a trust account (the “Trust Account”) at Oppenheimer & Co., Inc. in New York, New York with Continental Stock Transfer & Trust Company acting as trustee. The proceeds held in the Trust Account may be invested by the trustee only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations.
The Company incurred $13,193,740 in transaction costs, consisting of $4,600,000 of underwriting fees, $9,200,000 of deferred underwriting fees and $843,740 of offering costs, of which $110,000 remains in accounts payable as of June 30, 2022, partially offset by the reimbursement of $1,450,000 of offering expenses by the Underwriters. Using a portion of the net proceeds of the IPO that was not placed in the Trust Account, we repaid promissory notes issued to our Sponsor and an affiliate, which bore a total combined outstanding principal amount of $133,465. As of June 30, 2022, we had cash of $55,158 held outside the Trust Account for working capital purposes.
There has been no material change in the planned use of the proceeds from the IPO and the Private Placement as is described in the final prospectus included in the IPO Registration Statement.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
26
Item 6. Exhibits.
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Exhibit Number |
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Description |
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31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* |
Filed herewith |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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GigCapital5, Inc. |
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Date: August 15, 2022 |
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By: |
/s/ Dr. Raluca Dinu |
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Dr. Raluca Dinu |
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Chief Executive Officer, President and Secretary (Principal Executive Officer) |
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Date: August 15, 2022 |
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By: |
/s/ Brad Weightman |
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Brad Weightman |
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Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) |
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