NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description
of Organization and Business Operations
Organization and General
Authentic Equity Acquisition Corp. (the “Company”)
was incorporated as a Cayman Islands exempted company on September 29, 2020. The Company was formed for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities
(the “Business Combination”).
As of March 31, 2021, the Company had not commenced any operations.
All activity through March 31, 2021 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”)
described below and the search for a target business with which to consummate an initial Business combination. The Company will not generate
any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating
income in the form of interest income on investments held in trust account from the proceeds derived from the Initial Public Offering
and the sale of the Private Placement Warrants (as defined below).
Sponsor and Financing
The Company’s sponsor is Authentic Equity
Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial
Public Offering was declared effective on January 14, 2021. On January 20, 2021, the Company consummated its Initial Public Offering
of 23,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the
“Public Shares”), including 3,000,000 additional Units sold pursuant to the underwriters’ over-allotment option (the
“Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of
approximately $13.3 million, of which approximately $8.1 million was for deferred underwriting commissions (Note 5).
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 6,600,000 warrants (each, a “Private Placement Warrant” and collectively,
the “Private Placement Warrants”) to the Sponsor for an aggregate purchase price of approximately $5.8 million, and incurred
offering costs of approximately $18,000, in a private placement (the “Private Placement”). In addition, the Company consummated
the sale of certain rights to General Electric Pension Trust (“GEPT” and such rights, the “GEPT Rights”) for
gross proceeds of $824,500, which will allow GEPT to purchase up to $50.0 million of Forward Purchase Units (as defined in Note 5) immediately
prior to any initial Business Combination, subject to certain terms and conditions set forth in the Forward Purchase Agreement (as defined
in Note 5).
Trust Account
Upon the closing of the Initial Public Offering
and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds
of the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and are invested only in United States “government securities” within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity
of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act,
which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account as described below.
Initial Business Combination
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering, the Private Placement and the sale of the
GEPT Rights, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or
more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding
the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of the signing of the
agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The Company will provide the holders of the Public
Shares (the “Public Shareholders”), with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account ($10.00 per Public Share). The per-share amount to be distributed to Public
Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the
underwriters (as discussed in Note 5). These Public Shares are classified as temporary equity upon the completion of the Initial Public
Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). In such case, the Company will proceed with a
Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and
a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company
does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated
memorandum and articles of association (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions
pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”) and file tender offer documents
with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transactions is required by law, or
the Company decides to obtain shareholder approval for business or legal 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. Additionally, each Public Shareholder
may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks
shareholder approval in connection with a Business Combination, the initial shareholders (as defined below) agreed to vote their Founder
Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business
Combination. Pursuant to the Company’s insider trading policy, insiders are required to: (i) refrain from purchasing shares during
certain blackout periods and when they are in possession of any material non-public information and (ii) clear all trades with the Company’s
Chief Financial Officer prior to execution. In addition, the initial shareholders agreed to waive their redemption rights with respect
to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
Notwithstanding the foregoing, the Amended and
Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or
any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the
Company.
The Company’s Sponsor, officers and directors
(the “initial shareholders”) agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association
(a) that would modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does
not complete a Business Combination within 24 months from the closing of the Initial Public Offering, or January 20, 2023, (the “Combination
Period”) or (b) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination
activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction
with any such amendment.
If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash,
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 tax obligations, if any (less up to $100,000 of interest to pay dissolution expenses)
divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights
as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve,
subject in the case of clauses (ii) and (iii), to the Company’s obligations under Cayman Islands law to provide for claims of creditors
and the requirements of other applicable law.
AUTHENTIC
EQUITY ACQUISITION CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The
initial shareholders agreed to waive their liquidation rights with respect to the Founder
Shares if the Company fails to complete a Business Combination within the Combination Period.
However, if the initial shareholders acquire Public Shares in or after the Initial Public
Offering, they will be entitled to liquidating distributions from the Trust Account with
respect to such Public Shares if the Company fails to complete a Business Combination within
the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting
commission (see Note 5) held in the Trust Account in the event the Company does not complete
a Business Combination within the Combination Period and, in such event, such amounts will
be included with the other funds held in the Trust Account that will be available to fund
the redemption of the Public Shares. In the event of such distribution, it is possible that
the per share value of the residual assets remaining available for distribution (including
Trust Account assets) will be only $10.00 per share initially held in the Trust Account.
