FINTECH ECOSYSTEM DEVELOPMENT CORP. Management’s discussion and analysis of financial condition and results of operations. (Form 10-Q)
References to “we”, “us”, “company” or “our company” are to
Warning regarding forward-looking statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), 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 otherU.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a
Issuance of additional shares in our stock in a business combination:
• may significantly dilute the equity interest of investors in this offering;
• may subordinate the rights of holders of common stock if preferred stock
is issued with rights senior to those afforded our common stock;
• could cause a change of control if a substantial number of shares of our
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;
• may have the effect of delaying or preventing a change of control of us
by diluting the stock ownership or voting rights of a person seeking to
obtain control of us; and
• may adversely affect prevailing market prices for our common stock,
rights, and/or warrants. Similarly, if we issue debt securities, it could
result in:
• default and foreclosure on our assets if our operating revenues after an
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 such covenants;
• our immediate payment of all principal and accrued interest, if any, if
the debt security is payable on demand;
• our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
• our inability to pay dividends on our common stock;
• 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;
• limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry,
and competitive conditions and adverse changes in government regulation;
and
• 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.
As indicated in the accompanying accounts, per
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Table of Contents Recent Developments Initial Public Offering
On
Substantially simultaneously with the closing of the IPO, the company completed the sale, in a private placement, of 3,900,250 warrants (“Private Placement Warrants”), to the company’s sponsor,
Liquidity and capital resources
Per
The company’s liquidity needs before the completion of the stock exchange listing were covered through payment of
We may also need to obtain additional financing either to complete a business combination or because we will be obligated to redeem a substantial number of shares of Class A common stock upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with with the business association.
Based on the foregoing, management does not believe that we will have sufficient
working capital to meet its needs through the earlier of the consummation of an
initial business combination or one year from this Report. Over this time
period, we will be using the funds held outside of the trust account for paying
existing accounts payable and accrued liabilities, identifying and evaluating
prospective initial business combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the initial business combination. We believe we may need to raise
additional funds in order to meet the expenditures required for operating the
business. Furthermore, if our estimate of the costs of identifying a target
business, undertaking
in-depth
due diligence and negotiating an initial business combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate the business prior to the initial business combination. Moreover, we may
need to obtain additional financing either to complete the initial business
combination or to redeem a significant number of our public shares upon
completion of the initial business combination, in which case we may issue
additional securities or incur debt in connection with such initial business
combination. Our sponsor, officers and directors may, but are not obligated to,
loan us funds from time to time or at any time, in whatever amount they deem
reasonable in their sole discretion, to meet our working capital needs. The
factors, among others, raise substantial doubt about our ability to continue as
a going concern. The financial statements do not include any adjustments that
result from our inability to continue as a going concern.
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There can be no assurance that our plans to complete an initial business combination will be successful within
Out of balance
Sheet arrangements; Obligations and contractual obligations; Quarterly results
As ofJune 30, 2022 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this prospectus as we have conducted no operations to date.
Result of operations
We have neither engaged in any operations nor generated any revenue to date. Our only activities since inception have been organizational activities and those necessary to prepare for our initial public offering. We will not generate any operating income until we close and complete our first business combination.
For the six-month period endedJune 30, 2022 , we had net income of$2,173,412 , which consisted of$2,534,855 non-operating income resulting from the change in fair value of derivative liabilities and forward purchase agreement and$168,541 interest income generated from the cash held in the trust account. These other incomes are offset by$529,984 in general and administrative expense.
For the period from
Transactions with related parties
Please see Note 5, Related Party Transactions, in “Part 1. Financial Information – Item 1. Financial Statements” for a discussion of our related party transactions.
Critical accounting principles and estimates
Our management makes a number of significant estimates, assumptions, and judgments in the preparation of our financial statements. See "Note 2, Summary of Significant Accounting Policies, in "Part 1. Financial Information - Item 1. Financial Statements" for a discussion of the estimates and judgments necessary in our accounting for common stock subject to possible redemption and net income (loss) per common share. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in the notes to our condensed financial statements contained in this Quarterly Report on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed financial statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.
Newer accounting standards
Please see Note 2, Summary of Significant Accounting Policies, in “Part 1. Financial Information – Item 1. Financial Statements” for a discussion of recent accounting pronouncements and their expected effect on our business.
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The JOB Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and, under the JOBS Act, are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd- Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that the PCAOB may adopt regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for five years following the completion of our initial public offering or until we are no longer an "emerging growth company," whichever is earlier.
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