NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description of Organization, Business
Operations and Basis of Presentation
CF Acquisition Corp. IV (the “Company”)
was incorporated in Delaware on January 23, 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 (the “Business Combination”).
Although the Company is not limited in its search
for target businesses to a particular industry or sector for the purpose of consummating a Business Combination, the Company intends to
focus its search on companies operating in the financial services, healthcare, real estate services, technology and software industries.
The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early
stage and emerging growth companies.
As of September 30, 2021, the Company had not
commenced operations. All activity through September 30, 2021 relates to the Company’s formation and the initial public offering
(the “Initial Public Offering”) described below, and all activity since the Initial Public Offering, relates to the Company’s
efforts toward locating and completing a suitable Business Combination. The Company will not generate any operating revenues until after
the completion of its initial Business Combination, at the earliest. The Company has generated non-operating income in the form of interest
income on investments in money market funds that invest in U.S. Treasury Securities and cash equivalents from the proceeds derived from
the Initial Public Offering, and recognized changes in the fair value of warrant liability and FPS (as defined below) liability as other
income (expense).
The Company’s sponsor is CFAC Holdings IV,
LLC (the “Sponsor”). The registration statements for the Initial Public Offering became effective on December 22, 2020. On
December 28, 2020, the Company consummated the Initial Public Offering of 50,000,000 units (each, a “Unit” and with respect
to the shares of Class A common stock included in the Units sold, the “Public Shares”), including 5,000,000 Units sold upon
the partial exercise of the underwriters’ overallotment option, at a purchase price of $10.00 per Unit, generating gross proceeds
of $500,000,000, which is described in Note 3. Each Unit consists of one share of Class A common stock and one-third of one redeemable
warrant. Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50. Each warrant will
become exercisable on the later of 30 days after the completion of the Business Combination or 12 months from the closing of the Initial
Public Offering and will expire 5 years after the completion of the Business Combination, or earlier upon redemption or liquidation.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 1,000,000 units (the “Private Placement Units”) at a price of $10.00
per Private Placement Unit to the Sponsor in a private placement, generating gross proceeds of $10,000,000, which is described in Note
4. The proceeds of the Private Placement Units were deposited into the Trust Account (as defined below) and will be used to fund the redemption
of the Public Shares subject to the requirements of applicable law (see Note 4).
Offering costs amounted to approximately $9,600,000,
consisting of $9,100,000 of underwriting fees and approximately $500,000 of other costs.
Following the closing of the Initial Public Offering
and sale of Private Placement Units on December 28, 2020, an amount of $500,000,000 ($10.00 per Unit) from the net proceeds of the sale
of the Units in the Initial Public Offering and the sale of the Private Placement Units (see Note 4) was placed in a trust account (“Trust
Account”) located in the United States at UMB Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee,
which may be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act
of 1940, as amended (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 selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of
Rule 2a-7 of the Investment Company Act, as determined by the Company, 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 and the sale
of Private Placement Units, 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 taxes payable on income earned on the Trust Account) at the time 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.
The Company will provide the holders of the Public
Shares (the “public stockholders”) 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 stockholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for
a pro -rata portion of the amount then in the Trust Account (initially $10.00 per Public Share). The per share amount to be distributed
to public stockholders who redeem the Public Shares will not be reduced by the Marketing Fee (as defined below in Note 4). There will
be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Company will proceed
with a Business Combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation
of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is
not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will,
pursuant to its amended and restated certificate of incorporation (as may be amended, the “Amended and Restated 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 Business Combination
is required by law, or the Company decides to obtain stockholder 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 stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed Business
Combination. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined
below) have agreed to vote their Founder Shares (as defined below in Note 4), their shares underlying the Private Placement Units and
any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders
have agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares held by the initial stockholders
in connection with the completion of a Business Combination.
Notwithstanding the foregoing, the Amended and
Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder 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 common stock sold in the Initial Public Offering, without the prior consent of the Company.
The Sponsor and the Company’s officers and
directors (the “initial stockholders”) have agreed not to propose an amendment to the Amended and Restated Certificate of
Incorporation (i) that would affect the substance or timing of the Company’s obligation to allow redemption in connection with its
Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination or (ii) with respect
to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the public
stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
Forward Purchase Contract —
In connection with the Initial Public Offering, the Sponsor committed, pursuant to a forward purchase contract with the Company (the “FPA”),
to purchase, in a private placement for gross proceeds of $15,000,000 to occur concurrently with the consummation of an initial Business
Combination, 1,500,000 of the Company’s Units on substantially the same terms as the sale of Units in the Initial Public Offering
at $10.00 per Unit, and 375,000 shares of Class A common stock (for no additional consideration) (the securities issuable pursuant to
the FPA, the “FPS”). The funds from the sale of the FPS will be used as part of the consideration to the sellers in the initial
Business Combination; any excess funds from this private placement will be used for working capital in the post-transaction company. This
commitment is independent of the percentage of stockholders electing to redeem their Public Shares and provides the Company with a minimum
funding level for the initial Business Combination.
Failure to Consummate a Business Combination
– The Company has until December 28, 2022 to consummate a Business Combination, or a later date approved by the Company’s
stockholders in accordance with the Amended and Restated Certificate of Incorporation (the “Combination Period”). If the Company
is unable to complete a Business Combination by the end of 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 taxes (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and
the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii), to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to
complete a Business Combination within the Combination Period.
The initial stockholders have 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 stockholders 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. 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 less than $10.00 per share initially held in the Trust Account. In order to
protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a
vendor 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, 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, except for the Company’s independent registered public accounting firm.
Liquidity and Capital Resources
As of September 30, 2021 and December 31, 2020,
the Company had $25,000 and $468,731, respectively, of cash in its operating account, and a working capital deficit of $1,344,675 and
working capital of $219,290, respectively. During the three and nine months ended September 30, 2021, the Company had $12,605 and $33,703,
respectively, of interest income earned on funds held in the Trust Account available to pay taxes.
The Company’s liquidity needs through September
30, 2021 have been satisfied through a contribution of $25,000 from the Sponsor in exchange for the issuance of the Founder Shares, a
loan of $157,994 from the Sponsor pursuant to a promissory note (the “Pre-IPO Note”) (see Note 4), the proceeds from the Initial
Public Offering and the sale of the Private Placement Units not held in the Trust Account, and the Sponsor Loan (as defined below). The
Company fully repaid the Pre-IPO Note upon completion of the Initial Public Offering. In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor has committed up to $1,750,000 to be provided to the Company to fund the Company’s
expenses relating to investigating and selecting a target business and other working capital requirements after the Initial Public Offering
and prior to the Company’s initial Business Combination (the “Sponsor Loan”). If the Sponsor Loan is insufficient, 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 with Working Capital Loans (as defined in Note 4). As of September 30, 2021 and December 31, 2020, there was $811,840 and
$0 outstanding, respectively, under the Sponsor 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 target businesses, 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.
Basis of Presentation
The unaudited condensed financial statements
are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
and pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of normal recurring adjustments,
which are, in the opinion of management, necessary for a fair presentation of the financial position as of September 30, 2021 and
the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in
unaudited condensed financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and
regulations. Interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed
financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form
10-K/A and the final prospectus filed by the Company with the SEC on December 23, 2021 and December 28, 2020, respectively.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of 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 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
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 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
unaudited condensed 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.
Restatement of Previously Issued Financial
Statements
In connection with the change in presentation
for shares of Class A common stock subject to possible redemption in the Company’s financial statements for the quarter ended September
30, 2021, the Company re-evaluated its accounting of the Public Shares. As a result, the Company determined that at the closing of the
Initial Public Offering, it had improperly valued the Public Shares. The Company has previously determined the Public Shares subject to
possible redemption to be equal to the redemption value of $10.00 per share, while also taking into consideration that pursuant to the
Company’s amended and restated certificate of incorporation, a redemption cannot result in net tangible assets being less than $5,000,001.
Pursuant to the updated analysis, management determined that all Public Shares can be redeemed or become redeemable subject to the occurrence
of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include
all Public Shares subject to possible redemption, resulting in the shares of Class A common stock subject to possible redemption being
equal to their redemption value, and reclassified the remaining Public Shares from permanent equity to temporary equity on the Company’s
condensed balance sheets.
The
Company assessed the materiality of these corrections on its prior periods’
financial statements in accordance with SEC Staff Accounting Bulletins Topic 1.M, Materiality and Topic 1.A, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and the guidance in Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error
Corrections. As a result of this assessment, the Company determined that
the corrections were material to the previously
filed financial statements that contained the error as initially reported in the Company’s Forms 10-Q for the quarterly periods
ended March 31, 2021 and June 30, 2021 (collectively, the “Affected Periods”).
Therefore, the Company
concluded
that the Affected Periods should be restated to present all Public Shares
as temporary equity and recognized accretion from the initial book value to redemption value
at the time of the Initial Public Offering, with a resulting decrease in Additional paid-in capital and increase in Accumulated deficit.
As such, the Company is reporting these restatements to the Affected Periods in this Amendment.
In connection with the change in presentation
for the shares of Class A common stock subject to redemption, the Company also restated its earnings per share calculation to allocate
net income (loss) pro-rata to shares of Class A common stock subject to possible redemption, non-redeemable shares of Class A common stock
and shares of Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case all
classes of common stock share pro-rata in the net income (loss) of the Company.
There has been no change in the Company’s
total assets, liabilities, or operating results for all periods presented.
The impact
of the restatement on the financial statements for the Affected Periods is presented below.
The table
below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported
balance sheet as of March 31, 2021:
|
|
As of March 31, 2021
(Unaudited)
|
|
Balance Sheet
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption
|
|
$
|
477,072,980
|
|
|
$
|
22,927,020
|
|
|
$
|
500,000,000
|
|
Class A common stock
|
|
$
|
329
|
|
|
$
|
229
|
|
|
$
|
100
|
|
Additional paid-in-capital
|
|
$
|
3,135,274
|
|
|
$
|
(3,135,274
|
)
|
|
$
|
—
|
|
Retained earnings/ (Accumulated deficit)
|
|
$
|
1,863,150
|
|
|
$
|
(19,791,517
|
)
|
|
$
|
(17,928,367
|
)
|
Total Stockholders’ Equity/(Deficit)
|
|
$
|
5,000,003
|
|
|
$
|
(22,927,020
|
)
|
|
$
|
(17,927,017
|
)
|
The table
below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported
statement of cash flows for the three months ended March 31, 2021:
|
|
Three Months Ended March 31, 2021
(Unaudited)
|
|
Statement of Cash Flows
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash financing activities
|
|
|
|
|
|
|
|
|
|
Change in Class A common stock subject to possible redemption
|
|
$
|
7,658,920
|
|
|
$
|
(7,658,920
|
)
|
|
$
|
—
|
|
The table
below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported
balance sheet as of June 30, 2021:
|
|
As of June 30, 2021
(Unaudited)
|
|
Balance Sheet
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption
|
|
$
|
473,285,460
|
|
|
$
|
26,714,540
|
|
|
$
|
500,000,000
|
|
Class A common stock
|
|
$
|
367
|
|
|
$
|
(267
|
)
|
|
$
|
100
|
|
Additional paid-in-capital
|
|
$
|
6,922,756
|
|
|
$
|
(6,922,756
|
)
|
|
$
|
—
|
|
Accumulated deficit
|
|
$
|
(1,924,371
|
)
|
|
$
|
(19,791,517
|
)
|
|
$
|
(21,715,888
|
)
|
Total Stockholders’ Equity /(Deficit)
|
|
$
|
5,000,002
|
|
|
$
|
(26,714,540
|
)
|
|
$
|
(21,714,538
|
)
|
The table
below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported
statement of cash flows for the six months ended June 30, 2021:
|
|
Six Months Ended June 30, 2021
(Unaudited)
|
|
Statement of Cash Flows
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash financing activities
|
|
|
|
|
|
|
|
|
|
Change in Class A common stock subject to possible redemption
|
|
$
|
3,871,400
|
|
|
$
|
(3,871,400
|
)
|
|
$
|
—
|
|
The
impact to the reported amounts of basic and diluted earnings per common share is presented below for the Affected Periods:
|
|
Three Months Ended March 31, 2021
(Unaudited)
|
|
Statement of Operations
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
Basic and diluted net income (loss) per share, Class A – Public shares
|
|
$
|
0.00
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
Basic and diluted net income (loss) per share, Class A – Private placement
|
|
$
|
0.57
|
|
|
$
|
(0.45
|
)
|
|
$
|
0.12
|
|
Basic and diluted net income (loss) per share, Class B – Common stock
|
|
$
|
0.57
|
|
|
$
|
(0.45
|
)
|
|
$
|
0.12
|
|
|
|
Three Months Ended June 30, 2021
(Unaudited)
|
|
Statement of Operations
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
Basic and diluted net income (loss) per share, Class A – Public shares
|
|
$
|
0.00
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
Basic and diluted net income (loss) per share, Class A – Private placement
|
|
$
|
(0.28
|
)
|
|
$
|
0.22
|
|
|
$
|
(0.06
|
)
|
Basic and diluted net income (loss) per share, Class B – Common stock
|
|
$
|
(0.28
|
)
|
|
$
|
0.22
|
|
|
$
|
(0.06
|
)
|
|
|
Six Months Ended June 30, 2021
(Unaudited)
|
|
Statement of Operations
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
Basic and diluted net income (loss) per share, Class A – Public shares
|
|
$
|
0.00
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
Basic and diluted net income (loss) per share, Class A – Private placement
|
|
$
|
0.29
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.06
|
|
Basic and diluted net income (loss) per share, Class B – Common stock
|
|
$
|
0.29
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.06
|
|
Note 2—Summary of Significant Accounting
Policies
Use of Estimates
The preparation of financial statements in conformity
with U.S. 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 and the reported amounts of revenues
and 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 financial statements is the determination of the fair value of the warrant
liability and FPS liability. Such estimates may be subject to change as more current information becomes available and, therefore, 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 in its operating
account as of September 30, 2021 and December 31, 2020. The Company’s investments held in the Trust Account as of September 30,
2021 and December 31, 2020 were comprised of cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation maximum coverage limit of $250,000, and cash equivalents held in the Trust Account. For the three and nine
months ended September 30, 2021 and for the period from January 23, 2020 (inception) through September 30, 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 ASC 820, Fair Value Measurement, approximates the carrying amounts represented in
the balance sheets, primarily due to their short-term nature, with the exception of the warrant and FPS liabilities.