In order to protect the amounts held in the Trust Account, the Sponsor agreed to 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
discussed entering into a transaction agreement, reduce the amount of funds in the Trust
Account. This liability will not apply with respect to any claims by a third party who executed
a waiver of any right, title, interest or claim of any kind in or to any monies held in the
Trust Account or to any claims under the Company’s indemnity of the underwriters of
the Initial Public Offering against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event
that an executed waiver is deemed to be unenforceable against a third party, the Sponsor
will not be responsible to the extent of any liability for such third-party claims. The Company
will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have all vendors, service providers, except
our independent registered public accounting firm, prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving
any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
As of March 31, 2021, the Company had approximately
$860,000 of cash in its operating account and working capital of approximately $755,000.
The Company’s liquidity needs to date have
been satisfied through a contribution of $25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the Founder
Shares, a loan of $96,500 from the Sponsor pursuant to the Note (see Note 4), and a portion of the proceeds from the consummation of
the Private Placement and sale of the GEPT Rights not held in the Trust Account. The Company repaid the Note in full on January 20, 2021.
In addition, 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, provide the Company Working Capital Loans (see
Note 4). As of March 31, 2021 and December 31, 2020, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that
the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of
the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one
year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying
and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business
Combination.
Note 2—Basic
of Presentation and Summary of 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 (“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 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 period presented. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the
results that may be expected through December 31, 2021 or any future period.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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 of 2002, 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 shareholder approval of any
golden parachute payments not previously approved.
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
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 an emerging growth 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 an 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 that is neither an emerging growth company nor an emerging growth company that 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 unaudited condensed financial statements in conformity
with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements. 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 unaudited condensed 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
financial statements is the determination of the fair value of the derivative warrant liability. Such estimates may be subject to change
as more current information becomes available. 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. As of March 31, 2021
and December 31, 2020, the Company did not have any cash equivalents not held in the Trust Account.
Investments Held in Trust Account
Upon the closing of
the Initial Public Offering and the Private Placement, $230.0 million of the net proceeds of the sale of the Units in the Initial
Public Offering and the Private Placement were placed in the Trust Account and invested in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented
on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these
securities is included in net gain on investments, dividends and interest held in Trust Account in the accompanying unaudited condensed
statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of
Credit Risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at
times, may exceed the Federal Depository Insurance Corporation limit of $250,000, and investments held in Trust Account. At March 31,
2021 and December 31, 2020, 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 fair value of the Company’s assets
and liabilities, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements” approximates
the carrying amounts represented in the balance sheet.
Fair Value Measurements
Fair value is defined
as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market
participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value.
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
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Level 1, defined as observable
inputs such as quoted prices for identical instruments in active markets;
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Level 2, defined as inputs
other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments
in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations
derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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In some circumstances,
the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances,
the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant
to the fair value measurement.
Offering Costs Associated
with the Initial Public Offering
Offering costs consisted of legal,
accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial
Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering
based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant
liabilities are expensed as incurred and presented as non-operating expenses in the statement of operations. Offering costs
associated with the Class A ordinary shares were charged to shareholders’ equity upon the completion of the Initial Public
Offering.
Derivative 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 share purchase warrants, to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). 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.
The 18,100,000 warrants issued in connection with the Initial Public
Offering (11,500,000) (the “Public Warrants”) and the Private Placement Warrants (6,600,000) and units committed to be issued
in connection with forward purchase agreement are recognized as derivative assets or liabilities in accordance with ASC 815. Accordingly,
the Company recognizes the warrant instruments and forward purchase units as derivative assets and liabilities at fair value and adjusts
the instruments to fair value at each reporting period. The derivative assets and liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value
of the warrants issued in connection with the Initial Public Offering were initially measured using a binomial lattice model and subsequently
been measured at each measurement date based on the market price of such warrants. The fair value of warrants issued in connection with
the Private Placement was initially measured using Black-Scholes Option Pricing model and subsequently using the market value of the public
warrants when they were separately listed and traded. The fair value of the units committed to be issued in connection with the forward
purchase agreement has been estimated using Black-Scholes Option Pricing models at each measurement date.
