Item 1. Financial Statements
TWELVE SEAS INVESTMENT COMPANY II
CONDENSED BALANCE SHEETS
| |
March 31, 2022 (Unaudited) | | |
December 31, 2021 | |
Assets: | |
| | |
| |
Current Assets: | |
| | |
| |
Cash | |
$ | 457,237 | | |
$ | 751,090 | |
Prepaid expenses | |
| 100,506 | | |
| 36,590 | |
Total current assets | |
| 557,743 | | |
| 787,680 | |
| |
| | | |
| | |
Marketable Securities held in Trust
Account | |
| 345,046,109 | | |
| 345,017,951 | |
Total Assets | |
$ | 345,603,852 | | |
$ | 345,805,631 | |
| |
| | | |
| | |
Liabilities, Class A Common Stock Subject
to Possible Redemption and Stockholders’ Deficit | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 413,681 | | |
$ | 326,527 | |
Promissory note – related party | |
| 36,921 | | |
| 37,500 | |
Total current liabilities | |
| 450,602 | | |
| 364,027 | |
| |
| | | |
| | |
Warrant liabilities | |
| 3,086,873 | | |
| 5,903,562 | |
Total liabilities | |
| 3,537,475 | | |
| 6,267,589 | |
| |
| | | |
| | |
Commitments and Contingencies (See Note
8) | |
| | | |
| | |
| |
| | | |
| | |
Common Stock subject to possible redemption, 34,500,000 shares at redemption value of $10.00 as of March 31, 2022 and December 31, 2021 | |
| 345,000,000 | | |
| 345,000,000 | |
| |
| | | |
| | |
Stockholders’ Deficit: | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 1,165,000 non-redeemable shares issued and outstanding (excluding 34,500,000 shares subject to possible redemption) as of March 31, 2022 and December 31, 2021 | |
| 116 | | |
| 116 | |
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 8,625,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021 | |
| 863 | | |
| 863 | |
Additional paid-in capital | |
| — | | |
| — | |
Accumulated deficit | |
| (2,934,602 | ) | |
| (5,462,937 | ) |
Total stockholders’
deficit | |
| (2,933,623 | ) | |
| (5,461,958 | ) |
Total Liabilities,
Class A Common Stock Subject to Redemption and Stockholders’ Deficit | |
$ | 345,603,852 | | |
$ | 345,805,631 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
TWELVE SEAS INVESTMENT COMPANY II
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| |
For the
Three Months
Ended
March 31,
2022 | | |
For the
Three Months
Ended
March 31,
2021 | |
Formation and operating
costs | |
$ | 316,512 | | |
$ | 82,958 | |
Loss from Operations | |
| (316,512 | ) | |
| (82,958 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest earned on cash and marketable securities held in
Trust Account | |
| 28,158 | | |
| 864 | |
Offering costs allocated to warrants | |
| — | | |
| (260,113 | ) |
Change in fair value of warrant liabilities | |
| 2,816,689 | | |
| 253,616 | |
Total other income
(expense), net | |
| 2,844,847 | | |
| (5,633 | ) |
| |
| | | |
| | |
Net income (loss) | |
$ | 2,528,335 | | |
$ | (88,591 | ) |
| |
| | | |
| | |
Weighted average shares outstanding of Class A common stock | |
| 35,665,000 | | |
| 11,480,333 | |
Basic and diluted
net income (loss) per share, Class A common stock | |
$ | 0.06 | | |
$ | 0.00 | |
Weighted average shares outstanding of Class B common stock | |
| 8,625,000 | | |
| 7,775,000 | |
Basic and diluted
net income (loss) per share, Class B common stock | |
$ | 0.06 | | |
$ | 0.00 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
TWELVE SEAS INVESTMENT COMPANY II
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022
| |
Common Stock | | |
Additional | | |
| | |
Total | |
| |
Class A | | |
Class B | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance as of January 1, 2022 | |
| 1,165,000 | | |
$ | 116 | | |
| 8,625,000 | | |
$ | 863 | | |
$ | — | | |
$ | (5,462,937 | ) | |
$ | (5,461,958 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,528,335 | | |
| 2,528,335 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2022 (unaudited) | |
| 1,165,000 | | |
$ | 116 | | |
| 8,625,000 | | |
$ | 863 | | |
$ | — | | |
$ | (2,934,602 | ) | |
$ | (2,933,623 | ) |
FOR THE THREE MONTHS ENDED MARCH 31, 2021
| |
Common Stock | | |
Additional | | |
| | |
Total Stockholders’ | |
| |
Class A | | |
Class B | | |
Paid-in | | |
Accumulated | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
(Deficit) | |
Balance as of January 1, 2021 | |
| — | | |
$ | — | | |
| 8,625,000 | | |
$ | 863 | | |
$ | 24,137 | | |
$ | (951 | ) | |
$ | 24,049 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of 800,000 Private Class A shares on March 2, 2021 and 90,000 Class A shares on March 10, 2021 through public offering and over-allotment, net of fair value of warrant liability and offering costs | |
| 890,000 | | |
| 89 | | |
| — | | |
| — | | |
| 8,660,613 | | |
| — | | |
| 8,660,702 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of representative shares | |
| 275,000 | | |
| 27 | | |
| — | | |
| — | | |
| 2,749,973 | | |
| — | | |
| 2,750,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accretion of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (11,434,723 | ) | |
| (7,300,158 | ) | |
| (18,734,881 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (88,591 | ) | |
| (88,591 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2021 (unaudited) | |
| 1,165,000 | | |
$ | 116 | | |
| 8,625,000 | | |
$ | 863 | | |
$ | — | | |
$ | (7,389,700 | ) | |
$ | (7,388,721 | ) |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
TWELVE SEAS INVESTMENT COMPANY II
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| |
For The Three Months Ended March 31, 2022 | | |
For The Three Months Ended March 31, 2021 | |
Cash flows from operating activities: | |
| | |
| |
Net income (loss) | |
$ | 2,528,335 | | |
$ | (88,591 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Interest earned on marketable securities held in Trust Account | |
| (28,158 | ) | |
| (864 | ) |
Offering costs allocated to warrants | |
| — | | |
| 260,113 | |
Change in fair value of warrant liabilities | |
| (2,816,689 | ) | |
| (253,616 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| (63,916 | ) | |
| (195,887 | ) |
Accounts payable and accrued expenses | |
| 87,154 | | |
| 61,250 | |
Net cash used in operating activities | |
| (293,274 | ) | |
| (217,595 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Investment of cash in Trust Account | |
| — | | |
| (345,000,000 | ) |
Net cash used in investing activities | |
| — | | |
| (345,000,000 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from sale of Units, net of underwriters’ discount | |
| — | | |
| 338,100,000 | |
Proceeds from issuance of Private Placement | |
| — | | |
| 8,900,000 | |
Repayment of promissory note – related party | |
| (579 | ) | |
| (163,561 | ) |
Payment of offering costs | |
| — | | |
| (323,509 | ) |
Net cash (used in) provided by financing activities | |
| (579 | ) | |
| 346,512,930 | |
| |
| | | |
| | |
Net change in cash | |
| (293,853 | ) | |
| 1,295,335 | |
Cash, beginning of period | |
| 751,090 | | |
| 74,810 | |
Cash, end of the period | |
$ | 457,237 | | |
$ | 1,370,145 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
TWELVE SEAS INVESTMENT COMPANY II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Twelve Seas Investment Company II (the “Company”)
is a blank check company incorporated in Delaware on July 21, 2020. The Company was formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(“Business Combination”). The Company has not selected any specific business combination target and the Company has not,
nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target with
respect to the Business Combination.
As of March 31, 2022, the Company had not commenced
any operations. All activity for the period from July 21, 2020 (inception) through March 31, 2022 relates to the Company’s formation
and the initial public offering (“IPO”), which is described below. The Company will not generate any operating revenues until
after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest
income from the proceeds derived from the IPO.
The Company’s sponsor is Twelve Seas Sponsor
II LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s
IPO was declared effective on February 25, 2021 (the “Effective Date”). On March 2, 2021, the Company consummated the
IPO of 30,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered,
the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $300,000,000, which is discussed in Note 3.
The underwriters had a 45-day option from the
date of the IPO (March 2, 2021) to purchase up to an additional 4,500,000 units to cover over-allotments. On March 8, 2021, the Underwriters
exercised their over-allotment option in full, and the closing of the issuance and sale of the additional 4,500,000 Units (the “Over-Allotment
Units”) occurred on March 10, 2021, generating gross proceeds of $45,000,000.
Simultaneously with the closing of the IPO, the
Company completed the private sale (the “Private Placement”) of an aggregate of 800,000 Units (the “Private Placement
Units”) to Twelve Seas Sponsor II LLC (the “Sponsor”) and Mizuho Securities USA LLC, the representative of the underwriters
(“Representatives” or “Mizuho”) at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds
to the Company of $8,000,000. In connection with the closing of the purchase of the Over-Allotment Units, the Company sold an additional
90,000 Private Placement Units to the Sponsor at a price of $10.00 per Private Placement Unit, generating an additional $900,000 of gross
proceeds.
On March 2, 2021, the Company also issued the
underwriter (and/or its designees) (the “Representative”) 275,000 shares of Class A common stock (the “Representative
Shares”) upon the consummation of the IPO. The Company accounts for the Representative Shares as an expense of the IPO resulting
in a charge directly to stockholders’ equity (deficit), at an estimated fair value of $2,750,000.
Transaction costs amounted to $10,178,359 consisting
of $6,900,000 of underwriting commissions, fair value of the representative shares of $2,750,000 and $528,359 of other cash offering
costs.
As of March 31, 2022, $457,237 of cash was held
outside of the Trust Account (as defined below) and is available for working capital purposes.
Following the closing of the IPO and the over-allotment
option, which was fully exercised, on March 2, 2021 and March 10, 2021, respectively, $345,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the IPO and the sale of the Private Units was placed in a Trust Account and was invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in
any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment
Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company. Except with respect to interest
earned on the funds held in the trust account that may be released to the Company to pay its franchise and income tax obligations (less
up to $100,000 of interest to pay dissolution expenses), the proceeds from the IPO and the sale of the Private Units will not be released
from the trust account until the earliest of (a) the completion of the Company’s initial business combination, (b) the redemption
of any Public Shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate
of incorporation, and (c) the redemption of the Company’s Public Shares if the Company is unable to complete the initial business
combination within 24 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the trust account could
become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s
public stockholders.
