References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Stratim Cloud Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Stratim Cloud Acquisition LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the 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 Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"may," "should," "could," "would," "expect," "plan," "believe," "anticipate,"
"intend," "estimate," "seek" and variations 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 as well as assumptions made by, and based on
information currently available to, our management. 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,
including that the conditions of the Proposed Business Combination are not
satisfied. 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 with the U.S. Securities and Exchange Commission (the
"SEC") on April 1, 2022, and as otherwise provided for in Item 1A herein] and as
otherwise described in our other SEC filings filed or to be filed. 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.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the 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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
July 29, 2020 for the purpose of entering into a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from July 29, 2020 (inception) through September 30, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities 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 for due
diligence expenses in connection with searching for, and completing, a Business
Combination.
For the three months ended September 30, 2022, we had a net income of $540,809,
which consists of a change in fair value of warrant liabilities of $130,000 and
interest earned on marketable securities held in Trust Account of $1,339,378,
offset by operating and formation costs of $236,780, unrealized loss on
marketable securities held in the Trust Account of $514,410 and provision for
income taxes of $177,379.
For the nine months ended September 30, 2022, we had a net income of $6,803,290,
which consists of a change in fair value of warrant liabilities of $6,630,000
and interest earned on marketable securities held in Trust Account of
$1,657,184, offset by operating and formation costs of $792,105, unrealized loss
on marketable securities held in the Trust Account of $514,410 and provision for
income taxes of $177,379.
For the three months ended September 30, 2021, we had a net income of
$2,624,246, which consists of change in fair value of warrant liability of
$2,646,666 and interest earned on marketable securities held in Trust Account of
$5,137, offset by operating and formation costs of $27,557.
For the nine months ended September 30, 2021, we had a net income of $9,232,491,
which consists of change in fair value of warrant liability of $10,913,333,
interest earned on marketable securities held in Trust Account of $8,220, offset
by transaction costs related to warrant and compensation expenses of $931,722,
and operating and formation costs of $757,340.
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Liquidity and Capital Resources
On March 16, 2021, we consummated the Initial Public Offering of 25,000,000
Units at $10.00 per unit, generating gross proceeds of $250,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 4,666,667 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant in a private placement to the Sponsor, generating gross
proceeds of $7,000,000.
Following the Initial Public Offering and the sale of the Private Units, a total
of $250,000,000 was placed in the Trust Account. We incurred $14,326,696 in
Initial Public Offering related costs, including $5,000,000 of underwriting
fees, $8,750,000 of deferred underwriting fees and $576,696 of other offering
costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $751,513. Net income of $6,803,290 was affected by a change in fair value of
warrant liabilities of $6,630,000, interest earned on marketable securities held
in Trust Account of $1,657,184 and unrealized loss on marketable securities held
in the Trust Account of $514,410. Changes in operating assets and liabilities
provided $152,368 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $824,491. Net income of $9,232,491 was affected by a change in fair value of
warrant liabilities of $10,679,999, transaction costs incurred in connection
with warrant liabilities of $698,388, compensation expenses incurred in
connection with IPO of $233,334, and interest earned on marketable securities
held in Trust Account of $8,220. Changes in operating assets and liabilities
used $67,151 of cash for operating activities.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $250,815,389. Interest income on the balance in the Trust Account may be used
by us to pay taxes. Through September 30, 2022, we withdrawn $341,818 of
interest earned from the Trust Account to pay taxes. We intend to use
substantially all of the funds held in the Trust Account, including any amounts
representing interest earned on the Trust Account (less income taxes payable),
to complete our Business Combination. To the extent that our capital stock or
debt is used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the target business or businesses,
make other acquisitions and pursue our growth strategies.
As of September 30, 2022, the Company had $543,054 in its operating bank
account, and working capital of $163,802. The Company's liquidity needs prior to
the Company's Initial Public Offering and Private Placement had been satisfied
through a capital contribution from the Sponsor in the amount of $25,000 (see
Note 5) for the Founder Shares, and an unsecured promissory note from the
Sponsor of $300,000 (see Note 5). The Company fully repaid the promissory note
to the Sponsor on January 15, 2021. Subsequent to the consummation of the
Initial Public Offering and Private Placement, the Company's liquidity needs
have been satisfied through the proceeds from the consummation of the Private
Placement not held in the Trust Account. In addition, in order to finance
transaction costs in connection with a Business Combination, the Company's
Sponsor, or an affiliate of the Sponsor, or certain Company's officers and
directors may, but are not obligated to, provide the Company with Working
Capital Loans (see Note 5).
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a 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 warrants
at a price of $1.50 per warrant, at the option of the lender. The warrants would
be identical to the Private Placement Warrants.
19
Going Concern
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standards Board's Accounting Standards Codification
Topic 205-40, "Presentation of Financial Statements - Going Concern," we have
until March 16, 2023, to consummate an initial business combination. It is
uncertain that we will be able to consummate an initial business combination by
this time. If an initial business combination is not consummated by this date,
there will be a mandatory liquidation and subsequent dissolution of the Company.
Additionally, it is uncertain that we will have sufficient liquidity to fund the
working capital needs of the Company through March 16, 2023 or through twelve
months from the issuance of this report. We have determined that the liquidity
condition and mandatory liquidation, should an initial business combination not
occur, and potential subsequent dissolution 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 March 16, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. 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 the Sponsor
a monthly fee of $10,000 for office space, utilities, administrative and support
services. We began incurring these fees on March 11, 2021 and will continue to
incur these fees monthly until the earlier of the completion of the Business
Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per share, or
$8,750,000 in the aggregate. The deferred fee 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
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the 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:
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1and SEC Staff
Accounting Bulletin ("SAB") Topic 5A - "Expenses of Offering". Offering costs
consist principally of professional and registration fees incurred through the
balance sheet date. Offering costs are allocated to the separable financial
instruments issued in the IPO based on a relative fair value basis compared to
total proceeds received. Offering costs associated with warrant liabilities is
expensed, and offering costs associated with the Class A common stock are
charged to the stockholders' deficit. Accordingly, as September 30, 2022,
offering costs in the aggregate of $14,326,696 have been charged to
stockholders' deficit and $233,334 of offering costs associated with warrant and
forward purchase unit issuance cost has been expensed on the Company's
statements of operations.
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC
815-40 under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in the
statements of operations. The Private Warrants and the Public Warrants for
periods where no observable traded price was available are valued using a
Modified Black-Scholes Option Pricing Model. For periods subsequent to the
detachment of the Public Warrants from the Units, the Public Warrant quoted
market price will be used as the fair value as of each relevant date.
20
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Class A common stock subject to
mandatory redemption is classified as a liability instrument and 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 Class A common stock features
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, Class A common
stock subject to possible redemption is presented at redemption value as
temporary equity, outside of the stockholders' deficit section of our condensed
balance sheets.
Net Income Per Common Stock
Net income per common stock, basic and diluted for Class A common stock subject
to possible redemption is calculated by dividing the interest income earned on
the Trust Account, net of applicable taxes, if any, by the weighted average
number of shares of Class A common stock subject to possible redemption
outstanding for the period. Net income per common stock, basic and diluted, for
non-redeemable common stock is calculated by dividing net income less income
attributable to Class A common stock subject to possible redemption, by the
weighted average number of common stock of non-redeemable common stock
outstanding for the period presented.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("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, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. We adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU
2020-06 did not have an impact on our financial statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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