Class A Ordinary
Shares Subject to Possible Redemption
The Company accounts
for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary
shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The
Company’s Class A ordinary shares 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, at March 31, 2021, 20,621,711 Class A ordinary shares
subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s
condensed balance sheet.
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Income Taxes
FASB ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. There
were no unrecognized tax benefits as of March 31, 2021. Company recognizes accrued interest and penalties related to unrecognized tax
benefits as income tax expense. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position.
There is currently no taxation imposed on income by the Government
of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income
taxes are not reflected in the Company’s financial statements.
Net Income (Loss)
per Ordinary Share
Net Income (loss) per ordinary share is computed
by dividing net income (loss) applicable to shareholders by the weighted average number of ordinary shares outstanding during the period.
The Company has not considered the effect of the Public Warrants and the Private Placement Warrants in the calculation of diluted income
per share, because their inclusion would be anti-dilutive under the treasury stock method.
The Company’s unaudited condensed statement
of operations includes a presentation of income (loss) per ordinary shares subject to redemption in a manner similar to the two-class
method of income (loss) per share. Net income per ordinary share, basic and diluted for Class A ordinary shares is calculated by dividing
the investment income earned on the Trust Account of approximately $4,000 by the weighted average number of Class A ordinary shares outstanding
for three months ended March 31, 2021. Net income per ordinary share, basic and diluted for Class B ordinary shares is calculated by
dividing the net income of approximately $6.2 million for the three months ended March 31, 2021, less income attributable to Class A
ordinary shares of approximately $4,000, by the weighted average number of Class B ordinary shares outstanding for the three months ended
March 31, 2021.
Recent Adopted Accounting
Standards
In August 2020, the FASB issued ASU No. 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 the derivative scope exception, and it simplifies
the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the
ASU did not impact the Company’s financial position, results of operations or cash flows.
Recent Issued Accounting
Standards
The Company’s
management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would
have a material effect on the accompanying unaudited condensed financial statements.
Note 3—Initial
Public Offering
On January 20, 2021, the Company consummated
its Initial Public Offering of 23,000,000 Units, including 3,000,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds
of $230.0 million, and incurring offering costs of approximately $13.3 million, of which approximately $8.1 million was for deferred
underwriting commissions.
Each Unit consists of one Class A ordinary share,
and one-half of one redeemable warrant. Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at a price
of $11.50 per share, subject to adjustment (see Note 7).
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 4—Related
Party Transactions
Founder Shares
On October 1, 2020, the Sponsor paid $25,000
to cover certain expenses on behalf of the Company in exchange for issuance of 5,750,000 Class B ordinary shares, par value $0.0001,
(the “Founder Shares”). In December 2020, the Company effected a share capitalization with respect to the Class B ordinary
shares resulting in an aggregate of 7,000,000 Founder Shares outstanding. The Sponsor subsequently transferred 25,000 Class B ordinary
shares to each of the Company’s independent directors, which shares were not subject to forfeiture in the event the underwriters’
over-allotment option was not exercised. The Sponsor agreed to forfeit (a) up to 750,000 Founder Shares to the extent that the over-allotment
option was not exercised in full by the underwriters and (b) up to 1,250,000 Founder Shares depending on the number of units purchased
under the Forward Purchase Agreement (as defined in Note 5) if such number is below 5,000,000. The forfeiture in the preceding clause
(a) would be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder
Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering plus the number of
Class A ordinary shares that may be sold pursuant to the Forward Purchase Agreement (as defined in Note 5). On January 20, 2021, the
underwriter fully exercised its over-allotment option; thus, 750,000 Founder Shares were no longer subject to forfeiture.
The Sponsor, the Company’s directors and
executive officers and GEPT agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares or the
Class B ordinary shares that may be issued to GEPT under the Forward Purchase Agreement, until the earlier to occur of: (a) one year
after the completion of the initial Business Combination and (b) subsequent to the initial Business Combination, (x) if the closing price
of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial
Business Combination or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction
that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other
property.
Private Placement Warrants
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the Private Placement of 6,600,000 Private Placement Warrants to the Sponsor for an aggregate
purchase price of approximately $5.8 million, and incurred offering costs of approximately $18,000.