The Company will have 24 months from the closing
of the IPO, or until March 2, 2023, to consummate a Business Combination (the “Combination Period”). However, if the Company
is unable to complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding Public Shares
for a pro rata portion of the funds held in the trust account, equal to the aggregate amount then on deposit in the trust account including
interest earned on the funds held in the trust account and not previously released to the Company to pay its franchise and income taxes,
divided by the number of then outstanding Public Shares, subject to applicable law and as further described in the registration statement,
and then seek to dissolve and liquidate.
The Company will only proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks
stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required
by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other
reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file
tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business
or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s
Sponsor has agreed to vote its founder shares and any Public Shares purchased during or after the IPO in favor of approving a Business
Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective
of whether they vote for or against the proposed transaction.
The Sponsor, officers and directors and Representatives
have agreed to (i) waive their redemption rights with respect to their founder shares, private shares, and Public Shares in connection
with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares, private
shares, and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate
of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares
and private shares if the Company fails to complete the initial business combination within the Combination Period.
The Company’s Sponsor has agreed that it
will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement
or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per Public Share
and (ii) the actual amount per Public Share held in the trust account as of the date of the liquidation of the trust account, if less
than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply
to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust
account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters
of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its Sponsor
to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds
to satisfy its indemnity obligations and believe that the Company’s Sponsor’s only assets are securities of the Company.
Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Risks and Uncertainties
On January 30, 2020, the World Health
Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19
outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s
financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and
restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly
uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the
Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an
initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to
contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among
others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential
target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a
timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to
raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably
possible that the virus could have a negative effect on the Company’s financial position, results of its operations, close of
the IPO and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed
financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
In February 2022, the Russian Federation and
Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and
related sanctions on the world economy are not determinable as of the date of these condensed financial statements and the specific
impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of
these condensed financial statements.
Liquidity and Capital Resources
As of March 31, 2022, the Company had $457,237 in its operating bank
account, and working capital of $357,141, excluding franchise taxes payable. 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 common stock. As of March 31, 2022, none of the amount in the Trust Account was available to be withdrawn as described above.
Through March 31, 2022, the Company’s liquidity
needs were satisfied through receipt of $25,000 from the sale of the founder shares, issuance of $300,000 unsecured promissory note to
the Sponsor, and the remaining net proceeds from the IPO and the sale of Private Placement Shares.
Going Concern
The Company anticipates that the $457,237
outside of the Trust Account as of March 31, 2022, might not be sufficient to allow the Company to operate for at least the next 12
months from the issuance of the condensed financial statements, assuming that a Business Combination is not consummated during that
time. Until consummation of its 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) from the initial stockholders, the Company’s officers and directors,
or their respective affiliates (which is described in Note 5), 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 can raise additional capital through
Working Capital Loans from the initial stockholders, the Company’s officers, directors, or their respective affiliates (which is
described in Note 5), or through loans from third parties. None of the sponsor, officers or directors are under any obligation to advance
funds to, or to invest in, the Company. 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.
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
March 2, 2023 to consummate a Business Combination. However, if the Company is unable to complete a business combination within the Combination
Period, the Company will redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account,
equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and
not previously released to the Company, divided by the number of then outstanding Public Shares, subject to applicable law and as further
described in the registration statement, and then seek to dissolve and liquidate. Management plans to complete a business combination
prior to the mandatory liquidation date.
Management has determined that the uncertainty
of availability of new financing to meet its liquidity needs and mandatory liquidation, should a 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 2, 2023.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed financial statements
reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results
for the periods presented. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results
to be expected for the year ending December 31, 2022 or for any future periods.
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 filed by the Company
with the SEC on April 1, 2022.
Emerging Growth Company Status
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart
our Business Startups Act of 2012, (the “JOBS Act”), and it may 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, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, 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 a 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 standard at the time private companies adopt the new or revised standard. This
may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and warrant liabilities at the date of the financial statements and the reported amounts of expenses during the
reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the
estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which
management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of
the more significant accounting estimates included in these condensed financial statements is the determination of the fair
value of the warrant liability. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of March
31, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
The funds in the Trust Accounts are invested
in United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having
a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule
2a-7 promulgated under the Investment Company Act of 1940, as amended (or any successor rule), which invest only in direct U.S. government
treasury obligations, as determined by the Company. As of March 31, 2022 and December 31, 2021 the assets held in the Trust Account were
held in a money market mutual fund.
Financial Instruments
The fair value of the Company’s certain assets and liabilities,
which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying
amounts represented in the condensed balance sheets as of March 31, 2022 and December 31, 2021, except for warrant liabilities (Note 7).
The fair values of cash, prepaid assets, accounts payable and accrued expenses are estimated to approximate the carrying values as of
March 31, 2022 and December 31, 2021 due to the short maturities of such instruments.