Offering Costs Associated with the Initial
Public Offering
Offering costs consisted of legal, accounting,
and other costs incurred in connection with the preparation for the Initial Public Offering. These costs, together with the underwriting
discount, were charged against the carrying value of the shares of Class A common stock upon the completion of the Initial Public Offering.
Warrant and FPS Liability
The Company accounts for the Warrants and FPS
as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the Warrants and FPS using
applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives
and Hedging. The assessment considers whether the Warrants and FPS are freestanding financial instruments pursuant to ASC 480, meet
the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including
whether the Warrants and FPS are indexed to the Company’s own common shares and whether the warrant holders could potentially require
“net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.
This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the Warrants and execution of
the FPA and as of each subsequent quarterly period-end date while the Warrants and FPS are outstanding. For issued or modified warrants
and for instruments to be issued pursuant to the FPA that meet all of the criteria for equity classification, such warrants and instruments
are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants and
for the FPA instruments that do not meet all the criteria for equity classification, such warrants and instruments are required to be
recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter. Changes in the estimated fair
value of liability-classified Warrants and the FPS are recognized on the statements of operations in the period of the change.
The Company accounts for the Warrants and FPS
in accordance with guidance in ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASC 815-40”),
pursuant to which the Warrants and FPS do not meet the criteria for equity classification and must be recorded as liabilities. See Note
7 for further discussion of the pertinent terms of the Warrants and Note 8 for further discussion of the methodology used to determine
the fair value of the Warrants and FPS.
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 480. Shares of Class A common stock subject to mandatory redemption
(if any) are classified as liability instruments and measured at fair value. Shares of conditionally redeemable Class A common stock (including
shares of Class A common stock 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, shares of Class A common stock are classified as stockholders’ equity. As discussed in Note 1, all of the Public 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, as of both September 30, 2021 and December 31, 2020, 50,000,000 shares of Class A common stock subject to
possible redemption are presented as temporary equity outside of the stockholders’ equity section of the Company’s balance
sheets. The Company recognizes any subsequent changes in redemption value immediately as they occur and adjusts the carrying value of
redeemable Class A common stock to the redemption value at the end of each reporting period. Immediately upon the closing of the Initial
Public Offering, the Company recognized the accretion from initial book value to redemption amount value of redeemable Class A common
stock. This method would view the end of the reporting period as if it were also
the redemption date for the security. The change in the carrying value of redeemable Class A common stock also resulted in charges against Additional paid-in capital
and Accumulated deficit.
Income Taxes
Income taxes are accounted for under ASC 740,
Income Taxes (“ASC 740”), using the asset and liability method. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the unaudited condensed financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. To the extent that it is more likely than not that deferred tax assets will not be recognized, a valuation allowance would be established
to offset their benefit.
ASC 740 prescribes a recognition threshold that
a tax position is required to meet before being recognized in the unaudited condensed financial statements. The Company provides for uncertain
tax positions, based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination
by tax authorities. The Company recognizes interest and penalties related to unrecognized tax benefits as provision for income taxes on
the statement of operations.
Net Income (Loss) Per Share of Common Stock
The Company complies with the accounting and disclosure
requirements of ASC 260, Earnings Per Share. Net income (loss) per share of common stock is computed by dividing net income (loss)
applicable to stockholders by the weighted average number of shares of common stock outstanding for the applicable periods. The Company
applies the two-class method in calculating earnings per share. 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 Company has not considered the effect of the
warrants to purchase an aggregate of 16,999,999 shares of Class A common stock sold in the Initial Public Offering and Private Placement
in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result,
diluted earnings per share of common stock is the same as basic earnings per share of common stock for the periods presented.
The following tables reflect the calculation of
basic and diluted net income (loss) per share of common stock:
|
|
For the Three Months
Ended September 30,
2021
|
|
|
For the Three Months
Ended September 30,
2020
|
|
|
For the Nine Months
Ended September 30,
2021
|
|
|
For the Period from
January 23, 2020
(Inception) through
September 30, 2020
|
|
|
|
Class A –
Public shares
|
|
|
Class A-
Private
placement
shares and
Class B –
Common stock
|
|
|
Class A –
Public shares
|
|
|
Class A-
Private
placement
shares and
Class B –
Common stock
|
|
|
Class A –
Public shares
|
|
|
Class A-
Private
placement
shares and
Class B –
Common stock
|
|
|
Class A –
Public shares
|
|
|
Class A-
Private
placement
shares and
Class B –
Common stock
|
|
Basic and diluted net income per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income
|
|
$
|
2,508,369
|
|
|
$
|
677,259
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,556,709
|
|
|
$
|
1,500,312
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average number of shares of common stock outstanding
|
|
|
50,000,000
|
|
|
|
13,500,000
|
|
|
|
-
|
|
|
|
11,250,000
|
|
|
|
50,000,000
|
|
|
|
13,500,000
|
|
|
|
-
|
|
|
|
11,250,000
|
|
Basic and diluted net income per share of common stock
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Recent Accounting Pronouncements
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. The standard is expected
to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts
in an entity’s own equity. The ASU also enhances information transparency by making targeted improvements to the related disclosures
guidance. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for
convertible instruments. The new standard will become effective for the Company beginning January 1, 2024, can be applied using either
a modified retrospective or a fully retrospective method of transition and early adoption is permitted. Management is currently evaluating
the impact of the new standard on the Company’s unaudited condensed 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 the Company’s unaudited
condensed financial statements.
Note 3—Initial Public Offering
Pursuant to the Initial Public Offering, the Company
sold 50,000,000 Units at a price of $10.00 per Unit, including 5,000,000 Units sold upon the partial exercise of the underwriters’
overallotment option. Each Unit consists of one share of Class A common stock, and one-third of one redeemable warrant (each, a “Public
Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50
per share, subject to adjustment (see Note 6). No fractional warrants will be issued upon separation of the Units and only whole warrants
will trade. On December 28, 2020, the Sponsor forfeited 437,500 shares of Class B common stock due to the underwriter not exercising the
remaining portion of the overallotment option, such that the initial stockholders would collectively own 20% of the Company’s issued
and outstanding shares of common stock after the Initial Public Offering (not including the shares of Class A common stock underlying
the Private Placement Units).
Note 4—Related Party Transactions
Founder Shares
On January 23, 2020, the Sponsor purchased 11,500,000
shares (the “Founder Shares”) of the Company’s Class B common stock, par value $0.0001 (“Class B common stock”)
for an aggregate price of $25,000. On September 23, 2020, the Company effected a 1.25-for-1 stock split. On November 3, 2020, the Sponsor
returned to the Company, at no cost, an aggregate of 2,875,000 Founder Shares, which the Company cancelled. On December 18, 2020, the
Sponsor transferred an aggregate of 30,000 Founder Shares to independent directors of the Company. On December 22, 2020, the Company effected
a 1.125-for-1 stock split. On December 28, 2020, the Sponsor forfeited 437,500 shares of Class B common stock, due to the underwriter
not exercising the overallotment option in full, such that the initial stockholders would collectively own 20% of the Company’s
issued and outstanding shares of common stock after the Initial Public Offering (not including the shares of Class A common stock underlying
the Private Placement Units), resulting in an aggregate of 12,500,000 Founder Shares outstanding and held by the Sponsor and independent
directors of the Company. All share and per share amounts have been retroactively restated. The Founder Shares will automatically convert
into shares of Class A common stock at the time of the consummation of the Business Combination and are subject to certain transfer restrictions.
The initial stockholders have agreed, subject
to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the
completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price
of the 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 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 the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Units
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of 1,000,000 Private Placement Units at a price of $10.00 per Private Placement
Unit ($10,000,000 in the aggregate). Each Private Placement Unit consists of one share of Class A common stock and one-third of one warrant
(the “Private Placement Warrants”). Each whole Private Placement Warrant is exercisable for one share of Class A common stock
at a price of $11.50 per share. The proceeds from the Private Placement Units have been added to the net 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 or its permitted transferees.
The Private Placement Warrants will expire five
years after the completion of the Business Combination or earlier upon redemption or liquidation.
The Sponsor and the Company’s officers and
directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Units until 30 days
after the completion of the initial Business Combination.
Underwriter
The lead underwriter is an affiliate of the Sponsor
(see Note 5).