Each whole Private Placement Warrant is exercisable
for one whole Class A ordinary share at a price of $11.50 per share. A portion of the proceeds from the Private Placement was added to
the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within
the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and
exercisable on a cashless basis so long as they are held by the Sponsor, GEPT or their permitted transferees.
The Sponsor and the Company’s officers
and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30
days after the completion of the initial Business Combination.
Related Party Loans
On September 30, 2020, the Sponsor agreed to
loan the Company an aggregate of up to $300,000 to cover for expenses related to the Initial Public Offering pursuant to a promissory
note (the “Note”). This loan was non-interest bearing and payable upon the completion of the Initial Public Offering. The
Company borrowed $96,500 under the Note and fully repaid the Note on January 20, 2021.
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 proceeds held outside the Trust Account to repay the Working Capital Loans but no
proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working
Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans
would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5
million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per
warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2021 and December 31, 2020, the Company had
no borrowings under the Working Capital Loans.
AUTHENTIC
EQUITY ACQUISITION CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Administrative Support Agreement
Commencing on the effective date of the prospectus
relating to the Initial Public Offering, the Company agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office
space, secretarial and administrative services provided to the Company. Upon completion of the initial Business Combination or the Company’s
liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2021, the Company incurred approximately
$24,000 in expense for these services. As of March 31, 2021, there was $10,000 in accounts payable – related party outstanding,
as reflected in the accompanying condensed balance sheets.
Note 5—Commitments and Contingencies
Forward Purchase Agreement
In connection with the consummation of the Initial
Public Offering, the Company entered into a forward purchase agreement (the “Forward Purchase Agreement”) with GEPT, pursuant
to which, in exchange for $824,500 of proceeds paid to the Company simultaneously with the closing of the Initial public Offering, GEPT
has the right, in its discretion, to purchase up to the lesser of (i) $50.0 million of units and (ii) a number of units equal to 19.99%
of the pro forma equity outstanding at the time of the closing of the Company’s initial Business Combination, including but not
limited to, any ordinary shares issued in connection with the Initial Public Offering, the Forward Purchase Agreement or any private
placement or other offering or to any seller in the initial Business Combination (the “Forward Purchase Units”), with each
unit consisting of one Class A ordinary share (the “Forward Purchase Shares”) and 0.425 of one warrant to purchase one Class
A ordinary share at $11.50 per share, subject to adjustment (the “Forward Purchase Warrants”), for a purchase price of $10.00
per unit, in a private placement to occur immediately prior to the closing of the initial Business Combination.
If GEPT purchases the maximum number of Forward
Purchase Units available to it under the Forward Purchase Agreement, the Company will issue to GEPT, at the closing of the Company’s
initial Business Combination and prior to the conversion of the Class B ordinary shares into Class A ordinary shares in accordance with
the terms thereof (the “GEPT Issuance”):
|
●
|
a number of Class B ordinary shares
(the “GEPT Class B ordinary shares”) that is equal to 12.5% of the aggregate
number of Class B ordinary shares outstanding at the time of the initial Business Combination
prior to the conversion of such Class B ordinary shares into Class A ordinary shares pursuant
to the terms thereof and after giving effect to the issuance of the GEPT Class B ordinary
shares and any other Class B ordinary shares as a result of anti-dilution rights or other
adjustments and the number of Class B ordinary shares transferred, assigned, sold or forfeited
in connection with the initial Business Combination but excluding 115,000 Class B ordinary
shares from such calculation (the “Post-Business Combination Class B ordinary shares”)
(provided, however, that if the Founder Shares are converted into Class A ordinary shares
prior to the date of the Company’s initial Business Combination, GEPT will receive
a number of Class A ordinary shares equal to the number of Class A ordinary shares that it
would have been entitled to pursuant to the GEPT Issuance); and
|
|
●
|
a number of Private Placement Warrants
equal to 12.5% of the aggregate number of Private Placement Warrants outstanding at the time
of the Company’s initial business combination prior to the conversion of such Class
B ordinary shares into Class A ordinary shares pursuant to the terms thereof and after giving
effect to any Private Placement Warrants transferred, assigned, sold or forfeited in connection
with the initial Business Combination (the “Post-Business Combination Private Placement
Warrants”).
|
In connection with such issuance, the Sponsor
agreed to forfeit to the Company for no consideration a number of Class B ordinary shares and Private Placement Warrants (the “Sponsor
Forfeiture”) such that after the Sponsor Forfeiture and the GEPT Issuance, the Sponsor will own (i) a number of Class B ordinary
shares equal to 87.5% of the number of Post-Business Combination Class B ordinary shares plus 15,000 Class B ordinary shares, and (ii)
a number of Private Placement Warrants equal to 87.5% of the number of Post-Business Combination Private Placement Warrants.