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 the Federal
Depository Insurance Corporation Coverage of $250,000. As of March 31, 2022 and December 31, 2021, the Company has not experienced losses
on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The Company follows the guidance in ASC 820,
“Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value at each
reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
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:
|
Level 1
— |
Valuations
based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
|
Level 2
— |
Valuations
based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active
for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived
principally from or corroborated by market through correlation or other means. |
|
Level 3
— |
Valuations
based on inputs that are unobservable and significant to the overall fair value measurement. |
See Note 7 for additional information on assets
and liabilities measured at fair value.
Derivative Warrant Liabilities
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its 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 re-assessed at the end of each reporting period.
Derivative assets and liabilities are classified
on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument is required
within 12 months of the balance sheet date. The Company has determined that both the private and public warrants are a derivative instrument.
The Company evaluated the Public Warrants and Private Placement Warrants
(collectively, “Warrants”, which are discussed in Note 4, Note 6 and Note 7) in accordance with ASC 815-40, “Derivatives
and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to
certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition
of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the condensed balance sheets and measured
at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”,
with changes in fair value recognized in the Condensed Statement of Operations in the period of change.
Offering Costs Associated with the Initial
Public Offering
The Company complies with the requirements
of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO
that were directly related to the IPO. Offering costs were 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 were
expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs
associated with the Class A common stock, including the cost of the Class A warrants, were charged to Class A common stock subject
to possible redemption upon the completion of the IPO.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.”
Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A common stock (including Class A 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)
are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity (deficit). The
Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 34,500,000 shares
of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity (deficit)
section of the Company’s condensed balance sheets.
Additionally, the Company has issued Class A
Representative Shares (see Note 8). The Representative has waived their redemption rights, and as such these shares remain in permanent
equity (deficit).
The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of redeemable common shares to equal the redemption value at the end of
each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security.
Immediately upon the closing of the IPO, the
Company recognized the accretion from initial book value to redemption amount. Increases or decreases in the carrying amount of redeemable
common stock are affected by charges against additional paid-in capital and accumulated deficit.
As of March 31, 2022 and December 31, 2021, the
Class A common stock reflected in the condensed balance sheets are reconciled in the following table:
Gross Proceeds | |
$ | 345,000,000 | |
Less: | |
| | |
Proceeds allocated to public warrants | |
| (8,816,636 | ) |
Issuance costs related to Class A common stock | |
| (9,918,245 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 18,734,881 | |
Class A common stock subject to possible
redemption | |
$ | 345,000,000 | |
Income Taxes
The Company accounts for income taxes under ASC
740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to
be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position 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. ASC 740 also
provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The Company has identified the United States
as its only “major” tax jurisdiction.
The Company may be subject to potential examination
by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net Income (Loss) Per Common
Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common stock is computed by dividing net
income (loss) by the weighted average number of common stock outstanding for the period. The Company has two classes of shares, which
are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares.
Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates
fair value. The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with
the (i) IPO and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The
warrants are exercisable to purchase 11,796,667 Class A common stock in the aggregate. As of March 31, 2022 and 2021, the Company did
not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share
in the earnings of the Company. As a result, diluted net income (loss) per common stock is the same as basic net income (loss) per common
stock for the periods presented.
The following table reflects the calculation
of basic and diluted net income (loss) per common stock (in dollars, except per share amounts):
|
|
For
The Three Months Ended
March 31, 2022 |
|
|
For
The Three Months Ended
March 31, 2021 |
|
|
|
Class
A |
|
|
Class
B |
|
|
Class
A |
|
|
Class
B |
|
Basic and diluted net income (loss) per common stock | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income (loss), as adjusted | |
$ | 2,035,969 | | |
$ | 492,366 | | |
$ | (52,819 | ) | |
$ | (35,772 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 35,665,000 | | |
| 8,625,000 | | |
| 11,480,333 | | |
| 7,775,000 | |
Basic and diluted net income (loss) per common stock | |
$ | 0.06 | | |
$ | 0.06 | | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
Recent Accounting Pronouncements
In August 2020, the FASB issued 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): 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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings
per share calculation in certain areas. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective
basis, with early adoption permitted beginning on January 1, 2021. The Company is reviewing the impact adoption would have, if any, on
its financial statements.
Management does not believe that any other
recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
Note 3 — Initial Public Offering
On March 2, 2021, the Company consummated the
IPO of 30,000,000 units (the “Units”), at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class
A common stock, and one-third warrant to purchase one share of Class A common stock. Each warrant will entitle the holder to purchase
one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Each warrant will become exercisable on the
later of 30 days after the completion of the initial business combination or 12 months from the closing of the IPO and will expire five
years after the completion of the initial business combination, or earlier upon redemption or liquidation (see Note 6).
The underwriters had a 45-day option from the
date of the IPO (March 2, 2021) to purchase up to an additional 4,500,000 units to cover over-allotments. On March 8, 2021, the Underwriters
exercised their over-allotment option in full, and the closing of the issuance and sale of the additional 4,500,000 Units occurred on
March 10, 2021, generating proceeds of $45,000,000.
Note 4 — Private Placement
Simultaneously with the closing of the IPO, the
Sponsor and the Representatives purchased an aggregate of 800,000 Private Units at a purchase price of $10.00 per Private Unit, generating
gross proceeds to the Company of $8,000,000. The Private Units (and the underlying securities) are identical to the Units sold as part
of the Units in the IPO.
