Item 1. Financial Statements.
GLASS HOUSES ACQUISITION
CORP.
CONDENSED BALANCE
SHEETS
| |
March 31,
2022 | | |
December 31,
2021 | |
Assets | |
(unaudited) | | |
(audited) | |
Current assets: | |
| | |
| |
Cash | |
$ | 650,582 | | |
$ | 1,025,685 | |
Prepaid expenses | |
| 493,978 | | |
| 499,341 | |
Total current assets | |
| 1,144,560 | | |
| 1,525,026 | |
Prepaid expenses, non-current | |
| — | | |
| 99,542 | |
Marketable securities held in Trust Account | |
| 220,509,964 | | |
| 220,487,761 | |
Total Assets | |
$ | 221,654,524 | | |
$ | 222,112,329 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Deficit | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accrued expenses | |
$ | 252,187 | | |
$ | 238,402 | |
Total current liabilities | |
| 252,187 | | |
| 238,402 | |
| |
| | | |
| | |
Warrant liabilities | |
| 6,411,351 | | |
| 11,255,958 | |
Deferred underwriting payable | |
| 7,716,553 | | |
| 7,716,553 | |
Total liabilities | |
| 14,380,091 | | |
| 19,210,913 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 6) | |
| | | |
| | |
Class A common stock subject to possible redemption, 22,047,293 shares at redemption value of $10.00 per share | |
| 220,472,930 | | |
| 220,472,930 | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value; 400,000,000 shares authorized; 0 shares issued and outstanding (excluding 22,047,293 shares subject to possible redemption) | |
| — | | |
| — | |
Class B common stock, $0.0001 par value; 40,000,000 shares authorized; 5,511,823 shares issued and outstanding | |
| 551 | | |
| 551 | |
Additional paid-in capital | |
| — | | |
| — | |
Accumulated deficit | |
| (13,199,048 | ) | |
| (17,572,065 | ) |
Total Stockholders’ Deficit | |
| (13,198,497 | ) | |
| (17,571,514 | ) |
| |
| | | |
| | |
Total Liabilities and Stockholders’ Deficit | |
$ | 221,654,524 | | |
$ | 222,112,329 | |
The accompanying
notes are an integral part of the unaudited condensed financial statements.
GLASS HOUSES ACQUISITION
CORP.
UNAUDITED CONDENSED
STATEMENTS OF OPERATIONS
| |
For the Three
Months Ended
March 31,
2022 | | |
For the Period
from
January 19,
2021
(Inception)
through
March 31,
2021 | |
Formation and operating costs | |
$ | 493,793 | | |
$ | 84,378 | |
Loss from operations | |
| (493,793 | ) | |
| (84,378 | ) |
| |
| | | |
| | |
Other income (expenses) | |
| | | |
| | |
Warrant issuance costs | |
| — | | |
| (812,974 | ) |
Other expense relating to fair value exceeding amount paid for warrants | |
| — | | |
| (2,363,027 | ) |
Interest earned on marketable securities held in Trust Account | |
| 22,203 | | |
| — | |
Change in fair value of warrant liabilities | |
| 4,844,607 | | |
| (172,000 | ) |
Total other income (expense) | |
| 4,866,810 | | |
| (3,348,001 | ) |
| |
| | | |
| | |
Net income (loss) | |
$ | 4,373,017 | | |
$ | (3,432,379 | ) |
| |
| | | |
| | |
Basic and diluted weighted average shares outstanding of Class A, common stock subject to redemption | |
| 22,047,293 | | |
| 1,968,505 | |
Basic and diluted net income (loss) per share of Class A, common stock subject to redemption | |
$ | 0.16 | | |
$ | (0.49 | ) |
| |
| | | |
| | |
Basic and diluted weighted average shares outstanding of Class B, non-redeemable common stock | |
| 5,511,823 | | |
| 5,008,255 | |
Basic and diluted net income (loss) per share of Class B, non-redeemable common stock | |
$ | 0.16 | | |
$ | (0.49 | ) |
The accompanying
notes are an integral part of the unaudited condensed financial statements.
GLASS HOUSES
ACQUISITION CORP.
UNAUDITED CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Three Months Ended
March 31, 2022
| |
Class A Common Stock | | |
Class B Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance – December 31, 2021 | |
| — | | |
$ | — | | |
| 5,511,823 | | |
$ | 551 | | |
$ | — | | |
$ | (17,572,065 | ) | |
$ | (17,571,514 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 4,373,017 | | |
| 4,373,017 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance – March 31, 2022 | |
| — | | |
$ | — | | |
| 5,511,823 | | |
$ | 551 | | |
$ | — | | |
$ | (13,199,048 | ) | |
$ | (13,198,497 | ) |
From January 19,
2021 (inception) through March 31, 2021
| |
Class A Common Stock | | |
Class B Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance – January 19, 2021 (Inception) | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Class B common stock issued to Sponsor | |
| — | | |
| — | | |
| 5,750,000 | | |
| 575 | | |
| 24,425 | | |
| — | | |
| 25,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,432,379 | ) | |
| (3,432,379 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (24,425 | ) | |
| (25,977,027 | ) | |
| (26,001,452 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance – March 31, 2021 | |
| — | | |
| — | | |
| 5,750,000 | | |
$ | 575 | | |
$ | — | | |
$ | (29,409,406 | ) | |
$ | (29,408,831 | ) |
The accompanying
notes are an integral part of the unaudited condensed financial statements.
GLASS HOUSES ACQUISITION
CORP.
UNAUDITED CONDENSED
STATEMENTS OF CASH FLOWS
| |
For the
Three Months
Ended
March 31,
2022 | | |
For the
Period from
January 19,
2021
(Inception)
through
March 31,
2021 | |
Cash flows from Operating Activities: | |
| | |
| |
Net income (loss) | |
$ | 4,373,017 | | |
$ | (3,432,379 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Interest earned on marketable securities held in Trust Account | |
| (22,203 | ) | |
| — | |
Change in fair value of warrant liabilities | |
| (4,844,607 | ) | |
| 172,000 | |
Warrant issuance costs | |
| — | | |
| 812,974 | |
Other expense relating to fair value exceeding amount paid for warrants | |
| — | | |
| 2,363,027 | |
Changes in current assets and current liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 104,905 | | |
| (901,398 | ) |
Due to related party | |
| — | | |
| 6,452 | |
Accrued expenses | |
| 13,785 | | |
| 189,275 | |
Net cash used in operating activities | |
| (375,103 | ) | |
| (790,049 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Cash held in Trust Account | |
| — | | |
| (220,472,930 | ) |
Net cash used in investing activities | |
| — | | |
| (220,472,930 | ) |
| |
| | | |
| | |
Cash flows from Financing Activities: | |
| | | |
| | |
Proceeds from Initial Public Offering, net of underwriter’s fees | |
| — | | |
| 216,063,471 | |
Proceeds from private placement | |
| — | | |
| 7,609,459 | |
Proceeds from issuance of founder shares | |
| — | | |
| 25,000 | |
Repayment to promissory note to related party | |
| — | | |
| (99,360 | ) |
Payments of offering costs | |
| — | | |
| (567,910 | ) |
Net cash provided by financing activities | |
| — | | |
| 223,030,660 | |
| |
| | | |
| | |
Net change in cash | |
| (375,103 | ) | |
| 1,767,681 | |
Cash, beginning of the period | |
| 1,025,685 | | |
| - | |
Cash, end of the period | |
$ | 650,582 | | |
$ | 1,767,681 | |
| |
| | | |
| | |
Supplemental disclosure of noncash investing and financing activities: | |
| | | |
| | |
Deferred underwriting commissions charged to additional paid in capital | |
$ | — | | |
$ | 7,716,553 | |
Initial value of Class A common stock subject to possible redemption | |
$ | — | | |
$ | 194,471,478 | |
Accretion of Class A common stock to redemption value | |
$ | — | | |
$ | 26,001,452 | |
Initial classification of warrant liability | |
$ | — | | |
$ | 21,729,963 | |
Deferred offering costs paid by Sponsor loan | |
$ | — | | |
$ | 99,360 | |
The accompanying
notes are an integral part of the unaudited condensed financial statements.
GLASS HOUSES ACQUISITION
CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE
1. ORGANIZATION AND BUSINESS OPERATIONS
Organization
and General
Glass Houses Acquisition Corp.
(the “Company”) is a blank check company incorporated as a Delaware corporation on January 19, 2021. The Company was formed
for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses (“Business Combination”). The Company has not selected any specific Business Combination target.
Although the Company is not limited
to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to search for a
target business that provides critical resources and/or services to the technologies powering the 21st century industrial economy. 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.
The Company’s
fiscal year-end is December 31.
As of March 31, 2022, the Company
had not commenced any operations. All activity for the period from January 19, 2021 (inception) through March 31, 2022 relates to the
Company’s formation, the initial public offering (“IPO”), which is described below, and, since the closing of the IPO,
a search for a Business Combination candidate. 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 cash and
cash equivalents from the proceeds derived from the IPO and will recognize changes in the fair value of its warrant liability as other
income (or expense).
The Company’s
sponsor is Glass Houses Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for
the Company’s IPO was declared effective on March 22, 2021 (the “Effective Date”). On March 25, 2021, the Company consummated
the IPO of 20,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units being
offered, the “public shares”), at $10.00 per Unit, generating gross proceeds of $200,000,000, which is discussed in Note
3.
Simultaneously with the closing
of the IPO, the Company consummated the sale of 7,200,000 Private Placement Warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating total gross proceeds of $7,200,000.
Transaction costs amounted to
$12,693,922 consisting of $4,409,459 of cash underwriting fees, $7,716,553 of deferred underwriting fees, and $567,910 of
other offering costs.
The Company granted the underwriter
in the IPO a 45-day option to purchase up to 3,000,000 additional Units to cover over-allotments, if any. On March 30, 2021,
the underwriter partially exercised the over-allotment option to purchase 2,047,293 Units (the “Over-allotment Units”),
generating an aggregate of gross proceeds of $20,472,930, and the Company incurred $409,459 in cash underwriting fees and $716,553 in
deferred underwriting fees. Simultaneously with the closing of the over-allotment option, the Company sold an additional 409,459 Private
Placement Warrants to the Sponsor at a price of $1.00 per share.
Trust
Account
Following the closing of the
IPO on March 25, 2021 and the closing of the underwriter’s partial exercise of the over-allotment option on April 1, 2021, $220,472,930 ($10.00 per
Unit) from the net proceeds of the sale of the Units in the IPO and over-allotment and the sale of the Private Placement Warrants was
placed in a Trust Account, which may only be invested in United States “government securities” within the meaning of Section
2(a)(16) of 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. Except with respect
to interest earned on the funds held in the Trust Account that may be released to the Company to pay its franchise and income taxes, the
proceeds from the IPO and the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest to
occur of: (a) the completion of the initial Business Combination; (b) the redemption of any public shares properly tendered in connection
with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (i) to modify the substance or
timing of the Company’s obligation to redeem 100% of the Company’s public shares if the Company does not complete the
initial Business Combination within 24 months from the closing of the IPO (March 25, 2023, the “Combination Period”), or (ii)
with respect to any other provisions relating to the rights of holders of the Class A common stock; and (c) the redemption of the Company’s
public shares if the Company is unable to complete the Business Combination within the Combination Period, subject to applicable law.
Initial Business Combination
The Company’s Business
Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the net balance
in the Trust Account (excluding the amount of deferred underwriting discounts held and taxes payable on the income earned on the Trust
Account) at the time of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business
Combination if the post-Business Combination 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 of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will
be able to successfully effect a Business Combination.
The Company will provide public
stockholders with the opportunity to redeem all or a portion of their public shares of Class A common stock upon the completion of the
initial 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 proposed Business Combination or conduct
a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro
rata share of the aggregate amount then on deposit in the Trust Account (initially approximately $10.00 per share, plus any pro rata
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The shares of common stock subject
to redemption are recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with
Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” 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, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted
in favor of the Business Combination.
If the Company is unable to complete
the initial 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 no more than ten business days thereafter subject to lawfully available funds therefor,
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 the franchise and income 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 board of directors, dissolve and liquidate, subject in each case to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor, officers and directors
have agreed (i) to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with
the completion of the Company’s initial Business Combination and (ii) to waive their rights to liquidating distributions from the
Trust Account with respect to any founder shares held by them if the Company fails to complete the initial Business Combination within
the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public
shares they hold if the Company fails to complete the Business Combination within the Combination Period.
The Company’s Sponsor has
agreed that it will be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the
Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount
of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account
as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest
which may be withdrawn to pay the franchise and income taxes. This liability will not apply with respect to any claims by a third
party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the indemnity
of the underwriter of the IPO 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, then the Sponsor will
not be responsible to the extent of any liability for such third-party claims. To the Company’s knowledge, the Sponsor’s only
assets are securities of the Company. The Company has not asked the Sponsor to reserve for such indemnification obligations. None of the
Company’s officers will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective
target businesses.
Going Concern and Liquidity
As of March 31, 2022, the
Company had approximately $0.7 million in its operating bank account and working capital of approximately $0.9 million.
Prior to the completion of the
IPO, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $25,000 (see Note 5) for the founder
shares to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $99,160 (see Note 5).
The promissory note from the Sponsor was paid in full on March 26, 2021. Subsequent to the consummation of the IPO and Private Placement,
the Company’s liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in
the Trust Account.
In addition, in order to finance
transaction costs in connection with an intended initial Business Combination, the Company’s 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, as
defined below (see Note 5). To date, there were no amounts outstanding under any Working Capital Loans.
On April 11, 2022, the Company
and the Sponsor entered into a promissory note, pursuant to which the Sponsor committed to provide up to $200,000 in loans to the
Company for working capital purposes. The Company can draw down on such maximum amount during the term of the promissory note. The loan
is non-interest bearing and payable by the Company on the earlier of: (i) March 25, 2023 or (ii) the date on which the Company
consummates a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one
or more businesses.
In connection
with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” management determined that the liquidity condition and date for mandatory liquidation and
dissolution raise substantial doubt about the Company’s ability to continue as a going concern through March 25, 2023, the scheduled
liquidation date of the Company if it does not complete a Business Combination prior to such date. These unaudited condensed financial
statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that
might be necessary should the Company be unable to continue as a going concern.
Risks
and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic 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, cash flows and/or search for a target company, the specific impact
is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
NOTE
2. 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 interim financial information and pursuant to the SEC’s rules and regulations found in Article
8 of Regulation S-X. 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, 2022 are not
necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited condensed
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31,
2021, as filed with the SEC on April 13, 2022 (our “Annual Report”).