The Company will determine the number of Forward
Purchase Units to be sold under the Forward Purchase Agreement and GEPT’s obligation to purchase such units will be subject to
the satisfaction of certain conditions, including, among others, the delivery by GEPT of a notice to the Company that it will purchase
the Forward Purchase Units in whole or in part. The rights of GEPT under the Forward Purchase Agreement do not depend on whether any
Class A ordinary shares are redeemed by the Public Shareholders. If GEPT does not purchase the maximum number of Forward Purchase Units
available to it under the Forward Purchase Agreement, GEPT will not be entitled to receive any of the Founder Shares or Private Placement
Warrants described above, and we will be entitled to retain the $824,500 paid to the Company by GEPT.
The Forward Purchase Warrants purchased by GEPT
under the Forward Purchase Agreement will have the same terms as the Public Warrants. The Private Placement Warrants to be issued to
GEPT as described above will have the same terms and be subject to the same transfer restrictions as the Private Placement Warrants held
by the Sponsor.
AUTHENTIC
EQUITY ACQUISITION CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the
exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to
registration rights pursuant to a registration and shareholder rights agreement signed upon consummation of the Initial Public Offering.
These holders are entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder
rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective
until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred
in connection with the filing of any such registration statements.
Pursuant to the Forward Purchase Agreement, the
Company has agreed to use reasonable best efforts to: (i) file within 30 days after the closing of the initial Business Combination a
registration statement with the SEC for a secondary offering of the Forward Purchase Shares and the Forward Purchase Warrants (and underlying
Class A ordinary shares); (ii) cause such registration statement to be declared effective promptly thereafter but in no event later than
sixty (60) days after the initial filing; (iii) maintain the effectiveness of such registration statement until the earliest of (A) the
date on which GEPT or its assignees cease to hold the securities covered thereby, and (B) the date all of the securities covered thereby
can be sold publicly without restriction or limitation under Rule 144 of the Securities Act; and (iv) after such registration statement
is declared effective, cause the Company to conduct firm commitment underwritten offerings, subject to certain limitations. In addition,
the Forward Purchase Agreement provides for certain “piggy-back” registration rights to the holders of forward purchase securities
to include their securities in other registration statements filed by the Company. The Company will bear the cost of registering these
securities.
Underwriting Agreement
The Company granted the underwriters a 45-day
option from the final prospectus relating to the Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments,
if any, at $10.00 per Unit, less the underwriting discounts and commissions. On January 20, 2021, the underwriter fully exercised its
over-allotment option.
The underwriters were entitled to an underwriting
discount of $0.20 per unit, or $4.6 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35
per unit, or approximately $8.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The
deferred underwriting commissions will become payable to the underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Risks and Uncertainties
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 and/or search for a target company, the specific impact is not readily
determinable as of the date of these financial statement. The financial statement does not include any adjustments that might result
from the outcome of this uncertainty.
AUTHENTIC
EQUITY ACQUISITION CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 6—Shareholders’
Equity
Preference Shares — The Company
is authorized to issue 1,000,000 preference shares with such designations, voting and other rights and preferences as may be determined
from time to time by the Company’s board of directors. As of March 31, 2021 and December 31, 2020, there were no preference shares
issued or outstanding.
Class A Ordinary Shares —
The Company is authorized to issue 300,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of March 31, 2021, there
were 2,387,419 Class A ordinary shares issued and outstanding, excluding 20,621,711 Class A ordinary shares subject to possible redemption.
As of December 31, 2020, there were no Class A ordinary shares issued or outstanding.
Class B Ordinary Shares —
The Company is authorized to issue 30,000,000 Class B ordinary shares with a par value of $0.0001 per share. On October 1, 2020, the
Company issued 5,750,000 Class B ordinary shares to the Sponsor. In December 2020, the Company effected a share capitalization with respect
to the Class B ordinary shares resulting in an aggregate of 7,000,000 Class B ordinary shares outstanding. At December 31, 2020, of the
7,000,000 Class B ordinary shares outstanding, up to 750,000 Class B ordinary shares were subject to forfeiture to the extent that the
underwriters’ over-allotment option was not exercised in full or in part, and up to 1,250,000 Class B ordinary shares are subject
to forfeiture depending on the number of units purchased by GEPT under the Forward Purchase Agreement if such number is below 5,000,000,
so that the initial shareholders will collectively own approximately 20% of the Company’s issued and outstanding ordinary shares
(less the total number of Class B ordinary shares forfeited (if any) by the Sponsor to the extent less than 5,000,000 units are purchased
under the Forward Purchase Agreement) plus the number of Class A ordinary shares that may be sold pursuant to the Forward Purchase Agreement
(See Note 5). On January 20, 2021, the underwriter fully exercised its over-allotment option; thus, 750,000 Class B ordinary shares were
no longer subject to forfeiture.
Ordinary shareholders of record are entitled
to one vote for each share held on all matters to be voted on by shareholders. Except as described below, holders of Class A ordinary
shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s
shareholders except as required by law.
The Class B ordinary shares will automatically
convert into Class A ordinary shares at the time of the initial Business Combination or earlier at the option of the holders thereof
at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate,
on an as-converted basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of the Initial
Public Offering (less the total number of Class B ordinary shares forfeited (if any) by the Sponsor to the extent less than 5,000,000
units are purchased under the Forward Purchase Agreement) and the number of Class A ordinary shares that may be sold pursuant to the
Forward Purchase Agreement, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion
or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the
consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or
convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination, any
Private Placement Warrants issued to the Sponsor, its affiliates or any member of the management team upon conversion of Working Capital
Loans and any Forward Purchase Warrants. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate
of less than one-to-one.
Note 7—Derivative
Liabilities
As of March 31, 2021, the Company had 11,500,000
Public Warrants and the 6,600,000 Private Placement Warrants outstanding. No warrants were outstanding as of December 31, 2020.
Public Warrants may only be exercised for a whole
number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration
statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus
relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless
exercise is exempt from registration under the Securities Act). The Company agreed that as soon as practicable, but in no event later
than twenty (20) business days after the closing of the initial Business Combination, the Company will use its commercially reasonable
efforts to file with the SEC a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants, and
the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing
of the initial Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating
to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement provided that if the
Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy
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, it will not be required to file or maintain in effect a registration statement.
If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th
day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants
on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company 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.
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The warrants have an exercise price of $11.50
per whole share, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
As of March 31, 2021, there were 18,100,000 warrants outstanding.
In addition, if (x) the Company issues additional
Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business
Combination (excluding any forward purchase securities) at an issue price or effective issue price of less than $9.20 per ordinary share
(with such issue price or effective issue price to be determined in good faith by the 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 the initial Business Combination on the
date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price
of Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates
the initial 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, the $18.00 per
share redemption trigger price described under “Redemption of warrants when the price per Class A ordinary share equals or exceeds
$18.00” and “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00” 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 price described under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00”
will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants and the Forward
Purchase Warrants will be identical to the Public Warrants, except that the Private Placement Warrants and the Class A ordinary shares
issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the
completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable
on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted
transferees. If the Private Placement Warrants are held by someone other than the initial purchasers, GEPT or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of warrants when the price per
Class A ordinary share equals or exceeds $18.00.
Once the warrants become exercisable, the Company
may redeem the outstanding warrants (except with respect to the Private Placement Warrants):
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption;
and
|
|
●
|
if, and only if, the last reported sale price (the “closing price”)
of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, 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.
|
The Company will not redeem the warrants as described
above unless an registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants
is effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period.
If and when the warrants become redeemable by the Company, it may exercise its redemption right even if it is unable to register or qualify
the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per
Class A ordinary share equals or exceeds $10.00.
Commencing 90 days after 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;
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption;
|
|
●
|
if, and only if, the closing price of Class A ordinary shares equals
or exceeds $10.00 per Public Share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days
before the Company sends the notice of redemption to the warrant holders; and
|
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
|
●
|
if the closing price of the Class A ordinary shares 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), the Private Placement Warrants must also be concurrently called
for redemption on the same terms as the outstanding Public Warrants, as described above;
|
provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based
on the redemption date and the “fair market value” of the Class A ordinary shares.