In connection with the closing of the purchase
of the Over-Allotment Units, the Company sold an additional 90,000 Private Placement Units to the Sponsor at a price of $10.00 per Private
Placement Unit, generating an additional $900,000 of gross proceeds.
The Company’s Sponsor, officers, directors,
and Representative agreed to (i) waive their redemption rights with respect to their founder shares, private shares, and Public
Shares in connection with the completion of the Company’s initial business combination, (ii) waive their redemption rights
with respect to the founder shares, private shares, and Public Shares in connection with a stockholder vote to approve an amendment to
the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s
obligation to redeem 100% of its public shares if the Company does not complete its initial business combination within 24 months
from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business
combination activity and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder
shares if the Company fails to complete its initial business combination within 24 months from the closing of this offering. In
addition, the Company’s Sponsor, officers, directors, and Representative have agreed to vote any founder shares, private shares,
and Public Shares held by them and any Public Shares purchased during or after this offering (including in open market and privately
negotiated transactions) in favor of the Company’s initial business combination.
Note 5 — Related Party Transactions
Founder Shares
In August 2020, the Company issued 5,750,000 shares
of Class B common stock to the Sponsor for $25,000 in cash, or approximately $0.004 per share, in connection with formation. On
January 26, 2021, the Company effected a stock dividend of 0.25 shares for each Class B common stock outstanding, resulting
in there being an aggregate of 7,187,500 Founder Shares outstanding. On February 25, 2021, the Company effected a stock dividend
of 0.2 for each share of Class B common stock outstanding, resulting in the initial stockholders holding an aggregate of 8,625,000 Founder
Shares. This number includes up to 1,125,000 shares of Class B common stock subject to forfeiture if the over-allotment option
is not exercised in full or in part by the underwriters. On March 8, 2021, the underwriter exercised its over-allotment option in
full, hence, the 1,125,000 Founder Shares are no longer subject to forfeiture since then.
The Sponsor agreed not to transfer, assign or
sell its founder shares until the earlier to occur of (A) one year after the completion of the Company’s initial business
combination or (B) subsequent to the Company’s initial business combination, (x) if the last sale price of the Company’s
Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s
initial business combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other
similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Promissory Note — Related Party
On July 21, 2020, the Company issued an unsecured
promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to be used for
a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured and due at the earlier of March 31, 2021
or the closing of the IPO. The loan was not repaid upon the closing of the IPO and is due on demand. As of March 2, 2021, the Company
had incurred an aggregate of $201,061 of offering expenses from the IPO under the promissory note. The Company owes $36,921 and $37,500
as of March 31, 2022 and December 31, 2021, respectively. There are no remaining borrowings available to the Company and the balance is
due on demand.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans
but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans
may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private
placement warrants, including as to exercise price, exercisability and exercise period. At March 31, 2022 and December 31, 2021, no Working
Capital Loans were outstanding.
Administrative Service Fee
The Company has agreed, commencing on the
Effective Date of the IPO, March 2, 2021, to pay an affiliate of the Company’s Sponsor a monthly fee of an aggregate of
$10,000 for office space, utilities and secretarial and administrative support. Upon completion of the Company’s Business
Combination or its liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2022, the
Company incurred and paid $30,000 which is included in formation cost on the condensed statement of operations. For the three months
ended March 31, 2021, the Company incurred and paid $10,000 which is included in formation cost on the condensed statement of
operations.
Note 6 — Warrant Liabilities
The Company has outstanding warrants to purchase
an aggregate of 11,796,667 shares of the Company’s common stock issued in connection with the IPO and the Private Placement (including
warrants issued in connection with the consummation of the Over-allotment).
Each whole warrant entitles the registered holder
to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment. Pursuant to the
warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. No fractional
warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on
the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the IPO. The Public Warrants
will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any
shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless
a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of
the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the
Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will
be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise
their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state
of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable,
but in no event later than 20 business days after the closing of a Business Combination, the Company will use its commercially reasonable
efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering
the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating
to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock
is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise
their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the
Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially
reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share
of Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
| ● | in
whole and not in part; |
| ● | at
a price of $0.01 per warrant; |
| ● | upon
not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder;
and |
| ● | if,
and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the
third trading day prior the date on which the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by
the Company, the Company may exercise the redemption right even if it is unable to register or qualify the underlying securities or sale
under all applicable state securities laws.
Redemption of Warrants When the Price per Share
of Class A Common Stock Equals or Exceeds $10.00
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
| ● | in
whole and not in part; |
| ● | at
a price of $0.10 per warrant provided that the holder will be able to exercise their warrants on cashless basis prior to redemption and
receive that number of shares based on the redemption date and the fair market value of the Class A common stock; |
| ● | upon
a minimum of 30 days’ prior written notice of redemption; |
| ● | if,
and only if, the last reported sale price of the Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the
third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and |
| ● | if
the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading
day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted
for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Warrants must also be concurrently called
for redemption on the same terms as the outstanding Public Warrants, as described above. |
If the Company calls the Public Warrants for redemption,
as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on
a “cashless basis,” as described in the warrant agreement.