Business Combination Marketing Agreement
The Company has engaged Cantor Fitzgerald &
Co. (“CF&Co.”), an affiliate of the Sponsor, as an advisor in connection with the Business Combination to assist the Company
in holding meetings with its stockholders to discuss the Business Combination and the target business’ attributes, introduce the
Company to potential investors that are interested in purchasing the Company’s securities, 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 CF&Co. a cash fee (the “Marketing Fee”) for such services upon the consummation of the
Business Combination in an amount of $18,500,000, which is equal to, in the aggregate, 3.5% of the gross proceeds of the base offering
in the Initial Public Offering, and 5.5% of the gross proceeds from the partial exercise of the underwriters’ over-allotment option.
Related Party Loans
The Sponsor made available to the Company, under
the Pre-IPO Note, up to $300,000 to be used for a portion of the expenses of the Initial Public Offering. Prior to closing the Initial
Public Offering, the amount outstanding under the Pre-IPO Note was $157,994. The Pre-IPO Note was non-interest bearing and was repaid
in full upon the completion of the Initial Public Offering.
In order to finance transaction costs in connection
with an intended initial Business Combination, the Sponsor has committed, pursuant to the Sponsor Loan, up to $1,750,000 to be provided
to the Company to fund the Company’s expenses relating to investigating and selecting a target business and other working capital
requirements, including $10,000 per month for office space, administrative and shared personnel support services that will be paid to
the Sponsor, after the Initial Public Offering and prior to the Company’s initial Business Combination. As of September 30, 2021
and December 31, 2020, the Company had borrowed $811,840 and $0, respectively, under the Sponsor Loan.
If the Sponsor Loan is insufficient to cover the
working capital requirements of the Company, 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 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 Sponsor pays expenses on the Company’s
behalf. The Company reimburses the Sponsor for such expenses paid on its behalf. The unpaid balance is included in Payables to related
parties on the accompanying balance sheets. As of September 30, 2021 and December 31, 2020, the Company had accounts payable outstanding
to the Sponsor for such expenses paid on the Company’s behalf of $0 and $412,500, respectively.
Note 5—Commitments and Contingencies
Registration Rights
Pursuant to a registration rights agreement entered
into on December 22, 2020, the holders of Founder Shares and Private Placement Units (and component securities) are entitled to registration
rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). These holders are
entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting Agreement
The Company granted CF&Co., the lead underwriter
and an affiliate of the Sponsor, a 45-day option to purchase up to 6,750,000 additional Units to cover over-allotments at the Initial
Public Offering price less the underwriting discounts and commissions. CF&Co. partially exercised the over-allotment option for 5,000,000
Units concurrent with the closing of the Initial Public Offering. On December 28, 2020, simultaneously with the closing of the Initial
Public Offering, CF&Co. advised the Company that it would not exercise the remaining portion of the over-allotment option.
CF&Co. was paid a cash underwriting discount
of $9,000,000 in connection with the Initial Public Offering.
The Company also engaged a qualified independent
underwriter to participate in the preparation of the registration statement and exercise the usual standards of “due diligence”
in respect thereto. The Company paid the independent underwriter a fee of $100,000 upon the completion of the Initial Public Offering
in consideration for its services and expenses as the qualified independent underwriter. The qualified independent underwriter received
no other compensation.
Business Combination Marketing Agreement
The Company has engaged CF&Co. as an advisor
in connection with the Company’s Business Combination (see Note 4).
Risks and Uncertainties
Management is continuing to evaluate the impact
of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have an 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 the unaudited condensed financial statements. The unaudited condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Note 6—Stockholders’ Equity
Class A Common Stock - The Company
is authorized to issue 240,000,000 shares of Class A common stock, par value $0.0001 per share. As of both September 30, 2021 and
December 31, 2020, there were 1,000,000 shares of Class A common stock issued and outstanding, excluding 50,000,000 shares subject to
possible redemption. The outstanding Class A common stock includes 1,000,000 shares included in the Private Placement Units. The shares
of Class A common stock included in the Private Placement Units do not contain the same redemption features contained in the Public Shares.
Class B Common Stock - The Company
is authorized to issue 40,000,000 shares of Class B common stock, par value $0.0001 per share. Holders of Class B common stock are entitled
to one vote for each share. As of both September 30, 2021 and December 31, 2020, there were 12,500,000 shares of Class B common stock
issued and outstanding. On December 28, 2020, the Sponsor forfeited 437,500 shares of Class B common stock, due to the underwriter not
exercising the remaining portion of the overallotment option. The initial stockholders collectively own 20% of the Company’s issued
and outstanding shares of common stock after the Initial Public Offering (not including the Private Placement Units).
Prior to the consummation of the Business Combination,
only holders of Class B common stock have the right to vote on the election of directors. Holders of Class A common stock are not entitled
to vote on the election of directors during such time. Holders of Class A common stock and Class B common stock vote together as a single
class on all other matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically
convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment. 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 the Initial Public Offering and related to the closing of the 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 the Initial Public Offering
plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Business Combination
(excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination).