The “fair market value” of the Class
A ordinary shares for the above purpose shall mean the volume weighted average price of Class A ordinary shares during the 10 trading
days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants
be exercisable in connection with this redemption feature for more than 0.365 Class A ordinary shares per warrant (subject to adjustment).
If the Company has not completed the initial
Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants
will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets
held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 8—Fair Value Measurements
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and indicates the
fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value. There were no assets or liabilities
that are measured at fair value on a recurring basis as of December 31, 2020.
|
|
Fair Value Measured as of March
31, 2021
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account - U.S. Treasury Securities
|
|
$
|
230,004,412
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
230,004,412
|
|
Derivative assets - Forward purchase agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
91,300
|
|
|
|
91,300
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities - public warrants
|
|
|
7,360,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,360,000
|
|
Derivative liabilities - private warrants
|
|
|
-
|
|
|
|
4,224,000
|
|
|
|
-
|
|
|
|
4,224,000
|
|
Total liablilities
|
|
$
|
237,364,412
|
|
|
$
|
4,224,000
|
|
|
$
|
91,300
|
|
|
$
|
241,679,712
|
|
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning
of the reporting period. The estimated fair value of the Public Warrants and the Private Warrants transferred from a Level 3 measurement
to a Level 1 and a Level 2 fair value measurement in March 2021, respectively, when the Public Warrants were separately listed and traded.
The fair value of the
warrants issued in connection with the Initial Public Offering was initially measured using a binomial lattice model and subsequently
been measured at each measurement date based on the market price of such warrants. The fair value of warrants issued in connection with
the Private Placement was initially measured using Black-Scholes Option Pricing model and subsequently using the market value of the
public warrants when they were separately listed and traded. The fair value of the units committed to be issued in connection with the
forward purchase agreement has been estimated using Black-Scholes Option Pricing model at each measurement date. For the three months
ended March 31, 2021, the Company recognized a gain on change in the fair value of derivative liabilities of approximately $8.9 million
presented on the accompanying unaudited condensed statement of operations.
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The change in the fair value of the Level 3 derivative liabilities
for the three months ended March 31, 2021 is summarized as follows:
Derivative liabilities at January 1, 2021
|
|
$
|
-
|
|
Issuance of Public and Private Warrants
|
|
|
19,548,000
|
|
Public Warrants transfer to Level 1
|
|
|
(12,420,000
|
)
|
Private Warrants transfer to Level 2
|
|
|
(7,128,000
|
)
|
Derivative liabilities at March 31, 2021
|
|
$
|
-
|
|
The change in the fair
value of the Level 3 derivative assets for the three months ended March 31, 2021 is summarized as follows:
Derivative assets at January 1, 2021
|
|
$
|
-
|
|
Initial fair value of forward purchase agreement
|
|
|
(824,500
|
)
|
Change in fair value of derivative assets
|
|
|
915,800
|
|
Derivative assets at March 31, 2021
|
|
$
|
91,300
|
|
The estimated fair
value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, is determined using
Level 3 inputs. Inherent in a binomial lattice model and Black-Scholes Option 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
warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer
company’s ordinary shares 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 assumed to be equivalent to their remaining contractual term. The dividend rate is based on the
historical rate, which the Company anticipates remaining at zero. The Company estimates the probability of completing a Business Combination based on recent historical failure
rates for SPACs and the current market environment.
The following table
provides quantitative information regarding Level 3 fair value measurements inputs of derivative liabilities at the measurement date:
|
|
As of
January 20,
2021
|
|
Exercise price
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
9.93
|
|
Term (in years)
|
|
|
5.50
|
|
Volatility
|
|
|
20.00
|
%
|
Risk-free interest rate
|
|
|
0.50
|
%
|
Dividend yield
|
|
|
-
|
|
Probability of completing a Business Combination
|
|
|
80.00
|
%
|
The estimated fair value
of the forward purchase agreement is determined using Level 3 inputs. Inherent in a Black-Scholes Option 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 the forward purchase unit based on implied volatility from the Company’s traded units and from historical volatility of select
peer company’s ordinary shares that matches the expected remaining life of the units. 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 unit. The expected
life of the forward purchase unit is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the
historical rate, which the Company anticipates remaining at zero.