In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination
at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined
in good faith by the Company’s board of directors and, in the case of any such issuance to the sponsor or its affiliates, without
taking into account any founder shares held by the sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest
thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions),
and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the
trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below
$9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market
Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent)
to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger described
above will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The warrant agreement contains an Alternative
Issuance provision that if less than 70% of the consideration receivable by the holders of the shares of common stock in the Business
Combination is payable in the form of common equity in the successor entity, and if the holders of the warrants properly exercises the
warrants within thirty days following the public disclosure of the consummation of Business Combination by the Company, the warrant price
shall be reduced by an amount equal to the difference (but in no event less than zero) of (i) the warrant price in effect prior to
such reduction minus (ii) (A) the Per Share Consideration (as defined below) minus (B) the Black-Scholes Warrant Value (as defined
below). The “Black-Scholes Warrant Value” means the value of a Warrant immediately prior to the consummation of the Business
Combination based on the Black-Scholes Warrant Model for a Capped American Call on Bloomberg Financial Markets. “Per Share Consideration”
means (i) if the consideration paid to holders of the shares of common stock consists exclusively of cash, the amount of such cash
per share of common stock, and (ii) in all other cases, the volume weighted average price of the shares of common stock as reported
during the ten-trading day period ending on the trading day prior to the effective date of the Business Combination.
The Company believes that the Alternative Issuance
provision and the adjustments to the exercise price of the warrants is based on a variable that is not an input to the fair value of a
“fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40, and thus the warrants are not eligible
for an exception from derivative accounting.
The accounting treatment of derivative
financial instruments requires that the Company record a derivative liability upon the closing of the IPO. Accordingly, the Company
has classified each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the
issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject
to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be
adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will
reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the
warrants will be reclassified as of the date of the event that causes the reclassification. As such, the Company recorded $9,055,934
of warrant liability upon issuance as of March 2, 2021 as adjusted for the closing of the Underwriters’ fully exercised
over-allotment option. For the three months ended March 31, 2022, the Company recorded a change in the fair value of the warrant
liabilities in the amount of approximately $2,816,689 on the condensed statement of operations, resulting in warrant liabilities of
$3,086,873 as of March 31, 2022 on the condensed balance sheets.
Note 7 — Fair Value Measurements
The following table presents information about
the Company’s assets and liabilities that are measured on a recurring basis as of March 31, 2022 and December 31, 2021 and indicates
the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
| |
March 31, 2022 | | |
Quoted Prices In Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Marketable Securities held in Trust Account | |
$ | 345,046,109 | | |
$ | 345,046,109 | | |
$ | — | | |
$ | — | |
| |
$ | 345,046,109 | | |
$ | 345,046,109 | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liability - Public Warrants | |
$ | 3,007,250 | | |
$ | 3,007,250 | | |
$ | — | | |
$ | — | |
Warrant liability – Private Warrants | |
| 79,623 | | |
| — | | |
| — | | |
| 79,623 | |
| |
$ | 3,086,873 | | |
$ | 3,007,250 | | |
$ | — | | |
$ | 79,623 | |
| |
December 31, 2021 | | |
Quoted Prices In Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Marketable Securities held in Trust Account | |
$ | 345,017,951 | | |
$ | 345,017,951 | | |
$ | — | | |
$ | — | |
| |
$ | 345,017,951 | | |
$ | 345,017,951 | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liability – Public Warrants | |
$ | 5,750,000 | | |
$ | 5,750,000 | | |
$ | — | | |
$ | — | |
Warrant liability – Private Warrants | |
| 153,562 | | |
| — | | |
| — | | |
| 153,562 | |
| |
$ | 5,903,562 | | |
$ | 5,750,000 | | |
$ | — | | |
$ | 153,562 | |
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period. The subsequent measurement of the public warrants for the year ended December 31, 2021 is classified
as Level 1 due to the use of an observable market quote in an active market. For the three months ended March 31, 2022, there were no
transfers between levels.
The following table sets forth a summary
of the changes in the fair value of the Level 3 warrant liability for the three months ended March 31, 2022:
Warrant liabilities as of December 31, 2021 | |
$ | 153,562 | |
Change in fair value of warrant liabilities | |
| (73,939 | ) |
Warrant liabilities as of March 31, 2022 | |
$ | 79,623 | |
The following table sets forth a summary of
the changes in the fair value of the Level 3 warrant liability for the three months ended March 31, 2021:
Warrant liability at March 2, 2021,
as adjusted for over-allotment |
|
$ |
9,055,934 |
|
Change in fair value of warrant liabilities |
|
|
(253,616 |
) |
Warrant liabilities as of March 31, 2021 |
|
$ |
8,802,318 |
|
The estimated fair value of the warrant liability
at March 2, 2021, was determined using Level 3 inputs. Inherent in a Monte Carlo options pricing model are assumptions related to expected
stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common
stock based on projected volatility of comparable public companies that matches the expected remaining life of the warrants. The risk-free
interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining
life of the warrants. The expected life of the warrants is based on management assumptions regarding the timing and likelihood of completing
a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. Based on management’s
observation, there is an 85% likelihood of completing a Business Combination following historical trends of SPACs.
The subsequent measurement of private warrants
is determined using Level 3 inputs. The following table provides quantitative information regarding Level 3 fair value measurements of
the Company’s private warrant liabilities as of March 31, 2022 and December 31, 2021.
| |
March 30, 2022 | | |
December 31, 2021 | |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Stock price | |
$ | 9.77 | | |
$ | 9.70 | |
Volatility | |
| 4.8 | % | |
| 10.6 | % |
Expected life of the options to convert | |
| 5.48 | | |
| 5.62 | |
Risk-free rate | |
| 2.42 | % | |
| 1.32 | % |
Dividend yield | |
| — | % | |
| — | % |
Likelihood of completing a business combination | |
| 85 | % | |
| 85 | % |
Note 8 — Commitments and Contingencies
Registration Rights
The holders of the founder shares, private placement
warrants, and warrants that may be issued upon conversion of working capital loans will have registration rights to require the Company
to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed prior to or on February
25, 2021. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers
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.
Underwriters Agreement
The underwriters had a 45-day option from
March 2, 2021 to purchase up to an additional 4,500,000 units to cover over-allotments.
On March 2, 2021, the Company paid an underwriting
discount of $6,000,000.
On March 10, 2021, the underwriters purchased
an additional 4,500,000 units to exercise its over-allotment option in full. The Company paid an additional underwriting discount of $900,000
related to the exercise of the over-allotment option.
Business Combination Marketing Agreement
The Company has engaged Mizuho as an advisor in
connection with its business combination to assist the Company in holding meetings with its stockholders to discuss the potential business
combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing
the Company’s securities in connection with its initial business combination, assist the Company in obtaining stockholder approval
for the business combination and assist the Company with its press releases and public filings in connection with the business combination.
The Company will pay Mizuho a cash fee for such services upon the consummation of our initial business combination in an amount equal
to 3.5% of the gross proceeds of this offering.
Representative Shares
On March 2, 2021, the Company issued the underwriter
(and/or its designees) (the “Representative”) 275,000 shares of Class A common stock (the “Representative Shares”)
upon the consummation of the IPO. The Company accounts for the Representative Shares as an expense of the IPO resulting in a charge directly
to stockholders’ equity (deficit), at an estimated fair value of $2,750,000. In addition, the underwriter (and/or its designees)
agree (i) to waive its redemption rights with respect to such shares in connection with the completion of the initial business combination
and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete
its initial business combination within the Combination Period.
Note 9 — Stockholders’ Deficit
Preferred Stock — The
Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. As of March 31, 2022 and December
31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue a total of 100,000,000 shares of Class A common stock at par value of $0.0001 each. As of March
31, 2022 and December 31, 2021, there were 1,165,000 shares of Class A common stock issued and outstanding, excluding 34,500,000 shares
of Class A common stock subject to possible redemption.
Class B Common Stock —
The Company is authorized to issue a total of 10,000,000 shares of Class B common stock at par value of $0.0001 each. In August 2020,
the Company issued 5,750,000 shares of Class B common stock to its initial stockholders for $25,000, or approximately $0.004 per share.
On January 26, 2021, the Company effected a stock dividend of 0.25 shares for each share of Class B common stock outstanding, resulting
in there being an aggregate of 7,187,500 Founder Shares outstanding. On February 25, 2021, the Company effected another stock dividend
of 0.2 shares for each share of Class B common stock outstanding, resulting in the initial stockholders holding an aggregate of 8,625,000
Founder Shares. Shares of Class B common stock outstanding as of March 31, 2022 and December 31, 2021 was 8,625,000. This number included
up to 1,125,000 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised in full or in part
by the underwriters. On March 8, 2021, the underwriter exercised its over-allotment option in full, hence, the 1,125,000 Founder
Shares are no longer subject to forfeiture.
The Company’s initial stockholders have
agreed not to transfer, assign or sell its founder shares until the earlier to occur of (A) one year after the completion of the
Company’s initial business combination or (B) subsequent to the Company’s initial business combination, (x) if the
last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at
least 150 days after the Company’s initial business combination, or (y) the date on which the Company completes a liquidation,
merger, capital stock exchange or other similar transaction that results in all of its stockholders having the right to exchange their
shares of common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and
other agreements of the Company’s initial stockholders with respect to any founder shares.
The shares of Class B common stock will automatically
convert into shares of the Company’s Class A common stock at the time of its initial business combination on a one-for-one basis,
subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment
as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed
issued in excess of the amounts offered in this prospectus and related to the closing of the initial business combination, the ratio at
which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance
or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common
stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding
upon the completion of this offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued
in connection with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to
any seller in the initial business combination or any private placement-equivalent units issued to the Sponsor or its affiliates
upon conversion of loans made to the Company).
Holders of the Class A common stock and holders
of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders,
with each share of common stock entitling the holder to one vote.
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Cautionary Note 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, and Section 21E of 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 SEC filings.
Results of Operations
We have neither engaged in any operations nor generated any revenues
to date. Our only activities through March 31, 2022 were organizational activities, those necessary to prepare for our initial public
offering, described below, and, after our initial public offering, identifying a target company for our initial business combination.
We do not expect to generate any operating revenues until after the completion of our initial 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. For the three months
ended March 31, 2022, there was $28,158 interest earned from the trust account.