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
independent registered public accounting firm 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 a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use
of Estimates
The preparation of the unaudited
condensed financial statements in conformity with US GAAP requires 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 balance sheet. Actual results
could differ from those estimates.
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.
Cash and Securities Held in
Trust Account
At March 31, 2022, the assets
held in the Trust Account consisted of $220,509,717 held in mutual funds invested in U.S. Treasury securities and $247 held
in cash. At December 31, 2021, the assets held in the Trust Account consisted of $220,487,514 held in mutual funds invested in U.S. Treasury
securities and $247 held in cash.
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.
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:
|
● |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
● |
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 |
|
● |
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. |
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. See Note 7 for details.
The fair value of the Company’s
certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid expenses, and
accrued expenses are estimated to approximate the carrying values as of March 31, 2022 and December 31, 2021 due to the short maturities
of such instruments.
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 Accounting Standards Codification ASC Topic 480
“Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as
a liability instrument and are measured at redemption value. Conditionally redeemable common stock (including common stock that features
redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity.
All of the 22,047,293 shares
of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public
shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business
Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance
with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions
not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.
Therefore, all Class A common stock has been classified outside of permanent equity.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges
against additional paid in capital and accumulated deficit.
As of March
31, 2022, the Class A common stock reflected on the balance sheet are reconciled in the following table:
Gross proceeds from IPO | |
$ | 220,472,930 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (14,120,504 | ) |
Class A common stock issuance costs | |
| (11,880,948 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 26,001,452 | |
Class A common stock subject to possible redemption | |
$ | 220,472,930 | |
Net Income
(Loss) Per Share of Common Stock
The Company has two classes of
shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes
of shares. The 18,633,106 potential common shares for outstanding warrants to purchase the Company’s stock were excluded
from diluted earnings per share for the three months ended March 31, 2022 and for the period from January 19, 2021 (inception) through
March 31, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net
income (loss) per common share is the same as basic net income (loss) per common share for such periods. The table below presents
a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common
stock:
| |
For the Three Months
Ended March 31, 2022 | |
| |
Class A | | |
Class B | |
Basic and diluted net income per share: | |
| | |
| |
Numerator: | |
| | |
| |
Allocation of net income | |
$ | 3,498,414 | | |
$ | 874,603 | |
| |
| | | |
| | |
Denominator: | |
| | | |
| | |
Weighted-average shares outstanding | |
| 22,047,293 | | |
| 5,511,823 | |
Basic and diluted net income per share | |
$ | 0.16 | | |
$ | 0.16 | |
| |
For the Period from January 19, 2021 (Inception) through March 31, 2021 | |
| |
Class A | | |
Class B | |
Basic and diluted net loss per share: | |
| | |
| |
Numerator: | |
| | |
| |
Allocation of net loss | |
$ | (968,452 | ) | |
$ | (2,463,927 | ) |
| |
| | | |
| | |
Denominator: | |
| | | |
| | |
Weighted-average shares outstanding | |
| 1,968,505 | | |
| 5,008,255 | |
Basic and diluted net loss per share | |
$ | (0.49 | ) | |
$ | (0.49 | ) |
Offering
Costs associated with the Initial Public Offering
The Company complies with the
requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”.
Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the
IPO. Accordingly, as of March 31, 2021, offering costs of $12,693,922 (consisting of $4,409,459 of underwriting commissions,
$7,716,553 of deferred underwriters’ commission, and $567,910 other cash offering costs) have been incurred. Offering
costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis compared to total proceeds
received. Offering costs associated with warrant liabilities is expensed, and offering costs associated with the Class A common stock
are charged to the stockholders’ equity. Accordingly, $812,974 of offering costs associated with warrant liabilities is expensed
in the statement of operations for the period from January 19, 2021 (inception) through March 31, 2021.
Derivative
Financial Instruments
The Company evaluates its financial instruments to determine if such
instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives
and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes
in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance
sheet date. The Company has determined the warrants are a derivative instrument and should be accounted for as liabilities. As such, the
Company recognizes the warrant liabilities at fair value at each reporting period and records the change in fair value in the statements
of operations.
FASB ASC 470-20, “Debt with Conversion and Other Options,”
addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this
guidance to allocate initial public offering proceeds from the Units between Class A common stock and warrants, using the residual method
by allocating initial public offering proceeds first to fair value of the warrants and then the Class A common stock.
Income Taxes
The Company accounts for income
taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future
tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established
when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740
also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued
interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts
accrued for interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under
review that could result in significant payments, accruals or material deviation from its position.
The Company
has identified the United States as its only “major” tax jurisdiction.
The Company is subject to income
tax examinations by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions,
the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does
not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
In August 2020, the FASB issued
ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years. The Company continues to evaluate the impact of ASU 2020-06 to its unaudited condensed
financial statements.