The following table
provides quantitative information regarding Level 3 fair vale measurements inputs of forward purchase agreement at each measurement date:
|
|
As of
March 31,
2021
|
|
|
As of
January 20,
2021
|
|
Exercise price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
Unit price
|
|
$
|
10.39
|
|
|
$
|
9.97
|
|
Term (in years)
|
|
|
0.80
|
|
|
|
1.00
|
|
Volatility
|
|
|
13.70
|
%
|
|
|
20.00
|
%
|
Risk-free interest rate
|
|
|
0.10
|
%
|
|
|
0.10
|
%
|
Dividend yield
|
|
|
-
|
|
|
|
-
|
|
Probability of completing a Business Combination
|
|
|
80.00
|
%
|
|
|
80.00
|
%
|
AUTHENTIC EQUITY ACQUISITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 9 — Revision to Prior Period Financial
Statements
On April 12, 2021, the staff of the SEC (the
“SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants
issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff
Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be
classified as liabilities on the SPAC’s balance sheets as opposed to equity. Since their issuance on January 20, 2021, the Company’s
warrants have been accounted for as equity within the Company’s previously reported balance sheet. During the course of preparing
the quarterly report on Form 10-Q for the three-month period ended March 31, 2021, the Company identified a misstatement in its misapplication
of accounting guidance related to the Company’s warrants in the Company’s previously issued audited balance sheet dated January
20, 2021, filed on Form 8-K on January 26, 2021 (the “Post-IPO Balance Sheet”).
The Warrants were reflected as a component of
equity in the Post-IPO Balance Sheet as opposed to liabilities on the balance sheet, based on the Company’s application of FASB
ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in
the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its
warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for
warrants issued on January 20, 2021, in light of the SEC Staff’s published views. Based on this reassessment, management determined
that the warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported
in the Company’s Statement of Operations each reporting period.
The Company concluded that the misstatement was
not material to the Post-IPO Balance Sheet and the misstatement had no material impact to any prior interim period. The effect of the
revisions to the Post-IPO Balance Sheet is as follows:
|
|
As of January 20, 2021
|
|
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Revised
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
232,343,303
|
|
|
$
|
-
|
|
|
$
|
232,343,303
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
991,671
|
|
|
$
|
-
|
|
|
$
|
991,671
|
|
Deferred underwriting commissions
|
|
|
8,050,000
|
|
|
|
-
|
|
|
|
8,050,000
|
|
Derivative liabilities - forward purchase agreement
|
|
|
-
|
|
|
|
824,500
|
|
|
|
824,500
|
|
Derivative liabilities - warrants
|
|
|
-
|
|
|
|
19,548,000
|
|
|
|
19,548,000
|
|
Total liabilities
|
|
|
9,041,671
|
|
|
|
20,372,500
|
|
|
|
29,414,171
|
|
Class A ordinary shares, 0.001 par value; shares subject to possible redemption
|
|
|
218,301,630
|
|
|
|
(20,372,500
|
)
|
|
|
197,929,130
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preference shares - 0.001 par value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Class A ordinary shares - 0.001 par value
|
|
|
117
|
|
|
|
204
|
|
|
|
321
|
|
Class B ordinary shares - 0.001 par value
|
|
|
700
|
|
|
|
-
|
|
|
|
700
|
|
Additional paid-in-capital
|
|
|
5,056,765
|
|
|
|
2,053,978
|
|
|
|
7,110,743
|
|
Accumulated deficit
|
|
|
(57,580
|
)
|
|
|
(2,054,182
|
)
|
|
|
(2,111,762
|
)
|
Total shareholders’ equity
|
|
|
5,000,002
|
|
|
|
-
|
|
|
|
5,000,002
|
|
Total liabilities and shareholders’ equity
|
|
$
|
232,343,303
|
|
|
$
|
-
|
|
|
$
|
232,343,303
|
|
Note 10—Subsequent
Events
Management has evaluated subsequent events and transactions that occurred
after the balance sheet date through the date the unaudited condensed financial statements were issued. Based upon this review, other
than as described herein, including Note 9 - Revision to Prior Period Financial Statements, the Company did not identify any other subsequent
events that would have required adjustment or disclosure in the unaudited condensed financial statements.