On September 23, 2020, the Company effected a
1.25-for-1 stock split. On November 3, 2020, the Sponsor returned to the Company, at no cost, an aggregate of 2,875,000 Founder Shares,
which were cancelled. On December 18, 2020, the Sponsor transferred an aggregate of 30,000 Founder Shares to the independent directors
of the Company. On December 22, 2020, the Company effected a 1.125-for-1 stock split. On December 28, 2020, the Sponsor forfeited 437,500
shares of Class B common stock, resulting in an aggregate of 12,500,000 Founder Shares outstanding and held by the Sponsor and independent
directors of the Company. Information contained in the unaudited condensed financial statements have been retroactively adjusted for this
split and cancellation.
Preferred Stock - The Company is
authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share 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 both September 30, 2021
and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Note 7—Warrants
Warrants - Public Warrants may only
be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. 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 shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available.
The Company has agreed that as soon as practicable,
but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable
best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common
stock issuable upon exercise of the Public Warrants. The Company will use its commercially reasonable best efforts to cause the same to
become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the
expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration
statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective within a specified
period following the consummation of Business Combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available.
If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The
Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to
the Public Warrants, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private
Placement Warrants are not 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 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 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.
The Company may redeem the Public Warrants:
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
at any time during the exercise period;
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption;
|
|
●
|
if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and
|
|
●
|
if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
|
If the Company calls the Public Warrants for redemption,
management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”,
as described in the warrant agreement.
The exercise price and number of shares of Class
A common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a stock dividend,
or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuance of Class A common
stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants. If
the Company is unable to complete a 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 on a Recurring Basis
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. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs to valuation techniques used in measuring
fair value.
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 three levels of the fair value hierarchy are:
|
●
|
Level 1 measurements – unadjusted observable inputs such as quoted prices for identical instruments in active markets;
|
|
●
|
Level 2 measurements – 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
|
|
●
|
Level 3 measurements – unobservable inputs for 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.
|
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.
The following tables present information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December
31, 2020, and indicate the fair value hierarchy of the inputs that the Company utilized to determine such fair value.
September 30, 2021
Description
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held in Trust Account - U.S. Treasury Securities
|
|
$
|
500,026,749
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
500,026,749
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
14,333,333
|
|
|
$
|
286,666
|
|
|
$
|
-
|
|
|
$
|
14,619,999
|
|
FPS liability
|
|
|
-
|
|
|
|
-
|
|
|
|
2,698,819
|
|
|
|
2,698,819
|
|
Total Liabilities
|
|
$
|
14,333,333
|
|
|
$
|
286,666
|
|
|
$
|
2,698,819
|
|
|
$
|
17,318,818
|
|
December 31, 2020
Description
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held in Trust Account - U.S. Treasury Securities
|
|
$
|
500,000,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
500,000,000
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,635,499
|
|
|
$
|
22,635,499
|
|
FPS liability
|
|
|
-
|
|
|
|
-
|
|
|
|
3,370,886
|
|
|
|
3,370,886
|
|
Total Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
26,006,385
|
|
|
$
|
26,006,385
|
|
Level 1 assets as of September 30, 2021 and December
31, 2020 include investments in a money market fund that holds U.S. Treasury securities. The Company uses inputs such as actual trade
data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Warrant Liability
The Warrants are accounted for as liabilities
in accordance with ASC 815-40 and are presented within warrant liability on the Company’s balance sheet. The warrant liability is
measured at fair value at inception and on a recurring basis, with any subsequent changes in fair value presented within change in fair
value of warrant liability in the Company’s statement of operations.
Initial Measurement
The Company established the initial fair value
for the Warrants on December 28, 2020, the date of the closing of the Initial Public Offering, and subsequent fair value as of December
31, 2020. As of December 31, 2020, the Public Warrants and Private Placement Warrants were measured at fair value on a recurring basis,
using an Options Pricing Model (the “OPM”). The Company allocated the proceeds received from (i) the sale of Units in the
Initial Public Offering (which is inclusive of one share of Class A common stock and one-third of one Public Warrant), (ii) the sale of
the Private Placement Units (which is inclusive of one share of Class A common stock and one-third of one Private Placement Warrant),
and (iii) the issuance of Class B common stock, first to the Warrants based on their fair values as determined at initial measurement,
with the remaining proceeds allocated to shares of Class A common stock subject to possible redemption. The Warrants were classified as
Level 3 at the initial measurement date and as of December 31, 2020 due to the use of unobservable inputs.
The Company utilized the OPM to value the Warrants
as of December 31, 2020, with any subsequent changes in fair value recognized in the statement of operations. The estimated fair value
of the warrant liability as of December 31, 2020 was determined using Level 3 inputs. Inherent in the OPM are assumptions related to expected
share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the volatility of its shares
of common stock based on historical volatility that matches the expected remaining life of the Warrants. The risk-free interest rate was
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 was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the
historical rate, which the Company anticipated to remain at zero. The aforementioned warrant liability is not subject to qualified hedge
accounting.
The following table provides quantitative information
about the inputs utilized by the Company in the fair value measurement of the Warrants as of December 31, 2020:
|
|
December 31,
2020
|
|
Risk-free interest rate
|
|
|
0.5
|
%
|
Expected term (years)
|
|
|
5
|
|
Expected volatility
|
|
|
17.5
|
%
|
Exercise price
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
10.29
|
|
Dividend yield
|
|
|
0.0
|
%
|
Subsequent Measurement
During the nine months ended September 30, 2021,
the fair value measurement of the Public Warrants was reclassified from Level 3 to Level 1 due to the use of an observable quoted price
in an active market. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private
Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of the Private
Placement Warrants is equivalent to that of the Public Warrants. As such, the Private Placement Warrants were reclassified from Level
3 to Level 2 during the nine months ended September 30, 2021.
As of September 30, 2021, the aggregate fair values
of the Private Placement Warrants and Public Warrants were approximately $0.3 million and $14.3 million, respectively.
The following table presents the changes in the
fair value of warrant liability:
|
|
Private
Placement
|
|
|
Public
|
|
|
Warrant
Liability
|
|
Fair value as of December 31, 2020
|
|
$
|
443,833
|
|
|
$
|
22,191,666
|
|
|
$
|
22,635,499
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(150,500
|
)
|
|
|
(7,525,000
|
)
|
|
|
(7,675,500
|
)
|
Fair value as of March 31, 2021
|
|
$
|
293,333
|
|
|
$
|
14,666,666
|
|
|
$
|
14,959,999
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
70,033
|
|
|
|
3,501,667
|
|
|
|
3,571,700
|
|
Fair value as of June 30, 2021
|
|
$
|
363,366
|
|
|
$
|
18,168,333
|
|
|
$
|
18,531,699
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(76,700
|
)
|
|
|
(3,835,000
|
)
|
|
|
(3,911,700
|
)
|
Fair value as of September 30, 2021(2)
|
|
$
|
286,666
|
|
|
$
|
14,333,333
|
|
|
$
|
14,619,999
|
|
(1)
|
Changes in valuation inputs or other assumptions are recognized in Change in fair value of warrant liability in the statement of operations.
|
(2)
|
Due to the use of quoted prices in an active market (Level 1) and the use of observable inputs for similar assets or liabilities (Level 2) for Public Warrants and Private Placement Warrants, respectively, subsequent to initial measurement, the Company had transfers out of Level 3 totaling $7.7 million during the nine months ended September 30, 2021. There were no transfers between levels during the three months ended September 30, 2021.
|
FPS Liability
The liability for the FPS was valued using an
adjusted net assets method, which is considered to be a Level 3 fair value measurement. Under the adjusted net assets method utilized,
the aggregate commitment of $15.0 million pursuant to the FPA is discounted to present value and compared to the fair value of the shares
of common stock and warrants to be issued pursuant to the FPA. The fair value of the shares of common stock and warrants to be issued
under the FPA are based on the public trading price of the Units issued in the Initial Public Offering. The excess (liability) or deficit
(asset) of the fair value of the shares of common stock and warrants to be issued compared to the $15.0 million fixed commitment is then
reduced to account for the probability of consummation of the Business Combination. The primary unobservable input utilized in determining
the fair value of the FPS is the probability of consummation of the Business Combination. As of September 30, 2021, the probability assigned
to the consummation of the Business Combination was 82% which was determined based on a hybrid approach of both observed success rates
of business combinations for special purpose acquisition companies and the Sponsor’s track record for consummating similar transactions.
The following table presents a summary of the
changes in the fair value of the FPS liability:
|
|
FPS
Liability
|
|
Fair value as of December 31, 2020
|
|
$
|
3,370,886
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(274,940
|
)
|
Fair value as of March 31, 2021
|
|
$
|
3,095,946
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(40,743
|
)
|
Fair value as of June 30, 2021
|
|
$
|
3,055,203
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(356,384
|
)
|
Fair value as of September 30, 2021
|
|
$
|
2,698,819
|
|
(1)
|
Changes in valuation inputs or other assumptions are recognized in Change in fair value of FPS liability in the statement of operations.
|
Note 9—Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the financial statements date through the date that the unaudited condensed financial statements were available to
be issued and determined that there have been no events that have occurred that would require adjustments to the disclosures in the unaudited
condensed financial statements.