Management does not believe that
any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited condensed financial statements.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant to the IPO on March
25, 2021, the Company sold 20,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of one share of
Class A common stock, and one-half 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 per share, subject to adjustment. Each warrant will become exercisable 30 days after the completion
of the initial Business Combination and will expire five years after the completion of the initial Business Combination, or earlier upon
redemption or liquidation.
On March
30, 2021, the underwriter partially exercised the over-allotment option to purchase 2,047,293 units.
Following the closing of the
IPO on March 25, 2021 and the closing of the underwriter’s partial exercise of the over-allotment option on April 1, 2021, $220,472,930 ($10.00 per
Unit) from the net proceeds of the sale of the Units in the IPO and over-allotment and the sale of the Private Placement Warrants was
placed in a Trust Account, which may only be invested in United States “government securities” within the meaning of Section
2(a)(16) of 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.
Public
Warrants
Each whole warrant entitles
the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment
as discussed herein. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities
for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue
price of less than $9.20 per share of the Class A common stock (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 the Class A common stock 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, and the $18.00 per share redemption trigger price described below under “Redemption
of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00” and “Redemption of Warrants When the
Price per Share of Class A Common Stock 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 below under “Redemption
of Warrants When the Price per Share of Class A Common Stock 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 warrants will become exercisable
30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Company’s
initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated
to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants
is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below
with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will
not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the Class A common stock issuable upon such
warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered
holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to
a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for
the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for
the share of Class A common stock underlying such unit.
Redemption of Warrants When
the Price per Share of Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable,
the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’
prior written notice of redemption (the “30-day redemption period”); and |
| ● | if, and only if, the last reported
sales price (the “closing price”) of the Class A common stock equals or exceeds $18.00 per share 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. |
Redemption of Warrants When
the Price per Share of Class A Common Stock Equals or Exceeds $10.00
Once the warrants become exercisable,
the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | upon a minimum of 30 days’
prior written notice of redemption; and |
| ● | if, and only if, the closing
price of the Class A common stock equals or exceeds $10.00 per share 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. |
If a registration statement covering
the shares of Class A common stock 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. In such event, each holder would
pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A)
the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied
by the excess of the “fair market value” (defined below) less the exercise price of the warrants by (y) the fair market value
and (B) 0.361. The “fair market value” as used in this paragraph shall mean the volume weighted average price of the
Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by
the warrant agent.
NOTE
4. PRIVATE PLACEMENT
Simultaneously with the closing
of the IPO, the Sponsor purchased an aggregate of 7,200,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant, for an aggregate purchase price of $7,200,000, in a private placement (the “Private Placement”).
Pursuant to the underwriter’s
partial exercise of the over-allotment option on March 30, 2021, on April 1, 2021 the Sponsor purchased an additional 409,459 Private
Placement Warrants at a price of $1.00 per warrant.
Each Private Placement Warrant
entitles the holder to purchase one share of the Class A common stock at a price of $11.50 per share. 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. If the
Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will
be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the warrants included in
the Units being sold in the IPO.
The Private Placement Warrants
(including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or
saleable until 30 days after the completion of the initial Business Combination.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder Shares
On January 19, 2021, the Sponsor
paid $25,000 to cover certain offering costs of the Company in consideration for 5,750,000 shares of Class B common stock
(the “founder shares”). The founder shares include an aggregate of up to 750,000 shares subject to forfeiture if
the over-allotment option is not exercised by the underwriter in full. On February 7, 2021, the Sponsor transferred 20,000 founder
shares to each of the Company’s independent directors and chief financial officer (which shares will not be subject to forfeiture
in the event the underwriter’s over-allotment is not exercised).
On March 30, 2021, the underwriter
partially exercised the over-allotment option to purchase 2,047,293 Units. As a result, 238,177 founder shares were
forfeited on April 1, 2021.
With certain limited exceptions,
the founder shares will not be transferable, assignable by the Sponsor until the earlier of: (A) one year after the completion of the
initial Business Combination; or (B) subsequent to the initial Business Combination, (x) if the closing 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, reorganization or other similar transaction that results
in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
The Sponsor has agreed (i) to
waive its redemption rights with respect to any founder shares and any public shares held by it in connection with the completion of the
Company’s initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect
to any founder shares held by it if the Company fails to complete the initial Business Combination within the Combination Period, although
the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any public shares it hold if the Company
fails to complete the Business Combination within the Combination Period.
Promissory Note — Related
Party
The Company’s Sponsor agreed
to loan the Company an aggregate of up to $300,000 to be used for a portion of the expenses of the IPO. The loan was non-interest
bearing, unsecured and due at the earlier of December 31, 2021 or the closing of the IPO. As of March 25, 2021, the Company had an outstanding
balance of $99,160 under the promissory note. The promissory note from the Sponsor was paid in full on March 26, 2021.
On April
11, 2022, the Company and the Sponsor entered into a promissory note, pursuant to which the Sponsor committed to provide up to $200,000
in loans to the Company for working capital purposes. The Company can draw down on such maximum amount during the term of the promissory
note. The loan is non-interest bearing and payable by the Company on the earlier of: (i) March 25, 2023 or (ii) the date on which the
Company consummates a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses.