For the three months ended March 31, 2022, we
had a loss from operations of $316,512 which consisted of formation and operating costs, and net income of $2,528,335, which included
gain from the change in the fair value of warrants of $2,816,689 and interest income of $28,158. We are required to revalue our liability-classified
warrants at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of
the warrant in the period in which the change occurred.
For the three months ended March 31, 2021, we
had loss from operations of $82,958 which consisted of general and administrative costs, and net loss of $88,591, which included warrant
issuance costs of $260,113, offset by a net gain from the change in the fair value of warrants of $253,616, and interest income of $864.
We are required to revalue our liability-classified warrants at the end of each reporting period and reflect in the statement of operations
a gain or loss from the change in fair value of the warrant in the period in which the change occurred.
Liquidity and Capital Resources
On March 2, 2021, we consummated our initial public
offering of 30,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $300,000,000. In connection with the initial
public offering, the underwriters were granted a 30-day option from the date of the prospectus to purchase up to 4,500,000 additional
units to cover over-allotment, if any. On March 8, 2021, the underwriters fully exercised the over-allotment option, generating gross
proceeds of $45,000,000.
Simultaneously with the initial closing and over-allotment
closing of the initial public offering, we consummated the sale of 890,000 Private Placement Units to the Sponsor at a price of $10.00
per unit, generating gross proceeds of $8,900,000.
Following the IPO, the exercise of the over-allotment
option and the sale of the placement units, a total of $345,000,000 was placed in the trust account.
As of March 31, 2022, we had marketable securities held in the trust
account of $345,046,109. Interest income on the balance in the trust account may be used by us to pay taxes. For the three months ended
March 31, 2022 and March 31, 2021, there was $28,158 and $864 interest income earned from the trust account, respectively.
For the three months ended March 31, 2022, cash
used in operating activities was $293,274.
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 initial business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete
our initial 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 March 31, 2022, we had cash of $457,237
held outside the trust account. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete our initial business combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with our initial business combination, the initial stockholders or their affiliates may, but
are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts.
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 warrants identical to the private placement warrants, at a price of $1.00 per warrant at the option of the
lender.
We do not believe we will need to raise additional
funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target
business, 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 complete 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 initial business combination. Subject to compliance with applicable securities laws, we would only
complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial
business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the
trust account. In addition, 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
We did not have any off-balance sheet
arrangements as of March 31, 2022.
Contractual Obligations
At March 31, 2022, we did not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities. On February 25, 2021, we entered into an administrative
support agreement pursuant to which we have agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities
and secretarial and administrative support. Upon the earlier of the completion of the business combination and the Company’s liquidation,
we will cease paying these monthly fees. For the three months ended March 31, 2022, we incurred expenses of $30,000 under this agreement.
For the three months ended March 31, 2021, we incurred $10,000 under this agreement.
We have engaged Mizuho as an advisor in connection
with our initial business combination to assist us in holding meetings with our stockholders to discuss the potential business combination
and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection
with our initial business combination, assist us in obtaining stockholder approval for the initial business combination and assist us
with our press releases and public filings in connection with the initial business combination. We will pay Mizuho a cash fee for such
services upon the consummation of our initial business combination in an amount equal to 3.5% of the gross proceeds of our initial public
offering ($12,075,000).
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:
Class A Common stock subject to possible redemption
We account for Class A common stock subject to
possible redemption 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 is measured
at fair value. Conditionally redeemable Class A common stock (including Class A 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, Class A common stock is classified as stockholders’ equity (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’ equity (deficit) section of our condensed balance sheets.
Derivative warrant liabilities
We do not use derivative instruments to hedge
exposures to cash flow, market, or foreign currency risks. We evaluate all of its 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 re-assessed at the end of each reporting period.
We account for our 11,796,667 common stock warrants
issued in connection with our initial public offering (11,500,000) and private placement (296,667) 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 re-measurement at each balance sheet date until exercised, and
any change in fair value is recognized in our statements of operations. The fair value of Placement warrants issued by the Company in
connection with our initial public offering and private placement has been estimated using Monte-Carlo simulations at each measurement
date. The fair value of public warrants issued with our initial public offering was initially measured using Monte-Carlo simulations and
then measured based trading price once they commenced trading on March 29, 2021.
Offering costs associated with the Initial
Public Offering
We allocated with the requirements of the ASC
340-10-S99-1 and 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 that are related to the Public Offering.
We allocated the offering costs between common
stock and public warrants using relative fair value method, the offering costs allocated to the public warrants will be expensed immediately,
and offering costs allocated to common stock were charged to temporary equity upon the completion of our initial public offering.
Net income (loss) per share of common
stock
We compute net income (loss) per common stock
by dividing net income (loss) by the weighted average number of common stock outstanding for the period. We have two classes of shares,
which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes
of shares. This presentation assumes a business combination as the most likely outcome. Accretion associated with the redeemable shares
of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent accounting standards
In August 2020, the FASB issued 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):
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. The ASU also removes certain settlement conditions
that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation
in certain areas. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early
adoption permitted beginning on January 1, 2021. We are reviewing the impact adoption would have, if any, on its financial statements.
Management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.