References to "we", "us", "our" or the "Company" are to Sarissa Capital
Acquisition Corp., except where the context requires otherwise. The following
discussion should be read in conjunction with our financial statements and
related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a newly incorporated blank check company incorporated as a Cayman Islands
exempted company and formed for the purpose of effecting a merger, capital share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses, which we refer to as our initial
business combination. The Company's IPO was declared effective by the SEC on
October 20, 2020. On October 23, 2020, the Company consummated the IPO of
20,000,000 units (the "Units"), including the issuance of 2,500,000 Units as a
result of the underwriter's partial exercise of its over-allotment option. Each
Unit consists of one Class A ordinary share,
$0.0001 par value, and one-third of one redeemable warrant entitling its holder
to purchase one Class A ordinary share at a price of $11.50 per share. The Units
were sold at an offering price of $10.00 per Unit, generating gross proceeds of
$200,000,000.
- 34 -
--------------------------------------------------------------------------------
Simultaneously with the closing of the IPO, the Company consummated the private
placement ("Sponsor Private Placement") with the Sponsor of an aggregate of
3,333,333 warrants ("Sponsor Private Warrants"), each at a price of $1.50 per
Sponsor Private Warrant, generating total proceeds of $5,000,000 and with the
underwriter of an aggregate of 666,667 warrants (the "Cantor Private Warrants"
and together with Sponsor Private Warrants, "Private Warrants"), each at a price
of $1.50 per Cantor Private Warrant, generating total proceeds of $1,000,000. We
expect to continue to incur significant costs in the pursuit of our acquisition
plans. We cannot assure you that our plans to raise capital or to complete our
initial business combination will be successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities, those
necessary to prepare for our initial public offering and identifying a target
company for our initial 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 cash
equivalents held in the trust account. We incur expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as expenses as we conduct due diligence on prospective
business combination candidates.
For the year ended December 31, 2021, we had a net income of $19,396,370. We
incurred $784,688 of formation and operating costs, consisting mostly of general
and administrative expenses. The Company also recorded a change in fair value of
warrant liabilities of $20,168,451. We had interest income of $12,607 of
interest on the trust account.
For the period from August 12, 2020 (inception) to December 31, 2020, we had a
net loss of $17,826,208. We incurred $87,399 of formation and operating costs
(not charged against shareholders' equity), consisting mostly of general and
administrative expenses. The Company also recorded a change in fair value of
warrant liabilities of $17,268,428 and offering costs allocated to issuance of
warrants of $472,585. We had interest income of $2,204 of interest on the trust
account.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until October 23, 2022 to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by this time. If a Business Combination is
not consummated by this date and an extension not requested by the Sponsor,
there will be a mandatory liquidation and subsequent dissolution of the Company.
No adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after October 23, 2022.
Liquidity and Capital Resources
As of December 31, 2021, we had cash outside the trust account of $512,884
available for working capital needs. All remaining cash held in the trust
account are generally unavailable for the Company's use, prior to an initial
business combination, and is restricted for use either in a business combination
or to redeem ordinary shares. As of December 31, 2021, none of the amount in the
trust account was available to be withdrawn as described above. Through
December 31, 2021, the Company's liquidity needs were satisfied through receipt
of $25,000 from the sale of the founder shares and the remaining net proceeds
from the initial public offering and the sale of private placement units.
The Company anticipates that the $512,884 outside of the trust account as of
December 31, 2021, will be sufficient to allow the Company to operate for at
least the next 12 months, assuming that a business combination is not
consummated during that time. Until consummation of our business combination,
the Company will be using the funds not held in the trust account, and any
additional Working Capital Loans (as defined in Note 5 to our financial
statements) from the initial shareholders, the Company's officers and directors,
or their respective affiliates (which is described in Note 5 to our financial
statements), 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.
- 35 -
--------------------------------------------------------------------------------
The Company does not believe it will need to raise additional funds in order to
meet the expenditures required for operating its business. However, if the
Company's estimates of the costs of undertaking in-depth due diligence and
negotiating business combination is less than the actual amount necessary to do
so, the Company may have insufficient funds available to operate its business
prior to the business combination. Moreover, the Company will need to raise
additional capital through loans from its sponsor, officers, directors, or third
parties beyond this commitment, although the company has obtained a commitment
letter from its sponsor for an additional $600,000 in funding. If the Company is
unable to raise additional capital, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, curtailing operations, suspending the pursuit of its business plan,
and reducing overhead expenses. The Company cannot provide any assurance that
new financing will be available to it on commercially acceptable terms, if at
all.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would
be considered off-balance sheet arrangements as of December 31, 2021. 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
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of our Sponsor a monthly fee of $10,000 for office space, utilities
and administrative support provided to the Company. We began incurring these
fees on October 23, 2020 and will continue to incur these fees monthly until the
earlier of the completion of the initial Business Combination and the Company's
liquidation.
The underwriters are entitled to deferred commissions of $0.35 per unit of the
gross proceeds from the Units sold in the IPO, or $7,000,000 in the aggregate.
The deferred commissions will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our results of operations and liquidity
and capital resources are based on our financial information. We describe our
significant accounting policies in Note 2 - Summary of Significant Accounting
Policies, of the Notes to Financial Statements included in this report. Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). Certain of our
accounting policies require that management apply significant judgments in
defining the appropriate assumptions integral to financial estimates. On an
ongoing basis, management reviews the accounting policies, assumptions,
estimates and judgments to ensure that our financial statements are presented
fairly and in accordance with GAAP. Judgments are based on historical
experience, terms of existing contracts, industry trends and information
available from outside sources, as appropriate. However, by their nature,
judgments are subject to an inherent degree of uncertainty, and, therefore,
actual results could differ from our estimates.
- 36 -
--------------------------------------------------------------------------------
Emerging Growth Company
We are an "emerging growth company," as defined in Section 2(a) of the
Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the "JOBS Act"). As such, we are eligible to take advantage of certain
exemptions from various reporting requirements that are applicable to other
public companies that are not "emerging growth companies" including, but not
limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not
previously approved. In addition, Section 107 of the JOBS Act also provides that
an "emerging growth company" can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for complying with
new or revised accounting standards. In other words, an "emerging growth
company" can delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. We intend to take
advantage of the benefits of this extended transition period.
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815 15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is reassessed
at the end of each reporting period. We account for our 10,666,667 ordinary
shares warrants issued in connection with our IPO (6,666,667) and Private
Placement (4,000,000) as derivative warrant liabilities in accordance with
ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at
fair value and adjust the instruments to fair value at each reporting period.
The liabilities are subject to remeasurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. At December 31, 2021 and December 31, 2020, we used the quoted share
price in the active market to value the public warrants and a Modified Black
Scholes to value the private warrants with changes in fair value charged to the
statement of operations.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as a liability instrument and are measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our Class A ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of
December 31, 2021 and December 31, 2020, 20,000,000 shares of Class A ordinary
shares subject to possible redemption, are presented at redemption value as
temporary equity, outside of the shareholders' equity section of our balance
sheets.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update
("ASU") 2020-06, Debt - Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity
(Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to
equity classification of contracts in an entity's own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity.
ASU 2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2024 for smaller reporting companies and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. The Company is currently assessing the
impact, if any, that ASU 2020-06 would have on its financial position, results
of operations or cash flows.
Management 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.
- 37 -
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses