Item 1. Condensed Financial Statements
GLENFARNE MERGER CORP.
CONDENSED BALANCE SHEETS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
954,386
|
|
|
$
|
7,000
|
|
Prepaid expenses
|
|
|
1,306,774
|
|
|
|
-
|
|
Total current assets
|
|
|
2,261,160
|
|
|
|
7,000
|
|
Investments held in Trust Account
|
|
|
272,538,865
|
|
|
|
-
|
|
Deferred offering costs
|
|
|
-
|
|
|
|
282,610
|
|
Total Assets
|
|
$
|
274,800,025
|
|
|
$
|
289,610
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
82,347
|
|
|
$
|
21,437
|
|
Accrued expenses
|
|
|
110,467
|
|
|
|
250,000
|
|
Franchise tax payable
|
|
|
101,968
|
|
|
|
1,993
|
|
Total current liabilities
|
|
|
294,782
|
|
|
|
273,430
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
|
9,538,992
|
|
|
|
-
|
|
Derivative warrant liabilities
|
|
|
11,329,660
|
|
|
|
-
|
|
Total liabilities
|
|
|
21,163,434
|
|
|
|
273,430
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock, $0.0001 par value; 24,863,659 and -0- shares subject to possible redemption at $10 per share as of June 30, 2021 and December 31, 2020, respectively
|
|
|
248,636,590
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 3,245,688 and -0- shares issued and outstanding (excluding 24,863,659 and -0- shares subject to possible redemption) as of June 30, 2021 and December 31, 2020, respectively
|
|
|
325
|
|
|
|
-
|
|
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,813,566 and 7,187,500 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
|
|
|
682
|
|
|
|
719
|
|
Additional paid-in capital
|
|
|
3,762,630
|
|
|
|
24,281
|
|
Retained earnings (accumulated deficit)
|
|
|
1,236,364
|
|
|
|
(8,820
|
)
|
Total stockholders' equity
|
|
|
5,000,001
|
|
|
|
16,180
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
274,800,025
|
|
|
$
|
289,610
|
|
The accompanying notes are an integral part
of these unaudited condensed financial statements.
GLENFARNE MERGER CORP.
CONDENSED STATEMENTS OF OPERATIONS
|
|
For the
Three Months
Ended June 30,
2021
|
|
|
For the
Six Months
Ended June 30,
2021
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
General and administrative expenses
|
|
$
|
332,413
|
|
|
$
|
434,416
|
|
General and administrative expenses - related party
|
|
|
30,000
|
|
|
|
40,000
|
|
Franchise tax expenses
|
|
|
49,315
|
|
|
|
99,975
|
|
Loss from operations
|
|
|
(411,728
|
)
|
|
|
(574,391
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Change in fair value of derivative warrant liabilities
|
|
|
2,155,580
|
|
|
|
2,591,150
|
|
Offering costs associated with derivative warrant liabilities
|
|
|
(55,790
|
)
|
|
|
(767,820
|
)
|
Loss from investments held in Trust Account
|
|
|
(3,755
|
)
|
|
|
(3,755
|
)
|
Income before income taxes
|
|
|
1,684,307
|
|
|
|
1,245,184
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
Net income
|
|
$
|
1,684,307
|
|
|
$
|
1,245,184
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of redeemable Class A common stock
|
|
|
26,783,592
|
|
|
|
26,623,069
|
|
Basic and diluted net income per share, redeemable Class A common stock
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Weighted average shares outstanding of non-redeemable Class A and Class B common stock
|
|
|
7,541,570
|
|
|
|
6,939,629
|
|
Basic and diluted net income per share, non-redeemable Class A and Class B common stock
|
|
$
|
0.22
|
|
|
$
|
0.18
|
|
The accompanying notes
are an integral part of these unaudited condensed financial statements.
GLENFARNE
MERGER CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Earnings
|
|
|
Total
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-In
|
|
|
(Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
Balance - December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
7,187,500
|
|
|
$
|
719
|
|
|
$
|
24,281
|
|
|
$
|
(8,820
|
)
|
|
$
|
16,180
|
|
Sale of Units in initial public offering, less fair value of derivative warrant liabilities
|
|
|
25,000,000
|
|
|
|
2,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
237,580,830
|
|
|
|
-
|
|
|
|
237,583,330
|
|
Sale of Private Placement Units, less fair value of derivative warrant liabilities
|
|
|
810,000
|
|
|
|
81
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,673,319
|
|
|
|
-
|
|
|
|
7,673,400
|
|
Offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,613,381
|
)
|
|
|
-
|
|
|
|
(13,613,381
|
)
|
Class A common stock subject to possible redemption
|
|
|
(22,622,040
|
)
|
|
|
(2,262
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(226,218,138
|
)
|
|
|
-
|
|
|
|
(226,220,400
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(439,123
|
)
|
|
|
(439,123
|
)
|
Balance - March 31, 2021 (unaudited)
|
|
|
3,187,960
|
|
|
|
319
|
|
|
|
7,187,500
|
|
|
|
719
|
|
|
|
5,446,911
|
|
|
|
(447,943
|
)
|
|
|
5,000,006
|
|
Sale of Units in initial public offering, less fair value of derivative warrant liabilities (over-allotment)
|
|
|
2,254,262
|
|
|
|
225
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,527,975
|
|
|
|
-
|
|
|
|
21,528,200
|
|
Sale of Private Placement Units, less fair value of derivative warrant liabilities (over-allotment)
|
|
|
45,085
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
387,725
|
|
|
|
-
|
|
|
|
387,730
|
|
Offering costs (over-allotment)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,184,052
|
)
|
|
|
-
|
|
|
|
(1,184,052
|
)
|
Forfeiture of Class B common stock
|
|
|
|
|
|
|
|
|
|
|
(373,934
|
)
|
|
|
(37
|
)
|
|
|
37
|
|
|
|
-
|
|
|
|
-
|
|
Class A common stock subject to possible redemption
|
|
|
(2,241,619
|
)
|
|
|
(224
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,415,966
|
)
|
|
|
-
|
|
|
|
(22,416,190
|
)
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,684,307
|
|
|
|
1,684,307
|
|
Balance - June 30, 2021 (unaudited)
|
|
|
3,245,688
|
|
|
$
|
325
|
|
|
|
6,813,566
|
|
|
$
|
682
|
|
|
$
|
3,762,630
|
|
|
$
|
1,236,364
|
|
|
$
|
5,000,001
|
|
The accompanying notes
are an integral part of these unaudited condensed financial statements.
GLENFARNE MERGER CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS
ENDED JUNE 30, 2021(Unaudited)
Cash Flows from Operating Activities:
|
|
|
|
Net income
|
|
$
|
1,245,184
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
Change in fair value of derivative warrant liabilities
|
|
|
(2,591,150
|
)
|
Offering costs associated with derivative warrant liabilities
|
|
|
767,820
|
|
Loss from investments held in Trust Account
|
|
|
3,755
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Prepaid expenses
|
|
|
(1,306,774
|
)
|
Accrued expenses
|
|
|
40,467
|
|
Accounts payable
|
|
|
60,910
|
|
Franchise tax payable
|
|
|
99,975
|
|
Net cash used in operating activities
|
|
|
(1,679,813
|
)
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
Cash deposited in Trust Account
|
|
|
(272,542,620
|
)
|
Net cash used in investing activities
|
|
|
(272,542,620
|
)
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
Repayment of note payable to related party
|
|
|
(97,250
|
)
|
Proceeds from note payable to related party
|
|
|
30,000
|
|
Proceeds received from initial public offering
|
|
|
272,542,620
|
|
Proceeds received from private placement
|
|
|
8,550,850
|
|
Offering costs paid
|
|
|
(5,856,401
|
)
|
Net cash provided by financing activities
|
|
|
275,169,819
|
|
|
|
|
|
|
Net increase in cash
|
|
|
947,386
|
|
|
|
|
|
|
Cash - beginning of the period
|
|
|
7,000
|
|
Cash - end of the period
|
|
$
|
954,386
|
|
|
|
|
|
|
Supplemental disclosure of noncash activities:
|
|
|
|
|
Offering costs included in accrued expenses
|
|
$
|
70,000
|
|
Offering costs paid by related party under promissory note
|
|
$
|
67,250
|
|
Reversal of accrued expenses
|
|
$
|
250,000
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
$
|
9,538,992
|
|
Initial value of Class A common stock subject to possible redemption
|
|
$
|
225,842,730
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
22,793,860
|
|
The accompanying notes
are an integral part of these unaudited condensed financial statements.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description
of Organization and Business Operations
Glenfarne Merger Corp. (the “Company”)
is a blank check company incorporated in Delaware on June 16, 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”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with
emerging growth companies.
As of June 30, 2021, the Company had not commenced
any operations. All activity for the period from June 16, 2020 (inception) through June 30, 2021 relates to the Company’s formation
and the initial public offering (the “Initial Public Offering”) described below. 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 from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its
fiscal year end.
The Company’s sponsor is Glenfarne Sponsor,
LLC, a Delaware corporation (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on March 18, 2021. On March 23, 2021, the
Company consummated its Initial Public Offering of 25,000,000 units (the “Units”
and, with respect to the Class A common stock included in the Units offered in the Initial Public Offering, the “Public Shares”),
at $10.00 per Unit, generating gross proceeds of $250.0 million, and incurring offering costs of approximately $14.3 million, of which
approximately $8.8 million was for deferred underwriting commissions (see Note 5). The Company granted the underwriter a 45-day option
to purchase up to an additional 3,750,000 Units at the Initial Public Offering price to cover over-allotments, if any. On April
16, 2021, the underwriters notified the Company of their partial exercise of the over-allotment option and, on April 20, 2021, purchased
2,254,262 additional Units (the “Additional Units”), generating gross proceeds of approximately $22.5 million (the “Over-Allotment”).
The Company incurred additional offering costs of approximately $1.2 million in connection with the Over-Allotment (of which approximately
$789,000 was for deferred underwriting fees).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 810,000
units (each, a “Private Placement Unit” and collectively, the “Private Placement Units”), at a price of $10.00
per Private Placement Unit with the Sponsor, generating gross proceeds of $8.1 million (see Note 4). Simultaneously with the closing of
the Over-Allotment on April 20, 2021, the Company consummated the second closing of the Private Placement, resulting in the purchase of
an aggregate of an additional 45,085 Private Placement Units at $10.00 per additional Private Placement Unit (the “Additional Private
Placement Units”), generating additional gross proceeds of approximately $451,000.
Upon the closing of the Initial Public Offering
and the Private Placement, $250.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”) located
in the United States with Continental Stock Transfer & Trust Company acting as trustee, and was invested only in U.S. “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company
Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act which invest only in direct U.S. government treasury obligations, 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.
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 net assets held in the Trust Account (excluding the deferred
underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of signing a definitive agreement
in connection with 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 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.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will provide the holders (the “Public
Stockholders”) of the Public Shares 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 held in the Trust Account (initially, $10.00 per Public Share). The per-share amount to be distributed
to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay
to the underwriters (as discussed in Note 5). These Public Shares were recorded at a redemption value and classified as temporary equity
in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). The Company will proceed with a Business Combination
only if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in
an amount that would cause its net tangible assets to be less than $5,000,001. 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 (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules
of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a
Business Combination. If, however, stockholder approval of the transaction is required by 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 transaction. If the Company seeks stockholder approval in connection with
a Business Combination, the initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and
any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders
agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a
Business Combination.
The 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 Public Shares, without the prior
consent of the Company.
The holders of the Founder Shares (as defined
in Note 4) prior to the Initial Public Offering (the “initial stockholders”) agreed not to propose an amendment to the Certificate
of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company
does not complete a Business Combination within the Combination Period (as defined below) or with respect to any other material provisions
relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders
with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a Business
Combination within 24 months from the closing of the Initial Public Offering, or March 23, 2023 (the “Combination Period”),
the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay
its taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then outstanding Public
Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, 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 initial stockholders agreed to waive their
rights to liquidating distributions from the Trust Account 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. The underwriters agreed to waive their rights to the deferred underwriting commission
(see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period
and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption
of the Public Shares.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In the event of such distribution, it is possible
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00,
or less under certain circumstances. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the
Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm)
for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter
of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), reduce the amount of
funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the
Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value
of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed
a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to
any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). 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
(other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which
the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies
held in the Trust Account.
Liquidity and Capital Resources
As of June 30, 2021, the Company had approximately
$954,000 in its operating bank account and working capital of approximately $2.1 million (not taking
into account approximately $101,000 in tax obligations that may be paid using investment income earned in the Trust Account).
The Company’s liquidity needs through June
30, 2021 were satisfied through a payment of $25,000 from the Sponsor to purchase the Founder Shares, the loan of approximately $97,000
from the Sponsor under the Note (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the
Trust Account of $3.1 million. The Company repaid the Note (as defined in Note 4) in full on March 26, 2021. In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 4). As of June 30,
2021 and December 31, 2020, there were no amounts outstanding under any Working Capital Loans.
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 the funds held outside of the Trust Account for paying existing
accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective
target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating
and consummating the Business Combination.
Risks and Uncertainties
Management continues to evaluate the impact of
the COVID-19 global pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative
effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is
not readily determinable as of the date of these financial statement. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 2—Basis
of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed
financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not
include all of the information and footnotes required by GAAP. In the opinion of management, the condensed financial statements reflect
all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the
periods presented. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that
may be expected through December 31, 2021 or any future period.
Emerging Growth
Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the 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, 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.
Use of Estimates
The preparation of financial
statements in conformity with 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 financial statements and the reported amounts of income
and expenses during the reporting period. Making estimates requires management to exercise significant judgment. One of the more significant
accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. 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. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no
cash equivalents as of June 30, 2021 and December 31, 2020.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Investments Held
in the Trust Account
The Company’s portfolio of investments is
comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity
of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable
fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government
securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented
on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these
securities is included in income on investments held in the Trust Account in the accompanying unaudited condensed statement of operations.
The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Depository Insurance Corporation coverage limit of $250,000. As of June 30, 2021 and December 31, 2020, the Company had not experienced
losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial
Instruments
The fair value of the Company’s assets and
liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements” equal or approximate
the carrying amounts represented in the condensed balance sheets.
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 consist of:
|
●
|
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.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Derivative Warrant
Liabilities
The Company does not
use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial
instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
The Public Warrants and
the Private Placement Warrants (each as defined below) are recognized as derivative liabilities in accordance with ASC 815. Accordingly,
the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair
value at each reporting period until they are exercised. The liabilities are subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the initial Public
Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants were initially measured at
fair value using a Monte Carlo simulation model. The fair value of the Public Warrants as of June 30, 2021 is based on observable listed
prices for such warrants, and the fair value of the Private Placement Warrants are measured using a Monte Carlo simulation model. The
Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The determination
of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the
actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation
is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial
Public Offering
Offering costs consisted of legal, accounting,
underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering.
Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value
basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities were expensed as incurred and
presented as non-operating expenses in the condensed statements of operations. Offering costs associated with the Class A common stock
issued were charged to stockholders’ equity upon the completion of the Initial Public Offering. The Company classifies deferred
underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets
or require the creation of current liabilities.
Class A Common
Stock Subject to Possible Redemption
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory
redemption (if any) are classified as a liability instruments and is measured at fair value. 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, Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock feature
certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future
events. Accordingly, as of June 30, 2021, 24,863,659 shares of Class A common stock subject
to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s condensed balance sheets. There were no shares of Class A common stock subject to possible redemption
at December 31, 2020.
Net Income (Loss)
Per Share of Common Stock
The Company’s condensed statements of operations
include a presentation of net income (loss) per share for Class A common stock subject to possible redemption in a manner similar to the
two-class method of net income (loss) per common stock. Net income (loss) per common stock, basic and diluted, for Class A common stock
is calculated by dividing the interest income earned on the Trust Account, less interest available to be withdrawn for the payment of
taxes, by the weighted average number of Class A common stock outstanding for the periods. Net income (loss) per common stock, basic and
diluted, for Class B common stock is calculated by dividing the net income (loss), adjusted for income attributable to Class A common
stock, by the weighted average number of Class B Common Stock outstanding for the periods. Class B common stock include the Founder Shares
as these common stocks do not have any redemption features and do not participate in the income earned on the Trust Account.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The calculation of diluted net income (loss) per
common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, (ii) exercise of
over-allotment and (iii) Private Placement since the exercise price of the warrants is in excess of the average common stock price for
the period and therefore the inclusion of such warrants would be anti-dilutive.
The following table reflects the calculation of
basic and diluted net income (loss) per share of common stock:
|
|
For the
Three Months
Ended
June 30,
2021
|
|
|
For
the
Six Months
Ended
June 30,
2021
|
|
Class A common stock
|
|
|
|
|
|
|
Numerator: Income allocable to Class A common stock
|
|
|
|
|
|
|
Income from investments held in Trust Account
|
|
$
|
-
|
|
|
$
|
-
|
|
Less: Company's portion available to be withdrawn to pay taxes
|
|
|
-
|
|
|
|
-
|
|
Net income attributable
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator: Weighted average Class A common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Class A common stock
|
|
|
26,783,592
|
|
|
|
26,623,069
|
|
Basic and diluted net income per share, Class A common stock
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Class B common stock
|
|
|
|
|
|
|
|
|
Numerator: Net income (loss) minus net income allocable to Class A common stock
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,684,307
|
|
|
$
|
1,245,184
|
|
Net income allocable to Class A common stock
|
|
|
-
|
|
|
|
-
|
|
Net income (loss) attributable
|
|
$
|
1,684,307
|
|
|
$
|
1,245,184
|
|
Denominator: weighted average Class B common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Class B common stock
|
|
|
7,541,570
|
|
|
|
6,939,629
|
|
Basic and diluted net loss per share, Class B common stock
|
|
$
|
0.22
|
|
|
$
|
0.18
|
|
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to differences between the 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 included the enactment
date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
There were no unrecognized tax benefits as of June 30, 2021 and December 31, 2020. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of June
30, 2021 and December 31, 2020. 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 is subject to income tax examinations by major taxing authorities since
inception.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Recent
Accounting Pronouncements
In August 2020, the FASB
issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by
removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for
equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in
certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position,
results of operations or cash flows.
The Company’s management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s
unaudited condensed financial statements.
Note 3—Initial
Public Offering
On March
23, 2021, the Company consummated its Initial Public Offering of 25,000,000 Units,
at $10.00 per Unit, generating gross proceeds of $250.0 million, and incurring offering costs of approximately $14.3 million, of which
approximately $8.8 million was for deferred underwriting commissions.
Each Unit consists of one share of Class A common
stock, and one-third of one redeemable warrant (each, a “Public Warrant”). Each 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 7).
Note 4—Related
Party Transactions
Founder Shares
In July 2020, the Sponsor purchased 8,625,000
shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”) for an aggregate price
of $25,000. In January 2021, the Sponsor forfeited 1,437,500 shares of Class B common stock for no consideration, resulting in an aggregate
of 7,187,500 shares of Class B common stock outstanding. The initial stockholders agreed to forfeit up to 937,500 Founder Shares to the
extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20% of
the Company’s issued and outstanding shares after the Initial Public Offering (excluding the Private Placement Shares). On April
16, 2021, the underwriters notified the Company of their partial exercise of the over-allotment option, and on April 20, 2021, purchased
an additional 2,254,262 additional Units; thus, 373,934 shares of Class B common stock were forfeited.
The initial stockholders agreed, subject to limited
exceptions, not to transfer, assign or sell any of the 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
shares of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalization, stock dividends,
rights issuances, subdivisions 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 following the completion of the initial Business
Combination on which the Company completes a liquidation, merger, amalgamation, stock exchange, reorganization or other similar transaction
that results in all of the Public Stockholders having the right to exchange their Class A common stock for cash, securities or other property.
Any permitted transferees would be subject to the same restrictions and other agreements of the initial stockholders with respect to any
Founder Shares.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Private Placement Units
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 810,000 Private
Placement Units, at a price of $10.00 per Private Placement Unit with the Sponsor, generating gross proceeds of $8.1 million. Simultaneously
with the closing of the Over-Allotment on April 20, 2021, the Company consummated the second closing of the Private Placement, resulting
in the purchase of the 45,085 Additional Private Placement Units at $10.00 per Additional Private Placement Unit, generating additional
gross proceeds of approximately $451,000.
Each whole private placement warrant underlying
the Private Placement Units (the “Private Placement Warrants”) is exercisable for one whole Class A common stock at a price
of $11.50 per share. A portion of the proceeds from the Private Placement Units was added to the proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement
Units and the underlying securities will expire worthless.
The Sponsor and the Company’s officers and
directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Units (including the Private
Placement Shares, the Private Placement Warrants and Class A common stock issuable upon exercise of such warrants) until 30 days after
the completion of the initial Business Combination.
Related Party Loans
On July 22, 2020, the Sponsor agreed to loan the
Company an aggregate of up to $300,000 pursuant to a promissory note (the “Note”). This loan was non-interest bearing and
payable upon the completion of the Initial Public Offering. As of March 23, 2021, the Company had borrowed approximately $97,000 under
the Note. The Company repaid the Note in full on March 26, 2021. Subsequent to the repayment, the facility was no longer available to
the Company.
In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and
directors may, but are not obligated to, 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. The Working Capital Loans would either
be repaid upon consummation of a Business Combination or, at the lender’s discretion, up to $1.5 million of such Working Capital
Loans may be convertible into units of the post-Business Combination entity at a price of $10.00 per unit at the option of the lender.
The units would be identical to the Private Placement Units. 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. As of June 30, 2021, the Company had no borrowings
under the Working Capital Loans.
Administrative Support Agreement
Commencing on the date that the Company’s
securities were first listed on Nasdaq through the earlier of the Company’s consummation of a Business Combination and its liquidation,
the Company agreed to pay an affiliate of the Sponsor $10,000 per month for office space and administrative and shared personnel support
services. For the three and six months ended June 30, 2021, the Company incurred expenses of $30,000 and $40,000 under this agreement,
respectively. As of June 30, 2021, the Company had $40,000 outstanding for services in connection with such agreement on the accompanying
condensed balance sheets. There were no outstanding balance at December 31, 2020.
The Sponsor, executive officers and directors,
or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the
Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 5—Commitments
and Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement
Units (including securities contained therein) and the units that may be issued upon conversion of the Working Capital Loans (and any
shares of Class A common stock issuable upon the exercise of the Private Placement Units and units that may be issued upon conversion
of Working Capital Loans) are entitled to registration rights pursuant to a registration and stockholder rights agreement signed upon
the consummation of the Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder
Shares, only after conversion to Class A common stock). The holders of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration
rights for sale under the Securities Act. In addition, the holders will have “piggy-back” registration rights to include such
securities in other registration statements filed by the Company and rights to require the Company to register for resale such securities
pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company would not permit any
registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The registration
rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s
securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting
discount of $0.20 per unit, or $5.5 million in the aggregate, paid upon the closing of the Initial Public Offering and over-allotment.
An additional fee of $0.35 per unit, or approximately $9.5 million in the aggregate will be payable to the underwriters for deferred underwriting
commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Risks and Uncertainties
Management continues
to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Note 6—Stockholders’
Equity
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 June 30, 2021 and December
30, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The
Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common
stock are entitled to one vote for each share. As of June 30, 2021, there were 3,245,688 shares
of Class A common stock outstanding, excluding 24,863,659 shares of Class A common stock subject to possible redemption, that were classified
as temporary equity in the accompanying condensed balance sheets. There were no shares of Class A common stock issued and outstanding
at December 31, 2020.
Class B Common Stock — The
Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of June 30, 2021 and
December 31, 2020, there were 6,813,566 and 7,187,500 shares of Class B common stock issued and outstanding, respectively.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Stockholders of record are entitled to one vote
for each share held on all matters to be voted on by stockholders. Holders of Class A common stock and holders of 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.
