Business context and reporting period
The filing is Murphy Canyon Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2022. The request metadata names CDT Equity Inc.; that name does not match the registrant identified in the filing and should be verified. Murphy Canyon is a newly formed SPAC, reported as a shell company, seeking a business combination, with a stated search focus on real estate. It had not selected a target or begun substantive discussions with one by the filing date.
The company completed its IPO on February 7, 2022, selling 13.225 million units at $10 each after full exercise of the underwriters’ over-allotment option. It also sold 754,000 private placement units to its sponsor.
Financial results and position
- Revenue: No operating revenue; the company had not commenced operations. It reported $10,182 of trust-account interest income.
- Expenses and loss: Quarterly expenses were $263,718, including $243,718 of general and administrative expenses and $20,000 of related-party administration fees. Net loss was $253,536, or $0.02 per Class A and Class B share.
- Cash flow: Operating cash use was $692,485; investing cash use was $134.895 million, primarily the trust deposit; financing cash provided was $136.504 million. Cash increased by $916,047 to $964,602.
- Assets and liquidity: Total assets were $136.526 million, including $134.905 million in the trust account. Current assets were $1.454 million and current liabilities $78,357. The MD&A reports working capital of $1.446 million, which does not appear to reconcile to those balance-sheet figures; their difference is approximately $1.375 million.
- Debt and other obligations: The $177,057 sponsor note outstanding at year-end was repaid in February. No working capital loans were outstanding. Deferred underwriting commission payable was $4.629 million, due only if a business combination is completed.
- Margins: Not meaningful for this pre-operating SPAC.
Material changes versus prior comparable period
The filing presents results only for the three months ended March 31, 2022; it does not provide a comparable prior-year quarterly income statement or cash-flow period. From December 31, 2021 to March 31, 2022, the company’s balance sheet expanded primarily due to the IPO and placement proceeds, with $134.905 million in trust investments and $964,602 in cash at quarter-end. Redeemable Class A shares of $134.895 million were classified as temporary equity.
Outlook, risks, and unusual items
- Management said post-IPO funds should support operations for at least one year from issuance of the financial statements. The company must complete a business combination within 12 months of the IPO closing, with potential extensions subject to conditions and additional trust deposits; otherwise it must wind up and redeem public shares.
- Management had not identified a target and gave no financial or transaction guidance. A qualifying transaction must meet the stated 80% trust-asset value test and result in acquisition of control.
- Public shareholders may redeem shares in connection with a business combination. Warrants receive no trust-account liquidation distribution and may expire worthless if no transaction is completed.
- Management said COVID-19 could adversely affect the company’s financial position and target search, but the impact was not determinable. The filing reported no material change to previously disclosed risk factors, no legal proceedings, and no subsequent event requiring adjustment or disclosure.
- The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It is an emerging growth company and elected the extended transition period for new accounting standards.
Important facts for investors to verify
- Confirm the intended issuer: the supplied company metadata says CDT Equity Inc., while this filing is for Murphy Canyon Acquisition Corp.
- Reconcile the MD&A working-capital figure of $1.446 million with balance-sheet current assets and liabilities, which imply approximately $1.375 million.
- Review the SPAC’s business-combination deadline, extension conditions, sponsor funding commitment, redemption terms, and trust-account balance.
- Verify the share and warrant capitalization and related dilution terms, including the founder-share conversion provisions and the $11.50 warrant exercise price.