Related
Party Loans
In order to finance transaction
costs in connection with an intended initial 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 (the “Working Capital Loans”).
If the Company completes an initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial
Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the
Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of
such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants
would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. At March 31,
2022 and December 31, 2021, no such Working Capital Loans were outstanding.
Administrative Support Agreement
Pursuant to an administrative
support agreement effective on March 22, 2021, the Company agreed to pay the Sponsor a total of $25,000 per month for office space,
utilities and professional, secretarial and administrative support. Upon completion of the initial Business Combination or the Company’s
liquidation, the Company will cease paying these monthly fees. The Company recorded administrative support fees of $75,000 and $6,452 for
the three months ended March 31, 2022 and for the period from January 19, 2021 (inception) through March 31, 2021.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Registration and Shareholder
Rights
The holders of the founder shares,
Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common
stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital
Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights and stockholder
agreement signed on March 22, 2021, requiring the Company to register such securities for resale (in the case of the founder shares, only
after conversion to the Class A common stock). The holders of the majority of these securities are entitled to make up to three demands,
excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination and
rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriters
Agreement
The underwriter had a 45-day
option from the date of the IPO to purchase up to an additional 3,000,000 Units to cover over-allotments, if any.
On March 25, 2021, the Company
paid a fixed underwriting discount in aggregate of $4,000,000. Additionally, the underwriter will be entitled to a deferred underwriting
discount of 3.5% of the gross proceeds of the IPO held in the Trust Account, or $7,716,553, upon the completion of the Company’s
initial Business Combination subject to the terms of the underwriting agreement.
On March 30, 2021, the underwriter
partially exercised the over-allotment option to purchase 2,047,293 Units. In connection therewith, the Company paid additional
underwriting fees of $409,459.
NOTE
7. FAIR VALUE MEASUREMENTS
The following table presents
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2022,
and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| |
March 31, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
| |
2022 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Marketable securities held in Trust Account | |
$ | 220,509,964 | | |
$ | 220,509,964 | | |
$ | - | | |
$ | - | |
| |
$ | 220,509,964 | | |
$ | 220,509,964 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liabilities – Public Warrants | |
$ | 3,748,040 | | |
$ | 3,748,040 | | |
$ | - | | |
$ | - | |
Warrant Liabilities – Private Placement Warrants | |
| 2,663,311 | | |
| - | | |
| - | | |
| 2,663,311 | |
| |
$ | 6,411,351 | | |
$ | 3,748,040 | | |
$ | - | | |
$ | 2,663,311 | |
The following table presents
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31,
2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| |
December 31, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
| |
2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Marketable securities held in Trust Account | |
$ | 220,487,761 | | |
$ | 220,487,761 | | |
$ | - | | |
$ | - | |
| |
$ | 220,487,761 | | |
$ | 220,487,761 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liabilities – Public Warrants | |
$ | 6,614,188 | | |
$ | 6,614,188 | | |
$ | - | | |
$ | - | |
Warrant Liabilities – Private Placement Warrants | |
| 4,641,770 | | |
| - | | |
| - | | |
| 4,641,770 | |
| |
$ | 11,255,958 | | |
$ | 6,614,188 | | |
$ | - | | |
$ | 4,641,770 | |
The fair value of the Public
Warrants at March 31,2022 and December 31, 2021 are classified as Level 1 due to the use of an observable market quote in an active market.
As of March 31, 2022 and December 31, 2021, the aggregate value of Public Warrants was $3,748,040 and $6,614,188, respectively. The Public
Warrants were classified as Level 3 up to May 13, 2021 when the Class A common stock and Public Warrants included in the Units were separately
traded.
The fair value of the Private
Placement Warrants is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets
with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in
a material change in fair value. The valuation model utilizes inputs such as assumed share prices, volatility, discount factors and other
assumptions and may not be reflective of the price at which they can be settled at Level 3.