The Class B common stock will automatically convert
into Class A common stock on the first business day following the completion of the initial Business Combination at a ratio such that
the number of shares of the Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted
basis, 20% of the sum of (i) the total number of shares of the Class A common stock and Class B common stock issued and outstanding upon
completion of the Initial Public Offering (not including the shares of Class A common stock underlying the Private Placement Units), plus
(ii) the sum of (a) the total number of shares of the Class A common stock issued or deemed issued or issuable upon conversion or exercise
of any equity-linked securities or rights issued or deemed issued by the Company in connection with or in relation to the completion of
the initial Business Combination, excluding any shares of the Class A common stock or equity-linked securities exercisable for or convertible
into shares of the Class A common stock issued, or to be issued, to any seller in the initial Business Combination, and any Private Placement
Units issued to the Sponsor or any of its affiliates upon conversion of Working Capital Loans, minus (b) the number of Public Shares redeemed
by Public Stockholders in connection with the initial Business Combination. In no event will the shares of the Class B common stock convert
into shares of Class A common stock at a rate of less than one to one.
Note 7—Warrants
As of June 30, 2021, the Company had 9,084,753
Public Warrants and 315,085 Private Placement Warrants outstanding. There were no warrants outstanding at December 31, 2020.
Public Warrants may only be exercised for a whole
number of shares. No fractional shares will be issued upon exercise of the Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. 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 Class A common stock issuable upon exercise of the
Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants
on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company agreed that as soon
as practicable, but in no event later than 20 business days after the closing of the initial Business Combination, the Company will use
its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of the Class
A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of the Class A common
stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares
of the Class A common stock issuable upon exercise of the warrants is not effective by the 60th business 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.
The warrants have an exercise price of $11.50
per whole share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation. In addition, If (x) the Company issues additional shares of the 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 initial stockholders 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 completion of the initial Business Combination (net of redemptions),
and (z) the volume-weighted average trading price of Class A common stock during the 20 trading day period starting on the trading day
prior to the day on which the Company completes its 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 $10.00 and $18.00 per share redemption trigger prices described under “Redemption of warrants
when the price per Class A common stock equals or exceeds $18.00” and “Redemption of warrants when the price per Class A common
stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market
Value and the Newly Issued Price, respectively.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Private Placement Warrants are identical to
the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject
to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor
or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of warrants when the price per
share of Class A common stock equals or exceeds $18.00:
Once the warrants become exercisable, the Company
may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
|
●
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in whole and not in part;
|
|
|
|
|
●
|
at a price of $0.01 per warrant;
|
|
|
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption; and
|
|
|
|
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●
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if, and only if, the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like).
|
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 (except as described herein with respect to the Private Placement Warrants):
|
●
|
in whole and not in part;
|
|
|
|
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●
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A common stock;
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|
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●
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if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like); and
|
|
|
|
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●
|
if the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
The “fair market value” of Class A
common stock shall mean the volume-weighted average price of Class A common stock for the ten trading days immediately following the date
on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with
this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).
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.
The Private Placement Warrants are identical to
the Public Warrants underlying the Units sold in the Initial Public Offering, 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 saleable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are
non-redeemable and may be exercised on a cashless basis, in each case so long as they are held by the Sponsor or its permitted transferees.
If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants
will be exercisable by such holders on the same basis as the Public Warrants.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 8—Fair Value Measurements
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021
and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
Description
|
|
Quoted Prices in Active
Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant Other
Unobservable Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account - U.S. Treasury securities
|
|
$
|
272,538,865
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public warrants
|
|
$
|
9,902,380
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Derivative warrant liabilities - Private placement warrants
|
|
$
|
-
|
|
|
$
|
349,740
|
|
|
$
|
-
|
|
As of December 31, 2020, there were no assets
or liabilities that are measured at fair value on a recurring basis.
Transfers to/from Levels
1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of Public Warrants was transferred from
a Level 3 measurement to a Level 1 measurement, when the Public Warrants were separately listed and traded in an active market in May
2021. The estimated fair value of the Private Warrants was transferred from a Level 3 measurement to a Level 2 fair value measurement
at the same time as Public Warrants, 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 each Private Placement Warrant is equivalent to that of each Public Warrant. There were no other transfers to/from Levels 1, 2, and
3 during the three and six months ended June 30, 2021.
The initial fair value
of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants are measured at fair value using a
Monte Carlo simulation model. For periods subsequent to the detachment of the Public Warrants from the Units in May 2021, the Public Warrants’
listed price in an active market was used as the fair value.
The estimated fair value
of the Private Placement Warrants, and the Public Warrants, prior to Public Warrants being traded in an active market, is determined using
Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free
interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on historical volatility of
select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based
on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants.
The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical
rate, which the Company anticipates remaining at zero.
GLENFARNE MERGER CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table provides
quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
|
|
Initial Fair
Value
|
|
|
March 31,
2021
|
|
|
April 20,
2021
|
|
|
June 30,
2021
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
9.50
|
|
|
$
|
9.54
|
|
|
$
|
9.54
|
|
|
$
|
9.65
|
|
Volatility
|
|
|
22.9
|
%
|
|
|
22.3
|
%
|
|
|
19.0
|
%
|
|
|
15.9
|
%
|
Term
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.4
|
|
|
|
6.2
|
|
Risk-free rate
|
|
|
1.18
|
%
|
|
|
1.28
|
%
|
|
|
1.12
|
%
|
|
|
1.07
|
%
|
The change in the fair
value of the derivative warrant liabilities, measured using Level 3 inputs, for the three and six months ended June 30, 2021 is summarized
as follows:
Derivative warrant liabilities at January 1, 2021
|
|
$
|
-
|
|
Issuance of Public and Private Warrants
|
|
|
12,843,270
|
|
Change in fair value of derivative warrant liabilities
|
|
|
(435,570
|
)
|
Derivative warrant liabilities at March 31, 2021
|
|
$
|
12,407,700
|
|
Issuance of Public and Private Warrants - over-allotment
|
|
|
1,077,540
|
|
Transfer of Public Warrants to Level 1
|
|
|
(13,014,420
|
)
|
Transfer of Private Warrants to Level 2
|
|
|
(470,820
|
)
|
Change in fair value of derivative warrant liabilities
|
|
|
-
|
|
Derivative warrant liabilities at June 30, 2021
|
|
$
|
-
|
|
Note 9—Subsequent
Events
The Company evaluated subsequent events and transactions
that occurred up to the date through the date condensed financial statements were issued. Based upon this review, the Company did not
identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References
to the “Company,” “Glenfarne Merger Corp.,” “Glenfarne,” “our,” “us” or “we”
refer to Glenfarne Merger Corp. The following discussion and analysis of the Company’s financial condition and results of operations
should be read in conjunction with the unaudited interim 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 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 in Delaware on June 16, 2020. We were 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”). We are an emerging growth company, and, as such, the Company is subject to all of the risks associated with emerging
growth companies.
Our
sponsor is Glenfarne Sponsor, LLC, a Delaware corporation (the “Sponsor”). The registration
statement for our initial public offering (“Initial Public Offering) was declared effective on March 18, 2021. On March
23, 2021, we consummated our Initial Public Offering of 25,000,000 units
(the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”),
at $10.00 per Unit, generating gross proceeds of $250.0 million, and incurring offering costs of approximately $14.3 million, of which
approximately $8.8 million was for deferred underwriting commissions (see Note 5 to the accompanying unaudited interim condensed financial
statements). On April 16, 2021, the underwriters notified the Company of their partial exercise of the over-allotment option and, on
April 20, 2021, purchased 2,254,262 additional Units, generating gross proceeds of approximately $22.5 million (the “Over-Allotment”).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 810,000
units (each, a “Private Placement Unit” and collectively, the “Private Placement Units”), at a price of $10.00
per Private Placement Unit with the Sponsor, generating gross proceeds of $8.1 million (see Note 4 to the accompanying unaudited interim
condensed financial statements). Simultaneously with the closing of the Over-Allotment on April 20, 2021, the Company consummated the
second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 45,085 Private Placement Units at
$10.00 per additional Private Placement Unit (the “Additional Private Placement Units”), generating additional gross proceeds
of approximately $451,000.
Upon
the closing of the Initial Public Offering and the Private Placement, $250.0 million ($10.00 per
Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a
trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as
trustee, and was invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company
Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury
obligations, 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.
Our
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 we will be able to complete a Business Combination successfully. We must complete one
or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of signing
a definitive agreement in connection with the initial Business Combination. However, we will only complete a Business Combination if
the post-transaction company owns or acquires 50% or more of the 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.
If
we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 23, 2023
(the “Combination Period”), we 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 us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then
outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the
right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve,
subject in each case, to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law.
Liquidity
and Capital Resources
As
of June 30, 2021, we had approximately $954,000 in our operating bank account and working capital of approximately $2.1 million (not
taking into account approximately $101,000 of taxes that may be paid using interest income from the Trust Account).
Our
liquidity needs prior to the Initial Public Offering were satisfied through a payment of $25,000 from the Sponsor to purchase the Founder
Shares, the loan of approximately $97,000 from the Sponsor under a promissory note, and subsequent to the Initial Public Offering, the
proceeds from the consummation of the Private Placement not held in the Trust Account of $3.1 million. We repaid the promissory Note
in full on March 26, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor
or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan the Company funds as may
be required (“Working Capital Loans”). As of June 30, 2021, there were no amounts outstanding under any Working Capital Loans.
Based
on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate
of our Sponsor, or certain of our 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, we will be using these funds for paying existing accounts payable, identifying and
evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for
travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business
Combination.
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on our financial position, results of our operations 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.
Results
of Operations
Our
entire activity since inception up to June 30, 2021 was in preparation for our formation and the Initial Public Offering, and, subsequent
to the Initial Public Offering, identifying a target company for a Business Combination. 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 June 30, 2021, we had net income of approximately $1.7 million, which consisted of approximately $332,000 in general
and administrative expense, $30,000 in general and administrative expenses – related party, approximately $49,000 in franchise
tax expense, approximately $56,000 in offering costs associated with derivative warrant liabilities, and approximately $4,000 in losses
from investments held in Trust Account, partially offset by an approximately $2.2 million non-operating gain resulting from the change
in fair value of derivative warrant liabilities.
For
the six months ended June 30, 2021, we had net income of approximately $1.2 million, which consisted of approximately $434,000 in general
and administrative expense, $40,000 in general and administrative expenses – related party, approximately $100,000 in franchise
tax expense, approximately $768,000 in offering costs associated with derivative warrant liabilities, and approximately $4,000 in losses
from investments held in Trust Account, partially offset by an approximately $2.6 million non-operating gain resulting from the change
in fair value of derivative warrant liabilities.
Contractual
Obligations
Administrative
Support Agreement
Commencing
on the date that the Company’s securities were first listed on Nasdaq through the earlier of the Company’s consummation of
a Business Combination and its liquidation, the Company agreed to pay an affiliate of the Sponsor $10,000 per month for office space
and administrative and shared personnel support services. For the three and six months ended June 30, 2021, the Company incurred expenses
of $30,000 and $40,000 under this agreement, respectively. As of June 30, 2021, the Company had $40,000 outstanding for services in connection
with such agreement on the accompanying condensed balance sheets. There were no outstanding balance at December 31, 2020.
The
Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred
in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence
on suitable Business Combinations.
Registration
Rights
The
holders of the Founder Shares, Private Placement Units (including securities contained therein) and the that may be issued upon conversion
of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Units and units
that may be issued upon conversion of the Working Capital Loans) were entitled to registration rights pursuant to a registration and
stockholder rights agreement signed upon the effective date of the Initial Public Offering requiring us to register such securities for
resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of these securities are entitled
to make up to three demands, excluding short form demands, that we register such securities for sale under the Securities Act. In addition,
the holders will have “piggy-back” registration rights to include such securities in other registration statements filed
by us and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However,
the registration rights agreement provides that we would not permit any registration statement filed under the Securities Act to become
effective until termination of the applicable lock-up period. The registration rights agreement does not contain liquidating damages
or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters were entitled to an underwriting discount of $0.20 per unit, or $5.5 million in the aggregate, paid upon the closing of
the Initial Public Offering and over-allotment. An additional fee of $0.35 per unit, or approximately $9.5 million in the aggregate will
be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical
Accounting Policies
Derivative
Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and
FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The
9,084,753 Public Warrants and the 315,085 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC
815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments
to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised. The
initial fair value of the Public Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants
have been estimated using a binomial lattice model in a risk-neutral framework. The fair value of the Public Warrants as of June 30,
2021 is based on observable listed prices for such warrants. The Company determined that the fair value of each Private Placement Warrant
is equivalent to that of each Public Warrant. The determination of the fair value of the warrant liability may be subject to change as
more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities
are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require
the creation of current liabilities.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC 480. Class
A common stock subject to mandatory redemption (if any) are classified as a liability instruments and is measured at fair value. 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, Class A common stock are classified as stockholders’ equity. The Company’s Class
A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, as of June 30, 2021, 24,863,659 shares of Class A common stock subject to possible redemption
at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’ equity section of
the Company’s condensed balance sheets. There were no shares of Class A common stock subject to possible redemption at December
31, 2020.
Net
Income (Loss) Per Share of Common Stock
The
Company’s condensed statements of operations include a presentation of net income (loss) per share for Class A common stock subject
to possible redemption in a manner similar to the two-class method of net income (loss) per common stock. Net income (loss) per common
stock, basic and diluted, for Class A common stock is calculated by dividing the interest income earned on the Trust Account, less interest
available to be withdrawn for the payment of taxes, by the weighted average number of Class A common stock outstanding for the periods.
Net income (loss) per common stock, basic and diluted, for Class B common stock is calculated by dividing the net income (loss), adjusted
for income attributable to Class A common stock, by the weighted average number of Class B Common Stock outstanding for the periods.
Class B common stock include the Founder Shares as these common stocks do not have any redemption features and do not participate in
the income earned on the Trust Account.
The
calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the
(i) Initial Public Offering, (ii) exercise of over-allotment and (iii) Private Placement since the exercise price of the warrants is
in excess of the average common stock price for the period and therefore the inclusion of such warrants would be anti-dilutive.
Recent
Accounting Pronouncements
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for
convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions
that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s
financial position, results of operations or cash flows.
The
Company’s management does not believe that any other recently issued, but not yet effective, accounting standards updated, if currently
adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Off-Balance
Sheet Arrangements
As
of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS
Act
The
Jumpstart Our Business Startups Act of 2012 (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,
the 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 CEO’s compensation to median employee
compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until
we are no longer an “emerging growth company,” whichever is earlier.