The following
table provides quantitative information regarding Level 3 fair value measurements as of March 31, 2022:
Input | |
Private Placement Warrants | |
Expected term (years) | |
| 5.75 | |
Expected volatility | |
| 5.00 | % |
Risk-free interest rate | |
| 2.41 | % |
Fair value of the common stock price | |
$ | 9.75 | |
The following
table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2021:
Input | |
Private Placement Warrants | |
Expected term (years) | |
| 5.50 | |
Expected volatility | |
| 11.00 | % |
Risk-free interest rate | |
| 1.31 | % |
Fair value of the common stock price | |
$ | 9.71 | |
The following table provides
quantitative information regarding Level 3 fair value measurements as of March 22, 2021 (Initial Measurement):
Input | |
Public Warrants and Private Placement Warrants | |
Expected term (years) | |
| 6.00 | |
Expected volatility | |
| 23.20 | % |
Risk-free interest rate | |
| 1.11 | % |
Fair value of the common stock price | |
$ | 9.29 | |
The following table sets forth
a summary of the changes in the fair value of the Level 3 warrant liability related to the Private Placement Warrants for the three months
ended March 31, 2022:
| |
Warrant Liability | |
Fair value as of January 1, 2022 | |
$ | 4,641,770 | |
Change in valuation inputs or other assumptions | |
| (1,978,459 | ) |
Fair value as of March 31, 2022 | |
$ | 2,663,311 | |
The following table sets forth
a summary of the changes in the fair value of the Level 3 warrant liability for the period from January 19, 2021 (inception) through March
31, 2021, which included both the Public Warrants and the Private Placement Warrants:
| |
Warrant Liability | |
Fair value as of January 19, 2021 (inception) | |
$ | — | |
Initial fair value of warrant liabilities on March 22, 2021 | |
| 22,232,000 | |
Initial fair value of warrant liabilities on March 31, 2021 (for over allotment) | |
| 1,860,990 | |
Change in valuation inputs or other assumptions | |
| 172,000 | |
Fair value as of March 31, 2021 | |
$ | 24,264,990 | |
NOTE 8. STOCKHOLDERS’
EQUITY
Preferred Stock —
The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At March 31, 2022
and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue a total of 400,000,000 shares of Class A common stock at par value of $0.0001 each.
As of March 31, 2022 and December 31, 2021, there were 0 shares of Class A common stock issued and outstanding, excluding 22,047,293 shares
of Class A common stock subject to possible redemption.
Class B Common Stock —
The Company is authorized to issue a total of 40,000,000 shares of Class B common stock at par value of $0.0001 each. On
January 19, 2021, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 5,750,000 shares
of Class B common stock. The founder shares included an aggregate of up to 750,000 shares subject to forfeiture if the over-allotment
option was not exercised by the underwriter in full. On March 30, 2021, the underwriter partially exercised the over-allotment option
to purchase 2,047,293 Units. As a result, 238,177 founder shares were forfeited on April 1, 2021. As of March 31,
2022 and December 31, 2021, there were 5,511,823 shares of Class B common stock issued and outstanding.
With certain limited exceptions,
the founder shares will not be transferable, assignable by the Sponsor until the earlier of: (A) one year after the completion of the
initial Business Combination; or (B) subsequent to the initial Business Combination, (x) if the closing 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, reorganization or other similar transaction that results
in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
The shares of Class B common
stock will automatically convert into shares of the Company’s Class A common stock at the time of the Company’s initial Business
Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the
like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked
securities, are issued or deemed issued in excess of the amounts offered in the registration statement and related to the closing of the
initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will
be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect
to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of
Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of
common stock outstanding upon the completion of the IPO plus all shares of Class A common stock and equity-linked securities issued or
deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued,
to any seller in the Business Combination).
Holders of founder shares may
also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment
as provided above, at any time.
Holders of the Class A common
stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders,
except as required by law.
NOTE
9. SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were
issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the unaudited condensed financial statements, other than the related party promissory note executed between the Sponsor and the Company
on April 11, 2022 (see Note 5).
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Glass
Houses Acquisition Corp.” “our,” “us” or “we” refer to Glass Houses Acquisition Corp. The following
discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited
condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that
may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels
of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “could,” “would,” “expect,”
“plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of
such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to,
those described in our other SEC filings.
Overview
We are a blank check company incorporated as a
Delaware corporation on January 19, 2021 and 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, which we refer to herein as our initial Business
Combination. We have not selected any specific Business Combination target. We intend to effectuate our initial Business Combination using
cash from the proceeds of the IPO and the private placement of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We expect to continue to incur significant costs
in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial Business Combination will be successful.
The registration statement for the IPO was declared
effective on March 22, 2021. On March 25, 2021, we consummated the IPO of 22,047,293 Units, including 2,047,293 additional Units that
were issued pursuant to the underwriter’s partial exercise of its over-allotment option, at $10.00 per Unit, generating gross proceeds
of approximately $220.5 million, and incurring offering costs of approximately $12.7 million, inclusive of $7.7 million in deferred underwriting
commissions.
Simultaneously with the closing of the IPO, we
consummated the private placement of 7,200,000 Private Placement Warrants to the Sponsor, at a price of $1.00 per Private Placement Warrant,
generating gross proceeds of approximately $7.2 million. Simultaneously with the closing of the over-allotment option, we sold an additional
409,459 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating additional gross proceeds
of approximately $0.4 million. Each Private Placement Warrant is exercisable to purchase one share of the Company’s Class A common
stock.
Results of Operations
Our entire activity since inception up to March
31, 2022 relates to our formation, the IPO and, since the closing of the IPO, a search for a Business Combination candidate. We will not
be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the three months ended March 31, 2022, we
had net income of $4,373,017, which was comprised of the change in the fair value of our warrants of $4,844,607 and interest earned on
marketable securities held in trust account of $22,203, partially offset by operating costs of $493,793.
For the period from January 19, 2021 (inception)
through March 31, 2021, we had net loss of $3,432,379, which was comprised of operating costs of $84,378, warrant issuance costs of $812,974,
other expense relating to fair value exceeding amount paid for warrants of $2,363,027, and change in fair value of warrants of $172,000.
Going Concern and Liquidity
As of March 31, 2022, we had approximately
$0.7 million in our operating bank account, and working capital of approximately $0.9 million.
Prior to the completion of the IPO, our liquidity
needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares to cover certain offering costs and the
loan under an unsecured promissory note from the Sponsor of $99,160. On March 25, 2021, we consummated the initial public offering of
20,000,000 Units at a price of $10.00 per Unit. On March 30, 2021, the underwriter partially exercised its over-allotment option, purchasing
an additional 2,047,293 Units, at $10.00 per Unit, on April 1, 2021. In aggregate, gross proceeds of $220,472,930 were generated. Simultaneously
with the closing of the IPO, we consummated the sale of 7,200,000 Private Placement Warrants at a price of $1.00 per Private Placement
Warrant in a private placement to the Sponsor. On April 1, 2021, simultaneously with the closing of the over-allotment option, we sold
an additional 409,459 Private Placement Warrants to the Sponsor at a price of $1.00 per share. In aggregate, gross proceeds of $7,609,459
were generated.
Following the IPO, the closing of the over-allotment
option and the sale of the Private Placement Warrants, a total of $220,472,930 was placed in the trust account. We incurred $12,693,922
in transaction costs, including $4,409,459 of underwriting fees, $7,716,553 of deferred underwriting fees and $567,910 of other offering
costs. The promissory note from the Sponsor was paid in full on March 26, 2021. Subsequent to the consummation of the IPO, the closing
of the over-allotment option and the sale of the Private Placement Warrants, our liquidity needs have been satisfied through the proceeds
from the consummation of the private placement not held in the trust account.
On April 11, 2022, we and the Sponsor entered
into a promissory note, pursuant to which the Sponsor committed to provide up to $200,000 in loans to us for working capital purposes.
We can draw down on such maximum amount during the term of the promissory note. The loan is non-interest bearing and payable by us on
the earlier of: (i) March 25, 2023 or (ii) the date on which we consummate a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more businesses.
In addition, in order to finance transaction costs
in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and
directors may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working
Capital Loans.
In connection
with our assessment of going concern considerations in accordance with FASB’s ASU 2014-15, “Disclosures of Uncertainties about
an Entity’s Ability to Continue as a Going Concern,” management determined that the liquidity condition and date for mandatory
liquidation and dissolution raise substantial doubt about our ability to continue as a going concern through March 25, 2023, the scheduled
liquidation date of us if we do not complete a Business Combination prior to such date. These unaudited condensed financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should we be unable to continue as a going concern.
Critical Accounting Estimates and Policies
The preparation of the unaudited condensed financial
statements in conformity with US GAAP requires 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 unaudited condensed financial statements and the
reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following
as our critical accounting policies:
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 Accounting Standards Codification ASC Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument
and are measured at redemption value. Conditionally redeemable common stock (including common stock that features redemption rights that
is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity.
All of the 22,047,293 shares of Class A common
stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection
with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in
connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with the SEC
and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not
solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore,
all Class A common stock has been classified outside of permanent equity.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital
and accumulated deficit.
Net Income (loss) Per Share of Common Stock
The Company has two classes of shares, which are
referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares.
The 18,633,106 potential common shares for outstanding warrants to purchase the Company’s stock were excluded from diluted
earnings per share for the three months ended March 31, 2022 and for the period from January 19, 2021 (inception) through March 31, 2021
because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income (loss)
per common share is the same as basic net income (loss) per common share for such periods.
Derivative Financial Instruments
The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic
815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each
reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified
on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required
within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument and should be accounted
for as liabilities. As such, the Company recognizes the warrant liabilities at fair value at each reporting periods and records the change
in fair value in the statements of operations.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the
allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to
allocate initial public offering proceeds from the Units between Class A common stock and warrants, using the residual method by allocating
initial public offering proceeds first to fair value of the warrants and then the Class A common stock.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06 to
simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining
to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective
for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
The Company continues to evaluate the impact of ASU 2020-06 to its financial statements.
Management does not believe that any other recently
issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed
financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2022, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
We do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly
fee of $25,000 for office space and administrative support to the Company. We began incurring these fees on March 22, 2021 and will continue
to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
The underwriter is entitled to a deferred fee
of $0.35 per Unit, or $7,716,553 in the aggregate. Subject to the terms of the underwriting agreement, (i) the deferred fee was placed
in the trust account and will be released to the underwriter only upon the completion of a Business Combination and (ii) the deferred
fee will be waived by the underwriter in the event that we do not complete a Business Combination.
JOBS Act
On April 5, 2012, the JOBS Act was signed into
law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.
We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying
on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as
an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide
an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform
and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation
or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion
and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and
performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of the IPO or until we are no longer an “emerging growth company,”
whichever is earlier.